Is Risk the Fuel of the Business Cycle? Financial Frictions and Oil Market Disturbances
Christoph Schult
IWH Discussion Papers,
No. 4,
2024
Abstract
I estimate a dynamic stochastic general equilibrium (DSGE) model for the United States that incorporates oil market shocks and risk shocks working through credit market frictions. The findings of this analysis indicate that risk shocks play a crucial role during the Great Recession and the Dot-Com bubble but not during other economic downturns. Credit market frictions do not amplify persistent oil market shocks. This result holds as long as entry and exit rates of entrepreneurs are independent of the business cycle.
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Media Response
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Archive
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The Nasty Gap 30 years after unification: Why East Germany is still 20% poorer than the West Dossier In a nutshell The East German economic convergence process is hardly…
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Compensation Regulation in Banking: Executive Director Behavior and Bank Performance after the EU Bonus Cap
Stefano Colonnello, Michael Koetter, Konstantin Wagner
Journal of Accounting and Economics,
No. 1,
2023
Abstract
The regulation that caps executives’ variable compensation, as part of the Capital Requirements Directive IV of 2013, likely affected executive turnover, compensation design, and risk-taking in EU banking. The current study identifies significantly higher average turnover rates but also finds that they are driven by CEOs at poorly performing banks. Banks indemnified their executives by off-setting the bonus cap with higher fixed compensation. Although our evidence is only suggestive, we do not find any reduction in risk-taking at the bank level, one purported aim of the regulation.
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Joint Economic Forecast
Joint Economic Forecast The joint economic forecast is an instrument for evaluating the overall economic situation and development in Germany, the euro area and the rest of the…
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Financial Systems: The Anatomy of the Market Economy How the financial system is constructed, how it works, how to keep it fit and what good a bit of chocolate can do. Dossier In…
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Data Protection Policy We take the protection of your personal data very seriously and treat your personal data with confidentiality and in compliance with the provisions of law…
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