scholarly journals FINANCIAL LIBERALISATION, CREDIT RATIONING AND SLOW GROWTH IN MEXICO: TESTING THE MCKINNON-SHAW HYPOTHESIS

2009 ◽  
Vol 21 (39) ◽  
Author(s):  
Ignacio Perrotini Hernández
Keyword(s):  
Slow Growth ◽  
Credit Rationing ◽  
Interesting Case ◽  
Financial Fragility ◽  
Financial Instability ◽  
Long Run ◽  
Financial Liberalisation ◽  
Macroeconomic Effects

The Mexican experience with financial liberalisation provides an interesting case of study for countries facing financial instability problems. The aim of this paper is twofold: first, to provide an overview of the macroeconomic effects of the lending boom associated with Mexico's transition from a financially repressed regime to financial liberalisation. And second, to empirically assess whether the McKinnon-Shaw hypothesis holds in this case. It is argued that financial liberalisation tends to generate financial fragility, credit rationing and long-run slow growth.

scholarly journals Are Soybean Yields Getting a Free Ride From Climate Change? Evidence From Argentine Time Series

2018 ◽  
Author(s):  
Hildegart Ahumada ◽  
Magdalena Cornejo
Keyword(s):  
Climate Change ◽  
Time Series ◽  
Extreme Rainfall ◽  
Co2 Concentration ◽  
Interesting Case ◽  
Extreme Rainfall Events ◽  
Beneficial Effects ◽  
Positive Effects ◽  
Long Run ◽  
Equilibrium Correction

Soybean yields are often indicated as an interesting case of climate change mitigation due to the beneficial effects of CO2 fertilization. In this paper we econometrically study this effect using a time series model of yields in a multivariate framework for a main producer and exporter of this commodity, Argentina. We have to deal with the upward behavior of soybean yields trying to identify which variables are the long-run determinants responsible of its observed trend. With this aim we adopt a partial system approach to estimate subsets of long-run relationships due to climate, technological and economic factors. Using an automatic selection algorithm we evaluate encompassing of the different obtained equilibrium correction models. We found that only technological innovations due to new crop practices and the use of modified seeds explain soybean yield in the long run. Regarding short run determinants we found positive effects associated with the use of standard fertilizers and also from changes in atmospheric CO2 concentration which would suggest a mitigation effect from global warming. However, we also found negative climate effects from periods of droughts associated with La Niña episodes, high temperatures and extreme rainfall events during the growing season of the plant.

Monetary and Financial Stability

2013 ◽  
Author(s):  
Brigitte Granville
Keyword(s):  
Financial Stability ◽  
The Other ◽  
Necessary Condition ◽  
Financial Instability ◽  
Information Flows ◽  
Asset Bubbles ◽  
Root Cause ◽  
Monetary Stability ◽  
Long Run ◽  
The Mean

This chapter examines the relation between monetary and financial stability, looking at possible chains of cause and effect running in both directions between them—from the possibility that an unexpected tightening of monetary policy increases the mean probability of financial system distress, to the general risk of monetary stability being undermined by financial instability. The idea that monetary stability encourages financial instability is controversial. Inflation is often the root cause of financial instability by distorting information flows between lenders and borrowers, leading to asset bubbles and over investment. Most empirical evidence tends to support the view that monetary stability should promote financial stability in the long run and not the other way around. But while monetary stability is a necessary condition for financial stability, it is not a sufficient one. In other words, financial instability can still occur even with the inflation rate under control.

scholarly journals Varieties of capitalism, increasing income inequality and the sustainability of long-run growth

2020 ◽  
Vol 44 (3) ◽  
pp. 559-582
Author(s):  
Mark Setterfield ◽  
Yun K Kim
Keyword(s):  
Varieties Of Capitalism ◽  
Financial Fragility ◽  
Debt Accumulation ◽  
Us Economy ◽  
Long Run ◽  
The Social ◽  
The Us ◽  
Debt Dynamics ◽  
Social Wage ◽  
Household Borrowing

Abstract We model US household debt accumulation during the neoliberal boom (1990–2007) as a response to emulation effects and the decline of the social wage, which has ‘privatised’ an increasing share of the costs of providing for services such as health and education. The debt dynamics of the US economy are then studied under alternative assumptions about the configuration of distributional variables, which is shown to differ across varieties of capitalism that have ‘neoliberalised’ to different degrees. A key result is that distributional change alone will not make contemporary US capitalism financially sustainable due, in part, to the paradoxical nature of inequality as a spur to household borrowing, and hence a source of both demand-formation and financial fragility. Achieving sustainability requires, instead, more wide-ranging reform.

scholarly journals The wrong track also leads someplace: Milton Friedman's presidential address at 50

2018 ◽  
Vol 6 (4) ◽  
pp. 517-532 ◽  
Author(s):  
Servaas Storm
Keyword(s):  
Phillips Curve ◽  
Presidential Address ◽  
Aggregate Demand ◽  
Financial Fragility ◽  
American Economic Association ◽  
Structural Forces ◽  
Long Run ◽  
Economic Association ◽  
The Right ◽  
Do So

Milton Friedman's presidential address to the American Economic Association holds a mythical status as the harbinger of the supply-side counter-revolution in macroeconomics – centred on the rejection of the long-run Phillips-curve inflation–unemployment trade-off. Friedman (seconded by Edmund Phelps) argued that the long run is determined by ‘structural’ forces, not demand, and his view swept the profession and dominated academic economics and macro policymaking for four decades. Friedman, tragically, put macroeconomics on the wrong track which led to disaster: secular stagnation, rising inequality, mounting indebtedness, financial fragility, a banking catastrophe and recession – and no free lunches. This is Friedman's legacy. We have to unlearn the wrong lessons and return macroeconomics to the right track. To do so, this paper shows that Friedman's (and Phelps's) conclusions break down in a general model of the long run in which productivity growth is endogenous – aggregate demand is driving everything again, short and long.

Die Trägheit von Zinssätzen und Kreditrationierung in der Bundesrepublik Deutschland / The Sluggishness of Interest Rates and Credit Rationing in the Federal Republic of Germany

1995 ◽  
Vol 214 (2) ◽  
Author(s):  
Peter Winker
Keyword(s):  
Interest Rates ◽  
Federal Republic ◽  
Error Correction ◽  
Credit Rationing ◽  
Price Setting ◽  
Federal Republic Of Germany ◽  
Monthly Data ◽  
Long Run ◽  
Short Run ◽  
Marginal Price

SummaryCredit rationing is often considered as the outcome of asymmetric information between lenders and borrowers. The paper combines this aspect with a marginal price setting behavior of the banks. The resulting model describes adjustment processes between interbank rates, interest rates on deposits and on loans. Due to the non stationarity of the data, the model is estimated in error correction form allowing for distinguishing between short run dynamics and long run equilibrium. The derived hypothesis of a delayed adjustment of loan rates to changes in the interbank rates cannot be rejected with monthly data covering the sample 1975 to 1989.

Financial instability, integration and volatility of emerging South Asian stock markets

2017 ◽  
Vol 6 (2) ◽  
pp. 177-190 ◽  
Author(s):  
Rakesh Kumar ◽  
Raj S. Dhankar
Keyword(s):  
Stock Returns ◽  
South Asian ◽  
Stock Markets ◽  
Equity Markets ◽  
International Market ◽  
Portfolio Diversification ◽  
Financial Instability ◽  
Content Type ◽  
Long Run ◽  
Short Run

Purpose The purpose of this paper is to examine the short- and long-run spillover effect of international financial instability on emerging South Asian stock markets. The paper also investigates the financial integration regionally. Design/methodology/approach Granger causality test is used for short-run causal relations. Since results of preliminary test highlight the significant autocorrelations in stock returns, GARCH class models with extreme shocks in international financial market are utilized to test the long-run spillover impact on stock returns. Findings Results indicate significant short- and long-run spillover impacts of international financial instability on the stock returns. They highlight the significant co-integration of South Asian stock markets with the international market. Significant correlations in stock returns and volatility reveal the degree of regional integration to be high between India, Pakistan and Sri Lanka. Research limitations/implications Business, political and market conditions of South Asian stock markets are fundamentally different from each other. These economies were liberalized at different time, which in turn may affect the degree of integration with international equity markets and regionally alike. Practical implications Financial liberalization has linked the South Asian stock markets to the rest of the world. Stock prices move in the same line with the emergence of global expected and unexpected economic shocks. The benefits that arise from the diversification of funds will be eradicated in the long run. Investors with long investment horizons will not actually benefit from portfolio diversification in South Asian equity markets. The Bangladesh stock market does not respond to volatility in international market in the short run and may be a good destination for short-term investment. Originality/value Pioneer efforts are made by utilizing a novel approach with the use of net volatility change in world financial instability for measuring the short- and long-run impacts. Given the emergence of South Asian stock markets, new insights into their vulnerability to world financial shocks provide interesting findings for portfolio diversification.

scholarly journals Integrative literature review of the financial fragility hypothesis proposed by Minsky

2021 ◽  
Author(s):  
Cláudio Caríssimo ◽  
Francisval Melo Carvalho ◽  
carlos eduardo Stefaniak Aveline ◽  
Mozar José de Brito ◽  
rafaela maiara caetano
Keyword(s):  
Public Sector ◽  
Fiscal Policy ◽  
Literature Review ◽  
Interest Rates ◽  
Cash Flow ◽  
Empirical Studies ◽  
Financial Fragility ◽  
Financial Instability ◽  
The Public ◽  
Theoretical Assumptions

<p>This paper conducts an Integrative Literature Review on the Financial Fragility Hypothesis presented by Minsky and on Financial Fragility Applied to the Public Sector. Twenty papers were chosen that addressed the proposed theme in both quantitative and qualitative procedures. The topics discussed ways of measuring financial fragility, effects on fiscal policy and need for regulation, relations between investment, cash flow expectations, the influence of interest rates and indebtedness on firms, and financial instability. The integration reinforced the conceptual aspects and propositions presented by Minsky, broadening in an integrated way the understanding of his theoretical assumptions regarding financial fragility, addressing the causes, observations, and economic and institutional consequences, in addition to signaling for insufficiencies of more empirical studies and the public sector.</p>

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