Mere Criticism of the ECB is no Solution
M. Fratzscher, Reint E. Gropp, Jan Pieter Krahnen, Hans-Helmut Kotz, Christian Odendahl, Beatrice Weder di Mauro, Guntram Wolff
Einzelveröffentlichungen,
2016
Abstract
Die Kritik an der EZB in Deutschland ist kontraproduktiv. Die Geldpolitik muss expansiv bleiben, damit die EZB ihrem Mandat zumindest ansatzweise gerecht wird. Das gebietet auch der Erhalt ihrer Glaubwürdigkeit. Die EZB muss nicht weniger, sondern Europas Politik muss mehr tun. Sie muss entschiedener handeln, um Europa wieder auf einen Wachstumspfad zu bringen.
[Eine kürzere Version des Beitrags ist unter dem Titel “Kritik an Draghi ist noch keine Lösung“ erschienen in der Frankfurter Allgemeinen Sonntagszeitung vom 10 April 2016].
Die Politik, auch die deutsche, darf sich nicht länger ihrer Mitverantwortung für die gegenwärtige wirtschaftliche Lage in weiten Teilen Europas entziehen. Benötigt werden eine wachstumsfreundliche Fiskalpolitik, Strukturreformen zur Öffnung neuer Märkte und eine Konsolidierung und Restrukturierung des Finanzsektors. Dabei müssen vor allem wir in Deutschland uns den Spiegel vorhalten – denn die meisten dieser Reformen benötigen wir genauso dringend wie unsere europäischen Nachbarn.
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Konjunktur aktuell: Stabile Konjunktur in Deutschland trotz krisenhaften Umfelds
Konjunktur aktuell,
No. 1,
2016
Abstract
Die deutsche Konjunktur ist trotz internationaler Risiken und politischer Verwerfungen kraftvoll in das Jahr 2016 gestartet. Beschäftigung und Einkommen nehmen zu, und die Binnennachfrage steigt deutlich, auch weil der Staat zusätzliche Ausgaben im Zusammenhang mit der Flüchtlingsmigration tätigt. Allerdings dürfte es im Frühjahr zu einer vorübergehenden Verlangsamung der Dynamik kommen, darauf deuten Stimmungsindikatoren hin. Mit Fortschritten bei der Bewältigung der aktuellen politischen Probleme in Europa dürfte die Zuversicht wieder zunehmen und die deutsche Konjunktur insgesamt stabil bleiben, sodass das Bruttoinlandsprodukt im Jahr 2016 wohl mit einer Rate von 1,5% expandieren wird.
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Structural Reforms in Banking: The Role of Trading
Jan Pieter Krahnen, Felix Noth, Ulrich Schüwer
Abstract
In the wake of the recent financial crisis, significant regulatory actions have been taken aimed at limiting risks emanating from trading in bank business models. Prominent reform proposals are the Volcker Rule in the U.S., the Vickers Report in the UK, and, based on the Liikanen proposal, the Barnier proposal in the EU. A major element of these reforms is to separate “classical” commercial banking activities from securities trading activities, notably from proprietary trading. While the reforms are at different stages of implementation, there is a strong ongoing discussion on what possible economic consequences are to be expected. The goal of this paper is to look at the alternative approaches of these reform proposals and to assess their likely consequences for bank business models, risk-taking and financial stability. Our conclusions can be summarized as follows: First, the focus on a prohibition of only proprietary trading, as envisaged in the current EU proposal, is inadequate. It does not necessarily reduce risk-taking and it likely crowds out desired trading activities, thereby negatively affecting financial stability. Second, there is potentially a better solution to limit excessive trading risk at banks in terms of potential welfare consequences: Trading separation into legally distinct or ring-fenced entities within the existing banking organizations. This kind of separation limits cross-subsidies between banking and proprietary trading and diminishes contagion risk, while still allowing for synergies across banking, non-proprietary trading and proprietary trading.
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To Separate or not to Separate Investment from Commercial Banking? An Empirical Analysis of Attention Distortion under Multiple Tasks
Reint E. Gropp, K. Park
IWH Discussion Papers,
No. 2,
2016
Abstract
In the wake of the 2008/2009 financial crisis, a number of policy reports (Vickers, Liikanen, Volcker) proposed to separate investment banking from commercial banking to increase financial stability. This paper empirically examines one theoretical justification for these proposals, namely attention distortion under multiple tasks as in Holmstrom and Milgrom (1991). Universal banks can be viewed as combining two different tasks (investment banking and commercial banking) in the same organization. We estimate pay-performance sensitivities for different segments within universal banks and for pure investment and commercial banks. We show that the pay-performance sensitivity is higher in investment banking than in commercial banking, no matter whether it is organized as part of a universal bank or in a separate institution. Next, the paper shows that relative pay-performance sensitivities of investment and commercial banking are negatively related to the quality of the loan portfolio in universal banks. Depending on the specification, we obtain a reduction in problem loans when investment banking is removed from commercial banks of up to 12 percent. We interpret the evidence to imply that the higher pay-performance sensitivity in investment banking directs the attention of managers away from commercial banking within universal banks, consistent with Holmstrom and Milgrom (1991). Separation of investment banking and commercial banking may indeed be associated with a reduction in risk in commercial banking.
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1st IWH-FIN-FIRE Workshop on Challenges to Financial Stability
Annika Bacher, Lena Tonzer
Wirtschaft im Wandel,
No. 5,
2015
Abstract
Im Rahmen des Workshops tauschten sich internationale Teilnehmerinnen und Teilnehmer über aktuelle Forschungspapiere rund um das Thema „Challenges to Financial Stability“ aus. Im Wesentlichen diente der Workshop als Plattform, um Änderungen in den regulatorischen Rahmenbedingungen des Finanzsektors und die daraus resultierenden Einflüsse auf die Finanzstabilität bzw. die Konsequenzen für die Realwirtschaft zu diskutieren.
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Cross-border Interbank Networks, Banking Risk and Contagion
Lena Tonzer
Journal of Financial Stability,
2015
Abstract
Recent events have highlighted the role of cross-border linkages between banking systems in transmitting local developments across national borders. This paper analyzes whether international linkages in interbank markets affect the stability of interconnected banking systems and channel financial distress within a network consisting of banking systems of the main advanced countries for the period 1994–2012. Methodologically, I use a spatial modeling approach to test for spillovers in cross-border interbank markets. The results suggest that foreign exposures in banking play a significant role in channeling banking risk: I find that countries that are linked through foreign borrowing or lending positions to more stable banking systems abroad are significantly affected by positive spillover effects. From a policy point of view, this implies that in stable times, linkages in the banking system can be beneficial, while they have to be taken with caution in times of financial turmoil affecting the whole system.
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The Quantity Theory Revisited: A New Structural Approach
Makram El-Shagi, Sebastian Giesen
Macroeconomic Dynamics,
No. 1,
2015
Abstract
We propose a unified identification scheme to identify monetary shocks and track their propagation through the economy. We combine three approaches dealing with the consequences of monetary shocks. First, we adjust a state space version of the P-star type model employing money overhang as the driving force of inflation. Second, we identify the contemporaneous impact of monetary policy shocks by applying a sign restriction identification scheme to the reduced form given by the state space signal equations. Third, to ensure that our results are not distorted by the measurement error exhibited by the official monetary data, we employ the Divisia M4 monetary aggregate provided by the Center for Financial Stability. Our approach overcomes one of the major difficulties of previous models by using a data-driven identification of equilibrium velocity. Thus, we are able to show that a P-star model can fit U.S. data and money did indeed matter in the United States.
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Financial Stability and Central Bank Governance
Michael Koetter, Kasper Roszbach, G. Spagnolo
International Journal of Central Banking,
No. 4,
2014
Abstract
The financial crisis has ignited a debate about the appropriate objectives and the governance structure of Central Banks. We use novel survey data to investigate the relation between these traits and banking system stability focusing in particular on their role in micro-prudential supervision. We find that the separation of powers between single and multiple bank supervisors cannot explain credit risk prior or during the financial crisis. Similarly, a large number of Central Bank governance traits do not correlate with system fragility. Only the objective of currency stability exhibits a significant relation with non-performing loan levels in the run-up to the crisis. This effect is amplified for those countries with most frequent exposure to IMF missions in the past. Our results suggest that the current policy discussion whether to centralize prudential supervision under the Central Bank and the ensuing institutional changes some countries are enacting may not produce the improvements authorities are aiming at. Whether other potential improvements in prudential supervision due to, for example, external disciplinary devices, such as IMF conditional lending schemes, are better suited to increase financial stability requires further research.
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