1,720,979 research outputs found
Contingent liquidity
Get PDFAfter the crisis, bank regulators are considering mitigating liquidity risk by introducing quantity limits on liquidity and maturity mismatch. We argue that aggregate liquidity risk can be reduced with little deadweight loss by encouraging banks, through adequate regulatory relief, to satisfy part of their financing needs with a new class of securities. These would include a Roll-Over Option Facility (ROOF) that allows the issuer, for a price, to keep the funds if at maturity a readily observable variable correlated with systemic liquidity risk (e.g. the LIBOR-OIS spread) is above a trigger threshold. At roll-over the yield would reflect the current price of liquidity and credit risk, making ROOFs attractive to investors. The instrument could attenuate a liquidity crisis by reducing banks’ need to roll debt over or sell off assets, and diminish the probability of runs, if markets are convinced that banks can secure sufficient liquidity when needed thanks to the widespread use of this contingent claim.funding, liquidity, contingent claim, financial crisis
Economic Consequences of Wars: Evidence from Landmine Contamination in Mozambique
Get PDFThis paper evaluates the economic returns to improved households access to infrastructure, public services and land in the context of a large landmineclearance program in post-war Mozambique. The International Campaign to Ban Landmines production and use estimates that there are more than 80 billion landmines in the ground in more than 80 countries. Despite the scale of the problem and large investments by OECD countries to clear mines in low income countries, the economic consequences of landmine contamination have been so far unexamined by economists working on the economics of wars, perhaps due to the lack of data thus far. The evaluation uses a unique dataset on landmine contamination intensity covering 126 Mozambican districts to evaluate the causal impact of landmine contamination on income and welfare. The method uses a difference-in-difference estimator to correct for selection in landmine placement. I find large and statistically significant effects of landmine contamination on poverty (in level and depth) and consumption per capita. Hence, the cost-benefit analysis indicates that despite the high cost to clear a mine under reasonable assumptions the program generates a positive return.war, poverty, landmines, difference-in-difference estimator, cost-benefit analysis
The Long Term Educational Cost of War: Evidence from Landmine Contamination in Cambodia
No full textThe economic impact of war may be visible in the long run and particularly through its impact on human capital. This paper uses unique district level data on landmine contamination intensity in Cambodia combined with survey data on individuals to evaluate the long-run impact of Cambodia's 30 years of war (1970-1998) on education levels and earnings. These effects are identified using difference-in-differences (DD) and instrumental variables (IV) estimators. In the DD framework I exploit two sources of variation in an individual's exposure to the conflict: age in 1970 and landmine contamination intensity in the district of residence. The IV specification uses the distance to the Thai border as an exogenous source of variation in landmine contamination intensity. The most conservative result indicates that individuals who were too young to have attended school before the start of the war received on average 0.5 less years of education. And, immediately after the war there was no visible effect on earnings. The effects are therefore overall weak. I argue that the destruction of physical capital may be what contributes to drive down the returns to education in Cambodia post-war. The estimates reported may be very conservative due to both error in our measure of conflict intensity and possible selection bias in the placement of prosperous regions.
The long-term impact of French settlement on education in Algeria
Get PDFIn settlement colonies, the economic systems, infrastructure and development projects of the settlers exclusively served their own needs. The disastrous outcomes of this discrimination became apparent in the post-colonial era particularly as regards education. In Algeria under French rule (1930-1962) education was almost exclusively reserved to French and other European settlers and as a consequence only ten per cent of Muslim Algerians were literate at independence. While the majority of the settlers left Algeria in 1962, the infrastructure remained. This paper exploits substantial regional variations in the non-Muslims proportion of the population on the eve of the war of independence (1954) in Algeria to evaluate the long term impact of colonial discrimination in public goods allocation on education levels. Using an instrumental variables approach to correct for endogeneous sorting of settlers and natives into regions my results indicate that settlement regions, which inherited a larger stock of infrastructure per capita at independence, have persistently higher literacy rates relative to extractive regions. However, these disparities tend to vanish over time probably as a result of the massive funds allocated to the education sector by the successive governments in the post-independence era.
The Long Term Effect of Education Spending Decentralization on Human Capital in Spain
Get PDFIn 1980, seven out of the seventeen Spanish regions were devolved education spending responsibility. Using a difference-in-differences approach, which I show to be particularly credible in this context, I evaluate the long term effect of this reform on human capital. I find no robust evidence to corroborate the theoretically predicted benefits of decentralization.
Landmines, Poverty and Recovery: Instrumental Variables Evidence from Mozambique
Get PDFThe International Campaign to Ban Landmines production and use estimates that there are more than 80 billion landmines in the ground in more than 80 countries. Despite the scale of the problem and large investments by OECD countries to clear mines in low income countries, the economic consequences of landmine contamination have been so far unexamined by economists working on the economics of wars, perhaps due to the lack of data thus far. This paper exploits a unique dataset on landmine contamination intensity covering 126 Mozambican districts. Because landmines (unlike other weapons) are used as a weapon of choice to protect territories, the empirical strategy uses an indicator of distance to strategic borders as an instrumental variable to correct for selection in landmine placement. Instrumental variables estimates indicate a large effect of landmine contamination on poverty and consumption several years after the ceasefire. Hence, despite the very high cost to clear a mine a conservative costbenefit evaluation of the national demining program indicates that the program generates a large positive return.
The Human Capital Cost of Landmine Contamination in Cambodia
No full textThe International Campaign to Ban Landmines production and use estimates that there are more than 80 billion landmines in the ground in more than 80 countries. Despite the scale of the problem and large investments by OECD countries to clear mines in low income countries, the economic consequences of landmine contamination have been so far unexamined by economists working on the economics of wars, perhaps due to the lack of data thus far. Using unique data from Cambodia, this paper estimates the effect of landmine contamination on human capital. These effects are identified using difference-in-differences (DD) and instrumental variables (IV) estimators. In the DD framework I exploit two sources of variation in an individual’s exposure to the conflict: her age in 1970 due to the spread of landmines over time and landmine contamination intensity in her district of birth. The IV specification uses the distance to the Thai border as an exogenous source of variation in landmine contamination intensity. The IV estimate indicates a education loss of 0.4 years at the mean and no visible effect on earnings. I discuss three factors that probably drive down the returns to education in post-war Cambodia: (1) The downgrading of educated people during the Khmer rouge regime (2) Direct Effects of landmines on the returns to education (3) the destruction of physical capital and technological delay through capital-skill complementarity.
The long-term educational cost of war: evidence from landmine contamination in Cambodia
Get PDFThe economic impact of war may be visible in the long run and particularly its impact on human capital. I use unique district level data on landmine contamination intensity in Cambodia combined with individual survey data to evaluate the long run cost of Cambodia's 30 years war (1970-1998) on education levels and earnings. These effects are identified using difference-in-differences (DD) and instrumental variables (IV) estimators. In the DD framework I exploit two sources of variation in an individual's exposure to the conflict: her age in 1970 and landmine contamination intensity in her district of residence. The IV specification uses an indicator of distance to the Thai border-average district fluency in Thai- as an exogenous source of variation in landmine contamination intensity. I show that young individuals who had not yet attended school before 1970 received less education (relative to the older cohort) and this effect was higher in regions where conflict has been more intense. However, immediately after the war there are no visible effects on earnings. I argue that the destruction of physical capital is the major factor that drives down the returns to education in Cambodia post-war.
Contingent Capital and Bank Risk-Taking among British Banks before World War I
Get PDFThe recent financial turmoil highlights the incentive of highly leveraged financial institutions to take excessive risk, given the protection of limited liability. During the nineteenth and early twentieth century, many banks operated under liability rules which obligated shareholders to bear larger costs of bank insolvency in the form of contingent, or even unlimited liability. This paper examines the empirical relationship between the size of banks’ contingent liability and their risk-taking behavior using data on British banks from 1878-1912. We find that banks with more contingent liability appear to have taken less risk. We also find evidence that the risk-reducing effects of contingent liability were larger for banks with higher leverage, suggesting that contingent capital mitigated moral hazard problem at banks.Contingent Capital, Bank Risk-Taking, British Banks
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