193 research outputs found
Can Europe recover without credit?
Data from 135 countries covering five decades suggests that creditless recoveries, in which
the stock of real credit does not return to the pre-crisis level for three years after the GDP
trough, are not rare and are characterised by remarkable real GDP growth rates: 4.7 percent
per year in middle-income countries and 3.2 percent per year in high-income countries.
However, the implications of these historical episodes for the current European situation are
limited, for two main reasons. First, creditless recoveries are much less common in highincome
countries, than in low-income countries which are financially undeveloped. European
economies heavily depend on bank loans and research suggests that loan supply played a
major role in the recent weak credit performance of Europe. There are reasons to believe that,
despite various efforts, normal lending has not yet been restored. Limited loan supply could
be disruptive for the European economic recovery and there has been only a minor
substitution of bank loans with debt securities. Second, creditless recoveries were associated
with significant real exchange rate depreciation, which has hardly occurred so far in most of
Europe. This stylised fact suggests that it might be difficult to re-establish economic growth
in the absence of sizeable real exchange rate depreciation, if credit growth does not return
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
Reduction of systemic risk by means of Pigouvian taxation
We analyze the possibility of reduction of systemic risk in financial markets through Pigouvian taxation of financial institutions, which is used to support the rescue fund. We introduce the concept of the cascade risk with a clear operational definition as a subclass and a network related measure of the systemic risk. Using financial networks constructed from real Italian money market data and using realistic parameters, we show that the cascade risk can be substantially reduced by a small rate of taxation and by means of a simple strategy of the money transfer from the rescue fund to interbanking market subjects. Furthermore, we show that while negative effects on the return on investment (ROI) are direct and certain, an overall positive effect on risk adjusted return on investments (ROIRA) is visible. Please note that the taxation is introduced as a monetary/regulatory, not as a _scal measure, as the term could suggest. The rescue fund is implemented in a form of a common reserve fund
Component-wise incremental LTL model checking
Efficient symbolic and explicit-state model checking
approaches have been developed for the verification of linear
time temporal
logic (LTL) properties. Several attempts have been made to
combine the advantages of the various algorithms. Model
checking LTL
properties usually poses two challenges: one must compute the
synchronous product of the state space and the automaton
model of the
desired property, then look for counterexamples that is
reduced to finding strongly connected components (SCCs) in
the state space
of the product. In case of concurrent systems, where the
phenomenon of state space explosion often prevents the
successful
verification, the so-called saturation algorithm has proved
its efficiency in state space exploration. This paper
proposes a new
approach that leverages the saturation algorithm both as an
iteration strategy constructing the product directly, as well
as in a
new fixed-point computation algorithm to find strongly
connected components on-the-fly by incrementally processing
the components
of the model. Complementing the search for SCCs, explicit
techniques and component-wise abstractions are used to prove
the absence
of counterexamples. The resulting on-the-fly, incremental LTL
model checking algorithm proved to scale well with the size
of
models, as the evaluation on models of the Model Checking
Contest suggests
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