Browsing by Subject "N25"

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  • Fromlet, Hubert (2014)
    BOFIT Policy Brief 15/2014
    During and after the Central Committee’s Third Plenum in November 2013, China announced far-reaching reforms in the spheres of marketization and economic deregulation that included financial markets. While the speed of the rollout of China’s planned reforms is still unknown, officials repeatedly reference the great opportunities for guiding China onto a healthier, more sustainable social and economic track. The risks of such ambitious marketization and deregulation plans need to be considered in the context of speed and sequencing of reforms of the financial sector. We currently lack the skills for overcoming the famously low predictability of financial crises. The areas for skill improvement largely relate to market psychology (behavioral finance) and the understanding of history and macrofinancial aggregates. The much-undervalued discipline of behavioral finance has started to come into its own over the past 10 to 15 years, including the awarding of the 2013 Nobel Prize Robert in Economics to Robert Shiller for his efforts at understanding the psychology of financial markets. This year’s Nobel Prize winner, Jean Tirole, also considers behavioral aspects in his work. Sweden has had two serious banking crises in the past 30 years. The first – and most serious – crisis occurred in the early 1990s, while a smaller crisis took place at the end of the last decade. Both were foreseeable. The first crisis emerged as Swedish banking entered uncharted deregulation waters, a situation Chinese reformers will themselves inevitably confront. Swedish research findings with respect to sequencing, speed of reforms and behavioral finance apply nicely to the Chinese discussion. The italicized discussion focuses on what the Swedish deregulation experience means for Chinese policy choices, but most of these observations are generally relevant for policymakers in emerging markets in Asia and elsewhere. Publication keywords: financial deregulation, Asia, Sweden
  • Miao, Meng; Guanjie, Niu; Noe, Thomas (2017)
    BOFIT Discussion Papers 13/2017
    Published in Journal of Financial Economics 2021 ; 140 ; 3 June "Contracting without contracting institutions : The trusted-assistant loan in 19th century China" https://doi.org/10.1016/j.jfineco.2021.02.005
    This paper considers lending to finance projects in a setting where repayment enforcement appears impossible. The loan was illegal and thus legally unenforceable. Creditors were incapable of applying private coercion to force repayment. Borrowers lacked both collateral and reputation capital. Project cash flows were unobservable. The projects were the acquisition of Imperial administrative posts by scholars in nineteenth century Qing China. The lending mechanism was the “trusted-assistant loan.” Our model of trusted-assistant lending shows that it is a renegotiation-proof implementation of efficient state dependent financing. Empirical analysis of officials’ diaries and bank records shows that the employment of trusted-assistant lending and the performance of trusted-assistant loans conforms roughly with the model’s predictions.