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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The Impact of Bank and Non-bank Financial Institutions on Local Economic Growth in China
Xiaoqiang Cheng, Hans Degryse
Journal of Financial Services Research,
No. 2,
2010
Abstract
This paper provides evidence on the relationship between finance and growth in a fast growing country, such as China. Employing data of 27 Chinese provinces over the period 1995–2003, we study whether the financial development of two different types of financial institutions — banks and non-banks — have a (significantly different) impact on local economic growth. Our findings indicate that banking development shows a statistically significant and economically more pronounced impact on local economic growth.
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International Bank Portfolios: Short- and Long-Run Responses to Macroeconomic Conditions
S. Blank, Claudia M. Buch
Review of International Economics,
No. 2,
2010
Abstract
International bank portfolios constitute a large component of international country portfolios. Yet, banks’ response to international macroeconomic conditions remains largely unexplored.We use a novel dataset on banks’ international portfolios to answer three questions. First, what are the long-run determinants of banks’ international portfolios? Second, how do banks’ international portfolios adjust to short-run macroeconomic developments? Third, does the speed of adjustment change with the degree of financial integration?We find that, in the long-run, market size has a positive impact on foreign assets and liabilities. An increase in the interest differential between the home and the foreign economy lowers foreign assets and increases foreign liabilities. Foreign trade has a positive impact on international bank portfolios, which is independent from the effect of other macroeconomic variables. Short-run dynamics show heterogeneity across countries, but these dynamics can partly be explained with gravity-type variables.
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Im Fokus: Polen in der globalen Finanz- und Konjunkturkrise – Realwirtschaft trotzt mit IWF-Unterstützung den Finanzmarktturbulenzen
Tobias Knedlik
Wirtschaft im Wandel,
No. 4,
2010
Abstract
Poland’s economy resists turbulences on financial markets
Poland has been affected by the global financial crisis. However, developments in Poland deviated considerably from developments in other middle and eastern European countries. Risk premiums, as measured by credit default swaps, increased by less but more suddenly as compared with other countries of the region. The Polish currency crisis started earlier and lasted longer as in other countries of the region. The developments on financial markets did, however, not result in a recession.
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20 years of innovation policy in East Germany – from a pure “survival support” to high-tech subsidy
Jutta Günther, Nicole Nulsch, Katja Wilde
Wirtschaft im Wandel,
20 Jahre Deutsche Einheit - Teil 2 -
2010
Abstract
The article uses the occasion of “20 years German re-unification” in order to provide an overview of the range of innovation policy schemes in East Germany with the intention to identify changing patterns or paradigms in its philosophy and priorities over time. In general, innovation policy schemes aim at increasing research and development (R&D) activities of companies in order to strengthen their competitiveness as market incentives for R&D are usually too low (problem of market failure). However, in East Germany in the early 1990s the situation was different. At the very beginning, the transformation process in East Germany was accompanied by innovation policy schemes that aimed at the pure maintenance of industrial research and the stock of R&D personnel since the potential for innovation was at a risk to be eliminated completely. In the late 1990s the intention of innovation policies changed. Instead of financial support primarily for human resources, innovation policy schemes since then focused on the support of cooperation projects between different research entities (companies and scientific organizations) and, later on, also the setup of networks in order to close the economic differences between East and West Germany.
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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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Money and Inflation: The Role of Persistent Velocity Movements
Makram El-Shagi, Sebastian Giesen
Abstract
While the long run relation between money and inflation is well established, empirical evidence on the adjustment to the long run equilibrium is very heterogeneous. In the present paper we use a multivariate state space framework, that substantially expands the traditional vector error correction approach, to analyze the short run impact of money on prices. We contribute to the literature in three ways: First, we distinguish changes in velocity of money that are due to institutional developments and thus do not induce inflationary pressure, and changes that reflect transitory movements in money demand. This is achieved with a newly developed multivariate unobserved components decomposition. Second, we analyze whether the high volatility of the transmission from monetary pressure to inflation follows some structure, i.e., if the parameter regime can assumed to be constant. Finally, we use our model to illustrate the consequences of the monetary policy of the Fed that has been employed to mitigate the impact of the financial crisis, simulating different exit strategy scenarios.
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Macroeconomic Shocks and Banks' Foreign Assets
Claudia M. Buch, K. Carstensen, A. Schertler
Journal of Money, Credit and Banking,
No. 1,
2010
Abstract
Recent developments in international financial markets have highlighted the role of banks in the transmission of shocks across borders. We employ dynamic panel methods for a sample of OECD countries to analyze whether banks' foreign assets react to macroeconomic shocks at home and abroad. We find that banks reduce their foreign assets in response to a relative increase in domestic interest rates, and they increase their foreign assets when the growth rate of world energy prices rises. The responses are characterized by a temporal overshooting and a dynamic adjustment process that extends over several quarters.
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Wirtschaftsentwicklung und Staatsfinanzen: Eine Vorausschau der Jahre 2010 bis 2014
Kristina vanDeuverden, Rolf Scheufele
Wirtschaft im Wandel,
No. 1,
2010
Abstract
In 2009 the German budget was clearly in the red, and in 2010 prospects are even worse. Deficits are such impressive that consolidation became a top subject in general publicity. To provide a sound basis for this discussion the IWH presents its second midterm projection of German economic development and public finances.
While economy will improve slowly in the medium term and the output gap will be closed in the end of the projection period public finances will deteriorate until 2011. Thereafter the situation will improve but only due to cyclical reasons. In 2014 structural budget balance will have reached 2½% of nominal GDP.
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