A Marxian Model of Market for Money Capital: Profit Rate, Interest Rate, and Leverage Ratio

In this paper, I develop a Marxian model of market for money capital populated by capitalists equipped with equal money capital endowment but with heterogeneous linear production technology. Due to a maximization of return on equity, capitalists with relatively weak technology, yielding profit rate lower than interest rate, become a money capitalist (lender) and capitalists with relatively strong technology, yielding profit rate greater than interest rate, become an industrial capitalist (borrower). The equilibrium interest rate is derived by the associated demand and supply relation. In this context, Marx’s notion of the role of credit system in an expanded reproduction of capital is understood in terms of an efficient reallocation of funds through credit market. From this setup of the model follow two essential relationships Marx establishes between the average profit rate and the interest rate: (i) that the profit (rate) sets a maximum limit of interest (rate), and (ii) that the two rates are correlated. Lastly, depending on the financial sector’s leverage ratio, which is supported by its intermediation technology, the financial sector may be more or less profitable than the industrial sector. This result suggests that one aspect of the industrial-banking capitalists antagonism surrounding the division of profit into interest and profit of enterprise lies in the banking capitalists’ strenuous efforts towards continuous innovations in financial intermediation technology

Three Essays on Macroeconomic Implications of Contemporary Financial Intermediation

This dissertation contributes to the growing literature on macroeconomic models with a financial intermediary sector. The first two chapters use the circuit of capital modeling methodology to study the relation between growth and profitability in capitalist economy where credit is essential, and the third uses a more standard macrodynamic model to investigate how securitized banking, which relies on short-term collateralized borrowing, as opposed to traditional commercial banking, generates procyclical bank leverage, which in turn leads to supply-led fluctuation in credits and ultimately to a boom-bust cycle of asset prices. In chapter 1, I extend the baseline model of circuit of capital to incorporate a profit-making financial capitalist sector and the associated financial variables. The extended model is examined to see how the main findings of the existing literature regarding growth, profitability, and credits are modified. It is shown that once finance is explicitly incorporated, the Cambridge equation-type result is modified in a way that relates growth to net return on equity of a firm sector, not to the latter\u27s gross profit rate; hence, leverage ratio of the firm sector and the bank profitability, which is determined in line with interest rates, become crucial variables. In chapter 2, by relying on the extended circuit of capital model, I propose a new categorization for growth theory that characterizes financial aspects of growth, i.e. firm leverage-led vs. bank leverage-led growth. When the growth is led by firm leverage, on the one hand, growth does not face any upper bound while it stimulates excess demand for bank credits and hence is accompanied by a rise in the interest rates. On the other hand, when the growth is led by bank leverage, growth faces some upper bound but it stimulates excess supply of bank credits and consequently is accompanied by a fall in the interest rate. Chapter 3 draws upon the recent empirical finding on procyclical bank leverage and makes a contribution to the related literature in two directions. First, I build a one-period banking model of repurchase agreement to show that repo transactions motivate borrowers to manage their leverage procyclically due to counter-party risks and collateral value risks involved in the transactions. Second, with this result as a microfoundation, I build a macrodynamic model, which reveals the logic underlying persistent boom-bust cycles observed in the securitized banking system

Liquidity, Bank Runs, and Fire Sales Under Local Thinking

In this paper, we examine the implications on banking crises when markets are populated by agents that neglect tail risks and form expectations conditioned on a favorable subset of all possible states of the economy. We find that optimal bank liq- uidity is lower than would be the case when banks are guided by rational expectations, and, consequently, the banking system is more vulnerable to adverse shocks, which leads to bank runs. Asset pledgeability of surviving banks is also affected so that their capacity to raise external funds for purchasing assets of distressed banks is weakened. Further, we examine the case when asset returns are correlated through securitization. In this case adverse shocks will be felt uniformly across the banking sector and banks that survive with the help of a public liquidity backstop will become risk–averse and reluctant to purchase distressed assets. We also explore a government funded asset purchase program, that is implemented with an asset price target

Shadow Banks and the Collateral Multiplier

With an emphasis on contributing to macroeconomic pedagogy we examine the collateral multiplier by comparing it to the traditional money multiplier in a simplified framework of traditional banking and shadow banking in which government bonds are the core assets. While the money multiplier is a measure of the ability of the banking system to intermediate sovereign debt by creating deposits, the collateral multiplier is a measure of the shadow banking system’s ability to intermediate sovereign debt by creating shadow money. It also measures the degree of re-use of sovereign debt as collateral. In this setup, the collateral multiplier is defined as the ratio between dealer banks’ matched book repo activity relative to their trading book. Using the New York Fed’s Primary Dealer Statistics data, we empirically estimate the collateral multiplier for U.S. Treasury repo collateral. Our model and empirical results shed light on the transmission mechanisms of monetary policy channeled through shadow banks and on the U.S. Treasuries market turmoil induced by COVID-19 in March 2020

A Puzzle about the Monetary Expression of Labor Time: An Equilibrating Mechanism or Just A Coincidence?

In this paper, we report a puzzling result about the monetary expressions of labor time (MELTs) of the productive and unproductive sectors. Since part of the aggregate value produced in productive sectors is transferred to unproductive sectors, the productive sector’s MELT is a measure of value realized in productive sectors while the unproductive sector’s MELT is a measure of value transferred to unproductive sectors. Using the national income data for the U.S. economy during 1987-2016 and for the Korean economy during 1993-2016, it is found that the MELT of the aggregate productive sector and the MELT of the aggregate unproductive sector have been moving in a very close lockstep in both countries during the entire sample periods. We build a model which explicitly formalizes the unproductive sector as not producing any value but making the value production process efficient, and find that the co-movement of the two MELTs is not an optimal condition. We also suggest some ex post implications of it, including what the puzzling result implies on the relation between unproductive sector and capital accumulation

Unproductive Activities and the Rate of Surplus Value at the Industry Level in Korea, 1995–2015

In order to explain how the Korean economy underwent the structural change through the two crises of 1997-8 and 2008 within the context of globalization, this article focuses on class analysis and inter-sectoral value transfer by estimating the sectoral rates of exploitation along with the sectoral monetary expressions of labor time. Our data indicate the possibility that the expansion of unproductive activities, accompanied by intensification of exploitation within the unproductive sectors, might not have overtaken capital accumulation in Korea during 1995–2015. It can also be concluded that the condition for manufacturing’s capital accumulation steadily improved since the 1997–8 crisis, but started to deteriorate after 2011. Our value–theoretic analysis provides a foundation for understanding the context of the regime change, which may plausibly characterize the Korean economy last couple of decades

Empirical research on the experience of the New Homiletic in South Korea

The purpose of this article is to present empirical research to reveal the reality of the New Homiletic in South Korea. This research was conducted by means of semistructured interviews with seven pastors and eight laypeople of the evangelical faith, residing in Seoul and its metropolitan areas, within the age limits of 20–59 years. The aim was to uncover the experience of the sermons by both the preachers and the hearers of the sermons. The researcher chose Pieterse’s methodology of analysing the data, which is an inductive analysis called open coding. Six main categories from the pastor’s group and five categories from the laypeople emerged from the data. The categories were rearranged into four themes, which is a valuable finding for current-day Korean preaching in order to enhance the homiletical praxis. INTRDISCIPLINARY AND/ OR INTERDISCIPLINARY IMPLICATIONS : This article presents empirical research on the reality of the New Homiletic in South Korea. The results indicate similarity between South Korea and the USA. The conclusion is that traditional discourse should give way to the New Homiletic. This research can become the basis for finding new strategies for evangelical preaching.The article is based on a part of Hyun Woong Park (2015) PhD thesis "A homiletical strategy for evangelical preaching in South Korea : beyond the New Homiletic" that he did under supervision of Cas Wepener. (http://hdl.handle.net/2263/50756)http://www.ve.org.zaam2016Practical Theolog

Clinical characteristics of acute drug-induced dystonia in pediatric patients

Objecstonia is a movement disorder in which muscles contract uncontrollably. Acute drug-induced dystonia (DID) can be diagnosed through detailed history taking and physical examination. This study aimed to identify the clinical characteristics of DID in children, which could help emergency physicians diagnose these conditions more efficiently. Methods We reviewed medical rtive Dyecords of children aged below 18 years diagnosed with drug-related dystonia after discharge from the emergency department over 10 years. We collected the patients’ age, sex, suspected causative drugs, initial diagnosis of the prescribing physician, duration of drug-taking, diagnostic evaluations, treatment methods, and prognosis. Results Seventy-nine patients were enrolled. The mean age was 11.3±4.9 years (range, 4.0 months to 18.0 years), and 41 patients (51.9%) were boys. The most common cause of DID was gastrointestinal medications in 45 patients (57.0%), followed by antipsychotics in 23 patients (29.1%). Eleven (24.4%) out of 45 patients with DID due to gastrointestinal medications had the initial diagnosis of upper respiratory infection, and seven (30.4%) out of 23 patients with DID due to antipsychotics had the initial diagnosis of non-psychotic diseases. Younger children received more diagnostic procedures and were more frequently admitted. A benzodiazepine (67.1%) was the most common single drug for treatment. Conclusion Physicians should not only acknowledge DID in order to reduce unnecessary workup and admission, but also know that antiemetics and antipsychotics are common causes of DID. Therefore, physicians should try to avoid multidrug prescriptions in children