Banks, Liquidity Crises and Economic Growth

How do the liquidity functions of banks affect investment and growth at different stages of economic development? How do financial fragility and the costs of banking crises evolve with the level of wealth of countries? We analyze these issues using an overlapping generations growth model where agents, who experience idiosyncratic liquidity shocks, can invest in a liquid storage technology or in a partially illiquid Cobb-Douglas technology. By pooling liquidity risk, banks play a growth-ancing role in reducing ineffcient liquidation of long-term projects, but they may face liquidity crises associated with severe output losses. We show that middle-income economies may find it optimal to be exposed to liquidity crises, while poor and rich economies have more incentives to develop a fully covered banking system.Growth models, Liquidity, Financial intermediation, Financial fragility, Banking crises

A Review of the Literature on Early Warning Systems for Banking Crises

This paper presents a review of alternative methodologies for early detection of banking distress. The methodologies proposed are aimed to the early identification of financial distress for countries without an important recent history of bank failure, but facing an unstable international environment. We evaluate several indicators and methodologies to measure financial distress such as qualitative indicators, the signal extraction approach, limited dependent estimation and finally duration models.

Wealth, Financial Intermediation and Growth

This paper presents empirical support for the existence of wealth effects in the contribution of financial intermediation to economic growth, and offers a theoretical explanation for these effects. Using GMM dynamic panel data techniques applied to study the growth-promoting effects of financial intermediation, we show that the exogenous contribution of financial development to economic growth has different effects for different levels of income per capita. We find that this contribution is generally increasing with the level of income per capita of the economy, up to a relatively high level of income.Growth models, Liquidity, Financial intermediation, Financial fragility, Banking crises

Structural Changes in the Transmission Mechanism of Monetary Policy in Mexico: A Non-linear VAR Approach

In this paper we present a first approach to the study of the transformation in the transmission mechanism of monetary policy that has taken place in Mexico in recent years. For this purpose, we use a non-linear VAR model that allows for regime shifts. The comparison of the different regimes identified leads to the following main findings: a) there was a major structural change in the transmission mechanism around January 2001, date that coincides with the formal adoption of the inflation targeting framework; b) after this change, fluctuations in the real exchange rate have had smaller effects on the process of price formation, the formation of inflation expectations and the nominal interest rate; c) also, there have been stronger reactions of the nominal interest rate to increases in the output gap and the rate of inflation; and d) the movements of the nominal interest rate have a more effective influence on the real exchange rate and the rate of inflation.Monetary policy, Mexico, Monetary transmission mechanism

Seismic vulnerability enhancement of medieval and masonry bell towers externally prestressed with unbonded smart tendons

Medieval and masonry bell towers are highly vulnerable to suffer strong earthquake damage due to the mechanical and physical characteristics of masonry and other important factors. An approach for the seismic vulnerability reduction of masonry towers with external prestressing is proposed. The devices are vertically and externally located in order to be removable when needed. The characteristic flexural failure mode of medieval towers and the shear mechanism of bell towers are simulated. Both failure modes are in agreement with earthquake damage in similar towers. Medium prestressing level enhances force capacity of towers failing by bending without reducing ductility. High prestressing level slightly reduces the displacement capability of towers failing ductile. In case of belfry failure, both prestressing levels permit to increase displacement but lower force than towers failing by bending. The proposed medium prestressing level is the optimal for masonry towers and other slender structures failing by bending and shear.ITESO, A.C.Technical University of BraunschweigUniversity of Florenc

Earthquake risk assessment methods of unreinforced masonry structures: Hazard and vulnerability

Seismic risk management of the built environment is integrated by two main stages, the assessment and the remedial measures to attain its reduction, representing both stages a complex task. The seismic risk of a certain structure located in a seismic zone is determined by the conjunct of the seismic hazard and its structural vulnerability. The hazard level mainly depends on the proximity of the site to a seismic source. On the other hand, the ground shaking depends on the seismic source, geology and topography of the site, but definitely on the inherent earthquake characteristics. Seismic hazard characterization of a site under study is suggested to be estimated by a combination of studies with the history of earthquakes. In this Paper, the most important methods of seismic vulnerability evaluation of buildings and their application are described. The selection of the most suitable method depends on different factors such as number of buildings, importance, available data and aim of the study. These approaches are classified in empirical, analytical, experimental and hybrid. For obtaining more reliable results, it is recommends applying a hybrid approach, which consists of a combination between methods depending on the case. Finally, a recommended approach depending on the building importance and aim of the study is described.Technical University of BraunschweigPolytechnical University of Guadalajar

Analysis of the unusual earthquake of 13 August 2006 in Michoacán, México

The moderate earthquake of 13 August 2006 which occurred in the coastal area of Michoacán, México, offered the first opportunity to study an earthquake that has a focal mechanism oriented practically perpendicular to the vast majority of the earthquakes occurring along the subduction zone of the Mexican Pacific continental margin. The location and focal mechanism estimated in this study are in close agreement with those estimated by the Global Centroid Moment Tensor (CMT) project and the US Geological Survey, National Earthquake Information Center (NEIC) and place the earthquake in a complex tectonic region where 3 lithospheric plates converge. Our review shows that for the most severe historical earthquakes in the area the seismic recurrence period has expired, consequently the seismic hazard of this region is high and the analysis of the unusual event must be considered important. The main purposes of this study are (i) re-esti- mate the location and focal mechanism of the unusual event by using available seismic records close to the source, (ii) conduct a tectonic analysis of the area in relation with the previous fault plane estimated, (iii) evaluate the peak ground accelerations generated for this particular thrust event relative to those occurring during the more common events and (iv) generate the isoseismal map. The analysis of the intensities of this event together with a tectonic analysis of the area where this event occurred, attest to an unexpected behavior of this event in this region.National Autonomous University of MexicoUniversity of Colim