25 Years IWH

Professor Dr Gregor von Schweinitz

Professor Dr Gregor von Schweinitz
Current Position

since 10/17

Assistant Professor for Economics, esp. Quantitative Macroeconomics

University Leipzig

since 5/14

Head of the Research Group Volatility, Growth and Financial Crisis

Halle Institute for Economic Research (IWH) – Member of the Leibniz Association

since 7/13

Programme Manager of the IWH Doctoral Programme in Economics (IWH-DPE)

Halle Institute for Economic Research (IWH) – Member of the Leibniz Association

since 1/11

Economist in the Department of Macroeconomics

Halle Institute for Economic Research (IWH) – Member of the Leibniz Association

Research Interests

  • dynamic macroeconomics
  • European and international economic policy: in particular financial crises
  • risk modelling and analysis

Gregor von Schweinitz coordinates the research group "Volatility, Growth and Financial Crisis" since mid 2014 and is the programme manager of the IWH Doctoral Programme in Economics (IWH-DPE). Since October 2017, he is also an Assistant Professor for quantitative macroeconomics at the University of Leipzig. He has been working as an economist in the Department of Macroeconomics since 2011.

Gregor von Schweinitz studied business mathematics in Dresden, Strasbourg and Munich. He finished his thesis on the genesis of the European debt crisis in 2013.

Your contact

Professor Dr Gregor von Schweinitz
Professor Dr Gregor von Schweinitz
Mitglied - Department Macroeconomics
Send Message +49 345 7753-744

Publications

Predicting Financial Crises: The (Statistical) Significance of the Signals Approach

Makram El-Shagi Tobias Knedlik Gregor von Schweinitz

in: Journal of International Money and Finance , No. 35, 2013

Abstract

The signals approach as an early-warning system has been fairly successful in detecting crises, but it has so far failed to gain popularity in the scientific community because it cannot distinguish between randomly achieved in-sample fit and true predictive power. To overcome this obstacle, we test the null hypothesis of no correlation between indicators and crisis probability in three applications of the signals approach to different crisis types. To that end, we propose bootstraps specifically tailored to the characteristics of the respective datasets. We find (1) that previous applications of the signals approach yield economically meaningful results; (2) that composite indicators aggregating information contained in individual indicators add value to the signals approach; and (3) that indicators which are found to be significant in-sample usually perform similarly well out-of-sample.

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Qual VAR Revisited: Good Forecast, Bad Story

Makram El-Shagi Gregor von Schweinitz

in: Journal of Applied Economics , No. 2, 2016

Abstract

Due to the recent financial crisis, the interest in econometric models that allow to incorporate binary variables (such as the occurrence of a crisis) experienced a huge surge. This paper evaluates the performance of the Qual VAR, originally proposed by Dueker (2005). The Qual VAR is a VAR model including a latent variable that governs the behavior of an observable binary variable. While we find that the Qual VAR performs reasonable well in forecasting (outperforming a probit benchmark), there are substantial identification problems even in a simple VAR specification. Typically, identification in economic applications is far more difficult than in our simple benchmark. Therefore, when the economic interpretation of the dynamic behavior of the latent variable and the chain of causality matter, use of the Qual VAR is inadvisable.

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Real Effective Exchange Rate Misalignment in the Euro Area: A Counterfactual Analysis

Makram El-Shagi Axel Lindner Gregor von Schweinitz

in: Review of International Economics , No. 1, 2016

Abstract

The European debt crisis has revealed severe imbalances within the Euro area, sparking a debate about the magnitude of those imbalances, in particular concerning real effective exchange rate misalignments. We use synthetic matching to construct a counterfactual economy for each member state in order to identify the degree of these misalignments. We find that crisis countries are best described as a combination of advanced and emerging economies. Comparing the actual real effective exchange rate with those of the counterfactuals gives evidence of misalignments before the outbreak of the crisis: all peripheral countries appear strongly and significantly overvalued.

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Working Papers

The Joint Dynamics of Sovereign Ratings and Government Bond Yields

Makram El-Shagi Gregor von Schweinitz

in: Deutsche Bundesbank Discussion Papers , No. 13, 2016

Abstract

Can a negative shock to sovereign ratings invoke a vicious cycle of increasing government bond yields and further downgrades, ultimately pushing a country toward default? The narratives of public and political discussions, as well as of some widely cited papers, suggest this possibility. In this paper, we will investigate the possible existence of such a vicious cycle. We find no evidence of a bad long-run equilibrium and cannot confirm a negative feedback loop leading into default as a transitory state for all but the very worst ratings.

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Optimizing Policymakers' Loss Functions in Crisis Prediction: Before, Within or After?

Peter Sarlin Gregor von Schweinitz

in: ECB Working Paper Series , No. 2025, 2017

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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Why They Keep Missing: An Empirical Investigation of Rational Inattention of Rating Agencies

Gregor von Schweinitz Makram El-Shagi

in: IWH Discussion Papers , No. 1, 2017

Abstract

Sovereign ratings have frequently failed to predict crises. However, the literature has focused on explaining rating levels rather than the timing of rating announcements. We fill this gap by explicitly differentiating between a decision to assess a country and the actual rating decision. Thereby, we account for rational inattention of rating agencies that exists due to costs of reassessment. Exploiting information of rating announcements, we show that (i) the proposed differentiation significantly improves estimation; (ii) rating agencies consider many nonfundamental factors in their reassessment decision; (iii) markets only react to ratings providing new information; (iv) developed countries get preferential treatment.

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