Monetary Policy in an Oil-dependent Economy in the Presence of Multiple Shocks
Review of World Economics,
Russian monetary policy has been challenged by large and continuous private capital outflows and a sharp drop in oil prices during 2014. Both contributed to significant depreciation pressures on the ruble and led the central bank to give up its exchange rate management strategy. Against this background, this work estimates a small open economy model for Russia, featuring an oil price sector and extended by a specification of the foreign exchange market to correctly account for systematic central bank interventions. We find that shocks to the oil price and private capital flows substantially affect domestic variables such as inflation and output. Simulations for the estimated actual strategy and alternative regimes suggest that the vulnerability of the Russian economy to external shocks can substantially be lowered by adopting some form of inflation targeting. Strategies to target the nominal exchange rate or the ruble price of oil prove to be inferior.
Non-base Compensation and the Gender Pay Gap
LABOUR: Review of Labour Economics and Industrial Relations,
This paper investigates whether non-base compensation contributes to the gender pay gap (GPG). Using administrative data from Germany, we find in wage decompositions that lower bonus payments to women explain about 10 per cent of the gap at the mean and at different quantiles of the unconditional wage distribution whereas the lower prevalence of shift premia and overtime pay among women is unimportant. Among managers, the contribution of bonuses to the mean gap more than doubles and is steadily rising as one moves up the wage distribution. Our findings suggest that gender differences in bonuses are an important contributor to the GPG, particularly in top jobs.
BigTech Credit and Monetary Policy Transmission: Micro-level Evidence from China
IWH Discussion Papers,
This paper studies monetary policy transmission through BigTech and traditional banks. By comparing business loans made by a BigTech bank with those made by traditional banks, it finds that BigTech loans tend to be smaller, and the BigTech bank grants credit to more new borrowers compared with conventional banks in response to expansionary monetary policy. The BigTech bank‘s advantages in information, monitoring, and risk management are the potential mechanisms. The analysis also finds that BigTech and traditional bank credits to firms that have already borrowed from these banks respond similarly to changes in monetary policy. Overall, BigTech credit amplifies monetary policy transmission mainly through the extensive margin. In addition, monetary policy has a stronger impact on the real economy through BigTech lending than traditional bank loans.
Productivity, Managers’ Social Connections and the Financial Crisis
Journal of Banking and Finance,
This paper investigates whether managers’ personal connections help corporate productivity to recover after a negative economic shock. Leveraging the heterogeneity in the severity of the financial crisis across different sectors, the paper reports that (i) the financial crisis had a negative effect on within-firm productivity, (ii) the effect was long-lasting and persistent, supporting a productivity-hysteresis hypothesis, and (iii) managers’ personal connections allowed corporations to recover from this productivity slowdown. Among the possible mechanisms, we show that connected managers operating in affected sectors foster productivity recovery through higher input cost efficiency and better access to the credit market, as well as more efficient use of labour and capital.
01.06.2022 • 12/2022
IWH welcomes top international researcher as head of new department
A powerful boost for the Halle Institute for Economic Research (IWH): Merih Sevilir, a world-renowned researcher on the interplay of financial and labour markets, is heading the Institute’s newest department as of today. Her expertise strengthens the unique selling points of the institute and can be expected to generate significant opportunities for policy insights.
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13.04.2022 • 9/2022
Economy in East Germany will not suffer more from the war in Ukraine than in Germany as a whole – Implications of the Joint Economic Forecast Spring 2022 and new data for the East German economy
The recovery of the East German economy, like that of Germany as a whole, will weaken considerably due to Russia’s war in Ukraine. However, the economic slump and recovery were not as pronounced as in West Germany. In 2021, East German output grew by 2.3%, less than in Germany as a whole (2.9%). According to the Halle Institute for Economic Research (IWH), GDP growth in East Germany is also likely to be lower than in Germany as a whole in 2022 (2.1% in East Germany vs. 2.7% in Germany) and 2023 (2.5% vs. 3.1%).
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The Effect of Foreign Institutional Ownership on Corporate Tax Avoidance: International Evidence
Journal of International Accounting, Auditing and Taxation,
We find that foreign institutional investors (FIIs) reduce their investee firms’ tax avoidance. We provide evidence that the effect is driven by the institutional distance between FIIs’ home countries/regions and host countries/regions. Specifically, we find that the effect is driven by the influence of FIIs from countries/regions with high-quality institutions (i.e., common law, high government effectiveness, and high regulatory quality) on investee firms located in countries/regions with low-quality institutions. Furthermore, we show that the effect is concentrated on FIIs with little experience in the investee countries/regions or FIIs with stronger monitoring incentives. Finally, we find that FIIs are more likely to vote against management if the firm has a higher level of tax avoidance.
Military Directors, Governance and Firm Behavior
Advances in Accounting,
We build a large dataset of board of directors with military experience and document a substantial and persistent presence of independent military directors serving on corporate boards. We find that firms with independent military directors are associated with better monitoring outcomes, including less excessive CEO compensation, greater forced CEO turnover–performance sensitivity, and less earnings management.