Financial Modernization in US Banking Markets: A Local or Global Event?

Abstract:   We test the hypothesis that the passage of the Financial Services Modernization Act (FSMA) of 1999 has spillover effects cross‐nationally, using a sample of US, non‐US transactional (Australian, Canadian, and UK), and relationship (German, Japanese, Dutch, and Swiss) banks. Our results suggest that financial modernization in the US has limited cross‐national effects. We find strong evidence that US banks were affected favorably. Although we detect some evidence of significant reactions by banks in certain countries, a closer examination reveals that the reaction is most likely attributable to events in the respective countries during the event period. We do find, however, that non‐US transactional banks have been more likely to elect financial holding company status compared to relationship banks, suggesting they are positioning themselves to exploit the expanded opportunity set created by the FSMA. Nonetheless, the majority of elections have been made by US banks. In general, the results suggest that the respective banking markets are efficient in filtering events that are largely country‐specific with only limited implications for other international banks.     

Productivity measurement for a distribution firm

The paper derives a consistent accounting framework for the treatment of inventories when measuring the productivity of a distribution firm. The average purchase price of an inventory item during an accounting period must be distinguished from its average selling price and these two average prices should be distinguished from the corresponding balance sheet prices. The accounting framework is implemented for a distribution firm which sold 76,000 separate items. The firm achieved a 9.6 percent per quarter total factor productivity growth rate over 6 quarters.The first author is a Professor of Economics at the University of British Columbia and a research associate of the NBER. He thanks the SSHRC of Canada for research support. The second author is a recent graduate of the University of British Columbia.     

Seasonality in industry specific indices

This study examines seaonality in three industry specific stock market indices; the Standard and Poor's (S&P) 20 Transportation, the S&P 40 Utilities, and the S&P 40 Financial. The results support the existence of a weekend effect in the transportation index. There is no evidence of a weekend effect in the utilities and financial indices. Both the transportation and financial indices exhibit the January effect. The utilities index, however, shows no evidence of a January effect. The finding of a weekend and a January effect at the industry level is significant because select mutual funds enhance the ability of investors to capitalize on such anomalies.     

Financial-market effects of Federal Government budget deficits

Conclusion This paper finds that, for the 30-year period 1955–1984, the federal government budget deficit in the United States had a positive and significant effect on the longer-term nominal interest rate. This finding is at odds with most of the existing literature, which finds federal budget deficits to have no measurable impact upon interest rates in the United States [cf. Evans, 1985; 1987; Hoelscher, 1983; Makin, 1983; Motley, 1983; McMillin, 1986; and Mascaro and Meltzer, 1983]. The difference between the findings here and the findings in these other studies can be traced at least in part to the way in which we specify the deficit variable. That is, we distinguish between thestructural deficit, which approximates theexogenous component of the total deficit, and thecyclical deficit, which represents theendogenous component of the total deficit. By contrast, these other related studies measure the deficit in more aggregated ways, which combine the cyclical deficit with the structural deficit into one variable.     

Comecon, trade and the west :

Though uninsured depositors are recognized as a source of market discipline, the possible disciplinary effect of decisions made by fully insured depositors have gone largely unexamined. Using proprietary administrative deposit data at the account level, this paper analyzes depositor behavior at a recently failed institution. The results suggest that although uninsured deposits exited at a greater rate than insured deposits, the vast majority of deposits withdrawn were fully insured. Among types of deposit accounts, the rates of withdrawal for fully insured individual, joint, and trust accounts were relatively high. Uninsured business account owners were highly sensitive to the bank's deteriorating condition. In contrast, owners of uninsured individual retirement accounts effectively exerted no market discipline. The opinions expressed in this paper are ours and do not necessarily reflect those of the Federal Deposit Insurance Corporation. All errors are our own.     

The Depositor Behind the Discipline: A Micro-Level Case Study of Hamilton Bank

Though uninsured depositors are recognized as a source of market discipline, the possible disciplinary effect of decisions made by fully insured depositors have gone largely unexamined. Using proprietary administrative deposit data at the account level, this paper analyzes depositor behavior at a recently failed institution. The results suggest that although uninsured deposits exited at a greater rate than insured deposits, the vast majority of deposits withdrawn were fully insured. Among types of deposit accounts, the rates of withdrawal for fully insured individual, joint, and trust accounts were relatively high. Uninsured business account owners were highly sensitive to the bank's deteriorating condition. In contrast, owners of uninsured individual retirement accounts effectively exerted no market discipline. The opinions expressed in this paper are ours and do not necessarily reflect those of the Federal Deposit Insurance Corporation. All errors are our own.