Professor Dr Stefan Eichler

Professor Dr Stefan Eichler
Current Position

since 10/16

Professor of International Monetary Economics 

TU Dresden

since 4/14

Head of the Research Group Financial Market Structure and Financial Stability

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

Research Interests

  • financial crises
  • monetary policy
  • exchange rates
  • international investment

Stefan Eichler is Professor of International Monetary Economics at TU Dresden since October 2016 as well as a member of the Department of Financial Markets at IWH since April 2014. His research focuses on financial market structure and financial stability.

Stefan Eichler earned a diploma from Chemnitz University of Technology and TU Dresden. He received his PhD from TU Dresden. Prior to joining IWH, he was Temporary Professor of  Monetary Economics at TU Dresden, Junior Professor of International Macroeconomics and Finance at Otto von Guericke University Magdeburg, and Professor of International Money and Finance at the Leibniz University Hannover.

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Professor Dr Stefan Eichler
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Publications

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Central Bank Transparency and the Volatility of Exchange Rates

Stefan Eichler Helge Littke

in: Journal of International Money and Finance, forthcoming

Abstract

We analyze the effect of monetary policy transparency on bilateral exchange rate volatility. We test the theoretical predictions of a stylized model using panel data for 62 currencies from 1998 to 2010. We find strong evidence that an increase in the availability of information about monetary policy objectives decreases exchange rate volatility. Using interaction models, we find that this effect is more pronounced for countries with a lower flexibility of goods prices, a lower level of central bank conservatism, and a higher interest rate sensitivity of money demand.

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Regional Banking Instability and FOMC Voting

Stefan Eichler Tom Lähner Felix Noth

in: Journal of Banking & Finance, 2018

Abstract

This study analyzes if regionally affiliated Federal Open Market Committee (FOMC) members take their districts’ regional banking sector instability into account when they vote. Considering the period 1979–2010, we find that a deterioration in a district's bank health increases the probability that this district's representative in the FOMC votes to ease interest rates. According to member-specific characteristics, the effect of regional banking sector instability on FOMC voting behavior is most pronounced for Bank presidents (as opposed to Governors) and FOMC members who have career backgrounds in the financial industry or who represent a district with a large banking sector.

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Regional, Individual and Political Determinants of FOMC Members' Key Macroeconomic Forecasts

Stefan Eichler Tom Lähner

in: Journal of Forecasting, No. 1, 2018

Abstract

We study Federal Open Market Committee members' individual forecasts of inflation and unemployment in the period 1992–2004. Our results imply that Governors and Bank presidents forecast differently, with Governors submitting lower inflation and higher unemployment rate forecasts than bank presidents. For Bank presidents we find a regional bias, with higher district unemployment rates being associated with lower inflation and higher unemployment rate forecasts. Bank presidents' regional bias is more pronounced during the year prior to their elections or for nonvoting bank presidents. Career backgrounds or political affiliations also affect individual forecast behavior.

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Working Papers

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A Market-based Indicator of Currency Risk: Evidence from American Depositary Receipts

Stefan Eichler Ingmar Roevekamp

in: IWH Discussion Papers, No. 4, 2016

Abstract

We introduce a novel currency risk measure based on American Depositary Receipts(ADRs). Using a multifactor pricing model, we exploit ADR investors’ exposure to potential devaluation losses to derive an indicator of currency risk. Using weekly data for a sample of 831 ADRs located in 23 emerging markets over the 1994-2014 period, we find that a deterioration in the fiscal and current account balance, as well as higher inflation, increases currency risk. Interaction models reveal that these macroeconomic fundamentals drive currency risk, particularly in countries with managed exchange rates, low levels of foreign exchange reserves and a poor sovereign credit rating.

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Deriving the Term Structure of Banking Crisis Risk with a Compound Option Approach: The Case of Kazakhstan

Stefan Eichler Alexander Karmann Dominik Maltritz

in: Discussion paper, Series 2: Banking and financial studies, No. 01/2010, No. 1, 2010

Abstract

We use a compound option-based structural credit risk model to infer a term structure of banking crisis risk from market data on bank stocks in daily frequency. Considering debt service payments with different maturities this term structure assigns a separate estimator for short- and long-term default risk to each maturity. Applying the Duan (1994) maximum likelihood approach, we find for Kazakhstan that the overall crisis probability was mainly driven by short-term risk, which increased from 25% in March 2007 to 80% in December 2008. Concurrently, the long-term default risk increased from 20% to only 25% during the same period.

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