The Performance of Domestic and Foreign Banks: The Case of Korea and the Asian Financial Crisis

This paper considers the performance of banks, domestic and foreign, in Korea prior to, during, and immediately after the Asian financial crisis, examining how the profitability of those banks differed and identifying factors that explain why those differences existed. The performance of Korean banks deteriorated dramatically in 1998 with most banks recovering somewhat in 1999. Foreign banks did not experience the same negative effect on their returns on assets and equity as a rule. Several standard findings emerge. For example, equity to assets correlates positively with domestic, but not foreign, bank performance, as measured by the returns on assets and equity, even when the government recapitalized institutions that were performing quite badly. Also, foreign-currency deposits significantly and negatively correlate with domestic Korean bank performance, although only in the post-crisis period for regional banks. In sum, the domestic Korean banks suffered more severely from the Asian financial crisis than foreign banks.

Measuring Potential Output and Output Gap and Macroeconomic Policy: The Case of Kenya

Measuring the level of an economy.s potential output and output gap are essential in identifying a sustainable non-inflationary growth and assessing appropriate macroeconomic policies. The estimation of potential output helps to determine the pace of sustainable growth while output gap estimates provide a key benchmark against which to assess inflationary or disinflationary pressures suggesting when to tighten or ease monetary policies. These measures also help to provide a gauge in the determining the structural fiscal position of the government. This paper attempts to measure Kenya.s potential output and output gap using alternative statistical techniques and structural methods. Estimation of potential output and output gap using these techniques shows varied results. The estimated potential output growth using different methods gave a range of .2.9 to 2.4 percent for 2000 and a range of .0.8 to 4.6 for 2001. Although various methods produce varied results, they however provided a broad consensus on the over-all trend and performance of the Kenyan economy. This study found that firstly, potential output growth is declining over the recent time and secondly, the Kenyan economy is contracting in the recent years.

Forecasting and Analyzing Economic Activity with Coincident and Leading Indexes: The Case of Connecticut

We develop coincident and leading employment indexes for the Connecticut economy. Four employment-related variables enter the coincident index while five employment-related variables enter the leading index. The peaks and troughs in the leading index lead the peaks and troughs in the coincident index by an average of 3 and 9 months. Finally, we use the leading index in vector-autoregressive (VAR) and Bayesian vector-autoregressive (BVAR) models to forecast the coincident index, nonfarm employment, and the unemployment rate.