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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Business Cycle Volatility in Germany
Claudia M. Buch, J. Doepke, C. Pierdzioch
German Economic Review,
2004
Abstract
Stylized facts suggest that output volatility in OECD countries has declined in recent years. The causes and the nature of this decline have so far been analyzed mainly for the United States. In this paper, we analyze whether structural changes in output volatility in Germany can be detected. We report evidence that output volatility has declined in Germany. It is difficult to answer the question whether this decline in output volatility reflects good economic and monetary policy or merely ‘good luck’.
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IWH forecast of economic activity: Lack of investment slows growth of domestic demand in Germany
Wirtschaft im Wandel,
No. 12,
2004
Abstract
Das Statistische Bundesamt hat seine ersten Berechnungen zum Bruttoinlandsprodukt und zu seinen Komponenten für das zweite Quartal 2004 vorgelegt und die bisherigen Ergebnisse für die zurückliegenden Vierteljahre überarbeitet – Anlass für eine Überprüfung der Konjunkturprognose des IWH. Laut amtlicher Neuberechnung für die ersten drei Monate des Jahres fiel die konjunkturelle Spaltung zwischen Auslands- und Inlandsnachfrage in Deutschland noch deutlicher aus als ursprünglich gemeldet, und diese Schere hat sich in den Monaten April bis Juni nicht verringert. Die Anpassung der Prognosewerte für das zweite Halbjahr, die dominiert wird von einer Aufwärtskorrektur des außenwirtschaftlichen Beitrags zur gesamtwirtschaftlichen Produktion, hat eine Erhöhung der Wachstumsprognose des Bruttoinlandsprodukts für dieses Jahr von 1,8% auf 2% zur Folge. Im Zuge der Verlangsamung des weltwirtschaftlichen Aufschwungs wird der konjunkturelle Impuls aus dem Ausland im weiteren Verlauf dieses und des nächsten Jahres an Stärke verlieren. Dafür gewinnt die Inlandsnachfrage wieder etwas an Schwung. Voraussetzung ist, dass die Unternehmen ihre Investitionszurückhaltung aufgeben und die über die Außenwirtschaft erzielten Gewinne in den Wirtschaftskreislauf zurückführen. Das Bruttoinlandsprodukt wird 2005 um 1,8% höher als in diesem Jahr sein. Ohne Arbeitstageeffekt ergibt sich infolge des – wenn auch nur zögerlichen – Übergreifens der Konjunktur auf die Binnennachfrage ein Anstieg um 2%, nach 1,5% in diesem Jahr.
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Germany after stagnation: Slow stimulation of overall economy by export driven recovery
Wirtschaft im Wandel,
No. 9,
2004
Abstract
The main centres of the recovery in this business cycle remain in the US and East Asia. Amid the fading stimuli from economic policy, the US economy loses some of its momentum and GDP will increase by 4.5% in 2004 followed by 3.5% in the coming year. In the euro area, the vibrant external trade more and more spills over into the domestic economy. Still, with 1.5% this year and 2% in 2005, GDP will clearly underperform in comparison to the growth centres of the world. In Germany, even more so than in the euro area, the revival depends on the world economy. Exports will maintain their strong upward trend and in their wake, demand for consumer as well as capital goods will start to increase. But increases in consumption will remain small this year and it will be 2005 before clear improvements can be observed. After stagnating in 2003, GDP will rise by 1.8% both this and next year.
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The Contestable Markets Theory - Efficient Advice for Economic Policy
Christian Growitsch, Thomas Wein
External Publications,
2004
Abstract
During the nineties of the last century several formerly monopolistic markets (telecommunication, electricity, gas, and railway) have been deregulated in Germany based on European directives and theoretically inspired by the theory of contestable markets. The original contestable market theory implied three assumptions necessary to be satisfied to establish potential competition: Free market entry, market exit possible without any costs, and the price adjustment lag exceeding the entry lag. Our analysis shows that if the incumbent reduces its prices slowly (high adjustment lag) and the market entry can be performed quickly (low entry lag), a new competitor will be able to earn back sunk costs. Therefore it is not necessary that all three conditions be complied with for potential competition to exist. Applying this „revised“ contestable market theory to the deregulated sectors in Germany, natural monopolies can be identified in telecommunication sections local loops and local/regional connection networks, in the national electricity grid and the regional/local electricity distribution networks, in the national and regional/local gas transmission/distribution sections, and in the railroad network. These sections are not contestable due to sunk costs, expected high entry lags and a probably short price adjustment lag. They are identified as bottlenecks, which should be regulated. The function of system operators in energy and railroad are closely related to the non-contestable monopolistic networks.
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The influence of Vertical Integration and Property Rights on Network Access Charges in the German Electricity Markets
Christian Growitsch, Thomas Wein
External Publications,
No. 6,
2004
Abstract
German Electricity markets were deregulated in the late nineties of the last century. In contrast to other European countries, the German government enacted negotiated third party access instead of installing a regulation authority. Network access charges for new competitors are based on contractual arrangements between energy producers and industrial consumers, which specify the calculation schemes for access charges. Local and regional suppliers are nevertheless able to set (monopolistic) charges at their own discretion, restricted only by the possibility of interference competition authorities. While some of those suppliers have been acquired by one of the four Transmission System Operators and become vertically integrated, the majority is still independent public utility companies. In this paper we analyse if there is evidence for different charging behaviour depending on the supplier’s economic independence or its level of vertical integration. Controlling for other coefficients as the so called structural features and related cost differences as well as the influence of competition law suits, multivariate estimations show significantly lower access charges than vertically separated suppliers, whereas incorporated network operators charge significantly higher charges compared to independent suppliers for at least one typical case.
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The economic situation and development in the German regions along the border with Poland
Gerhard Heimpold
Jahrbuch für Regionalwissenschaft,
No. 1,
2004
Abstract
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“Law on loyalty to collectively agreed standards“ - no means for adjusting competitive conditions in construction industry
Andrea Besenthal
Wirtschaft im Wandel,
No. 2,
2004
Abstract
Due to the increasing competition from abroad which is able to offer services for lower prices because of lower wage standards the stress of competition intensifies in Germany. With regard to West Germany the East German companies - paying lower wages – represent an immediate business competition. The supporter of the Tariftreuegesetze (laws concerning the construction industry which restrict public contracts only to contractors who pay union wages) see the laws` advantage in eliminating the existing differences in competitive conditions, which emerge from differences on the wage level. The IWH study concludes that the named wage laws do not seem necessary from an economic point of view.
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IWH Economic Outlook 2004: No longer waiting for the economic upturn
Wirtschaft im Wandel,
No. 1,
2004
Abstract
The Economic Outlook 2004 updates the IWH forecast for 2004 and gives a first outlook on 2005. The world recovery is mainly driven by the strong economic impulses from the USA. Whereas the upturn in the US is domestically driven, the impetus in the euro area is coming from external trade. Nonetheless in Germany corporate investment activity still is slow. Although the tax reductions in 2004 will support private consumption, its overall economic impulse will be weak. German GDP in 2004 will increase 1.6% and 1.8% in 2005. At the labour market no clear improvement can be expected till the second half of 2004; on a yearly average employment will decrease by 100 000 persons in 2004. Albeit the partly broad forward third instalment of the tax reform, fiscal policy will have a restrictive aim. Monetary policy on the other hand will continue to be highly expansive, but as the output gap shrinks the ECB can be expected to increase interest rates moderately.
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The Reform of Local Public Services of General Interest in Europe
Peter Haug, Martin T. W. Rosenfeld
Applied Economics Quarterly (Supplement),
2004
Abstract
The benefits of a reduced supply of local public services may more than outweigh the supposed welfare losses. This was suggested by various theoretical and empirical investigations in many fields of economics during the last decades. Nevertheless, local and national politicians, trade unionists, charities, and other lobbyists have succeeded in preventing further liberalisation of “services of general interest” in Europe. This article examines why these preserve agents have been and are still successful. The analysis is based on an institutional economic approach. Several policy measures and institutional changes are suggested to either reduce influence of preserve agents or to compensate them for their losses.
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