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Linking Distress of Financial Institutions to Macrofinancial Shocks

Alexander Al-Haschimi, Stéphane Dées, Filippo di Mauro, Martina Jančoková
ECB Working Paper, No. 1749, 2014
Abstract
This paper links granular data of financial institutions to global macroeconomic variables using an infinite-dimensional vector autoregressive (IVAR) model framework. The approach taken allows for an assessment of the two-way links between the financial system and the macroeconomy, while accounting for heterogeneity among financial institutions and the role of international linkages in the transmission of shocks. The model is estimated using macroeconomic data for 21 countries and default probability estimates for 35 euro area financial institutions. This framework is used to assess the impact of foreign macroeconomic shocks on default risks of euro area financial firms. In addition, spillover effects of firm-specific shocks are investigated. The model captures the important role of international linkages, showing that economic shocks in the US can generate a rise in the default probabilities of euro area firms that are of a significant magnitude compared to recent historical episodes such as the financial crisis. Moreover, the potential heterogeneity across financial firms.
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Cross-border Interbank Networks, Banking Risk and Contagion

Lena Tonzer
FIW Working Paper Nr. 129, December, 2013
published in: Journal of Financial Stability
Abstract
Recent events emphasize the role of cross-border linkages between banking systems in transmitting local developments across national borders. This paper analyzes whether international linkages in interbank markets affect the stability of interconnected banking systems and channel financial distress within a network consisting of banking systems of main advanced countries for the period 1993-2009. Methodologically, I use a spatial modelling approach to test for spillovers in cross-border interbank markets. The results suggest that foreign exposures in banking play a significant role in channelling banking risk: I find that countries which are linked through foreign borrowing or lending positions to more stable banking systems abroad are significantly affected by positive spillover effects. From a policy point of view, this implies that especially in stable times linkages in the banking system can be beneficial, while they have to be taken with caution in times of financial turmoil covering the hole system.
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Internationalisation Theory and Technological Accumulation - An Investigation of Multinational Affiliates in East Germany

Björn Jindra
, 2010
Abstract
This dissertation applies the theory of technology accumulation to explain the internationalisation of foreign and West German multinational enterprises (MNEs) into East Germany. This theory shifts the focus from technology transfer to the international diffusion of innovation within the MNE. It rejects the position that all MNEs offer the same technological opportunities to host economies. Yet, most of the existing empirical research on postcommunist transition economies including East Germany applies the traditional technology transfer perspective. Therefore, this dissertation provides a complementary and novel approach. We assume a dynamic interaction between existing location specific technological capabilities within the host country, MNEs’ location choice, their internationalisation of research and development (R&D) and innovation, and the potential for technological spillover effects from MNEs to the host economy. The dissertation exploits information from the IWH FDI micro database on the full population of MNEs that entered East German manufacturing until 2005 and corresponding survey data. Microeconometric estimation results generate a number of novel findings: We can show that existing location specific technological capabilities affect MNEs’ general location choice within East Germany. They are not powerful enough to attract MNEs’ technological activities. Instead, the location of MNEs’ innovation requires the joint presence of technological and industry specialisation within regions, whereas foreign R&D benefits from technological specialisation in combination with a diversified industry structure. Moreover, the location of technological activity differs depending upon the underlying motive for internationalisation. Our findings suggest that the potential for technological externalities from affiliates to local firms is subject to centrally and locally driven technological heterogeneity of MNEs. Existing location specific technological capabilities do not affect the spillover potential. This hints a limited dynamic interaction of ownership and locational advantages in firms’ internationalisation. We derive implications for the technology accumulation theory as well as for various fields of science and technology policy.
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Subsidiary Roles, Vertical Linkages and Economic Development: Lessons from Transition Economies

Björn Jindra, Axèle Giroud, J. Scott-Kennel
Journal of World Business, 2009
Abstract
Vertical supply chain linkages between foreign subsidiaries and domestic ?rms are important mechanisms for knowledge spillovers, contributing to the economic development of host economies. This paper argues that subsidiary roles and technological competences affect the extent of vertical linkages as such as well as their potential for technological spillovers. Using survey evidence from 424 foreign subsidiaries based in transition economies, we tested for the effect of subsidiaries’ autonomy, initiative, technological capability, internal and external technological embeddedness on the extent and intensity of forward and backward vertical linkages. The evidence supports our main argument that the potential of technology diffusion via vertical linkages depends on the nature of subsidiary roles. We discuss the implications for transition as well as other developing countries.
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14
JUN 2021
14:00 - 15:30

IWH Research Seminar

Virtual Lecture: Production Networks and International Fiscal Spillovers

Who
Changhua Yu (Peking University)
Where
via Zoom

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17
MAR 2014
18
MAR 2014

Workshops and conferences

4th IWH/INFER Workshop on Applied Economics and Economic Policy: A New Fiscal Capacity for the EU?

Who
Keynote Speakers: Lars Feld (Walter-Eucken-Institute Freiburg and German Council of Economic Experts); Helge Berger (IMF and FU Berlin)
Where
IWH conference room

The Halle Institute for Economic Research (IWH) and the International Network for Economic Research (INFER) were organising a workshop on risk spillover, current challenges for sustainable fiscal policy, and evaluations of pan-European transfers.

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17
SEP 2015
18
SEP 2015

Workshops and conferences

5th IWH/INFER Workshop on Applied Economics and Economic Policy: Trade and Capital Liberalisations – Boost for Growth or Bane of Spillover?

Who
Keynote Speakers: Arnoud Boot (University of Amsterdam); Jeromin Zettelmeyer (Federal Ministry for Economic Affairs and Energy, Berlin)
Where
IWH conference room

The Halle Institute for Economic Research (IWH) and the International Network for Economic Research (INFER) were organising a workshop on risk spillover, current challenges for sustainable fiscal policy, and evaluations of pan-European transfers.

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