Economics Commons^™

Japan Provision Of Subordinated Loans, Shiro Kawana

Journal of Financial Crises

During the international financial turmoil associated with the Global Financial Crisis, Japan’s financial institutions remained relatively sound because their exposure to overseas structured credit products was limited. Restructuring in the aftermath of Japan’s own banking crisis in the late 1990s also contributed to making Japanese banks resilient to external shocks. Nonetheless, Japanese banks’ profitability was at risk. Due to the large amount of stockholdings, major banks had large market risks which might significantly worsen their capital ratios. The increasing volatility of stock prices could make banks conscious of capital constraints in the future and could trigger an adverse feedback loop …

Japan’S Act On Strengthening Financial Functions (Asff), Vaasavi Unnava, Junko Oguri

Journal of Financial Crises

After the Japanese Financial Crisis in 1990s, the non-performing loan problem was mitigated in the large Japanese banks but persisted in the regional banking system. By 2004, regional banks accounted for half of all non-performing loans. In 2004, the government passed the Act on Strengthening Financial Functions (ASFF), legislation for capital injections to address the non-performing loan problem. Aimed at regional banks, the ASFF secured ¥2 trillion in capital, with various eligibility restrictions and requirements, such as a rigorous debt restructuring plan. As the Japanese economy and the financial system encountered multiple external shocks, the government amended the Act several …

Financial Functions Stabilization Act, Vaasavi Unnava

Journal of Financial Crises

In 1990, the asset-pricing bubble in Japan peaked and began a steady decline. Over the next seven years, a series of bank failures induced the Japanese government to introduce the first of a series of capital injections in 1998, 1999, and 2004. The capital injection of 1998, authorized by the Financial Functions Stabilization Act, made ¥13 trillion ($103 billion) available to financial institutions that applied. By the end of the injection window, 21 banks and trusts applied for and received ¥1.8 trillion ($13.5 billion) in subordinated debt and loans and preferred shares. While there were no limits on compensation for …

Prompt Recapitalization Act, Vaasavi Unnava

Journal of Financial Crises

In 1997, Japan’s banks were in crisis due to hundreds of billions of dollars of non-performing real estate loans. In response, the government performed three rounds of capital injections in 1998, 1999, and the early 2000s. The capital injection of 1999, authorized by the Prompt Recapitalization Act, made as much as ¥25 trillion ($208 billion) available to financial institutions that applied, regardless of their capitalization. By the end of the injection window, 32 banks and trusts applied for and received ¥8.6 trillion ($71.6 billion) total in preferred shares and subordinated debts. The Act required banks to submit and adhere to …

Italy (2008) Capital Injections, Manuel León Hoyos

Journal of Financial Crises

In response to the 2007–09 Global Financial Crisis, in October 2008, the Italian government announced urgent measures to guarantee financial stability and the flow of credit. The Italian government targeted three areas of support: (1) bank recapitalizations, (2) liquidity access, and (3) expansion of guarantees on bank deposits. This case study exclusively examines the Italian bank recapitalization scheme introduced in December 2008 in line with European Union State Aid rules.

The four Italian banks recapitalized in 2009 under the scheme were Banco Popolare (€1.45 billion), Banca Popolare di Milano (€500 million), Credito Valtellinese (€200 million), and Banca Montepaschi di Siena …

Israeli Bank Shares Arrangement (Hesder Hamenayot Habankayot), Natalie Leonard

Journal of Financial Crises

From 1980 to 1983, Israeli consumer prices more than doubled every year and the shekel lost more than 50% of its value annually. This high inflation and currency devaluation posed an extraordinary challenge for Israel’s biggest banks. They needed to grow their capital bases to keep up with the rising market value of their assets, but investors needed protection against the continually declining value of the local currency. Banks’ solution was to regularly issue new, nonvoting shares in extraordinary amounts while ensuring investors a high return by regularly buying their own shares to manipulate prices. The government tacitly supported the …

Ireland 2009 Recapitalization Program For Financial Institutions, Steven Kelly

Journal of Financial Crises

At the November 2008 height of the Global Financial Crisis, Ireland’s Department of Finance announced a willingness to inject capital into the six largest banks. This announcement followed the issuance of a blanket guarantee of those banks’ liabilities in September 2008. After broadly designing the potential investments in 2008, the Irish government came to agreements with Bank of Ireland and Allied Irish Banks in February 2009 to inject €3.5 billion ($4.5 billion) in each bank in exchange for preferred equity stakes. The government funded the investments from the funds of the National Pensions Reserve Fund, something it would secure the …

Indonesia Joint Recapitalization Of 1999, Vaasavi Unnava, Ariel Smith

Journal of Financial Crises

The Indonesian government implemented a joint recapitalization program in 1999 to aid some of its private banks struggling with the effects of the Asian Economic Crisis. Nine banks were eligible, and seven ultimately participated. The program was voluntary; in order to participate, bank managers had to pass a test proving that they were competent enough to run their bank and create a three-year plan for the bank’s operations subject to independent assessment. All of the bank participants were able to return to the 4% minimum capital adequacy ratio by the end of the program.

Hungary Recapitalization Scheme, Alec Buchholtz

Journal of Financial Crises

In the midst of the global financial crisis in October 2008, the Magyar Namzeti Bank (MNB), the Hungarian national bank, noticed a selloff of government securities by foreign banks and a large depreciation in the exchange rate of the Hungarian forint (HUF) in FX markets. Hungarian banks experienced liquidity pressure due to margin calls on FX swap contracts, prompting the MNB and Minister of Finance to seek assistance from the International Monetary Fund (IMF), European Central Bank (ECB) and the World Bank. The IMF and ECB approved the Hungarian government’s (the State) requests in late 2008 to create a €19 …

The Hungarian Bank Recapitalization Program, Junko Oguri

Journal of Financial Crises

Hungary implemented a number of new policies from the late 1980s to the early 1990s, shifting from a centrally planned economy to a market economy. Despite the top-down market reforms, Hungary lacked the knowledge to build a fully functional financial system. Eventually, an economic turmoil caused by the collapse of eastern markets and fragility in the financial system led to the banking crisis of 1992–1993, revealing the undercapitalization of the financial system. The government implemented the recapitalization, or “bank consolidation,” as part of a stabilization program. It injected capital into banks in three stages—in December 1993, May 1994, and December …

Hong Kong Contingent Bank Capital Facility (Cbcf), David Tam, Steven Kelly

Journal of Financial Crises

On October 14, 2008, Hong Kong’s financial secretary announced the Hong Kong Monetary Authority (HKMA) would use Hong Kong’s Exchange Fund to provide standby capital to banks if needed. The Contingent Bank Capital Facility (CBCF) was available until the end of 2010 to shore up depositor and investor confidence in the local banking sector and commenced in parallel with a broader set of announced measures including a consumer bank deposit guarantee. Twenty-three locally incorporated “Authorized Institutions” were eligible to access CBCF capital upon request. The provisioning of CBCF capital would be accompanied by enhanced oversight from the HKMA. The Hong …

Greece (2008) – Capital Injections, Manuel León Hoyos

Journal of Financial Crises

In October 2008, in the midst of the Global Financial Crisis (2007–09), the Greek government announced a €28 billion ($36 billion) government package. Greek Law 3723/2008, “Enhancement of Liquidity in the Economy in Response to the Impact of the International Financial Crisis,” was passed and approved under European Union State Aid rules. The Greek law provided for three voluntary programs: recapitalizations (€5 billion), guarantees (€15 billion), and securities (€8 billion). This case study exclusively examines the recapitalization program. In this program, the Greek government acquired convertible preferred shares in banks in order to build and maintain banks’ Tier 1 capital …

Germany Soffin Capital Injections, Priya Sankar

Journal of Financial Crises

The insolvency of Lehman Brothers in September 2008 and the subsequent global liquidity crisis spurred the German state to pass the Financial Market Stabilization Fund Act (Finanzmarktstabilisierungsfondsgesetz, “FMStFG”) establishing the Federal Agency for Financial Market Supervision (Bundesanstalt für Finanzmarktstabilisierung), or FMSA. Created in October 2008, it provided government support to ailing financial institutions. The FMSA supported German banks and maintained the stability of the German banking system, in part by establishing the Financial Market Stabilization Fund (Sonderfunds Finanzmarktstabilisierung), or SoFFin. SoFFin could provide capital injections and risk shield measures of €80 billion and also possessed a guarantee provision of up …

France Société De Prise De Participation De L’État (Sppe), Devyn Jeffereis

Journal of Financial Crises

As the Global Financial Crisis deepened, the bankruptcy of Lehman Brothers on September 15, 2008, and ensuing contagion began affecting the French economy and financial system. France experienced declines in major economic indicators such as GDP, household consumption, and investment. In addition, the ensuing credit crunch in financial markets resulted in the seizing up of various lending markets. Due to conservative business practices, a consolidated market structure, and a sound regulatory framework, the French banks were relatively better situated than their European counterparts to weather the crisis. However, the French authorities instituted a precautionary recapitalization scheme in order to “restore …

Finland’S 1992 Capital Injection, Kaleb B. Nygaard

Journal of Financial Crises

Following a large-scale deregulation of the financial sector during the 1980s and subsequent massive credit expansion, a banking crisis in Finland caused a sharp contraction in the economy in the early 1990s. To prevent the collapse of the banking system, the government offered FIM 8 billion in capital injections. Parliament appropriated the funds in the spring of 1992 and terms were defined in June 1992. The program was open to all banks, in proportion to their size, regardless of their solvency. In the fall of 1992, FIM 7.9 billion was deployed to 56 cooperative banks and 22 savings banks of …

Danish Capital Injections Scheme 2009 (Dk Gfc), Priya Sankar

Journal of Financial Crises

Both the international financial system and Denmark were experiencing challenges in 2007 and 2008, and they came to a head in Denmark when Roskilde Bank experienced liquidity pressures in June 2008. As it became clear that Roskilde Bank was insolvent and no private solutions would be found, and as the global financial crisis worsened leading to the bankruptcy of Lehman Brothers, the Danish government decided to take stronger action. To ensure the short-term survival of Roskilde Bank, the national bank issued a non-limited credit facility. After it passed a deposit guarantee scheme in 2008 and established a Financial Stability Company, …

Austria: Finanzmarktstabilitätsgesetz (Finstag), Claire Simon

Journal of Financial Crises

Following the adoption of a joint framework by euro area countries in response to the intensifying financial crisis in October 2008, Austria enacted a package of measures including the Financial Market Stability Act (Finanzmarktstabilitätsgesetz, or FinStaG). In addition to permitting nationalization under certain circumstances, FinStaG allowed the Austrian government to use six specific measures to recapitalize credit institutions operating in Austria and Austrian insurance companies. According to FinStaG, €15 billion ($22 billion) could be used for this purpose, though this amount was later increased. Eight institutions received support through FinStaG, and the government granted capital and liquidity support totaling €21 …

Essays On Human Capital, Soumyajit Chakraborty

Economics ETDs

The first essay: Agriculture in Nepal is the most critical sector for economic growth – it directly benefits the poor, and a considerable proportion of the population derives their livelihoods from agriculture. This essay uses the 2017–2018 baseline survey data from Nepal Seed and Fertilizer (NSAF) project funded through the USAID’s “Feed the Future” program. The essay explores a causal relationship between agronomical knowledge and productivity-enhancing farming decisions. Evidence indicates that there are significant, consistent, and positive returns to agronomical knowledge via engaging in advisory contact through traditional agricultural extension. Given the drawback of the institutional irregularity of advisory services, …

Recruitment Machines, Community Power And Political Return On Investment (Proi): Economic Development Policy In The Age Of Amazon, Eric G. Griego Montoya

Political Science ETDs

ABSTRACT

A fundamental policy choice in economic development among local policy makers is the appropriate mix of “outside” strategies that use incentives to attract companies, and “inside” strategies that invest in smaller and local businesses. Using a mixed-methods research design, including national and state surveys along with qualitative analysis of interviews conducted with policy elites, I examine the role of ideology, elites, community, competition, social capital (trust and influence), and electoral politics in these policy decisions. I use new descriptive theoretical frameworks called “recruitment machines” and “Political Return on Investment (PROI)” to describe how and why local elected officials support …

Three Essays In Development And Environmental Economics, Michael Benjamin Goodwin

Economics ETDs

This dissertation explores three unique topics in development and environmental economics. The first paper looks at the value people place on clean air in Mexico City using an alternative air pollution measure to the typical ground measurement. Research and policy addressing air pollution remains hampered by a lack of ground level air quality data. This study attempts to overcome this issue using aerosol optical depth from satellite imagery as a proxy for air pollution. Using a hedonic framework and least squares estimation, results show that Mexico City residents place a significant value on clean air as demonstrated by their choices …

Modeling, Analysis, And Control Of Student Loan Debt Using Epidemiological Models, Kavya Ravishankar, Padmanabhan Seshiayer

Annual Symposium on Biomathematics and Ecology Education and Research

No abstract provided.

How Does The Elimination Of State Aid To For-Profit Colleges Affect Enrollment?: Evidence From California’S Reforms, Oded Gurantz, Ryan Sakoda, Shayak Sarkar

Upjohn Institute Policy and Research Briefs

No abstract provided.

How Does The Elimination Of State Aid To For-Profit Colleges Affect Enrollment? Evidence From California’S Reforms, Oded Gurantz, Ryan Sakoda, Shayak Sarkar

Upjohn Institute Working Papers

This paper examines how financial aid reform based on postsecondary institutional performance impacts student choice. Federal and state regulations often reflect concerns about the private, for-profit sector’s poor employment outcomes and high loan defaults, despite the sector’s possible theoretical advantages. We use student-level data to examine how eliminating public subsidies to attend low-performing for-profit institutions impacts students’ college enrollment and completion behavior. Beginning in 2011, California tightened eligibility standards for their state aid program, effectively eliminating most for-profit eligibility. Linking data on aid application to administrative payment and postsecondary enrollment records, this paper utilizes a difference-in differences strategy to investigate …

The Coronavirus Pandemic And International Trade, E. Wesley F. Peterson

Cornhusker Economics

The Coronavirus pandemic has disrupted economic activities around the world. Many businesses had to cease operations and furlough or lay off their workers. The World Bank (2021) has reported that global economic output fell by 3.4% in 2020. The good news is that the massive infusion of financial support from many governments in high-income countries meant that the worst economic effects of the pandemic were mitigated, and a rapid recovery has begun to make up for the pandemic-related losses. The International Monetary Fund (IMF) predicts that the global economy will grow by 5.9% in 2021 recovering the 2020 losses and …

Assessment Of Preference, Health Issues, And Spatial Dependence In A Solid Waste Management System, Mohammad Mashiur Rahman

Economics ETDs

The insurmountable population growth in developing countries, specifically in the urban cities, has posed numerous socio-economic and environmental challenges. The growth of household solid waste is one of them, creating environmental disruption and climate change from a broader perspective. This dissertation investigates three issues related to a solid waste management system; the health risks from improper waste management behavior, household's preference to participate in a waste management system, and the solution to a municipality for optimal allocation of waste disposal by multiple techniques. The first paper uses a primary survey data collected in 2016 to investigate the association between health …

Reemployment Services And Eligibility Assessments (Resea) In Maryland: Process Analysis Report, Christopher J. O'Leary, Gabrielle Pepin, Ting Zhang, Conrad Helms

Upjohn Institute Technical Reports

No abstract provided.

Growing During A Global Crisis, Ahmad E. Shahin

Theses and Dissertations

Employing the data from the World Bank Enterprise surveys, we examine how the first shock of the COVID-19 pandemic has affected firm dynamics across the world. Our first group of robust models have tested the effect of internal firms’ managerial decisions and other external factors on the sales’ growth, where we found that the most important decisions are related to preserving and increasing liquidity levels, in addition to utilizing the workforce in giving more input to maintain and grow the firms’ sales. Our second group of robust models have tested the firms’ financial decisions and other external factors on the …

The Economic Impact Of The Longview Power Plant On West Virginia, Eric Bowen, John Deskins

Bureau of Business & Economic Research

In this report, we consider the potential economic impact of the Longview Power Plant’s switch to in-state coal suppliers, and the Longview Power Plant overall. In addition to increased coal purchases, we estimate the PPA would generate an additional $19.4 million in related economic activity in the state, for a total economic impact of more than $58 million annually.

Optimal Unilateral Carbon Policy, Samuel Kortum, David A. Weisbach

Cowles Foundation Discussion Papers

We derive the optimal unilateral policy in a general equilibrium model of trade and climate change where one region of the world imposes a climate policy and the rest of the world does not. A climate policy in one region shifts activities—extraction, production, and consumption—in the other region. The optimal policy trades off the costs of these distortions. The optimal policy can be implemented through: (i) a nominal tax on extraction at a rate equal to the global marginal harm from emissions, (ii) a tax on imports of energy and goods, and a rebate of taxes on exports of energy …

Life Satisfaction And Tax Morale In Azerbaijan: Mediating Role Of Institutional Trust And Financial Satisfaction, Orkhan Nadirov, Khatai Aliyev, Bruce Dehning, Ilaha Sharifzada, Rafiga Aliyeva

Accounting Faculty Articles and Research

This paper examines the relationship between life satisfaction (measured as the self-reported satisfaction of each individual with their past life and goal achievements) and tax morale (measured as the likelihood of an individual’s intrinsic motivation to pay taxes). Using a large-scale survey dataset from Azerbaijan, it is documented that life satisfaction is positively associated with tax morale. Life satisfaction plays a significant role in increasing tax compliance practices. It is also important to note that there is a positive mediating effect of life satisfaction on tax morale through financial satisfaction and institutional trust. In line with our hypotheses, the results …