Default contagion and systemic risk in loan guarantee networks

This paper studies systemic risk in the Chinese debt market stemming from inter‐corporate loan guarantees using field data from Zhejiang Province. We apply a weighted and directed network model to analyse the implications for default contagion and systemic risk under different stress testing scenarios. The empirical results indicate that the topology of the loan guarantee network is close to a ‘scale‐free’ structure, which is known to be robust against accidental failures but vulnerable to coordinated attacks. Hence, the network is able to cope with idiosyncratic shocks resulting from single company failures, but can easily suffer from more widespread contagion if a group of systemically important companies are hit by a targeted shock. We further demonstrate that within our sample of small and medium‐sized enterprise (SME) companies, increasing leverage reduces network stability and exacerbates the effects of contagion. More lenient bank lending policies increase the survival rate of sample companies and thereby reduce the losses from default contagion.     

The Effectiveness of Unconventional Monetary Policy in Japan

Since the global financial crisis of 2007–2008, central bankers around the world have been forced to abandon conventional monetary policy tools in favor of unconventional policies such as quantitative easing, forward guidance, and even lowering the interest rate paid on bank reserves into negative territory. Japan, which faced a crisis in its banking sector and came up against the theoretical zero lower bound on interest rates nearly a decade earlier, was a pioneer in the use of many of these unconventional policy tools. This article analyzes the effectiveness of Japan’s bold experiment with unconventional monetary policy. Using a panel of bi-annual bank data covering the full universe of Japanese commercial banks over a fifteen-year period, this study analyzes the effectiveness of quantitative easing policy on the bank lending channel of monetary policy transmission. Our findings suggest that Japan’s unconventional monetary policy worked: there is a bank lending channel of monetary policy transmission in Japan. These results are robust to the inclusion of time fixed effects and generalized method of moments analysis.     

The impact of the introduction of the Euro on firms' expectations

Firms' expectations regarding their ability to enter new markets and to develop new products, and concerning the foreign competition they will face in future, are strongly affected by the introduction of the euro. The following article analyzes these expectations using panel data taken from a quarterly business survey in the service sector. Helpful comments from our colleagues Friedrich Heinemann, Georg Licht and Herbert S. Buscher on earlier drafts of this paper are gratefully acknowledged. We are also indebted to Enrico Steeb and Rolf Kempkes for their helping hand in setting up the data set and to Christina Kaiser for research assistence. We also wish to thank Semka Thorvaldsen for proof-reading.     

Misleading Forecasts in Accounting Estimates: A Form of Ethical Blindness in Accounting Standards?

Drawing from research on strategic choice, this study investigates the relationship between market turbulence and firms’ sustainable behavior, in the context of sustainability-related institutional adversity. It argues that the relationship between market turbulence and sustainability is mediated by network embeddedness, and this mediating role in turn is moderated by a firm’s innovative orientation. Data collected from a sample of Ontario restaurants inform predictions about firms’ propensity to adopt local wines in their portfolios, despite the limited market and normative support that these wines receive compared with imported wines. The study shows that market turbulence enhances sustainable firm behavior, through the development of strong network relationships. Furthermore, the mediating effect of network embeddedness is particularly salient among firms that exhibit a stronger innovative orientation. These findings reveal how and when turbulent market conditions can contribute to a firm’s sustainable behaviors in the presence of limited institutional support for such behaviors.     

Housing, taxation and retirement provision

This paper considers the tax treatment of housing and the issue of savings for retirement in the context of a simplified model that still allows key aspects of the household context to be realistically represented. A model is developed in which both housing and financial assets can be used as vehicles for household saving. Individuals face perfect capital markets and choose between owner-occupied and rented accommodations. For the model developed, it is shown that the tax advantage of owner-occupied housing is not fully removed even if imputed rents are subject to income taxation. However, deferred income taxation for both housing and savings in the form of financial assets would result in an equal treatment of tenants and owner-occupiers.     

The timing and pattern of real wage divergence in pre‐industrial Europe: evidence from Germany,c. 1500–1850

This study uses price information relating to 12 towns and wage information from 18 towns to develop a real wage index for unskilled urban labourers in Germany during the three‐and‐a‐half centuries preceding the onset of rapid industrialization. Combining the new series with information from other parts of Europe establishes two stages of real wage divergence during the seventeenth to nineteenth century. The first occurred in the middle of the seventeenth century when real wages in centres of trade and finance located on the rim of the North Sea rose far above the level prevailing in their hinterland. The second stage unfolded from the second quarter of the eighteenth century when the real wage in south England, northern and central Italy, and Germany began to diverge; Germany followed a middle path between the other two countries. The second commercial revolution, which improved business techniques and promoted Smithian growth, goes a long way towards accounting for this development.     

Within the triangle of healthcare legacies: comparing the performance of South-Eastern European health systems

Objective: Inter-regional comparison of health-reform outcomes in south-eastern Europe (SEE).

Methods: Macro-indicators were obtained from the WHO Health for All Database. Inter-regional comparison among post-Semashko, former Yugoslavia, and prior-1989-free-market SEE economies was conducted.

Results: United Nations Development Program Human Development Index growth was strongest among prior-free-market SEE, followed by former Yugoslavia and post-Semashko. Policy cuts to hospital beds and nursing-staff capacities were highest in post-Semashko. Physician density increased the most in prior-free-market SEE. Length of hospital stay was reduced in most countries; frequency of outpatient visits and inpatient discharges doubled in prior-free-market SEE. Fertility rates fell for one third in Post-Semashko and prior-free-market SEE. Crude death rates slightly decreased in prior-free-market-SEE and post-Semashko, while growing in the former Yugoslavia region. Life expectancy increased by 4 years on average in all regions; prior-free-market SEE achieving the highest longevity. Childhood and maternal mortality rates decreased throughout SEE, while post-Semashko countries recorded the most progress.

Conclusions: Significant differences in healthcare resources and outcomes were observed among three historical health-policy legacies in south-eastern Europe. These different routes towards common goals created a golden opportunity for these economies to learn from each other.