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Inside Asset Purchase Programs: The Effects of Unconventional Policy on Banking Competition

Michael Koetter, Natalia Podlich, Michael Wedow
ECB Working Paper Series, Nr. 2017, 2017
Abstract
We test if unconventional monetary policy instruments influence the competitive conduct of banks. Between q2:2010 and q1:2012, the ECB absorbed Euro 218 billion worth of government securities from five EMU countries under the Securities Markets Programme (SMP). Using detailed security holdings data at the bank level, we show that banks exposed to this unexpected (loose) policy shock mildly gained local loan and deposit market shares. Shifts in market shares are driven by banks that increased SMP security holdings during the lifetime of the program and that hold the largest relative SMP portfolio shares. Holding other securities from periphery countries that were not part of the SMP amplifies the positive market share responses. Monopolistic rents approximated by Lerner indices are lower for SMP banks, suggesting a role of the SMP to re-distribute market power differentially, but not necessarily banking profits.
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Optimizing Policymakers' Loss Functions in Crisis Prediction: Before, Within or After?

Peter Sarlin, Gregor von Schweinitz
ECB Working Paper Series, Nr. 2025, 2017
publiziert in: Macroeconomic Dynamics
Abstract

Early-warning models most commonly optimize signaling thresholds on crisis probabilities. The expost threshold optimization is based upon a loss function accounting for preferences between forecast errors, but comes with two crucial drawbacks: unstable thresholds in recursive estimations and an in-sample overfit at the expense of out-of-sample performance. We propose two alternatives for threshold setting: (i) including preferences in the estimation itself and (ii) setting thresholds ex-ante according to preferences only. Given probabilistic model output, it is intuitive that a decision rule is independent of the data or model specification, as thresholds on probabilities represent a willingness to issue a false alarm vis-à-vis missing a crisis. We provide simulated and real-world evidence that this simplification results in stable thresholds and improves out-of-sample performance. Our solution is not restricted to binary-choice models, but directly transferable to the signaling approach and all probabilistic early-warning models.

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IWH-Flash-Indikator I. und II. Quartal 2017

Birgit Schultz
IWH-Flash-Indikator, Nr. 1, 2017
Abstract
Die deutsche Konjunktur konnte nach der kurzen Verschnaufpause im dritten Quartal 2016 zum Jahresende wieder mehr Fahrt aufnehmen, das Bruttoinlandsprodukt (BIP) stieg mit 0,4% merklich schneller als im Vorquartal. Der IWH-Flash-Indikator deutet darauf hin, dass das Expansionstempo zu Beginn des Jahres 2017 nochmals leicht zulegen und es danach etwas gemächlicher zugehen wird. Das Bruttoinlandsprodukt in Deutschland dürfte im ersten Quartal 2017 um 0,5% und danach um 0,4% steigen.
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The Risk‐Taking Channel of Monetary Policy in the U.S.: Evidence from Corporate Loan Data

Manthos D. Delis, Iftekhar Hasan, Nikolaos Mylonidis
Journal of Money, Credit and Banking, Nr. 1, 2017
Abstract
To study the presence of a risk-taking channel in the U.S., we build a comprehensive data set from the syndicated corporate loan market and measure monetary policy using different measures, most notably Taylor (1993) and Romer and Romer (2004) residuals. We identify a negative relation between monetary policy rates and bank risk-taking, especially in the run up to the 2007 financial crisis. However, this effect is purely supply-side driven only when using Taylor residuals and an ex ante measure of bank risk-taking. Our results highlight the sensitivity of the potency of the risk-taking channel to the measures of monetary policy innovations.
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Taking the Leap: The Determinants of Entrepreneurs Hiring Their First Employee

Robert W. Fairlie, Javier Miranda
Journal of Economics and Management Strategy, Nr. 1, 2017
Abstract
Job creation is one of the most important aspects of entrepreneurship, but we know relatively little about the hiring patterns and decisions of start‐ups. Longitudinal data from the Integrated Longitudinal Business Database (iLBD), Kauffman Firm Survey (KFS), and the Growing America through Entrepreneurship (GATE) experiment are used to provide some of the first evidence in the literature on the determinants of taking the leap from a nonemployer to employer firm among start‐ups. Several interesting patterns emerge regarding the dynamics of nonemployer start‐ups hiring their first employee. Hiring rates among the universe of nonemployer start‐ups are very low, but increase when the population of nonemployers is focused on more growth‐oriented businesses such as incorporated and employer identification number businesses. If nonemployer start‐ups hire, the bulk of hiring occurs in the first few years of existence. After this point in time, relatively few nonemployer start‐ups hire an employee. Focusing on more growth‐ and employment‐oriented start‐ups in the KFS, we find that Asian‐owned and Hispanic‐owned start‐ups have higher rates of hiring their first employee than white‐owned start‐ups. Female‐owned start‐ups are roughly 10 percentage points less likely to hire their first employee by the first, second, and seventh years after start‐up. The education level of the owner, however, is not found to be associated with the probability of hiring an employee. Among business characteristics, we find evidence that business assets and intellectual property are associated with hiring the first employee. Using data from the largest random experiment providing entrepreneurship training in the United States ever conducted, we do not find evidence that entrepreneurship training increases the likelihood that nonemployers hire their first employee.
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Internal Governance and Creditor Governance: Evidence from Credit Default Swaps

Stefano Colonnello
IWH Discussion Papers, Nr. 6, 2017
Abstract
I study the relation between internal governance and creditor governance. A deterioration in creditor governance may increase the agency costs of debt and managerial opportunism at the expense of shareholders. I exploit the introduction of credit default swaps (CDS) as a negative shock to creditor governance. I provide evidence consistent with shareholders pushing for a substitution effect between internal governance and creditor governance. Following CDS introduction, CDS firms reduce managerial risk-taking incentives relative to other firms. At the same time, after the start of CDS trading, CDS firms increase managerial wealth-performance sensitivity, board independence, and CEO turnover performance-sensitivity relative to other firms.
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Should Forecasters Use Real-time Data to Evaluate Leading Indicator Models for GDP Prediction? German Evidence

Katja Heinisch, Rolf Scheufele
IWH Discussion Papers, Nr. 5, 2017
publiziert in: German Economic Review
Abstract

In this paper we investigate whether differences exist among forecasts using real-time or latest-available data to predict gross domestic product (GDP). We employ mixed-frequency models and real-time data to reassess the role of survey data relative to industrial production and orders in Germany. Although we find evidence that forecast characteristics based on real-time and final data releases differ, we also observe minimal impacts on the relative forecasting performance of indicator models. However, when obtaining the optimal combination of soft and hard data, the use of final release data may understate the role of survey information.

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Financial Transaction Taxes: Announcement Effects, Short-run Effects, and Long-run Effects

Sebastian Eichfelder, Mona Noack, Felix Noth
IWH Discussion Papers, Nr. 4, 2017
publiziert in: IWH Discussion Papers
Abstract
We analyze the impact of the French 2012 financial transaction tax (FTT) on trading volumes, stock prices, liquidity, and volatility. We extend the empirical research by identifying FTT announcement and short-run treatment effects, which can distort difference-in-differences estimates. In addition, we consider long-run volatility measures that better fit the French FTT’s legislative design. While we find strong evidence of a positive FTT announcement effect on trading volumes, there is almost no statistically significant evidence of a long-run treatment effect. Thus, evidence of a strong reduction of trading volumes resulting from the French FTT might be driven by announcement effects and short-term treatment effects. We find evidence of an increase of intraday volatilities in the announcement period and a significant reduction of weekly and monthly volatilities in the treatment period. Our findings support theoretical considerations suggesting a stabilizing impact of FTTs on financial markets.
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The Drivers of Revenue Productivity: a New Decomposition Analysis with Firm-level Data

Filippo di Mauro, Giordano Mion, Daniel Stöhlker
ECB Working Paper, Nr. 2014, 2017
Abstract
This paper aims to derive a methodology to decompose aggregate revenue TFP changes over time into four different components – namely physical TFP, mark-ups, quality and production scale. The new methodology is applied to a panel of EU countries and manufacturing industries over the period 2006-2012. In summary, patterns of measured revenue productivity have been broadly similar across EU countries, most notably when we group them into stressed (Italy, Spain and Slovenia) and non-stressed countries (Belgium, Finland, France and Germany). In particular, measured revenue productivity drops for both groups by about 6 percent during the recent crisis. More specifically, for both stressed and non-stressed countries the drop in revenue productivity was accompanied by a substantial dip in the proxy we use for TFP in quantity terms, as well as by a strong reduction in mark-ups.
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Banks Credit and Productivity Growth

Fadi Hassan, Filippo di Mauro, Gianmarco Ottaviano
ECB Working Paper, Nr. 2008, 2017
Abstract
Financial institutions are key to allocate capital to its most productive uses. In order to examine the relationship between productivity and bank credit in the context of different financial market set-ups, we introduce a model of overlapping generations of entrepreneurs under complete and incomplete credit markets. Then, we exploit firm-level data for France, Germany and Italy to explore the relation between bank credit and productivity following the main derivations of the model. We estimate an extended set of elasticities of bank credit with respect to a series of productivity measures of firms. We focus not only on the elasticity between bank credit and productivity during the same year, but also on the elasticity between credit and future realised productivity. Our estimates show a clear Eurozone core-periphery divide, the elasticities between credit and productivity estimated in France and Germany are consistent with complete markets, whereas in Italy they are consistent with incomplete markets. The implication is that in Italy firms turn to be constrained in their long-term investments and bank credit is allocated less efficiently than in France and Germany. Hence capital misallocation by banks can be a key driver of the long-standing slow productivity growth that characterises Italy and other periphery countries. 
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