Cyclical effects of bank capital requirements with imperfect credit markets

This paper analyzes the cyclical effects of bank capital requirements in a simple model with credit market imperfections. Lending rates are set as a premium over the cost of borrowing from the central bank, with the premium itself depending on firms’ effective collateral. Basel I- and Basel II-type regulatory regimes are defined and a capital channel is introduced through a signaling effect of capital buffers on the cost of bank deposits. The macroeconomic effects of various shocks (a drop in output, an increase in the refinance rate, and a rise in the capital adequacy ratio) are analyzed, under both binding and nonbinding capital requirements. Factors affecting the procyclicality of each regime (defined in terms of the behavior of the risk premium) are also identified and policy implications are discussed.Banks&Banking Reform,Access to Finance,Economic Theory&Research,Currencies and Exchange Rates,Debt Markets

Capital Regulation, Monetary Policy and Financial Stability

This paper examines the roles of bank capital regulation and monetary policy in mitigating procyclicality and promoting macroeconomic and financial stability. The analysis is based on a dynamic stochastic model with imperfect credit markets. Macroeconomic (financial) stability is defined in terms of the volatility of nominal income (real house prices). Numerical experiments show that even if monetary policy can react strongly to inflation deviations from target, combining a credit-augmented interest rate rule and a Basel III-type countercyclical capital regulatory rule may be optimal for promoting overall economic stability. The greater the degree of interest rate smoothing, and the stronger the policymaker’s concern with macroeconomic stability, the larger is the sensitivity of the regulatory rule to credit growth gaps.

Relative returns to policy reform - evidence from controlled cross-country regressions

The authors aim at contributing to understand the dispersion of returns from policy reforms using cross-country regressions. The authors compare the"before reform"with"after reform"GDP growth outcome of countries that undertook import-liberalization and fiscal policy reforms. They survey a large sample (about 54) of developing countries over the period 1980-99. The benefits of openness to trade and fiscal prudence have been extensively identified in the growth literature, but the evidence from simple cross-section analysis can sometimes be inconclusive and remains vulnerable to criticism on estimation techniques, such as identification, endogeneity, multi-colinearity, and the quality of the data. The authors use a different analytical framework that establishes additional controls. First, they construct a counterfactual control group. These are countries that-under specific thresholds-did not introduce policy reforms under scrutiny. Second, the authors also try to use the most appropriate variable of policy reform, for example, exogenous changes in import-tariffs instead of the endogenous sum of all trade flows. Third, the authors try to base the before-after reform comparison on the most accurate date for the beginning of a policy reform period (instead of comparing averages over fixed intervals of time). Once these controls are set, they explain the difference between average GDP growth rates during the country-specific post and the pre-reform periods, relative to the average GDP growth of the relevant control group. The explanatory variables in the regressions include the standard growth-regression controls. The results are the following: 1) With a better measurement and timing of the policy reforms, the growth effect (the"returns on reform") is generally smaller than in previous papers. 2) There is evidence of contingent relationships between policy and growth, corresponding to the country's size, its export profile, and its governance. 2) Within the group of policy reformers, some countries have exhibited a relatively weaker growth response. Overall, the findings suggest that more accurate measurement and definition of the timing of reforms does not strengthen the significance of the effects of reforms on GDP growth. In fact, the effects are weaker than indicated in most cross-section studies. This suggests that the policy implications to be derived from these relationships should be treated with even more caution than previously thought.Environmental Economics&Policies,Trade Policy,Public Health Promotion,Economic Theory&Research,Health Monitoring&Evaluation,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Economic Theory&Research,Achieving Shared Growth,Environmental Economics&Policies,Trade and Regional Integration

Can the distributional impacts of macroeconomic shocks be predicted? A comparison of the performance of macro-micro models with historical data for Brazil

What was the impact of Brazil's 1998-99 currency crisis-which resulted in a change of exchange rate regime and a large real devaluation-on the occupational structure of the labor force and the distribution of incomes? Would it have been possible to predict such effects ahead of the crisis? The authors present an integrated macro-micro model of the Brazilian economy in 1998. The model consists of an applied general equilibrium macroeconometric component, connected through a set of linkage aggregate variables to a microeconomic model of household incomes. The authors use this framework to predict the employment and distributional consequences of the 1999 Brazilian currency crisis, based on 1998 household survey data. They then test the predictive performance of the model by comparing its simulated results with the actual household survey data observed in 1999. In addition to the fully integrated macro-micro model, the authors also test the performances of the microeconometric model on its own, and of a"representative household groups"approach. They find that the integrated macro-micro econometric model, while still inaccurate on many dimensions, can actually predict the broad pattern of the incidence of changes in household incomes across the distribution reasonably well, and much better than the alternative approaches. The authors conclude that further experimentation with these tools might be of considerable potential usefulness to policymakers.Labor Policies,Payment Systems&Infrastructure,Economic Theory&Research,Banks&Banking Reform,Environmental Economics&Policies,Economic Theory&Research,Environmental Economics&Policies,Macroeconomic Management,Inequality,Economic Stabilization

A computationally efficient method for calculating the maximum conductance of disordered networks: Application to 1-dimensional conductors

Random networks of carbon nanotubes and metallic nanowires have shown to be very useful in the production of transparent, conducting films. The electronic transport on the film depends considerably on the network properties, and on the inter-wire coupling. Here we present a simple, computationally efficient method for the calculation of conductance on random nanostructured networks. The method is implemented on metallic nanowire networks, which are described within a single-orbital tight binding Hamiltonian, and the conductance is calculated with the Kubo formula. We show how the network conductance depends on the average number of connections per wire, and on the number of wires connected to the electrodes. We also show the effect of the inter-/intra-wire hopping ratio on the conductance through the network. Furthermore, we argue that this type of calculation is easily extendable to account for the upper conductivity of realistic films spanned by tunneling networks. When compared to experimental measurements, this quantity provides a clear indication of how much room is available for improving the film conductivity.Comment: 7 pages, 5 figure

Elastocaloric Effect in Graphene Kirigami

Kirigami, a traditional Japanese art of paper-cutting, has recently been explored for its elastocaloric effect (ECE) in kirigami-based materials (KMs), where applying strain induces temperature changes. In this study, we investigate the ECE in a nanoscale graphene kirigami (GK) monolayer, representing the thinnest possible KM, to better understand this phenomenon. Through molecular dynamics simulations, we analyze the temperature change and coefficient of performance (COP) of the nanoscale GK architecture. Our findings reveal that while GKs lack the intricate temperature changes observed in macroscopic KMs, they exhibit a substantial temperature change of approximately 9.32 K (23 times higher than that of macroscopic KMs, which is about 0.4K) for heating and -3.50 K for cooling. Additionally, they demonstrate reasonable COP values of approximately 1.57 and 0.62, respectively. It is noteworthy that the one-atom-thick graphene configuration prevents the occurrence of the complex temperature distribution observed in macroscopic KMs.Comment: 14 pages, 06 figures, and 01 tabl