Found 474 article(s) for author 'Financial Services'

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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Private Equity: A Casebook

Private Equity: A Casebook. Paul Gompers, Victoria Ivashina, Richard Ruback, 2019, Book, “’Private Equity’ is an advanced applied corporate finance book with a mixture of chapters devoted to exploring a range of topics from a private equity investor’s perspective. The goal is to understand why and which practices are likely to deliver sustained profitability in the future. The book is a collection of cases based on actual investment decisions at different stages for process tackled by experienced industry professionals. The majority of the chapters deal with growth equity and buyout investments. However, a range of size targets and investments in different geographical markets are covered as well. These markets include several developed economies and emerging markets like China, Russia, Turkey, Egypt and Argentina. This compilation of cases is rich in institutional details, information about different markets, and segments of the industry as well as different players and their investment practices – it is a unique insight into the key alternative asset class.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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Risky Retirement Business

Risky Retirement Business. Carmen Reinhart, February 26, 2019, Opinion, “Regardless of whether yields in advanced economies rise, fall, or stay the same, core demographic trends are unlikely to change in the coming years, implying that pension costs will continue to balloon. Is there an asset class that can provide yield-hungry pension-fund managers what they’re looking for?Link

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The SEC’s Misguided Attack on Shareholder Arbitration

The SEC’s Misguided Attack on Shareholder Arbitration. Hal Scott, February 22, 2019, Opinion, “Jay Clayton, chairman of the Securities and Exchange Commission, announced earlier this month that the staff of his agency would allow Johnson & Johnson to block its shareholders from voting on an amendment to its own bylaws. I submitted that amendment as trustee of a trust that owns J&J shares.Link

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Dollar Dominance in Trade: Facts and Implications

Dollar Dominance in Trade: Facts and Implications. Gita Gopinath, 2019, Opinion, “It is an honor to give the EXIM Bank of India’s 33rd Commencement Day Lecture. I would like to especially thank the Managing Director, Mr. David Rasquinha, for inviting me to speak at this special event.  Given that this is the EXIM Bank lecture it feels appropriate to talk about international trade. The remarkable growth in international trade and finance over the last four decades has changed economics and politics. The global financial crisis over the last decade has challenged several of the existing paradigms in economics. In my lecture today I will speak about one such long-standing paradigm in international economics, the so-called “Mundell-Fleming paradigm,”and the recent evidence that questions the general validity of this framework. This new evidence arises from work I have done over the last decade with co-authors that has led us to push for a new paradigm that we call the “Dominant Currency Paradigm.”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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Communicating Resource Scarcity

Communicating Resource Scarcity. Ashley Whillans, Michael Norton, 2019, Paper, “The development and maintenance of interpersonal relationships require investments of both money and time—resources that are often limited in supply, but in great demand. Indeed, consumers are regularly asked to dedicate their money and time to social engagements, and need to manage these resources efficiently. Therefore, consumers often choose to cite insufficient time or money as an excuse for rejecting social invitations. But how does using the excuse of financial versus time scarcity influence interpersonal relationships? Across eight experiments, we demonstrate that using financial scarcity as an excuse (e.g., “I don’t have money”) increases perceptions of interpersonal closeness and helping behavior compared to using time scarcity as an excuse (e.g., “I don’t have time”). This effect is explained by the fact that time is perceived as a more personally controllable resource than money, resulting in consumers who cite financial (vs. temporal) constraints as being perceived as more trustworthy.Link

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Corporate Debt, Firm Size and Financial Fragility in Emerging Markets

Corporate Debt, Firm Size and Financial Fragility in Emerging Markets. Laura Alfaro, January 2019, Paper, “The post-Global Financial Crisis period shows a surge in corporate leverage in emerging markets and a number of countries with deteriorated corporate financial fragility indicators (Altman’s Z-score). Firm size plays a critical role in the relationship between leverage, firm fragility and exchange rate movements in emerging markets. While the relationship between firm-leverage and distress scores varies over time, the relationship between firm size and corporate vulnerability is relatively time-invariant. All else equal, large firms in emerging markets are more financially vulnerable and also systemically important. Consistent with the granular origins of aggregate fluctuations in Gabaix (2011), idiosyncratic shocks to the sales growth of large firms are positively and significantly correlated with GDP growth in our emerging markets sample. Relatedly, the negative impact of exchange rate shocks has a more acute impact on the sales growth of the more highly levered large firms.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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