A new theory of financial regulation: Predicting,measuring and preventing financial crises

The frequency of financial crises in the last 20 years can be attributed to the lack of a comprehensive theory of financial regulation to guide policy makers. Existing theories fail to define the range of regulatory models, the causes of regulatory failure, and how to measure and prevent it. Faulty design of regulatory models, and the lack of ongoing performance monitoring incorporating early warning systems, is disrupting economic and social development. The new theory illustrates the necessity for a staged approach to liberalisation, which first assesses the capacity to conduct effective prudential supervision, before attempts are made to remove protective measures.     

The Effects of Resources on Social Activity and Economic Performance in Social Economy Organizations

Social economy organizations (SEOs) represent the European Union's strong commitment to promoting the creation of welfare, employment, and social cohesion. This article examines the financial management model of these organizations by analyzing the impact of their available resources or capabilities on their economic performance and social activity and the possible mediating effect of their economic dimension as a strategic element in obtaining social achievements. In this study, we analyze 1,400 Spanish SEOs between 2009 and 2012 by using a structural equations model (SEM). Our results reveal that SEOs have their own financial management model that is characterized by the mediating role of economic performance and a high ability to adapt to changes in the environment.     

The Real Origins of the Global Crisis

In this paper we present an interpretation of the economic and financial crisis that considers crucial the issue of income distribution (Krugman 2007; Piketty and Saez 2003; Reynolds 2008), a question that is instead ignored by more widespread interpretations. In fact, we ask what lies behind the disaster of the subprime loans and, if a more thorough view is taken, it seems clear that the true causes of the crisis lead back to income distribution, in other words the enormous increase in the gap between rich and poor. This consideration is fundamental. If the crisis were merely financial then (perhaps) the policies of financial adjustment that are currently in place might be sufficient. If instead the crisis is due to more serious causes, and nothing is more serious than distribution inequalities, then the cure must be much more profound (and difficult). In other words, the crisis will be long and severe until such inequalities are reduced, a difficult task when weighed against public intervention in aid of financial institutions.     

论经济危机

过去我们是从书本上认识经济危机,这次＂次贷危机＂让我们亲历了一次1929年＂大萧条＂以来最严重的经济危机。有的专家还认为这次经济金融危机超过了当年的＂大萧条＂。现在全世界都在应对经济危机,各国各有对策,孰是孰非,莫衷一是。要正确应对经济危机,必先正确认识经济危机及其产生的原因。     

Financial Literacy: Building Economic Empowerment with Survivors of Violence

The purpose of this paper is to outline key constructs including financial literacy, economic self-efficacy, economic self-sufficiency, and economic empowerment, and then present findings from an exploratory study that sought to understand the relationship among these variables in a sample of abused women. The results revealed positive and significant relationships between financial literacy with economic empowerment, economic self-efficacy and economic-self sufficiency. Results also indicated that financial literacy, race, and economic self-sufficiency were significant predictors of economic empowerment. By focusing this research on abused women, it is our intention to raise awareness about the importance of financial literacy curricula with advocates, policy-makers and researchers, so more focus can be given to economically empowering IPV survivors.     

Family identification facilitates coping with financial stress: A social identity approach to family financial resilience

Family financial stress research has typically examined negative effects of deprivation on mental health, which in turn erode financial coping. While this work acknowledges family support’s role in buffering these effects, it has typically overlooked how family identification can act to structure the experience of, and response to, economic challenge. We adopt a Social Identity approach, arguing that family identification predicts increased social support and improved well-being, which predicts more effective coping with financial problems. We explore this in two community surveys (N = 369; N = 187). In the first we show that stronger family identification and support predict better well-being, which predicts better evaluation of economic coping. In the second we replicate these findings, and also show that the relationship between well-being and financial distress is fully mediated by perceptions of ‘Collective Family Financial Efficacy’. These findings point to a more positive understanding of how family cohesion can promote mental well-being/resilience.     

Financial intermediation in a model of directed technological change

In this paper, the financial sector is introduced into a directed technological change economic model. The paper shows that, although financial development reduces the incidence of the researcher’s moral hazard, it will not necessarily promote growth. In addition, financial development may have a positive, negative or non-existent effect on wage inequality. One possible implication of this paper is that financial development decreases the growth rate while it increases skill premia. The impact of taxes on economic growth and wage inequality is also investigated in this paper.     

Crony Capitalism and Financial System Stability

Prior to the Asian financial crisis, the cozy relationships between corporations, governments, and banks were seen as a potent force for economic growth and development. In this article we examine the institution of crony capitalism. Under conditions in which the Second Welfare Theorem does not hold, there is a role for government. Some governmental institutions do encourage more risky, high-payoff entrepreneurial activities. Our aim is to examine crony capitalism as a potential source of government activity that enhances economic productivity. In addition, we explore the conditions under which the government activity can instigate a financial crisis.     

“These Aren’t Very Good Times”: Financial Uncertainty Experienced by Romantic Partners in the Wake of an Economic Downturn

In the wake of the economic downturn, economic uncertainty is roughly double that of the past 23 years. Research indicates married couples are uncertain about finances and financial uncertainty can adversely affect individual and relational outcomes, yet little is known about the nature of financial uncertainty and how it is manifested. Thus, this investigation relied on face-to-face interviews to uncover the financial uncertainty experienced by 40 individuals in married or cohabiting relationships. The study found financial uncertainty was largely universal regardless of participant age, marital or socioeconomic status, sex, or family background. Five types of financial uncertainty emerged from the interviews: (1) economic uncertainty; (2) management uncertainty; (3) personal uncertainty; (4) communication uncertainty; and (5) chronic uncertainty, underscoring the importance of financial communication.     

Marriage and Socioeconomic Change in Contemporary Indonesia

This study investigates the relationship between economic trends and entry into marriage in a rapidly developing setting. We examine Indonesian marriage in the 1990s, a decade of substantial economic growth followed by a sudden financial collapse in 1998. We use discrete‐time hazard models to analyze information on 4,078 women and 4,496 men from the Indonesia Family Life Survey. Although previous research has shown that marriages may be postponed after economic downturn, we find no evidence of such delays at the national level following the 1998 financial crisis. In contrast, we use regional wage rate data to show that entry into marriage is inversely related to economic growth throughout the decade for all women and for men from lower socioeconomic strata.     

Cost–Benefit Analysis and the Rates of Return of Infrastructure Projects: Evidence from International Organizations

In this paper we analyse data on the rates of return of investment projects sponsored by three international institutions: the European Union (EU), the European Bank for Reconstruction and Development (EBRD), the World Bank (WB). The focus of the paper is on the variability of ex-ante economic rate of returns (ERR), of financial rates of return (FRR, available for EU and EBRD) and ex-post or re-estimated economic rates of return (RERR, available for WB only), along with the co-financing rate (EU). We propose a framework of analysis of FRR and ERR variations across projects, sectors, financing institutions and time, of the wedge between ERR and FRR, and of the gap between ERR and RERR. Our main conclusions are that the informational content of projects’ rates of return is valuable and is needed for cost–benefit analyses, and that sectors, countries, time and funding institutions explain much of the variability of these rates. We advocate the collection of standardized and comparable data since our framework could be used for comparing rates of return variability of development projects across countries, time of approval or completion, or any other relevant sampling criterion.     

The Socio-Economic Empowerment Assessment: Addressing Poverty and Economic Distress in Clients

In this paper, we introduce the Socio-Economic Empowerment Assessment (SEEA), a qualitative assessment that uses an ecological framework to better understand the psychological impact of poverty and financial insecurity. The assessment is designed as a practice tool and can be administered in a number of clinical settings, including agencies most likely to serve low-income populations. It can also be included as part of financial literacy or management sessions that social work agencies may offer. This paper explores how SEEA can be used to help develop specific and appropriate interventions that move low-income people and others toward economic empowerment. We examine the literature on financial literacy programs and theories on behavior regulation and social relationships related to consumption. A case study using an integrative assessment approach is included as an example of SEEA implementation.     

Financial development, investment, and economic growth

In this article, I use a multivariate vector-autoregressive (VAR) approach to examine the effects of permanent financial development on domestic investment and output in 41 countries between 1960 and 1993. The VAR approach permits the identification of the long-term cumulative effects of financial development on the domestic variables by allowing for dynamic interactions among these variables. The results reject the hypothesis that financial development simply follows economic growth and has very little effect on it. Instead, there is strong evidence that financial development is important to growth and that investment is an important channel through which financial development affects growth.     

Non-profit institutions in a flow of funds framework

The benefits of providing a separate accounting for non-profit organisations in the financial accounts of the United States are discussed. At present, national economic accounts in the US include non-profit organisations with individuals in the household sector; separate information on the financial activity of non-profit institutions until now has not been available. In this paper, aggregate statistics from federal government tax-exempt filings for non-profit institutions are put into a US flow-of-funds framework. The data for the 1982–1988 period indicate that non-profit institutions accounted for a significant and growing proportion of assets of the household sector in the United States. Their liabilities were also a surprisingly large share of the household sector total. Moreover, funds supplied by the non-profit sector for investment were in some years comparable to funds made available by several important groups of non-depository financial intermediaries. Separate accounting for non-profit organisations within national economic accounts would be likely to reveal an important channel for investment financing in the United States and would significantly improve our ability to measure and analyse the financial activity of individuals by allowing for a purer household sector.The analysis and conclusions set forth are those of the authors and do not necessarily indicate concurrence by Salomon Brothers, the Board of Governors, Federal Reserve Banks or other members of their staffs.     

Promoting Bank Accounts to Low-Income Households: Implications for Social Work Practice

In the wake of the recent economic challenges, it is clear that social workers must be educated about the financial opportunities for low-income households. Encouraging low-income households to have a bank account at an insured depository institution, or become banked, is increasingly emphasized in policy and practice. Becoming banked offers the opportunity to avoid high-cost alternative financial services. Social workers can facilitate relationships between low-income households and the mainstream financial services industry to help families advance their long-term financial interest. Understanding the structure of all types of banks and credit unions is imperative. Implications for social work practice are explored.     

DOES A GOOD CENTRAL BANKER MAKE A DIFFERENCE?

The personalities of central bankers moved center stage during the recent financial crisis. Indeed, several central bankers even became “superstars.” In this article, we investigate whether superstar central bankers have an impact on economic performance. We employ school grades given to central bankers by the financial press, defining as superstars those central bankers receiving the top grade. First, we explain the grades in a probit estimation with measures of economic performance, institutional features, and personal characteristics. Second, we employ a matching approach to account for the endogeneity of grading with respect to economic performance. Using entropy balancing, we identify credible counterfactuals for top‐graded central bankers, that is, nonsuperstar central bankers who face similar situations. Comparing the economic performance of both groups, we find that superstars do indeed matter: a top‐graded central banker faces a significantly more favorable output‐inflation tradeoff than his peers. This effect is driven by outstanding central bankers in both advanced and emerging economies and is especially prevalent in the precrisis subsample. (JEL E52, E58)     

Editorial

In writing this Editorial, it is impossible not to acknowledgethat sense that we are about to embark upon another profoundpolitical and economic shift with the election in America ofPresident Obama and the return to Keynesian following the globaleconomic crisis. Although the neo-con free marketers are stillto be found in every major national government and global financialinstitutions, they have at least been temporarily silenced bythe turmoil and spillover from the financial markets to thepoint where governments embrace regulation and have been franticallyadopting partial nationalization of the banking sector. Meanwhile,Obama speaks of change and new relationships between Americaand the rest of the world. We have, of course, been here before—although     

Economic mobility moderates the effect of relative deprivation on financial gambling motives and disordered gambling

This study examined whether a positive association between personal relative deprivation and disordered gambling severity is mediated by the motivation to gamble for financial gain. We hypothesized that this would occur specifically among people who perceived a low personal capacity for upward economic mobility via conventional means of advancement. A sample of community gamblers (N = 196) completed measures of personal relative deprivation, perceptions about upward economic mobility, gambling motivations (financial, coping, enhancement and social) and disordered gambling severity. The predicted moderated mediation model was observed – among people who perceived a low capacity for upward economic mobility, relative deprivation predicted disordered gambling severity via the motivation to gamble for financial gain. This indirect effect did not hold among people who perceived a high capacity for upward mobility. These findings suggest the importance of addressing beliefs about upward economic mobility in gambling prevention and intervention strategies. Among gamblers who feel relatively deprived, it may be advantageous to highlight feasible avenues for upward economic mobility that do not involve gambling.     

警惕中国经济泡沫化——中国经济增长模式面临的严重挑战

改革开放以来,中国经济35年增长主要是外向型经济拉动的。但2008年国际金融危机时间,中国出台的"4万亿"投资刺激计划,改变了中国原有的经济增长模式,投资在经济增长中的作用越来越重要。同时,带来了两个结构性矛盾:一是投资中政府融资平台的崛起,深刻地改变了中国的投资结构,投资效率开始下降;二是投资拉动的经济增长模式必然依靠货币信贷释放来支撑,容易带来经济泡沫化。评论中国经济是否有泡沫化现象,可以从经济货币化指数、固定资产投资占GDP的比重、PPI和CPI的长期背离三个方面进行分析。     

Mastering ‘Lady Credit’

This article politicizes current understandings of financial crises. It is argued that financial discourse, and specifically the discourse that locates financial crises in the realm of madness and delusion, is founded upon a distinctively masculine conception of agency. This argument is made by looking at early eighteenth-century debates concerning the emergence of credit and paper money. The article examines Daniel Defoe's satirical personification, Lady Credit. Lady Credit embodies all the irrational, inconstant and effeminate aspects that had to be purged from financial discourse before it was able to gain respectability as a rational, disinterested and scientific sphere of action. Lady Credit is not unlike ancient goddess, Fortuna, who ruled capriciously over the affairs of men. The financial discourse under examination implies that it is in times of crisis that financial man loses self-control and is prevented from seeing economic reality by the delusions that Lady Credit generates in him. Through the virile mastering of Lady Credit, it is implied, the smooth and neutral workings of the financial sphere are guaranteed. The article contends that this inherently gendered manner of understanding financial crises informs debates on financial crisis today, as can be exemplified by the public discussion on the recent crisis in Asia.