nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2005‒08‒03
two papers chosen by
Karl Petrick
Leeds Metropolitan University

  1. Institutions and Growth Volatility By Nejat Anbarci; Jonathan Hill; Hasan Kirmanoglu
  2. Financial Structure Change and Banking Income: a Canada-U.S. Comparison By Christian Calmès; Ying Liu

  1. By: Nejat Anbarci (Department of Economics, Florida International University); Jonathan Hill (Department of Economics, Florida International University); Hasan Kirmanoglu (Department of Economics, Bilkin University)
    Abstract: Growth volatility is a major factor that retards growth. Recent studies that link democracy and volatility can not account for a link between democracy and investment volatility. Here, instead, we focus on a specific channel that links individualistism and low volatility. Unlike an individualistic society, in a collectivistic society agents choose to invest together or choose not to invest together. We construct a two-equation system of investment and income growth volatility. We find individualism significantly directly and indirectly influences volatility negatively. We also find that, unlike individualism, democracy’s influence on investment depends on the measure of democracy and econometric specification used.
    Keywords: Growth volatility, investment volatility, democracy, individualism/collectivism
    JEL: E32 O10 P16
    Date: 2005–06
  2. By: Christian Calmès (Département des sciences administratives, Université du Québec en Outaouais et LRSP); Ying Liu (Bank of Canada)
    Abstract: Data suggest that the Canadian financial structure, and particularly indirect finance (e.g., banking), have become more market-oriented. we associate this financiel trend in part with the regulatory changes that have occured in Canada since the 1980s. Financial intermediaries are increasingly involved with financial market activities --e.g. off-balance sheet (OBS) activities such as underwriting securities. For this reason, we analyze the noninterest income attributable to financial market activities. We find that the variance of Canadian banks' aggregate operating-income growth is rising because of the increased contribution of noninterest income. This component is by nature quite volatile compared to interest income. Consequently, our analysis corroborates the U.S. finding of Stiroh (2004), and Stiroh and Rumble (2005): By contributing to banking income volatility, market-oriented activities do not necessarily yield straightforward diversification benefits to Canadian banks.
    Keywords: Regulatory changes, indirect finance, noninterest income, diversification
    JEL: G20 G21
    Date: 2005–07–26

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