Finance-Growth Nexus and Banking Efficiency: The Impact of Microfinance Institutions
Afsheen Abrar, Iftekhar Hasan, Rezaul Kabir
Journal of Economics and Business,
March-April
2021
Abstract
This paper investigates the relative importance of microfinance institutions (MFIs) at both the macro (financial development, economic growth, income inequality, and poverty) and micro levels (efficiency of traditional commercial banks). We observe a significant impact on most of the fronts. MFIs’ participation increases overall savings (total bank deposits) and credit allocation (loans to private sector) in the economy. Their involvement enhances economic welfare by reducing income inequality and poverty. Additionally, their active presence helps to discipline the traditional commercial banks by subjecting them to more competition triggering higher efficiency.
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18.03.2021 • 9/2021
Economic mobility likely to increase significantly after relaxation – but also number of COVID-19 cases
The relaxation of Corona containment measures from the beginning of March 2021 lead to a significant increase in economic mobility and thus also in personal contacts in Germany. Estimates suggest that the recent relaxations increase economic mobility by more than ten percentage points and the number of new infections and deaths in Germany by 25%. Because both continued lockdowns and relaxations carry significant negative consequences, it is even more important to enable further relaxations through better testing and quarantine strategies and by increasing the pace of vaccination without putting people's health at risk.
Oliver Holtemöller
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What Drives the Commodity-Sovereign Risk Dependence in Emerging Market Economies?
Hannes Böhm, Stefan Eichler, Stefan Gießler
Journal of International Money and Finance,
March
2021
Abstract
Using daily data for 34 emerging markets in the period 1994–2016, we find robust evidence that higher export commodity prices are associated with lower sovereign default risk, as measured by lower EMBI spreads. The economic effect is especially pronounced for heavy commodity exporters. Examining the drivers, we find that, first, commodity dependence is higher for countries that export large volumes of commodities, whereas other portfolio characteristics like volatility or concentration are less important. Second, commodity-sovereign risk dependence increases in times of recessions and expansionary U.S. monetary policy. Third, the importance of raw material prices for sovereign financing can likely be mitigated if a country improves institutions and tax systems, attracts FDI inflows, invests in manufacturing, machinery and infrastructure, builds up reserve assets and opens capital and trade accounts. Fourth, the country’s government indebtedness or amount of received development assistance appear to be only of secondary importance for commodity dependence.
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Power Generation and Structural Change: Quantifying Economic Effects of the Coal Phase-out in Germany
Katja Heinisch, Oliver Holtemöller, Christoph Schult
Energy Economics,
2021
Abstract
In the fight against global warming, the reduction of greenhouse gas emissions is a major objective. In particular, a decrease in electricity generation by coal could contribute to reducing CO2 emissions. We study potential economic consequences of a coal phase-out in Germany, using a multi-region dynamic general equilibrium model. Four regional phase-out scenarios before the end of 2040 are simulated. We find that the worst case phase-out scenario would lead to an increase in the aggregate unemployment rate by about 0.13 [0.09 minimum; 0.18 maximum] percentage points from 2020 to 2040. The effect on regional unemployment rates varies between 0.18 [0.13; 0.22] and 1.07 [1.00; 1.13] percentage points in the lignite regions. A faster coal phase-out can lead to a faster recovery. The coal phase-out leads to migration from German lignite regions to German non-lignite regions and reduces the labour force in the lignite regions by 10,100 [6300; 12,300] people by 2040. A coal phase-out until 2035 is not worse in terms of welfare, consumption and employment compared to a coal-exit until 2040.
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11.03.2021 • 8/2021
New wave of infections suspends economic recovery
The lockdown is being eased only slightly in Germany in March 2021, and gross domestic product (GDP) declines significantly in the first quarter of 2021. As vaccination campaigns progress and restrictions are gradually eased, a normalisation of household consumption patterns will likely boost the economy later during the year. The Halle Institute for Economic Research (IWH) forecasts that GDP will increase by 3.7% in 2021, following a decline of 4.9% in 2020. In East Germany, both the contraction and the rebound are much less pronounced.
Oliver Holtemöller
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04.03.2021 • 7/2021
IWH Bankruptcy Update: German Bankruptcy Rates Remain Low in February
Bankruptcies statistics trended sideways at a low level in February 2021. Furthermore, the Halle Institute for Economic Research (IWH) does not anticipate higher bankruptcy rates in the coming months, despite Germany’s prolonged lockdown. These are the key findings of the IWH Bankruptcy Update, which provides monthly statistics on corporate bankruptcies in Germany.
Steffen Müller
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Regional Effects of Professional Sports Franchises – Causal Evidence from Four European Football Leagues
Matthias Brachert
Regional Studies,
No. 2,
2021
Abstract
The locational pattern of clubs in four professional football leagues in Europe is used to test the causal effect of relegations on short-run regional development. The study relies on the relegation mode of the classical round-robin tournament in the European model of sport to develop a regression-discontinuity design. The results indicate small and significant negative short-term effects on regional employment and output in the sports-related economic sector. In addition, small negative effects on overall regional employment growth are found. Total regional gross value added remains unaffected.
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04.02.2021 • 5/2021
IWH Bankruptcy Update: Wave of bankruptcies in retail and hospitality has yet to materialise as downward trend in statistics continues
The number of reported bankruptcies in Germany fell in January 2021. Furthermore, bankruptcy statistics are anticipated to stay at a low level in coming months, according to the Halle Institute for Economic Research (IWH), which provides monthly statistics on corporate bankruptcies in Germany with its IWH Bankruptcy Update.
Steffen Müller
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Why Are Households Saving so much During the Corona Recession?
Reint E. Gropp, William McShane
IWH Policy Notes,
No. 1,
2021
Abstract
Savings rates among European households have reached record levels during the Corona recession. We investigate three possible explanations for the increase in household savings: precautionary motivations induced by increased economic uncertainty, reduced consumption opportunities due to lockdown measures, and Ricardian Equivalence, i.e. increases in the expected future tax-burden of households driven by increases in government debt. To test these explanations, we compile a monthly panel of euro area countries from January 2019 to August 2020. Our findings indicate that the chief driver of the increase in household savings is supply: As governments restrict households’ opportunities to spend, households spend less. We estimate that going from no lockdown measures to that of Italy’s in March, would have resulted in the growth of Germany’s deposit to Gross Domestic Product (GDP) ratio being 0.6 percentage points higher each month. This would be equivalent to the volume of deposits increasing by roughly 14.3 billion euros or 348 euros per house monthly. Demand effects, driven by either fears of unemployment or fear of infection from COVID-19, appear to only have a weak impact on household savings, whereas changes in government debt are unrelated or even negatively related to savings rates. The analysis suggests that there is some pent-up demand for consumption that may unravel after lockdown measures are abolished and may result in a significant increase in consumption in the late spring/early summer 2021.
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25.01.2021 • 2/2021
High public deficits not only due to the pandemic – Medium-term options for fiscal policy
According to the IWH’s medium-term projection, Germany's gross domestic product will grow more slowly between 2020 and 2025 than before, not only because of the pandemic crisis, but also because the work force will decline. The resulting structural public deficits are, if the legal framework remains unchanged, likely to be higher than the debt brake allows. Consolidation measures, especially if they relate to government revenues, entail economic losses in the short term. “There is much to be said, also from a theoretical point of view, for not abolishing the debt brake, but for relaxing it to some extent,” says Oliver Holtemöller, head of the Department of Macroeconomics and vice president at Halle Institute for Economic Research (IWH).
Oliver Holtemöller
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