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Professor Reint E. Gropp, PhD

Professor Reint E. Gropp, PhD
Current Position

since 11/14

President

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

since 10/14

Professor of Economics

Otto von Guericke University Magdeburg

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Research Interests
  • financial economics
  • macroeconomics
  • corporate finance
  • money and banking

Reint E. Gropp has been the President of IWH and Full Professor of Economics at the Otto von Guericke University Magdeburg since 2014. He is Associate Fellow of the Centre for Economic Policy Research (CEPR) and serves as consultant for various central banks. In 2021, Reint E. Gropp was elected Speaker of the section B institutes of the Leibniz Association.

Reint E. Gropp studied economics at the universities of Freiburg and Wisconsin-Madison, where he obtained a PhD in 1994. Prior to his appointment at the IWH, he held the endowed Chair for Sustainable Banking and Finance at Goethe-University Frankfurt am Main and worked for the International Monetary Fund (IMF) as well as the European Central Bank (ECB), where he was Deputy Head of the Financial Research Division.

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Professor Reint E. Gropp, PhD
Professor Reint E. Gropp, PhD
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Publications

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The Cleansing Effect of Banking Crises

Reint E. Gropp Steven Ongena Jörg Rocholl Vahid Saadi

in: Economic Inquiry, No. 3, 2022

Abstract

We assess the cleansing effects of the 2008–2009 financial crisis. U.S. regions with higher levels of supervisory forbearance on distressed banks see less restructuring in the real sector: fewer establishments, firms, and jobs are lost when more distressed banks remain in business. In these regions, the banking sector has been less healthy for several years after the crisis. Regions with less forbearance experience higher productivity growth after the crisis with more firm entries, job creation, and employment, wages, patents, and output growth. Forbearance is greater for state-chartered banks and in regions with weaker banking competition and more independent banks.

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Public Bank Guarantees and Allocative Efficiency

Reint E. Gropp Andre Guettler Vahid Saadi

in: Journal of Monetary Economics, December 2020

Abstract

A natural experiment and matched bank/firm data are used to identify the effects of bank guarantees on allocative efficiency. We find that with guarantees in place unproductive firms receive larger loans, invest more, and maintain higher rates of sales and wage growth. Moreover, firms produce less productively. Firms also survive longer in banks’ portfolios and those that enter guaranteed banks’ portfolios are less profitable and productive. Finally, we observe fewer economy-wide firm exits and bankruptcy filings in the presence of guarantees. Overall, the results are consistent with the idea that guaranteed banks keep unproductive firms in business for too long.

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Financial Incentives and Loan Officer Behavior: Multitasking and Allocation of Effort under an Incomplete Contract

Patrick Behr Alejandro H. Drexler Reint E. Gropp Andre Guettler

in: Journal of Financial and Quantitative Analysis, No. 4, 2020

Abstract

We investigate the implications of providing loan officers with a nonlinear compensation structure that rewards loan volume and penalizes poor performance. Using a unique data set provided by a large international commercial bank, we examine the main activities that loan officers perform: loan prospecting, screening, and monitoring. We find that when loan officers are at risk of losing their bonuses, they increase prospecting and monitoring. We further show that loan officers adjust their behavior more toward the end of the month when bonus payments are approaching. These effects are more pronounced for loan officers with longer tenures at the bank.

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Working Papers

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Supranational Rules, National Discretion: Increasing versus Inflating Regulatory Bank Capital?

Reint E. Gropp Thomas Mosk Steven Ongena Ines Simac Carlo Wix

in: Centre for Economic Policy Research Discussion Papers, No. 15764, 2021

Abstract

We study how higher capital requirements introduced at the supranational and implemented at the national level affect the regulatory capital of banks across countries. Using the 2011 EBA capital exercise as a quasi-natural experiment, we find that affected banks inflate their levels of regulatory capital without a commensurate increase in their book equity and without a reduction in bank risk. This observed regulatory capital inflation is more pronounced in countries where credit supply is expected to tighten. Our results suggest that national authorities forbear their domestic banks to meet supranational requirements, with a focus on short-term economic considerations.

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Flight from Safety: How a Change to the Deposit Insurance Limit Affects Households‘ Portfolio Allocation

H. Evren Damar Reint E. Gropp Adi Mordel

in: IWH Discussion Papers, No. 19, 2019

Abstract

We study how an increase to the deposit insurance limit affects households‘ portfolio allocation by exogenously reducing uninsured deposit balances. Using unique data that identifies insured versus uninsured deposits, along with detailed information on Canadian households‘ portfolio holdings, we show that households respond by drawing down deposits and shifting towards mutual funds and stocks. These outflows amount to 2.8% of outstanding bank deposits. The empirical evidence, consistent with a standard portfolio choice model that is modified to accommodate uninsured deposits, indicates that more generous deposit insurance coverage results in nontrivial adjustments to household portfolios.

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What Drives Banks‘ Geographic Expansion? The Role of Locally Non-diversifiable Risk

Reint E. Gropp Felix Noth Ulrich Schüwer

in: IWH Discussion Papers, No. 6, 2019

Abstract

We show that banks that are facing relatively high locally non-diversifiable risks in their home region expand more across states than banks that do not face such risks following branching deregulation in the 1990s and 2000s. These banks with high locally non-diversifiable risks also benefit relatively more from deregulation in terms of higher bank stability. Further, these banks expand more into counties where risks are relatively high and positively correlated with risks in their home region, suggesting that they do not only diversify but also build on their expertise in local risks when they expand into new regions.

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Keywords

Financial Markets Monetary Policy Brexit The new Europe Growth Productivity Financial Crisis Financial Stability Innovations Social Mobility Demographic Change East Germany Corona
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