LENDING RELATIONSHIPS AND MONETARY POLICY

Financial intermediation and bank spreads are the important elements in the analysis of business cycle transmission and monetary policy. We present a simple framework that introduces lending relationships, a relevant feature of financial intermediation that has been so far neglected in the monetary economics literature, into a dynamic stochastic general equilibrium model with staggered prices and cost channels. Our main findings are (a) banking spreads move countercyclically generating amplified output responses, (b) spread movements are important for monetary policymaking even when a standard Taylor Rule is employed, (c) modifying the policy rule to include a banking spread adjustment improves stabilization of shocks and increases welfare when compared to rules that only respond to output gap and inflation, and finally (d) the presence of strong lending relationships in the banking sector can lead to indeterminacy of equilibrium forcing the Central Bank to react to spread movements. (JEL E44, E52, G21)     

Die Legitimität von Finanzregimen

In this article we propose a financial regime typology that adds the role of cultural legitimacy to financial market regulation. Bridging Comparative Political Economy and Economic Sociology we refer to a German Weberian tradition of institutionalist research that has stressed the intermediate position of institutions between social values and concrete market action. Financial regimes do not only define formal rules and organizational patterns, they also install symbolic boundaries between legitimate and illegitimate finance, providing cultural acceptance to these morally and historically “problematic” markets. The article then explores four fields of institutional regulation of stock exchanges in Germany and UK since the 19th century: (1) the creation of an official arena, (2) rules of market access, (3) the legitimate trading goods and (4) rules for penalizing misconduct. We show that German financial regulation was integrative and wanted to protect the real economy by corporatively embedding finance and restrain harmful transactions. In contrast, British financial regulation was segmental and tried to protect the real economy by installing a socially exclusive club of traders governed by professional expertise and hierarchy. This new typification of financial regimes will help to understand the resilience of national financial regulatory patterns across crises and the obstacles to a transnational harmonization of rules. Political reform-making is tied to institutional principles of the past.     

FINANCIAL CRISES,OUTPUT LOSSES,AND THE ROLE OF STRUCTURAL REFORMS

Financial crises take a heavy toll on output growth. We assess the role of structural reforms in reducing the output losses resulting from financial crises across advanced economies, emerging and developing economies, and low‐income developing economies. We also revisit the role of macroeconomic policies in this context. The impact of crises on output growth differs between types of crises and economies, thus warranting sample splits along these lines. Some but not all reforms and policies help to reduce the output losses of crises in the medium term, highlighting the need not to overgeneralize the effectiveness of reforms and policies. Further research is warranted to further explore the heterogeneity in the impact of financial crises on output growth and to better understand when and how specific structural reforms and macroeconomic policies can mitigate the output costs of financial crises. (JEL E32, E44, E63, G28, O47)     

ECONOMIES OF SCALE IN BANKING,INDETERMINACY, AND MONETARY POLICY

This paper investigates economies of scale (ES) in financial intermediation as a source of equilibrium indeterminacy. Financial intermediation is embedded into a standard flexible‐price monetary model, and provides deposits (inside money) that substitute with currency to purchase consumption. The results indicate that equilibrium indeterminacy does not depend on a large degree of ES in intermediation nor a large intermediation sector, but on monetary policy and the determination of nominal interest rates. Monetary policies not targeting nominal rates allow for indeterminacy to arise for any positive degree of ES, while policies targeting nominal rates eliminate indeterminacy for all degrees of ES. (JEL C62, E44, E52)     

Building Local Support for Chinese Civil Society with International Resources

This article examines how international resources can be used to strengthen local support for civil society initiatives in China to improve the circumstances of poor and vulnerable populations. It identifies ways in which international resources have strengthened civil society in other countries, such as enhancing access to financial resources, building capacity of leaders and organizations, reducing sector fragmentation, building public legitimacy and improving cross-sector relations. It examines the characteristics and special circumstances facing civil society in China, arguing that institutional constraints are particularly problematic. Then it explores how international resources might be applied to each of the problem areas identified given the constraints of the Chinese context. Finally the article articulates five principles that might guide international donors for building more local support for civil society activity in China.     

Deposit Insurance,Institutions, and Bank Interest Rates

Many recent institutional reforms of the financial system have relied on the introduction of an explicit scheme of deposit insurance. This instrument aims at two main targets, contributing to systemic stability and protecting depositors. However, it may also affect the interest rate spread in the banking system, which can be viewed as an indicator of either inefficiency or market power in this financial segment. This paper provides an empirical investigation of the effect of deposit insurance and other institutional and economic variables on bank interest rates across countries. We find that deposit insurance increases the lending–deposit spread in banking. The main effect seems to arise not from the deposit side though, but from an increase in the lending rate. We interpret this result as evidence of the presence of moral hazard problems related to this instrument. We also find that higher quality of institutions is associated with lower spreads, thus contributing to eroding sources of market power in the banking sector.     

Institutional Deterioration in Transition Economies: Playing Follow-the-Leader During the Global Financial Crisis?

Economic transition was a systemic change of institutions from those that facilitated a planned, communist economy to those suitable for a market economy. This paper examines the state of this political and economic institutional development in 28 transition economies, focusing on the global financial crisis years of 2007–2012. According to various metrics of institutions, institutional regression has indeed occurred but has been somewhat localized in the countries of the CIS. However, property rights have regressed in some countries in Central/Southern Europe, while financial sector institutions have uniformly degraded across the entire transition space.     

The Islamic Banking Industry in Jordan

Thirty-three years ago Islamic banking was considered wishful thinking. However, serious research over the past two-and-a-half decades has shown that Islamic banking is not only feasible and viable, but is an efficient and productive way of financial intermediation. A number of Islamic banks have also been established during this period in Jordan. The objective of this paper is to examine the structure and performance of the Islamic banking industry in Jordan during the period 2000–2006. We find that the Jordanian Islamic banking industry is still in its infancy compared to a number of countries in the region and there is a growth trend in the financial services market, despite its current concentration and limited size.     

中东阿拉伯国家金融自由化探析

金融全球化是经济全球化的核心,而金融自由化则是金融全球化的重要组成部分。20世纪七十年代以来全球开始了以放松金融管制为主要内容的金融自由化进程。中东阿拉伯国家的金融自由化是其宏观经济改革战略的一部分,它力图通过自由化、现代化、提高透明度以及加强风险监管来提高金融中介效率。中东金融改革是一种渐进式的改革,包括货币政策改革、银行体系自由化和开放资本市场。中东金融体系已经成为世界金融体系的一部分,但在金融效率、深度和竞争力方面与发达国家和新兴国家相比还有很大的差距。     

COSTLY INTERMEDIATION AND CONSUMPTION SMOOTHING

This paper studies quantitatively how intermediation costs affect household consumption loans and welfare. Agents face uninsurable idiosyncratic shocks to labor productivity in a production economy with costly financial intermediation and a borrowing limit. Reducing intermediation costs has two effects: (1) For a given decrease in the interest rate on borrowing, agents' ability to smooth consumption over time improves. (2) The demand for loans increases, which increases the interest rate. The net welfare gain of reducing intermediation costs from 3.927% (U.S. level) to 1% is about 1.14% of equivalent consumption in the baseline economy for an endogenous interest rate and 1.90% for an exogenous interest rate. The gains are distributed unevenly: households at the bottom wealth decile improve welfare by 3.96% and 5.86% of equivalent consumption, while those at the top decile have welfare gains of 0.35% and 0.2%, respectively. Sufficiently high intermediation costs eliminate borrowing and hence the welfare gain of reducing costs is not substantial. The welfare analysis includes transitional dynamics between steady states. (JEL D91, E60, G38)     

Gender Mainstreaming: The Answer to the Gender Pay Gap?

This article examines the argument that gender mainstreaming offers the way forward for closing the gender pay gap. It juxtaposes research on the process of gender mainstreaming with our account of the processes involved in Australian state government Inquiries into the gender pay gap since the late 1990s. We indicate that the continuous process of analysis and response that gender mainstreaming can offer demands political will, intensive links between research and action, and adequate resources — which means that gender mainstreaming is seldom delivered in practice. We use our account of the Australian Inquiries to argue that, provided adequate political and financial resources are in place, the gender pay gap can be narrowed through the institutional mechanisms of an industrial relations system but that the regulatory approach is limited by its vulnerability to changes in industrial relations policy. The article concludes that, whatever strategy is used to narrow the gender pay gap, it must be able to show those who use and observe it that gender itself is a continuous, effortful and political process.     

Territoires professionnels en question. L’exemple des comptables et réviseurs au Proche-Orient, une comparaison Liban-Jordanie

In Lebanon as in Jordan, the accountancy profession is faced with major regulatory and institutional reforms owing to policies of economic liberalization, which open markets and try to attract foreign investments. Light is shed on both the issues underlying resistance to these reforms and the conflicts that have flared up. By pointing out similarities and variations in the definition of this profession and of its boundaries, we notice: the weight of history and of institutional and political factors; the convergence owing to the globalization of markets; and national responses to changes determined by factors and pressures that are mostly supranational. This can help us better understand conditions under which a profession is constructed in quite different contexts.     

Augustus Melmotte in Anthony Trollope's The Way We Live Now: characterizing the swindler as an important cultural and organizational figure

ABSTRACT

The current paper revisits Anthony Trollope's Victorian novel, The Way We Live Now, focusing on the main character of Augustus Melmotte. The paper analyzes the novel and its literary figure of a corrupt financier or swindler, drawing out theoretical and pedagogical contributions for organizational and management research. Contributions are framed in terms of imaginative organizational role archetypes embodied in swindler characterizations, swindlers’ institutional work across societal elites, and the dark sides and grey areas associated with swindlers’ organizational and financial misconduct. The rise and fall of Augustus Melmotte in Trollope's Victorian English society thus finds its cultural parallels today in outsiders who challenge financial and political elites and the status quo, at high personal risk to themselves and others complicit in their schemes. The conclusions concern the importance of recognizing dynamic figures that seize immense power over organizational, financial and political cultures.     

The Effect of Globalization on Financial Development in the MENA Region

This paper provides new evidence that sheds light on the effect of globalization on financial development using data from 9 MENA countries over the period 1991?C2007. The empirical results based on the Panel-data Vector Autoregression and Fully Modified Ordinary Least Squares methods reveal that globalization affects financial development and economic growth in the MENA region while globalization does not play any role in institutional reforms, which promote financial development and economic growth. Hence, governments can play a crucial role in improving the necessary economic conditions for the benefits of globalization to be felt in the MENA region. Also institutional reform policies can be important for policy makers who are attempting to accelerate globalization and financial development.     

Prospects for Innovation in State Policies for the Elderly

A comparison of recent state efforts for the elderly shows wide variation in the extensiveness of innovative responses. Overall, the states have been fairly reluctant to undertake new financial commitments, but have engaged in a wide variety of regulatory policy responses. The sources of innovation in state policy can be attributed to differences in the following major factors: problem magnitude, financial resources, political attitudes and traditions, political capacity, and leadership and lobbying efforts. The states have frequently displayed predictable responses in relation to past levels of policy action, but there are important instances of both "under-achievers" and "unexpected achievers" on specific policies. The level of innovative activity which occurred suggests the importance of lobbying and leadership roles by and for the elderly at the state level.     

Trading Diamonds Responsibly: Institutional Explanations for Corporate Social Responsibility

This article identifies factors that led to a comprehensive regulatory regime for the global diamond trade, the Kimberley Process Certification Scheme (KPCS), established through negotiations among NGOs, states, and the industry. The conflict diamonds case provides important insights into the processes by which global norms redefine how corporations are expected to conduct business. First, we show that global corporate social responsibility (CSR) norms rooted in the construct of world citizenship facilitated the rapid progress of the conflict diamonds campaign. Second, we detail how these norms became institutionalized in the KPCS, stressing the importance of the legitimacy of NGOs as bearers of corporate world citizenship models and the role of moral leaders within the diamond industry itself. We consider two theoretical perspectives on CSR development: management theories, which are strong on practitioner issues but mute regarding the content and authority of CSR ideology, and institutional theories, which offer better frameworks for understanding the impact of cultural and institutional environments on company responses to the moral claims advanced by NGOs. We use the conflict diamonds case to draw conclusions about how NGOs can effectively define new social responsibilities that companies come to see as obligations they must heed as responsible world citizens.     

Implications of behavioural economics for financial literacy and public policy

This paper summarizes and highlights different methodological approaches to behavioural economics in the context of the conventional economic wisdom and the implications of these different methodological approaches for financial literacy, related institutional change, and public policy. Conventional economics predicts no substantive improvement from improvements to financial literacy. The errors and biases approach to behavioural economics suggests limited improvements to decision making from financial education as errors and biases are largely hardwired in the brain. Government and expert intervention affecting individual choice behaviour is recommended. The evidence suggests that the bounded rationality approach to behavioural economics, with its focus on smart decision makers and the importance institutional and environment constraints on decision making, is the most promising lense through which to analyse financial decision making. From this perspective, financial decision making can be improved by providing decision makers with better quality information presented in a non-complex fashion, an institutional environment conducive to good decisions, an incentive structure that internalize externalities involved in financial decision making, and financial education that will facilitate making the best use of the information at hand within a specific decision-making environment.     

Rethinking Nonprofit Commercialization: The Case of the Czech Republic

Some nonprofit economists tend to see nonprofit commercialization as a moral dilemma because commercial activities may secure organizational survival at the cost of undermining the mission orientation. The present paper argues that this type of moral framing of the commercialization debate is hardly adequate for the transitional context of the Czech nonprofit sector which is still struggling to develop its distinct institutional identity. Given that financial independence is part of this identity, commercial activities help nonprofits to emancipate themselves from the state that used to be paternalistic in the past. On this basis, the paper underscores the institutional nature of the commercialization phenomenon in the Czech Republic. Commercialization decisions of Czech nonprofit managers are shown to be heavily influenced by the current institutional and regulatory environment that explicitly promotes nonprofit self-financing initiatives. If nonprofit commercialization is understood as an institutional phenomenon, then its moral significance is best captured in terms of institutional ethics rather than individual ethics of nonprofit managers which seems to be predominant in the Anglo-Saxon literature. After presenting the recent empirical findings on self-financing, the paper concludes by stressing the interrelation between the semantic and ethical aspects of the commercialization concept.     

The Political Economy of Institutional Landownership: Neorentier Society and the Financialization of Land

In recent decades a substantial shift in landownership has taken place in rural America as millions of acres of land have come under the ownership and control of various financial institutions. This article outlines a political economic framework for explaining and interpreting the significance of this proliferation of institutional investments into rural lands. Focusing on two of the nation's most important rural land resources—timberland and farmland—I suggest that we are witnessing an unprecedented integration between finance capital and landownership that harkens back to previous eras of rentier control. I further suggest that this increasing tendency to treat land as a financial asset—what I refer to as the “financialization of landownership”—gives rise to a number of contradictions that may have profound effects on rural communities across the United States. I conclude with a discussion of a land bubble and the role of institutional landowners in pushing up land prices in both timberland and farmland markets.     

Serve or Conserve: Mission,Strategy, and Multi-Level Nonprofit Change During the Great Recession

Change is frequently afoot in the nonprofit sector, both in the wider institutional environment in which nonprofits operate and within the organizations themselves. Environmental transformations—funding sources, supply and demand for collective goods, and administrative norms—create the circumstances in which organizations operate. Internally, change involves the alteration of goals, practices, and personnel. To explore how multiple aspects of change intersect across levels, we ask how organizations’ practices influence their experience of and reaction to changes in the environment. Turning open systems theories inside out, we argue that internal planning, routines, and missions give rise to organizational mindsets that imbue evolving environmental circumstances with meaning. We illustrate our argument using a unique longitudinal dataset of 196 representative 501(c)(3) public charities in the San Francisco Bay Area from 2005 to 2015 to assess both accelerators and obstacles of change. Empirically, we investigate predictors of organizational insolvency and the ability to serve constituents in the wake of the Great Recession. We find that strategic planning decreases the likelihood of insolvency whereas an orientation toward the needy increases spending. We conclude with our contributions to understanding of multi-level organizational change and nonprofit strategy.