ST/ESA/2001/DP.15 Bank-firm cross-shareholding in Japan: What is it, why does it matter, is it winding down?

An institutional structure of corporate groups evolved over the post-war years in Japan, wherein members of a group were linked together through mutual shareholding, often with commercial banks at the centre of the network. This paper examines the functioning of cross-shareholding, as it involved Japan's commercial banks in the 1990s. It finds that the banks have not been especially successful "monitors" of members of the corporate groups and that corporate management had relatively negative appraisals of the banks. Japan has been passing through a major financial crisis, which has shaken up the role of banks within its main bank system. It has also reduced the extent of cross-shareholding of banks. However, cross-shareholding continues to provide implicit relational contracts that play a role in Japanese business society. This study highlights the importance of paying adequate attention to historical and institutional factors in analyses of development. Go back to list of papers

ST/ESA/2001/DP.16 The Supply of Credit by Multinational Banks in Developing and Transition Economies:Determinants and Effects

The entry of multinational banks (MNBs) into the developing and transition economies is expected to create more market discipline for domestic banks, thus making them more efficient and enhancing financial stability. But is this the case? Using data from the Bank for International Settlements and the International Monetary Fund, I first try to determine which factors tend to increase MNB lending activity in emerging economies and then I look at the impact of MNBs on credit supply (and informally on financial stability) in a substantial sample of economies. I conclude that domestic banks respond to increased MNB competition for the low-risk segment of the market with lower overall lending (measured as a ratio to GDP), especially in the early stages of international financial competition. However, when MNBs have acquired a large market share, domestic bank lending tends to rise with, or complement, MNB lending, in particular to the enterprise sector. Go back to list of papers

ST/ESA/2001/DP.17 Global Implications of the United States Trade Deficit Adjustment

Rebalancing the large U.S. trade deficits could take different paths. Based on model simulations, the paper shows that if rebalancing is based solely on a sharp cut in the U.S. domestic demand, a recession will be inevitable for the U.S. economy, and the adverse impact for the global economy will be substantial. On the other hand, if the adjustment relies mainly on an increase in demand from the rest of the world, the impact on the U.S. economy would be minimal. But it seems unfeasible for the rest of the world to boost demand, enough to eliminate the large deficits of the United States in the short- to medium term. A feasible and benign adjustment therefore has to be a gradual process through both reducing the U.S. domestic demand and increasing demand from the rest of the world. The challenge for policy makers worldwide is to maneuver such a smooth adjustment. Go back to list of papers

ST/ESA/2001/DP.18 Price Stability in a Monetary Union

From the fiscal and monetary criteria indicated in the Maastricht Treaty, it appears that its architects were concerned with the risks of price instability and excessive public debt within the European Monetary Union. The goal of price stability is unanimously regarded as a solid principle for the success of the union. Several criticisms have been voiced over the years against the fiscal criteria. It is not clear, firstly, whether fiscal coordination is at all necessary for price stability but, secondly, also whether the fiscal criteria of the Treaty are best suited for this purpose. The paper analyzes whether coordination of fiscal policies within the union is necessary for price stability. The analysis is conducted using a standard general equilibrium model representing a monetary union with two countries featuring monopolistic competition and price rigidity. It turns out that some form of fiscal coordination is required for equilibria in which monetary policy alone is able to secure price stability. Go back to list of papers

ST/ESA/2001/DP.19 The Instrument of Monetary Policy for Germany: A Structural VAR Approach

The paper tries to answer the question of what is the best indicator for German monetary policy. Several VAR studies about Germany use the call rate or other short term market interest rates as a measure of German monetary policy relying on the analogy to the US federal funds rate. Although Bundesbank operations have become increasingly similar to those of the Fed over time, historically there are some differences. It might therefore be risky to use the call rate as indicator of monetary policy. Because the Bundesbank lacked the tools to target open-market interest rate precisely, it seems possible that short-term innovations in market rates might have reflected non-policy factors in the economy, such as shifts in the demand for reserves, as well as policy innovations. If shocks to the call rate reflect non-policy influences, then measured impulse responses to call rate innovations are no longer ''clean'' estimates of the effects of monetary policy shocks on the economy. Go back to list of papers

ST/ESA/2001/DP.20 Preventing Civil Strife: an Important Role for Economic Policy

Civil wars have become the dominant form of armed conflict in recent decades. This paper describes how some of the factors fueling these conflicts have changed over time and how economic policies are increasingly important in preventing them. The importance of economic policy, for example in ameliorating socio-economic disparities among different groups, has grown as a result of some recent developments, including the end of the Cold War (reducing the number of external interventions for geo-political reasons in wars); a trend towards democratization (allowing discord to rise into the open); economic reforms that have led to large distributional shifts (while leaving these equity issues to be solved by the political process); and the globalization of the world economy (increasing vulnerability and creating the potential for large distributional effects on an economy). With these developments, it has become more important that socio-economic factors do not become a reason for different groups — whether associated by region, religion, race, or roots — to revolt and that Governments continually address the impact of economic policies and economic developments on different groups. Go back to list of papers

ST/ESA/2001/DP.21 Government Policies toward Information and Communication Technologies: A Historical Perspective

The development of what one might call modern systems of information and communication began with the Gutenberg printing press in the 15th century, and progressed through the prepaid postal system, electric telegraph and telephone in the 19th century, radio and television broadcasting in the 20th century, and most recently the Internet. This essay focuses on the response of governments to these innovations, beginning with the printing press. Go back to list of papers

ST/ESA/2001/DP.22 Postal Savings and the Provision of Financial Services: Policy Issues and Asian Experiences in the Use of the postal Infrastructure for Savings Mobilization

In many countries postal savings and giro remittances have long enabled provision of financial services to all segments of the population, particularly women, rural communities and the urban poor and to have helped mobilize savings for investment in development. This paper reviews the postal financial systems of twelve developing Asian countries, including savings product development, investing mobilized funds, receiving overseas remittances and utilizing financial technologies. Also examined are experiences of developed countries where market liberalization and privatization have challenged savings operations. Policies are proposed for more effective utilization of the postal infrastructure in delivering financial services in developing and transition economies. Go back to list of papers