Banking Crises, Implicit Government Guarantees, and Optional Insurance

After major banking crisis, investors and academics alike are left wondering how it could have been avoided. Crises can take an enormous toll on society. Mexico's 1994 crisis cost almost 10% of GDP. Chile's 1983 crisis was even worse, with the ¯nal cost amounting to a stunning 30% of GDP. Moreover, the economy can experience a traumatic recovery process that in some cases lasts several years. The most common explanation of banking crises focuses on the anticipation of government bail out. This mechanism takes place when investors expect that the government will help them cover their losses in case they face a generalized adverse shock. The paper shows how an insurance scheme eliminates the externality generated by the above government bail out policy. As an example, the paper analyzes the case of liquidity risk, de¯ned as an unexpected cash withdrawal, and it presents a scheme to deal with this risk. This scheme works as an insurance where each bank pays a premium depending on the bank's risk. The scheme used in Argentina where the Central Bank charges to each bank a premium to insurance their liquidity risk, for an insurance which the Central Bank acquires in the international markets is an empirical example. In addition, a new procedure is developed to estimate the social cost of a bank crisis which is di®erent from the net transfer from the government to the banking sector and independent of the existence of the crisis.

Inflation Risk and Portfolio Allocation in the Banking System

This paper proposes theory and evidence on the relationship between inflation and the bank's portfolio allocation. The proposed idea rationalized what Rodriguez (1992) pointed out with respect to the Central Bank of Argentina, behaving as a "borrower of first resort", where banks reallocated their investment from the private sector to government bonds. A main component of inflation costs is the misallocation of resources, this paper shows a channel through the reallocation of credits, where the credit market for the private sector trend to disappear. Theoretically, this paper studies the behavior of risk-neutral financiers in a world in which monitoring costs, and limited liability on the part of firms leads to credit rationing equilibria. In light of the well established relation between inflation and changes in relative prices, the theoretical model rationalizes the relationship between inflation and the allocation of capital in the banking system. Empirically, it looks at the dynamic behavior of the composition of bank's assets in Argentina between 1983 and 1998, which shows a robust relationship between relative price variability and bank's allocation in government denominated assets.

Fixed points of discrete nilpotent group actions on S^2

We prove that for each integer k of at least 2, there is an open neigborhood \nu_k of the identity map of the 2-sphere S^2, in C^1-topology such that: if G is a nilpotent subgroup of Diff^1(S^2) with length k of nilpotency, generated by elements in \nu_k, then the natural action on S^2 has non-empty fixed point set. Moreover, the G-action has at least two fixed points if the action has a finite non-trivial orbit.Comment: 15 pages, 2 figure

The Twin Risks in the Dollarization Debate: Country and Devaluation Risks

This paper discusses dollarization from the perspective of the relation between country and devaluation risk. In the absence of balance sheet effects, we find that a full dollarization of an economy increases its country risk. On the other hand, when balance sheet effects are present, the full dollarization could reduce country risk. The link between these two risks is based on the government’s financial needs. In this paper government devalue the currency for fiscal purposes. Consequently, a full dollarization closes this avenue transferring the whole cost to bond holders. This paper stresses the idea that dollarization is at the very end a fiscal issue. Empirically, using the ratio of foreign currency deposit on total deposits as a proxy to the balance sheet effect, the paper tests the importance of this variable on country risk. We find that the balance sheet has a positive effect on country risk, in other words, country with higher balance sheet effect should have higher country risk.

Teaching the Emergency Department Patient Experience: Needs Assessment from the CORD-EM Task Force.

INTRODUCTION: Since the creation of Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) patient satisfaction (PS) scores, patient experience (PE) has become a metric that can profoundly affect the fiscal balance of hospital systems, reputation of entire departments and welfare of individual physicians. While government and hospital mandates demonstrate the prominence of PE as a quality measure, no such mandate exists for its education. The objective of this study was to determine the education and evaluation landscape for PE in categorical emergency medicine (EM) residencies. METHODS: This was a prospective survey analysis of the Council of Emergency Medicine Residency Directors (CORD) membership. Program directors (PDs), assistant PDs and core faculty who are part of the CORD listserv were sent an email link to a brief, anonymous electronic survey. Respondents were asked their position in the residency, the name of their department, and questions regarding the presence and types of PS evaluative data and PE education they provide. RESULTS: We obtained 168 responses from 139 individual residencies, representing 72% of all categorical EM residencies. This survey found that only 27% of responding residencies provide PS data to their residents. Of those programs, 61% offer simulation scores, 39% provide third-party attending data on cases with resident participation, 37% provide third-party acquired data specifically about residents and 37% provide internally acquired quantitative data. Only 35% of residencies reported having any organized PE curricula. Of the programs that provide an organized PE curriculum, most offer multiple modalities; 96% provide didactic lectures, 49% small group sessions, 47% simulation sessions and 27% specifically use standardized patient encounters in their simulation sessions. CONCLUSION: The majority of categorical EM residencies do not provide either PS data or any organized PE curriculum. Those that do use a heterogeneous set of data collection modalities and educational techniques. American Osteopathic Association and Accreditation Council for Graduate Medical Education residencies show no significant differences in their resident PS data provision or formal curricula. Further work is needed to improve education given the high stakes of PS scores in the emergency physician\u27s career

The twin risks in the dollarization debate: country and devaluation risks

This paper discusses dollarization from the perspective of the relation between country and devaluation risk. In the absence of balance sheet effects, we find that a full dollarization of an economy increases its country risk. On the other hand, when balance sheet effects are present, the full dollarization could reduce country risk. The link between these two risks is based on the government's financial needs. In this paper government devalue the currency for fiscal purposes. Consequently, a full dollarization closes this avenue transferring the whole cost to bond holders. This paper stresses the idea that dollarization is at the very end a fiscal issue. Empirically, using the ratio of foreign currency deposit on total deposits as a proxy to the balance sheet effect, the paper tests the importance of this variable on country risk. We find that the balance sheet has a positive effect on country risk, in other words, country with higher balance sheet effect should have higher country risk.Departamento de Economí

Economic Development as a Matter of Political Geography

We start out from the hypothesis that limited government leads to low uncertainty and low transaction costs. If political institutions affect the degree of uncertainty and transaction costs, we formally show they should affect the steady state level of income per capita. The impact of uncertainty and transaction costs on income per capita is formalized in a simple capital market model with credit constraints. Empirically, we find increases in political constraints precede economic growth, which is in line with the idea that economic development is driven by political development. Furthermore, only when there are high political constraints is polity persistence positively related to income per capita. We interpret these findings in the sense that limited government is the path towards economic development, being a pre-condition for poor countries to converge towards rich countries.limited government, laws, property rights, uncertainty, transaction costs, capital market, convergence, development

A Note on Commuting Diffeomorphisms on Surfaces

Let S be a closed surface with nonzero Euler characteristic. We prove the existence of an open neighborhood V of the identity map of S in the C^1-topology with the following property: if G is an abelian subgroup of Diff^1(S) generated by any family of elements in V then the elements of G have common fixed points. This result generalizes a similar result due to Bonatti and announced in his paper "Diffeomorphismes commutants des surfaces et stabilite des fibrations en tores".Comment: 16 page