This paper analyzes the determinants of banks’ net interest margins in Honduras during the years 1998 to 2013 – a period characterized by increasing banks’ net interest margins, foreign bank participation and consolidation. In line with findings in the previous literature, we find that operating costs are the most important drivers of banks’ net interest margins. We also find that competition among banks has led to higher concentration and that funding by parent banks positively impacts foreign banks’ net interest margins. Together, these results suggest that banks, particularly foreign banks, are under pressure to consolidate and reduce operating costs in order to offer competitive interest margins. We conclude that further structural reforms and consolidation may lower banks’ net interest margins.
JEL classification: E43; E44; D43
Keywords: Banks’ interest margins; Commercial banks; Panel corrected standard errors (PCSE).
This paper investigates the impact of low or high inflation on the public debt-to-GDP ratio in the G-7 countries. Our simulations suggest that if inflation were to fall to zero for five years, the average net debt-to-GDP ratio would increase by about 5 percentage points during that period. In contrast, raising inflation to 6 percent for the next five years would reduce the average net debtto-GDP ratio by about 11 percentage points under the full Fisher effect and about 14- percentage points under the partial Fisher effect. Thus higher inflation could help reduce the public debt-to-GDP ratio somewhat in advanced economies. However, it could hardly solve the debt problem on its own and would raise significant challenges and risks. First of all, it may be difficult to create higher inflation, as evidenced by Japan’s experience in the last few decades. In addition, an unanchoring of inflation expectations could increase long-term real interest rates, distort resource allocation, reduce economic growth, and hurt the lower–income households.
JEL classification: E31; F34; H63
Keywords: Inflation; debt crisis; G7; public debt; sovereign debt.
Japan’s high corporate savings might be holding back growth, by preventing a more efficient use of resources. Small and medium enterprises (SMEs) have been the main contributors to high corporate cash balances, but more recently larger companies have also increased cash holdings. This paper focuses on the causes and consequences of the current corporate behavior and suggests options for reform. In particular, Japan’s weak corporate governance – as measured by available indexes – might be contributing to high cash holdings. An empirical analysis on a panel of Japanese firms confirms that improving corporate governance would help unlock corporate savings. The main policy implication of the analysis carried out in this paper is that a more ambitious and comprehensive corporate governance reform should be a key component
of Japan’s growth strategy. Such a reform would help remove some of the bottlenecks of the legal and corporate governance framework
JEL classification: D22; G30; G34
Keywords:Japan; corporate cash holdings; corporate governance; growth strategy.
This paper illustrates that basic global economic concepts can be directly related to the First and Second Laws of Thermodynamics. We believe that all economic returns are from nothing except from current and past human expenditure of human energy; this is the result of the First Law of Thermodynamics. It is shown that everything is a product of energy in the form of labor and that the basic principle of Labor Theory of Value is still valid and this principle is validated not
relying on economics and fi nance models, rather on thermodynamic principles. This is illustrated by the development of the Labor Value Equation based on the application of the First and Second Law of Thermodynamics and how it can impact employment, asset valuation, supply/demand, productivity, global confl ict, global reserve currency and global stability.
JEL classification: C; G; J; P; F; A
Keywords: Thermodynamics, Labor Theory of Value, Labor Value Equation, Global Reserve
Currency, Financial Stability, Employment, Asset Valuation, Productivity
Adolfo Barajas, Ralph Chami, Seyed Reza Yousefi
Xubei Luo, Nong Zhu
Gustavo Adler, Sebastian Sosa
Jérémi Montornès, Jacques-Bernard Sauner-Leroy
Luca Gattini, Huw Pill, Ludger Schuknecht
Thomas Farole, Deborah Winkler
Laurent Maurin, Mervi Toivanen
Raju Jan Singh, Yifei Huang
Serhan Cevik, Katerina Teksoz
Jan Bruha, Beatrice Pierluigi, Roberta Serafini
Richard Baldwin, Daria Taglioni
Franz Seitz, Julian von Landesberger
Alexey Ponomarenko, Elena Vasilieva, Franziska Schobert
Doris Neuberger and Roger Rissi
Matjaž Volk and Polona Trefalt
Patrycja Chodnicka and Małgorzata Olszak
Emenike Kalu O.
Stefan Trappl, Karl Zehetner and Robert Pichler