The integration of imperfect financial markets: Implications for business cycle volatility
Claudia M. Buch, C. Pierdzioch
Journal of Policy Modeling,
No. 7,
2005
Abstract
During the last two decades, the degree of openness of national financial systems has increased substantially. At the same time, asymmetries in information and other financial market frictions have remained prevalent. We study the implications of the opening up of national financial systems in the presence of financial market frictions for business cycle volatility. In our empirical analysis, we show that countries with more developed financial systems have lower business cycle volatility. Financial openness has no strong impact on business cycle volatility, in contrast. In our theoretical analysis, we study the implications of the opening up of national financial markets and of financial market frictions for business cycle volatility using a dynamic macroeconomic model of an open economy. We find that the implications of opening up national financial markets for business cycle volatility are largely unaffected by the presence of financial market frictions.
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The Impact of Technology and Regulation on the Geographical Scope of Banking
Hans Degryse, Steven Ongena
Oxford Review of Economic Policy,
No. 4,
2004
Abstract
We review how technological advances and changes in regulation may shape the (future) geographical scope of banking. We first review how both physical distance and the presence of borders currently affect bank lending conditions (loan pricing and credit availability) and market presence (branching and servicing). Next we discuss how technology and regulation have altered this impact and analyse the current state of the European banking sector. We discuss both theoretical contributions and empirical work and highlight open questions along the way. We draw three main lessons from the current theoretical and empirical literature: (i) bank lending to small businesses in Europe may be characterized both by (local) spatial pricing and resilient (regional and/or national) market segmentation; (ii) because of informational asymmetries in the retail market, bank mergers and acquisitions seem the optimal route of entering another market, long before cross-border servicing or direct entry are economically feasible; and (iii) current technological and regulatory developments may, to a large extent, remain impotent in further dismantling the various residual but mutually reinforcing frictions in the retail banking markets in Europe. We conclude the paper by offering pertinent policy recommendations based on these three lessons.
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Demographischer Wandel in Sachsen – Teilbereich „Staatliche Handlungsfähigkeit/finanzielle Ressourcen“ – Teil III: „Implikationen für die Wirtschaftsförderung und den Infrastrukturaufbau“
Joachim Ragnitz
Gutachten des Instituts für Wirtschaftsforschung Halle im Auftrag der Sächsischen Staatskanzlei,
2004
Abstract
Sachsen wird wie auch die übrigen ostdeutschen Länder in den nächsten Jahren massive demographische Umwälzungen hinzunehmen haben, gekennzeichnet zum einen durch einen starken Rückgang der Bevölkerung, zum anderen durch eine Verschiebung der Bevölkerungsstruktur hin zu den höheren Altersgruppen. Dies wird Auswirkungen in allen Bereichen von Wirtschaft und Gesellschaft haben, die heute noch längst nicht vollständig erkannt sind. Die Sächsische Staatskanzlei hat aus diesem Grund das IWH gebeten, in einer Expertise die Frage zu behandeln, auf welche Weise die Wirtschaftspolitik auf die Herausforderungen der demographischen Entwicklung reagieren kann und soll. Darüber hinaus wurden weitere Gutachter beauftragt, die Konsequenzen des demographischen Wandels für die Familienpolitik, den Arbeitsmarkt und die Finanzpolitik abzuschätzen.
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Financing FDI into developing economies and the international transmission of business cycle fluctuations
Diemo Dietrich
Swiss Journal of Economics and Statistics,
2004
Abstract
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Promotion of investment in East Germany - Results of an empirical study of effectiveness
Harald Lehmann, Andreas Stierwald
Wirtschaft im Wandel,
No. 5,
2004
Abstract
In Germany considerable amounts of public funds are being spent on business development programs. In order to do so economic reasoning is needed. In particular the programs for supporting investment lack microeconometric empirical evaluation. To close this gap the special program „Gemeinschaftsaufgabe zur Verbesserung der regionalen Wirtschaftsstruktur“ (GA) is exemplarily analyzed. This program is intended to strengthen the capital stock of the East German economy, so firms of the East German manufacturing industries will be studied. A comparison of the two fundamental methods for microeconometric evaluation shall demonstrate the general problems in analyzing the effectiveness of development programs. The matching estimator provides more stable results then a sample selectivity model. The results suggest that the GA generates considerable extra investment activities.
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Diversifikation und regionale Wirtschafts- und Beschäftigungsentwicklung - Eine empirische Analyse für ausgewählte deutsche Gebiete
Peter Haug
Jahrbuch für Regionalwissenschaft,
No. 2,
2004
Abstract
This article analyses the effects of heterogeneous economic structures on the long-term development of regional employment. A simple model is introduced to illustrate the beneficial outcomes for households as well as for enterprises of locating in highly diversified municipalities because risk (volatility of income, recruitment costs in a broader sense) diminishes for both. Econometric results for a sample of municipalities in Lower Saxony provide some evidence for a positive effect of local economic diversification on employment opportunities. The results seem to be not confined to the aggregated local labour demand but also apply to most branches the local business sector.
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Significant Progress in East German Machine Construction Industry
Siegfried Beer
Wirtschaft im Wandel,
No. 2,
2003
Abstract
The restructuring of the mechanical engineering industry of the new Länder has displayed clearly positive effects. Between 1997 and 2001, productivity and turnover have increased by about 25 %. Since mid 1999 the number of employees has also gone up again. Business surveys indicate an improvement in profitability. This positive development is due to an increase in competitiveness which is based on new product lines together with more effective innovation activities. Growth has also been enhanced by the enlargement and modernisation of the capital stock and a moderate movement of wages. Despite this progress the east German engineering industry as a whole does by far not reach the productivity figures of its west German counterpart. Differences explaining this gap are found in the product structure with dominating customer specific products and in the firm size with a smaller number of employees in the East.
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Regional effects of infrastrukture investments on the New Länder
Walter Komar, Evelyn Krolopp, Joachim Ragnitz
IWH-Sonderhefte,
No. 2,
2002
Abstract
Given infrastructure deficiencies in eastern German states and concomitant
weak growth, the present volume analyzes the extent to which making
important infrastructure projects a priority could more quickly improve
local business conditions in eastern Germany. Although the Solidarity Pact
II makes funds available for infrastructure development, these funds are
allocated over a period of twenty years. This timeframe will not allow the
rapid improvement of local business conditions.
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Investment Behaviour of Financially Constrained Multinational Corporations: Consequences for the International Transmission of Business Cycle Fluctuations
Diemo Dietrich
IWH Discussion Papers,
No. 165,
2002
Abstract
The paper investigates the investment decision of a financially constrained multinational
corporation (MNC) planning investment projects both at home and in a developing
country. The collateral values of the projects diverge because of country specific
transactions costs so that the willingness of banks to grant a loan depends not only on
the MNCs financial wealth but also on the share of FDI in total investment. It is shown
that i) variations in the MNCs financial standing affects FDI stronger than domestic
investment, ii) FDI is likely to decrease following a macroeconomic shock to the MNC
parent, and iii) domestic investment is likely to increase following a macroeconomic
shock to the MNC affiliate.
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Germany s dependence on the economic situation in the U.S. is less crucial than generally assumed
Klaus Weyerstraß
Wirtschaft im Wandel,
No. 6,
2002
Abstract
In the context of the recent cyclical downturn in Germany it has often been argued that Germany depends more than other European countries on international economic developments. In this article it is investigated whether empirical support can be found for this proposition. Moreover, it is explored whether this relation has changed over time. For this purpose, vector autoregressive (VAR) models are applied to the output gaps of different economies.
It is shown that in the seventies and eighties, the transmission of business cycle shocks was more pronounced to Germany than to the other EU countries. Since the middle of the nineties, no such differences can be detected. Furthermore, since the middle of the nineties, the effects of shocks from abroad on the German business cycle have been significantly more short-lived than before.
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