Global Political Ties and the Global Financial Cycle
Gene Ambrocio, Iftekhar Hasan, Xiang Li
IWH Discussion Papers,
No. 23,
2023
Abstract
We study the implications of forging stronger political ties with the US on the sensitivities of stock returns around the world to a global common factor – the global financial cycle. Using voting patterns at the United Nations as a measure of political ties with the US along with various measures of the global financial cycle, we document evidence indicating that stronger political ties with the US amplify the sensitivities of stock returns in developing countries to the global financial cycle. We explore several channels and find that a deepening of financial linkages along with a reduction in information asymmetries and an amplification of sentiment are potentially important factors behind this result.
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28.09.2023 • 25/2023
The downturn in 2023 is milder in East Germany than in Germany as a whole – Implications of the Joint Economic Forecast Autumn 2023 and of Länder data from recent publications of the Statistical Offices
The German economy has been in a downturn for more than a year. In East Germany, however, the economy has been somewhat stronger in the past four quarters: According to the Halle Institute for Economic Research (IWH), East German gross domestic product (GDP) is expected to increase by 0.5% in 2023, while production in Germany as a whole will fall by 0.6%. Next year, expansion rates of 1.3% are forecast in both the east and the west. For 2025, East German gross domestic product is expected to grow by 1.2%, which is slightly slower than in Germany as a whole (1.5%).
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Department Profiles
Research Profiles of the IWH Departments All doctoral students are allocated to one of the four research departments (Financial Markets – Laws, Regulations and Factor Markets –…
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Productivity
Productivity: More with Less by Better Available resources are scarce. To sustain our society's income and living standards in a world with ecological and demographic change, we…
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Financial Stability
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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The Political Economy of the European Banking Union
The Political Economy of the European Banking Union Junior Professorship Lena Tonzer, PhD: The Political Economy of the European Banking Union: Causes for National Differences in…
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Ludwig (Interview)
About the CIA and a glass of red wine ... Professor Dr Udo Ludwig on the beginnings of our institute The core of the IWH founding team came from the Institute for Applied Economic…
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Poison Bonds
Shuo Xia, Rex Wang Renjie
SSRN Discussion Paper,
2023
Abstract
This paper documents the rise of "poison bonds", which are corporate bonds that allow bondholders to demand immediate repayment in a change-of-control event. The share of poison bonds among new issues has grown substantially in recent years, from below 20% in the 90s to over 60% after 2005. This increase is predominantly driven by investment-grade issues. We provide causal evidence that the pressure to eliminate poison pills has led firms to issue poison bonds as an alternative. Further analyses suggest that this practice entrenches incumbent managers, coincidentally benefits bondholders, but destroys shareholder value. Holding a portfolio of firms that remove poison pills but promptly issue poison bonds results in negative abnormal returns of -7.3% per year. Our findings have important implications for understanding the agency benefits and costs of debt: (1) more debt does not necessarily discipline the management; and (2) even without financial distress, managerial entrenchment can lead to conflicts between shareholders and creditors.
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Department Profiles
Research Profiles of the IWH Departments All doctoral students are allocated to one of the four research departments (Financial Markets – Laws, Regulations and Factor Markets –…
See page
Evidence-based Support for Adaptation Policies in Emerging Economies
Maximilian Banning, Anett Großmann, Katja Heinisch, Frank Hohmann, Christian Lutz, Christoph Schult
IWH Studies,
No. 2,
2023
Abstract
In recent years, the impacts of climate change become increasingly evident, both in magnitude and frequency. The design and implementation of adequate climate adaptation policies play an important role in the macroeconomic policy discourse to assess the impact of climate change on regional and sectoral economic growth. We propose different modelling approaches to quantify the socio-economic impacts of climate change and design specific adaptations in three emerging market economies (Kazakhstan, Georgia and Vietnam) which belong to the areas that are heavily exposed to climate change. A Dynamic General Equilibrium (DGE) model has been used for Vietnam and economy-energy-emission (E3) models for the other two countries. Our modelling results show how different climate hazards impact the economy up to the year 2050. Adaptation measures in particular in the agricultural sector have positive implications for the gross domestic product (GDP). However, some adaptation measures can even increase greenhouse gas emissions. In addition, the focus on GDP as the main indicator to evaluate policy measures can produce welfare-reducing policy decisions.
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