The Impact of Bank and Non-bank Financial Institutions on Local Economic Growth in China
Xiaoqiang Cheng, Hans Degryse
Journal of Financial Services Research,
No. 2,
2010
Abstract
This paper provides evidence on the relationship between finance and growth in a fast growing country, such as China. Employing data of 27 Chinese provinces over the period 1995–2003, we study whether the financial development of two different types of financial institutions — banks and non-banks — have a (significantly different) impact on local economic growth. Our findings indicate that banking development shows a statistically significant and economically more pronounced impact on local economic growth.
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The Extreme Risk Problem for Monetary Policies of the Euro-Candidates
Hubert Gabrisch, Lucjan T. Orlowski
IWH Discussion Papers,
No. 12,
2010
Abstract
We argue that monetary policies in euro-candidate countries should also aim at mitigating excessive instability of the key target and instrument variables of monetary policy during turbulent market periods. Our empirical tests show a significant degree of leptokurtosis, thus prevalence of tail-risks, in the conditional volatility series of such variables in the euro-candidate countries. Their central banks will be well-advised to use both standard and unorthodox (discretionary) tools of monetary policy to mitigate such extreme risks while steering their economies out of the crisis and through the euroconvergence process. Such policies provide flexibility that is not embedded in the Taylor-type instrument rules, or in the Maastricht convergence criteria.
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Shocks at Large Banks and Banking Sector Distress: The Banking Granular Residual
S. Blank, Claudia M. Buch, Katja Neugebauer
Journal of Financial Stability,
No. 4,
2009
Abstract
Size matters in banking. In this paper, we explore whether shocks originating at large banks affect the probability of distress of smaller banks and thus the stability of the banking system. Our analysis proceeds in two steps. In a first step, we follow Gabaix and construct a measure of idiosyncratic shocks at large banks, the so-called Banking Granular Residual. This measure documents the importance of size effects for the German banking system. In a second step, we incorporate this measure of idiosyncratic shocks at large banks into an integrated stress-testing model for the German banking system following De Graeve et al. (2008). We find that positive shocks at large banks reduce the probability of distress of small banks.
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A Dynamic Approach to Interest Rate Convergence in Selected Euro-candidate Countries
Hubert Gabrisch, Lucjan T. Orlowski
IWH Discussion Papers,
No. 10,
2009
Abstract
We advocate a dynamic approach to monetary convergence to a common currency that is based on the analysis of financial system stability. Accordingly, we empirically test volatility dynamics of the ten-year sovereign bond yields of the 2004 EU accession countries in relation to the eurozone yields during the January 2, 2001 untill January 22, 2009 sample period. Our results show a varied degree of bond yield co-movements, the most pronounced for the Czech Republic, Slovenia and Poland, and weaker for Hungary and Slovakia. However, since the EU accession, we find some divergence of relative bond yields. We argue that a ‘static’ specification of the Maastricht criterion for long-term bond yields is not fully conducive for advancing stability of financial systems in the euro-candidate countries.
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The integration of imperfect financial markets: Implications for business cycle volatility
Claudia M. Buch, C. Pierdzioch
Journal of Policy Modeling,
No. 7,
2005
Abstract
During the last two decades, the degree of openness of national financial systems has increased substantially. At the same time, asymmetries in information and other financial market frictions have remained prevalent. We study the implications of the opening up of national financial systems in the presence of financial market frictions for business cycle volatility. In our empirical analysis, we show that countries with more developed financial systems have lower business cycle volatility. Financial openness has no strong impact on business cycle volatility, in contrast. In our theoretical analysis, we study the implications of the opening up of national financial markets and of financial market frictions for business cycle volatility using a dynamic macroeconomic model of an open economy. We find that the implications of opening up national financial markets for business cycle volatility are largely unaffected by the presence of financial market frictions.
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