Quality Of Financial System Research Articles

Influencing the social impact of financial systems: alternative strategies

Abstract The social impact of the global financial crisis brought global and domestic financial systems into public focus. While over the last ten years governments have introduced a range of regulatory reforms, there are still low levels of public trust in financial sectors, and academics continue to express their concerns about financial systems and their desire for more influence. This is particularly the case for those framing their evaluation of the quality of financial systems in terms of social values. This article offers those seeking more influence over the social values of financial systems, a fresh perspective on their available strategic options for influencing outcomes. It argues that they should consider strategies aimed at making allies of financial sectors and regulators in influencing change. The main advantage of these alliance strategies is that they address key constraints to influence, as identified in existing scholarship, which are difficult to relax because they are tied to features inherent in financial systems. By addressing these constraints, alliance strategies could increase the likelihood that financial system outcomes align more closely with their preferred social values.

Asset Bubbles, Endogenous Growth, and Financial Frictions

This paper analyzes the effects of bubbles in an infinitely-lived agent model of endogenous growth with financial frictions and heterogeneous agents. We provide a complete characterization on the relationship between financial frictions and the existence of bubbles. Our model predicts that if the degree of pledgeability is sufficiently high or sufficiently low, bubbles can not exist. They can only arise at an intermediate degree. This suggests that improving the financial market condition might enhance the possibility of bubbles. We also examine whether bubbles are growth-enhancing or growth-impairing in the long run. We show that when the degree of pledgeability is relatively low, bubbles boost long-run growth. On the other hand, when it is relatively high, bubbles lower long-run growth. Moreover, we examine the effects of the burst of bubbles, and show that the effects much depend on the degree of the pldgeability, i.e., the quality of financial system.