1. About the IWH
  2. Team
  3. President

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

since 1/20

Acting Head of the Department of Laws, Regulations and Factor Markets

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

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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. At the IWH, he is acting head of the Department of Laws, Regulations and Factor Markets. Reint E. Gropp is Associate Fellow of the Centre for Economic Policy Research (CEPR) and serves as consultant for various central banks. In 2021, he 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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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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Banks’ Funding Stress, Lending Supply and Consumption Expenditure

H. Evren Damar Reint E. Gropp Adi Mordel

in: Journal of Money, Credit and Banking, No. 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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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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The Cleansing Effect of Banking Crises

Reint E. Gropp Steven Ongena Jörg Rocholl Vahid Saadi

in: IWH Discussion Papers, No. 12, 2020

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

in: Centre for Economic Policy Research Discussion Papers, 2020

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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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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