Feedback between US and UK Prices: a Frequency Domain Analysis

This paper decomposes the feedback between US and UK price levels by frequency over the period 1791 to 1990. By adapting Geweke's (1982) method of decomposing the feedback between time series to the case of I(1) time series generated by a bivariate error-correction model, we find that most of the feedback between the two time series occurs at very low frequencies. This result provides a reconciliation of the typical rejection of purchasing power parity (PPP) in short-run studies with the findings of paradoxically short half-lives for deviations from PPP often found in long-run studies.feedback decomposition

Miracle to malaise: what's next for Japan?

Economic conditions - Japan

Business cycles under monetary union: EU and US business cycles compared

In discussions of the likely implications for Europe of EMU, the United States is often cited as an example of a monetary union, while the United States' central bank, the Federal Reserve System, is cited as a model for how a central bank would function in a monetary union. While the costs and benefits of monetary union in Europe have been subject to a lot of debate, the authors focus on a potential set of costs and benefits that seem to have received relatively little attention in the existing literature. Specifically, they ask what are the likely benefits to Europe in terms of business cycle stabilization or synchronization from monetary union. The authors compare the business cycle properties of the fifteen EU countries that are potentially eligible for membership in EMU with the properties of the 12 Federal Reserve districts in the U.S.Business cycles ; European Economic Community

China: awakening giant

Economic indicators ; Economic conditions

Recovery from a financial crisis: the case of South Korea

Among the countries that were impacted by the 1997 Asian crisis, South Korea (Korea hereafter) has demonstrated the fastest recovery by blocking its downward spiral. Jahyeong Koo and Sherry Kiser examine the recovery process of financial crises, particularly in Korea, in light of the weak-fundamentals and financial-panic views. Since neither of these views adequately explains Korea’s recovery, the authors look at other phenomena for an explanation. Alternative financial arrangements and labor market adjustments are specifically examined. The authors acknowledge that Korea’s recovery was only possible after it gained control of its exchange-rate crisis. Since the recovery process affirms neither the weak-fundamentals view nor the financial-panic view, Koo and Kiser conclude that containing the downward spiral was a combination of factors working together and that much of Korea’s recovery can be attributed to the creation of alternative funding sources and labor adjustments.Banks and banking - Korea

Rolling recessions

Recessions

Financial liberalization, market discipline and bank risk

In the literature on systemic banking crises, two common themes are: (1) Risky lending often follows bank liberalization. (2) Lack of market discipline encourages risky lending. That not all liberalizations are followed by financial crisis and that financial systems without market discipline sometimes operate without incident invites examination of these themes. In a test of six countries, we find that our measure of bank risk increases significantly in the wake of financial liberalizations, but only where depositors fail to discipline banks. Our measures of market discipline and bank risk, however, are persistently inversely related

Financial repression, financial development and economic growth

In this paper, we examine the empirical relationship between financial repression, financial development, and growth. Theory has developed in which financial repression and growth are linked. The main contribution of this paper is to look at two parts. First, what, if any, is the empirical link between financial repression and growth, controlling for the level of financial development. Second, is there an empirical link between financial repression and financial development?Economic development

When does financial liberalization make banks risky? : an empirical examination of Argentina, Canada and Mexico

In the literature on systemic banking crises, two common themes are: (1) lack of market discipline encourages risky lending and (2) financial liberalization or privatization lead to risky lending. However, there is evidence to suggest that neither financial liberalization nor weak market discipline always precedes risky lending. We test for depositor discipline and, separately for post-liberalization or post-privatization risky lending in Argentina, Canada, and Mexico. In the countries without market discipline, lending risk increases significantly in the wake of liberalization. Where depositors discipline banks, banks neither behave riskily nor does their risk increase in the wake of privatization. ; Economic Research Working Paper 9905Banks and banking - Argentina ; Banks and banking - Canada ; Banks and banking - Mexico ; Financial crises