Central and Eastern European Countries in the Global Financial Crisis: A Typical Twin Crisis?
Diemo Dietrich, Tobias Knedlik, Axel Lindner
Post-Communist Economies,
Nr. 4,
2011
Abstract
This paper shows that during the Great Recession, banking and currency crises occurred simultaneously in Central and Eastern Europe. Events, however, differed widely from what happened during the Asian crisis that usually serves as the model case for the concept of twin crises. We look at three elements that help explaining the nature of events in Central and Eastern Europe: the problem of currency mismatches, the relation between currency and banking crises, and the importance of multinational banks for financial stability. It is shown that theoretical considerations concerning internal capital markets of multinational banks help understand what happened on capital markets and in the financial sector of the region. We discuss opposing effects of multinational banking on financial stability and find that institutional differences are the key to understand differing effects of the global financial crisis. In particular, we argue that it matters if international activities are organized by subsidiaries or by cross-border financial services, how large the share of foreign currency-denominated credit is and whether the exchange rate is fixed or flexible. Based on these three criteria we give an explanation why the pattern of the crisis in the Baltic States differed markedly from that in Poland and the Czech Republic, the two largest countries of the region.
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What Drives FDI in Central-eastern Europe? Evidence from the IWH-FDI-Micro Database
Andrea Gauselmann, Mark Knell, Johannes Stephan
Post-Communist Economies,
Nr. 3,
2011
Abstract
The focus of this paper is on the match between strategic motives of foreign investments into Central-Eastern Europe and locational advantages offered by these countries. Our analysis makes use of the IWH-FDI-Micro Database, a unique dataset that contains information from 2009 about the determinants of locational factors, technological activity of the subsidiaries, and the potentials for knowledge spillovers in the Czech Republic, Hungary, Poland, Romania, and Slovakia. The analysis suggests that investors in these countries are mainly interested in low (unit) labour costs coupled with a well-trained and educated workforce and an expanding market with the high growth rates in the purchasing power of potential buyers. It also suggests that the financial crisis reduced the attractiveness of the region as a source for localised knowledge and technology. There appears to be a match between investors’ expectations and the quantitative supply of unqualified labour, not however for the supply of medium qualified workers. But the analysis suggests that it is not technology-seeking investments that are particularly content with the capabilities of their host economies in terms of technological cooperation. Finally, technological cooperation within the local host economy is assessed more favourably with domestic firms than with local scientific institutions – an important message for domestic economic policy.
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Die Entwicklung der Corporate Governance deutscher Banken seit 1950
R. H. Schmidt, Felix Noth
Bankhistorisches Archiv,
Nr. 2,
2011
Abstract
The present paper gives an overview of the development of Corporate Governance of German banks since the 1950s. The focus will be on economic analysis. The most striking changes in Corporate Governance occurred with the ownership structure of commercial banks, in particular with the major joint-stock banks. In addition to that, the capital market has become a core element of Corporate Governance in all major German banks, which have replaced their prior concentration on the interests of a broadly defined circle of stakeholders by a one-sided concentration on shareholders’ interests. In contrast, with savings banks and cooperative cooperative banks, Corporate Governance has remained unchanged for the most part. Exceptions to this are the regional state banks: in their case, after they had turned away from traditional business models and in particular following the discontinuation of the guarantee obligation, the problems of their Corporate Governance, which were already discernible beforehand, became quite obvious. If you include the financial crisis, beginning in 2007, in the analysis, it becomes evident that it was precisely a Corporate Governance unilaterally geared to shareholders’ interest and the efficiency of the capital market that materially contributed to the evolution and widening of the crisis.
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Finance and Growth in a Bank-Based Economy: Is It Quantity or Quality that Matters?
Michael Koetter, Michael Wedow
Journal of International Money and Finance,
Nr. 8,
2010
Abstract
Most finance–growth studies approximate the size of financial systems rather than the quality of intermediation to explain economic growth differentials. Furthermore, the neglect of systematic differences in cross-country studies could drive the result that finance matters. We suggest a measure of bank’s intermediation quality using bank-specific efficiency estimates and focus on the regions of one economy only: Germany. This quality measure has a significantly positive effect on growth. This result is robust to the exclusion of banks operating in multiple regions, controlling for the proximity of financial markets, when distinguishing different banking sectors active in Germany, and when excluding the structurally weaker East from the sample.
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Neo-liberalism, the Changing German Labor Market, and Income Distribution: An Institutionalist and Post Keynesian Analysis
John B. Hall, Udo Ludwig
Journal of Economic Issues,
2010
Abstract
This inquiry relies on an Institutionalist and Post Keynesian analysis to explore Germany's neo-liberal project, noting cumulative effects emerging as measurable economic and societal outcomes. Investments in technologies generate rising output-to-capital ratios. Increasing exports offset the Domar problem, but give rise to capital surpluses. National income redistributes in favor of capital. Novel labor market institutions emerge. Following Minsky, good times lead to bad: as seeming successes of neo-liberal policies are accompanied by financial instability, growing disparities in household incomes, and sharp declines in German exports on world markets, resulting in one of the deepest, recent contractions in the industrialized world.
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Do Banks Benefit from Internationalization? Revisiting the Market Power-Risk Nexus
Claudia M. Buch, C. T. Koch, Michael Koetter
Abstract
Recent developments on international financial markets have called the benefits of
bank globalization into question. Large, internationally active banks have
acquired substantial market power, and international activities have not
necessarily made banks less risky. Yet, surprisingly little is known about the
actual link between bank internationalization, bank risk, and market power.
Analyzing this link is the purpose of this paper. We jointly estimate the
determinants of risk and market power of banks, and we analyze the effects of
changes in terms of the number of foreign countries (the extensive margin) and
the volume of foreign assets (the intensive margin). Our paper has four main
findings. First, there is a strong negative feedback effect between risk and market
power. Second, banks with higher shares of foreign assets, in particular those held
through foreign branches, have higher market power at home. Third, holding
assets in a large number of foreign countries tends to increase bank risk. Fourth,
the impact of internationalization differs across banks from different banking
groups and of different size.
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Corporate Governance in the Multinational Enterprise: A Financial Contracting Perspective
Diemo Dietrich, Björn Jindra
International Business Review,
2010
Abstract
The aim of this paper is to bring economics-based finance research more into the focus of international business theory. On the basis of an analytical model that introduces financial constraints into incomplete contracting in an international vertical trade relationship, we propose an integrated framework that facilitates the study of the interdependencies between internalisation decisions, firm-internal allocations of control rights, and the debt capacity of firms. We argue that the financial constraint of an MNE and/or its supplier should be considered as an important determinant of internal governance structures, complementary to, and interacting with, institutional factors and proprietary knowledge.
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Liberalization and Rules on Regulation in the Field of Financial Services in Bilateral Trade and Regional Integration Agreements
Diemo Dietrich, J. Finke, C. Tietje
Beiträge zum Transnationalen Wirtschaftsrecht Nr. 97, Halle (Saale),
2010
Abstract
Die jüngste internationale Finanzkrise hat eine scharfe Debatte um die Ursachen ausgelöst. Liberalisierung und Deregulierung werden hierbei benannt, und Deliberalisierung und Reregulierung scheinen eine natürliche Reaktion zu sein. Aus ökonomischer Perspektive ist diese Schlussfolgerung jedoch nicht berechtigt. Obwohl eine Liberalisierung von Finanzdienstleistungen die Stabilität eines Entwicklungslandes kurzfristig bedrohen kann, so fördert sie doch langfristiges Wirtschaftswachstum wenn gute rechtliche und ökonomische Institutionen die negativen Nebenwirkungen mildern. Um dieses Ziel zu erreichen brauchen Staaten den Politikspielraum zur Implementierung solcher Maßnahmen. Entgegen weitläufiger Meinung ist der Politikspielraum von Staaten keinesfalls übermäßig durch bilateral oder multilateral Abkommen beschränkt. Deren weitreichenden Ausnahmen hinsichtlich der Regulierung erlauben es den Staaten ihren eigenen Weg bei der Regulierung zu verfolgen. Die Herausforderung hierbei besteht vielmehr darin, die entsprechenden Regulierungskapazitäten aufzubauen.
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