Liberalization and the Evolution of Banking and Financial Risks:
The Case of South Korea
(file size: 780K, last updated: 01/2001)
Abstract: The paper provides new insights into the role of financial liberalization in the South Korean financial crisis using a number of novel approaches. Firstly, primary information regarding the relaxation of financial restraints, such as interest rate ceilings, capital controls and reserve requirements, is collected and summarised. Secondly, this information is used to construct summary measures of financial liberalization. Thirdly, qualitative information on the role of financial liberalization in the financial crisis is presented from a new survey of 44 IMF, World Bank and Korean officials who had direct exposure to the events surrounding the financial crisis. Fourthly, the effects of financial liberalization on the evolution of banking and financial risks are estimated utilising a conditional CAPM with time-varying market risk. Finally, qualitative and quantitative findings are juxtaposed, allowing insights into the extent to which financial markets recognized the increased banking and financial risks, which emanated from financial liberalization.
Credit and the South-Korean Crisis
(file size: 203K, last updated: 01/2001)
Abstract: We provide a novel empirical analysis of the South Korean economy that reveals large volumes of excess or 'unproductive' credit since the late 1970s, indicating that a sizeable proportion of total credit was used to refinance unprofitable projects. Our findings are consistent with the hypotheses of 'overlending' and 'overinvestment', which may reflect soft budget constraints and/or moral hazard. We argue that while these weaknesses were not on their own responsible for the financial crisis, their interaction with the risks emanating from capital account liberalisation created fertile ground for financial panic.
Liberalisation and the South Korean Financial Crisis: Some Qualitative
(file size: 451K, last updated: 03/2001)
Abstract: This paper provides a novel analysis of the South Korean financial crisis drawing on the findings of a unique survey of IMF/World Bank officials and South Korean economists. The survey reveals that over-optimism and inadequate recognition of financial risks inadvertently led to excessive risk taking by Korean financial intermediaries. It also indicates that the sources of over-optimistic assessments of East Asian economies, including Korea, were mainly to be found outside East Asia, including the IMF, the World Bank, western media and analysts. Weaknesses in risk management were the result of (i) lack of expertise in relation to handling the risks associated with capital flows, and (ii) disincentives to manage risks emanating from a relatively successful history of government provided safety nets for both industry and banking. Financial liberalisation widened risk-taking opportunities, by allowing lending to companies outside Korea. It also created additional disincentives for managing risk by intensifying competition and eroding bank franchise values. Finally, weaknesses in prudential regulation allowed bank portfolios to become much riskier, importantly in terms of maturity mis-matches between dollar-denominated assets and liabilities. The liquidity crisis, which followed the re-assessment of the South Korean economy by international lenders in late 1997, triggered a full-blown financial crisis because of the absence of an effective international lender of last resort.
Aspects of Public Infrastructure Investment
(file size: 242K, last updated: 06/2001)
Abstract: Modelling infrastructure as an international public good in a two-country model of trade where each country’s social planner behaves strategically, we show that the equilibrium levels of infrastructure are sub-optimal from a global perspective. Utilising an appropriate econometric framework and data from 16 European countries over the period 1987-95, we find evidence that accords well with the main predictions of our theory. Thus, we are able to offer a plausible theoretical explanation why public capital may be undersupplied, as suggested by previous empirical literature.
the Dynamic Interaction Between Income and Health: Time-Series
Evidence from Scandinavia
(file size: 338K, last updated: 08/2001)
Abstract: This paper complements existing cross-section and panel data analyses of the interaction of income and health outcomes by applying a cointegrating VAR model of income and health to time-series data for several Scandinavian countries. The results are consistent with previous crosssection and panel results, but also highlight the complexity and heterogeneity of the dynamic relationships that generate them. In particular, there are substantial differences across countries in the relative importance of different underlying causes of the health-income correlation.
Nation Divided? Price and Output Dynamics in English Regions
(file size: 270K, last updated: 10/2001)
Abstract: In this paper we estimate a VECM model for inflation and output growth in different English regions, allowing for interactions between variables and between regions. The model permits the estimation not only of the degree of inter-regional correlation of price and output innovations, but also of the degree of heterogeneity in the dynamics of regional responses to these innovations. Although regional shocks are highly correlated, there is much more heterogeneity in regional responses to these shocks.
Employment and Political Conflict in Northern Ireland
(file size: 359K, last updated: 10/2001)
Abstract: This paper combines panel data on employment and investment in different types of capital good in Northern Ireland with timeseries data on the level of political conflict (measured in various ways) in order to estimate the extent to which conflict discourages employment and investment of different kinds. While all factors of production are affected by political conflict, the magnitude of the effect varies substantially from one to another.
of Academic Journals and Institutions in Economics
(file size: 171K, last updated: 10/2001)
Contract Matching: An Analysis of Dual Earner Couples and Working
(file size: 275K, last updated: 11/2001)
Abstract: We explore the significance of intra-couple and intra -household influences on three broad types of employment contracts: self-employment, performance related pay, and salaried employment. Individuals may pool income risk with their partners by holding a diversified portfolio of employment contracts, introducing intra-household risk pooling. Alternatively, employment contract matching may occur whereby individuals within couples or households are employed under similar contracts. Our empirical analysis, based on cross-section data drawn from the British Family Expenditure Surveys 1996 to 2000, provides evidence of employment contract matching both within dual earner couples and, to a lesser extent, in the context of working household members.