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Loose (Interview)

When there were almost no flats in Halle yet ... Brigitte Loose about IWH's...

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IWH-CompNet Discussion Papers

IWH-CompNet Discussion Papers The IWH-CompNet Discussion Paper series presents research...

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Working Papers

Fiscal Policy and Fiscal Fragility: Empirical Evidence from the OECD ...

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Publications

Does Machine Learning Help us Predict Banking Crises? ...

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Joint Economic Forecast

Joint Economic Forecast The joint economic forecast is an instrument for evaluating...

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Avoiding the Fall into the Loop: Isolating the Transmission of Bank-to-Sovereign Distress in the Euro Area and its Drivers

Hannes Böhm, Stefan Eichler
IWH Discussion Papers, No. 19, 2018
Abstract
We isolate the direct bank-to-sovereign distress channel within the eurozone’s sovereign-bank-loop by exploiting the global, non-eurozone related variation in stock prices. We instrument banking sector stock returns in the eurozone with exposure-weighted stock market returns from non-eurozone countries and take further precautions to remove any eurozone crisis-related variation. We find that the transmission of instrumented bank distress, while economically relevant, is significantly smaller than the corresponding coefficient in the unadjusted OLS framework, confirming concerns on reverse causality and omitted variables in previous studies. Furthermore, we show that the spillover of bank distress is significantly stronger for countries with poorer macroeconomic performances, weaker financial sectors and financial regulation and during times of elevated political uncertainty.
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27.09.2018 • 18/2018

Joint Economic Forecast Autumn 2018: Upturn Loses Momentum

Berlin, 27 September – Germany’s leading economics research institutes have downwardly revised their forecasts for 2018 and 2019. They now expect economic output to increase by 1.7 percent in 2018, and not 2.2 percent as forecast in spring. They also scaled back their 2019 forecast slightly from 2.0 to 1.9 percent. These are the results of the Joint Economic Forecast for autumn 2018 that will be presented in Berlin on Thursday.

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Kommentar: Mit bester Absicht in die Krise

Reint E. Gropp
Wirtschaft im Wandel, No. 4, 2018
Abstract
Zehn Jahre nach der Lehman-Pleite werden die Finanzmärkte besser kontrolliert denn je. Das kann böse Folgen haben.
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EFN Report Summer 2018: Economic Outlook for the Euro Area in 2018 and 2019

EFN Reports, No. 3, 2018
Abstract
• In summer 2018 the cyclical upswing of the world economy is not over, but it appears to be fragmenting. While economic activity in the European Union has lost steam, the upswing in the US has gained pace, and growth in China appears to be robust. • Markets for commodities as well as for capital are at present strongly affected by political movements: oil prices are more than 50% higher than one year ago, as the US exit from the Iran nuclear deal puts the long run oil supply from Iran at risk, and the strongly expansionary US tax reform explains the rise in US long run interest rates. . • Uncertainties about the future international trade system cause firms to slow down or even reverse the globalization of value chains. As an early consequence, world trade in the second half of 2018 and in 2019 will expand at much slower rates than during 2017. • In the euro area growth slowed in the first quarter 2018, due to weaker investment activity in France and Italy and, more importantly, a fall in exports in all larger euro area economies except Spain. However, the drivers of the upswing such as low interest rates for credit and expanding real incomes will still be supportive in the near future, and fiscal policies will be slighly more expansionary. But a slowdown in world trade will dent export growth as well as corporate profits. All in all, we expect GDP growth in the euro area to go down from 2.4% in 2017 to 2.1% in 2018 and to 1.7% in 2019 – a forecast that will only be realized if damages to the international trade system are limited and if the European sovereign debt crisis does not come back. • While wage inflation has been slowly increasing during the past quarters to about 2%, a clear upwards trend of core consumer price inflation is still not detectable. The recent jump of the headline rate to 1.9% is due to higher oil prices. Our forecasts for 2018 and 2019 are close, although still below, 2%.
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Banks Fearing the Drought? Liquidity Hoarding as a Response to Idiosyncratic Interbank Funding Dry-ups

Helge Littke, Matias Ossandon Busch
IWH Discussion Papers, No. 12, 2018
Abstract
Since the global financial crisis, economic literature has highlighted banks’ inclination to bolster up their liquid asset positions once the aggregate interbank funding market experiences a dry-up. To this regard, we show that liquidity hoarding and its detrimental effects on credit can also be triggered by idiosyncratic, i.e. bankspecific, interbank funding shocks with implications for monetary policy. Combining a unique data set of the Brazilian banking sector with a novel identification strategy enables us to overcome previous limitations for studying this phenomenon as a bankspecific event. This strategy further helps us to analyse how disruptions in the bank headquarters’ interbank market can lead to liquidity and lending adjustments at the regional bank branch level. From the perspective of the policy maker, understanding this market-to-market spillover effect is important as local bank branch markets are characterised by market concentration and relationship lending.
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