Financial systems are crucial to the allocation of resources in a modern economy. They channel household savings to the corporate sector and allocate investment funds among firms; they allow intertemporal smoothing of consumption by households and expenditures by firms; and they enable households and firms to share risks. These functions are common to the financial systems of most developed economies. Yet the form of these financial systems varies widely. In the United States and the United Kingdom competitive markets dominate the financial landscape, whereas in France, Germany, and Japan banks have traditionally played the most important role. Why do different countries have such different financial systems? Is one system better than all the others? Do different systems merely represent alternative ways of satisfying similar needs? Is the current trend toward market-based systems desirable? Franklin Allen and Douglas Gale argue that the view that market-based systems are best is simplistic. A more nuanced approach is necessary. For example, financial markets may be bad for risk sharing; competition in banking may be inefficient; financial crises can be good as well as bad; and separation of ownership and control can be optimal. Financial institutions are not simply veils, disguising the allocation mechanism without affecting it, but are crucial to overcoming market imperfections. An optimal financial system relies on both financial markets and financial intermediaries.

比较金融系统 = Comparing financial systems

We propose a clarification of the notion of a soft budget constraint, a concept widely used in the analysis of socialist, transitional, and market economies. Our interpretation is broad enough to embrace most existing approaches to soft budget constraint phenomena and provides a classification of their causes and consequences. In light of this interpretation, we then review the theoretical literature on the subject and compare it with those on other dynamic commitment problems in economics.

/pdf/understanding-the-soft-budget-constraint-4eop8cxe52.pdf

Understanding the Soft Budget Constraint

Equality and Efficiency: The Big Tradeoff

https://www.federalreserve.gov/events/conferences/irfmp2010/papers/HommesHEHJan2010.pdf

The heterogeneous expectations hypothesis: Some evidence from the lab

1. Introduction 2. Bifurcations and chaos in 1-D systems 3. Bifurcations and strange attractors in 2-D systems 4. The nonlinear cobweb model 5. The cobweb model with heterogeneous expectations 6. An asset pricing model with heterogeneous beliefs 7. Empirical validation 8. Laboratory experiments.

Behavioral Rationality and Heterogeneous Expectations in Complex Economic Systems

The authors use firm level data on Bulgaria to investigate the impact of liquidity constraints on firms' investment performance. Internal funds are a important determinant of investment in most industrial economies. The authors use a simple accelerator model of investment to test whether liquidity constraints are relevant in Bulgaria's case. Their estimates are based on data for 1993-95, before Bulgaria's financial crisis of 1996-97. It turns out that Bulgarian firms are liquidity-constrained and that firms' size and financial structure help to distinguish between firms that are more and less liquidity-constrained. In the authors' view, liquidity constraints in transition economies should be interpreted in different ways than those in industrial economies. In Bulgaria, liquidity constraints, and hence access to external funds should be seen in the context of soft budget constraints and the financial system's failure to enforce the efficient allocation of funds. The relationship between liquidity constraints and firm characteristics may actually be the opposite of what is normally the case in industrial countries. In Bulgaria, lack of liquidity constraints may be a sign of financial weakness.

/pdf/liquidity-constraints-and-investment-in-transition-economies-55go5vv1hl.pdf

Liquidity constraints and investment in transition economies - the case of Bulgaria

https://repository.ubn.ru.nl/bitstream/handle/2066/45528/45528.pdf

Heterogeneity of Agents and Exchange Rate Dynamics: Evidence from the EMS

https://www.ru.nl/publish/pages/526883/asia.pdf

Behavioural heterogeneity and shift-contagion: Evidence from the Asian crisis

The authors use firm level data on Bulgaria to investigate the impact of liquidity constraints on firms'investment performance Internal funds are a important determinant of investment in most industrial economies The authors use a simple accelerator model of investment to test whether liquidity constraints are relevant in Bulgaria's case Their estimates are based on data for 1993-95, before Bulgaria's financial crisis of 1996-97 It turns out that Bulgarian firms are liquidity-constrained and that firms'size and financial structure help to distinguish between firms that are more and less liquidity-constrained In the authors'view, liquidity constraints in transition economies should be interpreted in different ways than those in industrial economies In Bulgaria, liquidity constraints, and hence access to external funds should be seen in the context of soft budget constraints and the financial system's failure to enforce the efficient allocation of funds The relationship between liquidity constraints and firm characteristics may actually be the opposite of what is normally the case in industrial countries In Bulgaria, lack of liquidity constraints may be a sign of financial weakness

Although during the last decades the importance of stock markets has increased in all OECD countries, the cross-country differences appear to be remarkably stable. In this paper we relate the factors determining cross-country differences in stock market activity to deeply rooted norms and values in the society, which are represented by the position of countries on cultural dimensions. Stock markets are relatively more important in countries where inhabitants accept more uncertainty and regard competition as a good way of interacting. These attitudes are represented by the national scores on the dimensions of Uncertainty Avoidance and Masculinity. Recent research shows that the differences between countries on these cultural dimensions are very enduring, which suggests that, provided no large shocks occur, the differences in importance of the stock market are likely to persist.

/pdf/cross-country-differences-in-stock-market-development-a-1u19z4rgzr.pdf

Eelke de Jong

Papers

Liquidity constraints and investment in transition economies - the case of Bulgaria

Heterogeneity of Agents and Exchange Rate Dynamics: Evidence from the EMS

Behavioural heterogeneity and shift-contagion: Evidence from the Asian crisis

Liquidity constraints and investment in transition economies - the case of Bulgaria

Cross-Country Differences in Stock Market Development: A Cultural View