Capital account liberalization, financial development and industry growth: A synthetic view

This paper synthesizes studies analyzing the effects of capital account liberalization on industry growth while controlling for financial crises, domestic financial development and the strength of institutions. We find evidence that financial openness has positive effects on the growth of financially dependent industries, although these growth-enhancing effects evaporate during financial crises. Further analysis indicates that the positive effects of capital account liberalization are limited to countries with relatively well-developed financial systems, good accounting standards, strong creditor rights and rule of law. It suggests that countries must reach a certain threshold in terms of institutional and economic development before they can expect to benefit from capital account liberalization.     

Exchange rate regimes,capital controls,and currency crises: Does the bipolar view hold?

This paper empirically examines the link between de facto exchange rate regimes and the incidence of currency crises in 84 countries from 1980 to 2001 using probit models. We employ the de facto classification of Reinhart and Rogoff (2004) that allows us to estimate the impact of relatively long-lived exchange rate regimes on currency crises with much greater precision. We find no evidence that, as the bipolar view argues, intermediate regimes have a significantly higher probability of currency crises than both hard pegs and free floats. Using the combined data of exchange rate regimes and the existence of capital controls, we also find that hard pegs with capital account liberalization have a significantly lower probability of currency crises than intermediate regimes with capital controls and free floats with capital controls. Hence, the bipolar view does not strictly hold in the sense that intermediate regimes are significantly more prone to currency crises than the two extreme regimes. However, the fact that hard pegs with capital account liberalization are substantially less prone to currency crises is worthy of note.     

De facto exchange rate regimes and currency crises: Are pegged regimes with capital account liberalization really more prone to speculative attacks?

This paper empirically examines whether de facto exchange rate regimes affect the occurrence of currency crises in 84 countries over the 1980–2001 period by using the probit model. We employ the de facto classification of Reinhart and Rogoff (2004) that allows us to estimate the impact of relatively long-lived exchange rate regimes on currency crises with much greater precision. We find that pegged regimes significantly decrease the likelihood of currency crises compared with floating regimes. By using the combined data of exchange rate regimes and the existence of capital controls, we also find interesting evidence that pegged regimes with capital account liberalization significantly lower the likelihood of currency crises compared with other regimes. These results are robust to a wide variety of samples and models. From the standpoint of the macroeconomic policy trilemma, we can conjecture that pegged regimes with capital account liberalization are substantially less prone to speculative attacks because they can enhance greater credibility in their currencies by abandoning monetary policy autonomy.     

利率市场化背景下银行系统性危机的实证研究

从利率市场化的国际经验来看,无论是在发达国家还是发展中国家,其实施过程都容易导致不同程度的银行业危机。采用1973~2012年42个国家的面板数据,对利率市场化背景下的银行业危机进行的实证研究表明：利率市场化的推进将增加银行系统性危机发生的机率,特别是在存款利率市场化阶段,而严格的银行监管是抑制银行系统危机发生的有效方法;显性存款保险制度的设立无助于利率市场化后银行系统性风险的防范,甚至有可能会增加危机发生的机率;资本账户开放下进行利率市场化会增加银行系统危机发生的机率。利率市场化进程中允许开设民营银行不会增加银行系统危机的发生机率。     

Bank regulation,property prices and early warning systems for banking crises in OECD countries

Early warning systems (EWS) for banking crises generally omit bank capital, bank liquidity and property prices. Most work on EWS has been for global samples dominated by emerging market crises where time series data on bank capital adequacy and property prices are typically absent. We estimate logit crisis models for OECD countries, finding strong effects from capital adequacy and liquidity ratios as well as property prices, and can exclude traditional variables. Higher capital adequacy and liquidity ratios have a marked effect on the crisis probabilities, implying long-run benefits to offset some of the costs that such regulations may impose.     

日韩金融自由化过程中和率与汇率、资本流动关系的研究

日本和韩国经验表明,利率市场化进程中,利率变动与汇率、资本流动的联系会不断增强。但由于利率市场化改革往往与汇率自由化、资本项目改革等交织在一起,制度改革、市场预期等外部因素的影响更加突出．导致利率与汇率、资本流动之间的关系不稳定,传导渠道欠通畅。保持宏观经济稳定和有序平稳推进利率市场化改革．是理顺利率和汇率、资本流动关系,成功实现利率市场化的保障。     

Inflation targeting and the forward bias puzzle in emerging countries

Based on quarterly data on 31 emerging countries (among which 16 are inflation targeting countries) from 1990Q1 to 2014Q3, we obtain a strong support for the conjecture that the implementation of inflation targeting weakens the Fisherian relation between expected depreciation and the interest rate differential (uncovered interest parity condition) and thus is conducive to the appearance of the forward bias puzzle in emerging countries. We show that this reflects the performance of inflation targeting regimes in lowering the level and volatility of inflation. Our finding holds when controlling for country-specific effects, time-specific effects, global disinflation, exchange rate management, crises, and using different econometric techniques.     

Capital Account Liberalization and Aggregate Productivity: The Role of Firm Capital Allocation

We study the effects of capital account liberalization on firm capital allocation and aggregate productivity in 10 Eastern European countries. Using a large firm‐level data set, we show that capital account liberalization decreases the dispersion in the return to capital across firms, particularly in sectors more dependent on external finance. We provide evidence that capital account liberalization improves capital allocation by allowing financially constrained firms to demand more capital and produce at a more efficient level. Finally, using a model of misallocation we document that capital account liberalization increases aggregate productivity through more efficient capital allocation by 10% to 16%.     

The interest group theory of financial development: Evidence from regulation

We use a new dataset of de jure measures of trade, capital account, product market, and domestic financial regulation for 91 countries from 1973 to 2005 to test Rajan and Zingales’s (2003) interest group theory of financial development. In line with the theory, we find strong evidence that trade liberalization is a leading indicator of domestic financial liberalization. This result is robust to the use of different data frequencies (annual, 5-year intervals), estimation methods (OLS, 2SLS, system GMM) and a check for non-linear effects. However, in contrast to the theory, we do not find consistent evidence of an effect of capital account liberalization.     

Deposit Insurance, Capital Adequacy Requirements and Interest Rate Dynamics

This paper examines the long run interaction among deposit insurance, bank deposit rates and capital adequacy requirements. Using analysis similar to the price discrimination model of Lott and Roberts (1991) we find that a competitive environment among banks would link the spread between insured and uninsured deposit rates to the size of the insurance premium. We also find that banks that choose to operate at the regulatory minimum capital level, would increase asset risk with increased capital requirements if (1) the implicit interest paid to insured and uninsured depositors is equally sensitive to changes in risk and capital adequacy and (2) the insurance premium is independent of the level of risk and capital adequacy. Under the present risk-based premium structure, asset risk has the potential to decline when the regulatory agency raises capital requirements. Finally, we examine the time series behavior of insured and uninsured interest rates to see if it is consistent with our theoretical model. We find that insured and uninsured rates, along with deposit insurance premiums, are cointegrated series as suggested by our model.     

Financial liberalization,market structure and credit penetration

This paper shows that the effects of financial liberalization on the credit market of a small and capital constrained economy depend on the market structure of domestic banks prior to liberalization. Specifically, under perfect competition in the domestic credit market prior to liberalization, liberalization leads to lower domestic interest rates, in turn leading to increased credit penetration. However, when the initial market structure is one of imperfect competition, liberalization can lead to the exclusion of less wealthy entrepreneurs from the credit market. This provides a rationale for the mixed empirical evidence concerning the effects of liberalization on access to credit in developing markets. Moreover, the analysis provides new insights into the consequences of foreign lenders’ entry into developing economies.     

Financial liberalization and banking crises: The role of capital inflows and lack of transparency

This paper shows that the liberalization of capital inflows may undermine bank stability in emerging markets. After financial liberalization, uninformed international investors rationally provide large amounts of funds at low cost. This enables insolvent banks to accumulate bad loans. In equilibrium, when a substantial amount of losses may have been accumulated, solvent banks do not find it any longer optimal to issue debt at the interest rate that would compensate investors for risk. Investors anticipate this and stop holding bank debt. When the market for bank liabilities breaks down, insolvent banks default. I show that, because of wasteful investment, the liberalization of capital inflows may decrease aggregate welfare.     

Are capital controls in the foreign exchange market effective?

One of the reasons for governments to employ capital controls is to obtain some degree of monetary independence. In this paper we test whether capital controls can reduce the link between exchange rates fluctuations and cross border interest differentials. Recent capital control proxies are used in order to determine the date of capital account liberalization for a panel of Western European and emerging countries. Results show that capital controls have a very limited effect on observed deviations from interest parities, even when accounting for the political risk associated with capital controls.     

利率市场化对商业银行影响的经验及启示——以台湾为例

利率市场化的加速推进给国内城商行的经营发展带来深刻的影响。国内利率市场化遵循渐进改革思路,与台湾地区利率市场化具有相似之处,经历14年的利率市场化改革,台湾银行业在低利差的环境下通过推进组织流程优化来提升运营效率;强化金融服务手段来改善资金来源结构,从而降低资金成本;依托金融控股公司平台,发挥整合行销效益,扩大客户基础;积极调整优化资产结构,大力拓展民营企业和消费金融业务等举措实现发展转型及安全稳健经营。台湾银行业的发展经验值得国内城商行借鉴。     

Decomposing the effects of financial liberalization: Crises vs. growth

We present a new empirical decomposition of the effects of financial liberalization on economic growth and on the incidence of crises. Our empirical estimates show that the direct effect of financial liberalization on growth by far outweighs the indirect effect via a higher propensity to crisis. We also discuss several models of financial liberalization and growth whose predictions are consistent with our empirical findings.     

中国系统重要性银行附加资本计提机制研究——基于Copula-CoVaR模型

在 CoVaR 风险度量框架的基础上建立系统重要性银行附加资本计提机制,旨在将风险溢出与资本计提挂钩。运用 Copula-CoVaR 模型测算商业银行对银行体系的风险溢出效应,考虑到额外的资本对溢出风险吸收作用,在控制每一家银行对银行系统的风险溢出一致的基础上确定银行的资本充足水平,进而确定对应的系统重要性银行附加资本的计提比例。     

The integrated impact of credit and interest rate risk on banks: A dynamic framework and stress testing application

Credit and interest rate risk are the two most important risks faced by commercial banks in their banking book. In this paper we derive a consistent and comprehensive framework to measure the integrated impact of both risks. By taking account of the repricing characteristics of assets, liabilities and off balance sheet items, we assess the integrated impact of credit and interest rate risk on banks’ economic value and capital adequacy. We then stress test a hypothetical but realistic bank using our framework and show that it is fundamental to measure the impact of credit and interest rate risk jointly.     

Do Strict Regulators Increase the Transparency of Banks?

We investigate the role that regulatory strictness plays on the enforcement of financial reporting transparency in the U.S. banking industry. Using a novel measure of regulatory strictness in the enforcement of capital adequacy, we show that strict regulators are more likely to enforce restatements of banks' call reports. Further, we find that the effect of regulatory strictness on accounting enforcement is strongest in periods leading up to economic downturns and for banks with riskier asset portfolios. Overall, the results from our study indicate that regulatory oversight plays an important role in enforcing financial reporting transparency, particularly in periods leading up to economic crises. We interpret this evidence as inconsistent with the idea that strict bank regulators put significant weight on concerns about the potential destabilizing effects of accounting transparency.     

Optimal capital controls and real exchange rate policies: A pecuniary externality perspective

A new literature studies the use of capital controls to prevent financial crises. Within this new framework, we show that when exchange rate policy is costless, there is no need for capital controls. However, if exchange rate policy entails efficiency costs, capital controls become part of the optimal policy mix. When exchange rate policy is costly, the optimal mix combines prudential capital controls in tranquil times with policies that limit exchange rate depreciation in crisis times. The optimal mix yields more borrowing, fewer and less severe financial crises, and much higher welfare than with capital controls alone.     

Bank liquidity creation,monetary policy,and financial crises

This paper examines the interplay among bank liquidity creation (which incorporates all bank on- and off-balance sheet activities), monetary policy, and financial crises. We find that: (1) high liquidity creation (relative to trend) – particularly off-balance sheet liquidity creation – helps predict crises, controlling for other factors; (2) monetary policy has statistically significant, but economically minor effects on liquidity creation by small banks during normal times, and these effects are even weaker during financial crises; (3) monetary policy has very little effects on medium and large bank liquidity creation during both normal times and crises. These findings suggest that authorities may wish to monitor bank liquidity creation closely in order to predict and perhaps lessen the likelihood of financial crises. They might also consider other tools to control bank liquidity creation, such as capital and liquidity requirements.