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Book part
Publication date: 19 August 2019

Erwin Dekker and Pavel Kuchař

In this chapter, we present fragments of previously unpublished correspondence between Ludwig Lachmann and G. L. S. Shackle on the nature of institutions. This…

Abstract

In this chapter, we present fragments of previously unpublished correspondence between Ludwig Lachmann and G. L. S. Shackle on the nature of institutions. This correspondence allows us to rationally reconstruct a theory of institutions, which extends Lachmann’s theoretical work. Shackle pointed out to Lachmann that institutions might be inputs into economic activities and that they themselves may be reproduced and transformed by these activities. Lachmann in turn contended that institutions consist of “instruments of interpretation.” We develop the concept of “instruments of interpretation” as a subset of institutions. These instruments are mental models and cognitive tools which are (1) inputs complementary to capital goods (2) jointly produced, reproduced, and transformed through economic activity. We suggest that in contrast to privately produced capital goods, parts of the institutional infrastructure are produced jointly as shared goods because the use of certain institutional elements is non-exclusive and non-subtractable; these elements – instruments of interpretation – are produced and reproduced by sharing and contributions through a process of joint production. This chapter explicitly connects two different but essential themes in Lachmann’s work: capital, and institutions. By combining these two strands of Lachmann’s work, we are able to demonstrate that there is a cross-complementarity between institutional orders and capital structures. This connection in turn provides a thicker understanding of the workings of markets.

Abstract

Details

Central Bank Policy: Theory and Practice
Type: Book
ISBN: 978-1-78973-751-6

Article
Publication date: 1 April 2004

SYLVIE BOURIAUX and WILLIAM L. SCOTT

The US insurance industry has long faced the spectrum of large unexpected losses from natural catastrophes such as hurricanes and earthquakes. However, the September 11…

Abstract

The US insurance industry has long faced the spectrum of large unexpected losses from natural catastrophes such as hurricanes and earthquakes. However, the September 11, 2001 terrorist attack clearly demonstrated a new form of catastrophic risk of man‐made origin. The damages in property and life are now well known as estimates of insured losses deriving from this event range from $40 to $54 billion. The 9/11 terrorist attacks renewed the capacity problem faced the insurance industry in the underwriting of large catastrophic risk. In that regard, this paper explores the feasibility of capital market alternatives to the conventional insurance mechanism, and analyses whether the capital market could provide extra capacity to absorb terrorism risk.

Details

The Journal of Risk Finance, vol. 5 no. 4
Type: Research Article
ISSN: 1526-5943

Abstract

Details

Central Bank Policy: Theory and Practice
Type: Book
ISBN: 978-1-78973-751-6

Article
Publication date: 15 September 2020

Khahan Na-Nan, Suteeluck N. Kanthong, Kattikamat Khummueng and Auemporn Dhienhirun

Intellectual capital (IC) is an important factor to push and drive organisations to achieve competitive advantages and growth. This study aims to develop and test an…

Abstract

Purpose

Intellectual capital (IC) is an important factor to push and drive organisations to achieve competitive advantages and growth. This study aims to develop and test an instrument to measure IC for employee behaviour in the context of small and medium-sized enterprises (SMEs).

Design/methodology/approach

The measurement instrument was designed after assessing literature reviews on IC that provided a strong theoretical support for application of a specific set of items in the SME context. Instrument validity and reliability were tested for item-objective congruence by five experts. The results ranged between 0.8 and 1.0, with a reliability coefficient of 0.950. Exploratory factor analysis and confirmatory factor analysis were used to confirm construct validity between theoretical and empirical evidence. Data were collected from 240 hairdressers employed by SMEs in Thailand.

Findings

The results revealed that IC can be classified into two groups as human capital and relational capital. Constructs between theoretical concepts and empirical evidence gave values of χ2 = 42.336, df = 35, p = 0.184, χ2/df = 1.210, GFI = 0.972, AGFI = 0.938, RMSEA = 0.030 and SRMR = 0.018.

Research limitations/implications

Empirical findings were derived from a sample of 240 hairdressers. However, validation and reliability of the instruments require confirmation in various other contexts with a larger number of samples. This cross-sectional study identified the effects of IC in SMEs, thereby contributing to the ongoing debate regarding the determinants of research performance.

Originality/value

The IC instrument was determined as valid and fulfilled the knowledge gap concerning SMEs by facilitating future studies on boundaries with IC assessment spanning SME contexts. This instrumental support will assist researchers and academics to develop a more comprehensive understanding of IC and explore its potential in future research areas.

Details

International Journal of Organizational Analysis, vol. 29 no. 4
Type: Research Article
ISSN: 1934-8835

Keywords

Article
Publication date: 13 November 2017

Stephan Fahr and John Fell

The global financial crisis demonstrated that monetary policy alone cannot ensure both price and financial stability. According to the Tinbergen (1952) rule, there was a…

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Abstract

Purpose

The global financial crisis demonstrated that monetary policy alone cannot ensure both price and financial stability. According to the Tinbergen (1952) rule, there was a gap in the policymakers’ toolkit for safeguarding financial stability, as the number of available policy instruments was insufficient relative to the number of policy objectives. That gap is now being closed through the creation of new macroprudential policy instruments. Both monetary policy and macroprudential policy have the capacity to influence both price and financial stability objectives. This paper develops a framework for determining how best to assign instruments to objectives.

Design/methodology/approach

Using a simplified New-Keynesian model, the authors examine two sets of policy trade-offs, the first concerning the relative effectiveness of monetary and macroprudential policy instruments in achieving price and financial stability objectives and the second concerning trade-offs between macroprudential policy instruments themselves.

Findings

This model shows that regardless of whether the objective is to enhance financial system resilience or to moderate the financial cycle, macroprudential policies are more effective than monetary policy. Likewise, monetary policy is more effective than macroprudential policy in achieving price stability. According to the Mundell (1962) principle of effective market classification, this implies that macroprudential policy instruments should be paired with financial stability objectives, and monetary policy instruments should be paired with the price stability objective. The authors also find a trade-off between the two sets of macroprudential policy instruments, which indicates that failure to moderate the financial cycle would require greater financial system resilience.

Originality/value

The main contribution of the paper is to establish – with the help of a model framework – the relative effectiveness of monetary and macroprudential policies in achieving price and financial stability objectives. By so doing, it provides a rationale for macroprudential policy and it shows how macroprudential policy can unburden monetary policy in leaning against the wind of financial imbalances.

Details

Journal of Financial Regulation and Compliance, vol. 25 no. 4
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 5 May 2021

Nisha Prakash and Madhvi Sethi

Advancing the economies in Asia toward meeting sustainable development goals (SDGs) needs an unprecedented investment in people, processes and the planet. The…

Abstract

Purpose

Advancing the economies in Asia toward meeting sustainable development goals (SDGs) needs an unprecedented investment in people, processes and the planet. The participation of the private sector is necessary to bridge the financing gap to attain this objective. Engaging the private sector can contribute significantly to attaining the 2030 agenda for SD. However, the financial markets in Asian economies are yet to realize this potential. In this context, this paper aims to discuss the state of finance for SD in Asia and identifies innovative financial instruments for attracting private investments for SDs in these economies.

Design/methodology/approach

This study relies on published articles, reports and policy documents on financing mechanisms for SD. The literature review covered journal data sources, reports from global institutions such as the UN, World Bank, International Monetary Fund and think-tanks operating in the field of climate change policies. Though the topic was specific to financial market instruments, a broader search was conducted to understand the different sources of sustainable finance available, particularly in Asia.

Findings

The investments that are required for meeting the SDGs remain underfunded. Though interest in sustainability is growing in the Asian economies, the financial markets are yet to transition to tap the growing interest in sustainable investing among global investors. This paper concludes that to raise capital from private investors the Asian economies should ensure information availability, reduce distortions and unblock regulatory obstacles. It would also need designing policies and introducing blended financing instruments combining private and public funds.

Research limitations/implications

Though the study has grouped Asian economies, the financing strategy for SDGs should be developed at the country-level considering the domestic financial markets, local developmental stage, fiscal capacity and nationally determined contributions. Further research can focus on developing country-specific strategies for using innovative financial instruments.

Originality/value

Mobilizing funds for implementing the 2030 Agenda for SD is a major challenge for Asian economies. The paper is addressed to national policymakers in Asian economies for developing strategies to raise capital for SD through private participation. It provides opportunities for revisiting national approaches to sustainable finance in these economies.

Details

International Journal of Innovation Science, vol. 14 no. 3/4
Type: Research Article
ISSN: 1757-2223

Keywords

Abstract

Details

The Banking Sector Under Financial Stability
Type: Book
ISBN: 978-1-78769-681-5

Article
Publication date: 10 July 2017

Yuanyan Zhang and Thierry Tressel

The design of a macro-prudential framework and its interaction with monetary policy has been at the forefront of the policy agenda since the global financial crisis…

Abstract

Purpose

The design of a macro-prudential framework and its interaction with monetary policy has been at the forefront of the policy agenda since the global financial crisis. However, most advanced economies (AEs) have little experience using macroprudential policies. As a result, relatively little is known empirically about macroprudential instruments’ effectiveness in mitigating systemic risks in these countries, about their channels of transmission, and about how these instruments would interact with monetary policy. This paper aims to fill in the gap.

Design/methodology/approach

The authors develop a new approach using the euro area bank lending survey to assess the effectiveness of macro-prudential policies in containing credit growth and house price appreciation in mortgage markets. Estimation is performed under the panel regressions (OLS, GLS) and panel VAR setup. Endogeneity issues arising from measures of macro-prudential policies are addressed by introducing GMM estimation and various instruments.

Findings

The authors find instruments targeting the cost of bank capital most effective in slowing down mortgage credit growth, and that the impact is transmitted mainly through price margins, the same banking channel as monetary policy. Limits on loan-to-value ratios are also effective, especially when monetary policy is excessively loose.

Originality/value

With limited data on macroprudential policy measures in the AEs, this paper proposed a new methodology of using answers from bank lending survey as proxies to assess the effectiveness of specific macroprudential measures and their transmission channels.

Details

Journal of Financial Regulation and Compliance, vol. 25 no. 3
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 26 July 2013

Hichem Hamza and Zied Saadaoui

This paper aims to examine the relationship between the volume of investment deposits and capitalization of Islamic commercial banks.

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Abstract

Purpose

This paper aims to examine the relationship between the volume of investment deposits and capitalization of Islamic commercial banks.

Design/methodology/approach

Unlike current accounts holders, investment accounts holders may support part or all of the losses on assets value, which could be a source of moral hazard among bank managers and shareholders. To test these assumptions, the authors use the system generalized method of moments (system GMM) on a dynamic panel of 59 Islamic banks observed during the period 2005‐2009.

Findings

After controlling for a set of variables that may influence capital level, the results show a significant negative relationship between PSIA and regulatory capital ratio. This may indicate that the specific nature of PSIA can be a source of excessive risk‐taking in Islamic banks. This behavior is likely to threaten the solvency of Islamic banks and shows that some deficiencies may exist in their risk management and governance system.

Practical implications

This paper suggests some recommendations to better implement the principle of profit and loss sharing and to curb excessive risk‐taking in Islamic banks.

Originality/value

The originality of this paper is to give empirical responses to theoretical assumptions of a relationship between PSIA and moral hazard in Islamic banks.

Details

Studies in Economics and Finance, vol. 30 no. 3
Type: Research Article
ISSN: 1086-7376

Keywords

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