a conference on postcrisis banking this essay provides an introduction to the special issue we focus on four themes which are important for policymakers and researchers alike in view of the experiences of the global financial crisis of 2007 2009 and the ensuing sovereign debt crisis in the euro area the relevance of the banking sector for the real economy the future structure and regulation of the banking sector the efficacy of past and current regulatory reforms and the impact of crossborder banking on economic stability and financial development

taming macroeconomic instability monetary and macro prudential policy interactions in an agent based model abstract we develop an agent based model to study the macroeconomic impact of alternative macro prudential regulations and their possible interactions with different monetary policy rules the aim is to shed light on the most appropriate policy mix to achieve the resilience of the banking sector and foster macroeconomic stability simulation results show that a triple mandate taylor rule focused on output gap inflation and credit growth and a basel iii prudential regulation is the best policy mix to improve the stability of the banking sector and smooth output fluctuations moreover we consider the different levers of basel iii and their combinations we find that minimum capital requirements and counter cyclical capital buffers allow to achieve results close to the basel iii first best with a much more simplified regulatory framework finally the components of basel iii are non additive the inclusion of an additional lever does not always improve the performance of the macro prudential regulation

nonmonetary effects of the financial crisis in propagation of the great depression this paper examines the effects of the financial crisis of the 1930s onthe path of aggregate output during that period our approach is complementary to that of friedman and schwartz who emphasized the monetary impact of the bank failures we focus on non monetary primarily credit related aspects of the financial sector output link and consider the problems of debtors as well as those of the banking system we argue that the financial disruptions of 1930 33 reduced the efficiency of the credit allocation process and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand evidence suggests that effects of this type can help explain the unusual length and depth of the great depression this abstract was borrowed from another version of this item

competitive investment in higher education the need for policy coordination abstract when aggregate advanced skills determine an economy s capacity to attract external capital they function as an impure public good education subsidies are indicated but nash equilibrium in education policies yields excessive subsidies if the supply of capital is not elastic

consequences of bank distress during the great depression the consequences of bank distress for the economy during the depression remain an area of unresolved controversy since john m keynes 1931 and irving fisher 1933 macroeconomists have argued that bank distress magnified the extent of the economic decline during the depression as the intermediaries controlling money and credit banks were in a special position to transmit their distress to other sectors but the mechanism through which banking distress mattered for the economy has been hotly contested milton friedman and anna j schwartz 1963 saw the contraction in the money multiplier driven in their view by panicked depositors withdrawals of deposits as the primary mechanism through which banking distress affected the real economy they described the mechanism transmitting banking distress to the real sector as operating at the national level through changes in the aggregate supply of money and interest rates bank distress reduced the money supply available to the public either through the closure of banks and the consequent freezing of bank deposits or the withdrawals of deposits by depositors that feared bank failure ben s bernanke 1983 building on fisher 1933 emphasized the transmission of monetary shocks via their effects on the balance sheets of borrowers and on the supply of credit by banks borrowers balance sheets were worsened by debt deflation as the result of fixed dollar debt obligations borrowers net worth and cash flow declined with the rising value of debt service costs relative to income borrowers with positive net present value projects but weak balance sheets had less internally generated retained earnings to invest and could not qualify for credit furthermore bernanke argued that the contraction of the money supply produced contraction of nominal income and prices relative to fixed debt service which weakened borrowers balance sheets and in turn weakened banks not only did firms financial distress reduce the number of qualified borrowers the contraction in banks net worth forced a reduction in the supply of bank loans to qualified borrowers many firms and individuals relied on banks for credit and as those banks suffered losses of capital due to asset value declines and contractions in deposits as depositors reacted to bank weakness by withdrawing their funds even borrowers with viable projects and strong balance sheets experienced a decrease in the effective supply of loanable funds bernanke termed the combined weakening of borrowers balance sheets and the contraction in bank credit supply a rise in the cost of credit intermediation the scarcity of perfect substitutes for the positive net present value investments of firms with weak balance sheets and for the credit supplied by existing banks implies that the weakening of firms and banks balance sheets the disappearance of banks and the contraction in surviving banks lending made it more difficult for the economy to channel funds to their best use thus what began as a contraction in aggregate demand became a contraction in aggregate supply which magnified adverse economic shocks and prolonged and deepened the depression the financial distress of firms and banks and the decline in bank lending were not only symptoms of the depression but means for magnifying the shocks that caused the depression bernanke s statistical evidence in support of this story is derived from time series analysis at the national level in calomiris graduate school of business 601 uris hall columbia university 3022 broadway new york ny 10027 and national bureau of economic research e mail cc374 columbia edu mason department of finance drexel university 3141 chestnut street philadelphia pa 19104 e mail joe mason drexel edu we thank valerie ramey david wheelock charles himmelberg steve zeldes gary gorton two referees and seminar participants at columbia university wharton northwestern university and the 2001 economic history association meetings for helpful comments on an earlier draft we gratefully acknowledge support from the national science foundation the university of illinois and the federal reserve bank of st louis

macroprudential policies capital flows and the structure of the banking sector abstract using a large sample of advanced and emerging market economies over the period 1999 2012 we examine the effectiveness of macroprudential policies mpps in managing cross border bank flows conditioning on the structure of the banking sector in the mpp implementing country we find that higher regulatory quality and a higher credit to deposit ratio increase the effectiveness of mpps while a higher cost to income ratio has the opposite effect if all three financial variables are evaluated at the median the marginal effect of our preferred mpp measure leads to a reduction of international bank inflows in percent of gdp by around half a percentage point and is only marginally significant however when the more enhanced 25th 10th percentiles of their respective distributions are considered we observe as a response to the same mpp measure a reduction of bank inflows by 3 44 5 39 percentage points that is highly statistically and economically significant additionally we find that the structure of the domestic banking sector determines spillovers from mpps across asset classes while spillovers from mpps across countries are a function of banking sector conditions both at home and abroad

on a tight leash does bank organizational structure matter for macroprudential spillovers abstract this paper examines whether the organizational form of multinational banks foreign affiliates affects cross border spillovers of macroprudential regulation we compare changes in the growth of lending provided by foreign banks branches versus subsidiaries in the united kingdom in response to changes in capital requirements lending standards and reserve requirements in foreign banks home countries our results suggest that a tightening of capital requirements at home reduces uk branches interbank lending growth by 5 7 pp more relative to subsidiaries we link this effect to the higher degree of control which parent banks hold over operations of their foreign branches compared to subsidiaries supporting this hypothesis a set of further tests illustrates that the response of foreign affiliates operating under a branch structure is stronger where parent banks are more likely to delegate more decision making authority to the board of directors of their subsidiaries

international monetary relations taking finance seriously in our book global capital markets integration crisis and growth we traced out the evolution of the international monetary system using the framework of the international monetary trilemma countries can enjoy at most two from the set exchange rate stability open capital markets and domestic monetary autonomy the events of the past decade or more highlight the further complications for this framework posed by financial stability issues here we update and qualify our prior analysis drawing on recent experience and research under the classical gold standard scant attention was paid to macro management either to stabilize output and employment or to ensure financial stability the interwar years highlighted the changing demands for modern central bank interventions in the economy financial instability followed by wwii left a world with sharply constricted financial markets and little private cross border capital mobility due to this historical accident the bretton woods system agreed in 1944 focused not at all on financial stability and focused on issues like adjustment exchange rate misalignment and international liquidity defined in terms of official not private capital account transactions post 1970s floating rates permitted but did not require liberalization of the capital account but the political equilibrium had shifted in favor of financial interests signaled by the push toward european integration and the later reform process in emerging markets starting in the 1990s this development however opened the door once again to domestic financial crises and their international transmission countries now become more susceptible to a new species of capital account crises fueled by bank and bond lending and its sudden withdrawal these developments in fact made evident a different financial trilemma countries can pick at most two from financial stability open capital markets and autonomy over domestic financial policy we distill the main lessons as to the interactions between the monetary and financial trilemmas and policies that could best address the resulting weaknesses

what do we know about the effects of macroprudential policy the literature on the effectiveness of macroprudential policy tools is still in its infancy and has so far provided only limited guidance for policy decisions in recent years however increasing efforts have been made to fill this gap progress has been made in embedding macroprudential policy in theoretical models there is increasing empirical work on the effect of some macroprudential tools on a range of target variables such as quantities and prices of credit asset prices and on the amplitude of the financial cycle and financial stability in this paper we provide a critical review of recent progress in theoretical and empirical research on the effectiveness of macroprudential instruments

banking competition collateral constraints and optimal monetary policy we analyze optimal monetary policy in a model with two distinct financial frictions monopolistically competitive banks that charge endogenous lending spreads and collateral constraints we show that welfare maximization is equivalent to stabilization of four goals inflation output gap the consumption gap between borrowers and savers and a housing gap that measures the distortion in the distribution of the collateralizable asset between both groups collateral constraints create a trade off between stabilization goals following both productivity and financial shocks and relative to strict inflation targeting the optimal policy implies sharper movements in the policy rate aimed primarily at reducing fluctuations in asset prices and hence in borrowers net worth the policy trade offs become amplified as banking competition increases due to the fall in lending spreads and the resulting increase in borrowers leverage

effects of monetary and macroprudential policies evidence from four inflation targeting economies we examine the effects of monetary and macroprudential policies in the asia pacific region where many inflation targeting economies have adopted macroprudential policies in order to safeguard financial stability using structural panel vector autoregressions that identify both monetary and macroprudential policy actions we show that tighter macroprudential policies used to contain credit growth also have a significant negative impact on macroeconomic aggregates such as real gdp and the price level the similar effects of monetary and macroprudential policies may suggest a complementary use of the two policies at normal times however they could also create challenges for policymakers especially during times when low inflation coincides with buoyant credit growth

does macro prudential regulation leak evidence from a uk policy experiment the regulation of bank capital as a means of smoothing the credit cycle is a central element of forthcoming macro prudential regimes internationally for such regulation to be effective in controlling the aggregate supply of credit it must be the case that i changes in capital requirements affect loan supply by regulated banks and ii unregulated substitute sources of credit are unable to offset changes in credit supply by affected banks this paper examines micro evidence lacking to date on both questions using a unique data set in the uk regulators have imposed time varying bank specific minimum capital requirements since basel i it is found that regulated banks uk owned banks and resident foreign subsidiaries reduce lending in response to tighter capital requirements but unregulated banks resident foreign branches increase lending in response to tighter capital requirements on a relevant reference group of regulated banks this leakage is substantial amounting to about one third of the initial impulse from the regulatory change

cross country spillovers from macroprudential regulation reciprocity and leakage abstract in a globally interconnected banking system there can be spillovers from domestic macroprudential policies to foreign banks and vice versa for example through the presence of foreign branches in the domestic economy the lack of reciprocity of some macroprudential instruments may result in an increase in bank flows to those banks with lower regulatory levels a phenomenon known as leakage this may decrease the effectiveness of macroprudential policies in the pursuit of financial stability to explore this topic i consider a two country dsge model with housing and credit constraints borrowers can choose whether to borrow from domestic or foreign banks macroprudential policies are conducted at a national level and are represented by a countercyclical rule on the loan to value ratio results show that when there are some sort of reciprocity agreements on macroprudential policies across countries financial stability and welfare gains are larger than in a situation of non reciprocity an optimal policy analysis shows that in order to enhance the effectiveness of macroprudential policies reciprocity mechanisms are desirable although the foreign macroprudential rule does not need to be as aggressive as the domestic one

contributions to canadian economic history the last 30 years the cliometric revolution that transformed economic history in the us in the 1960s was soon embraced by canadian economic historians many of the important issues surrounding canadian development remained the same the role of resources the place of international trade immigration capital accumulation and interactions with native americans among others but beginning in the 1960s and certainly over the last 30 years economic historians of canada have addressed them with the tools of modern economics both theoretical and empirical we highlight the recent work emphasizing not just the methods but also the fundamental ways our understanding of canadian history has been changed

time varying capital requirements and disclosure rules effects on capitalization and lending decisions we investigate how banks capital and lending decisions respond to changes in bank specific capital and disclosure requirements we find that an increase in the bank specific regulatory capital requirement results in a higher bank capital ratio brought about via less asset risk a decrease in the requirement implies more lending to firms but also less tier 1 capital and higher bank leverage we do not observe differences between confidential and public disclosure of capital requirements our results empirically illustrate a tradeoff between bank resilience and a fostering of the economy through more bank lending using banks capital requirement as policy instrument

the international transmission of financial shocks the case of japan one of the more dramatic financial events of the late 1980s and early 1990s was the surge in japanese stock prices that was immediately followed by a very sharp decline of more than 50 percent while the unprecedented fluctuations in japanese stock prices were domestic financial shocks the unique institutional characteristics of the japanese economy produce a framework that is particularly suited to the transmission of such shocks to other countries through the behavior of the japanese banking system the large size of japanese bank lending operations in the united states enables us to use u s banking data to investigate the extent to which this domestic japanese financial shock was transmitted to the united states as well as to identify a supply shock to u s bank lending that is independent of u s loan demand we find that binding risk based capital requirements associated with the decline in the japanese stock market resulted in a decline in commercial lending by japanese banks in the united states that was both economically and statistically significant this finding has added importance given the severe real estate loan problems currently faced by japanese banks how japanese bank regulators decide to resolve these problems will have significant implications for credit availability in the united states as well as in other countries with a significant japanese bank presence

fixed and variable rate mortgages business cycles and monetary policy the aim of this paper is twofold first i study how the proportion of xed and variable rate mortgages in an economy can aect the way shocks are propagated second i analyze optimal implementable simple monetary policy rules and the welfare implications of this proportion i develop and solve a new keynesian dynamic stochastic general equilibrium model that features a housing market and a group of constrained individuals who need housing collateral to obtain loans a given proportion of constrained households borrows at a variable rate while the rest borrows at a xed rate the model predicts that in an economy with mostly variable rate mortgages an exogenous interest rate shock has larger eects on borrowers than in a xed rate economy aggregate eects are also larger for the variable rate economy for plausible parametrizations dierences are muted by wealth eects on labor supply and by the presence of savers more persistent shocks such as in ation target and technology shocks cause larger aggregate dierences from a normative perspective i nd that in the presence of collateral constraints the optimal taylor rule is less aggressive against in ation than in the standard sticky price model furthermore for given monetary policy a high proportion of xed rate mortgages is welfare enhancing

public education under capital mobility the paper considers a two country model of overlapping generations economies with intergenerational transfers motivated by altruism and investment in human capital we examine in a non stationary competitive equilibrium the optimal provision of education with and without capital market integration first we explore how regimes of education provision public private or mixed arise and how they affect the dynamics of autarkic economies second we study the effects of capital market integration in equilibrium on the optimal provision of education third we show that capital market integration enhances government intervention in the provision of public education to improve the welfare of its constituents and consider various solutions to such a competition

the international transmission of bank capital requirements evidence from the uk abstract we use data on uk banks minimum capital requirements to study the impact of changes to bank specific capital requirements on cross border bank loan supply from 1999q1 to 2006q4 by examining a sample in which each recipient country has multiple relationships with uk resident banks we are able to control for demand effects we find a negative and statistically significant effect of changes to banks capital requirements on cross border lending a 100 basis point increase in the requirement is associated with a reduction in the growth rate of cross border credit of 5 5 percentage points we also find that banks tend to favor their most important country relationships so that the negative cross border credit supply response in core countries is significantly less than in others banks tend to cut back cross border credit to other banks including foreign affiliates more than to firms and households consistent with shorter maturity wholesale lending which is easier to roll off and may be associated with weaker borrowing relationships

the capital crunch neither a borrower nor a lender be the dramatic reduction in the growth rate of bank lending associated with the 1990 91 recession particularly in new england has evoked claims by many observers of a credit crunch however because of the difficulty in determining whether the observed slow credit growth is a demand or supply phenomenon convincing evidence of the practical importance of credit crunches for economic activity remains elusive we overcome this obstacle by examining a cross section of banks in new england that have experienced the same economic downturn effectively controlling for changes in demand we find empirical support for a capital crunch whereby poorly capitalized institutions shrink to satisfy capital requirements this alone is not a sufficient condition for a credit crunch however we find s6me additional evidence that the ca ital crunch may have limited credit availability in new england

comment on the spillovers interactions and un intended consequences of monetary and regulatory policies by kristin forbes dennis reinhardt and tomasz wieladek journal of monetary economics

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

canadian manufacturers relative productivity performance 1907 1990 in this paper i calculate tfp ratios for a sample of canadian manufacturers relative to their american counterparts on an annual basis throughout most of the twentieth century the data used to calculate these ratios are drawn from both industry level and firm level statistical sources i find that in contrast to the relative labour productivity evidence in the literature when tfp is used as the measuring stick there is virtually no evidence of consistent and substantial relative technical inefficiency on behalf of the canadian manufacturers represented in my sample jel classification d24 n60 dans ce memoire l auteur calcule les ratios de la productivite totale des facteurs de production ptf des manufacturiers canadiens par rapport a celle de leurs collegues americains sur une base annuelle pour la plus grande partie du vingtieme siecle les donnees utilisees sont tirees des sources statistiques tant au niveau de l industrie que de l entreprise on montre que contrairement a ce que suggere la litterature specialisee a propos de la productivite relative du travail quand la ptf est utilisee comme etalon de mesure on ne trouve vraiment pas vraiment de resultats qui suggereraient une inefficacite technique relative substantielle et persistante des manufacturiers canadiens de l echantillon

macroprudential and monetary policies implications for financial stability and welfare in this paper we analyze the implications of macroprudential and monetary policies for business cycles welfare and financial stability we consider a dynamic stochastic general equilibrium dsge model with housing and collateral constraints a macroprudential rule for the loan to value ratio ltv which responds to credit growth interacts with a traditional taylor rule for monetary policy we compute the optimal parameters of these rules both when monetary and macroprudential policies act in a coordinated and in a non coordinated way we find that both policies acting together unambiguously improves the stability of the system in both cases this interaction is welfare improving for the society especially in the case of the non coordinated game there is though a trade off between borrowers and savers however borrowers can compensate the saver s welfare loss view the mathml sourcela kaldor hicks to achieve a pareto superior outcome

financial intermediation and delegated monitoring this paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders it presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary diversification within an intermediary serves to reduce these costs even in a risk neutral economy the paper presents some more general analysis of the effect of diversification on resolving incentive problems in the environment assumed in the model debt contracts with costly bankruptcy are shown to be optimal the analysis has implications for the portfolio structure and capital structure of intermediaries

financial protectionism first evidence we examine large public interventions in the financial sector such as bank nationalizations and search for financial protectionism a decrease in the quantity and or an increase in the price of loans that banks from one country make to borrowers resident in another we use a bank level panel data set spanning all u k resident banks between 1997q3 and 2010q1 after nationalization foreign banks reduced their fraction of british loans by about 11 and increased their effective interest rates by about 70 basis points in contrast nationalized british banks did not significantly change either their loan mix or effective interest rates

reputation risk taking and macroprudential policy abstract this paper examines the role of macroprudential capital requirements in preventing inefficient credit booms in a model with reputational externalities in our model unprofitable banks have strong incentives to invest in risky assets when macroeconomic fundamentals are good in order to avoid the stigma of being assessed as low ability by the market we show that across the system countercyclical capital requirements that deter such gambling are constrained optimal when fundamentals are neither extremely weak nor extremely strong

effective macroprudential policy cross sector substitution from price and quantity measures macroprudential policy is increasingly being implemented worldwide key questions are its effectiveness in influencing bank credit and substitution effects beyond banking our results confirm the expected effects of macroprudential policies on bank credit both for advanced economies and emerging market economies but results also confirm substitution effects towards non bank credit especially in advanced economies reducing the policies effect on total credit quantity restrictions are particularly potent in constraining bank credit but also cause the strongest substitution effects policy implications indicate a need to extend macroprudential policy beyond banking especially in advanced economies

bank regulation and the credit crunch abstract this study investigates the direct link between regulatory enforcement actions and the shrinkage of bank loans to sectors likely to be bank dependent we partition the shrinkage due to loan supply into the component due to explicit regulatory enforcement actions and that due to a voluntary response by bank management to low capital to asset ratios we find that banks with formal actions shrink at a significantly faster rate than those without even after controlling for differences in capital to asset ratios furthermore much of the reduced lending has been in categories containing primarily loans to bank dependent borrowers

distance and private information in lending we study the effects of physical distance on the acquisition and use of private information in informationally opaque credit markets using a unique data set of all loan applications by small firms to a large bank we show that borrower proximity facilitates the collection of soft information leading to a trade off in the availability and pricing of credit which is more readily accessible to nearby firms albeit at higher interest rates ceteris paribus analyzing loan rates and firms decision to switch lenders provides further evidence for banks strategic use of private information however distance erodes our lender s ability to collect proprietary intelligence and to carve out local captive markets suggesting that the requisite soft information is primarily local the author 2010 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oxfordjournals org oxford university press

optimal monetary and macroprudential policy in a currency union abstract the financial crisis proved strikingly that financial frictions play a crucial role for system risk and policymakers have overlooked financial stability the obvious candidate for addressing financial stability is macroprudential policy in this paper we study the optimal ramsey monetary and macroprudential policy mix in a currency union in the case of different kinds of aggregate and idiosyncratic shocks the monetary and macroprudential instruments are modeled as independent tools with a union wide macroprudential tool full stabilization on the aggregate level is possible but welfare losses due to fluctuations in relative variables prevail with country specific macroprudential tools full stabilization of shocks is always possible but as a rule not optimal evaluating the performance of different policy regimes shows that the additional welfare gains from having country specific macroprudential tools are small and vanish as the ability of the central bank to commit decreases

do contractionary monetary policy shocks expand shadow banking summary using var models for the usa we find that a contractionary monetary policy shock has a persistent negative impact on the level of commercial bank assets but increases the assets of shadow banks and securitization activity to explain this waterbed effect we propose a standard new keynesian model featuring both commercial and shadow banks and we show that the model comes close to explaining the empirical results our findings cast doubt on the idea that monetary policy can usefully get in all the cracks of the financial sector in a uniform way

productivity in manufacturing industries canada japan and the united states 1953 1986 was the productivity slowdown reversed this paper analyzes total factor productivity growth and trends in relative efficiency levels in the national two digit manufacturing industries of japan canada and the united states during the last quarter century the well known slowdown in productivity growth rates in the 1973 80 period was a common phenomenon across the three countries but was felt most strongly in japan and least in canada while the 1980s saw a pick up in productivity growth over the slowdown period growth in productivity has not returned to the pre 1973 level the productivity slowdown and any subsequent increase in productivity growth rates have been correlated across industries in the three countries to a very high degree

capital requirements and bank behavior in the uk are there lessons for international capital standards abstract the financial crisis prompted widespread interest in developing a better understanding of how capital regulation drives bank behavior this paper uses a unique comprehensive database of regulatory capital requirements on all uk banks to examine their effects on capital lending and balance sheet management behavior we find that capital requirements that include firm specific time varying add ons set by supervisors affect banks desired capital ratios and that resulting adjustments to capital and lending depend on the gap between actual and target ratios we use these results to measure the effects of a capital regime that includes features similar to those embedded in the uk framework our results suggest that countercyclical capital requirements may be less effective in slowing credit activity when banks can readily satisfy them with lower quality lower costing capital elements versus higher quality common equity given the size of the uk banking sector and the global nature of many of the largest institutions in the uk banking sector the results have implications for the ongoing debate surrounding the design and calibration of international capital standards

borrowing relationships intermediation and the cost of issuing public securities abstract this paper investigates how an established borrowing relationship affects the costs associated with initial public offerings of equity our model illustrates how the existence of a borrowing relationship reduces the ex ante uncertainty about the value of the issuing firm s equity in the secondary market if underpricing is related to uncertainty a borrowing relationship can reduce underpricing empirically we find that other things equal ipos of firms with previously established borrowing relationships are underpriced substantially less than other ipos

financial integration investment and economic growth evidence from two eras of financial globalization abstract does international financial integration boost economic growth the empirical literature has not yet established a robust link between openness to the international capital market and economic growth in this paper we turn to the economic history of the first era of financial globalization 1880 1914 for new insights using identical empirical models and techniques as contemporary studies we find a significant growth effect in the historical period a key difference between now and then is that opening up to the international market led to net capital movements and higher investment in the historical period but it no longer does so today

the synchronization of credit cycles abstract this paper proposes a simple econometric procedure to test for the synchronization of credit cycles using a century of data for 14 advanced economies we find that credit cycle synchronization dropped in the early 1920s from initially relatively high levels between the 1920s and the 1970s synchronization was overall low and concentrated within five predominantly regional clusters however synchronization has significantly increased in the post bretton woods era and has become less associated with geographic proximity australia denmark france italy japan norway spain switzerland the uk and the us form a single major credit cycle cluster since the 1970s a smaller cluster is formed by canada the netherlands and sweden while the german credit cycle follows a distinct path using logistic regressions we find that the synchronization of credit and business cycles go hand in hand our findings are especially relevant for the international coordination of macroprudential policy as well as to spur and inform further analysis on credit cycle dynamics

the spillovers interactions and un intended consequences of monetary and regulatory policies abstract have bank regulatory policies and unconventional monetary policies and any possible interactions been a factor behind the recent deglobalisation in cross border bank lending to test this hypothesis we use bank level data from the uk a country at the heart of the global financial system our results suggest that increases in microprudential capital requirements tend to reduce international bank lending and some forms of unconventional monetary policy can amplify this effect specifically the uk s funding for lending scheme fls significantly amplified the effects of increased capital requirements on cross border lending quantitative easing did not appear to have a similar effect and countries with stronger prudential capital regulations were partially insulated against the effects of these changes in uk policy we find that this interaction between microprudential regulations and the fls can explain roughly 30 of the contraction in aggregate uk cross border bank lending between mid 2012 and end 2013 corresponding to around 10 of the global contraction in cross border lending this suggests that unconventional monetary policy designed to support domestic lending can have the unintended consequence of reducing foreign lending

policy mandates and institutional architecture abstract the model developed in this paper examines the interaction between monetary and macroprudential policies in promoting macroeconomic stability highlighting the role of shocks and policy instruments the paper shows that assigning the mandates of monetary and financial stability to independent authorities enhances macroeconomic stability only when some level of coordination exists between policymakers and it is the dominant institutional arrangement when monetary stability is socially important instead when society values financial stability internalising the policy spillovers by assigning the two mandates to a single policymaker could become the dominant configuration depending on the model s parameter values

fdi in space spatial autoregressive relationships in foreign direct investment abstract there are a number of theoretical reasons why foreign direct investment fdi into a host country may depend on the fdi in proximate countries such spatial interdependence has been largely ignored by the empirical fdi literature with only a couple recent papers accounting for such issues in their estimation this paper conducts a general examination of spatial interactions in empirical fdi models using data on us outbound fdi activity we find that estimated relationships of traditional determinants of fdi are surprisingly robust to inclusion of terms to capture spatial interdependence even though such interdependence is estimated to be significant however we find that both the traditional determinants of fdi and the estimated spatial interdependence are quite sensitive to the sample of countries one examines

how does credit supply respond to monetary policy and bank minimum capital requirements abstract we use data on uk banks minimum capital requirements to study the interaction of monetary policy and capital requirement regulation uk banks were subject to both time varying capital requirements and changes in interest rate policy tightening of either capital requirements or monetary policy reduces the supply of lending lending by large banks reacts substantially to capital requirement changes but not to monetary policy changes lending by small banks reacts to both there is little evidence of interaction between these two policy instruments the differences in the responses of small and large banks identify important distributional consequences within the financial system of these two policy instruments finally our findings do not corroborate theoretical models that raise concerns about complex interactions between monetary policy and macro prudential variation in capital requirements

who is to blame canadian manufacturers and the absence of income per capita convergence no significant convergence between canadian and american income per capita occurred during the first ninety years of the twentieth century this lack of convergence does not appear to have been due to technological dependence input price distortions or diseconomies of scale within the canadian manufacturing sector the evidence presented in this paper is based on total factor productivity measurement statistical testing and counterfactual experimentation using data from national statistical agencies and firm level sources

the impact of capital market integration on educational choice and the consequences for economic growth this paper examines the impact of capital market integration on higher education and the link to economic growth the analysis takes into account that participation in higher education is non compulsory and depends on individual choice due to capital skill complementarity integration increases reduces the incentives to participate in higher education in capital importing exporting economies all other things equal from a national policy point of view public education expenditure should increase after integration of similar economies in order to attract mobile capital using foreign direct investment as a measure of capital flows we present empirical evidence which largely confirms our main hypothesis an increase in net capital inflows in response to capital market integration raises participation in higher education in addition we show that the adjustment in educational attainment is an empirically relevant channel through which capital inflows foster economic growth

bigger establishments in thicker markets can we explain early productivity differentials between canada and the united states we use establishment level data describing manufacturers located in 128 border and near border counties in michigan new york ohio pennsylvania and ontario to calculate canadian relative to u s total factor productivity ratios for 25 industries the data have been compiled from the manuscripts for the 1870 u s and 1871 canadian census of manufacturing our results illustrate that the average u s establishment was approximately 7 more efficient than its canadian counterpart in 1870 71 when we control for establishment size and market density the u s productivity advantage shrinks to slightly less than 3 de plus gros etablissements dans des marches plus denses peut on expliquer les differentiels de productivite entre le canada et les etats unis au siecle dernier on utilise les donnees au niveau de l etablissement decrivant des installations manufacturieres localisees dans 128 comtes a la frontiere ou pres de la frontiere dans les etats du michigan de new york de l ohio de la pennsylvanie et dans la province de l ontario pour calculer la productivite totale relative des facteurs de production dans 25 industries les donnees ont ete extraites des manuscrits des recensements des manufactures des etats unis 1870 et du canada 1871 les resultats indiquent que l etablissement americain moyen etait a peu pres 7 plus productif que sa contrepartie au canada quand on normalise pour tenir compte de la taille de l etablissement et de la densite du marche l avantage comparatif des americains tombent a un peu moins de 3

macroprudential policies and housing prices a new database and empirical evidence for central eastern and southeastern europe several countries in central eastern and southeastern europe used a rich set of prudential instruments during the recent credit and housing boom and bust cycles we construct a comprehensive database of these policy measures covering 16 countries at a quarterly frequency we use this database to investigate whether the policy measures had an impact on housing price inflation the measures that appeared to be effective were capital measures minimum capital adequacy ratio maximum ratio of lending to households to share capital and nonstandard liquidity measures marginal reserve requirements mrrs on foreign funding mrrs linked to credit growth

capital markets integration growth and income distribution the paper considers a two country model of overlapping generation heterogenous economies with intergenerational transfers carried out in the form of bequest and investment in human capital we examine in competitive equilibrium the transitory and long run effects of capital markets integration first we explore how the regime of public education affects the dynamics of the integrated economy second we study the effects of capital markets integration in equilibrium on the intragenerational income distribution in both the host and investing country

canadian immigration policy the effectiveness of the point system and other instruments this paper examines the effects of changes in canadian immigration policy on the occupational composition of immigration we focus on 1967 changes that created a regulatory system including the point system that still forms the framework of canadian immigration policy we find that the point system provides some control over occupational composition but that its effectiveness in fine tuning is limited by the large number of other characteristics it seeks to control we also find that entry class and source country composition of inflow have impacts that have swamped the effects of the point system in the last two decades summary in fre

from financial crisis to great recession the role of globalized banks this paper provides evidence of the role of globalized banks in transmitting financial stresses to the real economy during the global financial crisis a novel dataset is constructed from quarterly balance sheet reports provided by all uk resident banks to the bank of england i find that the shock to bank funding from non resident creditors was transmitted domestically through a significant reduction in bank credit supply resident subsidiaries and branches of foreign owned banks reduced lending by a larger amount than domestically owned banks while the latter calibrated the reduction in domestic lending more closely to the size of the funding shock