US Credit Crisis and Spillovers to Asia

We review key highlights of the global credit crisis. We then consider how financial turmoil in the largest advanced economies might be transmitted to East Asia. The focus is on foreign trade links, international capital flows, currency market pressures and mismatches, financial sector fragilities, and countercyclical monetary and fiscal policy actions. We introduce a set of vulnerability indicators and explore whether an ordinal ranking of East Asian economies according to these vulnerability indicators seems to be related to the cross-country differences in estimated slowdowns of economic growth during the crisis. Finally, we discuss how Asian economies might encourage the adoption of a stronger regulatory and supervisory framework in the USA and whether some Asian economies and the USA might pursue a more “balanced” growth strategy after the crisis.     

Financial reforms and credit growth in Nigeria: empirical insights from ARDL and ECM techniques

In the last 37 years, Nigeria has undergone several stages of financial reforms with different impacts on the economy. This paper analyses the impact of these financial reforms on credit growth in Nigeria using annual data from 1980 to 2016. The research work hinges on the theoretical underpinning of McKinnon-Shaw hypothesis on the relevance of financial reforms in a lagging economy. Analysing the data with autoregressive distributed lag error correction representation and bounds testing techniques, we find evidence supporting this hypothesis, and specifically that at higher real interest rates there is increased financial intermediation evidenced by credit growth. Other findings are that in the long-run, financial system deposits, inflation rate and per capita GDP are strong asymmetrical predictors of credit growth and real interest rates (the financial reform indicator), while the short-run relationships are indicator-specific. We further show that a long-run cointegration relationship exists between domestic credit and other covariates and likewise between the real interest rate and its regressors.     

Political credit cycles

This paper tests the existence of political credit cycles, the positive comovement between credit and elections. While several single‐country studies point to the existence of this relationship, the link between electoral cycles and credit expansion has seen little exploration at the multicountry level. Using a comprehensive dataset covering bank and non‐bank credit in 165 countries from 1960 to 2013, we show that both government and private credit significantly increase in election years. This finding suggests the possibility that politicians use not only fiscal and monetary policy to court voters, but also implement credit policies such as interest rate subsidies and tax breaks for debt to enhance credit growth. We also find that a higher degree of financial openness weakens the frequency and magnitude of political credit cycles; yet, the conditional effect of financial openness is stronger for developing countries than developed economies.     

External deficits and non-performing loans in the recent financial crisis

This paper analyses the deterioration of bank credit quality during the recent financial crisis in a cross-national sample. Rapid credit growth in 2000-2005 predicted the relative amount of non-performing loans only if it was combined with a current account deficit.     

金融周期对宏观经济稳定的影响异质性分析*

宏观经济稳定长期以来作为中国宏观调控的重要目标，在“新常态”时期被更加广泛关注。金融稳定作为宏观经济稳定的必要条件，以洞悉金融周期为前提，要求细究金融周期变量对宏观经济运行的影响，为政策精准性提供支持。本文利用相关金融周期和宏观经济变量季度数据，使用滤波方法找出宏观经济的波动和平稳时期，运用机器学习算法验证所选输入变量与输出变量的匹配度，并测度各输入变量对输出变量的重要度。本文发现波动期和平稳时期宏观经济表现虽有不同，但资产价格指数和信贷水平对各宏观经济变量的重要度之和都达到50%以上，而其他金融周期变量如利差、杠杆率和金融机构风险暴露的重要度则有限。这表明相关政策需有的放矢，相较于无差别的大规模释放流动性，可将重心置于维护资产价格稳定和优化信贷政策配给，为宏观经济稳定保驾护航。     

The impact of housing market disturbances on the US financial system: a pre-crisis analysis

A common critique of the Federal Reserve over the past crisis is that it should have better anticipated the impact of the run-up in home mortgage debt and the subsequent housing market crash on the financial system. As a result, the Federal Reserve should have moved much more quickly to shore up financial markets. Our article tests the hypothesis that the impact of the housing market crash on the financial system could have been anticipated. Using a VAR model along with impulse response functions and variance decompositions, we examine the link between housing market mortgage debt shocks and the financial intermediaries’ credit market behaviour. We find important connections between key macroeconomic variables and the credit behaviour of these financial institutions. However, using the pre-crisis data, we find that housing market debt shocks fail to have an impact on the credit markets accessed by these firms. These results support the notion that the impact of this crisis on the financial system could not have been anticipated given the information available at the time.     

Does financialization retard growth? Time series and cross-sectional evidence

Although financial development is essential for economic development, excessive financialization of the economy is believed to exert a negative effect on output growth. In this article, empirical evidence is presented on the relation between economic growth and financialization as measured by the ratio of credit to GDP and the ratio of publicly traded shares to GDP. The empirical results are based on annual time series data for six country groups as well as cross-sectional data covering a large number of countries. The model is initially specified with unobserved components and estimated in a time-varying parametric framework to account for missing variables. Thereafter, the issue of linear versus quadratic specifications is examined. The results are robust with respect to model specification, estimation method, data type and variable definition, showing in general that financialization has a negative impact on growth. Some evidence is also presented to support the notion of the financial Kuznets curve.     

金融周期对宏观经济稳定的影响异质性分析*

宏观经济稳定长期以来作为中国宏观调控的重要目标，在“新常态”时期被更加广泛关注。金融稳定作为宏观经济稳定的必要条件，以洞悉金融周期为前提，要求细究金融周期变量对宏观经济运行的影响，为政策精准性提供支持。本文利用相关金融周期和宏观经济变量季度数据，使用滤波方法找出宏观经济的波动和平稳时期，运用机器学习算法验证所选输入变量与输出变量的匹配度，并测度各输入变量对输出变量的重要度。本文发现波动期和平稳时期宏观经济表现虽有不同，但资产价格指数和信贷水平对各宏观经济变量的重要度之和都达到50%以上，而其他金融周期变量如利差、杠杆率和金融机构风险暴露的重要度则有限。这表明相关政策需有的放矢，相较于无差别的大规模释放流动性，可将重心置于维护资产价格稳定和优化信贷政策配给，为宏观经济稳定保驾护航。     

EXTERNAL MACROECONOMIC IMBALANCES AND FOREIGN DIRECT INVESTMENT INFLOWS TO DEVELOPING COUNTRIES

We employ relative size of International Monetary Fund (IMF) credit as a proxy for interdependent macro variables that are associated with external macroeconomic imbalances or balance of payment (BOP) crisis to investigate how they impact foreign direct investment (FDI) inflows. Relative size of IMF credit as a share of gross domestic product sends two mixed signals to multinational enterprises (MNEs). First, it is a signal that a country is facing an actual or potential BOP crisis. Second, countries that seek IMF credit typically agree to implement a set of “IMF conditionality” before financial credit is disbursed. This may signal to MNEs that policy reforms that must accompany IMF financial credit may result in ex ante positive economic outlook and stability. We find that relative size of IMF credit is negatively (positively) correlated with FDI inflows to developing countries below (above) a threshold value of economic freedom. The main implication of these findings is that MNEs may view developing countries with below average index of economic freedom as lacking institutional capabilities to implement recommended IMF policy reforms when faced with an actual or potential BOP crisis. Our results are robust across alternative model specifications and consistent with the theory of catalytic finance. (JEL F21, F23, F33)     

Financial stress,economic activity and monetary policy in the ASEAN-5 economies

This article uses a structural vector autoregression approach to analyse the impact of financial stress on the economy and the relationship between monetary policy and financial stress in the ASEAN-5 economies (Indonesia, Malaysia, Philippines, Singapore and Thailand). We find that an increase in financial stress leads to tighter credit conditions and lower economic activity in all five countries. The estimated impact on the real economy displays an initial rapid decline followed by a gradual dissipation. In Malaysia, the Philippines and Thailand, the central banks tend to reduce policy interest rates (IRs) when financial stress increases, although there is substantial cross-country variation in the magnitude and time dynamics. The lower policy IRs are found to have little significant effects in lowering financial stress, but are still effective in stimulating economic activity through other channels. These findings imply that easing monetary policy is likely necessary but insufficient to address growth slowdowns associated with financial stress. Monetary easing should instead be complemented with other policy measures which are targeted at restoring financial stress to normal levels.     

EMU-related news and financial markets in the Czech Republic,Hungary and Poland

We analyse the impact of news on five financial markets in the Czech Republic, Hungary and Poland using a newly constructed data set in a Generalized Autoregressive Conditional Heteroscedastic (GARCH) framework. Macroeconomic shocks (on Gross Domestic Product (GDP), inflation rate, current account and trade balance) are constructed as deviations from expected values. Economic and Monetary Union (EMU)-related political and fiscal news is captured as news dummies. Macroeconomic shocks significantly affect short-term interest rates and, to a lesser extent, other financial variables. Political and fiscal news has an impact on long-term bond yields and exchange rates. News displayed prominently in our media sources has a greater impact on financial markets than other news and, in addition, the sources of news themselves matter. We also discover asymmetric effects of news within markets. Finally, using a pooled GARCH model we find that macroeconomic shocks have the strongest impact on financial markets in Hungary, while political news has the largest influence in both Hungary and Poland.     

经济政策不确定性、产权性质与商业信用

本文以经济政策不确定性为研究出发点,选取2007年第1季度-2014年第4季度沪深A股的上市公司,讨论了经济政策不确定性对企业商业信用规模的冲击。实证结果表明：当经济政策不确定性较高时,企业获得的商业信用规模总体上有缩小的趋势;国有企业会凭借产权优势抑制企业商业信用规模的下降;而较快的经济增长速度和较差的金融市场环境也会抑制企业商业信用规模的下降。本文的研究结果表明,经济政策不确定性对企业的商业信用规模确实存在冲击,商业信用作为企业维持经营的重要手段需引起特别重视。     

Firm credit in the euro area: a tale of three crises

Using survey data from 2009 to 2011, we analyse the effects of the recent euro area economic, financial and private debt crisis on the supply of and demand for bank finance for small and medium enterprises (SMEs). At the country level, we identify three distinct aspects of the recent crisis in the euro area affecting firm credit through different channels. Controlling for country fixed effects, the impact of a weak real economy on firm credit operates both by reducing firms’ demand for bank financing and by lenders increasing loan rejections and tightening terms and conditions on credit allocated. On the other hand, financial conditions have no significant effect on demand, but they do affect credit supply as we find that financial tensions worsen the chances of obtaining credit and its terms and conditions. We interpret this as evidence of a bank balance sheet channel negatively impacting credit provision. We find that private sector indebtedness has important effects on SMEs’ credit access and its terms and conditions.     

Directed credit,financial development and financial structure: theory and evidence

The recent initiative of the RBI in reviving the policy of directed credit allocation in a period dominated by the neoliberal philosophy necessitates reconsideration of the role of policy-directed credit allocation process on financial development and financial structure of firms. Introducing certain policy parameters, the paper attempts to model how financial development-financial structure interlinkage is influenced by the liberalization policies of the government. The theoretical construct is empirically verified using both aggregated and disaggregated (firm-level) data comprising a panel of 932 Indian manufacturing firms. Findings reveal that following the liberalization measures in the early 1990s, there has been a structural shift in the debt–equity ratio of firms, with equity market activities assuming prominence over time. As regards financial development, it has been observed that the withdrawal of DFIs specialized in term-lending activities in the early 2000s led to a significant increase in the degree of financing constraints faced by the manufacturing firms. This contradicts the basic premise of financial liberalization. The paper argues that under certain conditions, government intervention in the form of directed credit programmes would not only act as an effective instrument in ushering financial development, but also provide important guidelines in ensuring sustainability of institutions.     

我国区域金融发展差异的比较

通过运用金融相关比率、金融机构信贷比率、金融市场发展指标对我国东、中、西部的金融发展水平进行比较分析,得出以下结论东中西部的金融发展水平不仅表现出绝对差异,而且相对差异较大,中、西部地区落后于东部地区,且在信贷资金运用效率上中部劣势尤为突出。回归分析也证明了金融发展对我国区域经济增长有重要影响。因此,制定合理的金融政策有利于区域金融与经济协调发展。     

Monetary policy,endogenous transactions,and financial market segmentation

An endogenous financial market segmentation model is constructed to explore the role of costly credit as a medium of exchange in the monetary policy elasticity of financial market activity. Against inflation risk, credit is an alternative insurance device to a cash transfer from the financial market. In equilibrium, credit reduces the financial market activity rate. Monetary policy has redistributive effects across economic individuals. Inflation may not tax financial market non-participants. However, it may tax financial market participants by increasing the financial market activity rate. Welfare may increase and the optimal money growth rate can be positive.     

Credit in Times of Stress: Lessons from Latin America during the Global Financial Crisis

The 2008–2009 global financial crisis disrupted the provision of credit in Latin America less than in previous crises. This paper tests whether specific characteristics at both the bank and country levels at the onset of the global crisis contributed to the behavior of real credit growth in this region during the crisis. As shown, financial soundness characteristics of Latin American banks, such as capitalization, liquidity, and bank efficiency in the pre‐crisis period, played a role in explaining the dynamics of real credit during the crisis. We also found that foreign banks and banks that had expanded credit growth more before the crisis were also those that cut credit the most. Among country‐specific characteristics, we found evidence that balance sheet measures such as the economy's overall currency mismatches and external debt ratios (measuring either total debt or short‐term debt) were key variables in explaining credit growth resilience.     

金融发展与中国的经济增长——从储蓄动员型向市场配置的消费型经济转变

隐形税收机制瓦解后,储蓄动员型的金融发展模式取代了财政投资的主导地位,通过金融支持政策为公有经济部门融资,支撑了经济的高速增长。然而,随着市场约束机制的变化,金融支持政策的收益逐渐下降,成本却在递增。本文认为储蓄动员型的金融支持政策在一定阶段促进了经济的发展,但是也伴随着一系列经济发展的成本,比如降低了资本配置效率,过度投资产生的宏观经济成本和经济持续增长的外部风险加大等。因此,中国金融体制应深化改革,提高金融体系的资本配置效率,促进技术进步和生产效率的改进。同时,通过发展消费信贷和商业保险,减少信贷约束和不确定性,推动消费型经济的增长。     

Financial Deregulation and the Monetary Transmission Mechanism

Major changes to the Australian financial system in the 1980s may possibly have influenced the effects of monetary policy on economic activity. Using vector autoregressive econometric techniques we find that the deregulation of the financial system has made very little difference to the reduced form relationships among interest rates, employment growth, inflation and the growth rate of real credit. We find that interest rates are an important determinant of the business cycle, with credit being much less significant. We also find that monetary policy reacts to unexpected movements in real variables but does not react to surprises in the inflation rate.     

Finance and unemployment: new panel evidence

The effect of credit market imperfections on unemployment is largely investigated in the context of financial crises. This paper shifts the focus toward financial development and structure in a panel of advanced and developing countries. Some important findings emerge. Unemployment increases with financial development and concentration in banking markets but decreases with market orientation, the effect is stronger in magnitudes for young workers than female ones. More rigid market regulation increases unemployment. These findings are particularly pronounced for countries with higher income, better developed financial sectors, lower income inequality, greater trade openness, higher democracy, and common-law systems.