nep-ban New Economics Papers
on Banking
Issue of 2015‒01‒19
twenty-one papers chosen by
Christian Calmès, Université du Québec en Outaouais

  1. Banks' incentives and the quality of internal risk models By Plosser, Matthew; Santos, Joao A. C.
  2. Competition and Bank Opacity By Liangliang Jiang; Ross Levine; Chen Lin
  3. The Analytical Framework For Identifying And Benchmarking Systemically Important Financial Institutions In Europe By Renata Karkowska
  4. Banking panics and protracted recessions By Sanches, Daniel R.
  5. Sovereign Risk, Interbank Freezes, and Aggregate Fluctuations By Philipp Engler; Christoph Große Steffen
  6. Credit Supply and the Housing Boom By Justiniano, Alejandro; Primiceri, Giorgio E.; Tambalotti, Andrea
  7. Liquidity regulation and bank behavior By Bonner, C.
  8. Borrower Protection and the Supply of Credit: Evidence from Foreclosure Laws By Jihad Dagher; Yangfan Sun
  9. Enhancing prudential standards in financial regulations By Allen, Franklin; Goldstein, Itay; Jagtiani, Julapa; Lang, William W.
  10. Sovereign Defaults and Banking Crises By Cesar Sosa-Padilla
  11. Performance Analysis of Liquidity Indicators as Early Warning Signals By Chung-Hua Shen; Ting-Hsuan Chen
  12. An unobvious dynamics of rolled over time banking deposits under a shift in depositors’ preferences: whether a decrease of weighted average maturity of deposits is indeed an early warning liquidity indicator? By Voloshyn, Ihor
  13. Option-Based Credit Spreads By Christopher L. Culp; Yoshio Nozawa; Pietro Veronesi
  14. MRO bidding in the presence of LTROs: an empirical analysis of the pre-crisis period By Vogel, Edgar
  15. Hybrid intermediaries By Cetorelli, Nicola
  16. Monetary Policy, Financial Conditions, and Financial Stability By Tobias Adrian; Nellie Liang
  17. An Overview of Macroprudential Policy Tools By Stijn Claessens
  18. The determinants of household debt: a cross-country analysis By Massimo Coletta; Riccardo De Bonis; Stefano Piermattei
  19. Effectiveness and transmission of the ECB’s balance sheet policies By Jef Boeckx; Maarten Dossche; Gert Peersman
  20. The retail bank interest rate pass-through: The case of the euro area during the financial and sovereign debt crisis By Darracq Pariès, Matthieu; Moccero, Diego; Krylova, Elizaveta; Marchini, Claudia
  21. Crises and Government: Some Empirical Evidence By Jamie Bologna; Andrew T. Young

  1. By: Plosser, Matthew (Federal Reserve Bank of New York); Santos, Joao A. C. (Federal Reserve Bank of New York)
    Abstract: This paper investigates the incentives for banks to bias their internally generated risk estimates. We are able to estimate bank biases at the credit level by comparing bank-generated risk estimates within loan syndicates. The biases are positively correlated with measures of regulatory capital, even in the presence of bank fixed effects, consistent with an effort by low-capital banks to improve regulatory ratios. At the portfolio level, the difference in borrower probability of default is as large as 100 basis points, which can improve the typical loan portfolio’s Tier 1 capital ratio by as much as 33 percent. Congruent with a regulatory motive, the sensitivity to capital is greater for larger, riskier, and more opaque credits. In addition, we find that low-capital banks’ risk estimates have less explanatory power than those of high-capital banks with regard to the prices set on loans, indicating that low-capital banks not only have downward-biased risk estimates but that they also incorporate less information.
    Keywords: banks; incentives; default models; capital regulation; Basel II
    JEL: G21 G28
    Date: 2014–12–01
  2. By: Liangliang Jiang; Ross Levine; Chen Lin
    Abstract: Did regulatory reforms that lowered barriers to competition among U.S. banks increase or decrease the quality of information that banks disclose to the public and regulators? We find that an intensification of competition reduced abnormal accruals of loan loss provisions and the frequency with which banks restate financial statements. The results indicate that competition reduces bank opacity, enhancing the ability of markets and regulators to monitor banks.
    JEL: D22 D4 G21 G28 G38
    Date: 2014–12
  3. By: Renata Karkowska (University of Warsaw, Faculty of Management)
    Abstract: The aim of this article is to identify systemically important banks on a European scale, in accordance with the criteria proposed by the supervisory authorities. In this study we discuss the analytical framework for identifying and benchmarking systemically important financial institutions. An attempt to define systemically important institutions is specified their characteristics under the existing and proposed regulations. In a selected group of the largest banks in Europe the following indicators ie.: leverage, liquidity, capital ratio, asset quality and profitability are analyzed as a source of systemic risk. These figures will be confronted with the average value obtained in the whole group of commercial banks in Europe. It should help finding the answer to the question, whether the size of the institution generates higher systemic risk? The survey will be conducted on the basis of the financial statements of commercial banks in 2007 and 2010 with the available statistical tools, which should reveal the variability of risk indicators over time. We find that the largest European banks were characterized by relative safety and without excessive risk in their activities. Therefore, a fundamental feature of increased regulatory limiting systemic risk should understand the nature and sources of instability, and mobilizing financial institutions (large and small) to change their risk profile and business models in a way that reduces the instability of the financial system globally.Length: 32 pages
    Keywords: banking, Systematically Important Financial Institutions, SIFI, systemic risk, liquidity, leverage, profitability
    JEL: C1 F36 G21 G32 G33
    Date: 2014–09
  4. By: Sanches, Daniel R. (Federal Reserve Bank of Philadelphia)
    Abstract: This paper develops a dynamic theory of money and banking that explains why banks need to hold an illiquid portfolio to provide socially optimal transaction and liquidity services, opening the door to the possibility of equilibrium banking panics. Following a widespread liquidation of banking assets in the event of a panic, the banking portfolio consistent with the optimal provision of transaction and liquidity services during normal times cannot be quickly reestablished, resulting in an unusual loss of wealth for all depositors. This negative wealth effect stemming from the liquid portion of the consumers' portfolio is strong enough to produce a protracted recession. A key element of the theory is the existence of a dynamic interaction between the ability of banks to offer transaction and liquidity services and the occurrence of panics.
    Keywords: Banking Panics; Medium Of Exchange; Random Matching; Transaction Services; Liquidity Insurance
    JEL: E32 E42 G21
    Date: 2014–12–22
  5. By: Philipp Engler; Christoph Große Steffen
    Abstract: This paper studies the bank-sovereign link in a dynamic stochastic general equilibrium set-up with strategic default on public debt. Heterogeneous banks give rise to an interbank market where government bonds are used as collateral. A default penalty arises from a breakdown of interbank intermediation that induces a credit crunch. Government borrowing under limited commitment is costly ex ante as bank funding conditions tighten when the quality of collateral drops. This lowers the penalty from an interbank freeze and feeds back into default risk. The arising amplification mechanism propagates aggregate shocks to the macroeconomy. The model is calibrated using Spanish data and is capable of reproducing key business cycle statistics alongside stylized facts during the European sovereign debt crisis.
    Keywords: Sovereign default, interbank market, bank-sovereign link, Non-Ricardian effects, secondary markets, domestic debt, occasionally binding constraint
    JEL: E43 E44 F34 H63
    Date: 2014
  6. By: Justiniano, Alejandro (Federal Reserve Bank of Chicago); Primiceri, Giorgio E. (Northwestern University); Tambalotti, Andrea (Federal Reserve Bank of New York)
    Abstract: The housing boom that preceded the Great Recession was due to an increase in credit supply driven by looser lending constraints in the mortgage market. This view on the fundamental drivers of the boom is consistent with four empirical observations: the unprecedented rise in home prices and household debt, the stability of debt relative to house values, and the fall in mortgage rates. These facts are difficult to reconcile with the popular view that attributes the housing boom to looser borrowing constraints associated with lower collateral requirements. In fact, a slackening of collateral constraints at the peak of the lending cycle triggers a fall in home prices in our framework, providing a novel perspective on the possible origins of the bust.
    Keywords: Credit; housing prices; mortgages
    JEL: E44 G21 R21
    Date: 2014–07–01
  7. By: Bonner, C.
    Abstract: In response to the 2007-08 financial crisis, the Basel Committee on Banking Supervision proposed two liquidity standards to reinforce banks’ resilience to liquidity risks. The purpose of this thesis is to analyze the impact of liquidity regulation on bank behavior. The first of four main chapters analyzes the development of global liquidity standards, their objectives as well as their interaction with capital standards. The analysis suggests that regulating capital is associated with declining liquidity buffers. The interaction of liquidity regulation and monetary policy, the view that regulating capital also addresses liquidity risks as well as a lack of supervisory momentum were important factors hampering the harmonization of liquidity regulation. Chapter 3 takes a wide view on the impact of liquidity regulation on banks' liquidity management. The key question is whether the presence of liquidity regulation substitutes banks' incentives to hold liquid assets. The cross-country analysis suggests that most bank-specific and country-specific determinants of banks’ liquidity buffers are substituted by liquidity regulation while a bank's disclosure requirements become more important. The complementary nature of disclosure and liquidity requirements provides a strong rationale for considering them jointly in the design of regulation. Chapter 4 zooms in on one of the key questions regarding the interaction of the LCR with monetary policy transmission. The analysis shows that a liquidity requirement causes short-term and long-term interest rates as well as demand for long-term loans to increase. However, banks do not seem able to pass on the increased funding costs in the interbank market to their private sector clients. Rather, a liquidity requirement seems to decrease banks' interest margins, which might require central banks to use a representative real economy interest rate as additional target for monetary policy implementation. Chapter 5 is motivated by the European sovereign debt crisis and analyzes the impact of preferential regulatory treatment on banks’ demand for government bonds. The analysis suggests that preferential treatment in liquidity and capital regulation increases banks' demand for government bonds beyond their own risk appetite. Liquidity and capital regulation also seem to incentivize banks to substitute other bonds with government bonds. The thesis concludes with an epilogue on liquidity stress testing.
    Date: 2014
  8. By: Jihad Dagher; Yangfan Sun
    Abstract: Laws governing the foreclosure process can have direct consequences on the costs of foreclosure and could therefore affect lending decisions. We exploit the heterogeneity in the judicial requirements across U.S. states to examine their impact on banks’ lending decisions in a sample of urban areas straddling state borders. A key feature of our study is the way it exploits an exogenous cutoff in loan eligibility to GSE guarantees which shift the burden of foreclosure costs onto the GSEs. We find that judicial requirements reduce the supply of credit only for jumbo loans that are ineligible for GSE guarantees. These laws do not affect, however, the relative demand of jumbo loans. Our findings, which also hold using novel nonbinary measures of judicial requirements, illustrate the consequences of foreclosure laws on the supply of mortgage credit. They also shed light on a significant indirect cross-subsidy by the GSEs to borrower-friendly states that has been overlooked thus far.
    Keywords: Mortgages;United States;Banks;Loans;Credit;Supply and demand;Econometric models;Borrower protection, foreclosure laws, credit supply, regulation, GSEs
    Date: 2014–11–26
  9. By: Allen, Franklin (The Wharton School of the University of Pennsylvania and Imperial College London); Goldstein, Itay (The Wharton School of the University of Pennsylvania); Jagtiani, Julapa (Federal Reserve Bank of Philadelphia); Lang, William W. (Federal Reserve Bank of Philadelphia)
    Abstract: The financial crisis has generated fundamental reforms in the financial regulatory system in the U.S. and internationally. Much of this reform was in direct response to the weaknesses revealed in the precrisis system. The new “macroprudential” approach to financial regulations focuses on risks arising in financial markets broadly, as well as the potential impact on the financial system that may arise from financial distress at systemically important financial institutions. Systemic risk is the key factor in financial stability, but our current understanding of systemic risk is rather limited. While the goal of using regulation to maintain financial stability is clear, it is not obvious how to design an effective regulatory framework that achieves the financial stability objective while also promoting financial innovations. This paper discusses academic research and expert opinions on this vital subject of financial stability and regulatory reforms. Specifically, among other issues, it discusses the impact of increasing public disclosure of supervisory information, the effectiveness of bank stress testing as a tool to enhance financial stability, whether the financial crisis was caused by too big to fail (TBTF), and whether the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA) resolution regime would be effective in achieving financial stability and ending TBTF.
    Keywords: Financial stability; Financial regulations; Systemic risk; Too Big To Fail; Stress testing; Resolution plan; Mortgage finance
    JEL: G01 G18 G21 G23 G28
    Date: 2014–12–03
  10. By: Cesar Sosa-Padilla (McMaster University)
    Abstract: Episodes of sovereign default feature three key empirical regularities in connection with the banking systems of the countries where they occur: (i) sovereign defaults and banking crises tend to happen together, (ii) commercial banks have substantial holdings of government debt, and (iii) sovereign defaults result in major contractions in bank credit and production. This paper provides a rationale for these phenomena by extending the traditional sovereign default framework to incorporate bankers that lend to both the government and the corporate sector. When these bankers are highly exposed to government debt a default triggers a banking crisis, which leads to a corporate credit collapse and subsequently to an output decline. When calibrated to Argentina's 2001 default episode the model produces default on equilibrium with a frequency in line with actual default frequencies, and when it happens credit experiences a sharp contraction which generates an output drop similar in magnitude to the one observed in the data. Moreover, the model also matches several moments of the cyclical dynamics of macroeconomic aggregates.
    Date: 2014
  11. By: Chung-Hua Shen (National Taiwan University and Hong Kong Institute for Monetary Research); Ting-Hsuan Chen (Providence University)
    Abstract: This study compares the performance of an old liquidity ratio (LiqR) and two new liquidity indicators, namely, liquidity creation (LiqC) and net stable funding difference (NSFD), in sending early warning signals for distressed banks. Recent evidence shows that the old indicator appears incapable of measuring the liquidity condition of banks. However, the two new indicators have not yet been fully examined in terms of their possible role as indicators. We classify distressed banks into banks that have experienced a bank run, bailout, and failure. Sample data are collected from the United States and the European Union from before and after the crisis (2005-2009). We estimate a model using a sample before the crisis to predict liquidity shortages in 2008 and 2009. Evidence shows that the academic (LiqC) and officially recommended indicators (NSFD) outperform LiqR as early warning signal. Furthermore, LiqC is superior when banks actively engage in income diversification but not when banks engage in fund diversification. Therefore, a well income-diversified bank with a high LiqC tends to have a high distress probability in subsequent periods.
    Keywords: Liquidity Creation, Net Stable Funding Difference, Liquidity Ratio, Funding Diversification, Income Diversification
    JEL: C23 G21 G32
    Date: 2014–12
  12. By: Voloshyn, Ihor
    Abstract: A continuous-time deterministic model for analytical simulation of an impact of changes in credit turnover, term to maturity structure and rollover rate on balances of time banking deposits, i.e., preferences of depositors, is developed. The model allows taking into account an attraction of new deposits and rolling over the maturing deposits. It is shown some deceptive and unobvious regimes of depositing when the deposit balances increase in the beginning and then fall down and vice versa. It is presented an equilibrium money conservation law for banks. Besides, the examples of calculations of continuous-time deposit dynamics are given. It is shown that such a Basel early warning liquidity indicator as a decrease of weighted average maturity of liabilities is necessary but not sufficient. It is proposed that to make more accurate ALM decisions and avoid serious managerial errors a bank should rely not only on a change in deposit balances but on changes in turnovers, term structure of deposits and rollover rate. At long-term lending, a bank should orient on minimal deposit balances in a short-term period and long-term, steady state deposit balances, employing for this an equilibrium money conservation law.
    Keywords: bank, time deposit, retail, balance, credit turnover, debit turnover, term to maturity, rollover rate, dynamics, money conservation law, liquidity, early warning indicator, Basel iii, asset liability management (ALM), Volterra integral equation, Laplace transform
    JEL: G21
    Date: 2014–12–25
  13. By: Christopher L. Culp; Yoshio Nozawa; Pietro Veronesi
    Abstract: Theoretically, corporate debt is economically equivalent to safe debt minus a put option on the firm’s assets. We empirically show that indeed portfolios of long Treasuries and short traded put options (“pseudo bonds”) closely match the properties of traded corporate bonds. Pseudo bonds display a credit spread puzzle that is stronger at short horizons, unexplained by standard risk factors and unlikely to be solely due to illiquidity. Our option-based approach also offers a novel, model-free benchmark for credit risk analysis, which we use to run empirical experiments on credit spread biases, the impact of asset uncertainty, and bank-related rollover risk.
    JEL: G0 G12 G13 G21 G24 G3
    Date: 2014–12
  14. By: Vogel, Edgar
    Abstract: Using individual data from the Eurosystem’s liquidity providing tenders for the pre-crisis period we investigate banks’ joint bidding behaviour in Main Refinancing Operation (MRO) and Longer Term Refinancing Operations (LTRO). We test whether banks bid at lower rates in MROs before the LTRO and at higher rates after the LTRO, compared to other operations. We offer two main findings. First, we find that in general banks bid in the MRO before the LTRO at lower rates as compared to “other” MROs. Moreover, MRO participants which also bid in the following LTRO bid at even lower rates, compared to peers not bidding in the LTRO. These findings support the hypothesis that banks view obtaining liquidity from the two operations as substitutes and bid strategically. Second, we find that banks generally bid more aggressively in the MRO after the LTRO. Even more striking, banks which participated also in the LTRO preceding the MRO bid at substantially higher rates. These findings reflect that “short” banks, with potentially large net liquidity needs after the LTRO bid more aggressively. Other counterparties with liquidity needs in that particular operation are forced, as a best response reaction, to bid also at higher rates. Although size plays a considerable role for bidding behaviour, the conclusions are valid for banks of different size. JEL Classification: D44, D53, D84, E43, E50, G10, G21
    Keywords: central bank operations, monetary policy, open market operations, repo auctions, strategic bidding
    Date: 2014–12
  15. By: Cetorelli, Nicola (Federal Reserve Bank of New York)
    Abstract: I introduce the concept of hybrid intermediaries: financial conglomerates that control a multiplicity of entity types active in the “assembly line” process of modern financial intermediation, a system that has become known as shadow banking. The complex bank holding companies of today are the best example of hybrid intermediaries, but I argue that financial firms from the “nonbank” space can just as easily evolve into conglomerates with similar organizational structure, thus acquiring the capability to engage in financial intermediation. I document instances of the emergence and growth of such nonbank hybrid intermediaries. Notable nonbank firms (for example, from the investment banking or specialty lending sectors) that had become significant intermediaries and that turned into bank holding companies post-Lehman are, from an organizational standpoint, indistinguishable from firms with a traditional banking origin. Similar inference can be drawn by analyzing specific activities. I focus on securities lending, a well-understood example of shadow financial intermediation, and document the emergence of a firm from the asset management sector as one of the largest providers of related intermediation services globally.
    Keywords: intermediation; conglomeration
    JEL: G20 L20
    Date: 2014–12–01
  16. By: Tobias Adrian (Federal Reserve Bank of New York (E-mail:; Nellie Liang (Board of Governors of the Federal Reserve System (E-mail:
    Abstract: In the conduct of monetary policy, there exists a risk-return tradeoff between financial conditions and financial stability, which complements the traditional inflation-real activity tradeoff of monetary policy. The tradeoff exists even if monetary policy does not target financial stability considerations independently of its inflation and real activity goals, as the buildup of financial vulnerabilities from persistent accommodative monetary policy when the economy is close to potential increases risks to future financial stability. We review monetary policy transmission channels and financial frictions that give rise to this tradeoff between financial conditions and financial stability, within a monitoring program across asset markets, banking firms, shadow banking, and the nonfinancial sector. We focus on vulnerabilities that affect monetary policies' risk- return tradeoff including (i) pricing of risk, (ii) leverage, (iii) maturity and liquidity mismatch, and (iv) interconnectedness and complexity. We also discuss the extent to which structural and time-varying macroprudential policies can counteract the buildup of vulnerabilities, thus mitigating monetary policy's risk-return tradeoff.
    Keywords: risk taking channel of monetary policy, monetary policy transmission, monetary policy rules, financial stability, financial conditions, macroprudential policy
    JEL: E52 G01 G28
    Date: 2014–12
  17. By: Stijn Claessens
    Abstract: Macroprudential policies – caps on loan to value ratios, limits on credit growth and other balance sheets restrictions, (countercyclical) capital and reserve requirements and surcharges, and Pigouvian levies – have become part of the policy paradigm in emerging markets and advanced countries alike. But knowledge is still limited on these tools. Macroprudential policies ought to be motivated by market failures and externalities, but these can be hard to identify. They can also interact with various other policies, such as monetary and microprudential, raising coordination issues. Some countries, especially emerging markets, have used these tools and analyses suggest that some can reduce procyclicality and crisis risks. Yet, much remains to be studied, including tools’ costs ? by adversely affecting resource allocations; how to best adapt tools to country circumstances; and preferred institutional designs, including how to address political economy risks. As such, policy makers should move carefully in adopting tools.
    Keywords: Macroprudential policies and financial stability;Monetary policy;Procyclicality of financial system;Financial intermediation;Other systemic risk tools;Financial stability, financial intermediation, externalities, market failures, procyclicality, systemic risks
    Date: 2014–12–11
  18. By: Massimo Coletta (Bank of Italy); Riccardo De Bonis (Bank of Italy); Stefano Piermattei (Bank of Italy)
    Abstract: In most countries household debt increased from the 1990s until the crisis of 2007-2008 before stabilizing due to recession and deleveraging. However, there are national differences in household debt/GDP ratios. This paper studies the determinants of household debt, using a 32-country dataset and taking both demand-side and supply-side factors into account. The econometric exercises, covering the period 1995-2011, yield two main results. First, debt is greater in countries with higher per capita GDP and household wealth. Second, the efficacy of bankruptcy laws is correlated with the level of household debt, while a longer time to resolve insolvencies is associated with lower debt. These two institutional variables are linked to household debt more robustly than is the quality of credit registers.
    Keywords: household debt, income, wealth
    JEL: E21 G21 P5
    Date: 2014–10
  19. By: Jef Boeckx (Research Department, NBB); Maarten Dossche (Research Department, NBB, ECB); Gert Peersman (Ghent University)
    Abstract: We estimate the effects of exogenous innovations to the balance sheet of the ECB since the start of the financial crisis within a structural VAR framework. An expansionary balance sheet shock stimulates bank lending, stabilizes financial markets, and has a positive impact on economic activity and prices. The effects on bank lending and output turn out to be smaller in the member countries that have been more affected by the financial crisis, in particular those countries where the banking system is less well-capitalized.
    Keywords: unconventional monetary policy, ECB blance sheet, euro area, VAR
    JEL: C32 E30 E44 E51 E52
    Date: 2014–12
  20. By: Darracq Pariès, Matthieu; Moccero, Diego; Krylova, Elizaveta; Marchini, Claudia
    Abstract: This paper analyses the cross-country heterogeneity in retail bank lending rates in the euro area and presents newly developed pass-through models that account for the riskiness of borrowers, the balance sheet constraints of lenders and sovereign debt tensions affecting interest rate-setting behaviour. Country evidence for the four largest euro area countries shows that downward adjustments in policy rates and market reference rates have translated into a concomitant reduction in bank lending rates. In the case of Spain and Italy, however, sovereign bond market tensions and a deteriorating macroeconomic environment have put upward pressure on composite lending rates to non-financial corporations and households. At the same time, model simulations suggest that higher lending rates have propagated to the broader economy by depressing economic activity and inflation. As a response to increasing financial fragmentation, the ECB has introduced several standard and non-standard monetary policy measures. These measures have gone a long way towards alleviating financial market tensions in the euro area. However, in order to ensure the adequate transmission of monetary policy to financing conditions, it is essential that the fragmentation of euro area credit markets is reduced further and the resilience of banks strengthened where needed. Simulation analysis confirms that receding financial fragmentation could help to boost economic activity in the euro area in the medium term. JEL Classification: J64
    Keywords: bank lending rates, DSGE models, financial fragmentation, monetary policy, pass-through models
    Date: 2014–09
  21. By: Jamie Bologna (West Virginia University, College of Business and Economics); Andrew T. Young (West Virginia University, College of Business and Economics)
    Abstract: We examine a panel of 70 countries during 1966-2010 and utilize Reinhart and Rogoff crisis dates to estimate the effects of crises on the size and scope of government over both 5-year and 10-year horizons. We also estimate cross section regressions using 40-year (1970-2010) changes in government variables. Banking crises appear to be associated with decreases in the size and scope of government, while sovereign external debt crises are associated with increases. Otherwise, the size and scope of government appears to be persistent to the extent that even crisis episodes fail to leave a significant mark upon them. A notable exception may be that, over 40-year periods, countries that spend more years in crisis are associated with weaker legal systems and property rights.
    Keywords: sovereign debt crises, banking crises, currency crises, inflation crises, institutional quality, size of government, ratchet effect
    JEL: E02 O11 O43
    Date: 2014–12

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