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Transformation tables for administrative borders in Germany – data In order to...
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IWH EXplore Competitive Funding for Research Projects with External Involvement at...
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IWH Alumni The IWH would like to stay in contact with its former employees. We...
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The IWH Forecasting Dashboard – From Forecasts to Evaluation and Comparison
Katja Heinisch, Christoph Behrens, Jörg Döpke, Alexander Foltas, Ulrich Fritsche, Tim Köhler, Karsten Müller, Johannes Puckelwald, Hannes Reichmayr
IWH Technical Reports,
No. 1,
2023
Abstract
The paper describes the “Halle Institute for Economic Research (IWH) Forecasting Dashboard (ForDas)”. This tool aims at providing, on a non-commercial basis, historical and actual macroeconomic forecast data for the Germany economy to researchers and interested audiences. The database renders it possible to directly compare forecast quality across selected institutions and over time. It is partly based on data collected in the DFG-funded project “Macroeconomic Forecasts in Great Crises”.
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Do Larger Firms Exert More Market Power? Markups and Markdowns along the Size Distribution
Matthias Mertens, Bernardo Mottironi
IWH-CompNet Discussion Papers,
No. 1,
2023
Abstract
Several models posit a positive cross-sectional correlation between markups and firm size, which characterizes misallocation, factor shares, and gains from trade. Accounting for labor market power in markup estimation, we find instead that larger firms have lower product markups but higher wage markdowns. The negative markup-size correlation turns positive when conditioning on markdowns, suggesting interactions between product and labor market power. Our findings are robust to common criticism (e.g., price bias, non-neutral technology) and hold across 19 European countries. We discuss possible mechanisms and resulting implications, highlighting the importance of studying input and output market power in a unified framework.
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Do Larger Firms Exert More Market Power? Markups and Markdowns along the Size Distribution
Matthias Mertens, Bernardo Mottironi
IWH Discussion Papers,
No. 1,
2023
Abstract
Several models posit a positive cross-sectional correlation between markups and firm size, which characterizes misallocation, factor shares, and gains from trade. Accounting for labor market power in markup estimation, we find instead that larger firms have lower product markups but higher wage markdowns. The negative markup-size correlation turns positive when conditioning on markdowns, suggesting interactions between product and labor market power. Our findings are robust to common criticism (e.g., price bias, non-neutral technology) and hold across 19 European countries. We discuss possible mechanisms and resulting implications, highlighting the importance of studying input and output market power in a unified framework.
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Correlation Scenarios and Correlation Stress Testing
Natalie Packham, Fabian Wöbbeking
Journal of Economic Behavior and Organization,
January
2023
Abstract
We develop a general approach for stress testing correlations of financial asset portfolios. The correlation matrix of asset returns is specified in a parametric form, where correlations are represented as a function of risk factors, such as country and industry factors. A sparse factor structure linking assets and risk factors is built using Bayesian variable selection methods. Regular calibration yields a joint distribution of economically meaningful stress scenarios of the factors. As such, the method also lends itself as a reverse stress testing framework: using the Mahalanobis distance or Highest Density Regions (HDR) on the joint risk factor distribution allows to infer worst-case correlation scenarios. We give examples of stress tests on a large portfolio of European and North American stocks.
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The Disciplining Effect of Supervisory Scrutiny in the EU-wide Stress Test
Christoffer Kok, Carola Müller, Steven Ongena, Cosimo Pancaro
Journal of Financial Intermediation,
January
2023
Abstract
Relying on confidential supervisory data related to the 2016 EU-wide stress test, this paper presents novel empirical evidence that supervisory scrutiny associated to stress testing has a disciplining effect on bank risk. We find that banks that participated in the 2016 EU-wide stress test subsequently reduced their credit risk relative to banks that were not part of this exercise. Relying on new metrics for supervisory scrutiny that measure the quantity, potential impact, and duration of interactions between banks and supervisors during the stress test, we find that the disciplining effect is stronger for banks subject to more intrusive supervisory scrutiny during the exercise. We also find that a strong risk management culture is a prerequisite for the supervisory scrutiny to be effective. Finally, we show that a similar disciplining effect is not exerted neither by higher capital charges nor by more transparency and related market discipline induced by the stress test.
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The Color of Corporate Loan Securitization
Isabella Müller, Huyen Nguyen, Trang Nguyen
IWH Discussion Papers,
No. 22,
2022
Abstract
We examine whether banks manage firms’ climate transition risks via corporate loan securitization. Results show that banks are more likely to securitize loans granted to firms that become more carbon-intensive. The effect is more pronounced if banks have a lower willingness to adjust loan terms. Exploiting the election of Donald Trump as an exogenous shock that lowers transition risk, we show that banks respond by a lower securitization of loans given to firms that become more carbon-intensive. This is mainly driven by banks that have no or low preferences for sustainable lending and domestic lenders.
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