Bank Concentration and Retail Interest Rates
S. Corvoisier, Reint E. Gropp
Journal of Banking and Finance,
No. 11,
2002
Abstract
The recent wave of mergers in the euro area raises the question whether the increase in concentration has offset the increase in competition in European banking through deregulation. We test this question by estimating a simple Cournot model of bank pricing. We construct country and product specific measures of bank concentration and find that for loans and demand deposits increasing concentration may have resulted in less competitive pricing by banks, whereas for savings and time deposits, the model is rejected, suggesting increases in contestability and/or efficiency in these markets. Finally, the paper discusses some implications for tests of the effect of concentration on monetary policy transmission.
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Rating Agency Actions and the Pricing of Debt and Equity of European Banks: What Can we Infer About Private Sector Monitoring of Bank Soundness?
Reint E. Gropp, A. J. Richards
Economic Notes,
No. 3,
2001
Abstract
The recent consultative papers by the Basel Committee on Banking Supervision has raised the possibility of an explicit role for external rating agencies in the assessment of the credit risk of banks’ assets, including interbank claims. Any judgement on the merits of this proposal calls for an assessment of the information contained in credit ratings and its relationship to other publicly available information on the financial health of banks and borrowers. We assess this issue via an event study of rating change announcements by leading international rating agencies, focusing on rating changes for European banks for which data on bond and equity prices are available. We find little evidence of announcement effects on bond prices, which may reflect the lack of liquidity in bond markets in Europe during much of our sample period. For equity prices, we find strong effects of ratings changes, although some of our results may suffer from contamination by contemporaneous news events. We also test for pre-announcement and post-announcement effects, but find little evidence of either. Overall, our results suggest that ratings agencies may perform a useful role in summarizing and obtaining non-public information on banks and that monitoring of banks’ risk through bond holders appears to be relatively limited in Europe. The relatively weak monitoring by bondholders casts some doubt on the effectiveness of a subordinated debt requirement as a supervisory tool in the European context, at least until bond markets are more developed.
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Attribute Dependence and the Provision of Quality
Hans Degryse, Andreas Irmen
Regional Science and Urban Economics,
No. 5,
2001
Abstract
Often a quality improvement necessitates modifications of varietal product features. This paper studies firms’ incentives to provide quality when this decision affects the goods’ degree of perceived horizontal differentiation. We find that the quality level hinges crucially on the interaction between the quality and the varietal product attribute. We examine the outcome of a game where firms decide on quality and price relative to what a social planner would desire. If the interaction between quality and perceived horizontal differentiation is sufficiently positive, we find for the sequential game ‘quality then price’ that the private incentives to provide quality are excessive relative to the social optimum. As a result the level and the direction of interaction between the attributes determines whether there is excessive or insufficient provision of quality.
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Climate protection policy in the housing sector: Lacking impact and need for action
Steffen Hentrich
Wirtschaft im Wandel,
No. 11,
2001
Abstract
Energy savings in the rental housing sector may contribute to the reduction of global greenhouse gas emission. However, emissions have gone up since the early nineties despite of large energy saving potentials. In general the effects of energy saving regulations and support programmes were overestimated. Unfortunately, these programmes ignore market specific restraints.
Markets do not provide optimal incentives to prevent emissions since the costs of greenhouse gas emissions are not fully internalised in fuel prices. Special characteristics of rental housing market in Germany enhance this deficit. Consequently profitable measures of saving energy are neglected. Overall the effectiveness of regulations and support programmes suffers.
Therefore it is necessary to strengthen energy saving incentives. Suitable instruments would include a gradual rise in fuel taxes (Öko-Steuer), a reduction of rental housing market control and measures to improve the transparency of energy consumption.
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On the Incentives to Provide Fuel-Efficient Automobiles
Hans Degryse, Andreas Irmen
Journal of Economics,
No. 2,
2001
Abstract
We argue that the provision of more fuel-efficient cars necessitates specific aerodynamic shapes. We show that the presence of this technological constraint may reduce the incentives to provide fuel efficiency. In equilibrium, cars become more similar and aerodynamic as fuel prices increase. However, the provided level of fuel efficiency falls short of the social optimal one such that a fuel-economy standard is welfare-enhancing.
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Productivity gap of East German industry: A summarizing evaluation
Joachim Ragnitz
Wirtschaft im Wandel,
No. 7,
2001
Abstract
Ten years after German unification labor productivity in the New Laender reaches only 70 per cent of West German levels. Further, in the second half of the 1990ies, convergence did not continue. Because productivity can be regarded as a key for wages, for competitiveness of firms and for future transfer payments, the reasons for low productivity in East Germany are of major importance. In this article, it is argued that the existing productivity gap reflects mainly structural differences between East and West Germany, that is the high share of small firms and the predominance of sectors with low value added per worker. Additionally, difficulties on product markets leading to insufficient selling prices are responsible for the comparative low productivity of East German firms. Differences in capital intensity or in human capital, however, do explain only a small part of the productivity gap.
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Surplus value and prices: Interest and profit! A contribution to the determination of production prices considering fixed capital
Jens Müller
IWH Discussion Papers,
No. 147,
2001
Abstract
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The Tableau Economique by Francois Quesnay
Jens Müller
IWH Discussion Papers,
No. 146,
2001
Abstract
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Rising oil prices dampen upswing in Central and Eastern Europe
Axel Brüggemann
Wirtschaft im Wandel,
No. 16,
2000
Abstract
The article analyzes and forecasts the economic development in the Central and Eastern European transition economies. Due to the oil price effect and subsequently slower growth in the euro area, growth in transition economies will experience a slight setback too. On the whole however, it will reamin strong both in 2001 and in 2002. Accompaning the decrease in economic growth, the risk for financial crises in the region has increased.
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Moderate production and employment effects through rising crude oil prices – A simulation with the macroeconomic IWH model –
Christian Dreger
Wirtschaft im Wandel,
No. 15,
2000
Abstract
In the article the impacts of a rise in oil prices on production and employment are examined. The impacts are carried out by simulation on the grounds of a macroeconometric model. Given various price developments, the effects on production and employment are less pronounced than those in previous crisis. In the worst case scenario, output losses are 0.4 percentage points of the overall growth rate of the economy.
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