Low Skill but High Volatility?
Claudia M. Buch
CESifo Working Paper No. 2665,
2009
Abstract
Globalization may impose a double-burden on low-skilled workers. On the one hand, the relative supply of low-skilled labor increases. This suppresses wages of low-skilled workers and/or increases their unemployment rates. On the other hand, low-skilled workers typically face more limited access to financial markets than high-skilled workers. This limits their ability to smooth shocks to income intertemporally and to share risks across borders. Using cross-country, industry-level data for the years 1970 - 2004, we document how the volatility of hours worked and of wages of workers at different skill levels has changed over time. We develop a stylized theoretical model that is consistent with the empirical evidence, and we test the predictions of the model. Our results show that greater financial globalization and development increases the volatility of employment, and this effect is strongest for low-skilled workers. A higher share of low-skilled employment has a dampening impact.
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Does Export Openness Increase Firm-level Output Volatility?
Claudia M. Buch, Jörg Döpke, H. Strotmann
World Economy,
No. 4,
2009
Abstract
There is a widespread concern that increased trade may lead to increased instability and thus risk at the firm level. Greater export openness can indeed affect firm-level volatility by changing the exposure and the reaction of firms to macroeconomic developments. The net effect is ambiguous from a theoretical point of view. This paper provides firm-level evidence on the link between openness and volatility. Using comprehensive data on more than 21,000 German manufacturing firms for the period 1980–2001, we analyse the evolution of firm-level output volatility and the link between volatility and export openness. Our paper has three main findings. First, firm-level output volatility is significantly higher than the level of aggregate volatility, but it displays similar patterns. Second, increased export openness lowers firm-level output volatility. This effect is primarily driven by variations along the extensive margin, i.e. by the distinction between exporters and non-exporters. Variations along the intensive margin, i.e. the volume of exports, tend to have a dampening impact on volatility as well. Third, small firms are more volatile than large firms.
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Stages of the 2007/2008 Global Financial Crisis: Is there a Wandering Asset Price Bubble?
Lucjan T. Orlowski
Economics E-Journal 43. Munich Personal RePEc Archive 2008,
2009
Abstract
This study identifies five distinctive stages of the current global financial crisis: the meltdown of the subprime mortgage market; spillovers into broader credit market; the liquidity crisis epitomized by the fallout of Northern Rock, Bear Stearns and Lehman Brothers with counterparty risk effects on other financial institutions; the commodity price bubble, and the ultimate demise of investment banking in the U.S. The study argues that the severity of the crisis is influenced strongly by changeable allocations of global savings coupled with excessive credit creation, which lead to over-pricing of varied types of assets. The study calls such process a “wandering asset-price bubble“. Unstable allocations elevate market, credit, and liquidity risks. Monetary policy responses aimed at stabilizing financial markets are proposed.
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Estimation Uncertainty in Credit Risk Assessment: Comparison of Credit Risk Using Bootstrapping and an Asymptotic Approach
Henry Dannenberg
IWH Discussion Papers,
No. 3,
2009
Abstract
For credit risk assessment, probability of default and correlation have to be estimated simultaneously. However, these estimates are uncertain. To assess this uncertainty the literature has discussed the use of asymptotic confidence regions. This kind of region though needs a long credit history for exact assessment. An alternative method to generate a confidence region for a short credit history is bootstrapping. Hence, it could be more appropriate to assess estimation uncertainty with bootstrapping than with asymptotic methods if only a short credit history is available. Based on a simulation study, it is analyzed how many periods should be available for assessing credit risk – taking account of estimation uncertainty – if bootstrapping and a Wald confidence region shall achieve similar results. This article shows that more than 100 cycles have to be available for similar results.
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Crisis Contagion in Central and Eastern Europe
Hubert Gabrisch
Wirtschaft im Wandel,
No. 12,
2008
Abstract
The global financial crisis reached the Central and Eastern European region. Fears of a recession are spreading among investors in Russia and the Ukraine due to the heavy decline of oil and steel prices and provoked a first wave of short-term capital withdrawals. The export sector of all countries in the region is affected by weakening global demand. Finally, the financial sector, which is dominated by international banks in almost all countries, appears as the contagion channel for risk adjustments of mother banks. The combined impact of all these causes and channels lead to a proliferation of restrictions in credit and money supply and an outflow of investment capital. A strong weakening of economic growth is on the way in the region, and a long-lasting recession seems possible in some countries, in first line in the Baltic countries. It becomes a superior task of governments to ease the length and depth of the approaching recession by a strong fiscal stimulus. A continuation of the present policy of fiscal consolidation or of nominal convergence toward a quick adoption of the Euro does not seem very advisable. If governments decided to support domestic demand, measures should be taken to strengthening of a genuinely domestic banking sector in order to maintain credit availability.
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The Great Risk Shift? Income Volatility in an International Perspective
Claudia M. Buch
CESifo Working Paper No. 2465,
2008
Abstract
Weakening bargaining power of unions and the increasing integration of the world economy may affect the volatility of capital and labor incomes. This paper documents and explains changes in income volatility. Using a theoretical framework which builds distribution risk into a real business cycle model, hypotheses on the determinants of the relative volatility of capital and labor are derived. The model is tested using industry-level data. The data cover 11 industrialized countries, 22 manufacturing and services industries, and a maximum of 35 years. The paper has four main findings. First, the unconditional volatility of labor and capital incomes has declined, reflecting the decline in macroeconomic volatility. Second, the idiosyncratic component of income volatility has hardly changed over time. Third, crosssectional heterogeneity in the evolution of relative income volatilities is substantial. If anything, the labor incomes of high- and low-skilled workers have become more volatile in relative terms. Fourth, income volatility is related to variables measuring the bargaining power of workers. Trade openness has no significant impact.
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Vergleich der Kreditrisikobewertung bei Berücksichtigung von Schätzunsicherheit und Korrelation – Welche Risikokomponente Sollten Unternehmen bei der Bewertung von Forderungsportfoliorisiken wann berücksichtigen?
Henry Dannenberg
Die Unternehmung Swiss Journal of Business Research and Practice,
2008
Abstract
The use of probability of default estimates to assess the risks of a credit portfolio should not ignore estimation uncertainty. The latter can be quantified by confidence intervals. But assumptions about dependencies of these intervals are inconsistent with assumptions of conventional credit portfolio models. Based on simulation studies this paper shows that a model which includes estimation uncertainty but ignores default correlation might estimate the real credit risk more correctly than a model that implicates default correlation but ignore estimation uncertainty. The latter is a trait of conventional credit portfolio models. In this paper quantifying of estimation uncertainty based on the idea of confidence intervals and the underlying probability distributions of these intervals.
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Stages of the Ongoing Global Financial Crisis: Is There a Wandering Asset Bubble?
Lucjan T. Orlowski
IWH Discussion Papers,
No. 11,
2008
Abstract
This study argues that the severity of the current global financial crisis is strongly influenced by changeable allocations of the global savings. This process is named a “wandering asset bubble”. Since its original outbreak induced by the demise of the subprime mortgage market and the mortgage-backed securities in the U.S., this crisis has reverberated across other credit areas, structured financial products and global financial institutions. Four distinctive stages of the crisis are identified: the meltdown of the subprime mortgage market, spillovers into broader credit market, the liquidity crisis epitomized by the fallout of Bear Sterns with some contagion effects on other financial institutions, and the commodity price bubble. Monetary policy responses aimed at stabilizing financial markets are proposed.
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Metformin-Therapie bei PCO-Syndrom - Positive Vierjahresbilanz des oralen Antidiabetikums
D. Albrecht, P. Kaltwasser, E. Rosenkranz, Dirk Trocka
MedReview,
2007
Abstract
The Polycystic ovary syndrome (PCOS) is the most frequent endocrinal disease of women in child-bearing age. PCOS represents a high risk for infertility, metabolic and cardiovascular diseases. This article analyses the outcomes after four years of PCOS-treatment with Metformin, an orally administered medication. We describe under which circumstances Metformin treatment is useful.
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Die volkswirtschaftliche Bedeutung von Private Equity
Ulrich Blum
Private Equity. Beurteilungs- und Bewertungsverfahren von Kapitalbeteiligungsgesellschaften,
2008
Abstract
Private equity is a very specific institutional way of providing private capital to enterprises. The contribution inquires why it increased its economic importance and public visibility over the last years. The role of private capital within the framework of the innovation theory, transaction cost theory and the risk theory is assessed. Private equity is a specific way of organizing the procurement with private capital for enterprises in risky markets in order to efficiently reducing transaction costs. More and above, it is important for credible market-entry strategies. As most markets are incomplete and because of tax regulations which cannot be considered to be efficient under present conditions, the economic role of private equity has increased. The increase economic role, but also importance in the firm, necessitates a steering of enterprises along value-oriented objectives. As the “hype” has decreased in summer 2007, the article ends with an assessment of future prospects.
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