Financial Technologies and the Effectiveness of Monetary Policy Transmission
Iftekhar Hasan, Boreum Kwak, Xiang Li
Abstract
This study investigates whether and how financial technologies (FinTech) influence the effectiveness of monetary policy transmission. We use an interacted panel vector autoregression model to explore how the effects of monetary policy shocks change with regional-level FinTech adoption. Results indicate that FinTech adoption generally mitigates the transmission of monetary policy to real GDP, consumer prices, bank loans, and housing prices, with the most significant impact observed in the weakened transmission to bank loan growth. The relaxed financial constraints, regulatory arbitrage, and intensified competition are the possible mechanisms underlying the mitigated transmission.
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Konjunktur aktuell: Export und privater Konsum schwach – Deutschland wartet auf den Aufschwung
Konjunktur aktuell,
Nr. 4,
2023
Abstract
Die Weltwirtschaft verliert zum Ende des Jahres 2023 weiter an Schwung. Der durch den weltweiten Inflationsschub ausgelöste restriktive Schwenk der Geldpolitik drückt über höhere Finanzierungskosten vielerorts die Güternachfrage. Im nächsten Jahr dürfte die Weltwirtschaft wieder etwas anziehen. Die deutsche Wirtschaft ist nach Ende der Pandemie nicht wieder auf ihren alten Wachstumspfad zurückgekehrt. Das Verarbeitenden Gewerbe hat an Wettbewerbsfähigkeit eingebüßt, und die Weltnachfrage nach Industriegütern ist zurzeit schwach. Zudem ist die Inflation immer noch hoch, und die Realeinkommen sind längere Zeit über zurückgegangen. Die geldpolitische Straffung hat die Finanzierungsbedingungen verschlechtert, was besonders die Bauwirtschaft belastet. Das Bruttoinlandsprodukt wird 2023 wohl um 0,3% sinken und im kommenden Jahr um 0,5% expandieren.
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The Importance of Credit Demand for Business Cycle Dynamics
Gregor von Schweinitz
IWH Discussion Papers,
Nr. 21,
2023
Abstract
This paper contributes to a better understanding of the important role that credit demand plays for credit markets and aggregate macroeconomic developments as both a source and transmitter of economic shocks. I am the first to identify a structural credit demand equation together with credit supply, aggregate supply, demand and monetary policy in a Bayesian structural VAR. The model combines informative priors on structural coefficients and multiple external instruments to achieve identification. In order to improve identification of the credit demand shocks, I construct a new granular instrument from regional mortgage origination.
I find that credit demand is quite elastic with respect to contemporaneous macroeconomic conditions, while credit supply is relatively inelastic. I show that credit supply and demand shocks matter for aggregate fluctuations, albeit at different times: credit demand shocks mostly drove the boom prior to the financial crisis, while credit supply shocks were responsible during and after the crisis itself. In an out-of-sample exercise, I find that the Covid pandemic induced a large expansion of credit demand in 2020Q2, which pushed the US economy towards a sustained recovery and helped to avoid a stagflationary scenario in 2022.
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FDI and Corporate Tax Revenue: Tax Harmonization or Competition?
Reint E. Gropp, Kristina Kostial
Finance & Development,
Nr. 2,
2001
Abstract
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Income Shocks, Political Support and Voting Behaviour
Richard Upward, Peter Wright
IWH Discussion Papers,
Nr. 1,
2024
Abstract
We provide new evidence on the effects of economic shocks on political support, voting behaviour and political opinions over the last 25 years. We exploit a sudden, large and long-lasting shock in the form of job loss and trace out its impact on individual political outcomes for up to 10 years after the event. The availability of detailed information on households before and after the job loss event allows us to reweight a comparison group to closely mimic the job losers in terms of their observable characteristics, pre-existing political support and voting behaviour. We find consistent, long-lasting but quantitatively small effects on support and votes for the incumbent party, and short-lived effects on political engagement. We find limited impact on the support for fringe or populist parties. In the context of Brexit, opposition to the EU was much higher amongst those who lost their jobs, but this was largely due to pre-existing differences which were not exacerbated by the job loss event itself.
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Does IFRS Information on Tax Loss Carryforwards and Negative Performance Improve Predictions of Earnings and Cash Flows?
Sandra Dreher, Sebastian Eichfelder, Felix Noth
Journal of Business Economics,
January
2024
Abstract
We analyze the usefulness of accounting information on tax loss carryforwards and negative performance to predict earnings and cash flows. We use hand-collected information on tax loss carryforwards and corresponding deferred taxes from the International Financial Reporting Standards tax footnotes for listed firms from Germany. Our out-of-sample tests show that considering accounting information on tax loss carryforwards does not enhance performance forecasts and typically even worsens predictions. The most likely explanation is model overfitting. Besides, common forecasting approaches that deal with negative performance are prone to prediction errors. We provide a simple empirical specification to account for that problem.
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Market-implied Ratings and Their Divergence from Credit Ratings
Iftekhar Hasan, Winnie P. H. Poon, Jianfu Shen, Gaiyan Zhang
Journal of Financial Research,
Nr. 2,
2023
Abstract
In this article, we investigate the divergence between credit ratings (CRs) and Moody's market-implied ratings (MIRs). Our evidence shows that rating gaps provide incremental information to the market regarding issuers' default risk over CRs alone in the short horizon and outperform CRs over extended horizons. The predictive ability of rating gaps is greater for more opaque and volatile issuers. Such predictability was more pronounced during the 2008 financial crisis but weakened in the post-Dodd-Frank Act period. This finding is consistent with credit rating agencies' efforts to improve their performance when facing regulatory pressure. Moreover, our analysis identifies rating-gap signals that do (do not) lead to subsequent Moody's actions to place issuers on negative outlook and watchlists. We find that negative signals from MIR gaps have a real economic impact on issuers' fundamentals such as profitability, leverage, investment, and default risk, thus supporting the recovery-efforts hypothesis.
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Robot Adoption at German Plants
Liuchun Deng, Verena Plümpe, Jens Stegmaier
Abstract
Using a newly collected dataset of robot use at the plant level from 2014 to 2018, we provide the first microscopic portrait of robotisation in Germany and study the potential determinants of robot adoption. Our descriptive analysis uncovers five stylised facts concerning both extensive and, perhaps more importantly, intensive margin of plant-level robot use: (1) Robot use is relatively rare with only 1.55% German plants using robots in 2018. (2) The distribution of robots is highly skewed. (3) New robot adopters contribute substantially to the recent robotisation. (4) Robot users are exceptional along several dimensions of plant-level characteristics. (5) Heterogeneity in robot types matters. Our regression results further suggest plant size, low-skilled labour share, and exporter status to have strong and positive effect on future probability of robot adoption. Manufacturing plants impacted by the introduction of minimum wage in 2015 are also more likely to adopt robots. However, controlling for plant size, we find that plant-level productivity has no, if not negative, impact on robot adoption.
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Globalization, Productivity Growth, and Labor Compensation
Christian Dreger, Marius Fourné, Oliver Holtemöller
IWH Discussion Papers,
Nr. 7,
2022
Abstract
We analyze how changes in international trade integration affect productivity and the functional income distribution. To account for endogeneity, we construct a leaveout measure for international trade integration for country-industry pairs using international input-output tables. Our findings corroborate on the country-industry level that international trade integration increases productivity. Moreover, we show that both trade in intermediate inputs and trade in value added is associated with lower labor shares in emerging markets. For advanced countries, we document a positive effect of trade in value added on the labor share of income. Further, we show that the effects on productivity and labor share are heterogeneous across different sectors. Finally, we discuss the implications of our results for a possible throwback in international trade integration due to experiences from recent crises.
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Same, but Different: Testing Monetary Policy Shock Measures
Alexander Kriwoluzky, Stephanie Ettmeier
IWH Discussion Papers,
Nr. 9,
2017
Abstract
In this study, we test whether three popular measures for monetary policy, that is, Romer and Romer (2004), Barakchian and Crowe (2013), and Gertler and Karadi (2015), constitute suitable proxy variables for monetary policy shocks. To this end, we employ different test statistics used in the literature to detect weak proxy variables. We find that the measure derived by Gertler and Karadi (2015) is the most suitable in this regard.
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