Wilhelm Röpke and Richard C. Koo On Secondary Deflations and Balance Sheet Recessions

The concept of a ‘secondary deflation’ was developed in the 1930s by the German economist Wilhelm Röpke, who saw it as something different from a normal depression. While a primary deflation is a necessary reaction to the inflation from a boom period, a secondary deflation is independent and economically purposeless. Röpke argued that secondary depressions occurred in the US, Germany, France and Switzerland during the 1930s, but was vague on what made them follow primary depressions. Recently, the Taiwanese–American economist Richard C. Koo has claimed to have discovered the ‘Holy Grail of macroeconomics’, that is, what made the Great Depression so deep and long. During the Great Depression, the bursting of the asset price bubble resulted in private sectors having more debt than assets; as they shifted from maximising profits to minimising debt, the consequent debt deflation shrank the economy. According to Koo, Western economies today are suffering from a similar ‘balance sheet recession’. Strengthened by the notion of a balance sheet recession, Röpke's long‐lost insights might advance our understanding of the business cycle in general and the present crisis in the US and the Eurozone in particular.     

RECENT DEVELOPMENTS IN CONSUMER CREDIT AND DEFAULT LITERATURE

This survey discusses recent contributions to the quantitative literature on unsecured consumer debt and default, and some ongoing challenges for the literature. Key topics include the sources of the rise in personal bankruptcies, the importance of asymmetric information and the effects of developments in information technologies on consumer credit markets, delinquency and informal bankruptcy, debt collection and restructuring of distressed debt, the cyclical behavior of consumer debt and default, and the insurance role of household debt. Implications for welfare analysis and policy design are discussed. Several theoretical contributions and approaches to modeling the consumer credit markets are also highlighted.     

Dynamics of quote and deal prices in the foreign exchange market

We empirically investigate price fluctuations of yen-dollar exchange rate using the high-frequency data recorded in the electronic broking system for seven-year period. The distribution of quote price changes has symmetric fat-tails approximated by a power law; however, that of deal price is asymmetrical. The autocorrelation function and diffusion of price changes indicate that quote price exhibits anti-correlation feature in short time scale, whereas deal price is essentially uncorrelated. The bid-ask spread shows power-law distribution and long range temporal correlations similar to that observed in absoute price changes.      

公司治理与债务成本——来自深交所A股上市公司的经验证据

本文以2002-2005年间深圳证券交易所1525家A股上市公司为样本,实证检验了公司治理结构与上市公司债务成本的关系。研究发现,第一大股东持股比例、董事会独立性与总债务成本和银行贷款债务成本显著负相关。表明第一大股东、独立董事能有效降低债权人面临的代理冲突。研究还发现,高管持股比例和控制人类型对总债务成本和银行贷款债务成本具有不同影响。     

Deep learning for modeling the collection rate for third-party buyers

This study evaluates a wide range of machine learning techniques such as deep learning, boosting, and support vector regression to predict the collection rate of more than 65,000 defaulted consumer credits from the telecommunications sector that were bought by a German third-party company. Weighted performance measures were defined based on the value of exposure at default for comparing collection rate models. The approach proposed in this paper is useful for a third-party company in managing the risk of a portfolio of defaulted credit that it purchases. The main finding is that one of the machine learning models we investigate, the deep learning model, performs significantly better out-of-sample than all other methods that can be used by an acquirer of defaulted credits based on weighted-performance measures. By using unweighted performance measures, deep learning and boosting perform similarly. Moreover, we find that using a training set with a larger proportion of the dataset does not improve prediction accuracy significantly when deep learning is used. The general conclusion is that deep learning is a potentially performance-enhancing tool for credit risk management.     

Monetary policy and bank performance: The role of business models

This paper examines the relationship between monetary policy and bank performance in a multiple-instrument environment, particularly highlighting the conditioning role of bank business models. Employing a unique dataset of Vietnamese commercial banks from 2007 to 2019, we display that banks react to monetary policy changes, either when the central bank increases policy rates or injects money into the economy through open market operations, by decreasing overall returns and increasing financial instability. Additionally, we document that the accumulation of foreign exchange reserves benefits bank outcomes, contrasting to open market operations, albeit the central bank uses both of these policy instruments to alter money supply in the economy. Our key analysis of interest reveals that business models considerably matter in the effects of monetary policy on bank performance. Collectively, our findings demonstrate that banks’ business models that yield more non-interest income or diversify more into different income sources may mitigate the pass-through of monetary policy to bank performance. This finding holds across all interest- and quantitative-based monetary policy indicators and across all the functions of risk-taking behavior, earning-profit capacity, and financial stability. Furthermore, while plotting the marginal effects of monetary policy, we realize that they are insignificant for banks whose business models heavily rely on non-traditional segments.     

经济全球化和全球化的泡沫

在经济全球化的背景下,金融资本的国际化流动不断加强．促成了国际金融市场的联动性和互相影响程度不断加强。背后是金融风险发生后容易出现全球化扩散。而实体经济因为大宗商品金融定价权的原因也越来越受到金融市场波动的影响。在这样的背景下,资产价格的泡沫的出现和泡沫的全球化蔓延对我国经济发展提出了新的挑战和思考。     

The allocation of volatile aid and economic growth: Theory and evidence

We analyse, both theoretically and empirically, the growth effects associated with two components of volatile foreign financial assistance: ‘directly productive’ (or ‘tied’) aid and ‘pure’ aid. We find that scenarios in which aid can hurt the recipient's growth rate emerge only in cases where foreign aid is volatile. As a result, we conclude that it is only in conjunction with the presence of aid variability that aid allocation determines whether foreign aid hurts or promotes long-run growth.     

Debt markets and corporate debt structure in an emerging market: The South African example

This is a first attempt at gauging the effects of corporate public debt issuance on the debt structure, risk profile and valuation of firms in an emerging market. We find that financial services firms, along with government institutions, are important early supporters of an organized public debt market. Firms in this market use equity, public debt and private debt funds simultaneously as need be. Consistent with predictions of the corporate debt structure literature, public debt-issuing firms are larger, older, more profitable, and less informational opaque than non-public debt-issuing firms. Moreover, public debt-issuing firms experience significant reductions in both overall and systematic risks, and incur lower cost of capital following issuance than non-public debt issuers. These and other findings of the study suggest deepening national debt markets can be a fruitful financial market development exercise for emerging markets.     

公共财政框架下我国政府或有债务风险管理

目前我国公共财政部门存在着一定的财政风险,特别是隐性风险和或有风险更是不容忽视。在考察我国政府或有负债风险构成的基础上,从公共财政的角度,对财政风险产生的制度原因予以宏观分析,进一步指出我国政府或有负债形成的深层原因。研究表明,我国必须加强对政府或有债务的管理,建立面向全球经济的财政风险预算管理体制,从而减少或有债务风险对财政稳定性的冲击。