This paper is an empirical investigation into wage (i.e. hourly compensation of labor), hours (i.e. hours of market work), and earnings (i.e. the product of wage and hours) profiles over the entire life cycle, from the vantage point of panel data. To date, no empirical study has simultaneously considered these three variables within the same framework using individual level, longitudinal data covering the entire working life. In contrast, the theoretical literature is much more mature.
In modern economies, the government guarantees the debt of many borrowers. In a few cases, the promise is explicit; in others it is implicit but known to be likely; and in others, the guarantee occurs because the alternative is immediate collapse, with substantial harm to the rest of the economy. The modern government cannot stop itself from making good on the obligations of many borrowers, large and small. I demonstrate that debt guarantees deplete equity from fi rms at times of declines in asset values. Not only do fi rms fail to replace equity lost when leveraged portfolios lose value, but they have an incentive to deplete equity further, by paying unusually high dividends.
The government adopts a safeguard to protect the taxpayers against the worst abuses of guarantees|it imposes a capital requirement to limit the ratio of guaranteed debt to the value of the underlying collateral. In the United States, organizations with explicit guarantees on some debt (deposits) are mainly banks. The non-deposit obligations of banks and other intermediaries, notably the two huge mortgage-holders, Fannie Mae and Freddie Mac, enjoy market values that only make sense on the expectation of a government guarantee.
The liberalization of capital flows has facilitated high integration between international financial markets, increasing interdependence among the developed economies in the East Asian region. The investigation into this interdependence among financial markets has been a significant focus throughout literature, where understanding the behaviour of international financial markets’ inter dependencies is crucial for making asset allocation and risk management decisions. Assessing the changing interdependencies is also critical for determining the nature of financial crises.
For example, the experience of recent financial crises suggests that the interdependence among the financial markets during tranquil periods is different from that of crisis periods, where often, during financial crises, we observe that the interdependence tends to break down. Consequently, we can observe a strong increase in the co-movements (correlations) of the returns between markets. It is argued by some that a structural break in the correlations demonstrates that the international propagation mechanisms of financial shocks are discontinuous (Monica Billio and Loriana Pelizzon, 2003; Giancarlo Corsetti, Luca Dedola, and Sylvain Leduc, 2005; and Toni Gravelle, Maral Kichian, and James Morley, 2006). Indeed, this break is owing to financial panics, or the herding or switches of expectations across multiple equilibria (equilibrium with speculative attacks vs. equilibrium without speculative attacks; Paul Robert Masson, 1999).
