... diseases are a bit like the common cold. Apart from some of the skin cancers , they are not recorded in any official registry. They ... approach to and management of these conditions. This Atlas is a summary of the data that have been gathered over the last five ...
Story - antoq - 11/01/2010 - 07:27 - 0 comments - 0 attachments
One of the puzzles of 20th century macroeconomics is the extent to which capital market integration did not occur. Feldstein and Horioka (1980) famously observed that even among developed countries capital markets were barely integrated. However, signs of change in the aggregate data do appear in the mid 1990s (Blanchard and Giavazzi 2002). In addition, banking data also indicates that capital market integration is finally underway. The volume of cross border lending has risen dramatically, cross border bank mergers are common and barriers to foreign bank entry have broken down (Clarke, Cull, Peria, and Sanchez 2003).
We present a model for the equilibrium movement of capital between markets. Equilibrium conditional mean rates of return vary across markets according to the levels of capital invested in the respective markets. As a matter of supply and demand within each market, that market with the greater amount of capital earns lower conditional mean returns. Given a sufficient disparity in the capital levels in the markets, intermediaries find it optimal to search for investors in the market with “surplus” capital and offer them the opportunity to move their capital to the other market, which offers higher risk premia. Intermediaries charge investors a fee that is based on their gain from the move and based on the degree of competition in the market for intermediation. The equilibrium behavior of intermediaries is solved analytically, and characterized. Competition among intermediaries can in some cases reduce intermediation in equilibrium, relative to the monopolistic case.
Our starting point is the real0life situation of a policymaker aiming to identify and collect economic data, evaluate competing models of the intensity of financial crisis, and make policy decisions with a view to preventing and mitigating financial crises. The policymaker may be interpreted as either the IMF or the World Bank aiming to determine which crisis indicators to employ in their new role of assessing financial vulnerability. The tools available are a set of multiple, overlapping theories of financial crises emphasizing different channels (e.g., foreign exchange liquidity, bad banks) and a large set of economic data that encompasses potentially useful indicators of crisis shocks and channels, but may be costly to collect. In this context, it seems sensible for the policymaker to extract useful crisis indicators from the data by imposing priors based on the literature, choosing indicators that explain the intensity of historical financial crises, and paying the costs of collecting these data. Uncertainty over which policy to recommend follows from a number of sources of uncertainty, including theory and measurement uncertainty. In this study we assume that the policy maker wants to evaluate policies unconditionally with respect to a potentially large number of alternate models of financial crisis intensity.
The assessment of post crisis dynamics involves estimation of the intensity of a crisis in terms of its impact on the real sector. Intensity can be thought of as the distance that the economy travels from the pre0crisis equilibrium measured along the output dimension. This definition is useful for policy because governments care most about the welfare costs of financial crises, and welfare costs have a higher correlation with real GDP than with financial sector indicators. In addition, accurate financial indicators of crisis intensity are problematic, especially indicators meant to capture aggregate bank distress. Empirically, crisis intensity is gauged by the change in real GDP relative to the precrisis trend, conditional on the occurrence of a crisis.
