30.11.2022 • 28/2022
Stricter rules for banks can relieve real estate markets
Exuberant price levels in the German real estate market could further exacerbate an economic crisis. Fiscal instruments exert too little influence to contain this danger, shows a study by the Halle Institute for Economic Research (IWH).
Michael Koetter
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Real Estate Transaction Taxes and Credit Supply
Michael Koetter, Philipp Marek, Antonios Mavropoulos
IWH Discussion Papers,
No. 26,
2022
Abstract
We exploit staggered real estate transaction tax (RETT) hikes across German states to identify the effect of house price changes on mortgage credit supply. Based on approximately 33 million real estate online listings, we construct a quarterly hedonic house price index (HPI) between 2008:q1 and 2017:q4, which we instrument with state-specific RETT changes to isolate the effect on mortgage credit supply by all local German banks. First, a RETT hike by one percentage point reduces HPI by 1.2%. This effect is driven by listings in rural regions. Second, a 1% contraction of HPI induced by an increase in the RETT leads to a 1.4% decline in mortgage lending. This transmission of fiscal policy to mortgage credit supply is effective across almost the entire bank capitalization distribution.
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The Gender Reveal: The Effect of Sons on Young Fathers’ Criminal Behavior and Labor Market Activities
Kabir Dasgupta, André Diegmann, Tom Kirchmaier, Alexander Plum
Labour Economics,
October
2022
Abstract
Based on New Zealand’s administrative court charges data, we document child gender-specific differences in future criminal behavior of young fathers. The deterrent impact of having a son on the future likelihood of receiving convictions persists for as long as ten years post-childbirth. Utilizing population-wide monthly tax registers and Census data, we provide key insights into the role model hypothesis. We show that young fathers with a son have (i) a higher likelihood of being in employment, (ii) higher wages and salaries, (iii) lower benefit dependency, (iv) better qualification, and (v) a higher likelihood of being in a partnered relationship.
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The Impact of Financial Transaction Taxes on Stock Markets: Short-Run Effects, Long-Run Effects, and Reallocation of Trading Activity
Sebastian Eichfelder, Mona Noack, Felix Noth
National Tax Journal,
No. 3,
2022
Abstract
We investigate the French 2012 financial transaction tax (FTT) and find robust evidence for anticipation effects before the implementation date. Controlling for short-run effects, we only find weak evidence for a long-run reduction in trading activity. Thus, the main impact of the French FTT on trading activity is short-run. In line with liquidity clientele effects, we find a more potent effect for low-liquidity stocks and a reallocation of trading to high-liquidity stocks from the Supplemental Liquidity Provider (SLP) program. Finally, we find weak evidence for a persistent volatility reduction but no indication of a significant FTT impact on price efficiency.
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The Impact of Financial Transaction Taxes on Stock Markets: Short-run Effects, Long-run Effects, and Reallocation of Trading Activity
Sebastian Eichfelder, Mona Noack, Felix Noth
Abstract
We investigate the impact of the French 2012 financial transaction tax on trading activity, volatility, and price efficiency measured by first-order autocorrelation. We extend empirical research by analysing anticipation and reallocation effects. In addition, we consider measures for long-run volatility and first-order autocorrelation that have not been explored yet. We find robust evidence for anticipation effects before the effective date of the French FTT. Controlling for short-run effects, we only find weak evidence for a long-run reduction of trading activity due to the French FTT. Thus, the main impact of the French FTT on trading activity is short-run. We find stronger reactions of low-liquidity treated stocks and a reallocation of trading activity to high-liquidity stocks participating in the Supplemental Liquidity Provider Programme, which is both in line with liquidity clientele effects. Finally, we find weak evidence for a persistent volatility reduction but no indication for a significant FTT impact on price efficiency measured by first-order autocorrelation.
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The Effect of Foreign Institutional Ownership on Corporate Tax Avoidance: International Evidence
Iftekhar Hasan, Incheol Kim, Haimeng Teng, Qiang Wu
Journal of International Accounting, Auditing and Taxation,
March
2022
Abstract
We find that foreign institutional investors (FIIs) reduce their investee firms’ tax avoidance. We provide evidence that the effect is driven by the institutional distance between FIIs’ home countries/regions and host countries/regions. Specifically, we find that the effect is driven by the influence of FIIs from countries/regions with high-quality institutions (i.e., common law, high government effectiveness, and high regulatory quality) on investee firms located in countries/regions with low-quality institutions. Furthermore, we show that the effect is concentrated on FIIs with little experience in the investee countries/regions or FIIs with stronger monitoring incentives. Finally, we find that FIIs are more likely to vote against management if the firm has a higher level of tax avoidance.
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Hysteresis from Employer Subsidies
Emmanuel Saez, Benjamin Schoefer, David Seim
Journal of Public Economics,
August
2021
Abstract
This paper uses administrative data to analyze a large and 8-year long employer payroll tax rate cut in Sweden for young workers aged 26 or less. We replicate previous results documenting that during the earlier years of the reform, it raised youth employment among the treated workers, driven by labor demand (as workers’ take-home wages did not respond). First, drawing on additional years of data, this paper then documents that the longer-run effects during the reform are twice as large as the medium-run effects. Second, we document novel labor-demand-driven “hysteresis” from this policy – i.e. persistent employment effects even after the subsidy no longer applies – along two dimensions. Over the lifecycle, employment effects persist even after workers age out of eligibility. Three years after the repeal, employment remains elevated at the maximal reform level in the formerly subsidized ages. These hysteresis effects more than double the direct employment effects of the reform. Discrimination against young workers in job posting fell during the reform and does not bounce back after repeal, potentially explaining our results.
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Fiscal Policy and Fiscal Fragility: Empirical Evidence from the OECD
Makram El-Shagi, Gregor von Schweinitz
Journal of International Money and Finance,
July
2021
Abstract
In this paper, we use local projections to investigate the impact of consolidation shocks on GDP growth, conditional on the fragility of government finances. Based on a database of fiscal plans in OECD countries, we show that spending shocks are less detrimental than tax-based consolidation. In times of fiscal fragility, our results indicate strongly that governments should consolidate through surprise policy changes rather than announcements of consolidation at a later horizon.
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Completing the European Banking Union: Capital Cost Consequences for Credit Providers and Corporate Borrowers
Michael Koetter, Thomas Krause, Eleonora Sfrappini, Lena Tonzer
Abstract
The bank recovery and resolution directive (BRRD) regulates the bail-in hierarchy to resolve distressed banks without burdening tax payers. We exploit the staggered implementation of the BRRD across 15 European Union (EU) member states to identify banks’ capital cost and capital structure responses. In a first stage, we show that average capital costs of banks increased. WACC hikes are lowest in the core countries of the European Monetary Union (EMU) compared to formerly stressed EMU and non-EMU countries. This pattern is driven by changes in the relative WACC weight of equity in response to the BRRD, which indicates enhanced financial system resilience. In a second stage, we document asymmetric transmission patterns of banks’ capital cost changes on to corporates’ borrowing terms. Only EMU banks located in core countries that exhibit higher WACC are those that also increase firms’ borrowing cost and contract credit supply. Hence, the BRRD had unintended consequences for selected segments of the real economy.
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What Drives the Commodity-Sovereign Risk Dependence in Emerging Market Economies?
Hannes Böhm, Stefan Eichler, Stefan Gießler
Journal of International Money and Finance,
March
2021
Abstract
Using daily data for 34 emerging markets in the period 1994–2016, we find robust evidence that higher export commodity prices are associated with lower sovereign default risk, as measured by lower EMBI spreads. The economic effect is especially pronounced for heavy commodity exporters. Examining the drivers, we find that, first, commodity dependence is higher for countries that export large volumes of commodities, whereas other portfolio characteristics like volatility or concentration are less important. Second, commodity-sovereign risk dependence increases in times of recessions and expansionary U.S. monetary policy. Third, the importance of raw material prices for sovereign financing can likely be mitigated if a country improves institutions and tax systems, attracts FDI inflows, invests in manufacturing, machinery and infrastructure, builds up reserve assets and opens capital and trade accounts. Fourth, the country’s government indebtedness or amount of received development assistance appear to be only of secondary importance for commodity dependence.
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