the asymmetric effects of monetary policy on the business cycle evidence from the panel smoothed quantile regression model abstract this paper uses a panel smoothed quantile regression model to examine the asymmetric effects of monetary policy on the business cycle by using data for 40 countries from 2005 to 2016 the empirical results show that monetary policy is pro cyclical and amplifies the business cycle the positive effects of monetary policy are larger in the emerging countries and are larger during economic expansions than recessions the findings are robust to alternative panel quantile regression methods this paper contributes to the exploration of distinct roles of monetary policy can play in the different phases of the business cycle

network models and financial stability abstract systemic risk is a key concern for central banks charged with safeguarding overall financial stability in this paper we investigate how systemic risk is affected by the structure of the financial system we construct banking systems that are composed of a number of banks that are connected by interbank linkages we then vary the key parameters that define the structure of the financial system including its level of capitalisation the degree to which banks are connected the size of interbank exposures and the degree of concentration of the system and analyse the influence of these parameters on the likelihood of knock on defaults first we find that the better capitalised banks are the more resilient is the banking system against contagious defaults and this effect is non linear second the effect of the degree of connectivity is non monotonic i e initially a small increase in connectivity increases the contagion effect but after a certain threshold value connectivity improves the ability of a banking system to absorb shocks third the size of interbank liabilities tends to increase the risk of knock on default even if banks hold capital against such exposures fourth more concentrated banking systems are shown to be prone to larger systemic risk all else equal in an extension to the main analysis we study how liquidity effects interact with banking structure to produce a greater chance of systemic breakdown we finally consider how the risk of contagion might depend on the degree of asymmetry tiering inherent in the structure of the banking system a number of our results have important implications for public policy which this paper also draws out

asymmetric price adjustment and economic fluctuations this paper considers a possible explanation for asymmetric adjustment of nominal prices the authors present a menu cost model in which positive trend inflation causes firms relative prices to decline automatically between price adjustments in this environment shocks that raise firms desired prices trigger larger price responses than shocks that lower desired prices the authors use this model of asymmetric adjustment to address three issues in macroeconomics the effects of aggregate demand the effects of sectoral shocks and the optimal rate of inflation copyright 1994 by royal economic society

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

the federal funds rate and the channels of monetary transmission the authors show that the interest rate on federal funds is extremely informative about future movements of real macroeconomic variables then they argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves that is the funds rate is a good indicator of monetary policy actions finally using innovations to the funds rate as a measure of changes in policy the authors present evidence consistent with the view that monetary policy works at least in part through credit i e bank loans as well as through money i e bank deposits copyright 1992 by american economic association

asymmetric monetary policy empirical evidence for italy a growing body of empirical work has examined the potential asymmetry in the effects of monetary policy on united states real activity this study looks for such an empirical evidence for italy in the period 1982 1998 monetary shocks are obtained as residuals from a central bank reaction function where the three months interbank rate is taken as the indicator of the monetary policy stance the effects of these positive and negative shocks on output are statistically different from zero and the null of symmetry between the two is rejected in favour of negative shocks having a greater impact on real output growth thus confirming an asymmetric effect of monetary policy even for italy

corporate governance and the systemic risk a test of bundling hypothesis abstract we provide new evidence that the systemic risk of large banks is higher when the external and internal corporate governance mechanisms complement each other using a sample of large european banks from 2000 to 2016 we examine the relationship between various internal and external corporate governance mechanisms and the level of systemic risk specifically we analyze how monitoring by institutional investors complements or substitutes various board level governance mechanisms in determining systemic risk of a bank our empirical findings show that external institutional ownership and internal board level governance mechanisms complement each other to determine the level of systemic risk of a sample of domestic systemically important banks our results are robust to the alternative systemic risk measures and additional controls we conclude that banks have strategic flexibility in terms of configuring their corporate governance structures to attain similar levels of systemic risk

state dependent pricing and the dynamics of money and output standard macroeconomic models of price stickiness assume that each firm leaves its price unchanged for a fixed amount of time we present an alternative model in which the pricing decision depends on the state of the economy we find a method of aggregating individual price changes that allows a simple characterization of macroeconomic variables the model produces a positive money output correlation and an empirical phillips curve in addition the impact of monetary shocks depends crucially on the current level of output which points to a natural connection between state dependent microeconomics and state dependent macroeconomics i introduction there is a long tradition in macroeconomics of attributing the real effects of nominal demand shocks to nominal price stickiness in this view if there is no change in prices when nominal demand rises then quantities must bear the burden of adjustment hence nominal price rigidity provides the friction needed for nominal demand shocks to be transmitted to the real economy standard models of this transmission mechanism such as fischer 1977 and taylor 1980 are based on the assumption that each firm leaves its price unchanged for a fixed amount of time the main reason for considering such time dependent pricing rules is their analytic tractability constraining firms to adjust their prices at prespecified times both simplifies the derivation of equilibrium strategies and allows the use of powerful time series techniques to analyze aggregate dynamics the main disadvantage of the timedependent approach is that between price adjustments firms are not allowed to respond even to extreme changes of circumstance this makes it difficult to know whether the qualitative effects of money in these models are the result of nominal rigidities per se or of the exogenously imposed pattern of price changes an alternative approach to modeling price stickiness is to allow the price setting decision to depend on the actual state of the

pricing risk adjusted deposit insurance an option based model this paper presents a methodology for arriving at empirical estimates of deposit insurance premiums from market data by using isomorphic relationships betweeen equity and a call option and insurance and a put option the data utilizes the market value of equity to solve for the asset value and its volatility market perceptions of fdic bailout policies are explicitly modeled so as to eliminate the bias in inverted values of assets and their volatility sensitivity analyses are performed to show that rank orderings based on premiums are robust to changes in specification thus facilitating allocation of aggregate premium across banks while economists have long argued in favor of risk adjusted deposit insurance as both more equitable and more efficient than the current system of flatrate premiums various recent developments have further contributed to an increasing dissatisfaction with the current system first both the banking industry and the government seem to be tending to the view that deregulation of the banking industry would be necessary in order to meet more sophisticated future demands on the industry as well as desirable as a policy means of stimulating greater competition among banks moreover a sudden rise in the incidence of bank failures 1 and the vulnerability of the u s banks to the socalled international debt crisis have served to bring to the fore concern about the health of the banking industry in the absence of deposit insurance riskier banks will be able to attract deposits only at higher rates and these higher costs of funding serve as built in market regulated incentives to limit excessive risk taking by banks as introduction of deposit insurance makes deposits equally risk free across banks these incentives disappear and regulation and close supervision of the banking industry must necessarily replace them as deterrents to excessive risk taking thus when insurance is offered at a flat premium regulation is designed to ensure that the risk posed to the insurer both asset and financial risk is appropriately uniform

equity based natural resource allocation for infrastructure development evidence from large hydropower dams in africa and asia abstract large hydropower infrastructure development is a key energy priority in low and middle income countries as a means to increase energy access and promote national development nevertheless hydropower dams can also negatively impact people s livelihoods by reducing access to local natural resources such as land water and food this paper analyses equity based resource allocation from an ecological economics perspective by looking at local resource use competition between different uses food energy livelihoods and users villagers urban settlers local government and dam builders in selected case studies in asia and africa it also illustrates from a political ecology approach divergences between national priorities of energy production and growth and local development needs

understanding the macroeconomic impact of illiquidity shocks in the united states in this paper we empirically investigate the role of stock market illiquidity shocks stemming from amihud s illiquidity measure in explaining u s macroeconomic fluctuations from 1973 to 2018 we find that the impact of illiquidity shocks on economic activity is substantial and historical decomposition analysis shows that cumulative illiquidity shocks were an essential contributor to the prolonged economic slump of the great recession moreover our identified illiquidity shocks represent a distinct source of macroeconomic instability this suggests that illiquidity shocks measured by the stock price impacts may contain more information than other types of shocks in recent studies such as financial shocks and uncertainty shocks jel c32 e32

money income prices and interest rates including data from the 1980s sharply weakens the postwar time series evidence indicating significant relationships between money however defined and nominal income or between money and either real income or prices separately focusing on data from 1970 onward destroys this evidence altogether evidence indicating cointegration of real income and real money balances with due allowance for the effect of interest rates also deteriorates when the sample extends through the 1980s a positive finding is that the spread between the commercial paper rate and the treasury bill rate consistently contains highly significant information about future movements in real income copyright 1992 by american economic association

interpreting the macroeconomic time series facts the effects of monetary policy existing theory and evidence on the effects of monetary policy are reviewed substantial room for disagreement among economists remains new evidence based on multivariate time series studies of several countries is presented while certain patterns in the data consistent with effective monetary policy are strikingly similar across countries others particularly the tendency of interest rate increases to predict high inflation are harder to reconcile with effective monetary policy

regime switching approach to monetary policy effects even though monetary policy has kept interest rates at historically low levels the japanese economy has experienced long lasting recessions since the 1990s in this paper japanese data are employed to conduct an empirical analysis of changes in the effects of monetary policy on the real economy it is found that monetary policy effects vary depending on the phase of the business cycle and the lending attitudes diffusion indices more precisely policy effects are larger in recession but diminish in extreme recession and monetary policy is more effective when lenders attitudes are severe but less effective when they are excessively severe

srisk a conditional capital shortfall measure of systemic risk we introduce srisk to measure the systemic risk contribution of a financial firm srisk measures the capital shortfall of a firm conditional on a severe market decline and is a function of its size leverage and risk we use the measure to study top financial institutions in the recent financial crisis srisk delivers useful rankings of systemic institutions at various stages of the crisis and identifies fannie mae freddie mac morgan stanley bear stearns and lehman brothers as top contributors as early as 2005 q1 moreover aggregate srisk provides early warning signals of distress in indicators of real activity received june 7 2011 accepted april 18 2016 by editor geert bekaert

changing effects of monetary policy in the u s evidence from a time varying coefficient var we estimate a time varying coefficient var model for the us economy to analyse i if the effect of monetary policy on output has been changing systematically over time and ii if monetary policy has asymmetric effects over the business cycle we find that the impact of monetary policy shocks has been gradually declining over the sample period 1962 to 2002 as some theories of the monetary transmission mechanism imply in addition our results indicate that the effects of monetary policy are greater in a recession than in a boom

loss aversion and the asymmetric transmission of monetary policy there is widespread evidence that monetary policy exerts asymmetric effects on output over contractions and expansions in economic activity while price responses display no sizeable asymmetry to rationalize these facts we develop a dynamic general equilibrium model where households utility depends on consumption deviations from a reference level below which loss aversion is displayed state dependent degrees of real rigidity and elasticity of intertemporal substitution in consumption generate competing effects on output and inflation contractions face the central bank with higher responsiveness of output to interest rate changes as well as a flatter aggregate supply schedule

is the response of output to monetary policy asymmetric evidence from a regime switching coefficients model this paper investigates regime switching in the response of u s output to a monetary policy action we find substantial statistically significant time variation in this response that corresponds to high response and low response regimes we then investigate whether the timing of the regime shifts are consistent with three particular manifestations of asymmetry by modeling the transition probabilities governing the switching process as functions of state variables we find strong evidence that policy actions taken during recessions have larger effects than those taken during expansions we find less evidence of asymmetry related to the direction or size of the policy action

markov switching stochastic trends and economic fluctuations abstract i investigate cointegrating relationships such that even though the long run attractors are assumed to be linear the dynamics of the equilibrium errors depends on the business cycle i postulate a markov switching common stochastic trends model to study both the short run responses to permanent shocks and the effects of recessions in the long run growth i apply these findings to explore the short and long run asymmetric relationships among output consumption and investment

post crisis business investment in the euro area and the role of monetary policy business investment in the euro area strongly declined during the global financial crisis and the sovereign debt crisis it has not yet rebounded to its pre crisis trend despite the very expansiona

systemic risk measures the simpler the better abstract this paper estimates and compares two groups of high frequency market based systemic risk measures using european and us interbank rates stock prices and credit derivatives data from 2004 to 2009 measures belonging to the macro group gauge the overall tension in the financial sector and micro group measures rely on individual institution information to extract joint distress we rank the measures using three criteria i granger causality tests ii gonzalo and granger metric and iii correlation with an index of systemic events and policy actions we find that the best systemic measure in the macro group is the first principal component of a portfolio of credit default swap cds spreads whereas the best measure in the micro group is the multivariate densities computed from cds spreads these results suggest that the measures based on cdss outperform measures based on interbank rates or stock market prices

assessing systemic risks and predicting systemic events abstract the paper develops a framework for assessing systemic risks and for predicting systemic events i e periods of extreme financial instability with potential real costs it contributes to the literature on the prediction of financial crises mainly in two ways first it uses a financial stress index for identifying the starting date of systemic financial crises second it uses discrete choice models that combine both domestic and global indicators of macro financial vulnerabilities to predict systemic financial crises the performance of the models is evaluated in a framework that takes into account policy maker s preferences between missing crises and issuing false alarms our analysis shows that combining indicators of domestic and global macro financial vulnerabilities substantially improves the models ability to forecast systemic financial crises our framework also displays a good out of sample performance in predicting the ongoing global financial crisis

dueling policies why systemic risk taxation can fail abstract two policy instruments for the banking sector are investigated namely systemic risk taxation and constructive ambiguity about bailout policy bailout expectations can induce moral hazard in the form of excessive risk taking by banks systemic risk taxation induces banks to prefer uncorrelated investments leading to lower systemic risk formation constructive ambiguity generates uncertainty about bailout prospects however systemic risk taxation also may inform banks about the regulator s concern for financial stability and thereby its bailout policy this result leads to a trade off between systemic risk taxation and constructive ambiguity and highlights the need to consider interdependence across policies when evaluating their effectiveness

systemic risk and asymmetric responses in the financial industry abstract to date an operational measure of systemic risk capturing nonlinear tail comovements between system wide and individual bank returns has not yet been developed this paper proposes an extension of the covar methodology in adrian and brunnermeier 2011 to capture the asymmetric response of the banking system to positive and negative shocks to the market valued balance sheets of individual banks building on a comprehensive sample of u s banks in the period 1990 2010 the evidence in this paper shows that ignoring asymmetries that feature tail interdependences may lead to a severe underestimation of systemic risk on average the relative impact on the system of a fall in individual market value is sevenfold that of an increase moreover the downward bias in systemic risk measuring from ignoring this asymmetric pattern increases with bank size in particular the conditional tail comovement between the banking system and a bank that is losing market value belonging to the top size sorted decile is nearly 5 5 times larger than the unconditional tail comovement versus 3 3 times for banks in the bottom decile the asymmetric model also produces much better fitting with the restriction that gives rise to the standard symmetric model being rejected for most firms in the sample particularly in the segment of large scale banks this result is important from a regulatory and supervisory perspective since the asymmetric generalization enhances the capacity to monitor systemic interdependences

credit growth monetary policy and economic activity in a three regime tvar model we employ a threshold vector autoregression tvar methodology in order to examine the nonlinear nature of the interactions among credit market conditions monetary policy and economic activity we depart from the existing literature on the subject along two dimensions first we focus on a model in which the relevant threshold variable describes the state of economic activity rather than credit market conditions second in contrast to the existing tvar literature which concentrates exclusively on single threshold models we allow for the presence of a second threshold which is overwhelmingly supported by all relevant statistical tests our results indicate that the dynamics of the interactions among credit market conditions monetary policy and economic activity change considerably as the economy moves from one phase of the business cycle to another and that single threshold tvar models are too restrictive to fully capture the nonlinear nature of those interactions the impact of most shocks tends to be largest during periods of sub par economic growth and smallest during times of moderate economic activity by contrast credit risk shocks have the largest impact when output growth is considerably above it long term trend

the effect of changes in the federal funds rate target on market interest rates in the 1970s abstract this paper examines the influence of monetary policy on interest rates by estimating the effect of changes in the federal funds rate target the federal reserve s policy instrument on market interest rates in the 1970s we find that changes in the target caused large movements in short term rates and smaller but significant movements in intermediate and long term rates we hypothesize that the similarity of the reactions of three six and twelve month rates to changes in the target offers a possible explanation for the lack of support for the expectations theory from studies that have tested the theory using these rates

which are the sifis a component expected shortfall approach to systemic risk abstract this paper proposes a component approach to systemic risk which allows to decompose the risk of the aggregate financial system measured by expected shortfall while accounting for the firm characteristics developed by analogy with the component value at risk concept our new systemic risk measure called component es presents several advantages it is a hybrid measure which combines the too interconnected to fail and the too big to fail logics ces relies only on publicly available daily data and encompasses the popular marginal es measure ces can be used to assess the contribution of a firm to systemic risk at a precise date but also to forecast its contribution over a certain period the empirical application verifies the ability of ces to identify the most systemically risky firms during the 2007 2009 financial crisis we show that our measure identifies the institutions labeled as sifis by the financial stability board

what factors drive systemic risk during international financial crises abstract we analyze the determinants of the contribution of international banks to both global and local systemic risk during prominent financial crises we find no empirical evidence supporting conjectures that bank size leverage non interest income or the quality of the bank s credit portfolio are persistent determinants of systemic risk across financial crises in contrast our results show that global systemic risk in particular is predominantly driven by characteristics of the regulatory regime we also confirm for the subprime crisis that the banks contribution to moderately bad tail events in the past predicts the financial sector s crash risk

implications of bank ownership for the credit channel of monetary policy transmission evidence from india using bank level data from india we examine the impact of ownership on the reaction of banks to monetary policy and also test whether the reaction of different types of banks to monetary policy changes is different in easy and tight policy regimes our results suggest that there are considerable differences in the reactions of different types of banks to monetary policy initiatives of the central bank and that the bank lending channel of monetary policy is likely to be much more effective in a tight money period than in an easy money period we also find differences in impact of monetary policy changes on less risky short term and more risky medium term lending we discuss the policy implications of the findings

the dynamic impacts of monetary policy an exercise in tentative identification it is currently popular to identify monetary policy shocks with innovations in some measure of reserves or in the federal funds rate these assumptions about the interest elasticity of the supply of or demand for reserves imply monetary policy shocks that produce dynamic responses of macroeconomic variables that are anomalous relative to traditional monetary analyses this paper tentatively identifies supply and demand shocks in the markets for reserves and m2 for the 1980s and contrasts them with results for the 1970s in the later period identified monetary policy shocks have dynamic impacts that are fully consistent with traditional analyses

trade and the environment from a southern perspective the relationship between free trade and the environment is one of the main issues of contention between environmental and ecological economics environmental economics assumes a positive relationship between free trade economic growth and environmental policies environmental externalities may cause important damage however trade is not to be blamed for this instead the fault lies with policy inadequacies at the national level on the other hand some ecological economists criticise the assumptions of environmental economics especially the immobility of production factors and the positive correlation between income and environmental quality they plead for measures to prevent deterioration of northern environmental standards in a race to the bottom due to ecological dumping from the south in this paper we argue that neither environmental economics nor northern ecological economics take into account the structural conditions determining the international trade system based on some new empirical evidence on material flows we stress the notion of environmental cost shifting if physical and political ecology perspectives are adopted a southern approach to the trade and environment issue may arise 2001 elsevier science b v all rights reserved

systemic risk financial contagion and financial fragility abstract although it is hard to arrive at a widely accepted definition for systemic risk it is generally acknowledged that it is the risk of the occurrence of an event that threatens the well functioning of the system of interest financial payments banking etc sometimes to the point of making its operation impossible we model systemic risk with two main components a random shock that weakens one or more financial institutions and a transmission mechanism which transmits and possibly exacerbates such negative effects to the rest of the system our model could be conceptually represented by a network already described in previous works in this work we show how is possible to estimate the distribution of losses for the banking system with our model additionally we show how it is possible to separate the distribution of losses into two components the losses incurred by the initial shock and the losses resulting from the contagion process finally once the distribution is estimated we can derive standard risk measures for the system as a whole another important contribution of this work is that we can follow the evolution of certain risk measures like the expected loss or the cvar in order to evaluate if the system is becoming more or less risky in fact more or less fragile additionally we can decompose the distribution of losses of the whole banking system into the systemic and the contagion elements and we can determine if the system is more prone to experience contagious difficulties during a certain period of time

are economic time series asymmetric over the business cycle it has long been argued that major cyclical variables such as the unemployment rate display an asymmetric behavior over various phases of the business cycle the paper provides a statistical test for this hypothesis using the framework of finite state markov processes i implement a test to see if the behavior of the unemployment rate is characterized by sudden jumps and slower drops it is argued that the framework provided in the paper can also be used to test other sample path properties of economic time series

corporate debt overhang and macroeconomic expectations one way in which corporate financial structure affects macroeconomic performance is by creating debt overhang debt overhang occurs when existing debt deters new investment because the benefits from new investment will go to the existing creditors not to the new investors if the economy is booming debt overhang will not bind because the returns to investing are high if the economy is stagnant debt overhang will bind because the returns to investing are low as a result high levels of debt can create multiple expectational equilibria in which animal spirits determine economy activity copyright 1995 by american economic association

can we prove a bank guilty of creating systemic risk a minority report because increasing a bank s capital requirement to improve the stability of the financial system imposes costs upon the bank a regulator should ideally be able to prove beyond a reasonable doubt that banks classified as systemically risky really do create systemic risk before subjecting them to this capital punishment evaluating the performance of two leading systemic risk models we show that estimation error alone prevents the reliable identification of the most systemically risky banks we conclude that it will be a considerable challenge to develop a riskometer that is sound and reliable enough to provide an adequate foundation for macroprudential policy

the asymmetric effects of monetary shocks the case of turkey this paper examines whether there is an asymmetry in the effects of positive versus negative and small versus big money supply shocks and whether the effects of the shocks on output and prices vary over the business cycles in the case of turkey negative shocks to money are found to have greater output and smaller price effects compared to the effects of positive shocks irrespective of the initial state of the economy it is also found that monetary shocks of different size affect output growth and inflation rates proportionately these findings can be interpreted as evidence for the view that the short run aggragate supply curve is convex in such a country like turkey

towards an ecological theory of unequal exchange articulating world system theory and ecological economics abstract the focus of this paper is on how an ecological perspective might provide us with an analytically more precise way of defining unequal exchange it is only by looking at the ecological conditions of human economies that we can adequately conceptualize the mechanisms which generate inequalities in distribution considerations of market power aside neoclassical economic ideology has dispelled all possible criteria for assessing a market transaction as unequal or unfair one way to assess the occurrence of unequal exchange may be to look at the direction of net flows of energy and materials concrete productive potential but without falling into the trap of equating productive potential with economic value on the contrary it can be analytically demonstrated that unequal exchange emerges from a kind of inverse relationship between productive potential and economic value the notion of a reasonable market price conceals the fact that what is being exchanged are intact resources for products representing resources already spent if we consider longitudinally along the production process any given set of fuels and raw materials destined to be transformed into a given product plus waste its content of available energy will be inversely related to its utility or price in other words the more of its original energy that has been dissipated the higher its price this means that production i e the dissipation of resources will continuously be rewarded with ever more resources to dissipate generating ecological destruction and global core periphery inequalities as two sides of the same coin

costs of banking system instability some empirical evidence abstract this paper assesses the cross country stylised facts on empirical measures of the losses incurred during periods of banking crises we first consider the direct resolution costs to the government and then the broader costs to the welfare of the economy proxied by losses in gdp we find that the cumulative output losses incurred during crisis periods are large roughly 15 20 on average of annual gdp in contrast to previous research we also find that output losses incurred during crises in developed countries are as high or higher on average than those in emerging market economies moreover output losses during crisis periods in developed countries also appear to be significantly larger 10 15 than in neighbouring countries that did not at the time experience severe banking problems in emerging market economies by contrast banking crises appear to be costly only when accompanied by a currency crisis these results seem robust to allowing for macroeconomic conditions at the outset of crisis in particular low and declining output growth that have also contributed to future output losses during crises episodes

capital shortfall a new approach to ranking and regulating systemic risks the financial crisis of 2007 2009 has given way to the sovereign debt crisis of 2010 2012 yet many of the banking issues remain the same we discuss a method to estimate the capital that a financial firm would need to raise if we have another financial crisis this measure of capital shortfall is based on publicly available information but is conceptually similar to the stress tests conducted by us and european regulators we argue that this measure summarizes the major characteristics of systemic risk and provides a reliable interpretation of the past and current financial crises

are market based measures of global systemic importance of financial institutions useful to regulators and supervisors we analyze whether four market based measures of the global systemic importance of financial institutions offer early warning signals during three financial crises the tests based on the 2007 2008 crisis show that only one measure covar consistently adds predictive power to conventional early warning models however the additional predictive power remains small and it is not normally confirmed for the asian and the 1998 crises we conclude that it is problematic to identify a market based measure of systemic importance that remains valid across crises with different features the same criticism also applies to several conventional proxies of systemic importance of which size is the most consistent performer

the roles of corporate governance in bank failures during the recent financial crisis abstract this paper analyzes the roles of corporate governance in bank defaults during the recent financial crisis of 2007 2010 using a data sample of 249 default and 4 021 no default us commercial banks we investigate the impact of bank ownership and management structures on the probability of default the results show that defaults are strongly influenced by a bank s ownership structure high shareholdings of outside directors and chief officers managers with a chief officer position such as the ceo cfo etc imply a substantially lower probability of failure in contrast high shareholdings of lower level management such as vice presidents increase default risk significantly these findings suggest that high stakes in the bank induce outside directors and upper level management to control and reduce risk while greater stakes for lower level management seem to induce it to take high risks which may eventually result in bank default some accounting variables such as capital earnings and non performing loans also help predict bank default however other potential stability indicators such as the management structure of the bank indicators of market competition subprime mortgage risks state economic conditions and regulatory influences do not appear to be decisive factors in predicting bank default

systemic risk measurement multivariate garch estimation of covar abstract we modify adrian and brunnermeier s 2011 covar the var of the financial system conditional on an institution being in financial distress we change the definition of financial distress from an institution being exactly at its var to being at most at its var this change allows us to consider more severe distress events to backtest covar and to improve its consistency monotonicity with respect to the dependence parameter we define the systemic risk contribution of an institution as the change from its covar in its benchmark state defined as a one standard deviation event to its covar under financial distress we estimate the systemic risk contributions of four financial industry groups consisting of a large number of institutions for the sample period june 2000 to february 2008 and the 12 months prior to the beginning of the crisis we also investigate the link between institutions contributions to systemic risk and their characteristics

do recessions permanently change output abstract this paper examines whether negative innovations to gnp are more or less persistent than positive innovations we find that once we allow for the impulse response of gnp to be asymmetric negative innovations to gnp are observed to be much less persistent than positive ones in particular the effect of a recession on the forecast of output is found to be negligible after only eight to twelve quarters while the effect of a positive shock is estimated to be persistent and amplified over time our results may therefore help reconcile two antagonistic views about the nature of business cycle fluctuations

the mis behaviour of the aggregate price level this paper investigates the response of the price level to random monetary shocks through a model of the fixed cost of changing a nominal price it shows that in an inflationary environment an expansionary monetary shock is accommodated faster than a contractionary monetary shock furthermore when the average rate of monetary expansion increases the lag in response to a positive shock decreases the study also proves that the relationship between the expected rate of inflation and the variance of real prices is positive only above a critical level of expected inflation the most striking result in this area appears in the work of caplin and spulber 1987 they show that in the aggregate when inflation is monotone stickiness disappears even when all firms follow a strict s s rule in their model since firms are uniformly distributed discontinuous price adjustment at the firm level does not create stickiness at the aggregate level caballero and engel 1992 extend this analysis to incorporate idiosyncratic shocks they show that in the presence of monotone idiosyncratic shocks the long run stationary distribution of prices is the uniform distribution but in the short run when the distribution of prices is arbitrary aggregate stickiness can result from firms discontinuous price adjustments in the present work the focus shifts i use a model where aggregate stickiness emerges naturally from firms discontinuous price setting to investigate the effects of the rate of inflation on aggregate stickiness this work shows that aggregate stickiness is negatively correlated with the rate of inflation the higher the rate of inflation the less sticky the response of the aggregate price level with respect to positive nominal shocks and the closer the economy approaches the caplin and spulber model therefore when modeling a dynamic inflation tax one must account not only for the decrease in the monetary base but also for the increase in the speed at which the aggregate price level 889

systemic risk and bank size abstract in this paper we analyse firm level systemic risk for us and european banks from 2004 to 2012 we observe that common systemic risk indicators are primarily driven by firm size which implies an overriding concern for too big to fail institutions however smaller banks may still pose considerable systemic threats as exemplified by the northern rock debacle in 2007 by introducing a simple standardisation we obtain new risk measures that often prove to be superior predictors of financial distress during the 2007 2009 subprime crisis we conclude that the new measures could be a valuable addition to the existing indicators employed in basel iii to identify systemically important banks

sticky price and limited participation models of money a comparison abstract we provide new evidence that models of the monetary transmission mechanism should be consistent with at least the following facts after a contractionary monetary policy shock the aggregate price level responds very little aggregate output falls interest rates initially rise real wages decline by a modest amount and profits fall we compare the ability of sticky price and limited participation models with frictionless labor markets to account for these facts the key failing of the sticky price model lies in its counterfactual implications for profits the limited participation model can account for all the above facts but only if one is willing to assume a high labor supply elasticity 2 percent and a high markup 40 percent the shortcomings of both models reflect the absence of labor market frictions such as wage contracts or factor hoarding which dampen movements in the marginal cost of production after a monetary policy shock 1997 elsevier science b v

beyond chayanov a sustainable agroecological farm reproductive analysis of peasant domestic units and rural communities sentmenat catalonia 1860 abstract we present a sustainable agroecological farm reproduction analysis that links two methodologies kept separated so far optimization modelling and social metabolism accounting of the biophysical turnover from a fund flow approach this socio agro ecological model combines two scales at farm gate and municipal levels and formalizes all relevant flows interlinking three living funds that have to be reproduced over time the domestic unit livestock and soil fertility from the requirements and capacities of each fund constraints we run the model under different scenarios objective functions to see the different configurations that the landscape structure and the flow patterns can take variables ensuring the reproducibility of funds by changing the objectives we obtain an intensive optimum that minimizes the land required an extensive optimum that minimizes labour and a monetary optimum that maximizes a prevailing cash crop the model is applied to a past advanced organic farming of a catalan village c 1860 to generate a set of counterfactual scenarios that confronted with historical data help to reveal how institutional settings and landownership inequality played a role in maintaining the real socio agro ecological structure away from these optima and the existing potential of possible eco functional intensification practices aimed at reducing the land cost of agrarian sustainability

financial structure and aggregate economic activity an overview this paper surveys literature that explores the possible links between the financial system and aggregate economic behavior the survey is in two parts the first reviews the traditional work and the second discusses new research copyright 1988 by ohio state university press

are the effects of monetary policy asymmetric huntley schaller by building on the hamilton 1989 markov switching model we examine questions like does monetary policy have the same effect in expansions and recessions given that the economy is currently in a recession does a fall in interest rates increase the probability of an expansion does monetary policy have an incremental effect on the growth rate within a given state or does it only affect the economy if it is sufficiently strong to induce a state change e g from recession to expansion as suggested by models with sticky prices or finance constraints interest rate changes have larger effects during recessions jel e52 e32 much of the recent work in macroeconomics has proceeded under the assumption that variables follow linear stochastic processes with constant coefficients as a result some of the richness of the burns mitchell analysis such as its focus on asymmetries between recessions and expansions may well have been lost blanchard and fischer 1989 7 i introduction for decades macroeconomists have debated whether monetary policy has the same effect on real output in expansions and recessions as far back as the 1930s keynes and pigou debated whether monetary policy would have less effect on output during a severe economic downturn in the 1960s there were active debates on a very different proposition namely whether the rightward portion of the aggregate supply curve was vertical so that monetary policy would have less effect on real output during expansions in this article we provide a new type of evidence on whether monetary policy has different effects depending on whether the economy is in an expansion or recession empirical evidence on this issue is particularly relevant in light of new theoretical work in macroeconomics that predicts asymmetric effects of demand shocks conditional on the state of the economy two examples of this work are s s type models of price adjustment and models in which there are agency costs of financial intermediation 1 the intuition for the latter class of models is simple 2 when there is information asymmetry in financial markets agents may behave as if they were constrained for a variety of reasons these finance constraints are more likely to bind during recessions when the net worth of agents is low an increase in interest rates will then have two effects on investment the standard effect of increasing the cost of capital and therefore reducing investment demand and an additional effect of reducing liquidity e g by increasing debt service obligations and thus reducing investment demand for constrained agents as a result monetary policy actions that change interest rates will have greater effects during a recession 3 the s s type price adjustment models of ball and mankiw 1994 caballero and engel 1992 and tsiddon 1993 lead to a convex aggregate supply curve and therefore also imply that monetary policy will have stronger effects during recessions one of the more frequently cited empirical papers on the potentially asymmetric effects of monetary policy is cover 1992 which finds evidence that positive monetary shocks have different effects from negative monetary shocks we are looking at a different type of asymmetry namely between booms and recessions we study asymmetries using an extension of the markov switching model developed by hamilton 1989 estimated over the period 1955 93 in hamilton s econometric specification the growth rate of output depends on a state variable that corresponds to an expansion or recession this approach has several advantages first unlike linear projections it allows for nonlinearities and asymmetries second in estimating the recession coefficients it gives greater relative weight to observations that most clearly correspond to recessions and similarly for the expansion coefficients

regional drivers of on farm energy production in bavaria abstract bavaria s energy policy seeks to increase the share of power supply from renewable sources related to on farm energy production agricultural biogas wind and solar energy from currently 15 to more than 30 in 2021 it is therefore of particular interest for policy makers to identify regional drivers of and barriers to this concept the presented study addresses this issue and applies a spatial regression analysis to bavaria s 71 rural counties the findings indicate significant impacts of technological regional transformation ability agricultural structure degree of professionalization and consolidation of organic farming and neighborhood effects this is in contrast to most geographical factors which seem to be of minor relevance

measuring network systemic risk contributions a leave one out approach abstract the aim of this paper is to propose a new network measure of systemic risk contributions that combines the pair wise granger causality approach with the leave one out concept this measure is based on a conditional granger causality test and consists of measuring how far the proportion of statistically significant connections in the system breaks down when a given financial institution is excluded we analyse the performance of our measure of systemic risk by considering a sample of the largest banks worldwide over the 2003 2018 period we obtain three important results first we show that our measure is able to identify a large number of banks classified as global systemically important banks g sibs by the financial stability board fsb second we find that our measure is a robust and statistically significant early warning indicator of downside returns during the last financial crisis finally we investigate the potential determinants of our measure of systemic risk and find similar results to the existing literature in particular our empirical results suggest that the size and the business model of banks are significant drivers of systemic risk

impact of the financial crisis on bank run risk danger of the days after abstract we examine the developments of depositor knowledge attitudes and behavior throughout the recent financial crisis and discuss their impact on bank run risk based on a self collected data set surveying depositors before 2007 at 2008 and after the peak of the crisis 2009 we observe a worrying dynamic pattern at the peak depositors knew more about deposit insurance placed more importance on deposit security and slightly raised their deposits however in the aftermath of the crisis the enhanced depositor knowledge proved to be non permanent while the increased importance of deposit security and the exposure of depositors persisted the proportion of completely uninformed strongly involved and highly exposed depositors who carry the highest risk of triggering a bank run was reduced around the peak of the crisis but rebounded strongly afterwards even exceeding pre crisis levels these findings point to a higher bank run risk in the aftermath than during the financial crisis

does monetary policy have asymmetric effects on stock returns this paper investigates whether monetary policy has asymmetric effects on stock returns using markov switching models different measures of a monetary policy stance are adopted empirical evidence from monthly returns on the standard poor s 500 price index suggests that monetary policy has larger effects on stock returns in bear markets furthermore it is shown that a contractionary monetary policy leads to a higher probability of switching to the bear market regime

the environmentalism of the poor revisited territory and place in disconnected glocal struggles abstract in 2002 the year it was published the environmentalism of the poor was one of the first books examining in a multidisciplinary perspective three parallel environmental movements around the world eleven years later we re examine these movements the cult of wilderness the gospel of eco efficiency and the mantra of environmental justice focusing on the increased visibility of struggles representing environmental justice and the environmentalism of the poor even if they are often disconnected from an organizational standpoint glocal manifestations of resistance have emerged since the 1990s today environmental movements assert common values related to place identity and culture activists concepts such as ecological debt environmental justice environmental liabilities land grabbing environmental gentrification corporate accountability climate justice food sovereignty or economic degrowth are the keywords of the networks of the global environmental justice movement at the same time such concepts support the rural and urban movements that remake place for marginalized groups re assert traditional practices and protect territory from contamination land appropriation and real estate speculation some possibilities exist for cooperation between environmental justice and the other varieties of environmentalism here comparative research can help unravel the use of valuation languages different from green economic growth or sustainable development

competition for land a sociometabolic perspective abstract possible negative effects of increased competition for land include pressures on biodiversity rising food prices and ghg emissions however neoclassical economists often highlight positive aspects of competition e g increased efficiency and innovation competition for land occurs when several agents demand the same good or service produced from a limited area it implies that when one agent acquires scarce resources from land less resource is available for competing agents the resource competed for is often not land but rather its function for biomass production which may be supplanted by other inputs that raise yields increased competition may stimulate efficiency but negative environmental effects are likely in the absence of appropriate regulations competition between affluent countries with poor people in subsistence economies likely results in adverse social and development outcomes if not mitigated through effective policies the socioecological metabolism approach is a framework to analyze land related limits and functions in particular with respect to production and consumption of biomass and carbon sequestration it can generate databases that consistently link land used with biomass flows which are useful in understanding interlinkages between different products and services and thereby help to analyze systemic feedbacks in the global land system

rollover risk and market freezes the debt capacity of an asset is the maximum amount that can be borrowed using the asset as collateral we model a sudden collapse in the debt capacity of good collateral we assume short term debt that must be frequently rolled over a small transaction cost of selling collateral in the event of default and a small probability of meeting a buy to hold investor we then show that a small change in the asset s fundamental value can be associated with a catastrophic drop in the debt capacity the kind of market freeze observed during the crisis of 2007 to 2008 one of the many striking features of the crisis of 2007 to 2008 was the sudden freeze in the market for the rollover of short term debt from an in stitutional perspective the inability to borrow overnight against high quality but long term assets was a market failure that effectively led to the demise of a substantial part of investment banking in the united states more broadly it led to the collapse in the united states the united kingdom and other countries of banks and other financial institutions that had relied on signifi cant maturity mismatch between assets and liabilities and in particular on the rollover of short term wholesale debt in the asset backed commercial paper abcp and overnight sale and repurchase repo markets in this paper we are interested in developing a model of a sudden collapse in the ability to borrow short term against long lived assets in the absence of obvious problems of asymmetric information or fears about the value of col lateral we refer to this phenomenon as a market freeze more precisely a market freeze occurs when the debt capacity the maximum amount of collat eralized borrowing that can be supported by an asset is a small fraction of the fundamental value the economic value measured by the net present value npv of the stream of future returns an extreme form of a market freeze occurs when the fundamental value is close to the maximum possible value of the asset whereas the debt capacity is close to the minimum possible value of the asset

state dependent transmission of monetary policy in the euro area we estimate a logit mixture vector autoregressive model describing monetary policy transmission in the euro area over the period 1999 2015 in contrast to other classes of nonlinear vector autoregressive models regime affiliation is neither strictly binary nor binary with a transition period and based on multiple variables we show that monetary policy transmission in the euro area can be described as a mixture of two states in both states output and prices are found to decrease after contractionary monetary policy shocks however the effects of monetary policy are less enduring in the crisis state

asymmetric effects of positive and negative money supply shocks this paper examines whether positive and negative money supply shocks have symmetric effects on output the results are consistent with the hypothesis that positive money supply shocks do not have an effect on output while negative money supply shocks do have an effect on output this finding is independent of whether or not expected money is assumed to affect output the results reported in this paper imply that the fed could increase the growth rate of real output by reducing the standard deviation of unexpected changes in the money supply

monetary policy effectiveness and stock market cycles in asean 5 this article examines the asymmetric effects of monetary policy on real output in bull and bear phases of stock market in five asean economies malaysia singapore indonesia the philippines and thailand using the recently developed pooled mean group pmg technique stock market cycles are identified by employing markov switching models and the rule based nonparametric approach estimating the models using monthly data from 1991 1 to 2011 12 the results show that monetary policy measured by short term interest rate has a negative and statistically significant long run effect on real output in bull and bear market periods while the effects are stronger in bear periods than bulls in the short run there is no statistically significant relationship between monetary policy and real output these results are consistent with finance constraints capital market imperfection models that predict that monetary policy is more effective during bear periods than bulls