Countercyclical Research Articles

Techno-economic analysis by homer-pro approach of solar on-grid system for Fatehpur-Village, India

There are numerous locations available in rural regions of India, where essential electrical energy for load demand is not feasible. Individuals of those particular areas are facing problems, related to their social and economic development. To eliminate the energy crisis, uses of renewable sources are increasing day by day. In this study, we are analysis an On-grid solar energy harvesting system, which will provide necessary power requirement for the whole community of Fatehpur village located at 27°59′15″N and 77°44′07″E, to fulfil energy demand of the community load without much affecting environment. Here, the economic analysis using Homer-pro programme version 3.14.4, are examined, with Homer pro cycle charging as dispatch strategy. Load calculation and components pricing details are concluded through a local survey. Homer pro provides optimized results for selected site, through total present cost (NPC), the least cost of energy (LCOE) and operating cost etc. Based on simulation results by Homer pro, we obtained 1.77 RS/kWh as levelized cost of energy, which is much less than grid power price i.e. 5.6 Rs/kWh and 9,291,770.00 Rs as NPC. Main criteria of this software-package are NPC and LCOE to find out the best possible outcomes for the suited site.

Alternative frameworks for measuring credit gaps and setting countercyclical capital buffers

This paper complements the standard Basel countercyclical capital buffer framework by suggesting four additional measures for credit gaps that can be used to measure the financial cycle and to decide on countercyclical capital buffers for banks. The new measures behave similarly to the gaps calculated with the standard Basel one-sided Hodrick-Prescott filter in long samples, but they have the properties desired for countries with relatively short historical samples. While the standard Basel credit gaps have been deep in negative territory for many European Union countries since the Great Recession the new gaps are close to zero and the buffers suggested are more in line with the countercyclical capital buffer ratios that were in place in 2018.

Capital Flows to Latin America (2003–17): A Critical Survey from Prebisch’s Business Cycle Theory

ABSTRACT The economic literature on capital flows to developing countries has shared two important commonalities since the 1990s. Published works (whether they focus on the external situation or stress the domestic determinants of capital flows) tend to assume a beneficial effect of capital inflows, which leads to an improvement of peripheral institutions, whose deficiencies are ostensibly the main cause of economic turmoil and/or failure in attracting capital flows, in continuity with New Institutional Economics. In doing so, mainstream economists deliberately overlook the asymmetric characteristics of the international monetary system and the persisting hegemony of dollar. Raul Prebisch’s pioneering work on business cycles in Latin America provide an alternative view, one capable of amending the existing mainstream literature. On the one hand, Prebisch stressed the destabilizing role of capital inflows on Latin American economies, particularly short-term speculative capital. On the other hand, Prebisch designed a set of counter cyclical monetary policies in order to contrast capital volatility, particularly during downturns. An analysis of stylized facts shows that, when correctly updated, Prebisch’s theory has remarkable explanatory potential when applied to Latin America’s current economic and financial situation.

Research on the Macro-prudential Policy of Capital Flows: Based on a DSGE Model Considering Domestic and International Financial Institutions

In recent years, the importance of international capital flows has been increasing, which has significantly accelerated the integration process of the international financial system. After 2008, the central banks of major western developed economies implemented loose monetary policy, which led to a large amount of capital flowing into new market countries. However, international capital flowed out of new market countries after Federal Reserve Chairman Ben Bernanke said in 2013 that the Federal Reserve would gradually withdraw from quantitative easing.The great fluctuation of international capital has aroused the debate about monetary policy and macro-prudential policy. Rey (2015) believes that under any exchange rate system, only the control of international capital flows can maintain the independence of monetary policy. In view of the above findings, since 2016, the People’s Bank of China has established a macro-prudential regulatory mechanism for international capital flows to resist external financial shocks.By introducing domestic and international financial institutions, this paper brings the macro-prudential policy of foreign financial shocks and capital flows into the DSGE framework of small countries’ open economy. Domestic financial institutions can raise funds by absorbing the deposits of their own residents and foreign residents; international financial institutions buy and sell the creditor’s rights issued by various countries, so as to implement capital flows.It is found that under the impact of foreign interest rate increase, on the one hand, it will tighten the balance sheet of domestic financial institutions, and reduce the scale of corporate credit through bank incentives and constraints; on the other hand, it will cause the devaluation of domestic currency and international capital outflows, and affect the stability of the financial system. The macro-prudential management mechanism of capital flows can enhance the ability to resist external financial shocks. For China, the proportion of foreign debt is relatively low, and the policy effect is relatively mediocre for the counter cyclical tax adjustment mechanism of external borrowing of domestic financial structure; however, the counter cyclical adjustment mechanism for the capital flow of international financial institutions can significantly improve social welfare.This paper gives the following policy recommendations: Firstly, we should increase the significance of external financial risk prevention. In recent years, the rapid growth of international capital flows has brought new challenges to new economies. Secondly, we should strengthen the supervision of cross-border capital flows to resist external financial risks. In the process of further opening up of China’s financial market, the People’s Bank of China should improve the macro-prudential supervision of foreign exchange market, real estate market and credit market to prevent systemic financial risks. Finally, we should properly solve the financing problems of enterprises. For China, capital outflows will aggravate the already severe credit market pressure. Therefore, on the one hand, resist the external financial risk contagion through the macro-prudential supervision mechanism of capital flows; on the other hand, maintain the liquidity at a reasonable level through the flexible operation of monetary policy, in order to support economic growth.

Does Credit Supply Accelerate Business Cycle Changes in Korea?: Some New Evidence by Incorporating Regime Changes

This work empirically investigates how commercial banks' aggregate credit supply is associated with business cycle over different regimes of the Korean economy. Linear empirical models employed in most of previous studies are subject to a potential missapecification problem because it is well known that both real GDP and credit supply reveal different dynamic properties over different regimes. This work finds that credit supply has asymmetric effect on business cycle for expansion and contraction phases when the Smooth Transition Autoregressive Vector Error Correction Model (or STAR-VECM) is employed. Our empirical findings are as follows. Firstly, we find that credit supply has procyclical effect on real GDP in all phases. Secondly, the procyclical effects are significantly intensified especially in contractionary phases which indicates asymmetry of its effect. In sum, this result supports 'Credit Acceleration Hypothesis' of Bernanke et al. (1999). Lastly, we further find that real GDP has asymmetric effects on banks' credit supply with countercyclical effect on expansionary regimes.

Exploring contingent convertible bond alternatives for African banks

Background: A variant of the contingent convertible bond, first proposed in 2011, is investigated: the Call Option Enhanced Reverse Convertible (COERC). Although issued as a bond, it converts to new shareholder’s equity if a bank’s market share of capital falls below a pre-specified trigger point. Aim: COERCs avoid the problems with market-based triggers (e.g. sell-offs and death spirals) due to panic and market manipulation. Banks that issue COERCs have less incentive to choose investments that may be subject to large losses and disincentive problems, associated with the replenishment of shareholder’s equity after market declines (also known as debt overhang) are also avoided. Setting: Proposed amendments to the COERC structure are suggested for the African market. Methods: The data used were simulated, stylised values for a standard COERC. No market parameters are required, such as equity or debt levels or market volatility. Details of the stylised example are provided in Table 4 and Table 5 in the ‘results and discussion’ section. Results: Both examples of floating coupons for COERCS would aid in the objective of issuing a security that is countercyclical in nature, as banks would avoid having to pay coupons in times of distress. Conclusion: In addition to the recommendations of the Basel frameworks, CoCos have been considered and proposed as an additional measure to promote counter cyclicality in terms of capital composition in banks.

Regulatory capital funds and risk-sharing behavior in distressed financial conditions

PurposeThis paper aims to investigate the adequacy of regulatory capital funds through loss provisioning policies because of worsening credit quality associated with distressed financial conditions. A financial distress occurs when banks have difficulty in honoring financial commitments. This paper is expected to unveil how the provisioning mechanisms can address concerns associated with pro cyclicality of regulatory capital funds requirements, and how the banks behave in distressed financial conditions to share risks. The pro cyclicality of regulatory capital funds is the effect of various components of the financial system that aggravates the economic cycle such as during the expansion of the economy when banks are able to provide more loans and meet regulatory capital requirements with ease, while during the contraction of the economic cycle, can lead to deterioration of asset quality, and the resultant need to make loss provisions and recognize impairment. In turn, the situation puts further pressures on the capital requirements held by banks and their risk-sharing behavior. The paper analyzes a sample of Islamic banks in Malaysia.Design/methodology/approachBy estimating credit risk-related information through loss provisioning policies, the paper uses an unbalanced panel data on all Islamic banks in the Association of Islamic Banking Institutions Malaysia from 2003 to 2014. The association consists of full-fledged Islamic banks and several foreign-owned entities.FindingsThe paper findings support that Islamic banks during observed period of distressed financial conditions were less discouraged to increase their regulatory capital funds to share risks. Intuitively, they were more encouraged to engage in risk-shifting behavior. Also, the risk-shifting behavior was found to have a significantly high potential in foreign-owned Islamic banks than in domestic Islamic banks.Research limitations/implicationsAlthough the study is based on a sample of Islamic banks in Malaysia, the findings suggest targeted interventions aimed at discouraging risk shifting or transfer of risks in an interest-free Islamic financing.Practical implicationsThe outcome of this paper has practical implications for Islamic banks to build a buffer of capital funds to face downward pressures during heightened financial uncertainties while serving as protection to depositors. Moreover, this study has practical implications for shareholders to avail themselves the benefits of high investment accounts financing. The Islamic banks can continue to play their role in promoting inclusive growth, reducing inequality and accelerating poverty reduction.Social implicationsAlthough the current study is based on a sample of Islamic banks in Malaysia, the finding suggests that the extent of risk shifting was significantly more incentivized among the foreign-owned rather than the domestic Islamic banks. This information can be used to develop targeted interventions aimed at discouraging risk shifting or transfer of risks in an interest-free Islamic financing.Originality/valueThis paper is the first that investigates on adequacy of regulatory capital funds of Islamic banks through loss provisioning policies.

Repurchase Agreements and the European Sovereign Debt Crises: The Role of European Clearinghouses

This article investigates the European repo market and its role as an amplification channel for sovereign-debt crises. We focus on the centrally cleared segment, representing the majority of European repos. A novel data set on repo and margin haircuts applied to sovereign bonds by central clearing counter parties (CCPs) is gathered, allowing us to assess the haircut methodologies used by the major European CCPs. We document that following increases in sovereign risk, haircuts set bymajor CCPs on peripheral sovereign bonds increased significantly. The procyclicality of haircuts and the concentration of bilateral repos raise concerns about the CCP-intermediated repo market as a source of systemic risk in the Eurozone. This is however mitigated by the counter cyclical monetary policy of the European Central Bank (ECB).

The BNDES countercyclical role in the international economic crisis

http://dx.doi.org/10.5007/2175-8085.2016v19n2p39O artigo analisa o papel do Banco Nacional de Desenvolvimento Econômico e Social (BNDES) durante a crise deflagrada em 2008. É discutido, a partir de uma abordagem Keynesiana, o papel anticíclico da instituição financeira, com a disponibilização de recursos para financiamento de investimentos e seus efeitos sobre a expansão do emprego, renda e impostos. Em contraste as críticas, especialmente quanto aos subsídios advindos do Tesouro Nacional, pode-se concluir que foram positivos os efeitos da atuação do BNDES durante a crise e foi essencial para minimizar os impactos na economia brasileira. Os custos das operações financeiras com o Tesouro Nacional foram menores do que os benefícios produzidos, considerando-se o efeito multiplicador dos investimentos, bem como a demanda agregada, emprego e geração de impostos.

프로 경륜선수들의 심리적 계약위반과 직업의식 및 이직의도의 관계

The purpose of this study examined the analysis of Relationship among Psychological Contract Breach on Job Consciousness and Turnover Intention of Cycle Racers. The data were collected with purposive sampling from 310 of Cycle Racers. After excluding 5 data because partial part of the survey was missing or insincere responses were included, this study analyzed 305 data with SPSSWIN 18.0 through descriptive, factor, correlation, and multiple regression analysis. The analysis results are as follows. First, the psychological contract breach had positive influences on job consciousness of Pro cycle racers. Second, the psychological contract breach had negative influences on turnover intention of Pro cycle racers. Third, the job consciousness had negative influences on turnover intention of Pro cycle racers. The results stated above were discussed based on the previous studies and empirical research regarding psychological contract breach, job consciousness and turnover intention.

The Italian Sense of the Web. A Social History of the Culture of Connectivity: A Mediatization Approach

The culture of connectivity in Italy is produced by the interrelation of social media and the evolution of social ties evolution. This article analyses this culture by highlighting the dynamics of power and participation, and overcoming the dichotomy between the “manipulative” and “democratization” media theses. It therefore focuses on the specific transition between web 1.0 and web 2.0, tracing a change, caused by the spread of social network platforms, in discourses on the social sense of connectivity: in other words, reconstructing an history of technological and communicative transformations coupled with specific events that can produce a different social consciousness of connectivity. The approach adopted to analyze this transition in terms of the social history of the media will be periodization, while the mediatization approach will serve as the broader framework for understanding and interpreting the relation between the spread of social media and the evolution of the sense that social ties express the culture of connectivity. Linking periodization to mediatization will more specifically involve taking the temporal dimension into account on at least three levels: an events-based, micro-type temporality, capable of identifying specific media events or widespread media practices; a meso-type temporality, marked by a succession of media waves which underline the disruptive effect of certain ecosystemic configurations of media devices, which can alter significantly both market and cultural dimensions; and a macro-temporal dimension, suitable for tracing a succession of technological ages, such as the passage described in the literature as the transition from the age of the industrial revolution to the information or digital age. This framework of mediatization through the lens of the periodization of Italy’s digital evolution enables us to identify– in the context of a long-term perspective on the digital age – the countercyclical role of the digital, which, especially in the mid-period, both fostered and characterized the transition from web 1.0 to web 2.0. By applying a short-term, “evenemential” logic to an analysis of the 2009 to 2014 period, it becomes possible to trace the way in which the mediatization of the social tie, thanks to the diffusion of web 2.0 in Italy, resulted in a swift transition from a rhetoric of “friendship” to a rhetoric of “participation” thatin turn was widely perceived as becoming, in a political sense, increasingly critical.

Specialised Financial Intermediaries and the Impact of Savings and Loan Contracts on Real Estate Finance

The significant macroeconomic importance of housing market stability has been prominently highlighted in the context of the 2008 US sub-prime mortgage financial crisis. Evaluating the aftermath of this global economic crisis, the notorious stability of German housing markets in comparison to other industrialised nations is a particularly interesting case for empirical investigation. An idiosyncratic and yet vital institutional characteristic of German housing financing markets, regularly neglected in the academic literature, are building and loan associations (“Bausparkassen”). These institutions constitute a special case of financial intermediaries because they exclusively sell the rather unique mortgage financing instrument of savings and loan contracts (SLCs). Based on an overlapping-generation model, these contracts give their holders the option to take out a housing loan in the future at an interest rate fixed on the date of conclusion of contract.In this paper, we empirically examine whether this mortgage financing instrument creates the anti-cyclic incentive mechanisms that its peculiar option-like structure would theoretically suggest. More specifically, we investigate whether SLC contract holders indeed have a higher propensity to borrow under increasing interest rate regimes, thereby supposedly serving as an important stabiliser of housing market liquidity in crunching environments. Controlling for important macroeconomic covariates, we show that both SLC savings deposits and SLC loans taken by households precisely reflect this counter cyclicality to interest rate changes. These findings thus broadly corroborate SLCs as an important specificity of German mortgage financing contributing to the overall stability of corresponding housing markets.

China's Impact on Latin American Development: A Comparative Study of Bolivia and Venezuela

This analysis compares Bolivia's and Venezuela's recent development path and China's impact on it. The two country cases have been chosen due to the fact that they have experienced quite different economic development paths since the international financial crisis in 2008-2009, although they have pursued largely similar economic development strategies and foreign policy strategies. Bolivia has done much better than Venezuela that is now experiencing a chaotic social and economic situation with high levels of inflation and finances out of control. In contrast, Bolivia maintains stable growth figures of between four and five percent and is one of just a small select group of South American commodity exporting countries that is able to pursue counter-cyclical macroeconomic policies. The analysis further argues that China's significance was negligible at the turn of the Century and had become somewhat more significant for Venezuela by 2009, while it was still rather insignificant for Bolivia. Since then, China's significance has grown, particularly in Venezuela that has needed much foreign financing and had been frozen out of international financial markets. However, China has also grown in significance for Bolivia and mostly has had a positive, though, not big impact on its development. In contrast, China's impact on Venezuela has been bigger and mostly positive, but it has not sufficed to end Venezuela’s current development crisis.

Basel II and the Capital Requirements Directive: Responding to the 2008/09 Financial Crisis

This paper addresses factors which have prompted the need for further revision of banking regulation, with particular reference to the Capital Requirements Directive. The Capital Requirements Directive (CRD), which comprises the 2006/48/EC Directive on the taking up and pursuit of the business of credit institutions and the 2006/49/EC Directive on the capital adequacy of investment firms and credit institutions, implemented the revised framework for the International Convergence of Capital Measurement and Capital Standards (Basel II) within EU member states. Pro cyclicality has attracted a lot of attention – particularly with regards to the recent financial crisis, owing to concerns arising from increased sensitivity to credit risk under Basel II. This paper not only considers whether such concerns are well-founded, but also the beneficial and not so beneficial consequences emanating from Basel II’s increased sensitivity to credit risk (as illustrated by the Internal Ratings Based approaches). In so doing it considers the effects of Pillar 2 of Basel II, namely, supervisory review, with particular reference to buffer levels, and whether banks’ actual capital ratios can be expected to correspond with Basel capital requirements given the fact that they are expected to hold certain capital buffers under Pillar 2. Furthermore, it considers how regulators can respond to prevent systemic risks to the financial system during periods when firms which are highly leveraged become reluctant to lend. In deciding to cut back on lending activities, are the decisions of such firms justified in situations where such firms’ credit risk models are extremely and unduly sensitive - hence the level of capital being retained is actually much higher than minimum regulatory Basel capital requirements ?

Basel II and the Capital Requirements Directive: Responding to the 2008/09 Financial Crisis

This paper addresses factors which have prompted the need for further revision of banking regulation, with particular reference to the Capital Requirements Directive. The Capital Requirements Directive (CRD), which comprises the 2006/48/EC Directive on the taking up and pursuit of the business of credit institutions and the 2006/49/EC Directive on the capital adequacy of investment firms and credit institutions, implemented the revised framework for the International Convergence of Capital Measurement and Capital Standards (Basel II) within EU member states. Pro cyclicality has attracted a lot of attention – particularly with regards to the recent financial crisis, owing to concerns arising from increased sensitivity to credit risk under Basel II. This paper not only considers whether such concerns are well-founded, but also the beneficial and not so beneficial consequences emanating from Basel II’s increased sensitivity to credit risk (as illustrated by the Internal Ratings Based approaches). In so doing it considers the effects of Pillar 2 of Basel II, namely, supervisory review, with particular reference to buffer levels, and whether banks’ actual capital ratios can be expected to correspond with Basel capital requirements given the fact that they are expected to hold certain capital buffers under Pillar 2. Furthermore, it considers how regulators can respond to prevent systemic risks to the financial system during periods when firms which are highly leveraged become reluctant to lend. In deciding to cut back on lending activities, are the decisions of such firms justified in situations where such firms’ credit risk models are extremely and unduly sensitive - hence the level of capital being retained is actually much higher than minimum regulatory Basel capital requirements ?

Are remittances an instrument of stabilization and funding in the euro area?

ABSTRACTIn this study, we explore the specific question of the counter cyclicality of remittances in the euro area, namely, if they could be used to stabilize the business cycle and as an additional source of external financing. This research uses data for 13 euro area countries in the period 2004–2013. For whole of the sample, our two hypotheses concerning stabilization and external financing are rejected, but Lithuania and Greece are outliers. Remittances seem to have had a macroeconomic stabilizing effect on Lithuania and to have mitigated in part the liquidity problems that Greece has faced since the sovereign debt crisis.

A POLÍTICA ECONÔMICA NOS ANOS 1930: EVIDÊNCIAS DE UMA HETERODOXIA CONSCIENTE

O presente trabalho tem por finalidade discutir alguns aspectos da política anticíclica para a superação da crise de 1929, incluindo as escolhas técnicas em resposta à depressão econômica, o caráter político ideológico das medidas utilizadas e, por fim, a própria intencionalidade na condução dessas políticas como transformadoras da ordem econômica, revelando como tais políticas passaram a dialogar com novas vias de desenvolvimento na época. A partir do uso e análise de dados oficiais disponibilizados pelo Ipeadata e pelo Anuário Estatístico do Brasil de 1939/40 publicado pelo Instituto Brasileiro de Geografia e Estatística (IBGE), os autores calculam o multiplicador monetário da época, cujos valores parecem reforçar a hipótese sustentada por este artigo de que a condução da política econômica foi feita de forma heterodoxa e intencional, tendo o governo e, principalmente, Vargas, consciência do papel dessas medidas tanto para superação da crise, quanto para a consolidação dos novos pactos políticos que se estabeleceram no bojo do poder a partir da Revolução de 1930.

Régulation ou supervision : quels nouveaux risques ?

Les règles comptables et prudentielles régissant l’intermédiation financière se sont considérablement sophistiquées lors des vingt dernières années en se rapprochant des meilleures pratiques internes des institutions financières. Cette évolution a engendré une plus grande procyclicité et ouvert des options d’arbitrage réglementaire qui ont grandement contribué à la crise de 2008. Les réponses réglementaires qui se dessinent présentent deux risques. D’une part, les évolutions asymétriques de la réglementation bancaire et de celle du shadow banking risquent de conduire à une migration massive du financement de l’économie vers le shadow banking , encore très instable par nature. D’autre part, un retour en arrière vers des règles prudentielles simplifiées à l’excès telles que le ratio de levier peut créer des distorsions importantes dans le financement de l’économie. Un investissement important dans le capital humain de la supervision et une plus grande discrétion des superviseurs dans l’interprétation des règles paraissent mieux à même de pallier les insuffisances mises à jour par la crise. Classification JEL : G01, G21, G28.

(Finding Indicator Variables for Countercyclical Capital Buffer: The Case of Korea)

Korean Abstract: 본 연구는 2016년 도입 예정인 경기대응완충자본 제도를 운용하는 데 있어 활용할 수 있는 기준지표를 탐색한다. 신용, 거시경제, 금융시장 등 총 7개 부문 42개 변수에 대해 1981년 이후 우리나라에서 발생한 네 차례의 금융불안상황에 대한 예측력을 점검한 결과 완충자본 적립판단 부문에서는 기업가계신용 등 신용관련 변수가, 완충자본 사용판단 부문에서는 시장 변동성신용스프레드 등 금융시장관련 변수가 유용한 것으로 나타난다. 신용 변수를 중심 설명변수로 한 다변량 모형은 과거 금융불안상황에 대해 높은 설명력을 보인다.English Abstract: Countercyclical capital buffer in Basel III is a macropudential tool that aims to reduce procyclicality in financial intermediation. It requires banks to set aside additional capital buffer in times of credit overheating, and allows them to release the buffer when a breakdown in credit intermediation is imminent. To operationalize this buffer, it is important to find information variables that enable policymakers to determine whether current credit activities are overheated, to the extent that it can lead to a significant financial crisis afterwards.We explore indicator variables necessary for implementing countercyclical capital buffer in Korea. To do so, we first collect 42 variables in 7 sectors including credit aggregates, financial markets, and macroeconomic variables. We then evaluate the past performance of those variables to predict financial crises in Korea since 1981, using AUROC (area under receiver operating characteristic), loss function, and noise-to-signal ratio.The results show that credit variables such as the credit to non-financial firms and households are the most useful in determining when to build up the buffer, and so are financial market variables such as credit spread in determining when to release the buffer. A multi-variable approach, using mostly credit aggregate variables, has high explanatory power on the occurrence of past financial crises.

Analysis Of The Relationship Between Economic Cycle Swings And Adoption Rate Models Of Financial Innovation Diffusion

The United States financial crisis, starting with the credit boom of 2007 and ending with the failure of Lehman Brothers in September 2008, has led to a loss of confidence in the United States financial system. The Financial Crisis Inquiry Commission indicated that the financial crisis affected over 26 million Americans. Many scholars have attributed the crisis to financial innovations, such as mortgage backed securities, adjustable rate mortgages and no-income verified loans, as key innovations that led to the market collapse. Financial innovations have had both positive and negative impacts on the financial industry. Providing a framework that describes the relationship between economic cycle swings and adoption rates of innovative financial instruments can provide greater stability and predictability in financial innovation diffusion, which can lead to more stable returns for shareholders and enhance the public interest through a healthy, innovative and more stable financial industry. An abbreviated evidence-based systematic review was completed on financial innovations that led to the financial crisis of 2007. The research suggests that there is an equilibrium period of time that financial organizations can adopt innovation to avoid unintended consequences like the recent financial crisis. Providing a framework of adoption time can demonstrate where financial innovations can be absorbed to provide the organization with the ability to financially innovate during pro and counter cyclical economic periods. Through an understanding of the timing of financial innovations as they occur in economic cycles, managers of financial organizations can choose the adoption period of time more carefully which could have averted the financial crisis that affected millions of Americans.