Financial Intermediation, Competition, and Risk: A General Equilibrium Exposition

We study a simple general equilibrium model in which investment in a risky technology is subject to moral hazard and banks can extract market power rents. We show that more bank competition results in lower economy-wide risk, lower bank capital ratios, more efficient production plans and Pareto-ranked real allocations. Perfect competition supports a second best allocation and optimal levels of bank risk and capitalization. These results are at variance with those obtained by a large literature that has studied a similar environment in partial equilibrium. Importantly, they are empirically relevant, and demonstrate the need of general equilibrium modeling to design financial policies aimed at attaining socially optimal levels of systemic risk in the economy.General Equilibrium;Bank Competition;Market Power Rents;Risk

Capital Regulation, Liquidity Requirements and Taxation in a Dynamic Model of Banking

This paper formulates a dynamic model of a bank exposed to both credit and liquidity risk, which can resolve financial distress in three costly forms: fire sales, bond issuance and equity issuance. We use the model to analyze the impact of capital regulation, liquidity requirements and taxation on banks' optimal policies and metrics of efficiency of intermediation and social value. We obtain three main results. First, mild capital requirements increase bank lending, bank efficiency and social value relative to an unregulated bank, but these benefits turn into costs if capital requirements are too stringent. Second, liquidity requirements reduce bank lending, efficiency and social value significantly, they nullify the benifits of mild capital requirements, and their private and social costs increase monotonically with their stringency. Third, increases in corporate income and bank liabilities taxes reduce bank lending, bank effciency and social value, with tax receipts increasing with the former but decreasing with the latter. Moreover, the effects of an increase in both forms of taxation are dampened if they are jointly implemented with increases in capital and liquidity requirements.Capital requirements;liquidity requirements;taxation of liabilities. JEL Classifications

Flatness optimization of micro-injection moulded parts: The case of a PMMA microfluidic component

Micro-injection moulding (µ-IM) has attracted a lot of interest because of its potential for the production of low-cost, miniaturized parts in high-volume. Applications of this technology are, amongst others, microfluidic components for lab-on-a-chip devices and micro-optical components. In both cases, the control of the part flatness is a key aspect to maintaining the component's functionality. The objective of this work is to determine the factors affecting the flatness of a polymer part manufactured by µ-IM and to control the manufacturing process with the aim of minimizing the in-process part deformation. As a case study, a PMMA microfluidic substrate with overall dimensions of 10 mm diameter and 1 mm thickness was investigated by designing a µ-IM experiment having flatness as the experimental response. The part flatness was measured using a micro-coordinate measuring machine. Finite elements analysis was also carried out to study the optimal ejection pin configuration. The results of this work show that the control of the µ-IM process conditions can improve the flatness of the polymer part up to about 15 µm. Part flatness as low as 4 µm can be achieved by modifying the design of the ejection system according to suggested guideline

Effects of anisotropic and isotropic LIPSS on polymer filling flow and wettability of micro injection molded parts

In micro injection molding, the specific cavity surface texture and roughness directly influence the polymer flow and the heat transfer between polymer melt and mold. In this work, two different types of laser-induced periodic surface structures, linear and hexagonal, were generated, and their impact on the flow length in micro injection molding was evaluated. A complete investigation of the surface treatment effect on the polymer flow was carried out, comparing the performance of an untreated cavity surface with surfaces modified by LIPSS. The phenomenon was examined by localizing the weld lines created by the polymer flowing in two parallel channels having different surface treatments. Several cavity inserts were treated by varying the LIPSS process parameters to generate surfaces with different micro-and nanostructures directions and periodicity. Furthermore, the paper addresses the hydro-phobicity achieved on the micro molded surfaces replicated from mold inserts with different LIPSS-based surface topography. Mold surfaces with linear and hexagonal LIPSS and the respective molded parts were analyzed by optical profilometry and scanning electron microscopy to characterize the cavity surfaces replication and localize the weld lines on the micro injection molded parts

Systemic Risks and the Macroeconomy

This paper presents a modeling framework that delivers joint forecasts of indicators of systemic real risk and systemic financial risk, as well as stress-tests of these indicators as impulse responses to structural shocks identified by standard macroeconomic and banking theory. This framework is implemented using large sets of quarterly time series of indicators of financial and real activity for the G-7 economies for the 1980Q1-2009Q3 period. We obtain two main results. First, there is evidence of out-of sample forecasting power for tail risk realizations of real activity for several countries, suggesting the usefulness of the model as a risk monitoring tool. Second, in all countries aggregate demand shocks are the main drivers of the real cycle, and bank credit demand shocks are the main drivers of the bank lending cycle. These results challenge the common wisdom that constraints in the aggregate supply of credit have been a key driver of the sharp downturn in real activity experienced by the G-7 economies in 2008Q4- 2009Q1

Light-Controlled Direction of Distributed Feedback Laser Emission by Photo-Mobile Polymer Films

We report on the realization of Distributed Feedback (DFB) lasing by a high-resolution reflection grating integrated in a Photomobile Polymer (PMP) film. The grating is recorded in a recently developed holographic mixture basically containing halolakanes/acrylates and a fluorescent dye molecule (Rhodamine 6G). The PMP-mixture is placed around the grating spot and a subsequent curing/photo-polymerization process is promoted by UV-irradiation. Such a process brings to the simultaneous formation of the PMP-film and the covalent link of the PMP-film to the DFB-grating area (PMP-DFB system). The PMP-DFB allows lasing action when optically pumped with a nano-pulsed green laser source. Moreover, under a low-power light-irradiation the PMP-DFB bends inducing a spatial readdressing of the DFB-laser emission. This device is the first example of a light-controlled direction of a DFB laser emission. It could represent a novel disruptive optical technology in many fields of Science, making feasible the approach to free standing and light-controllable lasers

Financial Intermediation, Competition, and Risk: A General Equilibrium Exposition

We study a simple general equilibrium model in which investment in a risky technology is subject to moral hazard and banks can extract market power rents. We show that more bank competition results in lower economy-wide risk, lower bank capital ratios, more efficient production plans and Pareto-ranked real allocations. Perfect competition supports a second best allocation and optimal levels of bank risk and capitalization. These results are at variance with those obtained by a large literature that has studied a similar environment in partial equilibrium. Importantly, they are empirically relevant, and demonstrate the need of general equilibrium modeling to design financial policies aimed at attaining socially optimal levels of systemic risk in the economy

Bank Competition and Financial Stability: A General Equilibrium Exposition

Summary: We study versions of a general equilibrium banking model with moral hazard under either constant or increasing returns to scale of the intermediation technology used by banks to screen and/or monitor borrowers. If the intermediation technology exhibits increasing returns to scale, or it is relatively efficient, then perfect competition is optimal and supports the lowest feasible level of bank risk. Conversely, if the intermediation technology exhibits constant returns to scale, or is relatively inefficient, then imperfect competition and intermediate levels of bank risks are optimal. These results are empirically relevant and carry significant implications for financial policy

Systemic Real and Financial Risks: Measurement, Forecasting, and Stress Testing

Building on De Nicolò and Lucchetta (2010), this paper presents a novel modeling framework that delivers: (a) forecasts of indicators of systemic real risk and systemic financial risk based on density forecasts of indicators of real activity and financial health; (b) reduced-form stress tests as historical simulations; and (c) structural stress-tests as impulse responses of systemic risk indicators to structural shocks identified by standard macroeconomic and banking theory. This framework is implemented using large sets of quarterly time series of the G-7 economies in 1980Q1-2010Q2. We show that the model exhibits significant out-of sample forecasting power for tail real and financial risk realizations in each country. Furthermore, reduced-form stress tests, as well as structural stress tests in which aggregate demand shocks and bank credit demand shocks are identified as the main drivers of cycles in real activity and bank lending, provide significant early warnings on the build-up of real and financial vulnerabilities