Essays on market discipline in commercial and central banking


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Essays on market discipline in commercial and central banking

Show simple item record Forssbæck, Jens 2009-04-14 2009-04-14T12:26:30Z 2009-04-14T12:26:30Z 2009-04-14
dc.identifier.isbn 9788759383865
dc.description.abstract The thesis studies how financial markets discipline commercial and central banks’ behavior in various ways. In the first part, two papers test different aspects of market discipline of commercial banks’ risk taking, using a dataset of several hundred banks worldwide. In the first paper, it is shown that the risk-shifting opportunity of shareholders introduced by deposit insurance depends on ownership structure and the extent of market discipline by uninsured creditors. I find that the effect of shareholder control on risk is convex, and that creditor discipline tempers this effect but has little individual influence on risk. The second paper tests the monitoring dimension of market discipline and formulates a two-step procedure which makes it possible to sidestep the common methodological problem that banks’ ‘true’ risk is unobserved. Results suggest that if the quality of institutions is sufficiently high, some market-based indicators may be more accurate measures of banks’ true risk than a set of commonly used accounting-based benchmark indicators – a possibility effectively precluded by much of previous research. In the second part of the thesis, three papers study constraints on central bank behavior introduced by financial markets, using data from a set of small, open European economies during the 1980s and 1990s. The first of these papers tests how capital account liberalization and exchange-rate regime constrain monetary policy autonomy. Contrary to traditional theory, the paper finds no autonomy effect of exchange rate flexibility, whereas capital controls provided some (albeit limited) independence from innovations in foreign money market interest rates. The remaining two papers address how deregulation, innovation, and growth in domestic money markets interplay with central banks’ choices of monetary policy operating procedures. The analysis of the European countries suggests that while deregulation and the emergence of short-term financial markets constrained central bank discretion and compelled increased reliance on open market operations, the paths of money market development in different countries were also partially determined by the respective central banks’ decisions. In the final paper, the same framework of analysis is applied to China, which has announced its intention to rely increasingly on market operations in monetary policy. The results suggest that the disciplining effect of domestic financial markets on central bank behavior in China is so far very small, largely due to remaining de facto financial repression. en
dc.format.extent 271 s. en
dc.language eng en
dc.publisher Copenhagen Business School en
dc.relation.ispartofseries PhD Series;2009-8
dc.subject.other Finansielle markeder en
dc.subject.other Markedsadfærd en
dc.subject.other Banker en
dc.subject.other Ph.d.-afhandlinger en
dc.title Essays on market discipline in commercial and central banking en
dc.type phd en
dc.accessionstatus modt09apr14 jobrmo en
dc.contributor.corporation Copenhagen Business School. CBS en
dc.contributor.corporationshort PhD School in Economics and Management en
dc.contributor.department Institut for Finansiering en
dc.contributor.departmentshort FI en
dc.contributor.departmentuk Department of Finance en
dc.contributor.departmentukshort FI en
dc.idnumber 9788759383865 en Frederiksberg en
dc.publisher.year 2009 en

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