Time-varying Volatility, Financial Intermediation and Monetary Policy
S. Eickmeier, N. Metiu, Esteban Prieto
IWH Discussion Papers,
No. 19,
2016
Abstract
We document that expansionary monetary policy shocks are less effective at stimulating output and investment in periods of high volatility compared to periods of low volatility, using a regime-switching vector autoregression. Exogenous policy changes are identified by adapting an external instruments approach to the non-linear model. The lower effectiveness of monetary policy can be linked to weaker responses of credit costs, suggesting a financial accelerator mechanism that is weaker in high volatility periods.
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Does the Technological Content of Government Demand Matter for Private R&D? Evidence from US States
Viktor Slavtchev, Simon Wiederhold
American Economic Journal: Macroeconomics,
No. 2,
2016
Abstract
Governments purchase everything from airplanes to zucchini. This paper investigates the role of the technological content of government procurement in innovation. In a theoretical model, we first show that a shift in the composition of public purchases toward high-tech products translates into higher economy-wide returns to innovation, leading to an increase in the aggregate level of private R&D. Using unique data on federal procurement in US states and performing panel fixed-effects estimations, we find support for the model's prediction of a positive R&D effect of the technological content of government procurement. Instrumental-variable estimations suggest a causal interpretation of our findings.
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How Effective is Macroprudential Policy during Financial Downturns? Evidence from Caps on Banks' Leverage
Manuel Buchholz
Working Papers of Eesti Pank,
No. 7,
2015
Abstract
This paper investigates the effect of a macroprudential policy instrument, caps on banks' leverage, on domestic credit to the private sector since the Global Financial Crisis. Applying a difference-in-differences approach to a panel of 69 advanced and emerging economies over 2002–2014, we show that real credit grew after the crisis at considerably higher rates in countries which had implemented the leverage cap prior to the crisis. This stabilising effect is more pronounced for countries in which banks had a higher pre-crisis capital ratio, which suggests that after the crisis, banks were able to draw on buffers built up prior to the crisis due to the regulation. The results are robust to different choices of subsamples as well as to competing explanations such as standard adjustment to the pre-crisis credit boom.
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Executive Compensation Structure and Credit Spreads
Stefano Colonnello, Giuliano Curatola, Ngoc Giang Hoang
Abstract
We develop a model of managerial compensation structure and asset risk choice. The model provides predictions about how inside debt features affect the relation between credit spreads and compensation components. First, inside debt reduces credit spreads only if it is unsecured. Second, inside debt exerts important indirect effects on the role of equity incentives: When inside debt is large and unsecured, equity incentives increase credit spreads; When inside debt is small or secured, this effect is weakened or reversed. We test our model on a sample of U.S. public firms with traded CDS contracts, finding evidence supportive of our predictions. To alleviate endogeneity concerns, we also show that our results are robust to using an instrumental variable approach.
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Does the Technological Content of Government Demand Matter for Private R&D? Evidence from US States
Viktor Slavtchev, Simon Wiederhold
Abstract
Governments purchase everything from airplanes to zucchini. This paper investigates the role of the technological content of government procurement in innovation. We theoretically show that a shift in the composition of public purchases toward high-tech products translates into higher economy-wide returns to innovation, leading to an increase in the aggregate level of private research and development (R&D). Collecting unique panel data on federal procurement in US states, we find that reshuffling procurement toward high-tech industries has an economically and statistically significant positive effect on private R&D, even after extensively controlling for other R&D determinants. Instrumental-variable estimations support a causal interpretation of our findings.
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Fiscal Equalization, Tax Salience, and Tax Competition
Martin Altemeyer-Bartscher
IWH Discussion Papers,
No. 3,
2014
Abstract
Jurisdictions that engage in inter-regional tax competition usually try to attenuate competitive pressures by substituting salient tax instruments with hidden ones. On this effect, we investigate the efficiency consequences of inter-regional tax competition and fiscal equalization in a federal system when taxpayers fail to optimally react on shrouded attributes of local tax policy. If the statuary tax rate is a relatively salient instrument and taxpayers pay low attention to the quality and the frequency of tax enforcement, the underlying substitution of tax instruments with the aim of reducing the perceived tax price may suppress the under-exploitation of tax bases that is typically triggered by fiscal equalization.
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Zur Wirtschaftspolitik: Strukturreformen auch in Deutschland erforderlich!
Oliver Holtemöller, Martin Altemeyer-Bartscher, Tobias Knedlik, Axel Lindner, Götz Zeddies
Konjunktur aktuell,
No. 1,
2014
Abstract
Die günstige konjunkturelle Lage in Deutschland scheint der Wirtschaftspolitik den Blick auf die mittel- bis langfristigen Probleme zu verstellen. Im Bereich der Finanzpolitik liegt der Fokus derzeit auf der Ausweitung von Sozialleistungen. Wachstumsfreundliche Maßnahmen stehen hinten an. Zwar plant die neue Koalition zusätzliche investive Ausgaben, die grundsätzlich das Produktionspotenzial erhöhen könnten. Aber die konsumtiven Ausgaben stehen eindeutig im Vordergrund. Das wichtige Thema der Bund-Länder-Finanzbeziehungen wird auf die lange Bank geschoben, obwohl das Auslaufen der aktuellen Regeln Dringlichkeit gebietet und die Anreizprobleme des aktuellen Länderfinanzausgleichs offenkundig sind. Letztere könnten durch eine höhere Steuerautonomie der Bundesländer, etwa durch Zuschlagsrechte bei der Einkommensteuer, abgemildert werden. Im Bereich der Geldpolitik besteht derzeit die Gefahr, dass das mittelfristige Inflationsziel unterschritten wird. Es gibt zwar noch einige geldpolitische Instrumente, die für zusätzliche Liquiditätsbereitstellung genutzt werden könnten. Allerdings ist die Wirkung der Maßnahmen durch Probleme im Bankensektor derzeit gestört. Deshalb hat der im Jahr 2014 anstehende Stresstest eine hohe Bedeutung für die Wiederherstellung des Vertrauens im Bankensektor. Die Bankenunion sollte beherzt vollendet und nicht durch immer weitere Abstriche in ihrer Wirkung gefährdet werden. Die Europäische Kommission untersucht, ob der hohe deutsche Leistungsbilanzüberschuss auf ein gesamtwirtschaftliches Ungleichgewicht hinweist. Gegenwärtig gibt es allerdings kaum Anzeichen dafür, dass die gesamtwirtschaftliche Lage in Deutschland ungleichgewichtig ist. Der Leistungsbilanzüberschuss erklärt sich daraus, dass in einer alternden Gesellschaft wie der deutschen viel gespart wird und auch wegen der in Zukunft zu erwartenden Knappheit des Faktors Arbeit nicht genug rentierliche Investitionsprojekte im Land zu finden sind. Aus dieser Perspektive steht die Wirtschaftspolitik vor zwei Aufgaben: zum einen, die Risiken ungleichgewichtiger wirtschaftlicher Entwicklungen im Ausland für die Zukunft zu senken, um deutsche Anlagen vor Wertverlusten zu schützen. Zum anderen würde eine erfolgreiche Zuwanderungs- und Integrationspolitik über bessere langfristige Wachstumsperspektiven auch die Attraktivität von Investitionen im Inland erhöhen.
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Start-up Competitions as an Instrument of Entrepreneurship Policy: The German Experience
Michael Schwartz, Maximilian Göthner, Claus Michelsen, N. Waldmann
European Planning Studies,
No. 10,
2013
Abstract
The number of aspiring entrepreneurs in high-tech industries who successfully complete the transition from a nascent start-up project towards an operational new venture is comparatively low in Germany. Since the mid-1990s, policy-makers have initiated numerous start-up competitions (SUCs or business plan competitions) to facilitate this important step in the venture creation process. SUCs have two key objectives. They are aimed at increasing start-up activity by motivating potential entrepreneurs, while they should also help to increase the likelihood of subsequent entrepreneurial success through providing necessary entrepreneurial skills to prospective entrepreneurs. With our explorative study, we provide the first comprehensive empirical evidence from a cross-sectional survey of existing SUCs in Germany. Overall, 71 SUCs are identified which are analysed regarding their development, regional distribution, and main structural characteristics. Finally, we outline an agenda of future research questions concerning the effectiveness and efficiency of SUCs as an instrument of entrepreneurship policy.
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Transfer Payments without Growth: Evidence for German Regions, 1992–2005
Michael Koetter, Michael Wedow
International Journal of Urban and Regional Research,
No. 4,
2013
Abstract
After German reunification, interregional subsidies accounted for approximately 4% of gross fixed capital investment in the new federal states (i.e. those which were formerly part of the German Democratic Republic). We show that, between 1992 and 2005, infrastructure and corporate investment subsidies had a negative net impact on regional economic growth and convergence. This result is robust to both the specification of spatially weighted control variables and the use of instrumental variable techniques to control for the endogeneity of subsidies. Our results suggest that regional redistribution was ineffective, potentially due to a lack of spatial concentration to create growth poles.
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Gauging the Effects of Fiscal Stimulus Packages in the Euro Area
Mathias Trabandt, Roland Straub, Günter Coenen
Journal of Economic Dynamics and Control,
No. 2,
2013
Abstract
We seek to quantify the impact on euro area GDP of the European Economic Recovery Plan (EERP) enacted in response to the financial crisis of 2008–2009. To do so, we estimate an extended version of the ECB's New Area-Wide Model with a richly specified fiscal sector. The estimation results point to the existence of important complementarities between private and government consumption and, to a lesser extent, between private and public capital. We first examine the implied present-value multipliers for seven distinct fiscal instruments and show that the estimated complementarities result in fiscal multipliers larger than one for government consumption and investment. We highlight the importance of monetary accommodation for these findings. We then show that the EERP, if implemented as initially enacted, had a sizeable, although short-lived impact on euro area GDP. Since the EERP comprised both revenue and expenditure-based fiscal stimulus measures, the total multiplier is below unity.
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