Ricardian Equivalence, Foreign Debt and Sovereign Default Risk
Stefan Eichler, Ju Hyun Pyun
Journal of Economic Behavior and Organization,
May
2022
Abstract
We study the impact of sovereign solvency on the private-public savings offset. Using data on 80 economies for 1989–2018, we find robust evidence for a U-shaped pattern in the private-public savings offset in sovereign credit ratings. While the 1:1 savings offset is observed at intermediate levels of sovereign solvency, fiscal deficits are not offset by private savings at extremely low and high levels of sovereign solvency. Particularly, the U-shaped pattern is more pronounced for countries with high levels of foreign ownership of government debt. The U-shaped pattern is an emerging market phenomenon; additionally, it is confirmed when considering foreign currency rating and external public debt, but not for domestic currency rating and domestic public debt. For considerable foreign ownership of sovereign bonds, sovereign default constitutes a net wealth gain for domestic consumers.
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Inequality in Life and Death
Martin S. Eichenbaum, Sergio Rebelo, Mathias Trabandt
IMF Economic Review,
March
2022
Abstract
We argue that the COVID epidemic disproportionately affected the economic well-being and health of poor people. To disentangle the forces that generated this outcome, we construct a model that is consistent with the heterogeneous impact of the COVID recession on low- and high-income people. According to our model, two-thirds of the inequality in COVID deaths reflect preexisting inequality in comorbidity rates and access to quality health care. The remaining third stems from the fact that low-income people work in occupations where the risk of infection is high. Our model also implies that the rise in income inequality generated by the COVID epidemic reflects the nature of the goods that low-income people produce. Finally, we assess the health-income trade-offs associated with fiscal transfers to the poor and mandatory containment policies.
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Inequality in Life and Death
Martin S. Eichenbaum, Sergio Rebelo, Mathias Trabandt
Abstract
We argue that the Covid epidemic disproportionately affected the economic well-being and health of poor people. To disentangle the forces that generated this outcome, we construct a model that is consistent with the heterogeneous impact of the Covid recession on low- and high-income people. According to our model, two thirds of the inequality in Covid deaths reflect pre-existing inequality in comorbidity rates and access to quality health care. The remaining third, stems from the fact that low-income people work in occupations where the risk of infection is high. Our model also implies that the rise in income inequality generated by the Covid epidemic reflects the nature of the goods that low-income people produce. Finally, we assess the health-income trade-offs associated with fiscal transfers to the poor and mandatory containment policies.
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Wages and the Value of Nonemployment
Simon Jäger, Benjamin Schoefer, Samuel Young, Josef Zweimüller
Quarterly Journal of Economics,
Nr. 4,
2020
Abstract
Nonemployment is often posited as a worker’s outside option in wage-setting models such as bargaining and wage posting. The value of nonemployment is therefore a key determinant of wages. We measure the wage effect of changes in the value of nonemployment among initially employed workers. Our quasi-experimental variation in the value of nonemployment arises from four large reforms of unemployment insurance (UI) benefit levels in Austria. We document that wages are insensitive to UI benefit changes: point estimates imply a wage response of less than $0.01 per $1.00 UI benefit increase, and we can reject sensitivities larger than $0.03. The insensitivity holds even among workers with low wages and high predicted unemployment duration, and among job switchers hired out of unemployment. The insensitivity of wages to the nonemployment value presents a puzzle to the widely used Nash bargaining model, which predicts a sensitivity of $0.24–$0.48. Our evidence supports wage-setting models that insulate wages from the value of nonemployment.
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The Cleansing Effect of Banking Crises
Reint E. Gropp, Steven Ongena, Jörg Rocholl, Vahid Saadi
Abstract
We assess the cleansing effects of the recent banking crisis. In U.S. regions with higher levels of supervisory forbearance on distressed banks during the crisis, there is less restructuring in the real sector and the banking sector remains less healthy for several years after the crisis. Regions with less supervisory forbearance experience higher productivity growth after the crisis with more firm entries, job creation, and employment, wages, patents, and output growth. Supervisory forbearance is greater for state-chartered banks and in regions with weaker banking competition and more independent banks, while recapitalisation of distressed banks through TARP does not facilitate cleansing.
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The Cleansing Effect of Banking Crises
Reint E. Gropp, Steven Ongena, Jörg Rocholl, Vahid Saadi
Abstract
We assess the cleansing effects of the recent banking crisis. In U.S. regions with higher levels of supervisory forbearance on distressed banks during the crisis, there is less restructuring in the real sector and the banking sector remains less healthy for several years after the crisis. Regions with less supervisory forbearance experience higher productivity growth after the crisis with more firm entries, job creation, and employment, wages, patents, and output growth. Supervisory forbearance is greater for state-chartered banks and in regions with weaker banking competition and more independent banks, while recapitalization of distressed banks through TARP does not facilitate cleansing.
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Banks’ Funding Stress, Lending Supply and Consumption Expenditure
H. Evren Damar, Reint E. Gropp, Adi Mordel
Journal of Money, Credit and Banking,
Nr. 4,
2020
Abstract
We employ a unique identification strategy linking survey data on household consumption expenditure to bank‐level data to estimate the effects of bank funding stress on consumer credit and consumption expenditures. We show that households whose banks were more exposed to funding shocks report lower levels of nonmortgage liabilities. This, however, only translates into lower levels of consumption for low‐income households. Hence, adverse credit supply shocks are associated with significant heterogeneous effects.
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Wirtschaft unter Schock — Finanzpolitik hält dagegen
Oliver Holtemöller, Stefan Kooths, Claus Michelsen, Torsten Schmidt, Timo Wollmershäuser
Wirtschaftsdienst,
Nr. 4,
2020
Abstract
Nach Ansicht der führenden deutschen Wirtschaftsforschungsinstitute bricht die Konjunktur in Deutschland als Folge der Corona-Pandemie drastisch ein. Um die Infektionswelle abzubremsen, hat der Staat die wirtschaftliche Aktivität hierzulande stark eingeschränkt. Deshalb dürfte das Bruttoinlandsprodukt 2020 um 4,2 % schrumpfen. Die Rezession hinterlässt deutliche Spuren auf dem Arbeitsmarkt und im Staatshaushalt. In der Spitze wird die Arbeitslosenquote auf 5,9 % und die Zahl der Kurzarbeiter auf 2,4 Mio. hochschnellen. Die finanzpolitischen Stabilisierungsmaßnahmen führen 2020 zu einem Rekorddefizit im gesamtstaatlichen Haushalt von 159 Mrd. Euro. Nach dem Shutdown wird sich die Konjunktur schrittweise erholen. Entsprechend fällt der Anstieg des Bruttoinlandsprodukts 2021 mit 5,8 % kräftig aus. Mit dieser Prognose sind erhebliche Abwärtsrisiken verbunden, etwa weil sich die Pandemie deutlich langsamer abschwächen lässt, oder weil das Wiederhochfahren der wirtschaftlichen Aktivität schlechter gelingt als angenommen bzw. eine erneute Ansteckungswelle auslöst.
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Cross-border Transmission of Emergency Liquidity
Thomas Kick, Michael Koetter, Manuela Storz
Journal of Banking and Finance,
April
2020
Abstract
We show that emergency liquidity provision by the Federal Reserve transmitted to non-U.S. banking markets. Based on manually collected holding company structures, we identify banks in Germany with access to U.S. facilities. Using detailed interest rate data reported to the German central bank, we compare lending and borrowing rates of banks with and without such access. U.S. liquidity shocks cause a significant decrease in the short-term funding costs of the average German bank with access. This reduction is mitigated for banks with more vulnerable balance sheets prior to the inception of emergency liquidity. We also find a significant pass-through in terms of lower corporate credit rates charged for banks with the lowest pre-crisis leverage, US-dollar funding needs, and liquidity buffers. Spillover effects from U.S. emergency liquidity provision are generally confined to short-term rates.
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Zur Wirtschaftskraft deutscher Regionen aus langfristiger Perspektive: Alte Muster werden in Ostdeutschland langsam wieder sichtbar
Axel Lindner
Wirtschaft im Wandel,
Nr. 3,
2019
Abstract
Kann der Osten Deutschlands in Zukunft noch wesentlich aufholen, oder haben die 40 Jahre Zentralplanwirtschaft dauerhafte Spuren in der Raumstruktur der deutschen Volkswirtschaft hinterlassen? Dieser Beitrag vergleicht die Raumstruktur der deutschen Volkswirtschaft im Jahr 1925, vor den politischen Umbrüchen des 20. Jahrhunderts, mit ihrer Entwicklung nach der Vereinigung. Es zeigen sich folgende Punkte: Gewinner der historischen Umbrüche war eher Süd- als Westdeutschland. Berlin konnte sein Hauptstadt-Potenzial lange nicht ausspielen, beginnt dies aber nun nachzuholen. Die Wirtschaftskraft ostdeutscher Flächenländer war 1925 breit gestreut und dabei teils höher, teils niedriger als die Deutschlands. Seit 1990 ist sie dagegen viel niedriger als im gesamtdeutschen Durchschnitt und liegt eng beieinander. Zwar holten die ostdeutschen Flächenländer in den Jahren nach 1990 zügig auf, nach dem Jahr 2000 aber nur noch langsam. Die Streuung nimmt erst seit 2010 wieder ein wenig zu. Aus historischer Perspektive sehen manche Tendenzen, etwa der Berlin-Boom und die höhere Wachstumsdynamik in Sachsen, wie eine Normalisierung aus, die sich mit einiger Wahrscheinlichkeit fortsetzen dürfte.
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