Systemic risk: A survey

This paper develops a broad concept of systemic risk, the basic economic concept for the understanding of financial crises. It is claimed that any such concept must integrate systemic events in banking and financial markets as well as in the related payment and settlement systems. At the heart of systemic risk are contagion effects, various forms of external effects. The concept also includes simultaneous financial instabilities following aggregate shocks. The quantitative literature on systemic risk, which was evolving swiftly in the last couple of years, is surveyed in the light of this concept. Various rigorous models of bank and payment system contagion have now been developed, although a general theoretical paradigm is still missing. Direct econometric tests of bank contagion effects seem to be mainly limited to the United States. Empirical studies of systemic risk in foreign exchange and security settlement systems appear to be non-existent. Moreover, the literature surveyed reflects the general difficulty to develop empirical tests that can make a clear distinction between contagion in the proper sense and joint crises caused by common shocks, rational revisions of depositor or investor expectations when information is asymmetric ('information-based' contagion) and 'pure' contagion as well as between 'efficient' and 'inefficient' systemic events. JEL Classification: G21, G29, G12, E49banking crises, Contagion, currency crises, financial markets, financial stability, payment and settlement systems, systemic risk

Convergence of fiscal policies in the euro area

This paper aims at determining whether economic, financial and monetary integration on the one hand, and institutional factors on the other, may have led to gradual convergence in key fiscal variables across the euro area over the recent period, bringing fiscal positions closer together. The Maastricht convergence criteria have facilitated this process but we investigate here whether the structural factors bringing fiscal positions closer together have been a feature of European integration starting already in the 1970s. The alternative scenario is that the euro zone is still characterised by largely idiosyncratic national fiscal policies. Over the 1970-1998 period we run contemporaneous cross-correlation, dispersion and cointegration tests using annual data for government net lending, and total current revenue and expenditure to uncover common trends, as measures of fiscal convergence. We also investigate whether the short term fiscal position in a given country shares both a common euro area component and national features (i.e., idiosyncratic national cycles) using a dynamic factor analysis on quarterly data for the four largest euro area countries since 1985. We find convincing evidence that for euro area countries cross-correlation has increased steadily over the sample period and that fiscal dispersion has been declining at a sustained pace among all countries in the sample. There is evidence of cointegration across the euro area for several countries on the basis of total current revenue, and also for total current expenditure. However, when the series are corrected for the business cycle, cointegration is only accepted for net lending. There is clearly common fiscal cycles for net lending across the euro area that do not only express common business cycles. However, while countries have followed more similar policies in the 1990s in particular during the run-up to EMU, the timing of fiscal adjustment differed across countries. In addition, idiosyncratic components still contribute to a significant share of the variability of individual countries. JEL Classification: H60, E61, C22

A cross-country comparison of market structures in European banking

In order to assess the effect of EMU on market conditions for banks based in countries which adopt the Single Currency, we use the H indicator suggested by Panzar and Rosse (1987). Our contribution is to assess results separately for large and small banks, and for interest income and total income as a dependent variable. From a panel of banks over the period 1992-1996, we provide evidence that European banking markets for large banks in the mid-1990s were still characterised by monopolistic competition, as compared to the United States. Regarding small banks, the level of competition appears to be even lower, especially in France and Germany. EMU would therefore imply a notable rise in competition for small banks in France and Germany, as well as an increase in competition for large banks, especially in Italy. JEL Classification: G21, L12banking, competition, contestability, EMU, panel data analysis

Developing a Framework to Assess Financial Stability: Conference Highlights and Lessons

Central banks are still defining their approach to financial stability and are at an early stage in the development of useful models. The Bank of Canada's 2007 economic conference was organized to stimulate progress in the development of financial-stability frameworks. Among the highlights reported here are the discussions centred around three proposed frameworks: a contingent-claims-analysis framework, a semi-structural framework, and structural financial-stability models. Participants also reported on their experiences with stress-testing under the International Monetary Fund's Financial Sector Assessment Program and discussed the implications for financial stability of linkages among payment, clearing, and settlement systems.

Optimal capacity in the banking sector and economic growth

The paper investigates, from the welfare and growth point of view, the determination of the optimal capacity of the banking system. For that purpose, we consider an overlapping generation model with endogenous growth. There is horizontal differentiation and imperfect competition in the banking sector. Macro-economic shocks affect the return on capital and, together with the expectations of depositors, condition the stability of the banking sector. We specify to what extent deposit insurance may reduce instability and increase the number of deposits, welfare and growth. We also characterise the conditions under which excess banking capacities may appear and how their reduction may improve welfare.Deposit insurance; Imperfect competition; Banking; Growth; Overlapping generation model

Confiance dans le système bancaire et croissance économique

Cet article propose un modèle de croissance endogène dans lequel on introduit des intermédiaires financiers en concurrence imparfaite et une rémunération du capital soumise à un choc macroéconomique. Les anticipations rationnelles des ménages sur le risque de faillites bancaires (dont ils supportent en partie les coûts influencent leur décisions de dépôts, contribuent à déterminer le taux de croissance, et peuvent être á l'origine d'un piége á pauvreté. La règlementation de l'entrée dans le secteur bancaire peut, dans certains cas, permettre un meilleur arbitrage entre l'efficacité et la stabilité du secteur bancaire, et, en conséquence, augmenter le nombre de dépôts, la croissance et le bien-être.Croissance, banques, depots, confiance, concurrence imparfaite

Determining a low disease activity threshold for decision to maintain disease-modifying antirheumatic drug treatment unchanged in rheumatoid arthritis patients

International audienceINTRODUCTION: The aim of this study was to determine a low disease activity threshold--a 28-joint disease activity score (DAS28) value--for the decision to maintain unchanged disease-modifying antirheumatic drug (DMARD) treatment in rheumatoid arthritis patients, based on expert opinion. METHODS: Nine hundred and sixty-seven case scenarios with various levels for each component of the DAS28 (resulting in a disease activity score between 2 and 3.2) were presented to 44 panelists. For each scenario, panelists had to decide whether or not DMARD treatment (excluding steroids) could be maintained unchanged. In each scenario, for decision, the participants were given the DAS28 parameters, without knowledge of the resultant DAS28. The relationship between panelists' decision, DAS28 value, and components of the score were analysed by multiple logistic regression analysis. Each panelist analysed 160 randomised scenarios. Intra-rater and inter-rater reproducibility were assessed. RESULTS: Forty-four panelists participated in the study. Inter-panelist agreement was good (kappa = 0.63; 95% confidence interval = 0.61 to 0.65). Intra-panelist agreement was excellent (kappa = 0.87; 95% confidence interval = 0.82 to 0.92). Quasi-perfect agreement was observed for DAS28 3.0. For values below 2.5, panelists agreed to maintain unchanged DMARDs; for values above 2.5, discrepancies occurred more frequently as the DAS28 value increased. Multivariate analysis confirmed the relationship between panelist's decision, DAS28 value and components of the DAS28. Between DAS28 of 2.4 and 3.2, a major determinant for panelists' decision was swollen joint count. Female and public practice physicians decided more often to maintain treatment unchanged. CONCLUSIONS: As a conclusion, panelists suggested that in clinical practice there is no need to change DMARD treatment in rheumatoid arthritis patients with DAS28 < or = 2.4

In Antisynthetase Syndrome, ACPA Are Associated With Severe and Erosive Arthritis: An Overlapping Rheumatoid Arthritis and Antisynthetase Syndrome

International audienceAbstract: Anticitrullinated peptide/protein antibodies (ACPA), which are highly specific for rheumatoid arthritis (RA), may be found in some patients with other systemic autoimmune diseases. The clinical significance of ACPA in patients with antisynthetase syndrome (ASS), a systemic disease characterized by the association of myositis, interstitial lung disease, polyarthralgia, and/or polyarthritis, has not yet been evaluated with regard to phenotype, prognosis, and response to treatment. ACPA-positive ASS patients were first identified among a French multicenter registry of patients with ASS. Additionally, all French rheumatology and internal medicine practitioners registered on the Club Rhumatismes et Inflammation web site were asked to report their observations of ASS patients with ACPA. The 17 collected patients were retrospectively studied using a standardized questionnaire and compared with 34 unselected ACPA-negative ASS patients in a case–control study. All ACPA-positive ASS patients suffered from arthritis versus 41% in the control group (P 7-year mean follow-up, extra-articular outcomes and survival were not different. ACPA-positive ASS patients showed an overlapping RA–ASS syndrome, were at high risk of refractory erosive arthritis, and might experience ASS flare when treated with antitumor necrosis factor drugs. In contrast, other biologics such as anti-CD20 mAb were effective in this context, without worsening systemic involvements