The role of capital, liquidity and credit growth in financial crises in Latin America and East Asia

We construct a dataset of bank capital adequacy and liquidity to test their relationships to crises in Asia and Latin America. Event studies, logit and ROC estimations suggest these variables are valuable leading indicators of crises. They can be used to improve Early Warning System design although there are trade-offs between model simplicity, which implies less monitoring costs and complexity which may improve accuracy. There are significant differences between the regions so pooling assumptions are unsound. AUCs show that capital and/or liquidity can be used in a parsimonious model without substantial loss in crisis predictive accuracy. We find no direct role for credit growth in either region. Our results have implications for Asian and Latin American financial regulators concerned with the impacts of Basel III on their banking systems.This work is funded under ESRC Grant No. PTA – 053 – 27 – 0002, entitled “An Investigation into the Causes of Banking Crises and Early Warning System Design”

Financial liberalization and capital adequacy in models of financial crises

We characterize the effects of financial liberalization indices on OECD banking crises, controlling for the standard macro prudential variables that prevail in the current literature. We use the Fraser Institute’s Economic Freedom of the World database. This yields a variable that captures credit market regulations which broadly measures the restrictions under which banks operate. We then test for the direct impacts of some of its components, deposit interest rate regulations and private sector credit controls, on crisis probabilities and their indirect effects via capital adequacy. Over the period 1980 – 2012, we find that less regulated markets are associated with a lower crisis frequency, and it appears that the channel comes through strengthening the defence that capital provides. Deposit interest rate liberalisation adds to the strength of capital in protecting against crises. However, private sector credit liberalisation, appears to increase the probability of having a crisis, albeit not significantly. If policy makers are concerned about the costs of low risk events, they may wish to control private sector credit even if it has a probability of affecting significantly crises of between 10 and 20 per cent

Dispersion-engineered silicon nitride waveguides for mid-infrared supercontinuum generation covering the wavelength range 0.8-6.5 mu m

We numerically demonstrate the generation of a mid-infrared supercontinuum (SC) through the design of an on-chip complementary metal oxide semiconductor (CMOS) compatible 10-mm-long air-clad rectangular waveguide made using stoichiometric silicon nitride (Si 3 N 4 ) as the core and MgF 2 glass as its lower cladding. The proposed waveguide is optimized for pumping in both the anomalous and all-normal dispersion regimes. A number of waveguide geometries are optimized for pumping at 1.55 μ m with ultrashort pulses of 50-fs duration and a peak power of 5 kW. By initially keeping the thickness constant at 0.8 μ m, four different structures are engineered with varying widths between 3 μ m and 6 μ m. The largest SC spectral evolution covering a region of 0.8 μ m to beyond 6.5 μ m could be realized by a waveguide geometry with a width of 3 μ m. Numerical analysis shows that increasing width beyond 3 μ m by fixing thickness at 0.8 μ m results in a reduction of the SC extension in the long wavelength side. However, the SC spectrum can be enhanced beyond 6.5 μ m by increasing the waveguide thickness beyond 0.9 μ m with the same peak power and pump source. To the best of our knowledge, this is first time report of a broad SC spectral evolution through numerical demonstration in the mid-infrared region by the silicon nitride waveguide. In the case of all-normal dispersion pumping, a flatter SC spectra can be predicted with the same power and pump pulse but with a reduced bandwidth spanning 950–2100 nm

Off-balance sheet exposures and banking crises in OECD countries

Against the background of the acknowledged importance of off-balance-sheet exposures in the sub prime crisis, we seek to investigate whether this was a new phenomenon or common to earlier crises. Using a logit approach to predicting banking crises in 14 OECD countries we find a significant impact of a proxy for the ratio of banks‟ off-balance-sheet activity to total (off and on balance sheet) activity, as well as capital and liquidity ratios, the current account balance and GDP growth. These results are robust to the exclusion of the most crisis prone countries in our model. For early warning purposes we show that real house price growth is a good proxy for off balance sheet activity prior to the sub-prime episode. Variables capturing off-balance sheet activity have been neglected in most early warning models to date. We consider it essential that regulators take into account the results for crisis prediction in regulating banks and their off-balance sheet exposures, and thus controlling their contribution to systemic risk

Bank regulation, property prices and early warning systems for banking crises in OECD countries

Early warning systems (EWS) for banking crises generally omit bank capital, bank liquidity and property prices. Most work on EWS has been for global samples dominated by emerging market crises where time series data on bank capital adequacy and property prices are typically absent. We estimate logit crisis models for OECD countries, finding strong effects from capital adequacy and liquidity ratios as well as property prices, and can exclude traditional variables. Higher capital adequacy and liquidity ratios have a marked effect on the crisis probabilities, implying long run benefits to offset some of the costs that such regulations may impose

"On some definitions in matrix algebra"

Many definitions in matrix algebra are not standardized. This notediscusses some of thepitfalls associated with undesirable orwrong definitions, anddealswith central conceptslikesymmetry, orthogonality, square root, Hermitian and quadratic forms, and matrix derivatives.

Investigating the Evidence of Behavioral, Cognitive, and Psychiatric Endophenotypes in Autism: A Systematic Review

Substantial evidence indicates that parents of autistic individuals often display milder forms of autistic traits referred to as the broader autism phenotype (BAP). To determine if discrete endophenotypes of autism can be identified, we reviewed the literature to assess the evidence of behavioral, cognitive, and psychiatric profiles of the BAP. A systematic review was conducted using EMBASE, MEDLINE, PsycINFO, PsycEXTRA, and Global Health. Sixty papers met our inclusion criteria and results are discussed according to the proportion of studies that yield significant deficits per domain. The behavioral, cognitive, and psychiatric endophenotypes in parents of autistic probands are still not clarified; however, evidence suggests mild social/communication deficits, rigid/aloof personality traits, and pragmatic language difficulties as the most useful sociobehavioral candidate endophenotype traits. The existence of deficits in the cognitive domain does suggest familial vulnerability for autism. Furthermore, increased depressed mood and anxiety can also be useful markers; however, findings should be interpreted with caution because of the small number of studies in such heterogeneously broad domains and several methodological limitations

How idiosyncratic are banking crises in OECD countries?

Low levels of bank capital and liquidity in combination with ongoing crises in other countries are shown to increase the probability of banking crises in OECD countries. Hence global coordination of regulatory reform is vital for reducing crisis risks.Funding was received from the ESRC for this work

Large suppression of quantum fluctuations of light from a single emitter by an optical nanostructure

We investigate the reduction of the electromagnetic field fluctuations in resonance fluorescence from a single emitter coupled to an optical nanostructure. We find that such hybrid system can lead to the creation of squeezed states of light, with quantum fluctuations significantly below the shot noise level. Moreover, the physical conditions for achieving squeezing are strongly relaxed with respect to an emitter in free space. A high degree of control over squeezed light is feasible both in the far and near fields, opening the pathway to its manipulation and applications on the nanoscale with state-of-the-art setups.Comment: 10 pages, 5 figure