Uncertainty, financial fragility and monitoring: Will Basle-type pragmatism resolve the Japanese banking crisis?
AbstractThis paper argues that the naive adoption of an Anglo-American approach to the management of credit risk as the prescription for Japan's prolonged financial slump would amount to a very risky strategy. The neoclassical arguments for the adoption of Basle-type pragmatism and the adoption of Anglo-American financial norms neglect the important question of how to manage Japanese lenders' uncertainty, which affects their assessment of credit risk. We point out that an ill-planned transition without mechanisms for diversifying risk and uncertainty has encouraged herd behavior in lending. We also argue that Japan's traditional rent-based mode of financial intermediation and monitoring performed important functions, including the incubation of new enterprises, and should have been retained in alternative form rather than abandoned.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Review of Political Economy.
Volume (Year): 17 (2005)
Issue (Month): 1 ()
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- Eric Tymoigne, 2010. "Detecting Ponzi Finance: An Evolutionary Approach to the Measure of Financial Fragility," Economics Working Paper Archive wp_605, Levy Economics Institute, The.
- Eric Tymoigne, 2012. "Measuring Macroprudential Risk through Financial Fragility: A Minskyan Approach," Economics Working Paper Archive wp_716, Levy Economics Institute, The.
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