Cross-border Diversification in Bank Asset Portfolios
Claudia M. Buch, J.C. Driscoll, C. Ostergaard
International Finance,
forthcoming
Abstract
We compute optimally diversified international asset portfolios for banks located in France, Germany, Italy, the United Kingdom and the United States using the mean–variance portfolio model with currency hedging. We compare these benchmark portfolios with the actual cross-border asset positions of banks from 1995 to 2003 and ask whether the differences are best explained by regulations, institutions, cultural conditions or other financial frictions. Our results suggest that both culture and regulations affect the probability of a country's being overweighted in banks' portfolios: countries whose residents score higher on a survey measure of trust are more likely to be overweighted, while countries that have tighter capital controls are less likely to be overweighted. From a policy standpoint, the importance of culture suggests a limit to the degree of financial integration that may be achievable by the removal of formal economic barriers.
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Concerning the development of the debt level of the New Länder since the German unification
Sabine Freye
Wirtschaft im Wandel,
20 Jahre Deutsche Einheit - Teil 2 -
2010
Abstract
During the 1990s, public indebtedness rose remarkably in all German political subdivisions. This development was particularly strong in the New Länder. At the beginning of the 1990s, they had low indebtedness rates. Today, 20 years later, the debt level of some New Länder lies over the average value of all Federal states. The background of this development is complex and depends also on the individual situation of each state. Generally, the rise of the debt level of the New Länder can be attributed to the 1990s’ estimation of a fast adjustment of the New Länder’s economic and financial power to that of the old Federal states. From today's point of view, this estimation was too optimistic. Furthermore, the New Länder have been affected differently by the transformation-conditioned structural change and the therefore arising difficulties with the necessary adjustment to the market.
In Saxony-Anhalt, which is characterised by the highest debt level of the New Länder, the collapse of the basic industry has led to high regional unemployment and to a substantial migration of the population. Still Saxony-Anhalt has countrywide the largest negative migration balance.
Regardless of these state-specific characteristics of the transformation process, there is a gradual change in the attitude towards existing debts and their handling, starting around the year 2000. So, the interest in budget consolidation increases constantly. This development was supported by the economic boom of the years 2006 and 2007. At present, the economic crisis puts the consolidation efforts of the states to the test.
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International Banking and Liquidity Allocation: Cross-border Financial Services versus Multinational Banking
Diemo Dietrich, Uwe Vollmer
Journal of Financial Services Research,
2010
Abstract
This paper explores the comparative advantage of multinational banking over cross-border financial services in terms of capitalizing on a global access to funding sources. We argue that this advantage depends on the benefit and the cost of multinational banks' intimacy with local markets. The benefit is that it allows multinational banks to create more liquidity. The cost is that it causes inefficiencies in internal capital markets, on which a bank relies to allocate liquidity across countries. We analyze the conditions under which multinational banking is then likely to arise and show that capital requirements have an effect as they influence the degree of inefficiency in internal capital markets for alternative organization structures differently.
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Do differences in rental rates compensate for unequal living conditions?
Dominik Weiß
M. T. W. Rosenfeld, D. Weiß (Hrsg.), Gleichwertigkeit der Lebensverhältnisse zwischen Politik und Marktmechanismus. Empirische Befunde aus den Ländern Sachsen. Sachsen-Anhalt und Thüringen,
2010
Abstract
Equality of living conditions is a politically institutionalized goal in Germany. Due geographical inequality in income levels and in the availability of services in the area of “subsistence support”, politicians are claiming the necessity of intervention to overcome regional disparities. However, actual implementation of the goal of equality seems to be increasingly difficult in view of current migration tendencies and demographic developments. This article starts with the theory of geographical balances and analyzes the extent to which rental rates in the market process reflect regional differences in income and amenities.
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Die wirtschaftliche Transformation in den neuen Ländern: Mehr als eine rein ökonomische Aufgabe
Ulrich Blum
Die Politische Meinung,
2009
Abstract
Often the rise from the ruins of socialism is only considered from an economic perspective. In fact we know that economic success relates to considerable extent to its cultural prerequisites. The article analyzes the present development of the New Lander within the perspective of pre-economic cultural imprints of East Germany. It shows for East Germany that beside the specific mixture of protestant work ethic and status seeking, which generated own “living worlds”, the different development of society, especially the middleclass basis and entrepreneurship are of special importance. In addition, the lost interest in unification by West Germany is an important factor that explains why West Germans had little interest to explain their own economic and social system. These conditions put economic performance in a critical perspective.
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The Spatial Clustering of the Photo-voltaic Industry in Berlin-Brandenburg
Steffen Ebert, Matthias Brachert, Iciar Dominguez Lacasa
Wirtschaft im Wandel,
No. 11,
2009
Abstract
Recent empirical studies show a process of selective clustering in the photo-voltaic industry in East Germany. Especially locations like Bitterfeld-Wolfen, Freiberg/Dresden, Erfurt/Arnstadt and Berlin-Brandenburg were able to attract concentrations of economic activity in this industry. Regarding competition between the different locations for production and employment, emerging agglomeration economies can be seen as one major source increasing inter-regional competitiveness.
The aim of this article is to provide insights into the process of spatial clustering of photo-voltaic industry in Berlin-Brandenburg. With the help of a multi-dimensional cluster-concept developed by Bathelt, we analyse the region’s strengths and weaknesses regarding its generation of agglomeration economies.
The analysis shows that there are indeed first signs of agglomeration economies developing in the region. Despite a low level of horizontal cooperation, companies do profit from co-localisation by continuous observation of the local competitors. Along the value adding production chain, vertical co-operation is increasing, leading to positive effects by specialised suppliers and gains in transportation cost.
But the focal point in further industry development is the augmentation of the regional stock of knowledge. Regarding the increasing pressure on the companies’ innovativeness as a result of changes in market conditions in the photo-voltaic sector, only innovative and efficiently producing companies will be able to survive the industries’ consolidation period. Therefore, it is necessary to further support the increasing interconnectedness between university research, non-university research and local companies in order to profit from the high technological potential of the companies in the region.
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The Standing of the East German Cities within the German System of Cities: An Interim Review on the Basis of Economic Indicators 20 Years after the German Unification
Peter Franz
Wirtschaft im Wandel,
20 Jahre Deutsche Einheit - Teil 1 -
2009
Abstract
The hopes of the East German citizens coupled with the unification in 1990 were not only directed to their personal fortune, but also concerned the amelioration of the living conditions in their cities. Twenty years after this date, we can strike an interim balance how far these hopes have been become true. For this purpose, the thirteen largest East German cities (without Berlin) are compared to cities of similar size in three West German regions (South, North, Center represented by North Rhine/Westphalia). The indicators chosen rely to the cities’ economic and fiscal conditions. The indicators paint a differentiated picture: The average income per capita in the East German cities is still lower than in the West German cities and unemployment rates are still above the West German level. With respect to future growth potential, the East German cities show a relatively good endowment with qualified human capital, with public universities and research institutions. In contrast to that, the small size of the firms and the small number of firm headquarters are unfavourable for a dynamic growth in the future. Another persistent difference between East and West is the low level of public revenues, which keeps the East German cities dependent on Federal grants. The city officials were successful in cutting payroll costs and reducing the number of civil servants. In spite of the diverse depicted economic problems still to be solved, the East German cities over the years have shown impressive endurance in catching-up.
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The Economic Optimality of Sanction Mechanisms in Interorganizational Ego Networks – A Game Theoretical Analysis –
Muhamed Kudic, Marc Banaszak
IWH Discussion Papers,
No. 15,
2009
Abstract
Even though small- and medium-sized firms (SMEs) were believed not to proceed beyond exporting in their internationalization routes, we can observe new types of co-operation intensive entrepreneurial firms – so-called “micromultinational enterprises” (mMNEs) – entering the global landscape. These firms face the challenge to manage and control a portfolio of national and international alliances simultaneously (ego network). The aim of this paper is to provide game theoretically consolidated conditions in order to analyze the effectiveness and efficiency of interorganizational sanction mechanisms in an alliance portfolio setting. A game theoretical framework is developed over three stages with increasing complexity. Results show that two out of six analyzed sanction mechanisms do not fulfill the game theoretical condition for effectiveness. The efficiency analysis sensibilizes for discretionary elements in governance structures and demonstrates that not one single sanction mechanism but rather the right choice and combination of different types of sanction mechanisms leads to efficient results. We contribute to the international business, alliance, and network literature in several ways by focusing on alliance portfolios held by mMNEs. In doing so, we move beyond the dyadic level and analyze sanction mechanisms from an ego network perspective, a still widely under-emphasized topic in the literature.
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The Identification of Technology Regimes in Banking: Implications for the Market Power-Fragility Nexus
Michael Koetter, Tigran Poghosyan
Journal of Banking and Finance,
No. 8,
2009
Abstract
Neglecting the existence of different technologies in banking can contaminate efficiency, market power, and other performance measures. By simultaneously estimating (i) technology regimes conditional on exogenous factors, (ii) efficiency conditional on risk management, and (iii) Lerner indices of German banks, we identify three distinct technology regimes: Public & Retail, Small & Specialized, and Universal & Relationship. System estimation at the regional level reveals that greater bank market power increases bank profitability but also fosters corporate defaults. Corporate defaults, in turn, lead to higher probabilities of bank distress, which supports the market power-fragility hypothesis.
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Co-existence of Unemployment and Skilled Labour Shortage? Evidence from Thuringia
Dirk Trocka, Marco Sunder
Wirtschaft im Wandel,
No. 4,
2009
Abstract
In the light of favourable business conditions during the previous years, business organizations have repeatedly cautioned about a skilled labour shortage that could constrain future development of enterprises. While shortages may be typical of phases of economic expansion, the skilled labour shortage might turn into a permanent phenomenon if one takes into account the shrinking of the working-age population. The demographic transition occurs at an especially rapid pace in Eastern Germany. At the same time, this region still exhibits high rates of chronic unemployment, which renders the possibility of a skilled labour shortage questionable.
We focus on the federal state of Thuringia and investigate two questions. Firstly, we evaluate to what extent occupation-specific bottlenecks exist both in Germany and in Thuringia, using a set of criteria based on official labour market statistics. We find evidence of high utilization of labour supply in technical and metalworking professions in Germany. In the majority of these occupations, the same is true for Thuringia. Hence, a high level of unemployment and skilled labour shortage may coexist, at least in a transition phase. Secondly, we investigate whether companies in Thuringia already expect problems when searching for skilled personnel in the near future. For this purpose, the IWH has conducted a survey among approximately 1 000 companies. It turns out that 61% of the interviewed companies anticipate such problems, with statistically significant differences with respect to the companies’ characteristics. In addition, we discuss selected policies that companies plan to implement in the field of human resource management when anticipating problems.
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