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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A Review of Empirical Research on the Design and Impact of Regulation in the Banking Sector
Sanja Jakovljević, Hans Degryse, Steven Ongena
Annual Review of Financial Economics,
2015
Abstract
We review existing empirical research on the design and impact of regulation in the banking sector. The impact of each individual piece of regulation may inexorably depend on the set of regulations already in place, the characteristics of the banks involved (from their size or ownership structure to operational idiosyncrasies in terms of capitalization levels or risk-taking behavior), and the institutional development of the country where the regulation is introduced. This complexity is challenging for the econometrician, who relies either on single-country data to identify challenges for regulation or on cross-country data to assess the overall effects of regulation. It is also troubling for the policy maker, who has to optimally design regulation to avoid any unintended consequences, especially those that vary over the credit cycle such as the currently developing macroprudential frameworks.
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03.12.2015 • 44/2015
Migration Affects Labour Market in Eastern Germany
Migration increasingly affects the labour market in Eastern Germany, having effects on employment and unemployment figures as well as the number of recipients of social assistance benefits under the SGB II regulations. Particularly with countries in Middle and Eastern Europe, countries affected by the European debt and confidence crisis and with people seeking asylum, there are large increases meeting the dimensions in Western Germany. However, migrants overall still form a significantly smaller percentage of the population and other labour market parameters in Eastern Germany, since migration was a lot stronger in Western Germany during the last decades. While on the short run negative effects on unemployment have to be expected, there are also chances, in the medium- and long-term, to soften the expectable demographic problems, if integration and qualification are supported.
Oliver Holtemöller
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1st IWH-FIN-FIRE Workshop on Challenges to Financial Stability
Annika Bacher, Lena Tonzer
Wirtschaft im Wandel,
No. 5,
2015
Abstract
Im Rahmen des Workshops tauschten sich internationale Teilnehmerinnen und Teilnehmer über aktuelle Forschungspapiere rund um das Thema „Challenges to Financial Stability“ aus. Im Wesentlichen diente der Workshop als Plattform, um Änderungen in den regulatorischen Rahmenbedingungen des Finanzsektors und die daraus resultierenden Einflüsse auf die Finanzstabilität bzw. die Konsequenzen für die Realwirtschaft zu diskutieren.
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Consequences of China’s Opening to Foreign Banks
Ran Li, Xiang Li, Wen Lei, Yiping Huang
L. Song, R. Garnaut, C. Fang, L. Johnston (eds.), China's Domestic Transformation in a Global Context. Acton: ANU Press,
forthcoming
Abstract
China’s government has recently implemented additional reforms to relax the regulatory environment for foreign banks. Specifically, State Council Order No. 657, signed by Premier Li Keqiang, announced a decision to revise the Regulations of the People’s Republic of China on the Administration of Foreign-Funded Banks, effective from 1 January 2015. Implications of the revised regulations include removal of the requirement that a minimum of RMB100 million operating capital be transferred unconditionally from the overseas parent bank to the newly opened Chinese branch. In addition, in terms of the conditions attached to the right to carry out RMB-denominated activity, foreign banks are now eligible to apply to undertake local currency business after operating in China for one year—down from the previous three years. The requirement for two consecutive years of profit will be scrapped as well.
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Effects of Urban Renewal on Non-subsidised Property Owners: Evidence from East Germany
Martin T. W. Rosenfeld, Dominik Weiß
Town Planning Review,
No. 3,
2015
Abstract
Urban renewal programmes intervene in the housing market by offering different kinds of subsidies that support the improvement of public spaces or selective demolition. The central aim of this paper is to disentangle the economic impact of these subsidies on property owners and investors by exploring the value of residential real estate. There is limited knowledge as to which type of owners benefit from such actions and whether they even benefit at all. One may expect that the indirect effects of a regime of regulation inspire more confidence in market recovery from the perspective of property owners. By using the theory of real options it is assumed that urban renewal raises the option premium of a property which in turn represents an opportunity to the owners to use and develop their property. This opportunity is based on expectations of higher revenues in the future. The hypothesis of an increasing option premium is explored using data from a large urban renewal programme in East Germany.
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Einführung: Strukturen der öffentlichen Verwaltung und Raumentwicklung – Allgemeine Zusammenhänge und Ansätze zu ihrer Erforschung im Überblick
Martin T. W. Rosenfeld
Gebiets- und Verwaltungsstrukturen im Umbruch: Beiträge zur Reformdiskussion aus Erfahrungen in Sachsen, Sachsen-Anhalt und Thüringen,
No. 360,
2015
Abstract
Far-reaching measures of administrative restructuring are being often introduced in the face of demographic change and the financial diffculties of the municipalities and federal states. Only with larger entities, it is argued, will it in future be possible to provide high quality municipal services at a reasonable cost. The tendency to enlarge municipal entities fits with the overall picture of municipal reforms in Germany, which since 1945 have been dominated by measures associated with concentration and centralisation efforts. Territorial restructuring is, however, but one element of the entire spectrum of administrative reforms. Further elements of administrative (re)structuring are the reform of the portfolio of public tasks (critical review of public tasks), the transfer of responsibilities between the levels (functional reform), and a change in the specifications of financing regulations relevant to services assigned to the public sector (financing reform). This publication consists of the results of the working group “Administrative and Territorial Reforms” (AG VGR) of the state working groups Sachsen, Sachsen-Anhalt and Thüringen of the Akademie für Raumforschung und Landesplanung (ARL). A significant objective of the AG VGR was to shed more light on the spatially-related interactions of the effects of administrative reform measures, as there are few findings on the topic that are empirically well-founded and many questions remain unanswered.
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Socially Gainful Gender Quotas
Walter Hyll, Oded Stark
Journal of Economic Behavior and Organization,
No. 105,
2014
Abstract
We study the impact of gender quotas on the acquisition of human capital. We assume that individuals’ formation of human capital is influenced by the prospect of landing high-pay top positions, and that these positions are regulated by gender-specific quotas. In the absence of quotas, women consider their chances of getting top positions to be lower than men’s. The lure of top positions induces even men of relatively low ability to engage in human capital formation, whereas women of relatively high ability do not expect to get top positions and do not therefore engage in human capital formation. Gender quotas discourage men who are less efficient in forming human capital, and encourage women who are more efficient in forming human capital. We provide a condition under which the net result of the institution of gender quotas is an increase in human capital in the economy as a whole.
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Regulation, Innovation and Technology Diffusion - Evidence from Building Energy E fficiency Standards in Germany
Makram El-Shagi, Claus Michelsen, Sebastian Rosenschon
Discussionpapers des DIW Berlin,
No. 1371,
2014
Abstract
The impact of environmental regulation on technology diffusion and innovations is studied using a unique data set of German residential buildings. We analyze how energy effi ciency regulations, in terms of minimum standards, affects energy-use in newly constructed buildings and how it induces innovation in the residential-building industry. The data used consists of a large sample of German apartment houses built between 1950 and 2005. Based on this information, we determine their real energy requirements from energy performance certificates and energy billing information. We develop a new measure for regulation intensity and apply a panel-error-correction regression model to energy requirements of low and high quality housing. Our findings suggest that regulation significantly impacts technology adoption in low quality housing. This, in turn, induces improvements in the high quality segment where innovators respond to market signals.
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An Empirical Analysis of Legal Insider Trading in The Netherlands
Frank de Jong, Jérémie Lefebvre, Hans Degryse
De Economist,
No. 1,
2014
Abstract
In this paper, we employ a registry of legal insider trading for Dutch listed firms to investigate the information content of trades by corporate insiders. Using a standard event-study methodology, we examine short-term stock price behavior around trades. We find that purchases are followed by economically large abnormal returns. This result is strongest for purchases by top executives and for small market capitalization firms, which is consistent with the hypothesis that legal insider trading is an important channel through which information flows to the market. We analyze also the impact of the implementation of the Market Abuse Directive (European Union Directive 2003/6/EC), which strengthens the existing regulation in the Netherlands. We show that the new regulation reduced the information content of sales by top executives.
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