A behavioral theory of governments’ ability to make credible commitments to firms: The case of the East Asian paradox

An expansive literature exists linking institutional constraints, credible commitments, and economic growth. Yet, this literature runs into difficulty when it tries to explain the East Asian “paradox:” rapid economic growth achieved by countries with low levels of formal constraints on government discretion. We use a behavioral theory of commitment to argue that the characteristics of the salient actors (governments) and their actions (policies) affect the credibility of their behaviors in ways independent of the structural underpinnings of a country’s political institutions. This behavioral theory of commitment provides a distinct but complementary lens through which to view the apparent paradox presented by these East Asian countries, and more generally provides an alternative theoretical mechanism to explain and predict governments’ ability to credibly signal their commitment to a course of action to investing firms. The success of East Asian countries in encouraging investment from both domestic and foreign firms implies that firms interpret governments’ actions as credible signals of their intention to honor their commitments to firms, consistent with the behavioral theory of commitment.     

大稳健、大恐慌和大收缩

本文为英格兰银行负责货币政策的副行长查尔斯·比恩(Charles Bean)先生在2009年8月25日欧洲经济学协会熊彼特讲座上的主题演讲。与其他对于本轮危机的分析相比,本文有两个最显著的特点:一是视野更加开阔、观点更加平衡:二是分析框架更加规范、逻辑性强。本文所涉及的问题正是国际金融监管改革的核心。     

Do liquidity measures measure liquidity?

Given the key role of liquidity in finance research, identifying high quality proxies based on daily (as opposed to intraday) data would permit liquidity to be studied over relatively long timeframes and across many countries. Using new measures and widely employed measures in the literature, we run horseraces of annual and monthly estimates of each measure against liquidity benchmarks. Our benchmarks are effective spread, realized spread, and price impact based on both Trade and Quote (TAQ) and Rule 605 data. We find that the new effective/realized spread measures win the majority of horseraces, while the Amihud [2002. Illiquidity and stock returns: cross-section and time-series effects. Journal of Financial Markets 5, 31–56] measure does well measuring price impact.     

Financial Econometrics, Financial Innovation, and Financial Stability

Innovation in financial markets, spurred to a significant extentby developments in finance theory and financial econometrics,has played a critical role in spurring economic growth. However,the current turmoil in financial markets raises fundamentalquestions about the nature of financial innovation and the roleof policymakers in maintaining financial stability. This paperexplores these questions, focusing on the complexities of modelingfinancial risk and the potential trade-off between policiesaimed at combating short-run financial instability on the onehand and the potential financial market distortions and moralhazard that can result from such policies on the other.