Personal debt crises: an economic approach

This article provides further empirical investigation, using an ongoing data-set, of the level of arrears experienced by debtors in crisis. Various extensions to the traditional choice model are reviewed as explanations for the presence of personal debt crises. The regression model shows significant effects of exogenous shocks and life cycle position on the level of debt. However, the most powerful explanation of the level of debt appears to be the degree of self-control (as captured by the over-commitment variable) a factor not normally included in studies of household behaviour. Future research is needed which attempts to capture the dimensions of personality associated with crisis debt and embed these in an econometric model.     

Financial conservatism fosters job creation during economic crises

ABSTRACT

This article aims to analyse the phenomenon of financial conservatism in firms’ capital structures and relate it to their employment variation for a sample of Spanish companies during the 2008–2013 period, characterized by a sharp crisis and very high unemployment rates. Financial conservatism is described as following a low-leverage/high cash no-short-term capital structure policy. We use the noisy selection model that relates growth, age, and size, to which we add a dummy indicating financial conservatism. As the growth of a company is measured as its number of employees’ variation, we are ultimately analysing how financial conservatism affects job creation. The objective of this work is to stress the advantages of a financially conservative policy as the evidence shows that such a policy at a given enterprise is a positive factor for job creation, which in Macroeconomics terms means an improvement in economy’s employment. The average conservative company more likely to foster job creation is a small company belonging to the industry or services sector.     

The exploration of economic crises: parameter uncertainty and predictive ability

Over a long horizon, this paper examines joint economic crises and determines the power of 49 variables in predicting such episodes. While incorporating dynamism in the prediction, we generate the predictive power of various specifications and model the uncertainty in the parameters of interest. The results reveal that growth of real gross domestic product per capita, regulation, bank non‐performing loans, interest rate and inflation rate are the most significant variables in predicting the joint economic crises. These variables predict economic crises with about 93% accuracy and can predict joint economic crises in developing countries and recent joint crises.     

Wicksell's lecture notes on economic crises (1902/05)

The article brings to light Knut Wicksell's Lund lecture notes of 1902 and 1905 on economic crises. In these notes, written a few years after his book on interest and prices but before most of his published work on business cycles, Wicksell made an attempt to bridge the gap between monetary and real theories of crises. The notes are remarkable for a discussion of how partial overproduction is generalized through the credit mechanism and for an assessment and diagrammatic treatment of the controversies between Malthus, Say and Owen on general overproduction.     

Quantifying the impact of economic crises on infant mortality in advanced economies

Policy makers rely on a mix of government spending and tax cuts to address the imbalances in the economy during an economic crisis, by promoting price stability and renewed economic growth. However, little discussion appears to focus explicitly on quantifying the cost of economic crises in terms of human lives, especially the lives of the most vulnerable members of society, infants. Using a statistical approach that is robust to the increases of mortality in outlying years, we quantify the effect that economic crises, periods of prolonged economic recession, have on infant mortality. Moreover, we investigate whether different levels of public spending on health across advanced industrialized democracies can mitigate the impact of crises on infant mortality. We find that economic crises are extremely costly and lead to a more than proportional increase in infant mortality in the short-run. Substantial public spending on health is required in order to limit their impact.     

Remittances during crises

This paper begins by examining the characteristics and determinants of remittances sent from Germany to ex‐Yugoslavia, and then takes a first look at how they were affected by the war and later political and economic crises in the first half of the 1990s. The findings tentatively suggest that the propensity to send among ex‐Yugoslavs increased in the early 1990s, despite a breakdown in formal remittance channels and in contrast with the roughly stable and even decreasing propensity to send among Turkish guest workers.     

中国的土地危机

我国土地资源总面积为144亿亩，具有如下主要特点:其一，山地(含丘陵)多(占土地总面积的2/3)，平地少（占1/3）;其二，较难利用的沙漠、戈壁、高寒荒漠、石山和冰川以及永久积雪地的面积较广，约占土地总面积的18%;其三，在可供农用的土地中，草地比重最大(占土地面积的41.58%，约60亿亩)，林地次之(占17.95%，约26亿亩)，耕地最少(仅占14.21%，约20亿亩);其四，耕地质量不高（高产田不到1/3），退化严重，且可耕地的后备资源少。近20～30年来，由于人口大量增长和粗放的经济增长方式，使我国土地资源的退化状况日趋严重。土地资源退化是指…     

Transparency and currency crises

The role transparency plays in the prevention of currency crises is widely acknowledged. Nevertheless, the relationship between transparency and currency crises has rarely been subjected to systematic cross‐national scrutiny. This paper attempts to explore the effect of transparency on currency crises by focusing on a specific dimension of transparency: the public dissemination of aggregate economic data by governments. My analysis provides strong evidence that greater transparency is associated with a lower likelihood of currency crises, regardless of economic conditions. When I add economic and political determinants of currency crises, the estimate of transparency remains unaltered in magnitude or statistical significance.     

Political booms and currency crises

This paper shows evidence that political booms, defined as the rise in governments’ popularity, are associated with a higher likelihood of currency crises. The reasoning behind this finding is that prudent economic policies to address underlying weaknesses in the economy may be political costly for incumbent governments in the short-term. Hence, popularity-concerned governments may not have enough incentives to take such corrective actions in a timely manner. This approach, in turn, can deteriorate economic fundamentals and increase related risks in the economy which can eventually lead to crises. This paper sheds light on this phenomenon in the case of currency crises, suggesting that currency crises can be viewed as “political booms gone bust” events. Moreover, it finds that higher international reserves, higher exports, and a higher degree of financial openness alleviate the effect of political booms on currency crises.     

Banking crises in monetary economies

Abstract.  This paper analyzes the effect of inflation on banking crises in a model in which money and banks play essential roles. The model's equilibrium replicates some key features of actual banking crises, namely, the partial suspension of payments and the desire to hold cash even in the absence of pressing liquidity needs. When banks have access to a stable foreign currency, inflation has a threshold effect on banking crises: higher inflation reduces the likelihood of crises when inflation is below the threshold; the reverse happens when inflation exceeds the threshold. This result appears to be broadly consistent with available evidence.     

Political regimes and financial crises

This study investigates how democratic or autocratic regimes, their transitions, and durations, affect the probability of experiencing financial crises. The empirical strategy employs novel instruments and Lewbel's method to address potential endogeneity concerns. The results reveal that democratic transition reduces the probability of crises by around seven percent, whereas autocratic switchovers enhance the crises likelihood by twelve percent. The findings remain robust in presence of a number of heterogeneity checks, with alternative measures of crises indicators, and employing different proxy for democratic transition. Thus, institutions in transition countries could play important role in managing such financial upheavals.     

Banking crises and human rights

We examine the effect of banking crises on a country’s protection of basic human rights. Our results indicate that banking crises have a causal, substantive and robust negative effect on human rights, particularly in nondemocracies. This adds to our understanding of how economic shocks can politically destabilize countries.     

Exchange restrictions and devaluation crises

This paper develops a model of devaluation cycles for an economy in which foreign exchange transactions take place through both an official and a parallel market. The exchange rate differential determines the propensity to under-invoice exports. The authorities are assumed to follow a devaluation rule that relates official parity changes to the level of reserves. The analysis shows that such a rule leads to periodic cycles of erosion and recovery of foreign reserves, which bear some similarities to recent devaluation episodes in developing countries.     

Locational restructuring and financial crises

Since 1800, modern economic growth has caused an unprecedented locational restructuring of economies experiencing rapid economic development, a redistribution of population from farms and villages to towns and cities. In free market economies of the past, this urbanization process occurred in Kuznets cycles, averaging 15–25 years in duration. During these cycles, real investment typically occurred in a two-stage sequence — investment in a new production technology followed by investment in urban infrastructure — and resulted eventually in financial crisis and collapse. Recent developments in today’s less developed economies suggest the possible re-birth there of the Kuznets cycles of the past.     

Financial crises and regime-dependent dynamics

Generalized with the regime-dependent beliefs and regime-switching dynamics, the simple market-maker framework established by Day and Huang (1990) is capable to model all types of crises, that is, sudden crisis, disturbing crisis and smooth crisis, and to offer economic and dynamic justifications on how and why these crises appear. Moreover, the model simulations verify the salient qualitative and statistical properties commonly observed in the real financial data such as fat tails, volatility clustering, long range dependence, leverage effect and other stylized facts. Additionally, the model replicates the various chart patterns widely applied in the technical analysis.     

Stability periods between financial crises: The role of macroeconomic fundamentals and crises management policies

This study aims to identify which factors explain why some countries enjoy long durations of stability, while others experience crises in shorter intervals. We analyze the duration of stability periods between currency, debt, and banking crises by employing an innovative econometric strategy, the Finite Mixture Model (FMM). Real and financial variables show high predictive power for stability spells between currency crises. Regarding debt crises, the real interest rate is observed to be the best predictor. The time between systemic financial crises appears to be prolonged through government interventions and through IMF program participation, while bank recapitalization has a negative impact.     

Can debt crises be self-fulfilling?

Several papers argue that debt crises can be the result of self-fulfilling expectations that no one will lend to a country, triggering default and rationalizing the refusal to lend. I show these coordination failures can be eliminated by a combination of state-contingent securities and a mechanism that allows investors to promise to lend only if enough other investors do so as well. This suggests that runs on the debt of a single borrower (such as the government) can be eliminated and that self-fulfilling features are more plausible when externalities among many decentralized borrowers allow for economy-wide debt runs to occur.