Financial institutions and the wealth of nations: tales of development

Interactions between economic development and financial development are studied by looking at the roles of financial institutions in selecting R&D projects (including for both imitation and innovation). Financial development is regarded as the evolution of the financing regimes. The effectiveness of R&D selection mechanisms depends on the institutions and the development stages of an economy. At higher development stages a financing regime with ex post selection capacity is more effective for innovation. However, this regime requires more decentralized decision-making, which in turn depend on contract enforcement. A financing regime with more centralized decision-making is less affected by contract enforcement but has no ex post selection capacity. Depending on the legal institutions, economies in equilibrium choose regimes that lead to different steady-state development levels. The financing regime of an economy also affects development dynamics through a ‘convergence effect’ and a ‘growth inertia effect’. A backward economy with a financing regime with centralized decision-making may catch up rapidly when the convergence effect and the growth inertia effect are in the same direction. However, this regime leads to large development cycles at later development stages. Empirical implications are discussed

Wind braking of magnetars: to understand magnetar's multiwave radiation properties

Magnetars are proposed to be peculiar neutron stars powered by their super strong magnetic field. Observationally, anomalous X-ray pulsars and soft gamma-ray repeaters are believed to be magnetar candidates. While more and more multiwave observations of magnetars are available, unfortunately, we see accumulating failed predictions of the traditional magnetar model. These challenges urge rethinking of magnetar. Wind braking of magnetars is one of the alternative modelings. The release of magnetic energy may generate a particle outflow (i.e., particle wind), that results in both an anomalous X-ray luminosity and significantly high spindown rate. In this wind braking scenario, only strong multipole field is necessary for a magnetar (a strong dipole field is no longer needed). Wind braking of magnetars may help us to understand their multiwave radiation properties, including (1) Non-detection of magnetars in Fermi-LAT observations, (2) The timing behaviors of low magnetic field magnetars, (3) The nature of anti-glitches, (4) The criterion for magnetar's radio emission, etc. In the wind braking model of magentars, timing events of magnetars should always be accompanied by radiative events. It is worth noting that the wind engine should be the central point in the research since other efforts with any reasonable energy mechanism may also reproduce the results.Comment: 6 pages, 1 figure, submitted to conference proceeding of SMFNS2013 (Strong electromagnetic field and neutron stars 2013

The timing behavior of magnetar Swift J1822.3-1606: timing noise or a decreasing period derivative?

The different timing results of the magnetar Swift J1822.3-1606 is analyzed and understood theoretically. It is pointed that different timing solutions are caused not only by timing noise, but also that the period derivative is decreasing after outburst. Both the decreasing period derivative and the large timing noise may be originated from wind braking of the magnetar. Future timing of Swift J1822.3-1606 will help us make clear whether its period derivative is decreasing with time or not.Comment: 5 pages, 1 figure. Accepted by Research in Astronomy and Astrophysic

Financial Sector Returns and Creditor Moral Hazard: Evidence from Indonesia, Korea, and Thailand

This paper introduces a framework of investor behavior in which investors form their expectations regarding the credibility of a prospective IMF program in reforming the financial sector characterized by domestic implicit guarantees. We examine the changes in financial sector returns in response to IMF-related news such as announcements of program negotiations and approval to infer investor perception regarding the Fund support associated with the program. We test the implications of our framework based on the East Asian crisis of the late 1990s. Using daily financial sector returns from Indonesia, Korea, and Thailand, we find that news of program negotiations and approval increases financial sector returns in Indonesia and Korea. The findings are consistent with investor perception that negotiated IMF programs are non-credible due to expected continuation of domestic implicit guarantees during the future FundMoral Hazard, the IMF, Asian crisis, Financial markets

Financial Institutions and The Wealth of Nations: Tales of Development

Interactions between economic development and financial development are studied by looking at the roles of financial institutions in selecting R&D projects (including for both imitation and innovation). Financial development is regarded as the evolution of the financing regimes. The effectiveness of R&D selection mechanisms depends on the institutions and the development stages of an economy. At higher development stages a financing regime with ex post selection capacity is more effective for innovation. However, this regime requires more decentralized decision-making, which in turn depend on contract enforcement. A financing regime with more centralized decision-making is less affected by contract enforcement but has no ex post selection capacity. Depending on the legal institutions, economies in equilibrium choose regimes that lead to different steady-state development levels. The financing regime of an economy also affects development dynamics through a 'convergence effect' and a 'growth intertia effect'. A backward economy with a financing regime with centralized decision-making may catch up rapidly when the convergence effect and the growth inertia effect are in the same direction. However, this regime leads to large development cycles at later development stages. Empirical implications are discussed.Development, transition, financial institutions, R&D.

Financial Institutions and The Wealth of Nations: Tales of Development

Interactions between economic development and financial development are studied by looking at the roles of financial institutions in selecting R&D projects (including for both imitation and innovation). Financial development is regarded as the evolution of the financing regimes. The e?ectiveness of R&D selection mechanisms depends on the institutions and the development stages of an economy. At higher development stages a financing regime with ex post selection capacity is more e?ective for innovation. However, this regime requires more decentralized decision-making, which in turn depend on contract enforcement. A financing regime with more centralized decision-making is less a?ected by contract enforcement but has no ex post selection capacity. Depending on the legal institutions, economies in equilibrium chose regimes that lead to di?erent steady-state development levels. The financing regime of an economy also a?ects development dynamics through a ‘convergence e?ect’ and a ‘growth inertia e?ect.’ A backward economy with a financing regime with centralized decision-making may catch up rapidly when the convergence e?ect and the growth inertia e?ect are in the same direction. However, this regime leads to large development cycles at later development stages. Empirical implications are discussed.development, transition, financial institutions, R&D

Financial institutions and the wealth of nations: tales of development

Interactions between economic development and financial development are studied by looking at the roles of financial institutions in selecting R&D projects (including for both imitation and innovation). Financial development is regarded as the evolution of the financing regimes. The effectiveness of R&D selection mechanisms depends on the institutions and the development stages of an economy. At higher development stages a financing regime with ex post selection capacity is more effective for innovation. However, this regime requires more decentralized decision-making, which in turn depend on contract enforcement. A financing regime with more centralized decision-making is less affected by contract enforcement but has no ex post selection capacity. Depending on the legal institutions, economies in equilibrium choose regimes that lead to different steady-state development levels. The financing regime of an economy also affects development dynamics through a ‘convergence effect’ and a ‘growth inertia effect’. A backward economy with a financing regime with centralized decision-making may catch up rapidly when the convergence effect and the growth inertia effect are in the same direction. However, this regime leads to large development cycles at later development stages. Empirical implications are discussed.