Volatility and financial intermediation:
Following the Tequila period, its after-effects in Latin America and recent events in South East Asia, the effect of volatility on emerging market economies has become an important topic of research with the domestic financial intermediation process being advanced as one of the most important transm...
Gespeichert in:
| Beteiligte Personen: | , |
|---|---|
| Format: | Buch |
| Sprache: | Englisch |
| Veröffentlicht: |
Cambridge, Mass.
1997
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| Schriftenreihe: | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series
6320 |
| Schlagwörter: | |
| Links: | http://papers.nber.org/papers/w6320.pdf |
| Zusammenfassung: | Following the Tequila period, its after-effects in Latin America and recent events in South East Asia, the effect of volatility on emerging market economies has become an important topic of research with the domestic financial intermediation process being advanced as one of the most important transmission mechanisms. At the same time there has been continued interest in issues related to imperfect information and rationing in credit markets. In this paper, we consider an economy where risk neutral banks provide intermediation services and risk neutral producers demand credit to finance their working capital needs. Our model blends costly state verification with imperfect enforcement power and, in this context of costly financial intermediation, we show that a weak legal system combined with high information verification costs leads to large, first-order effects of volatility on production, employment and welfare. A calibration illustrates that the semi-elasticity of welfare with respect to volatility is less than -1 for reasonable parameter values (i.e., a one percent increase in the coefficient of variation of productivity shocks would reduce welfare by more than one percent). We suggest that legal and information problems in the credit market may then be at the heart of the reason why volatility has profound effects on emerging market economies. |
| Umfang: | 35 S. graph. Darst. |
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| 490 | 1 | |a National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |v 6320 | |
| 520 | |a Following the Tequila period, its after-effects in Latin America and recent events in South East Asia, the effect of volatility on emerging market economies has become an important topic of research with the domestic financial intermediation process being advanced as one of the most important transmission mechanisms. At the same time there has been continued interest in issues related to imperfect information and rationing in credit markets. In this paper, we consider an economy where risk neutral banks provide intermediation services and risk neutral producers demand credit to finance their working capital needs. Our model blends costly state verification with imperfect enforcement power and, in this context of costly financial intermediation, we show that a weak legal system combined with high information verification costs leads to large, first-order effects of volatility on production, employment and welfare. A calibration illustrates that the semi-elasticity of welfare with respect to volatility is less than -1 for reasonable parameter values (i.e., a one percent increase in the coefficient of variation of productivity shocks would reduce welfare by more than one percent). We suggest that legal and information problems in the credit market may then be at the heart of the reason why volatility has profound effects on emerging market economies. | ||
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| 650 | 4 | |a Credit |x Econometric models | |
| 650 | 4 | |a Intermediation (Finance) |x Econometric models | |
| 700 | 1 | |a Powell, Andrew |e Verfasser |4 aut | |
| 776 | 0 | 8 | |i Erscheint auch als |n Online-Ausgabe |
| 830 | 0 | |a National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |v 6320 |w (DE-604)BV002801238 |9 6320 | |
| 856 | 4 | 1 | |u http://papers.nber.org/papers/w6320.pdf |z kostenfrei |3 Volltext |
| 943 | 1 | |a oai:aleph.bib-bvb.de:BVB01-007970360 | |
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| id | DE-604.BV011805007 |
| illustrated | Illustrated |
| indexdate | 2024-12-20T10:18:55Z |
| institution | BVB |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-007970360 |
| oclc_num | 38419976 |
| open_access_boolean | 1 |
| owner | DE-19 DE-BY-UBM DE-521 |
| owner_facet | DE-19 DE-BY-UBM DE-521 |
| physical | 35 S. graph. Darst. |
| publishDate | 1997 |
| publishDateSearch | 1997 |
| publishDateSort | 1997 |
| record_format | marc |
| series | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| series2 | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| spelling | Aizenman, Joshua 1949- Verfasser (DE-588)124080057 aut Volatility and financial intermediation Joshua Aizenman ; Andrew Powell Cambridge, Mass. 1997 35 S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 6320 Following the Tequila period, its after-effects in Latin America and recent events in South East Asia, the effect of volatility on emerging market economies has become an important topic of research with the domestic financial intermediation process being advanced as one of the most important transmission mechanisms. At the same time there has been continued interest in issues related to imperfect information and rationing in credit markets. In this paper, we consider an economy where risk neutral banks provide intermediation services and risk neutral producers demand credit to finance their working capital needs. Our model blends costly state verification with imperfect enforcement power and, in this context of costly financial intermediation, we show that a weak legal system combined with high information verification costs leads to large, first-order effects of volatility on production, employment and welfare. A calibration illustrates that the semi-elasticity of welfare with respect to volatility is less than -1 for reasonable parameter values (i.e., a one percent increase in the coefficient of variation of productivity shocks would reduce welfare by more than one percent). We suggest that legal and information problems in the credit market may then be at the heart of the reason why volatility has profound effects on emerging market economies. Ökonometrisches Modell Credit Econometric models Intermediation (Finance) Econometric models Powell, Andrew Verfasser aut Erscheint auch als Online-Ausgabe National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 6320 (DE-604)BV002801238 6320 http://papers.nber.org/papers/w6320.pdf kostenfrei Volltext |
| spellingShingle | Aizenman, Joshua 1949- Powell, Andrew Volatility and financial intermediation National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series Ökonometrisches Modell Credit Econometric models Intermediation (Finance) Econometric models |
| title | Volatility and financial intermediation |
| title_auth | Volatility and financial intermediation |
| title_exact_search | Volatility and financial intermediation |
| title_full | Volatility and financial intermediation Joshua Aizenman ; Andrew Powell |
| title_fullStr | Volatility and financial intermediation Joshua Aizenman ; Andrew Powell |
| title_full_unstemmed | Volatility and financial intermediation Joshua Aizenman ; Andrew Powell |
| title_short | Volatility and financial intermediation |
| title_sort | volatility and financial intermediation |
| topic | Ökonometrisches Modell Credit Econometric models Intermediation (Finance) Econometric models |
| topic_facet | Ökonometrisches Modell Credit Econometric models Intermediation (Finance) Econometric models |
| url | http://papers.nber.org/papers/w6320.pdf |
| volume_link | (DE-604)BV002801238 |
| work_keys_str_mv | AT aizenmanjoshua volatilityandfinancialintermediation AT powellandrew volatilityandfinancialintermediation |