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Working Paper
Financial liberalization, market discipline and bank risk
In the literature on systemic banking crises, two common themes are: (1) Risky lending often follows bank liberalization. (2) Lack of market discipline encourages risky lending. That not all liberalizations are followed by financial crisis and that financial systems without market discipline sometimes operate without incident invites examination of these themes. In a test of six countries, we find that our measure of bank risk increases significantly in the wake of financial liberalizations, but only where depositors fail to discipline banks. Our measures of market discipline and bank risk, ...
Monograph
China: awakening giant
Working Paper
How much does international trade affect business cycle synchronization ?
In a recent article, Jeffrey Frankel and Andrew Rose (1998) examine the hypothesis that greater trade flows between two countries cause greater synchronicity between their business cycles. The increase in business cycle synchronicity may be seen as rationalizing a common monetary policy and, so, a shared currency. Arguing that product specialization would lower the synchronicity of business cycles, Frankel and Rose posit that a regression of output correlation on overall trade will indicate whether (positive) common demand shocks and productivity spillovers dominate or (negative) ...
Journal Article
Recovery from a financial crisis: the case of South Korea
Among the countries that were impacted by the 1997 Asian crisis, South Korea (Korea hereafter) has demonstrated the fastest recovery by blocking its downward spiral. Jahyeong Koo and Sherry Kiser examine the recovery process of financial crises, particularly in Korea, in light of the weak-fundamentals and financial-panic views. Since neither of these views adequately explains Koreas recovery, the authors look at other phenomena for an explanation. Alternative financial arrangements and labor market adjustments are specifically examined. The authors acknowledge that Koreas recovery was only ...
Working Paper
Decomposition of feedback between time series in a bivariate error-correction model
This paper adapts Geweke's [1982] method of decomposing the feedback between time series by frequency to the case of 1(1) time series generated by a bivariate error-correction model. The method is applied to long-run data on US and UK price levels with the finding that most of the feedback between the two time series occurs at very low frequencies.
Working Paper
When does financial liberalization make banks risky? an empirical examination of Argentina, Canada and Mexico
In the literature on systemic banking crises, two common themes are: (1) lack of market discipline encourages risky lending and (2) financial liberalization or privatization lead to risky lending. However, there is evidence to suggest that neither financial liberalization nor weak market discipline always precedes risky lending. We test for depositor discipline and, separately for post-liberalization or post-privatization risky lending in Argentina, Canada, and Mexico. In the countries without market discipline, lending risk increases significantly in the wake of liberalization. Where ...
Journal Article
Japan's economy still looks recessionary
Working Paper
An economic interpretation of suicide cycles in Japan
Suicide rates in Japan have increased dramatically in recent years, making. Japan?s male rate the highest among developed economies. This study revises the standard economic model of suicide to accommodate Japan?s experience, focusing on the change in human capital for the unemployed. We then use the new model and de-trended data to empirically investigate the relationship between the suicide cycle and the unemployment cycle. Unlike previous aggregate time series studies, we find that the relationship between the suicide rate and the unemployment rate is significantly and robustly positive ...