Data
Transformation tables for administrative borders in Germany – data In order to...
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Loose (Interview)
When there were almost no flats in Halle yet ... Brigitte Loose about IWH's...
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IWH-CompNet Discussion Papers
IWH-CompNet Discussion Papers The IWH-CompNet Discussion Paper series presents research...
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Working Papers
Macroeconomic Effects from Sovereign Risk vs. Knightian Uncertainty ...
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Centre for Evidence-based Policy Advice
Centre for Evidence-based Policy Advice (IWH-CEP) ...
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IWH-indicators for East Germany
IWH-indicators for East Germany Go to data These time series are or were collected or estimated by the IWH: Quarterly GDP in East Germany (estimation...
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Correlation Scenarios and Correlation Stress Testing
Natalie Packham, Fabian Wöbbeking
Journal of Economic Behavior and Organization,
January
2023
Abstract
We develop a general approach for stress testing correlations of financial asset portfolios. The correlation matrix of asset returns is specified in a parametric form, where correlations are represented as a function of risk factors, such as country and industry factors. A sparse factor structure linking assets and risk factors is built using Bayesian variable selection methods. Regular calibration yields a joint distribution of economically meaningful stress scenarios of the factors. As such, the method also lends itself as a reverse stress testing framework: using the Mahalanobis distance or Highest Density Regions (HDR) on the joint risk factor distribution allows to infer worst-case correlation scenarios. We give examples of stress tests on a large portfolio of European and North American stocks.
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30.11.2022 • 28/2022
Stricter rules for banks can relieve real estate markets
Exuberant price levels in the German real estate market could further exacerbate an economic crisis. Fiscal instruments exert too little influence to contain this danger, shows a study by the Halle Institute for Economic Research (IWH).
Michael Koetter
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17.08.2022 • 19/2022
Labour mobility is part of structural change
The coal phase-out will also change the affected regions in that part of the workforce will migrate. Politicians should take this process into account in structural policy, because it cannot be completely prevented. A study published by the Halle Institute for Economic Research (IWH) illustrates this with a historical example.
Oliver Holtemöller
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