Financial Fragility and Economic Performance

TL;DR: For most of 1999, it traded within a narrowband of between Z$38 and Z$39/US$, mainly due to a voluntary, informal agreement between the Reserve Bank and foreign currency dealers (mainly commercial banks) to achieve artificial stability at these levels as mentioned in this paper.

TL;DR: The main objective is to examine the role of collaterals in handling the strategic risk that can propagate to a systemic risk throughout the network in a cascade of defaults, and to solve for the optimal scheme of collateral contracts that capital raisers offer their investors.

Abstract: This thesis a im s to exam ine an d th e role of the bank ing secto r in the origins and propagation of In d o n es ia ’s deep econom ic crisis. Specifically, the objectives are: (1) to a sse ss ban k in g secto r w eaknesses in the lead-up to th e crisis, (2) to exam ine the consequences of a w eak ban k in g sector in m aking the econom y vulnerable to a financial crisis, an d (2) to h ighlight th e p ropagation process of the crisis, w ith p a rticu la r em p h asis on the tran sm issio n m ech an ism provided by bank ing channe ls . In o rder to achieve th e se objectives, m icroeconom ic an d m acroeconom ic app roaches are em ployed. The form er app roach is u sed to determ ine the factors co n tribu ting to b an k in g fragility. A m odel of ban k in g fragility is es tab lished and its in ferences te s ted in th e em pirical analysis u sing a Probit p rocedure. The la tte r ap p ro ach e lab o ra te s possib le m acroeconom ic in te rre la tio n sh ip s betw een the b an k in g sec to r an d th e re s t of the econom y. A m acroeconom ic m odel is developed, an d its in ferences d raw n in the em pirical analysis u sing co in tegrating reg ression , vector e rro r correction m odel, an d im pu lse response functions. This s tu d y re su lts in several key findings. F irst, a t th e onse t of the crisis, the b an k in g sec to r w as indeed quite vu lnerable. The underly ing banking prob lem s were: connec ted lending, in ad eq u a te equity capital, low liquidity, and high loan grow th, foreign liabilities, a n d exposu res to system ic risk. Second, th e b a lan ce of p ay m en ts w as suscep tib le to a cap ital inflows reversal. T hree p rob lem s s ta n d out: a h igh ra tio of deb t service to to tal exports, low ra tio of foreign exchange reserves relative to liquid foreign liabilities, and cu rren cy m ism atch . T hird , due to the w eakness of th e ban k in g sector, in te res t ra te policy was not effective in stav ing off the specu la tive a tta ck s th a t occurred after the collapse of the Thai b a h t on 2 Ju ly 1997. In te re st ra te increases only com plicated the difficulties for ailing b an k s , and ra ised the need to bail them out. F o u rth , bo th in te re s t ra te in c re ases an d large depreciation generated recessionary effects on real econom ic activities, especially investm ent. T hus, the adverse effects were m ain ly ch an n e lled th ro u g h investm en t spending. Fifth, while a real dep rec ia tion could have been expected to produce an expan sio n ary effect, exports ac tua lly con trac ted , partly owing to a reduction in the su p p ly of trade cred it d u e to th e collapse of the b ank ing sector. S ixth , the w orsen ing econom ic situa tion in creased bank ing fragility. C oupled w ith the socio-political cris is , th is triggered b a n k ru n s , leading to a loss of m o n e ta ry control, cap ita l outflow s, heigh ten ing inflation an d a collapse of the dom estic cu rrency . In add ition , th e collapse of the loan m ark e t held back econom ic recovery.

TL;DR: In this paper, abris der wichtigsten Merkmale der LBO-and MBO-Bewegung in den Vereinigten Staaten werden zunachst deren mikrookonomische Grunde analysiert and diese dann mit den Grunden verglichen, die fur die Wahl eines hohen Verschuldungsgrads and der benachbarten Transaktionen wie Unternehmensfusion and aufkauf aussch

TL;DR: In this paper, a model is developed to provide the first theoretical justification for true credit rationing in a loan market, where the amount of the loan and amount of collateral demanded affect the behavior and distribution of borrowers, and interest rates serve as screening devices for evaluating risk.

TL;DR: In this paper, the authors developed a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders, and presented a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary.

TL;DR: This edition of A Course in Probability Theory includes an introduction to measure theory that expands the market, as this treatment is more consistent with current courses.

TL;DR: The cycle theory of great depressions has been studied extensively in the literature as discussed by the authors, and its conclusions have been widely accepted and, so far as I know, no one has yet found them anticipated by previous writers, though several have zealously sought to find such anticipations.