Capital requirements and business cycles with credit market imperfections

The business cycle effects of bank capital regulatory regimes are examined in a New Keynesian model with credit market imperfections and a cost channel of monetary policy. Key features of the model are that bank capital increases incentives for banks to monitor borrowers, thereby reducing the probability of default, and excess capital generates benefits in terms of reduced regulatory scrutiny. Basel I and Basel II-type regulatory regimes are defined, and the model is calibrated for a middle-income country. Simulations of supply and demand shocks show that, depending on the elasticity that relates the repayment probability to the capital-loan ratio, a Basel II-type regime may be less procyclical than a Basel I-type regime.Banks&Banking Reform,Debt Markets,Access to Finance,Economic Theory&Research,Emerging Markets

Growth and welfare in mixed health system financing with physician dual practice in a developing economy: a case of Indonesia

Based on Indonesia’s hybrid BPJS Kesehatan health system, we analyze for welfare-optimal government financing strategy in an economy with a mixed health system using an endogenous growth framework with physician dual practice. We find the model solution to produce two vastly different regimes in terms of policy implications: a “high” public-sector congestion regime as in the benchmark case of Indonesia, and a “low” public-sector congestion, high capacity regime. In the former, welfare-optimal health financing strategy appears to be promoting private health service. In contrast, in the low-congestion, high capacity regime, a welfare-optimal strategy is to do the opposite of increasing government physician wage at the expense of private health subsidy. These results highlight the importance of developing a benchmarking system that measures the actual degree of congestion faced by the public health service in a developing economy, as it ultimately would influence the optimal health financing strategy to be pursued

What can we learn from the implementation of monetary and macroprudential policies: a systematic literature review

The emergence of macroprudential policies, implemented by central banks as a means of promoting financial stability, has raised many questions regarding the interaction between monetary and macroprudential policies. Given the limited number of studies available, this paper sheds light on this issue by providing a critical and systematic review of the literature. To this end, we divide the theoretical and empirical studies into two broad channels of borrowers - consisting of the cost of funds and the collateral constraint - and financial intermediaries - consisting of risk-taking and payment systems. In spite of the existing ambiguity surrounding coordination issues between monetary and macroprudential policies, it is argued that monetary policy alone is not sufficient to maintain macroeconomic and financial stability. Hence, macroprudential policies are needed to supplement monetary. Additionally, we find that the role of the exchange rate is critical in the implementation of monetary and macroprudential policies in emerging markets, whilst volatile capital flows pose another challenge. In so far as how the arrangement of monetary and macroprudential policies varies across countries, key theoretical and policy implications have been identified

Sources of Sex Information Used by Young British Women Who Have Sex with Women (WSW) and Women Who Have Sex Exclusively with Men (WSEM): Evidence from the National Survey of Sexual Attitudes and Lifestyles

There is little consideration about the provision of information about sex to women who have sex with women (WSW). This study drew on data from the third National Survey of Sexual Attitudes and Lifestyle, a nationally representative survey of people in Great Britain. Logistic regression was undertaken to examine firstly the relationships between WSW and women who have sex exclusively with men (WSEM) and their main source of information about sex, and secondly between WSW/WSEM and unmet need for information about sex. Each source was included as the binary outcome indicating yes this was the main source, or no this was not the main source of information about sex. The results found that WSW had significantly lower odds of reporting lessons at schools as their main source of information, and significantly higher odds of reporting sources defined as ‘other’ (predominantly first girlfriend/boyfriend or sexual partner) as their main source of information. Reported levels of unmet need for information was also higher amongst young WSW compared with WSEM. This study provides new insights into the sex educational needs of young women and highlights the need for sex education in schools in Great Britain to include information on a full-range of sexual practices, including same-sex sexual relationships

Endogenous Growth and Technological Progress with Innovation Driven by Social Interactions

We analyze the implications of innovation and social interactions on economic growth in a stylized endogenous growth model with heterogenous research firms. A large number of research firms decide whether to innovate or not, by taking into account what competitors (i.e., other firms) do. This is due to the fact that their profits partly depend on an externality related to the share of firms which actively engage in research activities. Such a share of innovative firms also determines the evolution of technology in the macroeconomy, which ultimately drives economic growth. We show that when the externality effect is strong enough multiple BGP equilibria may exist. In such a framework, the economy may face a low growth trap suggesting that it may end up in a situation of slow long run growth; however, such an outcome may be fully solved by government intervention. We also show that whenever multiple BGP exist, the economy may cyclically fluctuate between the low and high BGP as a result of shocks affecting the individual behavior of research firms

Infrastructure, Women’s Time Allocation, and Economic Development

This paper develops a gender-based OLG model of endogenous growth to analyze the impact of infrastructure on women’s time allocation between market work, raising children, own health care, home production, and leisure. Gender bias occurs as a result of firms discriminating between men and women, and of mothers devoting relatively more time to rearing their sons. Women’s health status in adulthood, which affects productivity and wages, depends on their health status in childhood. A stagnation equilibrium and multiple development regimes are derived. An increase in productive government spending may shift the economy to a high-growth equilibrium, in a process involving changes in life expectancy, fertility, and a reallocation of women’s time.

Fiscal Policy and Endogenous Growth with Public Infrastructure

Optimal tax and spending allocation rules are derived in an endogenous growth model in which raw labor must be educated to become productive and infrastructure services affect the schooling technology. The optimal tax rate is found to depend only on the elasticities of output with respect to infrastructure services and educated labor. The optimal share of spending on infrastructure (relative to education) depends also on these elasticities, as well as the quality of schooling and the degree to which infrastructure services affect the production of educated labor. Congestion costs in education tend to raise the optimal share of spending on infrastructure.