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on Financial Markets |
| By: | Thanh Dinh Thi Huyen; Kleimeier Stefanie (METEOR) |
| Abstract: | As banking markets in developing countries are maturing, banks face competition not only from other domestic banks but also from sophisticated foreign banks. Combined with a dramatic growth of consumer credit and increased regulatory attention to risk management, the development of a well-functioning credit assessment framework is essential. As part of such a framework, we propose a credit scoring model for Vietnamese retail loans. First, we show how to identify those borrower characteristics that should be part of a credit scoring model. Second, we illustrate how such a model can be calibrated to achieve the strategic objectives of the bank. Finally, we assess the use of credit scoring models in the context of transactional versus relationship lending. |
| Keywords: | financial economics and financial management ; |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2006011&r=fmk |
| By: | Alar Kein (Faculty of Economics and Business Administration, Tallinn University of Technology) |
| Abstract: | The paper examines the role of foreign stock markets’ price and volatility movements in the price and volatility movements in the Estonian stock market. Using daily log returns from July 8th, 1996 through December 31st, 2003 and applying a VAR-EGARCH framework, the author finds that there is a spillover of returns and volatility from foreign stock markets into the Estonian stock market. It is found that the stock prices in Estonia are influenced by the movement of prices on the markets of Denmark, Russia, Finland, the Czech Republic, Poland and the U.S.A. In general, the response to exogenous price movements is found to be contemporaneous, same-directional and symmetric, while the revealed impact of exogenous volatility-changes is rather market-specific and often asymmetric. The author also finds that the influence of the Finnish market on the Estonian market has significantly increased after the HEX-Group acquired the majority share in the Tallinn Stock Exchange and the integration of the Estonian stock market with the Finnish stock market began in April 2001. |
| Keywords: | stock returns, cross-border spillover of returns, cross-border spillover of volatility |
| JEL: | G12 G14 G15 G19 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ttu:wpaper:120&r=fmk |
| By: | Thorsten Koeppl (Department of Economics, Queen's University); James MacGee (Department of Economics, University of Western Ontario) |
| Abstract: | We show that interbank markets are a poor substitute for ``broad'' banks that operate across regions or sectors. In the presence of regional or sectoral asset and liquidity shocks, interbank markets can distribute liquidity efficiently, but fail to respond efficiently to asset shocks. Broad banks can condition on the joint distribution of both shocks and, hence, achieve an efficient internal allocation of capital. This allocation involves the cross-subsidization of loans across regions or sectors. Compared to regional banks that are linked through well-functioning interbank markets, broad banks lead to higher levels of aggregate investment, higher output, and less fluctuations within regions. However, broad banks generate endogenously aggregate uncertainty. |
| Keywords: | Banking Restrictions, Interbank Markets, Universal Banking, Endogenous Uncertainty |
| JEL: | G21 G28 D80 E44 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1052&r=fmk |
| By: | Dr. (elect.) Julia Korosteleva and Dr. Colin Lawson |
| Abstract: | The present paper examines the financial development of Belarus over the past decade with a particular focus on 1996-2002, when the financial sector was restrained through pervasive government controls in the form of interest rate ceilings, directed credit and preferential loans schemes, high reserve requirements, multiple exchange rates and capital controls. Belarus is of particular interest, as, despite no economic restructuring, the growth has averaged seven per cent per annum since 1997. While explanations of this ‘miracle’ abound, no empirical work has been done on the role of the financial system, particularly on the effects of pervasive government intervention. It has been argued that monetary stimulation of investment activity through interest rate ceilings and directed credit and preferential loans revived growth. This paper investigates whether financial policy led to financial deepening and increased the share of savings to be allocated to investment. |
| JEL: | C12 C22 E42 E44 G21 G28 O16 |
| URL: | http://d.repec.org/n?u=RePEc:gla:glaewp:2006_4&r=fmk |
| By: | Áron Gereben (Magyar Nemzeti Bank); Klára Pintér (Magyar Nemzeti Bank) |
| Abstract: | Market analysts and central banks often use the implied volatility of FX options as an indicator of expected exchange rate uncertainty. The aim of our study is to investigate the limits of this statistic. We present some key factors that may deviate the value of implied volatility from the exchange rate variability expected by the market. These biasing factors are linked to the simplifying assumptions of the Black-Scholes option pricing model. Our empirical results show that forint/euro implied volatilities carry useful information about future exchange rate uncertainty when the forecast horizon is shorter than one month. However, implied volatility provides a biased estimate, and does not encompass the information included in other (GARCH, ARMA) predictors of volatility calculated from historical exchange rate data. These results are in line with the findings of similar analyses of other currency pairs. |
| Keywords: | option, volatility, exchange rate. |
| JEL: | G13 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:mnb:opaper:2005/39&r=fmk |
| By: | Christian Daude (University of Maryland at College Park, Department of Economics, 3105 Tydings Hall College Park, MD 20742, USA.); Marcel Fratzscher (European Central Bank, Kaiserstrasse 29, Postfach 16 03 19, 60066 Frankfurt am Main, Germany.) |
| Abstract: | Is there a pecking order of cross-border investment in that countries become financially integrated primarily through some types of investment rather than others? Using a novel database of bilateral capital stocks for all types of investment – FDI, portfolio equity securities, debt securities as well as loans – for a broad set of 77 countries, we show that such a pecking order indeed exists. Motivated by the theoretical work on the capital structure of firms, the paper focuses on two key determinants of this pecking order: information frictions and the quality of host country institutions. Overall, we find that in particular FDI, and to some extent also loans, are substantially more sensitive to information frictions than investment in portfolio equity and debt securities. We also show that the share as well as the size of FDI that a country receive are largely insensitive to institutional factors in host countries, while portfolio investment is by far the most sensitive to the quality of institutions. This provides new evidence in favor of some hypotheses but contradicts others put forward in the theoretical literature on trade in financial assets. |
| Keywords: | foreign investment; pecking order; capital flows; information frictions; institutions; home bias; gravity. |
| JEL: | F34 G11 F21 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20060590&r=fmk |
| By: | Akram, Q. Farooq (The Central Bank of Norway); Rime, Dagfinn (The Central Bank of Norway); Sarno, Lucio (University of Warwick and CEPR) |
| Abstract: | This paper investigates the presence and characteristics of arbitrage opportunities in the foreign exchange market using a unique data set for three major capital and foreign exchange markets that covers a period of more than seven months at tick frequency, obtained from Reuters on special order. We provide evidence on the frequency, size and duration of round-trip and one-way arbitrage opportunities in real time. The analys is unveils the existence of numerous short-lived arbitrage opportunities, whose size is economically significant across exchange rates and comparable across different maturities of the instruments involved in arbitrage. The duration of arbitrage opportunities is, on average, high enough to allow agents to exploit deviations from the law of one price, but low enough to explain why such opportunities have gone undetected in much previous research using data at lower frequency. |
| Keywords: | Exchange rates; arbitrage; foreign exchange microstructure |
| JEL: | F31 F41 G14 G15 |
| Date: | 2006–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sifrwp:0042&r=fmk |
| By: | Siem Jan Koopman (Vrije Universiteit Amsterdam); Roman Kraeussl (Vrije Universiteit Amsterdam); Andre Lucas (Vrije Universiteit Amsterdam); Andre Monteiro (Vrije Universiteit Amsterdam) |
| Abstract: | We study the relation between the credit cycle and macro-economic fundamentals in an intensity-based framework. Using rating transition and default data of U.S. corporates from Standard and Poor’s over the period 1980—2005 we directly estimate the credit cycle from the micro rating data. We relate this cycle to the business cycle, bank lending conditions, and financial market variables. In line with earlier studies, these variables appear to explain part of the credit cycle. As our main contribution, we test for the correct dynamic specification of these models. In all cases, the hypothesis of correct dynamic specification is strongly rejected. Moreover, if we account for the dynamic mis-specification, many of the variables thought to explain the credit cycle, turn out to be insignificant. The main exceptions are GDP growth, and to some extent stock returns and stock return volatilities. Their economic significance appears low, however. This raises the puzzle of which macro-economic fundamentals explain default and rating dynamics. |
| Keywords: | Credit cycles; Business cycles; Bank lending conditions; Unobserved component models; Intensity models |
| JEL: | G11 G21 |
| Date: | 2006–03–08 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20060023&r=fmk |
| By: | Luigi Benfratello (University of Turin); Fabio Schiantarelli (Boston College and IZA Bonn); Alessandro Sembenelli (University of Turin) |
| Abstract: | In this paper we investigate the effect of local banking development on firms’ innovative activities, using a rich data set on innovation for a large number of Italian firms over the 1990’s. There is evidence that banking development affects the probability of process innovation, particularly for small firms and for firms in high(er) tech sectors and in sectors more dependent upon external finance. The evidence for product innovation is weaker. There is also some evidence that banking development reduces the cash flow sensitivity of fixed investment spending, particularly for small firms, and that it increases the probability they will engage in R&D. |
| Keywords: | banks, financial development, innovation, R&D, investment |
| JEL: | D24 G21 G38 O31 O33 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2032&r=fmk |
| By: | Thorsten Koeppl (Department of Economics, Queen's University) |
| Abstract: | When people share risk in financial markets, intermediaries provide costly enforcement for most trades and, hence, are an integral part of financial markets' organization. We assess the degree of risk sharing that can be achieved through financial markets when enforcement is based on the threat of exclusion from future trading as well as on costly enforcement intermediaries. Starting from constrained efficient allocations and taking into account the public good character of enforcement we study a Lindahl-equilibrium where people invest in asset portfolios and simultaneously choose to relax their borrowing limits by paying fees to an intermediary who finances the costs of enforcement. We show that financial markets always allow for optimal risk sharing as long as markets are complete, default is prevented in equilibrium and intermediaries provide costly enforcement competitively. In equilibrium, costly enforcement translates into both agent-specific borrowing limits and price schedules that include a separate default premium. Enforcement costs - or, equivalently, default premia - increase borrowing costs, while interest rates per se depend on the change in enforcement over time. |
| Keywords: | Limited Commitment, Enforcement Intermediaries, Lindahl-equilibrium, Endogenous Borrowing Constraints |
| JEL: | C73 D60 G10 H41 K42 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1048&r=fmk |
| By: | José M. Marín; Jacques Olivier |
| Abstract: | This paper documents that at the individual stock level insiders sales peak many months before a large drop in the stock price, while insiders purchases peak only the month before a large jump. We provide a theoretical explanation for this phenomenon based on trading constraints and asymmetric information. We test our hypothesis against competing stories such as patterns of insider trading driven by earnings announcement dates, or insiders timing their trades to evade prosecution. Finally we provide new evidence regarding crashes and the degree of information asymmetry. |
| Keywords: | Insider Trading, Rational Expectations Equilibrium, Trading Constraints, Volatility, Crashes |
| JEL: | D82 G11 G12 G14 G28 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:948&r=fmk |
| By: | L. Gangadharan; A. Farrell; R. Croson |
| Abstract: | Emissions trading is an important regulatory tool in environmental policy making. Unfortunately the effectiveness of these regulations is difficult to measure in the field due to the unavailability of appropriate data. In contrast, experiments in the laboratory can provide guidance to regulators and legislatures about the performance of different market features in emission trading programs. This paper reports on the implementation of three different institutional designs, and presents experimental results investigating important features of emissions trading regimes: the ability to make investments in emissions abatement, ability to bank allowances and a declining emissions cap, both with and without uncertainty. These features are observed in virtually all existing air pollution emissions trading programs currently in place and will almost certainly be part of future applications. Like previous experimental studies of emissions trading, this paper shows that the efficiency gains expected from economic theory emerge observationally. We also show reduced efficiency when permits are bankable due to over-banking and when investments in emissions abatement are possible due to overinvesting. These tendencies do not worsen, however, when emissions caps decline. |
| Keywords: | Emissions Trading, Investment in Abatement, Banking, Laboratory Experiments |
| JEL: | Q20 C91 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:mlb:wpaper:942&r=fmk |
| By: | Thorsten Koeppl (Department of Economics, Queen's University); Cyril Monnet (DG Research, European Central Bank) |
| Abstract: | Exchanges and other trading platforms are often vertically integrated to carry out trading and settlement as one operation. We show that these vertical silos can prevent the full realization of efficincy gains from horizontal consolidation of trading and settlement platforms. Independent of the gains from such consolidation, when costs of settlement are private information, a merger of vertical silos cannot be designed to always ensure efficient trading and settlement after the merger. Furthermore, we show that efficiency can nevertheless be guaranteed either by delegating the operation of settlement platforms to agents or by forcing competition across vertical silos through cross-listings. |
| Keywords: | Clearing and Settlement, Cross-listing, Vertical and Horizontal Integration, Mechanism Design |
| JEL: | C73 G20 G34 L22 |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1051&r=fmk |
| By: | Alessandro Calza (European Central Bank, Kaiserstrasse 29, Postfach 16 03 19, 60066 Frankfurt am Main, Germany.); Andrea Zaghini (Banca d’Italia, Servizio Studi, Via Nazionale 91, 00184 Rome, Italy.) |
| Abstract: | This paper investigates possible non-linearities in the dynamics of the euro area demand for the narrow aggregate M1. A long-run money demand relationship is firstly estimated over a sample period covering the last three decades. While the parameters of the relationship are jointly stable, there are indications of non-linearity in the residuals of the error-correction model. This non-linearity is explicitly modelled using a fairly general Markov switch- ing error-correction model with satisfactory results. The empirical findings of the paper are consistent with theoretical predictions stemming from "buffer stock" and "target-threshold" models and with analogous empirical evidence for European countries and the US. |
| Keywords: | Euro area; cointegration; non-linear error correction; demand for money. |
| JEL: | E41 C22 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20060592&r=fmk |
| By: | Olan T. Henry; Nilss Olekalns; Sandy Suardi |
| Abstract: | Evidence suggests that short-term interest rate volatility peaks with the level of short rates, while equity volatility responds asymmetrically to positive and negative shocks. We present an LM based test that distinguishes between level effects and asymmetry in volatility which is robust to the presence of unidentified nuisance parameters under the null. There is strong evidence of a level effect and asymmetric response in the relationship between S&P 500 Index returns and 3-month US Treasury Bills. The conditional covariance depends on the level of the short rate which has implications for hedging equity returns against short term interest rate movements. |
| Keywords: | Level Effects; Asymmetry; LM Tests; Davies Problem; Nonlinear Granger Causality |
| JEL: | C12 G12 E44 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:mlb:wpaper:941&r=fmk |
| By: | Pierre L. Siklos (Department of Economics and Viessmann Research Centre, Wilfrid Laurier University); Diana N. Weymark (Department of Economics, Vanderbilt University) |
| Abstract: | In this article, we introduce an index of ex ante exchange market pressure (EMP) that can be used as a benchmark against which to measure the effectiveness of sterilized intervention. Ex ante EMP is the change in the exchange rate that would have been observed if the policy authority had refrained from intervening and this policy decision had been correctly anticipated by rational agents. Ex post EMP measures the exchange market pressure under the policy actually implemented by the policy authority. We use a ratio of these two EMP measures to assess the effectiveness of sterilized intervention in Canada and Australia. |
| Keywords: | Exchange market pressure, exchange rate policy, foreign exchange intervention, Bank of Canada policy, Reserve Bank of Australia policy |
| JEL: | F31 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:0604&r=fmk |
| By: | Veronika Ilsjan (School of Economics and Business Administration, Tallinn University of Technology); Kaia Kask (School of Economics and Business Administration, University of Tartu) |
| Abstract: | During the past few years there have been many changes in financial reporting rules in EU countries. One significant change from the real estate point of view has taken place in balance sheet, where property investment account is switched to the asset side of the balance sheet, separate from the property, plant and equipment. Since 2005, all companies listed in the stock market have the obligation to apply International Accounting Standards/International Financial Reporting Standards (IFRS) in their everyday practice. At the same time, more and more researchers have pointed to the problem of valuation accuracy and to the uncertainty of the valuation product. The aim of the paper is to explore practical problems in implementing the income approach in the valuation for financial reporting purposes in Estonia. To achieve the aim of the paper, the authors conducted a survey, sending out a comprehensive questionnaire to all certified general appraisers (GA). The survey findings show that the valuation for accounting purposes is topical mainly in major cities in Estonia. The valuers’ behaviour refers to overconfidence in their actions together with above-average self-esteem, which is not supported by actual survey results. However, one of the main reasons here is that some theoretical regulations in standards are too general and need some specification to harmonise appraisers’ behaviour in practice. |
| Keywords: | real estate appraisal, appraiser behaviour, uncertainty in valuation, valuation for valuation reporting, income approach |
| JEL: | G2 M4 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ttu:wpaper:132&r=fmk |
| By: | Christiaan Hogendorn (Economics Department, Wesleyan University) |
| Abstract: | In many capacity-intensive industries (e.g. electricity, bandwidth), exchanges allow firms to buy and sell wholesale capacity before selling on the retail market. This allows firms to smooth demand shocks, but it also raises suspicions that exchanges facilitate tacit collusion to limit capacity investment. This paper models investment and exchange in a one-shot game and in a repeated game with tacit collusion. It finds that the presence of the exchange does not reduce total capacity investment, and thus does not raise consumer prices. In fact, the exchange may make it more difficult to sustain tacit collusion. |
| Keywords: | capacity investment; capacity exchanges; business to business exchanges; tacit collusion |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:wes:weswpa:2006-002&r=fmk |
| By: | James Crotty; Kang-Kook Lee |
| Abstract: | In December 1997 the IMF offered Korea loans to help alleviate its financial crisis. These loans were accompanied by what the IMF called “extreme structural conditionality.” Korea was required to replace its traditional East Asian economic system with a neoliberal model. We review economic performance in the neoliberal era. Growth has slowed, poverty and inequality have risen, and investment spending has stagnated, while foreign ownership of Korean firms and banks has skyrocketed. We argue that foreign investment has not helped Korea. For example, by leading a shift from corporate to consumer lending, foreign control of Korea’s financial markets has constrained capital accumulation and helped create an excessively indebted household sector, while making it harder for the government to adopt progressive economic policies. We conclude that the eight year experiment with radical neoliberal restructuring has turned out well for foreign capital and wealthy Koreans, but has been a failure for the majority of Korea’s people. |
| JEL: | O19 F34 F36 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:uma:periwp:wp111&r=fmk |
| By: | Jose Palacin (United Nations Economic Commission for Europe); Robert Shelburne (United Nations Economic Commission for Europe) |
| Abstract: | This study provides a broad overview of the private housing market in central and eastern Europe and some of the CIS – its history, current conditions and implications for the overall economy. It highlights regional differences, describes the different policy choices that have been made, and evaluates potential problem areas and the policy options for addressing them. The paper begins with a description of housing in these countries before and during their transition phase to market economies. The current state of the housing market in this region is then examined with an emphasis on its institutional development and size. Price trends throughout the region are analysed. A major objective is to ascertain the extent to which these markets are now similar to those observed in more developed western economies. The implications for the housing market resulting from the further integration of these countries into the global financial system are also explored. |
| Keywords: | housing market, East Europe, CIS, housing prices, housing bubble, mortgage market |
| JEL: | P25 G21 R31 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:ece:dispap:6&r=fmk |
| By: | Stephen M. Miller (University of Connecticut and University of Nevada, Las Vegas); Huiping Yuan (Xiamen University) |
| Abstract: | Kydland and Prescott (1977) develop a simple model of monetary policy making, where the central bank needs some commitment technique to achieve optimal monetary policy over time. Although not their main focus, they illustrate the difference between consistent and optimal policy in a sequential-decision one-period world. We employ the analytical method developed in Yuan and Miller (2005), whereby the government appoints a central bank with consistent targets or delegates consistent targets to the central bank. Thus, the central bank s welfare function differs from the social welfare function, which cause consistent policy to prove optimal. |
| JEL: | E42 E52 E58 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2005-55&r=fmk |
| By: | Christian Dreger; Jürgen Wolters |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp561&r=fmk |
| By: | Faik Koray; W. Douglas McMillin |
| Abstract: | This paper investigates empirically, using a VAR model, the response of the exchange rate and the current account to fiscal policy shocks for the U.S. economy during the period 1981:3-2005:3. The results indicate that positive shocks to real government purchases generate a persistent increase in the budget deficit, a transitory expansionary effect on output, and a long-lived positive effect on the price level, but reduce the real interest rate. Simultaneously, and consistent with interest parity, the real exchange rate depreciates, and the current account improves. Negative shocks to net taxes also generate a persistent increase in the budget deficit, and the effects on the model variables are generally in the same direction, but are almost never significant. Our results indicate it is inappropriate to attribute rising current account deficits to expansionary fiscal policy shocks, even though these shocks generate long-lived increases in the budget deficit. |
| URL: | http://d.repec.org/n?u=RePEc:lsu:lsuwpp:2006-02&r=fmk |
| By: | Katrin Kull (School of Economics and Business Administration, Tallinn University of Technology) |
| Abstract: | The current study defines the platform for approaching the subject of marketing financial services to businesses. The relationship between a financial institution and its business customer has been analyzed in the framework of relationship marketing. The author proposes that there are multiple models within the satisfaction process, which are moderated by product, person and situational factors. While reviewing the history and current trends of marketing financial services to businesses, the author claims that it would be most useful to be aware of metatheoretical positions and cross-examine the already existent data in order to develop the concepts instead of coming up with new approaches. Theories of personality research have been gone through to study the foundations of the self, role and identity, whereby the author comes to the conclusion that the theories lead us to a set of broad dimensions that characterize individual differences and that can be measured in a reliable way, but the „why“ of personality is something else. After conducting an interviews-based research, there would be good grounds for further discussion of the subject. |
| Keywords: | marketing, financial services, relationship, business-to-business relationship, relationship marketing, marketing financial services to businesses, personality research |
| JEL: | M19 M39 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ttu:wpaper:135&r=fmk |
| By: | Klaus Keller (Department of Geosciences, Penn State); Gary Yohe (Department of Economics, Wesleyan University); Michael Schlesinger (Department of Atmospheric Sciences, University of Illinois at Urbana-Champaign) |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:wes:weswpa:2005-009&r=fmk |
| By: | Christian Hellwig |
| URL: | http://d.repec.org/n?u=RePEc:cla:uclaol:376&r=fmk |
| By: | Dimitrov Dinko; Haake Claus-Jochen; Klaus Bettina (METEOR) |
| Abstract: | We study efficient and individually rational exchange rules for markets with heterogeneous indivisible goods that exclude the possibility that an agent benefits by bundling goods in her endowment. Even if agents'''' preferences are additive, no such rule exists. |
| Keywords: | microeconomics ; |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2006027&r=fmk |
| By: | Christian Hellwig |
| URL: | http://d.repec.org/n?u=RePEc:cla:uclaol:379&r=fmk |
| By: | Ondrej Knot; Ondrej Vychodil |
| Abstract: | This paper analyzes debt contracting in the presence of gambling on resurrection under different bankruptcy regimes. Ex-ante effects on investment levels, interest rates and profit, and ex-post effects on debtor's strategy choices are examined. A model of a debtor-creditor relationship is presented which shows that violation of the Absolute Priority Rule in bankruptcy (soft bankruptcy law) may partially eliminate excessive managerial risk-taking. But under law that is insufficiently soft, this moral hazard problem may be even stronger than under completely tough law. The gambling on resurrection argument for soft law is further weakened if the possibility of verifying the firm's situation by creditors is introduced. |
| Keywords: | Corporate bankruptcy, debt contracts, monitoring. |
| JEL: | G33 K12 K39 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp290&r=fmk |
| By: | Luc, BAUWENS (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE)); Walid, BEN OMRANE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE)); Erick, Rengifo |
| Abstract: | We design and implement optimal foreign exchange portfolio allocations. An optimal allocation maximizes the expected return subject to a Value-at-Risk (VaR) constraint. Based on intradaily data, the optimization procedure is carried out at regular time intervals. For the estimation of the conditional variance from which the VaR is computed, we use univariate and multivariate GARCH models. The result for each model is given by the best intradaily investment recommendations in terms of the optimal weights of the currencies in the risk portfolio. |
| Keywords: | Optimal portfolio selection; Value-at-risk; GARCH models; Foreign exchange markets |
| JEL: | C32 C53 G11 |
| Date: | 2006–02–16 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvec:2006005&r=fmk |
| By: | Leonardo Villar Gómez; David M. Salamanca Rojas; Andrés Murcia Pabón |
| Abstract: | Este trabajo analiza los vínculos entre crédito doméstico, flujos externos de capital y regulación financiera en Colombia en el período comprendido entre 1974 y 2003. Para ese propósito se incluye una visión histórica sobre la evolución de las variables y se hacen análisis cuantitativos sobre los determinantes del grado de profundización financiera, utilizando métodos de descomposición contable y ejercicios econométricos sencillos. Se observa que los ciclos en el crédito doméstico al sector privado en Colombia han coincidido con ciclos en la misma dirección en los flujos externos de capital. Ese comportamiento procíclico del crédito ha sido reforzado además por la política de regulación financiera. Entre 1974 y 1991, la prociclicidad de la política surgió fundamentalmente del comportamiento de los coeficientes de encaje requerido. En el período más reciente, esos coeficientes se movieron en forma menos procíclica. Durante la crisis que se inició en 1998, incluso, la política de encajes fue abiertamente contracíclica. En esta última etapa, sin embargo, la introducción del impuesto a las transacciones financieras actuó en la dirección contraria y reforzó la caída en el crédito. El resultado neto es que el grado de profundización financiera en Colombia a finales de 2003 se ubicaba por debajo de los niveles que tenía en 1974. Esos niveles son extremadamente bajos en comparación con los de economías desarrolladas o con los de economías en desarrollo exitosas. |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:322&r=fmk |
| By: | Antonio Anelli |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:ufg:qdsems:03-2006&r=fmk |
| By: | Gerald Epstein; James Heintz |
| Abstract: | This report summarizes the findings of a UNDP-sponsored study on the structure of the financial sector, central bank policy, and employment outcomes in Ghana. The financial sector is the primary conduit through which monetary policy affects real economic outcomes, and monetary policy determines the resources available to financial institutions. Therefore, monetary policy must be coordinated with financial sector reforms in order to improve employment opportunities, reduce poverty and support human development. The report develops a critique of financial programming and inflation targeting, presents a series of empirical estimates on the impact of monetary policy variables in Ghana, and describes the elements of an alternative monetary policy. In addition, the report documents the institutional and structural constraints currently operating in the financial system which prevent the sector from facilitating investment, growth, and improved employment opportunities. Econometric estimates of the determinants of investment explicitly link financial variables to real economic activity. The report summarizes a series of financial sector reforms that would improve the financial sector's capacity to move Ghana onto an employment-intensive growth path. |
| Keywords: | Monetary policy, financial programming, inflation-targeting, financial reform, Ghana, employment |
| JEL: | E22 E24 E52 E58 O11 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:uma:periwp:wp113&r=fmk |
| By: | Daisuke Ishikawa; Yoshiro Tsutsui |
| Abstract: | The purpose of this paper is to elucidate whether the supply side played a crucial role in causing credit crunch in 1990s. To this end, we estimated the supply and demand functions using prefectural panel data from 1990 to 2001, and calculate the shift of those functions. The results reveal that until 1996, the supply function largely shifted toward right, indicating that the supply side was not the main cause. However, after 1996 the loan supply shifted leftwards as much as the loan demand, implying that the contraction of supply contributed to the decrease in the loans. |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:06012&r=fmk |
| By: | Jaan Alver (Department of Accounting at Tallinn University of Technology) |
| Abstract: | A cash flow statement is required as part of a complete set of financial statements prepared in conformity with IFRS as well as US GAAP for all business enterprises. IAS 7 lays down a formal structure for the cash flow statement. Cash flows should be classified under the following three standard headings: “Operating activities”, “Investing activities”, “Financing activities”. The classification of cash flows among operating, investing and financing activities is essential to the analysis of cash flow data. Net cash flow (the change in cash and equivalents during the period) has little informational content by itself; it is the classification and individual components that are informative. Although the classification of cash flows into the three main categories is important, it should be mentioned that classification guidelines are arbitrary. IAS 7 has not indicated how to classify certain items that might fit logically in more than one of the major categories of the statement of cash flows. Examples: 1) Interest and dividends received can be presented as an operating activity, despite their close association with other activities presented as investing activities. 2) Interest and dividends paid can be presented as an operating activity, despite their close association with other activities presented as financing activities. Additional troubles arise from case that there is no standard definition of operating activities and consequently, cash flows from operating activities. Both IASB and FASB have taken position that operating activities are activities that are not investing or financing activities. At the same time the opinion that the association of a cash flow with profit is the primary criterion for classifying the flow as operating, is expressed. The examples illustrate the influence of the differences in the classification of cash flow data on net cash from different kinds of activities. |
| Keywords: | cash flows, IAS 7, SFAS 95. |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ttu:wpaper:127&r=fmk |
| By: | Sentis, Patrick |
| Date: | 2005–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:grf:mtpaps:ps002&r=fmk |
| By: | Thorsten Koeppl (Department of Economics, Queen's University); Cyril Monnet (DG Research, European Central Bank); Ted Temzelides (Department of Economics, University of Pittsburgh) |
| Abstract: | We investigate the role of settlement in a dynamic model of a payment system where the ability of participants to perform certain welfare-improving transactions is subject to random and unobservable shocks. In the absence of settlement, the full information first-best allocation cannot be supported due to incentive constraints. In contrast, this allocation is supportable if settlement is introduced. This, however, requires that settlement takes place with a sufficiently high frequency. |
| Keywords: | Payment Systems, Settlement, Mechanism Design |
| JEL: | E40 D82 C73 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1053&r=fmk |