4. IWH/INFER-Workshop on Applied Economics and Economic Policy: “A New Fiscal Capacity for the EU?“
Birgit Schultz, Gregor von Schweinitz
Wirtschaft im Wandel,
Nr. 2,
2014
Abstract
Am 17. und 18. März 2014 fand am IWH in Zusammenarbeit mit dem International Network for Economic Research (INFER) der 4. Workshop „Applied Economics and Economic Policy“ statt. Im Rahmen des Workshops stellten Wissenschaftler europäischer Universitäten und internationaler Organisationen ihre neuesten Forschungsergebnisse zu aktuellen ökonomischen Fragen und Problemen vor. Dabei war es nicht nur Ziel der Veranstaltung, aktuelle Forschungsergebnisse vorzustellen, sondern auch mit Vertretern aus Wissenschaft und Praxis über die aktuelle Wirtschaftspolitik und das Spezialthema „A New Fiscal Capacity for the EU?“ zu diskutieren.
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Toward a Taylor Rule for Fiscal Policy
Martin Kliem, Alexander Kriwoluzky
Review of Economic Dynamics,
Nr. 2,
2014
Abstract
In DSGE models, fiscal policy is typically described by simple rules in which tax rates respond to the level of output. We show that there is only weak empirical evidence in favor of such specifications in US data. Instead, the cyclical movements of labor and capital income tax rates are better described by a contemporaneous response to hours worked and investment, respectively. We show that conditioning on these variables is also desirable from a normative perspective as it significantly improves welfare relative to output-based rules.
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Fiscal Equalization, Tax Salience, and Tax Competition
Martin Altemeyer-Bartscher
IWH Discussion Papers,
Nr. 3,
2014
Abstract
Jurisdictions that engage in inter-regional tax competition usually try to attenuate competitive pressures by substituting salient tax instruments with hidden ones. On this effect, we investigate the efficiency consequences of inter-regional tax competition and fiscal equalization in a federal system when taxpayers fail to optimally react on shrouded attributes of local tax policy. If the statuary tax rate is a relatively salient instrument and taxpayers pay low attention to the quality and the frequency of tax enforcement, the underlying substitution of tax instruments with the aim of reducing the perceived tax price may suppress the under-exploitation of tax bases that is typically triggered by fiscal equalization.
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In Search for Yield? Survey-based Evidence on Bank Risk Taking
Claudia M. Buch, S. Eickmeier, Esteban Prieto
Journal of Economic Dynamics and Control,
Nr. 43,
2014
Abstract
Monetary policy can have an impact on economic and financial stability through the risk taking of banks. Falling interest rates might induce investment into risky activities. This paper provides evidence on the link between monetary policy and bank risk taking. We use a factor-augmented vector autoregressive model (FAVAR) for the US for the period 1997–2008. Besides standard macroeconomic indicators, we include factors summarizing information provided in the Federal Reserve’s Survey of Terms of Business Lending (STBL). These data provide information on banks׳ new loans as well as interest rates for different loan risk categories and different banking groups. We identify a risk-taking channel of monetary policy by distinguishing responses to monetary policy shocks across different types of banks and different loan risk categories. Following an expansionary monetary policy shock, small domestic banks increase their exposure to risk. Large domestic banks do not change their risk exposure. Foreign banks take on more risk only in the mid-2000s, when interest rates were ‘too low for too long’.
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Reconciling Narrative Monetary Policy Disturbances with Structural VAR Model Shocks?
Martin Kliem, Alexander Kriwoluzky
Economics Letters,
Nr. 2,
2013
Abstract
Structural VAR studies disagree with narrative accounts about the history of monetary policy disturbances. We investigate whether employing the narrative monetary shocks as a proxy variable in a VAR model aligns both shock series. We find that it does not.
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Towards Deeper Financial Integration in Europe: What the Banking Union Can Contribute
Claudia M. Buch, T. Körner, Benjamin Weigert
IWH Discussion Papers,
Nr. 13,
2013
Abstract
The agreement to establish a Single Supervisory Mechanism in Europe is a major step towards a Banking Union, consisting of centralized powers for the supervision of banks, the restructuring and resolution of distressed banks, and a common deposit insurance system. In this paper, we argue that the Banking Union is a necessary complement to the common currency and the Internal Market for capital. However, due care needs to be taken that steps towards a Banking Union are taken in the right sequence and that liability and control remain at the same level throughout. The following elements are important. First, establishing a Single Supervisory Mechanism under the roof of the ECB and within the framework of the current EU treaties does not ensure a sufficient degree of independence of supervision and monetary policy. Second, a European institution for the restructuring and resolution of banks should be established and equipped with sufficient powers. Third, a fiscal backstop for bank restructuring is needed. The ESM can play a role but additional fiscal burden sharing agreements are needed. Direct recapitalization of banks through the ESM should not be possible until legacy assets on banks’ balance sheets have been cleaned up. Fourth, introducing European-wide deposit insurance in the current situation would entail the mutualisation of legacy assets, thus contributing to moral hazard.
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Macroeconomic Factors and Micro-Level Bank Risk
Claudia M. Buch
Bundesbank Discussion Paper 20/2010,
2010
Abstract
The interplay between banks and the macroeconomy is of key importance for financial and economic stability. We analyze this link using a factor-augmented vector autoregressive model (FAVAR) which extends a standard VAR for the U.S. macroeconomy. The model includes GDP growth, inflation, the Federal Funds rate, house price inflation, and a set of factors summarizing conditions in the banking sector. We use data of more than 1,500 commercial banks from the U.S. call reports to address the following questions. How are macroeconomic shocks transmitted to bank risk and other banking variables? What are the sources of bank heterogeneity, and what explains differences in individual banks’ responses to macroeconomic shocks? Our paper has two main findings: (i) Average bank risk declines, and average bank lending increases following expansionary shocks. (ii) The heterogeneity of banks is characterized by idiosyncratic shocks and the asymmetric transmission of common shocks. Risk of about 1/3 of all banks rises in response to a monetary loosening. The lending response of small, illiquid, and domestic banks is relatively large, and risk of banks with a low degree of capitalization and a high exposure to real estate loans decreases relatively strongly after expansionary monetary policy shocks. Also, lending of larger banks increases less while risk of riskier and domestic banks reacts more in response to house price shocks.
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How does Institutional Setting Affect the Impact of EU Structural Funds on Economic Cohesion? New Evidence from Central and Eastern Europe
Marina Grusevaja, Toralf Pusch
Journal of Common Market Studies,
2012
Abstract
Structural Funds are the main instrument of the EU Cohesion Policy. Their effective use is subject to an ongoing debate in political and scientific circles. European fiscal assistance under this heading should promote economic and social cohesion in the member states of the European Union. Recently the domestic institutional capacity to absorb, to distribute and to invest Structural Funds effectively has become a crucial determinant of the cohesion process and has attracted attention of the scientific community. The aim of this study is to shed light on the effectiveness of Structural Funds in the countries of the first Central and Eastern European enlargement round in 2004. Using regional data for these countries we have a look on the impact of several institutional governance variables on the effectiveness of Structural Funds. In the interpretation of results reference is made to regional economics. Results of the empirical analysis indicate an influence of certain institutional variables on the effectiveness of Structural Funds in the new member states.
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