Findings from research and studies conducted at the Financial Research Center (FSA Institute) are organized and published as Discussion Papers to stimulate further discussion and comment.
The views expressed in the papers are those of the authors and do not necessarily reflect the views of the Financial Services Agency or the FSA Institute.
Discussion Papers (FY 2015)
|Application of Behavioral Economics to Financial Education: Shift in Focus from Behavioral Bias to Mindset Bias
Satoshi Kawanishi, Makiko Hashinaga
Abstract | Full text (PDF:1,769KB) (Full text is available only in Japanese.)
|A Model for Managing Interest Rate Risk in the Banking Book: A comparison between a modified earnings-based approach and economic value approach
Norio Hibiki, Junta Iwakuma
Abstract | Full text (PDF:5,793KB) (Full text is available only in Japanese.)
|An Analysis Based on the WTO/GATS and AFAS Financial Services Liberalization Commitment by Thailand and Indonesia from the Perspective of the Recent Developments in ASEAN’s Regional Integration
Abstract | Full text (PDF:1,831KB) (Full text is available only in Japanese.)
''Application of Behavioral Economics to Financial Education: Shift in Focus from Behavioral Bias to Mindset Bias''
Satoshi Kawanishi, Special Research Fellow, Financial Research Center
Makiko Hashinaga, Lecturer, Nagaoka University
This paper studies current research on how the findings of behavioral economics can be applied to provide more effective financial education. In the first part of the paper, we provide some examples of practical interventions where people’s behavioral bias is used proactively to modify the problematic financial behaviors of consumers. In the second part, focusing on the importance of people’s “mindset” about finance (that is, their feelings toward finance and/or thinking about finance), we conducted a survey to identify the effects of mindset on financial education. The survey revealed that (i) financial education has various effects on students’ mindsets; (ii) the outcome of financial education in terms of knowledge, proactivity, cautiousness, and interest tends to be better for students who have a positive mindset toward finance; and (iii) students who feel scared about finance tend to be inactive regarding matters related to finance. The survey results imply that, if there are biases in students’ mindsets, teachers would be able to provide more effective financial education by correcting these biases.
Keywords: behavioral economics, behavioral bias, mindset
''A Model for Managing Interest Rate Risk in the Banking Book: A comparison between a modified earnings-based approach and economic value approach''
Norio Hibiki, Special Research Fellow, Financial Research Center
Junta Iwakuma, Associate Research Fellow, Financial Research Center
The management of interest rate risk in the banking book is a significant issue for banks which earn profits by making loans and investing in securities using deposit funding. In practice, interest rate risk in the banking book has been discussed from the perspectives of both economic value and earnings. However, there is no clear consensus of opinion about which perspective is more important for banks.
In order to manage interest rate risk in the banking book, we develop a mathematical model that takes into account the characteristics of the complex banking book. The model also considers dependency relationships between interest rate risk and credit risk.
We examine the model through various sensitivity analyses using the Monte Carlo simulation, and we clarify the relationship between an economic value approach and earnings-based approach for interest rate risk management. To the best of our knowledge, there are no detailed studies conducted using such a practical model to manage interest rate risk in the banking book.
From the results of the analyses, we find that, to properly reflect the characteristics of the banking book in its risk management, we need to manage the risk from the earnings-based approach as well as the economic value approach.
Keywords: Interest rate risk, banking book, modified earnings-based approach, economic value approach, core deposits
''An Analysis Based on the WTO/GATS and AFAS Financial Services Liberalization Commitment by Thailand and Indonesia from the Perspective of the Recent Developments in ASEAN’s Regional Integration''
Mariko Kunimi, Special Research Fellow, Financial Research Center (FSA Institute)
Within ASEAN countries, the amount of trade in goods is increasing rapidly and such remarkable economic growth in this region is also promoting trade in financial services to increase gradually. It is essential to encourage further liberalization of the financial services sector for the development of economy in ASEAN.
By the end of 2015, the ASEAN Economic Community (AEC) will have been established, in line with the ASEAN Economic Blueprint adopted by the ASEAN leaders at the 13th ASEAN Summit in 2007. The establishment of the AEC is the goal of regional economic integration. Especially in terms of the financial services sector, the AEC aims to promote liberalization of barriers to trade such as financial services restrictions.
The Japanese Government is making great effort to provide technical assistance in areas such as financial services and human resource development to some of the ASEAN countries, such as Thailand and Indonesia.
This paper researches the progress of financial services liberalization in the ASEAN countries in relation to the AEC. It first introduces recent trends in ASEAN integration, and refers to the GATT/WTO round negotiations and GATS regulations. It also focuses on commercial banking services within many financial services sectors, which is one of the most essential industries in each nation.
Then, the paper conducts case studies of Thailand and Indonesia, for the purpose of enhancing Japanese international contribution. The reason for choosing these countries is that they are the target countries for the Japanese Government in building closer partnership through the Financial Services Agency (FSA), Japan. The FSA has been keen to promote cooperation with these countries and enhance the involvement of both the public and private financial sectors. These countries’ financial services sectors have strong potential to attain leading positions among the ASEAN countries in the future. However, they each have different weakness in their domestic financial systems. Therefore, the FSA can contribute through assistance and cooperation with these partner countries on a wide range of issues.
Keywords: financial services liberalization, ASEAN Economic Community (AEC), restrictions on foreign investment, GATS, ASEAN