Market Collapse Research Articles

The Real Effects of Asset Market Bubbles: Loan- and Firm-Level Evidence of a Lending Channel

This article studies how a shock to the financial health of banks, caused by a decline in the asset markets, affects the real economy. The land market collapse in Japan provides an ideal testing field in separating the impact of a loan supply shock from demand shocks. I find that banks with greater real estate exposure have to reduce lending. Firms' investment and market valuation are negatively associated with their top lender's real estate exposure. The lending channel is economically important: it accounts for one-third of lending contraction, one-fifth of the decline in investment, and a quarter of value loss.

The Effects of a Declining Housing Market on the U.S. Economy

Longstanding speculation about the likelihood of a housing market collapse has given way in the past few months to consideration of just how far the housing market will fall and how much damage the debacle will inflict on the economy. In this paper, we discuss recent developments related to the housing market; econometrically assess the magnitude of the impact of housing price decreases on real private expenditure; assess the importance of new types of mortgages and mortgage-related securities; and briefly analyze possible policy responses.

Green community entrepreneurship: creative destruction in the social economy

PurposeThe purpose of this paper is to examine the process of green community entrepreneurship in the social economy by studying creative responses among environmental non‐profit organizations to an external fiscal shock.Design/methodology/approachA total of 12 managers of environmental non‐profit organizations were interviewed to identify and classify their responses to a single external fiscal shock. These organizations are connected by a social capital network, their national association, Green Communities Canada. The social economy and ecological economics literatures are reviewed to construct a definition of green community entrepreneurship. Interview respondents identified factors which facilitate this process.FindingsThe need for green community entrepreneurship was driven by two interrelated issues (a loss of external government funding, and an associated market collapse for residential energy audits), and facilitated by three main factors (external social capital network flows, internal human capital stocks, and strategic partnerships).Research limitations/implicationsFuture research should examine other social economy organizations to determine if the dynamics discovered here are unique to green community organizations delivering climate change programs or apply more generally. Policy implications include the potential for joint project creation and investment utilizing green community entrepreneurship to integrate social and ecological economy objectives.Originality/valueA new conceptual framework for green community entrepreneurship is developed.

Collateral, debt capacity, and corporate investment: Evidence from a natural experiment

This paper examines how a shock to collateral value influences firms’ debt capacities and investments. Using a source of exogenous variation in collateral value provided by the land market collapse in Japan, I find that collateral has a statistically and economically significant impact on corporate investments. I also provide direct evidence on the workings of such a collateral channel. Exploiting a unique dataset of matched bank-firm lending, I show that firms with greater collateral losses are less likely to sustain their banking relationships and tend to obtain a smaller amount of bank credit.

Critical Iterations

Kenzer continuedfrom previous page the point of nonexistence in most countries around the world. Clearly this has been happening here in the US, where, no matter how much the average American sinks deeper into debt by purchasing an ever-greater litany of must-have goodies and socalled "necessary" goods—purchases that a growing number now argue are made for no other purpose than to placate themselves (psychologically), as their ability to enjoy "life" (the fervor realized through capital accumulation) is rapidly being replaced by their ability to buy (or, more frequently, leverage) more and more material items—their true buying power relative to the (ultra) rich has dwindled each and every year for many decades. Expanding income inequality in the US is as apparent, if not more so, today as it has ever been in the past; and, as I write this, the broadly based housing market collapse and the consequent, widely predicted, nationwide foreclosure crisis stand only to split open the gulfbetween the "haves" and the "have-nots" wider still. And yet, as much as I concur with this age-old argument, and as much as I agree with the geographical and geopolitical implications and ramifications detailed by Harvey, I am beginning to find the entire neo-Marxist analysis worn and tired, lacking much that is.new. Indeed, this same theoretical perspective was au courant when I was a graduate student back in the 1970s, and, to be quite blunt about it, little has changed. Harvey's ideas have certainly grown and changed—and I believe it is not a stretch to call him one of the brightest, if not the brightest, minds in academic geography today. He most assuredly has a broad knowledge of both factual and theoretical insights to bolster his narrative, but, in all sincerity, I fail to see this analysis taking geography (or the wider social sciences) to any higher level of inquiry than it did several decades ago. What I am saying, at bottom, is this: The ongoing, neo-Marxist critique of capitalism, even with the addition of a broadly focused geographical element/perspective, tells us little more than earlier generations were already able to discern; simply more historical and place-bound facts are available today to reinforce that original critique. What is "new" here is Harvey's breadth of knowledge—both historical and geographical knowledge—enabling himtoreinforce anoldcritique and thereby drive the point home beyond question. In short, it augments a very old story, but it does so, refreshingly, without the rhetoric, dogma, andjargon so prevalent in most neo-Marxian writing throughout much of the twentieth century. In the final analysis, however, I sense that this book will merely preach to the choir. Those scholars who have been saying the same thing about humankind since— and, in some instances, even before—Karl Marx put the central idea into words (i.e., that for capitalism to thrive it must constantly seek out, and indeed relies upon, a new person, a new group, a new place, a new region, or, today, an entire planet to exploit) will find further grist here because this fact above all others is essential to its survival. Capitalism (1) is continually in search of new "converts" (markets) to nourish the capitalist endeavor; (2) is forever doing battle with/seeking out cheaper and cheaper labor sources in noncapitalistic peoples/societies/places; and (3) is thereby inherently self-defeating over the long run because, at some point, unless we move on to some other planet, we will either run out of people and places to exploit and/or everyone will have converted to the capitalist enterprise, and, at that moment in time, there will be, by definition, (no)thing and no group or place left to exploit. Until we reach that watershed moment, economic development will continue to be uneven, and therefore, distinctgeographical patterns will emerge and then modify themselves again and again over time and across space. And while Harvey gives us a great deal to ponderhere and a rich framework within which we can better comprehend these processes—in particular the intriguing "space-time compression" portrayal he most fully articulated in The Condition of Postmodernity (1990), where we find ourselves...

Less Rationality, More Efficiency: A Laboratory Experiment on Lemons Markets

In this paper we experimentally test a theory of boundedly rational behavior in a lemons market. We analyzed two different market designs, for which perfect rationality implies complete and partial market collapse, respectively. Our empirical observations deviate substantially from these predictions of rational choice theory: Even after 20 repetitions, the actual outcome is closer to efficiency than expected. Our bounded rationality approach to explaining these observations starts with the insight that perfect rationality would require the players to perform an infinite number of iterative reasoning steps. Boundedly rational players, however, carry out only a limited number of such iterations. We have determined the iteration type of the players independently from their market behavior. A significant correlation exists between the iteration types and the observed price offers.

Collateral, Debt Capacity, and Corporate Investment: Evidence from a Natural Experiment

This paper examines how a shock to collateral value influences firms' debt capacities and investments. Using a source of exogenous variation in collateral value provided by the land market collapse in Japan, I find that collateral has a statistically and economically significant impact on corporate investments. I also provide direct evidence on the workings of such a collateral channel. Exploiting a unique dataset of matched bank-firm lending, I show that firms with greater collateral losses are less likely to sustain their banking relationships and obtain a smaller amount of bank credit.

Regional Impacts of a U.S. Hog Slaughter Plant Closing: The Thorn Apple Valley Case

As the 1998 U.S. hog market collapse unfolded, Thorn Apple Valley ceased hog slaughter operations at its Detroit, Michigan plant. We examine the impacts on Michigan live hog prices relative to Eastern Corn Belt hog prices. Results indicate that Michigan producers' relative price advantage diminished after the closure as procurement competition changed. As the impacts of the 1998 hog market collapse were absorbed, Michigan producers' relative price advantage became consistently negative. Examination of Michigan's market hog production distribution indicates postclosure shifts away from production in areas geographically near to Thorn Apple Valley and growth in counties geographically closer to alternative packers.

Ragnar Frisch and the Origin of Input–Output Analysis

Ragnar Frisch claimed on various occasions that he had invented the principles of input–output analysis. Frisch and Leontief worked simultaneously on their respective contributions but within different contexts. Frisch's contribution was an attempt to cope with market collapse of the depression and thus arose from a different motivation than Leontief's equilibrium analysis. Although prominently published in Econometrica in 1934, Frisch's ‘circulation planning’ has not been much discussed in the literature. The paper sets out the analytic core of Frisch's contribution and its formal similarity with Wassily Leontief's input–output analysis, which was the basis for Frisch's claim. It examines the inventiveness and analytical power of Frisch's approach and relates it to other works by him.

Eco-efficiency and industrial symbiosis – a counterfactual analysis of a mining community

Complex utilization, a production model analogous to those described by industrial symbiosis, was planned at the Russian Kola Science Center in mid-1980. The model integrates the waste streams of mining industries in the Kola Peninsula in such a way that waste from one industrial operator becomes raw material for another. Using a counterfactual method, this article determines the eco-efficiency of the model between the years 1985 and 2005. A parallel study of the eco-efficiency of the actual system, i.e. in the absence of complex utilization, is then performed for the same time period. The study shows that complex utilization would indeed have yielded increased eco-efficiency, even though not all environmentally harmful emissions would have decreased. As a result of market collapse and the use of upstream pollution prevention together with traditional end-of-pipe technologies, however, the actual system shows net emission reductions similar to those modeled in complex utilization. It is suggested that in systems like the mining industry of the Kola Peninsula, with high production volumes and poorly developed environmental technologies, upstream pollution prevention together with traditional end-of-pipe technologies may prove more attractive than industrial symbiosis, despite the substantial increases in eco-efficiency of the latter.

The role of externalities and information aggregation in market collapse

We examine the role that belief, network externality, and information aggregation play in inefficient market collapses. After receiving consecutive negative shocks, some ex-ante identical Bayesian agents will be discouraged about the unknown state of the market they invest; therefore, they will stop investing. This decision will have two effects: first, it will cause agents to aggregate information through social/observational learning; second, it will decrease the network externality effect. We show that there might be an inefficient market collapse if the externality effect diminishes too much, and the cost of re-entry to the market is too high. We also analyze the effects of strategic delay and experimentation on the exit decision of the agents.

Affirming Whiteness: Visualizing California Agriculture

Affirming Whiteness:Visualizing California Agriculture Marilyn Wyman (bio) Click for larger view View full resolution Figure 1. The Guardian of the Waters, San Diego, California [End Page 32] The Guardian of the Waters (Figure 1) looks down over the citizens of San Diego.1 As a fountain, she signifies the importance of water in the development of culture and community in the otherwise hot, dry climate of California's southernmost metropolitan center. Sculptor Donal Hord, raised in this dry southern California climate, understood the vagaries of what geobotanists call the "Sonora Zone." In an essay written for the Federal Art Project of the Works Progress Administration, Hord acknowledged the dynamics of water —its availability, its conservation— as the essential issue of the region.2 For Hord, the vagaries of nature rather than personalities determined the development of his Southern California community. But Donal Hord's Guardian, completed for the Works Projects Administration Federal Art Project in 1939, is more than a symbol of the forces of nature in the Southland. She also signifies the growing nativism of the Depression years and the need to reaffirm traditional American values within a population displaced by unemployment and failed farms. Although Guardian of the Waters appears to us today as a rather cumbersome, if not benign, figure, unenthusiastically viewed by those who espouse the power of modernism over regionalism, her appearance in 1939 sparked a controversy that cut to the core of the American-ness of the Federal Projects themselves. Guardian of the Waters is a twelve-foot tall silver-grey granite figure standing on an eight-foot drum embellished by a stylized landscape and anthropomorphized clouds. She looks out over the [End Page 33] federal plaza with downcast eyes while lifting to her left shoulder a Yuma (Indian)—style water jug from which life-giving water symbolically flows over the arid southern California land. Her skirt, emphasizing her compact nature, is composed of stylized pleats and folds inspired by the thick, fluted, columnar stem of the native Saguaro cactus. A shawl wraps around her upper torso and covers her head. Who is this guardian lifting the jug of water in silent prayer? To some, she was the archetypal American pioneer woman—strong, valiant, self-reliant, and capable of dominating an inhospitable environment. For others, her broad facial features, shawl and jug all pointed to one ethnicity — Mexican. And, in the race-conscious environment of the 1930s, they were outraged. Hord and his supporters from the San Diego Fine Arts Society successfully defended the commission, and Guardian of the Waters was completed as proposed. The heated controversy surrounding her features, the disdain for an image that looked Mexican and was therefore "deviant," (un-American) would be played out in the 1930s on many stages throughout California. Click for larger view View full resolution Figure 2. Mural in U.S. Post Office, Modesto, California By contrast, in the California Central Valley city of Modesto (Figure 2), white farmers look down from the walls over citizens as they enter the main post office. Grain in the field waves in an unseen breeze; tractors plow across the fertile fields; conveyor belts hum as they move the crop to waiting market trucks; women stand with baskets laden with the succulent fruits of the harvest. No Dust Bowl here; no trace of migrant laborers; no sense of the poverty and displaced field workers who made these crops possible— who made this farm successful. [End Page 34] This benign farmer and his wife give little evidence of the underlying alienation of the Depression years in California — the potent nativism; the fear of legal and illegal aliens in the fields; the need to reaffirm American-ness in a state with a large Mexican and Mexican-American population and a burgeoning population of migrants displaced by the Dustbowl of the American Midwest. Nor does this mural speak to the decimated farms in the heartland of the United States. The stock market collapse in October 1929 was not the first signal that the American economy was in trouble, but few people paid much attention to the American heartland. Landowners in the Midwestern or Plains states had financially over-extended themselves during World...

(Using Case-Based Reasoning to Develop the Daily Economic Condition Indicator Based on Data-Driven Method)

Korean Abstract: 본 연구에서는 사례기반추론(CBR: Case-Based Reasoning)과 유전자알고리즘(GA: Genetic Algorithm)을 이용하여 경제상황 판단지수를 개발하고자 한다. 본 연구에서 제시하는 경제상황 판단지수는 금융시장의 일별(daily) 자료의 모니터링을 통해 1997년 말의 외환위기와 같은 경제 위기상황에 대해서 경고메시지를 즉각적으로 보낼 수 있도록 설계되었다. 기존의 경제위기모형은 월별(monthly) 또는 분기, 연간 거시경제지표들을 이용하는 관계로 급격한 단기적 경제상황 변화에 대해서는 대처능력이 떨어지는 점을 감안, 본 연구에서는 일별 자료에 의거 모형을 구축함으로써 기존 모형의 한계를 극복하려고 하였다. 본 연구에서는 국내 최초로 경제상황 판단지수의 개발을 위해 CBR을 활용하였다. CBR은 경제위기와 같이 데이터의 크기가 작은 모델링에 우수한 예측력을 가지고 있는 인지적 방법론(intelligent method)으로서, 데이터의 업데이트 기능을 포함하는 유지 및 관리기능이 매우 우수하다. 이러한 이유 때문에 CBR의 도입은 본 연구모형에 적합하다고 판단하였다. 제안 모델은 일차적으로 CBR을 이용하여 금리, 환율 및 주가지수 정보가 반영되는 개별 경제상황지수를 만든 다음, GA를 활용하여 세 가지 경제상황지수를 결합한 새로운 일별 경제상황 판단지수를 개발하였다. 구축된 일별 경제상황 판단지수의 유용성을 알아보기 위해 1997년 이후 한국의 경제위기 관련사건과 모델에서 얻은 결과를 비교함으로써 과거 현실 경제 상황을 설명하는 정도를 평가하였다. English Abstract: Based on data-driven method, this paper shows that case-based reasoning (CBR), an artificial intelligence technique, is a quite efficient tool in monitoring financial market against its possible collapse. For this purpose, we propose daily economic condition indicator(DECI) using CBR that monitors daily evolution of the stock price index, foreign exchange rate, and interest rate either separately or collectively. As an empirical case study, DECI is constructed for the Korean financial market. Our discussion demonstrates that DECI might serve as an early warning system against a possible market collapse.

Distributed Terror and the Ordering of Networked Social Space

Truth be told, the “Y2K bug” was quite a disappointment. While the technopundits wooed us with visions of network failures worthy of millennial fervor, Jan. 1, 2000, came and went without even a glimmer of the catastrophic. Yet the Y2K “bug” did reveal the degree to which the American apocalypse now took the form of the network itself. The spaces of everyday life in America and elsewhere in a developed world produce and are produced by network structures that Manuel Castells has called “spaces of flow.” As such, Catastrophe today is marked more by dispersion and dissipation, rather than breakdown — a dis-strophe of social forms, structures, and experience.The dissipation of enactive networks does not, however, equate with a system failure. With the Internet “bubble burst” of March, 2000, the very exuberance of market flows were very much the conditions of possibility for both the irruption of a new economy and its sudden evaporation. It is not the ephemerality of these social forms and structures that disorients activities of everyday life in a network society, but rather our lack of control over distributed processes. The bubble burst, then, by no means sounded a death knell for distributed network functions. Rather, it marked a moment of increased misrecognition of the forms, structures, and practices that were the conditions of possibility for the event itself, as an ideology of authentication eclipsed a rhetoric of emergence and flow. Billions in capital disappeared in a matter of weeks, but the network forms and structures that allowed individual users “direct access” to the flows of capital remained in place for a normative virtual class, articulated as personalized and privatized spaces of control.

From Exclusionary Covenant to Ethnic Hyperdiversity in Jackson Heights, Queens

When Edward MacDougall of the Queensboro Realty Company originally envisioned and developed Jackson Heights in Queens, New York in the early twentieth century, he intended it to be an exclusive suburban community for white, nonimmigrant Protestants within a close commute of Midtown Manhattan. He could not have anticipated the 1929 stock market crash, the subsequent real estate market collapse, or the change in immigration policies and patterns after the 19505. This case study examines how housing and public transportation infrastructure intended to prevent ethnic diversity laid the foundation for one of the most diverse middle‐class immigrant neighborhoods in the United States.

The Global Export of Risk: Finance and the Film Business

This article examines the nature of risk and the limits of risk mitigation in the foreign financing of the US film business. The innovations and motivations through which foreign financial institutions have underwritten the most fundamental risk of the Hollywood model – the high costs of production – are discussed through several cases studies. These meetings of finance and the film business have produced monumental vestiges of corporate bankruptcy, market collapse and the inevitable redistribution of debt. Who paid? The public – and not only by their consumption of US film entertainment and merchandising. Foreign money has supported a portion of the substantial costs of failure created by the big-budget Hollywood production model. This global export of risk has often been placed upon the unknowing tax-payer or insurance-holder following the collapse of different financial institutions. Consequently, the ultimate importance behind the story of finance and the film business lies in its contribution to a broader evaluation about the sources of risk and the limits of risk mitigation in contemporary capitalism.

Generational Accounting, Solidarity and Pension Losses

The stock market collapse led to political tensions between generations due to the fuzzy definition of the property rights over the pension funds’ wealth. The problem is best resolved by the introduction of generational accounts. Modern consumption and portfolio theory shows that the younger generations should have the higher equity exposure due to their human capital. Stock market losses should be distributed smoothly over lifetime consumption by adjusting both current contributions and future entitlements. We present expressions for the substantial welfare losses involved in various practically relevant deviations from the optimal system.

"Oh, so many startlements...": History, Race, and Myth in O Brother, Where Art Thou?

I was born in 1950 and so did not live through and have no memory of the Depression. Still, I feel in ways as if it is part of my experience, for I heard many stories of it from my parents and grandparents. My father's father owned a farm supply store that failed with the stock market collapse in 1929. He never held another job, though he was only in middle age. Apparently the experience ruined his spirit. He moved his family from the Grant Park area of Atlanta to a small town about ten miles south called College Park. This was an important step in the events that made my coming on the scene possible. My mother's father began his career in Orange, Texas, in the early 1920s as a race car driver, mechanic, and stunt pilot. With the onset of the Depression in the South, he began to dust crops and moved with his family back and forth through the Gulf states--Louisiana and Mississippi especially--dusting against the inexorable progress of the boll weevil. My mother remembers moving sixteen times in four years and attending thirteen different schools. She recalls spending one Easter morning waking up in the family car, parked on the side of a Florida road. Finally, tired of dusting, my grandfather moved into commercial flying. He settled with his family in College Park and became a pilot for Delta Air Lines. Thus another necessary moment. My father and mother met, married, and here I am. For many people of my era the Depression, which we didn't live through, was a real and palpable experience. We knew about it, heard family tales about it, shared in its history and folklore. It was part of our heritage. Thus for me at least, and I suspect for many people of my post-World War II generation in the American South, O Brother, Where Art Thou? speaks in a particular way, as if some of its scenes linger on the verge of memory, as if it is family history, or might have been, as if Ulysses Everett McGill is the paterfamilias of us all. Reviews of O Brother, Where Art Thou? tend to praise the film but often describe it as a work of fluff, with much comedy and great music but no substance. For example, Robert Horton of Film.com wrote that particular excursion into screwball madness is often heavenly, and frankly leaves critical explication somewhat unnecessary. Joel and Ethan Coen, the film's directors and screen writers, described O Brother as a Ma and Pa Kettle movie but with really big production values and as the Lawrence of Arabia of hayseed movies. Parallels to Homer's The Odyssey were seen as superficial, and both the Coens claimed they had never read the poem. (1) This is doubtful. The Coen brothers make films replete with literary references, and it is difficult to believe they escaped reading Homer. Besides, this film really does draw a number of witty and clever parallels with the Greek epic. On the other hand, the plot of The Odyssey, with its tall-tale-telling hero and his fantastic exploits, is so ingrained in the cultural consciousness that even if one didn't actually read The Odyssey exposure would still come through movies, cartoons, and comic books. Many reviews also note a connection to the 1941 Preston Sturges comedy Sullivan's Travels, which chronicles the efforts of a film director famous for his comedies to learn about the life of the downtrodden so he can make a film about suffering called O Brother, Where Art Thou? One might imagine that the Coens' O Brother, Where Art Thou? is the movie that Sturges's director really ought to have made. The Coens' film does use a number of conventions from the Sturges comedy--a quest-based travel plot, quick-fire repartee between characters, a concern with the Depression and the poor, with convicts and people on the lam. Both films take a decidedly serious turn at the end. Both also have a scene in which convicts watch a film. In Sturges's comedy this scene is the central dramatic moment. The director, John Sullivan, changes his name, abandons his assistants, and goes out on the road, incognito, to learn about the poor. …

The stock market and innovative capability in the New Economy: the optical networking industry

The purpose of this paper is to analyze the impact of the stock market on the innovative capabilities of high‐technology companies that have been central to what in the last half of the 1990s came to be called the ‘New Economy’. The empirical focus is on equipment suppliers in optical networking—an industry that integrates the bandwidth potential of fiber optics with the data communications potential of the internet. The study covers the period from 1996 to 2003, during which the optical networking industry was, first, central to the New Economy boom, and, then from 2001, ensnared by the bursting of the New Economy bubble. This paper shows how, responding to the New Economy business model brought into the industry by Cisco Systems, three Old Economy companies—Nortel Networks, Lucent Technologies, and Alcatel—sought to use their corporate stock as a currency to acquire technology companies and compensate talented people, and thus accumulate innovative capability. To understand the relation between the stock market and innovative capability in the Cisco ‘growth‐through‐acquisition‐and‐integration’ model and in the ‘creative responses’ of the Old Economy companies to the Cisco challenge, we apply an analytical framework that links four functions of the stock market—control, combination, compensation and cash—with three social conditions of innovative enterprise: strategic control—the abilities and incentives of strategic decision makers to allocate resources to uncertain investments in innovative capabilities; organizational integration—the structure of incentives that motivates employees to apply their skills and efforts to collective learning processes; and financial commitment—the availability to the enterprise of resources to sustain cumulative learning processes until, by accessing markets, they can generate financial returns. Using this framework, we show that the ways in which the Old Economy companies used their stock to accumulate innovative capability in the New Economy boom of 1998–2000 made them more vulnerable to the stock market collapse and the slowdown in the optical networking industry in 2001–2003.

Generational Accounting, Solidarity and Pension Losses

The creeping stock market collapse eroded the wealth of funded pension systems. This led to political tensions between generations due to the fuzzy definition of property rights on the pension funds wealth. We argue that this problem can best be resolved by the introduction of generational accounts. Using modern portfolio and consumption planning theory we show that the younger generations should have the higher equity exposure due to their human capital. Capital losses should be distributed smoothly over lifetime consumption. When stock markets are depressed equity should be bought, savings and consumption should be scaled down equiproportionally, and retirement should be postponed. Portfolio investment restrictions are quite costly.