East Germany Rearguard Only investments in education will lead to a further catch-up ...
The maths behind gut decisions First carefully weigh up the costs and benefits and then make a rational...
Financial Stability Dossier ...
The New Europe
The new Europe The financial crisis is largely over, yet confidence in the ECB and EU...
Social Mobility Equal opportunities for everyone Dossier ...
The Minimum Wage Effects on Skilled Crafts Sector in Saxony-Anhalt ...
IWH-CompNet Discussion Papers
IWH-CompNet Discussion Papers The IWH-CompNet Discussion Paper series presents research...
Does Machine Learning Help us Predict Banking Crises? ...
Basel III Capital Requirements and Heterogeneous Banks
IWH Discussion Papers,
I develop a theoretical model to investigate the effect of simultaneous regulation with a leverage ratio and a risk-weighted ratio on banks‘ risk taking and banking market structure. I extend a portfolio choice model by adding heterogeneity in productivity among banks. Regulators face a trade-off between the efficient allocation of resources and financial stability. In an oligopolistic market, risk-weighted requirements incentivise banks with high productivity to lend to low-risk firms. When a leverage ratio is introduced, these banks lose market shares to less productive competitors and react with risk-shifting into high-risk loans. While average productivity in the low-risk market falls, market shares in the high-risk market are dispersed across new entrants with high as well as low productivity.
What Type of Finance Matters for Growth? Bayesian Model Averaging Evidence
The World Bank Economic Review,
We examine the effect of finance on long-term economic growth using Bayesian model averaging to address model uncertainty in cross-country growth regressions. The literature largely focuses on financial indicators that assess the financial depth of banks and stock markets. We examine these indicators jointly with newly developed indicators that assess the stability and efficiency of financial markets. Once we subject the finance-growth regressions to model uncertainty, our results suggest that commonly used indicators of financial development are not robustly related to long-term growth. However, the findings from our global sample indicate that one newly developed indicator—the efficiency of financial intermediaries—is robustly related to long-term growth.