Initial Evidence from a New Database on Capital Market Restrictions
Makram El-Shagi
Panoeconomicus,
No. 3,
2012
Abstract
One of the key obstacles to the empirical analysis of capital controls has been the unavailability of a detailed set of indicators for controls that cover a broad set of countries over a range of years. In this paper, we propose a new set of indicators derived from the Annual Reports on Exchange Arrangements and Export Restrictions. Contrary to most earlier attempts to construct control indicators from this source, our set of indices allows one to analyze the control intensity separately for inflow, outflow and repatriation controls. An additional set of indicators features information on the institutional design of controls. At first glance, the data show that the financial crisis caused a surge in capital market restrictions, most notably concerning the derivatives market. This reflex, which is not justified by the scarce empirical evidence on the success of controls, shows the importance of having a valid measure to allow an econometrically sound policy evaluation in this field. The data are available from the author upon request.
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Spillover Effects among Financial Institutions: A State-dependent Sensitivity Value-at-Risk Approach
Z. Adams, R. Füss, Reint E. Gropp
Abstract
In this paper, we develop a state-dependent sensitivity value-at-risk (SDSVaR) approach that enables us to quantify the direction, size, and duration of risk spillovers among financial institutions as a function of the state of financial markets (tranquil, normal, and volatile). Within a system of quantile regressions for four sets of major financial institutions (commercial banks, investment banks, hedge funds, and insurance companies) we show that while small during normal times, equivalent shocks lead to considerable spillover effects in volatile market periods. Commercial banks and, especially, hedge funds appear to play a major role in the transmission of shocks to other financial institutions. Using daily data, we can trace out the spillover effects over time in a set of impulse response functions and find that they reach their peak after 10 to 15 days.
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The Synchronization of Wage Dynamics across EMU Members: A Test of the Endogeneity Hypothesis
Herbert S. Buscher, Hubert Gabrisch
Empirica,
No. 3,
2012
Abstract
We test the hypothesis of an endogenous currency area for the labor market of the Euro area: has the introduction of a common currency caused wage dynamics to become more synchronized and to be able to cushion for asymmetric shocks? Trade intensity, sector specialization and financial integration are tested for being the driving forces for the endogenous synchronization of wage dynamics. We use regression techniques with instrument variables, and find evidence of persistent asymmetries in nominal wage formation, despite a single currency and monetary policy. We explain the result with more specialization following financial integration, and with still existing differences in wage formation and labor market institutions. We conclude that the euro zone is not endogenous with respect to wage formation. Rather, there are incentives for beggar-thy-neighbor policies in the Euro area.
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Do Government Owned Banks Trade Market Power for Slack?
Andreas Hackethal, Michael Koetter, Oliver Vins
Applied Economics,
No. 33,
2012
Abstract
The ‘Quiet Life Hypothesis (QLH)’ posits that banks with market power have less incentives to maximize revenues and minimize cost. Especially government owned banks with a public mandate precluding profit maximization might succumb to a quiet life. We use a unified approach that simultaneously measures market power and efficiency to test the quiet life hypothesis of German savings banks. We find that average local market power declined between 1996 and 2006. Cost and profit efficiency remained constant. Nonparametric correlations are consistent with a quiet life regarding cost efficiency but not regarding profit efficiency. The quiet life on the cost side is negatively correlated with bank size, quality of loan portfolio and local per capita income. The last result indicates that the quiet cost life is therefore potentially due to benevolent excess consumption of local input factors by public savings banks.
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Konjunktur aktuell: Deutsche Wirtschaft überwindet die kurze Schwächephase
Wirtschaft im Wandel,
No. 3,
2012
Abstract
Die Risiken, die von der Schulden- und Vertrauenskrise in Europa ausgehen und die deutsche Wirtschaft belasten, haben zuletzt etwas nachgelassen; die Aussichten für die deutsche Konjunktur haben sich verbessert. Das Bruttoinlandsprodukt wird in Deutschland nach der Schwächephase im Winterhalbjahr 2011/2012 im Jahr 2012 um 1,3% und im Jahr 2013 um 2,2% zunehmen; die Arbeitslosenquote dürfte weiter sinken – auf 6,4% im Jahr 2012 und auf 6,1% im Jahr 2013. Diese Entwicklung führt – trotz nachlassender Konsolidierungsbemühungen – zu einem raschen Abbau der öffentlichen Neuverschuldung.
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Protect and Survive? Did Capital Controls Help Shield Emerging Markets from the Crisis?
Makram El-Shagi
Economics Bulletin,
No. 1,
2012
Abstract
Using a new dataset on capital market regulation, we analyze whether capital controls helped protect emerging markets from the real economic consequences of the 2009 financial and economic crisis. The impact of the crisis is measured by the 2009 forecast error of a panel state space model, which analyzes the business cycle dynamics of 63 middle-income countries. We find that neither capital controls in general nor controls that were specifically targeted to derivatives (that played a crucial role during the crisis) helped shield economies. However, banking regulation that limits the exposure of banks to global risks has been highly successful.
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Crises, rescues, and policy transmission through international banks
Claudia M. Buch
Bundesbank Discussion Paper 15/2011,
2011
Abstract
The World Financial Crisis has shaken the fundamentals of international banking
and triggered a downward spiral of asset prices. To prevent a further meltdown of
markets, governments have intervened massively through rescues measures aimed at recapitalizing banks and through liquidity support. We use a detailed, banklevel dataset for German banks to analyze how the lending and borrowing of their foreign affiliates has responded to domestic (German) and to US crisis support schemes. We analyze how these policy interventions have spilled over into
foreign markets. We identify loan supply shocks by exploiting that not all banks
have received policy support and that the timing of receiving support measures
has differed across banks. We find that banks covered by rescue measures of the
German government have increased their foreign activities after these policy
interventions, but they have not expanded relative to banks not receiving support.
Banks claiming liquidity support under the Term Auction Facility (TAF) program
have withdrawn from foreign markets outside the US, but they have expanded
relative to affiliates of other German banks.
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A Macroeconomist’s View on EU Governance Reform: Why and How to Establish Policy Coordination?
Hubert Gabrisch
Economic Annals,
No. 191,
2011
Abstract
This paper discusses the need for macroeconomic policy coordination in the E(M)U. Coordination of national policies with cross-border effects does not exist at the macroeconomic level, although requested by the EU Treaty. The need for coordination stems from current account imbalances, which origin in market-induced capital flows, destabilizing the real exchange rates between low and high wage countries. The recent attempts of the Commission and the European Council to reform E(M)U governance do not address this problem and thus remain incapable to protect against future instability.
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The Technological Role of Inward Foreign Direct Investment in Central East Europe
Johannes Stephan
The Technological Role of Inward Foreign Direct Investment in Central East Europe,
2011
Abstract
Foreign direct investment (FDI) assumed a prominent role in Central East Europe (CEE) early on in the transition process. Foreign investors were assigned the task of restructuring markets, providing capital and knowledge for investment in technologically outdated and financially ailing firms.
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