A counter cyclical adjustment on the economic capital measurement of listed commercial banks

With the implementation of the "Basel III", banks need more capital to cover risks. The changing rules of capital will be different from the previous. Taking Morgan as an example, a top-down method is used to calculate its economic capital. Then, by comparing with the reported economic capital, the result shows Morgan has considered pro-cyclicality and made a great counter cyclical adjustment. In order to provide regulatory authority a reasonable method to know well the risk of commercial banks, the top-down economic capital measure model is counter cyclical modified

Asset Price Bubbles and Monetary Policy: Why Central Banks Have Been Wrong and What Should Be Done

Over the last several years debate over monetary policy has focused on two issues, inflation targeting and asset price bubbles. This paper explores the case for explicitly targeting asset price bubbles, a policy that the Federal Reserve Bank has opposed on the grounds that it is both infeasible and undesirable. The paper argues that the Fed is wrong on both counts. Asset price bubbles are identifiable. Bubbles also do significant economic harm through the debt footprint effects they leave behind and through interest rate blunderbuss effects resulting from attempts to mitigate the aggregate demand impact of bubbles. Managing bubbles calls for additional policy instruments. These can be provided a system of asset based reserve requirements (ABRR).

Crisis and opportunity:varieties of capitalism and varieties of crisis responses in Estonia and Slovenia

A growing literature has analysed capitalist institutions in Slovenia and Estonia, two countries often viewed as representing very different varieties of capitalism in Central and Eastern Europe. Slovenia has been unique in the region, given its highly centralized wage bargaining and the importance of corporatist institutions, notably the tripartite Economic and Social Council; it is thus an exception to the general pattern of weak unions and ‘illusory corporatism’ across the region. By contrast, Estonia is commonly viewed as a prime example of a liberal market economy, in which industrial relations are decentralized. This article analyses how these distinctive institutional configurations have shaped the two countries’ responses to the global economic crisis beginning in 2007–2008. It explores whether these institutions have undergone changes as a result of the crisis, and also seeks to identify lessons from this experience for the future prospects for corporatism and tripartism, and also for the revitalization of trade unions and progressive politics in Central and Eastern Europe more generally. </jats:p

Inflation Differentials in the Euro Area and their Determinants – an empirical view

In this paper, we present evidence on the statistical features of observed dispersion in HICP inflation rates in the Euro area. Our descriptive exercise shows that there is still a remarkable dispersion of HICP inflation rates across the member countries. We find that most of dispersion originates in the non-traded categories of the HICP. This suggests that the main source of dispersion in countries' headline inflation rates is in those components of the HICP where non-traded goods (services, (public) goods with regulated and administered prices) are more intensely represented. We then examine the determinants of inflation differentials in a panel of the states of the Euro area in 1999–2007 using alternative classifications of this group and three different datasets. The evidence presented shows that output gaps and a proxy for price level convergence were statistically significant. On the other hand, some determinants that were found significant in previous studies (for example Honohan and Lane, 2003, 2004; ECB, 2003) has no impact on inflation in our expanded time span (e.g. exchange rate movements) The dispersion of HICP inflation is expected to increase in the coming years as the new EU member states will join the Euro area. There are some risks for these countries connected with the common monetary policy, which is adjusted more to the conditions of stabilized advanced economies forming the core of the Euro area. This creates potential problems for the EU common monetary policy (ECB), in particular negative (positive) interest rates, their repercussions on investment processes, consumption and the possibility of creating asset bubbles.http://deepblue.lib.umich.edu/bitstream/2027.42/64425/1/wp958.pd

Financial Liberalization, Economic Growth and Investment Strategy: Lessons from Taiwan for New Industrial Countries

To examine the impact of foreign capital inflows on Taiwan’s economy after internet bubbles of 2000, this study adopts data from the first quarter of 2001 to the second quarter 2015 to test if foreign capital inflows have positive impacts on Taiwan’s economic growth. This study also uses program trading and aims to prove that with financial liberalizations, the investment efficiency of foreign institutional investors is better than domestic institutional investors. The results from the error correction model shows that capital formation, domestic savings and foreign direct investment all have positive relationships with the real economic growth. However, the rate of financing and foreign debt and depreciation all have negative relationships with the real economic growth. The results are all statistically significant. Hence, they do not completely support the hypothesis that foreign capital inflows are beneficial for economic growth. Moreover, this study proves that the futures market in Taiwan is not strong-form market efficient. This result provides support for the hypothesis that the investment efficiency of foreign institutional investors is higher than that of domestic institutional investors. Investors can therefore raise their investment performance by following the investment strategies of foreign institutional investors.

Innovation budgeting over the business cycle and innovation performance

The global economic crisis of 2008/2009 hit many firms hard. Faced with rapidly declining sales and highly uncertain economic prospects, firms had to cut costs and reconsider their business strategies. With respect to innovation, cost cutting often means to stop or underresource innovation projects which may harm a firm’s long-term competitiveness. Firms may therefore refrain from reducing innovation budgets during crises but rather deliberately allocate more resources to innovation activities in order to update their product portfolio for the following recovery. Our analysis examines the effects of changes in innovation budgets during the most recent economic crisis on firms’ post-crisis innovation performance. Based on firm-level panel data from the German Innovation Survey covering the period 2006 to 2012, we find a positive effect of crisis adjustment. Raising the ratio of innovation expenditure to sales does increase subsequent sales of market novelties, but not of product imitations. Our findings are dependent upon the way business cycle effects are measured, however. While the results hold for macroeconomic business cycle indicators (change in real GDP), they do not for demand changes in a firm’s primary sales market. This may imply that lower opportunity costs of innovation during an economic crisis are transferred into higher post-crisis new product sales by firms in markets less strongly affected by the crisis

Inflation Differentials in the Euro Area and their Determinants – an empirical view

In this paper, we present evidence on the statistical features of observed dispersion in HICP inflation rates in the Euro area. Our descriptive exercise shows that there is still a remarkable dispersion of HICP inflation rates across the member countries. We find that most of dispersion originates in the non-traded categories of the HICP. This suggests that the main source of dispersion in countries' headline inflation rates is in those components of the HICP where non-traded goods (services, (public) goods with regulated and administered prices) are more intensely represented. We then examine the determinants of inflation differentials in a panel of the states of the Euro area in 1999–2007 using alternative classifications of this group and three different datasets. The evidence presented shows that output gaps and a proxy for price level convergence were statistically significant. On the other hand, some determinants that were found significant in previous studies (for example Honohan and Lane, 2003, 2004; ECB, 2003) has no impact on inflation in our expanded time span (e.g. exchange rate movements) The dispersion of HICP inflation is expected to increase in the coming years as the new EU member states will join the Euro area. There are some risks for these countries connected with the common monetary policy, which is adjusted more to the conditions of stabilized advanced economies forming the core of the Euro area. This creates potential problems for the EU common monetary policy (ECB), in particular negative (positive) interest rates, their repercussions on investment processes, consumption and the possibility of creating asset bubbles.inflation differentials, price convergence, exchange rate, panel data

A Narrative Indicator of Monetary Conditions in China

In this paper, we apply the narrative approach, studying the PBC's historical records, to infer policy-makers' intentions and thereby build a time series of monetary policy indicator. We show that our narrative policy indicator is informative about economic activity. Changes in it reflect the PBC's responses to its perceptions of economic conditions. It is a good indicator of monetary policy actions. Finally, we show that compared to monetary aggregates, changes in interest rates and the required reserve ratio are more associated with changes in monetary policy, as measured by our narrative indicator, but only to a limited degree. None of them alone can be a good proxy of policy indicator

A Narrative Indicator of Monetary Conditions in China

In this paper, we apply the narrative approach, studying the PBC's historical records, to infer policy-makers' intentions and thereby build a time series of monetary policy indicator. We show that our narrative policy indicator is informative about economic activity. Changes in it reflect the PBC's responses to its perceptions of economic conditions. It is a good indicator of monetary policy actions. Finally, we show that compared to monetary aggregates, changes in interest rates and the required reserve ratio are more associated with changes in monetary policy, as measured by our narrative indicator, but only to a limited degree. None of them alone can be a good proxy of policy indicator