Central Bank Transparency and the Volatility of Exchange Rates
Stefan Eichler, Helge Littke
Journal of International Money and Finance,
2018
Abstract
We analyze the effect of monetary policy transparency on bilateral exchange rate volatility. We test the theoretical predictions of a stylized model using panel data for 62 currencies from 1998 to 2010. We find strong evidence that an increase in the availability of information about monetary policy objectives decreases exchange rate volatility. Using interaction models, we find that this effect is more pronounced for countries with a lower flexibility of goods prices, a lower level of central bank conservatism, and a higher interest rate sensitivity of money demand.
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A Market-based Measure for Currency Risk in Managed Exchange Rate Regimes
Stefan Eichler, Ingmar Roevekamp
Journal of International Financial Markets, Institutions and Money,
November
2018
Abstract
We introduce a novel currency risk measure based on American Depositary Receipts (ADRs). Using an augmented ADR pricing model, we exploit investors’ exposure to potential devaluation losses to derive an indicator of currency risk. Using weekly data for a sample of 807 ADRs located in 21 emerging markets over the 1994–2014 period, we find that a deterioration in the fiscal balance and higher inflation increase currency risk. Interaction models reveal that the fiscal balance and inflation drive the determination of currency risk for countries with poor sovereign rating, low foreign reserves, low capital account openness and managed float regimes.
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Avoiding the Fall into the Loop: Isolating the Transmission of Bank-to-Sovereign Distress in the Euro Area and its Drivers
Hannes Böhm, Stefan Eichler
Abstract
We isolate the direct bank-to-sovereign distress channel within the eurozone’s sovereign-bank-loop by exploiting the global, non-eurozone related variation in stock prices. We instrument banking sector stock returns in the eurozone with exposure-weighted stock market returns from non-eurozone countries and take further precautions to remove any eurozone crisis-related variation. We find that the transmission of instrumented bank distress, while economically relevant, is significantly smaller than the corresponding coefficient in the unadjusted OLS framework, confirming concerns on reverse causality and omitted variables in previous studies. Furthermore, we show that the spillover of bank distress is significantly stronger for countries with poorer macroeconomic performances, weaker financial sectors and financial regulation and during times of elevated political uncertainty.
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Expectation Formation, Financial Frictions, and Forecasting Performance of Dynamic Stochastic General Equilibrium Models
Oliver Holtemöller, Christoph Schult
Abstract
In this paper, we document the forecasting performance of estimated basic dynamic stochastic general equilibrium (DSGE) models and compare this to extended versions which consider alternative expectation formation assumptions and financial frictions. We also show how standard model features, such as price and wage rigidities, contribute to forecasting performance. It turns out that neither alternative expectation formation behaviour nor financial frictions can systematically increase the forecasting performance of basic DSGE models. Financial frictions improve forecasts only during periods of financial crises. However, traditional price and wage rigidities systematically help to increase the forecasting performance.
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Auswirkungen des gesetzlichen Mindestlohns im Handwerk in Sachsen-Anhalt
Hans-Ulrich Brautzsch, Birgit Schultz
Zeitschrift für Wirtschaftspolitik,
No. 2,
2018
Abstract
This paper examines the effects of the minimum wage introduction in Germany in 2015 on the skilled crafts sector in Saxony-Anhalt.
Using novel survey data on the skilled crafts sector in Saxony-Anhalt, we examine three questions: (1) How many employees are affected by the minimum wage introduction in the skilled crafts sector in Saxony-Anhalt? (2) What are the effects of the minimum wage introduction? (3) How did firms react to wage increase?
We find that about 8 % of all employees in the skilled crafts sector in Saxony-Anhalt are directly affected by the minimum wage introduction. A difference-in-difference estimation reveals no significant employment effects of the minimum wage introduction. We test for alternative adjustment strategies and observe a significant increase of output prices.
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Moral und Aktienerträge: Die Rolle von Dividenden und ethischen Bedenken bei der Bewertung von „Sin Stocks“
Stefano Colonnello, Talina Sondershaus
Wirtschaft im Wandel,
No. 3,
2018
Abstract
Forschungsergebnisse aus den letzten Jahren zeigen: Renditen von so genannten „Sin Stocks“, das heißt Aktien von Unternehmen, die aus Sicht der Investoren moralisch verwerflichen Tätigkeiten nachgehen, sind durchschnittlich höher als Renditen anderer Unternehmen. Aber warum gibt es hier einen Unterschied, und was könnten die Faktoren sein, die diesen Unterschied hervorrufen? Ein neues Arbeitspapier des IWH zeigt theoretisch und datenbasiert, wodurch unterschiedliche Renditen hervorgerufen werden. Dabei werden bisherige Erklärungsversuche, die auf dem so genannten „Boykott-Risiko“ basieren, um neue Ansätze ergänzt. Es werden zunächst in einem theoretischen Rahmen Situationen beschrieben, in denen die Möglichkeit, ethische Ansprüche der Investoren durch höhere Dividendenzahlungen zu ersetzen, sowie die Risikobereitschaft der Investoren die zentrale Rolle für unterschiedliche Renditen spielen. Im zweiten Teil werden diese hypothetischen Szenarien anhand von Daten zu US-Firmen über 50 Jahre getestet. Es zeigt sich, dass insbesondere Investoren, die sehr risikoscheu sind und lieber höhere Dividendenzahlungen von Unternehmen erhalten würden, die ihren ethischen Ansprüchen genügen, für ihr eingegangenes Risiko mittels höherer Erträge kompensiert werden wollen.
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Kommentar: 30 Jahre DAX
Reint E. Gropp
Wirtschaft im Wandel,
No. 3,
2018
Abstract
Gerade ist der Deutsche Aktienindex DAX 30 Jahre alt geworden, und es gibt viel zu feiern. Preisbereinigt hätte ein Investment von 1 000 Euro, angelegt am DAX-Eröffnungstag 1. Juli 1988, heute einen Wert von über 6 000 Euro, hätte sich also versechsfacht!
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Channeling the Iron Ore Super-cycle: The Role of Regional Bank Branch Networks in Emerging Markets
Helge Littke
IWH Discussion Papers,
No. 11,
2018
Abstract
The role of the financial system to absorb and to intermediate commodity boom induced windfall gains efficiently presents one of the most pressing issues for developing economies. Using an exogenous increase in iron ore prices in March 2005, I analyse the role of regional bank branch networks in Brazil in reallocating capital from affected to non-affected regions. For the period from March 2004 to March 2006, I find that branches directly exposed to this shock by their geographical location experience an increase in deposit growth in the post-shock period relative to non-affected branches. Given that these deposits are not reinvested locally, I further show that branches located in the non-affected region increase lending growth depending on their indirect exposure to the booming regions via their branch network. Even tough, these results provide evidence against a Dutch Disease type crowding out of the non-iron ore sector, further evidence suggests that this capital reallocation is far from being optimal.
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