Financial Risk Capacity

2021 ◽  
Vol 13 (4) ◽  
pp. 142-181
Author(s):  
Saki Bigio ◽  
Adrien d’Avernas
Keyword(s):  
Adverse Selection ◽  
Economic Activity ◽  
Financial Crises ◽  
Financial Risk ◽  
Bank Capital ◽  
Information Asymmetries ◽  
Coordination Failure ◽  
Slow Recovery ◽  
Profit Margins

Financial crises are particularly severe and lengthy when banks fail to recapitalize after bearing large losses. We present a model that explains the slow recovery of bank capital and economic activity. Banks provide intermediation in markets with information asymmetries. Large equity losses force banks to tighten intermediation, which exacerbates adverse selection. Adverse selection lowers bank profit margins, which slows both the internal growth of equity and equity injections. This mechanism generates financial crises characterized by persistent low growth. The lack of equity injections during crises is a coordination failure that is solved when the decision to recapitalize banks is centralized. (JEL D82, E32, E44, G01, G21, G32, L25)

scholarly journals Financial Crises, Macroeconomic Variables, and Long-Run Risk: An Econometric Analysis of Stock Returns Correlations (2000 to 2019)

2021 ◽  
Vol 14 (3) ◽  
pp. 127
Author(s):  
Marco Tronzano
Keyword(s):  
Stock Returns ◽  
Risk Premium ◽  
Financial Crises ◽  
Stock Price ◽  
Financial Risk ◽  
Swiss Franc ◽  
Chinese Stock Market ◽  
Stock Market Index ◽  
Defensive Role ◽  
Long Run

This paper focuses on four major aggregate stock price indexes (SP 500, Stock Europe 600, Nikkei 225, Shanghai Composite) and two “safe-haven” assets (Gold, Swiss Franc), and explores their return co-movements during the last two decades. Significant contagion effects on stock markets are documented during almost all financial crises; moreover, in line with the recent literature, the defensive role of gold and the Swiss Franc in asset portfolios is highlighted. Focusing on a new set of macroeconomic and financial series, a significant impact of these variables on stock returns correlations is found, notably in the case of the world equity risk premium. Finally, long-run risks are detected in all asset portfolios including the Chinese stock market index. Overall, this empirical evidence is of interest for researchers, financial risk managers and policy makers.

scholarly journals A Macroeconomic Model With Financially Constrained Producers and Intermediaries

Econometrica ◽  
2021 ◽  
Vol 89 (3) ◽  
pp. 1361-1418
Author(s):  
Vadim Elenev ◽  
Tim Landvoigt ◽  
Stijn Van Nieuwerburgh
Keyword(s):  
Financial Crises ◽  
Capital Requirements ◽  
Financial Fragility ◽  
Financial Intermediaries ◽  
Capital Regulation ◽  
Sharp Change ◽  
Bank Capital ◽  
Financial Firms ◽  
Bank Capital Regulation

How much capital should financial intermediaries hold? We propose a general equilibrium model with a financial sector that makes risky long‐term loans to firms, funded by deposits from savers. Government guarantees create a role for bank capital regulation. The model captures the sharp and persistent drop in macro‐economic aggregates and credit provision as well as the sharp change in credit spreads observed during financial crises. Policies requiring intermediaries to hold more capital reduce financial fragility, reduce the size of the financial and non‐financial sectors, and lower intermediary profits. They redistribute wealth from savers to the owners of banks and non‐financial firms. Pre‐crisis capital requirements are close to optimal. Counter‐cyclical capital requirements increase welfare.

Financial Crises and Bank Capital

2019 ◽  
Vol 47 (1) ◽  
pp. 1-11 ◽  
Author(s):  
Robert Z. Aliber
Keyword(s):  
Financial Crises ◽  
Bank Capital

Fiscal Policy in the Longer Term

2011 ◽  
Vol 217 ◽  
pp. F4-F10
Author(s):  
Ray Barrell
Keyword(s):  
Fiscal Policy ◽  
Economic Activity ◽  
Financial Crises ◽  
Economic Distress ◽  
Short Run ◽  
Use Tax ◽  
The Uk ◽  
Over Time

Governments are important players in many parts of the economy, and at present perhaps the most visible is the balance they set between taxing and spending. Tax and spending polices are in part designed to redistribute resources between individuals, but they can also be used to redistribute resources over time. Governments can also use tax and spending policies to sustain or restrain economic activity, and in most countries a case can be made for using active fiscal policy in periods of clear economic distress, or in periods when it would be useful to restrain imbalances that can lead to financial crises. As a result it is difficult to gauge the appropriate stance of policy. Short-run problems have to be balanced against longer-term needs, and mistakes are common. In the UK, for instance, in the six years up until 2008 the balance of policy was perhaps too loose, whilst over the next five years it is probably too tight, even though deficits are projected to be higher than they were before 2009.

scholarly journals Information Asymmetries in Consumer Credit Markets: Evidence from Payday Lending

2013 ◽  
Vol 5 (4) ◽  
pp. 256-282 ◽  
Author(s):  
Will Dobbie ◽  
Paige Marta Skiba
Keyword(s):  
Moral Hazard ◽  
Adverse Selection ◽  
Regression Discontinuity ◽  
Credit Markets ◽  
Consumer Credit ◽  
Probability Of Default ◽  
Information Asymmetries ◽  
Payday Lending ◽  
Loan Market ◽  
Payday Loans

Information asymmetries are prominent in theory but difficult to estimate. This paper exploits discontinuities in loan eligibility to test for moral hazard and adverse selection in the payday loan market. Regression discontinuity and regression kink approaches suggest that payday borrowers are less likely to default on larger loans. A $50 larger payday loan leads to a 17 to 33 percent drop in the probability of default. Conversely, there is economically and statistically significant adverse selection into larger payday loans when loan eligibility is held constant. Payday borrowers who choose a $50 larger loan are 16 to 47 percent more likely to default. (JEL D14, D82, G21)

scholarly journals QUARTERLY OUTLOOK ON MONETARY, BANKING, AND PAYMENT SYSTEM IN INDONESIA: QUARTER III, 2016

2016 ◽  
Vol 19 (2) ◽  
pp. 109-128
Author(s):  
TM Arief Machmud ◽  
Syachman Perdymer ◽  
Muslimin Anwar ◽  
Nurkholisoh Ibnu Aman ◽  
Tri Kurnia Ayu K ◽  
...  
Keyword(s):  
Global Economy ◽  
Financial Risk ◽  
Current Account Deficit ◽  
Economic Stability ◽  
Slow Recovery ◽  
Interest Rate Policy ◽  
Positive Growth ◽  
Rate Policy ◽  
The Government ◽  
The Right

The growth of Indonesian economy on Quarter III, 2016 recorded positive growth with a wellmaintained financial system and macroeconomic stability. The economy grew moderately supported by remaining strong domestic demand amidst the slow recovery of the global economy. The economic stability is also good reflected on the low inflation, decreasing current account deficit, and relatively stable exchange rate. An increase of domestic economy and lower global financial risk enable monetary ease on Quarter III, 2016. Furthermore, the reduction of interest rate policy is well transmitted and is expected to strengthen the growth momentum of the economy. Looking forward, Bank Indonesia will keep strengthening his policy mix and macroprudential, and his coordination with the government to ensure the inflation control, greater stimulus for growth, and the implementation of structural reform run on the right track, and hence preserve the sustainable economic development.

scholarly journals Accountants’ perceptions of tax amnesty: A survey during the COVID-19 pandemic in Greece

2021 ◽  
Author(s):  
Stergios Tasios ◽  
Evangelos Chytis ◽  
Stefanos Gousias
Keyword(s):  
United States ◽  
Stock Markets ◽  
Economic Activity ◽  
Financial Crises ◽  
The United States ◽  
Tidal Wave ◽  
Adverse Impact ◽  
Tax Amnesty ◽  
The Us ◽  
Restrictive Measures

Although humanity has faced many plaques and epidemics from antiquity, the COVID-19 came as a tidal wave, overwhelming nations and governments. Restrictive measures, social distancing and ultimately lockdown and quarantine, emerged as a response to decelerate the spread of the disease and save human lives. These measures may have decreased COVID-19 cases, they had, however, an adverse impact on economic activity and stock markets (Ashraf, 2020). Research shows that the pandemic has already influenced the United States (the US), Germany, and Italy‘s stock markets more than the global financial crises (Shehzad, Xiaoxing, & Kazouz 2020)

BIBLIOMETRIC ANALYSIS OF FINANCIAL CRISIS RESEARCH

2020 ◽  
pp. 1-28
Author(s):  
CHIEN-LUNG HSU ◽  
CHUN-HAO CHIANG
Keyword(s):  
Financial Crisis ◽  
Financial Crises ◽  
Financial Risk ◽  
Global Financial Crisis ◽  
Market Risk ◽  
Prudential Supervision ◽  
Occurrence Data ◽  
Lehman Brothers ◽  
The Global Financial Crisis ◽  
The Relationship

The global financial crisis that followed Lehman Brothers’ declaration of bankruptcy in September 2008 critically highlighted the significance of research on systemic risk and macro-prudential supervision. Accordingly, this paper mainly analyzed the relationship between financial crises and the article output in financial crisis research through the application of bibliometrics. The occurrence of a financial crisis leads to changes in the output of articles on crisis and risks. Hence, we focused on bibliographic coupling (e.g., co-authorship, co-occurrence), data classification by risk type in this study (e.g., market risk, credit risk) and citation analysis (e.g., top 1% cited paper). Meanwhile, the analysis indicated the most relevant disciplines in financial crisis research. For example, the number of top 1% cited articles and citations, MARKET RISK documents and citations published the most papers. In other words, the market risk is valued in the financial risk literature.

Bank Capital Constraints, Lending Supply and Economic Activity

2018 ◽  
Author(s):  
Antonio Maria Conti ◽  
Andrea Nobili ◽  
Federico Maria Signoretti
Keyword(s):  
Economic Activity ◽  
Bank Capital ◽  
Capital Constraints
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