Transparency and Forecasting: The Impact of Conditioning Assumptions on Forecast Accuracy
Katja Heinisch, Christoph Schult, Carola Stapper
Applied Economic Letters,
forthcoming
Abstract
This study investigates the impact of inaccurate assumptions on economic forecast precision. We construct a new dataset comprising an unbalanced panel of annual German GDP forecasts from various institutions, taking into account their underlying assumptions. We explicitly control for different forecast horizons to reflect the information available at the time of release. Our analysis reveals that approximately 75% of the variation in squared forecast errors can be attributed to the variation in squared errors of the initial assumptions. This finding emphasizes the importance of accurate assumptions in economic forecasting and suggests that forecasters should transparently disclose their assumptions to enhance the usefulness of their forecasts in shaping effective policy recommendations.
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Board Announcements
Board Announcements 27.03.2025: IWH 1st Trial Evaluation on June 16, 2025 27.03.2025: IWH 2nd Trial Evaluation on October 13, 2025 27.03.2025: IWH Evaluation on November 5 and…
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12.03.2024 • 8/2024
Risk in the banking sector: four out of ten top supervisors come from the financial industry
Europe's banks realise excess returns on the stock market when their alumni join the boards of national supervisory authorities. A study by the Halle Institute for Economic Research (IWH) shows that this happens more frequently than previously recognised. The findings indicate a risk to financial stability and call for a more merit-based, transparent appointment of senior regulators.
Michael Koetter
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Anti-Corruption
Prevention of Corruption and Misconduct IWH Anti-corruption Guidelines ( Simone Lösel ) Whistlelink Registration Number of the IWH in the EU Transparency Register (E-mail of the…
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Brown Bag Seminar
Brown Bag Seminar Financial Markets Department The seminar series "Brown Bag Seminar" was offered on a regular basis by members of the Financial Markets department and their…
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Logo and Colours
IWH Logo and IWH Colours 1. Logo 1.1 Combined Word Picture Mark 1.2 Reduced Versions 1.2.1 Signet 1.2.2 Horizontal Versions 1.2.3 Negative Versions 2. IWH Colours 1. Logo 1.1…
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Staffing Policy
Staffing Policy The aim of the Staffing Policy is to provide a uniform and comprehensible basis for staff appointments at the IWH. It serves to ensure transparency and…
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The Disciplining Effect of Supervisory Scrutiny in the EU-wide Stress Test
Christoffer Kok, Carola Müller, Steven Ongena, Cosimo Pancaro
Journal of Financial Intermediation,
January
2023
Abstract
Relying on confidential supervisory data related to the 2016 EU-wide stress test, this paper presents novel empirical evidence that supervisory scrutiny associated to stress testing has a disciplining effect on bank risk. We find that banks that participated in the 2016 EU-wide stress test subsequently reduced their credit risk relative to banks that were not part of this exercise. Relying on new metrics for supervisory scrutiny that measure the quantity, potential impact, and duration of interactions between banks and supervisors during the stress test, we find that the disciplining effect is stronger for banks subject to more intrusive supervisory scrutiny during the exercise. We also find that a strong risk management culture is a prerequisite for the supervisory scrutiny to be effective. Finally, we show that a similar disciplining effect is not exerted neither by higher capital charges nor by more transparency and related market discipline induced by the stress test.
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Do Firms Respond to Gender Pay Gap Transparency?
Morten Bennedsen, Elena Simintzi, Margarita Tsoutsoura, Daniel Wolfenzon
Journal of Finance,
No. 4,
2022
Abstract
We examine the effect of pay transparency on the gender pay gap and firm outcomes. Using a 2006 legislation change in Denmark that requires firms to provide gender-disaggregated wage statistics, detailed employee-employer administrative data, and difference-in-differences and difference-in-discontinuities designs, we find that the law reduces the gender pay gap, primarily by slowing wage growth for male employees. The gender pay gap declines by 2 percentage points, or 13% relative to the prelegislation mean. Despite the reduction of the overall wage bill, the wage transparency mandate does not affect firm profitability, likely because of the offsetting effect of reduced firm productivity.
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CoCo Bonds, Bank Stability, and Earnings Opacity
Melina Ludolph
IWH Discussion Papers,
No. 1,
2022
Abstract
This paper examines the effect of CoCo bonds that qualify as additional tier 1 capital on bank stability and reporting. The results reveal a significant reduction in the distance to insolvency following the hybrid bond issuance due to increased earnings volatility. Banks report less stable net income due to more volatile loss provisions, which increases earnings opacity rather than reflects changes in asset quality. The findings are consistent with the premise that persistent uncertainty and misconceptions among investors about bail-in likelihoods limit their monitoring engagement, which results in banks becoming less transparent.
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