The Impact of regulatory capital regulation on balance sheet structure, intermediation cost and growth

URL des Documents de travail : http://ces.univ-paris1.fr/cesdp/cesdp2016.htmlDocuments de travail du Centre d'Economie de la Sorbonne 2016.61 - ISSN : 1955-611XAs Europe is subject to a protracted recession, it should be asked whether the reform of the financial sector is not costly in terms of potential growth. Our analysis shows that the negative effect of the Basel III package excepted by the pre-QE studies are almost annihilated today. The recession must then have other causes: falling corporate lending volumes resulted from falling demand in the aftermath of the financial crisis, but this is longer the case. The EU is trying to incentivize corporate lending, via forward guidance as well as ‘supporting factor’ cutting down the Basel capital requirements. The macroeconomic theorists are trying to account for future success of monetary policy around zero nominal interest rate via the risk-taking channel. All these clever initiatives failed to deliver. As a consequence, we might infer that banks are simply not taking any risks: rather than appealing to risk aversion, we would like to argue that the banks seem especially embarrassed by future regulatory developments, which appear remote and uncertain. The binding constraint for corporate lending and growth in the EU is then plausibly a combination of banks' expectations of future regulation and strong uncertainty aversion. While we offer some mitigation prospects, we hope that the theoretical developments of the recent years will quickly yield both theoretical advances and practical results.Malgré les assouplissements récents de la règlementation bancaire afin de permettre une reprise des prêts aux entreprises, il semble que le paquet Bâle III ait un effet néfaste sur la croissance. Le texte s'interroge sur la contrainte active parmi l'ensemble des nouvelles règles. Il semblerait que les banques soient devenues très averses à l'incertitude, en particulier à l'incertitude sur l'évolution des règles qui leurs sont imposées. En conséquence nous proposons de modifier la nature des provisions en capital et le nombre de régulateurs ayant un pouvoir de décision sur le niveau des capitaux

An adverse social welfare consequence of a rich-to-poor income transfer: A relative deprivation approach

A transfer from a richer individual to a poorer one seems to be the most intuitive and straightforward way of reducing income inequality in a society. However, can such a transfer reduce the welfare of the society? We show that a rich-to-poor transfer can induce a response in the individuals’ behaviors which actually exacerbates, rather than reduces, income inequality as measured by the Gini index. We use this result as an input in assessing the social welfare consequence of the transfer. Measuring social welfare by Sen’s social welfare function, we show that the transfer reduces social welfare. These two results are possible even for individuals whose utility functions are relatively simple (namely, at most quadratic in all terms) and incorporate a distaste for low relative income. We first present the two results for a population of two individuals. We subsequently provide several generalizations. We show that our argument holds for a population of any size, and that the choice of utility functions which trigger this response is not singular - the results obtain for an open set of the space of admissible utility functions. In addition, we show that a rich-to-poor transfer can exacerbate inequality when we employ Lorenz-domination, and that it can decrease social welfare when we draw on any increasing, Schur-concave welfare function

Dealing with a traumatic past: the victim hearings of the South African truth and reconciliation commission and their reconciliation discourse

In the final years of the twentieth and the beginning of the twenty-first century, there has been a worldwide tendency to approach conflict resolution from a restorative rather than from a retributive perspective. The South African Truth and Reconciliation Commission (TRC), with its principle of 'amnesty for truth' was a turning point. Based on my discursive research of the TRC victim hearings, I would argue that it was on a discursive level in particular that the Truth Commission has exerted/is still exerting a long-lasting impact on South African society. In this article, three of these features will be highlighted and illustrated: firstly, the TRC provided a discursive forum for thousands of ordinary citizens. Secondly, by means of testimonies from apartheid victims and perpetrators, the TRC composed an officially recognised archive of the apartheid past. Thirdly, the reconciliation discourse created at the TRC victim hearings formed a template for talking about a traumatic past, and it opened up the debate on reconciliation. By discussing these three features and their social impact, it will become clear that the way in which the apartheid past was remembered at the victim hearings seemed to have been determined, not so much by political concerns, but mainly by social needs

Using the stated preference method for the calculation of social discount rate

The aim of this paper is to build the stated preference method into the social discount rate methodology. The first part of the paper presents the results of a survey about stated time preferences through pair-choice decision situations for various topics and time horizons. It is assumed that stated time preferences differ from calculated time preferences and that the extent of stated rates depends on the time period, and on how much respondents are financially and emotionally involved in the transactions. A significant question remains: how can the gap between the calculation and the results of surveys be resolved, and how can the real time preferences of individuals be interpreted using a social time preference rate. The second part of the paper estimates the social time preference rate for Hungary using the results of the survey, while paying special attention to the pure time preference component. The results suggest that the current method of calculation of the pure time preference rate does not reflect the real attitudes of individuals towards future generations

Price of anarchy on heterogeneous traffic-flow networks

The efficiency of routing traffic through a network, comprising nodes connected by links whose cost of traversal is either fixed or varies in proportion to volume of usage, can be measured by the `price of anarchy'. This is the ratio of the cost incurred by agents who act to minimise their individual expenditure to the optimal cost borne by the entire system. As the total traffic load and the network variability - parameterised by the proportion of variable-cost links in the network - changes, the behaviours that the system presents can be understood with the introduction of a network of simpler structure. This is constructed from classes of non-overlapping paths connecting source to destination nodes that are characterised by the number of variable-cost edges they contain. It is shown that localised peaks in the price of anarchy occur at critical traffic volumes at which it becomes beneficial to exploit ostensibly more expensive paths as the network becomes more congested. Simulation results verifying these findings are presented for the variation of the price of anarchy with the network's size, aspect-ratio, variability and traffic load

The racist bodily imaginary: the image of the body-in-pieces in (post)apartheid culture

This paper outlines a reoccurring motif within the racist imaginary of (post)apartheid culture: the black body-in-pieces. This disturbing visual idiom is approached from three conceptual perspectives. By linking ideas prevalent in Frantz Fanon’s description of colonial racism with psychoanalytic concepts such as Lacan’s notion of the corps morcelé, the paper offers, firstly, an account of the black body-in-pieces as fantasmatic preoccupation of the (post)apartheid imaginary. The role of such images is approached, secondly, through the lens of affect theory which eschews a representational ‘reading’ of such images in favour of attention to their asignifying intensities and the role they play in effectively constituting such bodies. Lastly, Judith Butler’s discussion of war photography and the conditions of grievability introduces an ethical dimension to the discussion and helps draw attention to the unsavory relations of enjoyment occasioned by such images

Financial Transaction Tax: Small is Beautiful

The case for taxing financial transactions merely to raise more revenues from the financial sector is not particularly strong. Better alternatives to tax the financial sector are likely to be available. However, a tax on financial transactions could be justified in order to limit socially undesirable transactions when more direct means of doing so are unavailable for political or practical reasons. Some financial transactions are indeed likely to do more harm than good, especially when they contribute to the systemic risk of the financial system. However, such a financial transaction tax should be very small, much smaller than the negative externalities in question, because it is a blunt instrument that also drives out socially useful transactions. There is a case for taxing over-the-counter derivative transactions at a somewhat higher rate than exchange-based derivative transactions. More targeted remedies to drive out socially undesirable transactions should be sought in parallel, which would allow, after their implementation, to reduce or even phase out financialtransaction taxes

The Quantity Theory of Money is Valid. The New Keynesians are Wrong!

We test the quantity theory of money (QTM) using a novel approach and a large new sample. We do not follow the usual approach of first differentiating the logarithm of the Cambridge equation to obtain an equation relating the growth rate of real GDP, the growth rate of money and inflation. These variables must then again be ‘integrated’ by averaging in order to obtain stable relationships. Instead we suggest a much simpler procedure for testing directly the stability of the coefficient of the Cambridge equation. For 125 countries and post-war data we find the coefficient to be surprisingly stable. We do not select for high inflation episodes as was done in most empirical studies; inflation rates do not even appear in our data set. Much work supporting the QTM has been done by economic historians and at the University of Chicago by Milton Friedman and his associates. The QTM was a foundation stone of the monetarist revolution. Subsequently belief in it waned. The currently dominant New Keynesian School, implicitly or explicitly denies the validity of the QTM. We survey this history and argue that the QTM is valid and New Keynesians are wrong

National business regulations and city entrepreneurship in Europe: a multilevel nested analysis

This article provides and tests a theoretical framework with a multilevel (country–city) nested model to analyze the relationship between national business regulations (NBRs) and city level entrepreneurship. While public interest theory predicts a positive relationship between NBR and city level entrepreneurship, public choice theory predicts the opposite, a negative relationship. Based on multilevel analysis for a matched country–city panel of 228 cities across 20 European countries for the years 2004 to 2009, the empirical evidence from panel data estimation explains how changes in NBRs influence changes in city level entrepreneurial activity over time