Uncertainty, Bank Lending, and Bank-level Heterogeneity
Claudia M. Buch, Manuel Buchholz, Lena Tonzer
IMF Economic Review,
No. 4,
2015
Abstract
We analyze how uncertainty affects bank lending. We measure uncertainty as the cross-sectional dispersion of shocks to bank-level variables. Comparing this measure of uncertainty in banking to more traditional measures of uncertainty, we find similar but no identical patterns. Higher uncertainty in banking has negative effects on bank lending. This effect is heterogeneous across banks: lending by banks that are better capitalized and have higher liquidity buffers tends to be affected less. Also, the degree of internationalization matters, as loan supply by banks in financially open countries is affected less by uncertainty. The impact of the ownership status of the individual bank is less important, in contrast.
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Support for Public Research Spin-offs by the Parent Organizations and the Speed of Commercialization
Viktor Slavtchev, D. Göktepe-Hultén
Abstract
We empirically analyze whether support by the parent organization in the early (nascent and seed) stage speeds up the process of commercialization and helps spin-offs from public research organizations generate first revenues sooner. To identify the impact of support by the parent organization, we apply multivariate regression techniques as well as an instrumental variable approach. Our results show that support in the early stage by the parent organization can speed up commercialization. Moreover, we identify two distinct channels - the help in developing a business plan and in acquiring external capital - through which support by the parent organization can enable spin-offs to generate first revenues sooner.
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EFN Report Autumn 2015: Economic Outlook for the Euro Area in 2015 and 2016
European Forecasting Network Reports,
No. 4,
2015
Abstract
For the end of this year and for 2016, chances are good that production in advanced economies will continue to expand a bit faster than at trend rates, while growth dynamics in emerging markets economies will not strengthen or even continue to decrease.
Since autumn 2014, production in the euro area expands at an annualized rate of about 1.5%. The recovery appears to be broad based, with contributions from private consumption, exports, and investment into fixed capital, although it fell back in the second quarter after a strong increase at the beginning of the year. From a regional perspective, the recovery is as well quite broad based: production is expanding in almost every country, surprisingly and according to official data, including Greece.
Structural impediments still limit the ability of the euro area economy to grow strongly: firms and, in particular, private households are only slowly reducing their heavy debt burdens.
According to our forecasts, the euro area GDP will grow by 1.6% in 2015 and by 1.9% in 2016. The high increase in the number of refugees in 2015 will, in principle, positively affect private as well as public consumption, but the effect should be below 0.1 percentage points relative to GDP.
Our inflation forecast for 2015 is 0.1%. For 2016, we expect that inflation will increase to 1.3%, which is still below the ECB’s target of 2%.
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Banks and Sovereign Risk: A Granular View
Claudia M. Buch, Michael Koetter, Jana Ohls
Abstract
We identify the determinants of all German banks’ sovereign debt exposures between 2005 and 2013 and test for the implications of these exposures for bank risk. Larger, more capital market affine, and less capitalised banks hold more sovereign bonds. Around 15% of all German banks never hold sovereign bonds during the sample period. The sensitivity of sovereign bond holdings by banks to eurozone membership and inflation increased significantly since the collapse of Lehman Brothers. Since the outbreak of the sovereign debt crisis, banks prefer sovereigns with lower debt ratios and lower bond yields. Finally, we find that riskiness of government bond holdings affects bank risk only since 2010. This confirms the existence of a nexus between government debt and bank risk.
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Young, Restless and Creative: Openness to Disruption and Creative Innovations
Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik
NBER Working Paper,
No. 19894,
2015
Abstract
This paper argues that openness to new, unconventional and disruptive ideas has a first-order impact on creative innovations—innovations that break new ground in terms of knowledge creation. After presenting a motivating model focusing on the choice between incremental and radical innovation, and on how managers of different ages and human capital are sorted across different firms with different degrees of openness to disruption, we provide firm-level, patent level and cross-country evidence consistent with this pattern. Our measures of creative innovations proxy for innovation quality (average number of citations per patent) and creativity (fraction of superstar innovators, the likelihood of a very high number of citations, and generality of patents). Our main proxy for openness to disruption is the age of the manager - based on the idea that only companies or societies open to such disruption will allow the young to rise up within the hierarchy. Using this proxy at the firm, patent and country level, we present robust evidence that openness to disruption is associated with more creative innovations, but we also show that once the effect of the sorting of young managers to firms that are more open to disruption is factored in, the (causal) impact of manager age on creative innovations is small.
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Does Going Public Affect Innovation?
Shai B. Bernstein
Journal of Finance,
No. 4,
2015
Abstract
This paper investigates the effects of going public on innovation by comparing the innovation activity of firms that go public with firms that withdraw their initial public offering (IPO) filing and remain private. NASDAQ fluctuations during the book-building phase are used as an instrument for IPO completion. Using patent-based metrics, I find that the quality of internal innovation declines following the IPO, and firms experience both an exodus of skilled inventors and a decline in the productivity of the remaining inventors. However, public firms attract new human capital and acquire external innovation. The analysis reveals that going public changes firms' strategies in pursuing innovation.
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Monetary Policy under the Microscope: Intra-bank Transmission of Asset Purchase Programs of the ECB
L. Cycon, Michael Koetter
IWH Discussion Papers,
No. 9,
2015
Abstract
With a unique loan portfolio maintained by a top-20 universal bank in Germany, this study tests whether unconventional monetary policy by the European Central Bank (ECB) reduced corporate borrowing costs. We decompose corporate lending rates into refinancing costs, as determined by money markets, and markups that the bank is able to charge its customers in regional markets. This decomposition reveals how banks transmit monetary policy within their organizations. To identify policy effects on loan rate components, we exploit the co-existence of eurozone-wide security purchase programs and regional fiscal policies at the district level. ECB purchase programs reduced refinancing costs significantly, even in an economy not specifically targeted for sovereign debt stress relief, but not loan rates themselves. However, asset purchases mitigated those loan price hikes due to additional credit demand stimulated by regional tax policy and enabled the bank to realize larger economic margins.
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Consequences of China’s Opening to Foreign Banks
Ran Li, Xiang Li, Wen Lei, Yiping Huang
L. Song, R. Garnaut, C. Fang, L. Johnston (Hrsg.), China's Domestic Transformation in a Global Context. Acton: ANU Press,
forthcoming
Abstract
China’s government has recently implemented additional reforms to relax the regulatory environment for foreign banks. Specifically, State Council Order No. 657, signed by Premier Li Keqiang, announced a decision to revise the Regulations of the People’s Republic of China on the Administration of Foreign-Funded Banks, effective from 1 January 2015. Implications of the revised regulations include removal of the requirement that a minimum of RMB100 million operating capital be transferred unconditionally from the overseas parent bank to the newly opened Chinese branch. In addition, in terms of the conditions attached to the right to carry out RMB-denominated activity, foreign banks are now eligible to apply to undertake local currency business after operating in China for one year—down from the previous three years. The requirement for two consecutive years of profit will be scrapped as well.
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On the Twin Deficits Hypothesis and the Import Intensity in Transition Countries
Hubert Gabrisch
International Economics and Economic Policy,
No. 2,
2015
Abstract
This article aims to explain the increasing deficits in the trade and current account balances of three post-transition countries–Czech Republic, Hungary, and Poland–by testing two hypotheses: the twin deficit hypothesis and increasing import intensity of export production. The method uses co-integration and related techniques to test for a long-run causal relationship between the fiscal and external deficits of three post-transition countries in Central and Eastern Europe. In addition, an import intensity model is tested by applying OLS and GMM. All the results reject the Twin Deficits Hypothesis. Instead, the results demonstrate that specific transition factors such as net capital flows and, probably, a high import intensity of exports affect the trade balance.
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The Euro Plus Pact: Competitiveness and External Capital Flows in the EU Countries
Hubert Gabrisch, K. Staehr
Journal of Common Market Studies,
No. 3,
2015
Abstract
The Euro Plus Pact was approved by the European Union countries in March 2011. The pact stipulates various measures to strengthen competitiveness with the ultimate aim of preventing accumulation of unsustainable external imbalances. This article uses Granger causality tests to assess the short-term linkages between changes in relative unit labour costs and changes in the current account balance for the period 1995–2011. The main finding is that changes in the current account balance precede changes in relative unit labour costs, while there is no discernible effect in the opposite direction. This suggests that capital flows from the European core to the periphery contributed to the divergence in unit labour costs across Europe prior to the global financial crisis. The results also suggest that the measures to restrain unit labour costs may have only limited effect on the current account balance in the short term.
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