What Might Central Banks Lose or Gain in Case of Euro Adoption – A GARCH-Analysis of Money Market Rates for Sweden, Denmark and the UK
Herbert S. Buscher, Hubert Gabrisch
IWH Discussion Papers,
No. 9,
2011
Abstract
This study deals with the question whether the central banks of Sweden, Denmark and the UK can really influence short-term money markets and thus, would lose this influence in case of Euro adoption. We use a GARCH-M-GED model with daily money market rates. The model reveals the co-movement between the Euribor and the shortterm interest rates in these three countries. A high degree of co-movement might be seen as an argument for a weak impact of the central bank on its money markets. But this argument might only hold for tranquil times. Our approach reveals, in addition, whether there is a specific reaction of the money markets in turbulent times. Our finding is that the policy of the European Central Bank (ECB) has indeed a significant impact on the three money market rates, and there is no specific benefit for these countries to stay outside the Euro area. However, the GARCH-M-GED model further reveals risk divergence and unstable volatilities of risk in the case of adverse monetary shocks to the economy for Sweden and Denmark, compared to the Euro area. We conclude that the danger of adverse monetary developments cannot be addressed by a common monetary
policy for these both countries, and this can be seen as an argument to stay outside the Euro area
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Africa and the Global Financial Crisis - Impact on Economic Reform Processes
R. Adelou Alabi, J. Alemazung, Achim Gutowski, Robert Kappel, Tobias Knedlik, O. Osnachi Uzor, Karl Wohlmuth, Hans H. Bass
African Development Perspectives Yearbook, Vol. 15,
2011
Abstract
In volume XV of the African Development Perspectives Yearbook, the Research Group on African Development Perspectives investigates the impact of the GFC on economic reform processes in Africa. The analysis is structured in such a way so as to reflect the opportunities and dangers of policy reversals in the face of the GFC. The impact of the crisis on different types and forms of governance in the region is considered. The first question is therefore which macro-economic policy instruments have to be applied in order to overcome the crisis and to continue with sustainable development. The second question is how the GFC has affected Africa's external economic relations and if the path of opening up to the world markets is continued. The third question raised is how the crisis has affected social cohesion, impacted on poverty alleviation strategies and the achievement of Millennium Development Goals (MDGs). All these questions are discussed in the various contributions which comprise general studies and country case studies. The authors also looked into the role of international financial institutions during and after the crisis. The volume XV of the African Development Perspectives Yearbook is structured into three Units. Unit 1 addresses general issues regarding the impact of the GFC on reform processes in Africa. Unit 2 presents case studies from countries and sub-regions. Unit 3 presents reviews and book notes of current literature focusing on issues of African development perspectives.
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Ageing and Labour Markets: An Analysis on the effect of worker’s age on productivity, innovation and mobility
Lutz Schneider
Technische Universität Dresden. Dissertation,
2011
Abstract
The present study analyses the labour market effect of workers’ ageing. Explicitly, the impact of age on productivity and wages, on innovation as well as on mobility is explored empirically. The econometric analyses are based on firm and employment data from the Institute for Employment Research (IAB) and, thus, refer to the labour market of Germany. Regarding the productivity and wage effects of age the econometric results confirm a positive correlation between firm productivity and the share of middle-aged employees (41-50 years old) within the manufacturing sector. Hence, the results provide evidence of an inverted u-shaped age-productivity profile in this sector also found for other countries. Furthermore, age-wage and age-productivity profiles seem to follow unequal patterns. Compared to the group of the 15-30 and the 51 and above years old workers the group of middle-aged employees earn less than a productivity based wage scheme would require. In terms of age effects on innovativeness the micro-econometric analysis again reveals an inverted u-shaped profile. Workers aged around 40 years seem to act as key driver for innovation activities within firms. An additional finding concerns the impact of age diversity on innovation. The expected positive effect of a heterogeneous age structure is not confirmed by the data. With respect to labour market mobility results are in favour of a negative correlation between age and job mobility either in terms of changing professions or firms. The estimation of a multi equation model verifies that expected wages of older workers do not or only marginally increase due to job mobility, so, financial incentives to change jobs are very low. Yet, even after controlling the absent wage incentive older employees still remain more immobile than younger workers. Altogether, these results should not only be of academic interest but also informative for actors on the firm and the governmental level. Both sides are asked to cope with the challenges of demographic change. Only by maintaining productivity and innovativeness until old ages the necessary resources can be generated to preserve an economy’s prosperity even if the share of non-active population is increasing by demographic developments. Secondly, enhancing productivity is essential to ensure employability of older persons and to sustain the size of workforce even in the circumstances of an ageing economy.
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Conference Report : Analyses and Policies for East Germany – Research Results from the IWH
B. Damm, Jutta Günther
Wirtschaft im Wandel,
No. 2,
2011
Abstract
On November 18th, 2010, the conference “Analyses and Policies for East Germany“ took place for the 4th time. IWH’s objective as the host of the conference was to present and discuss current research and, based on that, to provide some political consulting. The meeting dealt with possible paths of economic development of East Germany after the global financial crisis and how political objectives will influence the region. After presenting a general overview of the current situation, speakers also covered specific topics. Among these issues were: the co-operation between private companies and academic science in the field of photovoltaics, the demographic situation as well as potentials due to immigration to the region, the long-term results of the new administrative order of East German cities, and the necessity to overcome the current high-debt situation of the East German Länder.
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Midterm Projection: Economic Development and the Public Budget in the Years 2011 - 2015
Kristina vanDeuverden, Rolf Scheufele
Wirtschaft im Wandel,
No. 1,
2011
Abstract
In 2010 economic activity in Germany improved steadily. While global trade increased in the first half of the year – and, thus, German exports – domestic demand became increasingly important. Private Investment recovered and – even more important – consumption contributed to economic growth. Moreover, employment reached an all-time high and unemployment decreased further during the year.
Until 2015 economic growth will keep to be relatively high. German external trade will still gain momentum by the development of global trade. However, economic development will be driven more and more by domestic demand. Interest rates will remain relatively low and stimulate investment activity. Moreover, unemployment will continually shrink, partly reflecting demographic developments, but partly mirrored in increasing employment. Due to a higher degree of employment security and rising wages consumption will gain momentum. Real GDP will increase by 2.3% in 2011 and by 1.7% in 2012. From 2013 – 2015 it will rise by 1½% on average.
While the German economy will gain strength, public budgets will clearly improve. In 2010 the deficit ratio exceeds the Maastricht threshold only slightly; in relation to nominal GDP the German budget deficit was about 3.2%. Concerning the high fiscal stimulus, mainly given in the years 2009 and 2010, the deficit ratio is surprisingly low. While income and wage taxes as well as the receipts from social security contributions already increased, unemployment benefits already declined substantially.
The midterm projection shows a favorable development of public budgets. While employment remains high and unemployment continually decreases, the wage tax and the social security contributions will boost revenue. On contrast the same development will lessen public expenditure, especially transfers.
This projection relies heavily on the assumption that fiscal policy will trace its consolidation plans. For instance, it is assumed that the federal level will implement their plans from summer/autumn 2010 and that there will be no additional measures. In this case, in 2015 the German public budget will show a surplus of ¼% in relation to GDP.
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Die Entwicklung der Corporate Governance deutscher Banken seit 1950
R. H. Schmidt, Felix Noth
Bankhistorisches Archiv,
No. 2,
2011
Abstract
The present paper gives an overview of the development of Corporate Governance of German banks since the 1950s. The focus will be on economic analysis. The most striking changes in Corporate Governance occurred with the ownership structure of commercial banks, in particular with the major joint-stock banks. In addition to that, the capital market has become a core element of Corporate Governance in all major German banks, which have replaced their prior concentration on the interests of a broadly defined circle of stakeholders by a one-sided concentration on shareholders’ interests. In contrast, with savings banks and cooperative cooperative banks, Corporate Governance has remained unchanged for the most part. Exceptions to this are the regional state banks: in their case, after they had turned away from traditional business models and in particular following the discontinuation of the guarantee obligation, the problems of their Corporate Governance, which were already discernible beforehand, became quite obvious. If you include the financial crisis, beginning in 2007, in the analysis, it becomes evident that it was precisely a Corporate Governance unilaterally geared to shareholders’ interest and the efficiency of the capital market that materially contributed to the evolution and widening of the crisis.
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Möglichkeiten für Vollbeschäftigungspolitik im Rahmen des Europäischen Makroökonomischen Dialogs
Toralf Pusch, A. Heise
K. Busch (Hrsg.), Wirtschaftliche und Soziale Integration in der Europäischen Union,
2010
Abstract
A decade after its introduction the European Monetary Union is no more undisputed. While a successful record regarding price stability cannot be doubted, the EMU still suffers from high unemployment – not only related to the Financial Crisis. In this contribution we want to cast light on the question how this might be related to a dismal mix of wage policy and monetary policy. Taking a consideration of the European Macroeconomic Dialogue as a starting point, we develop a game theoretic model which can explain different macroeconomic alternatives. As a result we present a reputation equilibrium which would make full employment and price stability compatible and does not rest on overriding the actors’ independence.
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Human Capital Investment, New Firm Creation and Venture Capital
Merih Sevilir
Journal of Financial Intermediation,
No. 4,
2010
Abstract
This paper studies the relation between firm investment in general human capital, new firm creation and financial development for new firm financing, such as the existence of a venture capital industry. On one hand, firm investment in general human capital leads employees to generate new innovative ideas for starting their own firm. Since employees need a venture capitalist to start their new firm, firm investment in general human capital encourages the creation of venture capitalists by increasing the need for their services, such as providing advice and monitoring. On the other hand, as new firm financing becomes available, firms' willingness to invest in general human capital increases, and as a by-product, the creation of employee-founded and venture capital-backed new firms increases in the economy. Hence, our model provides a rational explanation for the emergence of new firms created by employees of established firms, which represents one of the most common type of new firms in many industries.
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Do Banks Benefit from Internationalization? Revisiting the Market Power-Risk Nexus
Claudia M. Buch, C. T. Koch, Michael Koetter
Abstract
Recent developments on international financial markets have called the benefits of
bank globalization into question. Large, internationally active banks have
acquired substantial market power, and international activities have not
necessarily made banks less risky. Yet, surprisingly little is known about the
actual link between bank internationalization, bank risk, and market power.
Analyzing this link is the purpose of this paper. We jointly estimate the
determinants of risk and market power of banks, and we analyze the effects of
changes in terms of the number of foreign countries (the extensive margin) and
the volume of foreign assets (the intensive margin). Our paper has four main
findings. First, there is a strong negative feedback effect between risk and market
power. Second, banks with higher shares of foreign assets, in particular those held
through foreign branches, have higher market power at home. Third, holding
assets in a large number of foreign countries tends to increase bank risk. Fourth,
the impact of internationalization differs across banks from different banking
groups and of different size.
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Liberalization and Rules on Regulation in the Field of Financial Services in Bilateral Trade and Regional Integration Agreements
Diemo Dietrich, J. Finke, C. Tietje
Beiträge zum Transnationalen Wirtschaftsrecht Nr. 97,
2010
Abstract
The recent international financial crisis has sparked a fierce debate about its causes and about how to prevent a recurrence. As liberalization and deregulation were widely considered being among the major culprits, de-liberalization and re-regulation seemed a natural response. However, an economic approach to this issue does not support such black-and-white solutions. Although liberalizing financial services sectors may threaten a developing country's financial stability in the short run, it also fosters long-run economic growth if sound legal and economic institutions are in place that can mitigate the adverse side-effects of liberalization. For achieving this objective, states need the policy space to implement such regulatory measures. Contrary to a wide-spread belief, states are not unduly hampered by bilateral or multilateral agreements. Instead, by providing a far-reaching exception concerning prudential regulation states can define their own regulatory approach. The challange for developing countries thus is to install regulatory capacities.
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