Too Connected to Fail? Inferring Network Ties from Price Co-movements
Journal of Business & Economic Statistics,
We use extreme value theory methods to infer conventionally unobservable connections between financial institutions from joint extreme movements in credit default swap spreads and equity returns. Estimated pairwise co-crash probabilities identify significant connections among up to 186 financial institutions prior to the crisis of 2007/2008. Financial institutions that were very central prior to the crisis were more likely to be bailed out during the crisis or receive the status of systemically important institutions. This result remains intact also after controlling for indicators of too-big-to-fail concerns, systemic, systematic, and idiosyncratic risks. Both CDS-based and Equity-based connections are significant predictors of bailouts.
Benchmark Value-added Chains and Regional Clusters in R&D-intensive Industries
International Regional Science Review,
Although the phase of euphoria seems to be over, policy makers and regional agencies have maintained their interest in cluster policy. Modern cluster theory provides reasons for positive external effects that may accrue from interaction in a group of proximate enterprises operating in common and related fields. Although there has been some progress in locating clusters, in most cases only limited knowledge on the geographical extent of regional clusters has been established. In the present article, we present a hybrid approach to cluster identification. Dominant buyer–supplier relationships are derived by qualitative input–output analysis from national input–output tables, and potential regional clusters are identified by spatial scanning. This procedure is employed to identify clusters of German research and development-intensive industries. A sensitivity analysis reveals good robustness properties of the hybrid approach with respect to variations in the quantitative cluster composition.
09.08.2017 • 29/2017
Networked and protected
During the financial crisis, billions were spent to rescue banks that were according to their governments too big to be allowed to fail. But a study by Michael Koetter from the Halle Institute for Economic Research (IWH) and co-authors shows that besides the size of the banks, the centrality within the global financial network was also pivotal for financial institutions to receive a bail-out.
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Too Connected to Fail? Inferring Network Ties from Price Co-movements ...
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Effects of Urban Renewal on Non-subsidised Property Owners: Evidence from East Germany
Town Planning Review,
Urban renewal programmes intervene in the housing market by offering different kinds of subsidies that support the improvement of public spaces or selective demolition. The central aim of this paper is to disentangle the economic impact of these subsidies on property owners and investors by exploring the value of residential real estate. There is limited knowledge as to which type of owners benefit from such actions and whether they even benefit at all. One may expect that the indirect effects of a regime of regulation inspire more confidence in market recovery from the perspective of property owners. By using the theory of real options it is assumed that urban renewal raises the option premium of a property which in turn represents an opportunity to the owners to use and develop their property. This opportunity is based on expectations of higher revenues in the future. The hypothesis of an increasing option premium is explored using data from a large urban renewal programme in East Germany.