Aggregation, efficiency and mutual fund separation in incomplete markets

Summary. This paper studies the conditions for aggregation, portfolio separation and effective completeness of competitive allocations in general equilibrium models with incomplete markets where agents have general preference and endowment distributions. We show that these properties are distinct. Demands may aggregate yet may fail to exhibit fund separation and conversely. Fund separation implies effective completeness while aggregation does not. The implications of these properties for the structure of equilibria are discussed, and generalizations of the CAPM, the consumption CAPM and the CAPM with nonmarketed wealth emerge from the analysis. Received: September 12, 1996; revised version: November 7, 1996     

FDI and credit constraints: Firm-level evidence from China

In this paper, we assess the success of the ongoing financial system reforms in China by investigating the extent to which firms are financially constrained. We focus on the role played by Foreign Direct Investment (FDI) in funding the Chinese corporate sector, and analyze whether incoming foreign investment in China plays an important role in alleviating domestic firms’ credit constraints. Using firm-level data on 1300 domestic companies over the period 2000–2002, we confirm that the development of cross-border relationships with foreign firms helps private domestic firms to bypass both the financial and legal obstacles that they face at home.     

Scale and Scaling in Ecological and Economic Systems

We review various aspects of the notion ofscale applied to natural systems, in particularcomplex adaptive systems. We argue that scalingissues are not only crucial from the standpointof basic science, but also in many appliedissues, and discuss tools for detecting anddealing with multiple scales, both spatial andtemporal. We also suggest that the techniquesof statistical mechanics, which have beensuccessful in describing many emergent patternsin physical systems, can also prove useful inthe study of complex adaptive systems.     

Endogenous money and shareholders' funds in the classical theory of banking

By its nature, bank money is endogenous, but its issuing is risky and presupposes the presence of banks' shareholders' funds. Shareholders' funds give banks the means of dealing with the difficulties involved in the process of money creation and which are inherent to the banking activity: convertibility constraint, credit and liquidity risks. Unlike the Richardian paradigm, Smith's ‘real bill theory’ and Thornton's ‘lender of last resort theory’ point out the functions of shareholder's funds. Therefore their monetary-banking approachs seem more complementary than contradictory. In other respects, the theory of endogenous money and credit introduces risks and capital in the analysis of exchange and lead to questioning the classical market theory constructed on the model of bartering     

R.G. Hawtrey on the national and international lender of last resort

Abstract

This paper traces R.G. Hawtrey's main contributions to the theory of the lender of last resort (LLR), both national and international (ILLR). This theory is a continuation of one of the traditions of the classical period, started by Henry Thornton, which differs in important points from that of Walter Bagehot. In their treatment of the classical concepts the authors partly depart from the interpretation of Thomas M. Humphrey, who considers that Thornton and Bagehot have basically the same approach about LLR. Hawtrey renewed Thonton's views and extended the concepts to new problems, including the ILLR. Hawtrey built a model of LLR in a dynamic macroeconomic model that includes the Cambridge market for cash balance and introduces the bases of a theory of ILLR, describing the sequence of twin crisis, exchange and banking crisis, thus explaining the difficulties for an ILLR to act on the currency market without taking the risks involved, in a situation completely different to the one faced on the money market by the national LLR.     

Multi-destination firms and the impact of exchange-rate risk on trade

Based on a French firm-level database that combines information on balance-sheet and destination-specific export information over the period 1995–2009, we document a new stylized fact related to the heterogeneous reaction of exporters to RER volatility: we show that strongly multi-destination firms tend to reduce significantly more their exports to a destination that faces higher exchange-rate volatility. We also show that, following an exchange-rate volatility shock in a given country, strongly multi-destination firms increase exports to all other destinations served. This specific behavior of multi-destination firms has significant aggregate implications. First, the bilateral aggregate impact is increasingly negative with the weight of multi-destination firms in total exports towards the considered destination. Second, the reallocation behavior of large, multi-destination firms ultimately translates into stable total French exports (summed over all destinations).     

Publikationen deutschsprachiger Forscher in Top-Journals (1. Quartal 2005)

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