Found 29 article(s) for author 'Banking'

How Central-Bank Independence Dies

How Central-Bank Independence Dies. Kenneth Rogoff, May 31, 2019, Opinion, “Since the world’s major central banks came to the global economy’s rescue in 2008, they have had more and more tasks foisted upon them, even as some politicians question their expanded role and others seek to undermine their policymaking autonomy. To escape this dilemma, monetary authorities must get back to doing what they do best.Link

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Smart Development Banks

Smart Development Banks. Ricardo Hausmann, 2019, Paper, “The conventional paradigm about development banks is that these institutions exist to target well-identified market failures. However, market failures are not directly observable and can only be ascertained with a suitable learning process. Hence, the question is how do the policymakers know what activities should be promoted, how do they learn about the obstacles to the creation of new activities? Rather than assuming that the government has arrived at the right list of market failures and uses development banks to close some well-identified market gaps, we suggest that development banks can be in charge of identifying these market failures through their loan-screening and lending activities to guide their operations and provide critical inputs for the design of productive development policies. In fact, they can also identify government failures that stand in the way of development and call for needed public inputs. This intelligence role of development banks is similar to the role that modern theories of financial intermediation assign to banks as institutions with a comparative advantage in producing and processing information. However, while private banks focus on information on private returns, development banks would potentially produce and organize information about social returns.Link

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Prices or Quantities Can Dominate Banking and Borrowing

Prices or Quantities Can Dominate Banking and Borrowing. Martin Weitzman, March 10, 2019, Paper, “The possibility of intertemporal banking and borrowing of tradeable permits is often viewed as tilting the various policy debates about optimal pollution control instruments toward favoring such time‐flexible quantities. The present paper shows that this view can be misleading, at least for the simplest dynamic extension of the original “prices vs. quantities” information structure. The model of this paper allows the firms to know and act upon the realization of uncertain future costs two full periods ahead of the regulators. For any given circumstance, the paper shows that either a fixed price or a fixed quantity is superior in expected welfare to time‐flexible banking and borrowing. Furthermore, the standard original formula for the comparative advantage of prices over quantities contains sufficient information to completely characterize the regulatory role of intertemporal banking and borrowing. The logic and implications of these results are analyzed and discussed.” Link

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The next financial crisis may come soon – are we all that safe?

The next financial crisis may come soon – are we all that safe? Kenneth Rogoff, February 5, 2019, Opinion, “A decade on from the 2008 global financial crisis, policymakers constantly assure us that the system is much safer today. The giant banks at the core of the meltdown have scaled back their risky bets, and everyone – investors, consumers, and central bankers – is still on high alert. Regulators have worked hard to ensure greater transparency and accountability in the banking industry. But are we really all that safe?Link

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Negative Nominal Interest Rates and the Bank Lending Channel

Negative Nominal Interest Rates and the Bank Lending Channel. Lawrence Summers, January 2019, Paper, “Following the crisis of 2008, several central banks engaged in a new experiment by setting negative policy rates. Using aggregate and bank level data, we document that deposit rates stopped responding to policy rates once they went negative and that bank lending rates in some cases increased rather than decreased in response to policy rate cuts. Based on the empirical evidence, we construct a macro-model with a banking sector that links together policy rates, deposit rates and lending rates. Once the policy rate turns negative, the usual transmission mechanism of monetary policy through the bank sector breaks down. Moreover, because a negative policy rate reduces bank profits, the total effect on aggregate output can be contractionary. A calibration which matches Swedish bank level data suggests that a policy rate of -0.50 percent increases borrowing rates by 15 basis points and reduces output by 7 basis points.Link

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An Experimental Test of the Association Between Network Centrality and Cross-Village Risk-Sharing Links

An Experimental Test of the Association Between Network Centrality and Cross-Village Risk-Sharing Links. Rohini Pande, August 14, 2018, Paper, “We test a prediction from a recent paper by Ambrus and Elliott (2018), according to which less volatile incomes increases the association between within community centrality of a household, defined as Myerson centrality, and the probability of keeping financial connections with households outside the village. We use data from a unique field experiment in 185 Indian villages in which a randomly chosen half of the villages got access to formal banking services. We find empirical support for the prediction, as the relationship between Myerson centrality and having outside links is significantly more positive in villages that got access to formal banking.Link 

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As Congress Rolls Back Banking Regulations, One Historian Urges Caution

As Congress Rolls Back Banking Regulations, One Historian Urges Caution. Nancy Koehn, May 29, 2018, Audio, “This month, Congress approved changes to the 2010 Dodd-Frank Act, a series of banking reforms passed in the wake of the 2008 financial crisis to stabilize the nation’s economy.  The rollback is limited, applying only to midsize and regional banks. Restrictions on the country’s largest banks are still in place. However, Harvard Business School historian Nancy Koehn cautioned against deregulating the industries responsible for the 2008 crisis too quickly.Link

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Andrei Shleifer at the Ratio Institute

Andrei Shleifer at the Ratio Institute. Andrei Shleifer, May 28, 2018, Video, “Andrei Shleifer is a Professor of Economics at Harvard University. On May 28th he gave a lecture in memory of Eli F. Heckscher at Stockholm School of Economics by invitation from EHFF and the Ratio Institute. In this Ratio dialogue with Ratio CEO Nils Karlson he discusses the Heckscher lecture 2018: ‘A Crisis of Beliefs: Investor Psychology and Financial Fragility’Link

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Issuer Default Risk and Rating Agency Conflicts

Issuer Default Risk and Rating Agency Conflicts. Anywhere Sikochi, April 2018, Paper, “This study examines whether rating agencies assign more stringent and accurate rating adjustments for issuers with higher default risk and whether this leads to adjustments that are more relevant to financial markets. We expect that rating agencies will make more informative subjective adjustments to limit their reputational risk for issuers with a higher likelihood of default—an event that can reveal the quality of assigned ratings. For defaulting issuers, especially those with a higher pre-failure default risk, we find that adjustments grow more stringent and accurate in the months leading up to default and better predict lender default recovery rates.Link

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