The role of banking portfolios in the transmission from the currency crises to banking crises - potential effects of Basel II
Tobias Knedlik, Johannes Ströbel
IWH Discussion Papers,
No. 21,
2006
Abstract
This paper evaluates the potential effects of the Basel II accord on preventing the transmission from currency crises to financial crises. By analyzing the case study of South Korea, it shows how mismatches on banks’ balance sheets were the primary cause for such a transmission, and models how Basel II would have affected those balance sheets. The paper shows that due to South Korea’s positive credit rating in the months leading up to the crisis, the regulatory capital reserves under Basel II would have been even lower than those under Basel I, and that therefore Basel II would have had adverse effects on the development of the crisis. In the second part, the article analyses whether the behavior of rating agencies has changed since their failure to predict the Asian crisis. The paper finds no robust econometric evidence that rating agencies have started to take micromismatches into account when assigning sovereign ratings. Thus, given the current approach of credit rating agencies, we have reservations concerning the effectiveness of Basel II to prevent the transmission from currency crises to banking crises, both for the case of South Korea and for potential future crises.
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Monetary Policy and Bank Lending in Japan: An Agency-based Approach
Diemo Dietrich
Incentives and Economic Behaviour,
2005
Abstract
This paper studies the incentive effects on Japanese banks of a low interest rate policy by the Bank of Japan. It utilizes a simplified version of an overlapping principal-agent-style model of corporate finance originally developed in Dietrich (2003). This model is dedicated to study the monetary policy transmission mechanism by combining arguments of the broad credit channel and the bank lending channel taking into account that banks need to be provided with incentives to monitor entrepreneurs. We argue that stipulating banks to possess some amount of own capital generate these incentives. We denote this capital requirement to be market based and show that this requirement depends crucially on interest rates. After revealing some shortcomings of the credit crunch hypothesis, we apply this approach to the Japanese economy. As a result, a policy of very low interest rates may not only be inefficient but counterproductive to reactivate a stumbled economy via the usual credit channel.
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Liberalization of Electricity Markets in Selected European Countries
Albrecht Kauffmann, M. Keim, P. J. J. Welfens
Diskussionsbeiträge des Europäischen Instituts für Internationale Wirtschaftsbeziehungen (EIIW), Bergische Universität Wuppertal, Nr. 124,
No. 124,
2004
Abstract
We look into liberalization issues in the context of the EU Electricity Liberalization. Taking a look at principal issues reveals that the Community Directive 96/92/EC does not really take into account the interdependencies of energy markets. Moreover, third party access is not effectively enforced, particularly not in Germany, where mergers between a major electricity company and the dominant gas company have raised particular issues. Electricity liberalization in Scandinavia is working relatively well. EU accession countries are considered potential electricity exporters in the long run as full restructuring will drive down both energy intensities and electricity intensities. Russia would be wise to quickly become a member country of WTO, not in the least to gain access to Western Europe’s electricity market; the role of Russia so far has been neglected in the discussion of electricity liberalization. Excess capacities in EU-27 can be expected in the medium term. There is considerable doubt that politicians – often with ambitious goals in the field of environmental policy – will allow for a pan-European liberalization of electricity. We also take a closer look at regulatory policy issues.
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The development of R&D intensive industries in East Germany makes progress
Siegfried Beer
Wirtschaft im Wandel,
No. 2,
2004
Abstract
For East Germany – also called the New German Länder – it is very important to enlarge human capital intensive production. Starting from this consideration, the empirical study investigates the development of research & development (R&D) intensive industries for the years 1998 to 2002 whereby the different technology classes are also taken into account. The study is based on official statistics for producer goods. The analysis shows that the production of goods from R&D intensive industries increased stronger than the total production in East Germany’s manufacturing industry (8.5% versus 5.9%). Especially the increased production of high-technology goods contributed to this development. Most important branches thereby are electronic industry and aerospace industry. Medium-tech industries were less important for the above described trend. Overall, the development indicates an improvement of the technological capability of East Germany’s manufacturing industry. Compared to West Germany, however, the production of goods from medium-tech industries is underrepresented. Further more, it is only one group of products in East Germany’s industry that plays a dominant role within Germany as a whole. This is electronic devices.
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The flood disaster and GDP in Germany
Udo Ludwig, Hans-Ulrich Brautzsch
Wirtschaft im Wandel,
No. 12,
2002
Abstract
The flood at Elbe, Danube and their tributary streams destroyed billion Euros worth of Capital Stock. GDP, though, does not include Capital Stock, but production. On the basis of plausible assumptions the production interruptions caused by the flood are estimated for Germany and the most severely affected areas of Saxony and Saxony-Anhalt. Considering the “set-aside” funds for restoration and with the help of the Input-Output-Model the direct effects on production and employment within the different economic sectors are being calculated. The results are compared with the foregone consumption due to the delayed next step of the tax reform. On balance clear effects can be observed in construction.
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Trade deficits in Poland and Estonia: Capital imports versus import penetration and the sustainability of current account deficits
Johannes Stephan
IWH Discussion Papers,
No. 82,
1998
Abstract
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The role of real exchange rates in the Central European transformation
Lucjan T. Orlowski
Forschungsreihe,
No. 1,
1998
Abstract
The study eamines the interactions between real exchange rates, current accounts and capital account balances in Poland, Hungary and the Czech Republic. The empirical investigation leads to a strong endorsement of more flexible exchange rates in the present stage of the economic transformation process of the former socialist countries in Central and Eastern Europe. Exchange rate flexibility allows more independent monetary policies that focus on financing structural adjustments and institutional changes in transition economies. However, the integration process with the European Union and more remote considerations of possible accession to the European Monetary Union will require a gradual move to fixed exchange rates and to an exchangerate-based monetary policy.
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