Financial Stability and Central Bank Governance
Michael Koetter, Kasper Roszbach, G. Spagnolo
International Journal of Central Banking,
No. 4,
2014
Abstract
The financial crisis has ignited a debate about the appropriate objectives and the governance structure of Central Banks. We use novel survey data to investigate the relation between these traits and banking system stability focusing in particular on their role in micro-prudential supervision. We find that the separation of powers between single and multiple bank supervisors cannot explain credit risk prior or during the financial crisis. Similarly, a large number of Central Bank governance traits do not correlate with system fragility. Only the objective of currency stability exhibits a significant relation with non-performing loan levels in the run-up to the crisis. This effect is amplified for those countries with most frequent exposure to IMF missions in the past. Our results suggest that the current policy discussion whether to centralize prudential supervision under the Central Bank and the ensuing institutional changes some countries are enacting may not produce the improvements authorities are aiming at. Whether other potential improvements in prudential supervision due to, for example, external disciplinary devices, such as IMF conditional lending schemes, are better suited to increase financial stability requires further research.
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The Impact of Local Factors on the Scope of Benefits from Public Investment: The Case of Tourism Infrastructure in Saxon Municipalities
Martin T. W. Rosenfeld, Albrecht Kauffmann
Urban Research & Practice,
No. 3,
2014
Abstract
Following the transition from socialist central planning economies to market economies in all of the former socialist countries, many regions have had to cope with severe structural changes and economic development problems. To overcome these problems, local governments have tried to invest in new public infrastructure to support the development of new industries. This paper looks at infrastructure that supports tourist activities and argues that the impact of infrastructure generally depends on certain local factors which differ between municipalities. One important factor is whether the local population possesses the relevant complementary factors, in particular the right ‘soft skills’.
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College Choice Allocation Mechanisms: Structural Estimates and Counterfactuals
J.-R. Carvalho, T. Magnac, Qizhou Xiong
Abstract
We evaluate a simple allocation mechanism of students to majors at college entry that was commonly used in universities in Brazil in the 1990s and 2000s. Students first chose a single major and then took exams that select them in or out of the chosen major. The literature analyzing student placement, points out that this decentralized mechanism is not stable and is not strategy-proof. This means that some pairs of major & students can be made better off and that students tend to disguise their preferences using such a mechanism. We build up a model of performance and school choices in which expectations are carefully specified and we estimate it using cross-section data reporting choices between two medical schools and grade performances at the entry exams. Given those estimates, we evaluate changes in selection and students’ expected utilities when other mechanisms are implemented. Results highlight the importance of strategic motives and redistributive effects of changes of the allocation mechanisms.
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Evaluation of the Main Achievements of Cohesion Policy Programmes over the Longer Term in 15 Selected Regions (from 1989-1993 Programming Period to the Present) (2011.CE.16.B.AT.015): Case Study Sachsen-Anhalt
Marina Grusevaja, Gerhard Heimpold, O. Schwab, K. Schwarze
Analyse: Bewertungen des Programmplanungszeitraums,
2013
Abstract
Sachsen-Anhalt’s regional development has been heavily determined by the transition from a centrally planned economy to a market economy after German unification in 1990. The process of transition took place during the 1990s as the formal rules associated with a market economy system were adopted. Nevertheless, a number of structural peculiarities which have their roots in the transition period continue to have an impact. This feature is not specific to Sachsen-Anhalt; it concerns all East German regions.
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Towards a Theory of Climate Innovation - A Model Framework for Analyzing Drivers and Determinants
Wilfried Ehrenfeld
Journal of Evolutionary Economics,
2013
Abstract
In this article, we describe the results of a multiple case study on the indirect corporate innovation impact of climate change in the Central German chemical industry. We investigate the demands imposed on enterprises in this context as well as the sources, outcomes and determining factors in the innovative process at the corporate level. We argue that climate change drives corporate innovations through various channels. A main finding is that rising energy prices were a key driver for incremental energy efficiency innovations in the enterprises’ production processes. For product innovation, customer requests were a main driver, though often these requests are not directly related to climate issues. The introduction or extension of environmental and energy management systems as well as the certification of these are the most common forms of organizational innovations. For marketing purposes, the topic of climate change was hardly utilized so far. As the most important determinants for corporate climate innovations, corporate structure and flexibility of the product portfolio, political asymmetry regarding environmental regulation and governmental funding were identified.
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Has the Euro Increased International Price Elasticities?
Oliver Holtemöller, Götz Zeddies
Empirica,
No. 1,
2013
Abstract
The introduction of the Euro has been accompanied by the hope that international competition between EMU member states would increase due to higher price transparency. This paper contributes to the literature by analyzing price elasticities in international trade flows between Germany and France and between Germany and the United Kingdom before and after the introduction of the Euro. Using disaggregated Eurostat trade statistics, we adopt a heterogeneous dynamic panel framework for the estimation of price elasticities. We suggest a Kalman-filter approach to control for unobservable quality changes which otherwise would bias estimates of price elasticities. We divide the complete sample, which ranges from 1995 to 2008, into two sub-samples and show that price elasticities in trade between EMU members did not change substantially after the introduction of the Euro. Hence, we do not find evidence for an increase in international price competition resulting from EMU.
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Testing for Structural Breaks at Unknown Time: A Steeplechase
Makram El-Shagi, Sebastian Giesen
Computational Economics,
No. 1,
2013
Abstract
This paper analyzes the role of common data problems when identifying structural breaks in small samples. Most notably, we survey small sample properties of the most commonly applied endogenous break tests developed by Brown et al. (J R Stat Soc B 37:149–163, 1975) and Zeileis (Stat Pap 45(1):123–131, 2004), Nyblom (J Am Stat Assoc 84(405):223–230, 1989) and Hansen (J Policy Model 14(4):517–533, 1992), and Andrews et al. (J Econ 70(1):9–38, 1996). Power and size properties are derived using Monte Carlo simulations. We find that the Nyblom test is on par with the commonly used F type tests in a small sample in terms of power. While the Nyblom test’s power decreases if the structural break occurs close to the margin of the sample, it proves far more robust to nonnormal distributions of the error term that are found to matter strongly in small samples although being irrelevant asymptotically for all tests that are analyzed in this paper.
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Bank Bailouts and Moral Hazard: Evidence from Germany
Lammertjan Dam, Michael Koetter
Review of Financial Studies,
No. 8,
2012
Abstract
We use a structural econometric model to provide empirical evidence that safety nets in the banking industry lead to additional risk taking. To identify the moral hazard effect of bailout expectations on bank risk, we exploit the fact that regional political factors explain bank bailouts but not bank risk. The sample includes all observed capital preservation measures and distressed exits in the German banking industry during 1995–2006. A change of bailout expectations by two standard deviations increases the probability of official distress from 6.6% to 9.4%, which is economically significant.
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Determinants of Evolutionary Change Processes in Innovation Networks – Empirical Evidence from the German Laser Industry
Muhamed Kudic, Andreas Pyka, Jutta Günther
Abstract
We seek to understand the relationship between network change determinants, network change processes at the micro level and structural consequences at the overall network level. Our conceptual framework considers three groups of determinants – organizational, relational and contextual. Selected factors within these groups are assumed to cause network change processes at the micro level – tie formations and tie terminations – and to shape the structural network configuration at the overall network level. We apply a unique longitudinal event history dataset based on the full population of 233 German laser source manufacturers and 570 publicly-funded cooperation projects to answer the following research question: What kind of exogenous or endogenous determinants affect a firm’s propensity and timing to cooperate and enter the network? Estimation results from a non-parametric event history model indicate that young micro firms enter the network later than small-sized and large firms. An in-depth analysis of the size effects for medium-sized firms provides some unexpected yet quite interesting findings. The choice of cooperation type makes no significant difference for the firms’ timing to enter the network. Finally, the analysis of contextual determinants shows that cluster membership can, but do not necessarily, affect a firm’s timing to cooperate.
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Monetary Policy in a World Where Money (Also) Matters
Makram El-Shagi, Sebastian Giesen
IWH Discussion Papers,
No. 6,
2012
Abstract
While the long-run relation between money and inflation as predicted by the quantity theory is well established, empirical studies of the short-run adjustment process have been inconclusive at best. The literature regarding the validity of the quantity theory within a given economy is mixed. Previous research has found support for quantity theory within a given economy by combining the P-Star, the structural VAR and the monetary aggregation literature. However, these models lack precise modelling of the short-run dynamics by ignoring interest rates as the main policy instrument. Contrarily, most New Keynesian approaches, while excellently modeling the short-run dynamics transmitted through interest rates, ignore the role of money and thus the potential mid-and long-run effects of monetary policy. We propose a parsimonious and fairly unrestrictive econometric model that allows a detailed look into the dynamics of a monetary policy shock by accounting for changes in economic equilibria, such as potential output and money demand, in a framework that allows for both monetarist and New Keynesian transmission mechanisms, while also considering the Barnett critique. While we confirm most New Keynesian findings concerning the short-run dynamics, we also find strong evidence for a substantial role of the quantity of money for price movements.
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