Monetary Policy through Exchange Rate Pegs: The Removal of the Swiss Franc‐Euro Floor and Stock Price Reactions
Gregor von Schweinitz, Lena Tonzer, Manuel Buchholz
International Review of Finance,
No. 4,
2021
Abstract
The Swiss National Bank abolished the exchange rate floor versus the Euro in January 2015. Using a synthetic matching framework, we analyze the impact of this unexpected (and therefore exogenous) policy change on the stock market. The results reveal a significant level shift (decline) in asset prices following the discontinuation of the minimum exchange rate. As a novel finding in the literature, we document that the exchange‐rate elasticity of Swiss asset prices is around −0.75. Differentiating between sectors of the Swiss economy, we find that the industrial, financial and consumer goods sectors are most strongly affected by the abolition of the minimum exchange rate.
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Konjunktur aktuell: Deutsche Wirtschaft noch nicht immun gegen COVID 19 – Ausblick erneut eingetrübt
Konjunktur aktuell,
No. 4,
2021
Abstract
Ende 2021 belastet eine neue Infektionswelle die wirtschaftliche Aktivität in Europa. Die Stimmung im Dienstleistungsbereich ist im Herbst weltweit gestiegen, doch das Verarbeitende Gewerbe leidet weiter überall unter Knappheiten. Im Sommerhalbjahr 2022 gewinnt die Weltkonjunktur wieder etwas an Schwung, aber der ungewisse Fortgang der Pandemie bleibt ein Risiko. Pandemiewelle und Lieferengpässe lassen auch die deutsche Wirtschaft im Winter stagnieren. Der private Konsum wird ab Frühjahr deutlich zulegen, und die Konjunktur wird wieder kräftig in Schwung kommen. Das BIP wird 2022 um 3,5% zunehmen, nach 2,7% im Jahr 2021. Die Inflation dürfte nur langsam zurückgehen.
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Dilemma and Global Financial Cycle: Evidence from Capital Account Liberalisation Episodes
Xiang Li
IWH Discussion Papers,
No. 13,
2021
Abstract
By focusing on the episodes of substantial capital account liberalisation and adopting a new methodology, this paper provides new evidence on the dilemma and global financial cycle theory. I first identify the capital account liberalisation episodes for 95 countries from 1970 to 2016, and then employ an augmented inverse propensity score weighted (AIPW) estimator to calculate the average treatment effect (ATE) of opening capital account on the interest rate comovements with the core country. Results show that opening capital account causes a country to lose its monetary policy independence, and a floating exchange rate regime cannot shield this effect. Moreover, the impact is stronger when liberalising outward and banking flows.
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Partisan Professionals: Evidence from Credit Rating Analysts
Elisabeth Kempf, Margarita Tsoutsoura
Journal of Finance,
No. 6,
2021
Abstract
Partisan perception affects the actions of professionals in the financial sector. Linking credit rating analysts to party affiliations from voter records, we show that analysts not affiliated with the U.S. president's party downward-adjust corporate credit ratings more frequently. Since we compare analysts with different party affiliations covering the same firm in the same quarter, differences in firm fundamentals cannot explain the results. We also find a sharp divergence in the rating actions of Democratic and Republican analysts around the 2016 presidential election. Our results show that analysts' partisan perception has price effects and may influence firms' investment policies.
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The Impact of Political Uncertainty on Institutional Ownership
Bill Francis, Iftekhar Hasan, Yun Zhu
Journal of Financial Stability,
December
2021
Abstract
This paper provides original evidence from institutional investors that political uncertainty greatly affects investment behavior. Using institutional holdings of common stock, we find that institutions significantly reduce their holdings by 0.8–2.3% points during presidential election years. Such effect holds for gubernatorial elections with cross-state-border difference-in-difference analysis and for tests using a political uncertainty index. The effect is the opposite for American Depository Receipts (ADRs). In addition, we find that institutions benefit financially from the observed strategy, and such strategy is in line with predicted outcomes of presidential election polls.
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Banking Globalization, Local Lending, and Labor Market Effects: Micro-level Evidence from Brazil
Felix Noth, Matias Ossandon Busch
Journal of Financial Stability,
October
2021
Abstract
Recent financial crises have prompted the interest in understanding how banking globalization interacts with domestic institutions in shaping foreign shocks’ transmission. This paper uses regional banking data from Brazil to show that a foreign funding shock to banks negatively affects lending by their regional branches. This effect increases in the presence of frictions in internal capital markets, which affect branches’ capacity to access funding from other regions via intra-bank linkages. These results also matter on an aggregate level, as municipality-level credit and job flows drop in exposed regions. Policies aiming to reduce the fragmented structure of regional banking markets could moderate the propagation of foreign shocks.
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How Can Macroprudential Policies Transmit Within a Banking Group?
Chris Becker, Matias Ossandon Busch, Lena Tonzer
WorldBank All About Finance,
2021
Abstract
The unexpected shock represented by the COVID-19 pandemic illustrates the importance of building robust macroprudential frameworks to increase countries’ resilience against sudden disruptions in financial markets. By now, a widespread opinion among commentators and policy makers is that the macroprudential frameworks that were implemented over the past decades were effective in moderating market stress, a view supported by ample evidence on the effectiveness of macroprudential policies.
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Konjunktur aktuell: Produktionsengpässe verzögern Erholung
Konjunktur aktuell,
No. 3,
2021
Abstract
Im Sommer 2021 dürfte die weltwirtschaftliche Produktion deutlich zugelegt haben, aber Schließungen von Produktionsanlagen und Häfen vergrößern den Stau im globalen Warenaustausch. Ansteigende Rohstoffpreise schlagen sich v. a. in den USA und im Euroraum in hohen Inflationsraten nieder, doch die Notenbanken werden sich mit dem Kurswechsel Zeit lassen. Dadurch erhält die Wirtschaft in den westlichen Industrieländern weiter Rückenwind seitens der Wirtschaftspolitik. Die Erholung der deutschen Wirtschaft kam im Sommerhalbjahr dank der Impfkampagne und des privaten Konsums gut voran. Wegen steigender Corona-Neuinfektionen und Produktionsengpässen ist dennoch nur mit einem recht schwachen Jahresschlussquartal zu rechnen. Das BIP wird 2021 um 2,2% und 2022 um 3,6% zunehmen.
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Access to Public Capital Markets and Employment Growth
Alexander Borisov, Andrew Ellul, Merih Sevilir
Journal of Financial Economics,
No. 3,
2021
Abstract
This paper examines the effect of going public on firm-level employment. To establish a causal effect, we employ a novel data set of private firms to investigate employment growth in IPO firms relative to a group of firms that file for an IPO but subsequently withdraw their offering. We find that employment increases significantly after going public, and the increase is more pronounced in industries with requirements for highly skilled labor and greater dependence on external finance. Improved ability to undertake acquisitions and a strategic shift toward commercialization, rather than agency problems, explain employment growth. Overall, these results highlight the importance of going public for firms' employment policies.
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