Contingent Capital and Bank Risk-Taking among British Banks before World War I

The recent financial turmoil highlights the incentive of highly leveraged financial institutions to take excessive risk, given the protection of limited liability. During the nineteenth and early twentieth century, many banks operated under liability rules which obligated shareholders to bear larger costs of bank insolvency in the form of contingent, or even unlimited liability. This paper examines the empirical relationship between the size of banks’ contingent liability and their risk-taking behavior using data on British banks from 1878-1912. We find that banks with more contingent liability appear to have taken less risk. We also find evidence that the risk-reducing effects of contingent liability were larger for banks with higher leverage, suggesting that contingent capital mitigated moral hazard problem at banks.Contingent Capital, Bank Risk-Taking, British Banks

Phenomenological Consequences of Soft Leptogenesis

Soft supersymmetry breaking terms involving heavy singlet sneutrinos can be the dominant source of leptogenesis. The relevant range of parameters is different from standard leptogenesis: a lighter Majorana mass, M < 10^9 GeV (allowing a solution of the gravitino problem), and smaller Yukawa couplings, Y_N < 10^{-4}. We investigate whether the various couplings of the singlet sneutrinos, which are constrained by the requirement of successful `soft leptogenesis', can have observable phenomenological consequences. Specifically, we calculate the contributions of the relevant soft supersymmetric breaking terms to the electric dipole moments of the charged leptons and to lepton flavor violating decays. Our result is that these contributions are small.Comment: 11 pages, 1 figure; v2: an additional contribution is considered (modifying: fig. 1, eq. 10-13, 22) and a reference added. Conclusions unchange

New Physics Effects in B→K(∗)ννB \to K^(*) \nu \nu Decays

We present a model-independent analysis of rare B decays, $B \to K^{(*)} \nu \nu$. The effect of possible new physics is written in terms of dimension-6 four-fermi interactions. The lepton number violating scalar- and tensor-type interactions are included, and they induce $B \to K^{(*)} \nu \nu ({\bar \nu} {\bar \nu})$ decays. We show systematically how the branching ratios and missing mass-squared spectrum depend on the coefficients of the four-fermi interactions.Comment: 20 pages with 7 figure

Neutrino masses and R-parity violation

We review different contributions to the neutrino masses in the context of R-parity violating supersymmetry in a basis independent manner. We comment on the generic spectrum expected in such a scenario comparing different contributions.Comment: Invited brief review for Mod. Phys. Lett. A, 15 pages, uses axodraw.st

International Aspects of the Great Depression and the Crisis of 2007: Similarities, Differences, and Lessons

We focus on two international aspects of the Great Depression--financial crises and international trade—and try to discern lessons for the current economic crisis. Both downturns featured global banking crises which were generated by boom-slump macroeconomic cycles. During both crises, world trade collapsed faster than world incomes and the trade decline was highly synchronized across countries. In the Depression, income losses and rises in trade barriers explain trade’s collapse. Due to vertical specialization and more intense trade in durables today’s trade collapse is due to uncertainty and small shocks to trade costs hitting international supply chains. So far, the global economy has avoided the global trade wars and banking collapses of the Depression perhaps due to improved policy. Even so, the global economy remains susceptible to large shocks due to financial innovation and technological change as recent events illustrate.Great Depression, Crisis of 2007

Shunto, Rational Expectations, and Output Growth in Japan

This paper describes a theoretical and empirical study of the Japanese macroeconomy that focuses on the role of predetermined nominal wages in the relation between monetary policy and aggregate output. The main features of the model are that nominal wage rates set at Shunto are equal to rational expectations of the nominal wage rates that would be consistent with target levels of real output and that firms determine employment and output by equating marginal productivities to real wage rates. The essential implication of the model is that the current deviation of aggregate output from its target level depends only on innovations in inflation and productivity since the last Shunto. The equation derived to implement the model empirically relates current aggregate output growth in a precise way to past values of output growth and inflation since the last Shunto and includes an explicit specification of a white noise error term. The results of econometric analysis of this restricted model equation are consistent with the hypothesis that nominal wages predetermined according to Shunto with rational expectations are important tor the determination of real aggregates. The empirical analysis, however, also suggests that the assumptions about monetary policy used to close the model are not adequate, a result that leads to directions for further research.