Browsing by Subject "Default (Finance)"
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Item Interests great and petty : Japan's nonperforming loans debates, 1991-1998(2007-12) Bloch, Jonathan Adam; Boone, CatherineThis dissertation considers the failure of the Japanese government from 1991 through late-1998 to take measures to bring swiftly under control the threat to the nation's finance system posed by nonperforming loans that arose with the collapse of the late-1980s land-price bubble. While some works plausibly argue that this record of delay, and a larger failure of the Japanese state to adjust its general economic policy strategy, can be attributed largely to a progressive fracturing of a 1950s consensus on basic economic policy objectives between relatively internationally competitive firms and firms more dependent on state protection of their business opportunities, this insight has led few scholars to enquire into the role played by advocates of the policy interests of Japan's most competitive large firms in producing the widely lamented policy of delay on nonperforming loans. Counter to the literature's preponderant emphasis on political pressure from protection-dependent firms as impediment to swift state adjustment to nonperforming loans and other economic policy challenges of the late-20th century Japanese state, this dissertation finds that state officials and expert commentators who in debates on nonperforming loans and closely related policy issues strongly advocated dismantling protections on which large numbers of firms depended and in their stead adopting policies more favorable to the firms best able to weather the harsh economic conditions of the 1990s, displayed willingness to tolerate further delay comparable to (and sometimes greater than) that shown by state officials and expert commentators who advocated greater solicitude for the protection-dependent. This finding is based chiefly on a reading of official Ministry of Finance policy statements, transcripts of hearings of relevant Japanese House of Representatives committees, public opinion polls, reporting and commentary published in two national-circulation and two local Japanese newspapers, and a variety of books and longer articles published in the mass-audience Japanese business press. This finding, I argue, suggests a need for more sustained critical analysis of the role of leading business interests in Japan's political processes, which in turn argues for a closer engagement than is now commonly attempted with the work of Karl Marx and Chalmers Johnson, and for following up some preliminary suggestions in the existing literature of an emergent economic policy dimension of Diet party competition.Item Three essays on financial macroeconomics(2004) Saunders, Drew Donald; Corbae, DeanI study financial arrangements that arise in economies with limited enforcement. Contractual promises are required to be rational for the obligated party at the time of fulfillment. Common also to each environment is perfect information. I study each economy in general equilibrium with competitive markets. In the first chapter, I study the provision of liquidity by one cohort of private agents to another building on the three-period model of Holmstrom and Tirole (Journal of Political Economy, 1998). Entrepreneurs issue financial liabilities to finance liquid investment. As a precaution against a random cost shock, entrepreneurs optimally buy, hold, and then sell a security that they cannot issue themselves. In contrast to Holmstrom and Tirole, I do not allow government liabilities to serve this purpose. Instead, I require that entrepreneurs liquidity needs be satisfied endogenously by circulation of third-party liabilities. The appropriate liabilities sell at a price premium relative to securities that do not serve the liquidity need. Liquidity uncertainty can distort production allocations among producers with different risk characteristics, and I show how issuers of circulating liabilities may be interpreted as banks. The second chapter presents an infinite time-horizon exchange economy wherein default cannot be punished by complete banishment from markets. An asset exists in the economy that cannot be confiscated, and that agents can never be prevented from trading. The payoff to an agent in default is a function of present and future prices and the agents ownership share of the non-collateral asset. Greater ownership implies a higher payoff upon default; but a higher default payoff reduces trading opportunities in equilibrium. Equilibration may generate volatile time-series for endogenous variables. I document the quantitative implications by computing equilibria of a plausibly calibrated economy. In the last chapter, I study the ability of a simple limited enforcement economy to explain arbitrary panel consumption data. Subject to satisfaction of mild inequality restrictions, if the consumption allocation implies that each agents wealth is finite, there is a feasible punishment institution that induces the data in equilibrium. The result shows that limited enforcement economies hold significant potential to explain anomalous features and implications of such data.