Household Indebtedness, Financial Frictions and the Transmission of Monetary Policy to Consumption: Evidence from China
Michael Funke, Xiang Li, Doudou Zhong
Emerging Markets Review,
im Erscheinen
Abstract
This paper studies the impact of household indebtedness on the transmission of monetary policy to consumption using the Chinese household-level survey data. We employ a panel smooth transition regression model to investigate the non-linear role of indebtedness. We find that housing-related indebtedness weakens the monetary policy transmission, and this effect is non-linear as there is a much larger counteraction of consumption in response to monetary policy shocks when household indebtedness increases from a low level rather than from a high level. Moreover, the weakened monetary policy transmission from indebtedness is stronger in urban households than in rural households. This can be explained by the investment good characteristic of real estate in China.
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Active Driver or Passive Victim - On the Role of International Monetary Policy Transmission
Annika Camehl, Gregor von Schweinitz
IWH Discussion Papers,
Nr. 3,
2023
Abstract
We provide new insights into determinants of international interest rates spillovers across seven advanced economies. To disentangle and quantify their respective importance, we identify country-specific structural monetary policy, demand, and supply equations in a Bayesian structural panel vector autoregressive model. We formulate prior beliefs on magnitudes and signs of contemporaneous structural coefficients (i.e., (semi-)elasticities), based on a standard theoretical multi-country open economy model from the literature. Our findings show that interest rate spillovers occur via an aggregated demand channel. Unexpected monetary tightening causes modest declines in most foreign interest rates, while demand and supply shocks result in increased foreign interest rates. Our results support that central banks respond to changes in the domestic macroeconomic environment induced by domestic or foreign shocks rather than directly reacting to foreign shocks. Spillovers are quantitatively stronger for shocks originating in economically large areas with strong trade linkages.
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Social Capital and Regional Innovation: Evidence from Private Firms in the US
Iftekhar Hasan, Nada Kobeissi, Bo Wang, Haizhi Wang, Desheng Yin
Regional Studies,
Nr. 1,
2023
Abstract
In this study we investigate whether and to what extent social capital may affect regional innovation by focusing on private firms in the United States. We document that regional social capital is positively associated with the quantity, quality and novelty of county-level innovation by private firms. In addition, we find that the positive relation between social capital and regional innovation is more prominent in counties with a lower supply of financial capital. We also report that social capital is complementary to investments in research and development to produce inventive outcomes in local areas. Using a spatial Durbin model, we provide evidence that regional social capital has significant spillover effects in boosting the innovation activities of neighbouring counties.
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Financial Linkages and Sectoral Business Cycle Synchronization: Evidence from Europe
Hannes Böhm, Julia Schaumburg, Lena Tonzer
IMF Economic Review,
December
2022
Abstract
We analyze whether financial integration leads to converging or diverging business cycles using a dynamic spatial model. Our model allows for contemporaneous spillovers of shocks to GDP growth between countries that are financially integrated and delivers a scalar measure of the spillover intensity at each point in time. For a financial network of ten European countries from 1996 to 2017, we find that the spillover effects are positive on average and much larger during periods of financial stress, pointing towards stronger business cycle synchronization. Dismantling GDP growth into value added growth of ten major industries, we observe that spillover intensities vary significantly. The findings are robust to a variety of alternative model specifications.
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Bank Failures, Local Business Dynamics, and Government Policy
Salvador Contreras, Manthos D. Delis, Amit Ghosh, Iftekhar Hasan
Small Business Economics,
Nr. 4,
2022
Abstract
Using MSA-level data over 1994–2014, we study the effect of bank failures on local business dynamics, in the form of net business formation and net job creation. We find that at least one bank failure in the metropolitan statistical area (MSA) with the mean population prevents approximately 475 net businesses from forming in that area, compared with MSAs that experience no bank failures, ceteris paribus. The equivalent effect on net job creation is 16,433 net job losses. Our results are even stronger for small businesses, which are usually more dependent on bank-firm relationships. These effects point to significant welfare losses stemming from bank failures, highlighting an important role for government intervention. We show that the Troubled Asset Relief Program (TARP) is effective in reducing the negative effects of bank failures on local business dynamics. This positive effect of TARP is quite uniform across small and large firms.
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IWH-Insolvenzforschung
IWH-Insolvenzforschung Die IWH-Insolvenzforschungsstelle bündelt die...
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IWH-Mittelfristprojektion Nach der Mittelfristprojektion des IWH wird das Wirtschaftswachstum in den kommenden sechs...
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IWH-FDI-Mikrodatenbank
IWH-FDI-Mikrodatenbank Die IWH-FDI-Mikrodatenbank (FDI = Foreign Direct Investment)...
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Financial Technologies and the Effectiveness of Monetary Policy Transmission
Iftekhar Hasan, Boreum Kwak, Xiang Li
IWH Discussion Papers,
Nr. 26,
2020
Abstract
This study investigates whether and how financial technologies (FinTech) influence the effectiveness of monetary policy transmission. We use an interacted panel vector autoregression model to explore how the effects of monetary policy shocks change with regional-level FinTech adoption. Results indicate that FinTech adoption generally mitigates monetary policy transmission to real GDP, consumer prices, bank loans, and housing prices, with the weakened transmission to bank loan growth being the most pronounced. The regulatory arbitrage and competition between FinTech and banks are the possible mechanisms underlying the mitigated transmission.
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Employment Effects of Introducing a Minimum Wage: The Case of Germany
Oliver Holtemöller, Felix Pohle
Economic Modelling,
July
2020
Abstract
Income inequality has been a major concern of economic policy makers for several years. Can minimum wages help to mitigate inequality? In 2015, the German government introduced a nationwide statutory minimum wage to reduce income inequality by improving the labour income of low-wage employees. However, the employment effects of wage increases depend on time and region specific conditions and, hence, they cannot be known in advance. Because negative employment effects may offset the income gains for low-wage employees, it is important to evaluate minimum-wage policies empirically. We estimate the employment effects of the German minimum-wage introduction using panel regressions on the state-industry-level. We find a robust negative effect of the minimum wage on marginal and a robust positive effect on regular employment. In terms of the number of jobs, our results imply a negative overall effect. Hence, low-wage employees who are still employed are better off at the expense of those who have lost their jobs due to the minimum wage.
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