Beyond capital ideals : restoring banking stability

The authors examine why emerging markets, in particular, are susceptible to and affected by financial difficulties. They show that these difficulties have a richer, more complex structure than they are sometimes believed to have - with marked information asymmetries and substantial volatility. The sources of heightened regulatory failure in emerging markets in recent years include the volatility of real and nominal shocks, the difficulty of operating in uncharted territory after financial liberalization and other changes in regime, and the political pressures that can inhibit the enforcement of prudential regulation. The authors discuss what stronger regulation can and cannot accomplish, as well as options to improve the incentive structure for bankers, regulators, and other market participants. They probe the shortcomings of a regulatory paradigm that relies mainly on supervised capital adequacy and discuss the possible intermittent application of supplementary"blunt instruments"as an interim solution while longer-term reforms are being put in place. Certain well-worn messages remain valid, but are respected more in theory than in practice. There would be fewer problems, the authors say, if there were: 1) more diversification; 2) more balanced financial structures (for example, as between debt and equity); 3) more foreign banks in emerging markets'financial systems; and 4) better enforcement of both contracts and regulations. Participants in the financial sector will constantly try to get around rules that limit their profitability, so regulation must be seen as an evolutionary struggle. Prevention of financial failure is not costless, and a heavy repressive hand is not warranted. But a richer regulatory palette can be used to protect financial systems more successfully against crisis while preserving the systems'growth-enhancing effectiveness.Environmental Economics&Policies,Payment Systems&Infrastructure,Financial Intermediation,Banks&Banking Reform,Financial Crisis Management&Restructuring,Economic Theory&Research,Banks&Banking Reform,Financial Intermediation,Financial Crisis Management&Restructuring,Environmental Economics&Policies

Banking policy and macroeconomic stability - an exploration

Whether and when does banking serve to stabilize the economy? The authors view the banking system as a filter through which foreign and domestic shocks feed through to the domestic economy. The filter can dampen or amplify the shocks through various credit market channels, including credit growth, import of foreign capital, and possibly interest rates. The question is whether the prudential quality of banking, as proxied by measures of regulatory quality and openness to foreign banking, amplify or dampen these shocks. The authors find that many of the regulatory characteristics that have been found to deepen a financial system and make it more robust to crises-notably those which empower the private sector-also appear to reduce the sector's ability to provide short-term insulation to the macro-economy. It is as if prudent bankers are reluctant to absorb short-term risks that, if neglected, might cause solvency and growth problems in the longer run. Forbearance might dampen short-term volatility, but at the expense of the longer run health of the banking sector and the economy. One way to avoid this apparent tradeoff is evident: banking systems which have a higher share of foreign-owned banks, a feature already associated with financial deepening and lowered risk of crisis, also seem to score well in terms of short-term macroeconomic insulation.Payment Systems&Infrastructure,Financial Intermediation,Financial Crisis Management&Restructuring,Banks&Banking Reform,Economic Theory&Research,Banks&Banking Reform,Financial Intermediation,Financial Crisis Management&Restructuring,Economic Theory&Research,Settlement of Investment Disputes

Length Dependence of Ionization Potentials of Trans-Acetylenes: Internally-Consistent DFT/GW Approach

We follow the evolution of the Ionization Potential (IP) for the paradigmatic quasi-one-dimensional trans-acetylene family of conjugated molecules, from short to long oligomers and to the infinite polymer trans-poly-acetylene (TPA). Our results for short oligomers are very close to experimental available data. We find that the IP varies with oligomer length and converges to the given value for TPA with a smooth, coupled inverse-length-exponential behavior. Our prediction is based on an "internally-consistent" scheme to adjust the exchange mixing parameter $\alpha$ of the PBEh hybrid density functional, so as to obtain a description of the electronic structure consistent with the quasiparticle approximation for the IP. This is achieved by demanding that the corresponding quasiparticle correction, in the GW@PBEh approximation, vanishes for the IP when evaluated at PBEh($\alpha^{ic}$). We find that $\alpha^{ic}$ is also system-dependent and converges with increasing oligomer length, allowing to capture the dependence of IP and other electronic properties.Comment: 22 pages with 9 figures, submitted to Physical Review

Banking Crises

The history of banking around the world has been punctuated by frequent systemic crises. Not all crises are the same with distinct roles being played at different times by mismanagement, government interference and macroeconomic shocks. This review draws on experience from developing countries as well as advanced economies. It identifies common features of crises in recent decades, describes how costly they have been (especially in developing countries) in terms of fiscal burden and impact on macroeconomic growth. It proceeds to outline the conceptual issues identified by theoreticians and considers appropriate policy responses. A lull in the new millennium led to optimism that banking crises might be a thing of the past, but the events of recent months have shown such optimism to be unwarranted.

ECONOMIC EFFECTS OF COPPER-NICKEL DEVELOPMENT IN NORTHEAST MINNESOTA

Computer simulations of industry gross output, employment and earnings changes associated with alternative copper-nickel development scenarios are presented in this report. The direct and indirect economic effects of seven development scenarios are projected for a mining impact Study Area in St. Louis County, Minnesota.Community/Rural/Urban Development, Resource /Energy Economics and Policy,