Career Experience, Political Effects, and Voting Behavior in the Riksbank’s Monetary Policy Committee
Stefan Eichler, Tom Lähner
Economics Letters,
June
2017
Abstract
We find that career experience shapes the voting behavior of the Riksbank’s Monetary Policy Committee (MPC) members. Members with a career in the Riksbank and the government prefer higher rates. During a legislation with a center-right (center-left) party administration, MPC members with a career background in the government favor higher (lower) interest rates. Highlights: • The determinants of voting behavior in the Swedish Riksbank are considered. • Voting is analyzed with random effects ordered logit models for 1999–2013. • Interplay of career experience and political factors shapes voting behavior. • Government or Riksbank background leads to higher interest rate votes. • Partisan voting behavior is detected for members with government background.
Artikel Lesen
Do Conventional Monetary Policy Instruments Matter in Unconventional Times?
Manuel Buchholz, Kirsten Schmidt, Lena Tonzer
Abstract
This paper investigates how declines in the deposit facility rate set by the European Central Bank (ECB) affect bank behavior. The ECB aims to reduce banks’ incentives to hold reserves at the central bank and thus to encourage loan supply. However, given depressed margins in a low interest environment, banks might reallocate their liquidity toward more profitable liquid assets other than traditional loans. Our analysis is based on a sample of euro area banks for the period from 2009 to 2014. Three key findings arise. First, banks reduce their reserve holdings following declines in the deposit facility rate. Second, this effect is heterogeneous across banks depending on their business model. Banks with a more interest-sensitive business model are more responsive to changes in the deposit facility rate. Third, there is evidence of a reallocation of liquidity toward loans but not toward other liquid assets. This result is most pronounced for non-GIIPS countries of the euro area.
Artikel Lesen
International Banking and Cross-border Effects of Regulation: Lessons from Germany
Jana Ohls, Markus Pramor, Lena Tonzer
International Journal of Central Banking,
Supplement 1, March
2017
Abstract
We analyze the inward and outward transmission of regulatory changes through German banks’ (international) loan portfolio. Overall, our results provide evidence for international spillovers of prudential instruments. These spillovers are, however, quite heterogeneous between types of banks and can only be observed for some instruments. For instance, domestic affiliates of foreign-owned global banks reduce their loan growth to the German economy in response to a tightening of sector-specific capital buffers, local reserve requirements, and loan-to-value ratios in their home country. Furthermore, from the point of view of foreign countries, tightening reserve requirements is effective in reducing lending inflows from German banks. Finally, we find that business and financial cycles matter for lending decisions.
Artikel Lesen
Banks Credit and Productivity Growth
Fadi Hassan, Filippo di Mauro, Gianmarco Ottaviano
ECB Working Paper,
Nr. 2008,
2017
Abstract
Financial institutions are key to allocate capital to its most productive uses. In order to examine the relationship between productivity and bank credit in the context of different financial market set-ups, we introduce a model of overlapping generations of entrepreneurs under complete and incomplete credit markets. Then, we exploit firm-level data for France, Germany and Italy to explore the relation between bank credit and productivity following the main derivations of the model. We estimate an extended set of elasticities of bank credit with respect to a series of productivity measures of firms. We focus not only on the elasticity between bank credit and productivity during the same year, but also on the elasticity between credit and future realised productivity. Our estimates show a clear Eurozone core-periphery divide, the elasticities between credit and productivity estimated in France and Germany are consistent with complete markets, whereas in Italy they are consistent with incomplete markets. The implication is that in Italy firms turn to be constrained in their long-term investments and bank credit is allocated less efficiently than in France and Germany. Hence capital misallocation by banks can be a key driver of the long-standing slow productivity growth that characterises Italy and other periphery countries.
Artikel Lesen
International Banking and Cross-border Effects of Regulation: Lessons from Germany
Jana Ohls, Markus Pramor, Lena Tonzer
Abstract
We analyze the inward and outward transmission of regulatory changes through German banks’ (international) loan portfolio. Overall, our results provide evidence for international spillovers of prudential instruments, these spillovers are however quite heterogeneous between types of banks and can only be observed for some instruments. For instance, foreign banks located in Germany reduce their loan growth to the German economy in response to a tightening of sector-specific capital buffers, local reserve requirements and loan to value ratios in their home country. Furthermore, from the point of view of foreign countries, tightening reserve requirements was effective in reducing lending inflows from German banks. Finally, we find that business and financial cycles matter for lending decisions.
Artikel Lesen
Monetary-fiscal Policy Interaction and Fiscal Inflation: A Tale of Three Countries
Martin Kliem, Alexander Kriwoluzky, Samad Sarferaz
European Economic Review,
2016
Abstract
We study the impact of the interaction between fiscal and monetary policy on the low-frequency relationship between the fiscal stance and inflation using cross-country data from 1965 to 1999. In a first step, we contrast the monetary–fiscal narrative for Germany, the U.S., and Italy with evidence obtained from simple regression models and a time-varying VAR. We find that the low-frequency relationship between the fiscal stance and inflation is low during periods of an independent central bank and responsible fiscal policy and more pronounced in times of non-responsible fiscal policy and accommodative monetary authorities. In a second step, we use an estimated DSGE model to interpret the low-frequency measure structurally and to illustrate the mechanisms through which fiscal actions affect inflation in the long run. The findings from the DSGE model suggest that switches in the monetary–fiscal policy interaction and accompanying variations in the propagation of structural shocks can well account for changes in the low-frequency relationship between the fiscal stance and inflation.
Artikel Lesen
Lend Global, Fund Local? Price and Funding Cost Margins in Multinational Banking
Rients Galema, Michael Koetter, C. Liesegang
Review of Finance,
Nr. 5,
2016
Abstract
In a proposed model of a multinational bank, interest margins determine local lending by foreign affiliates and the internal funding by parent banks. We exploit detailed parent-affiliate-level data of all German banks to empirically test our theoretical predictions in pre-crisis times. Local lending by affiliates depends negatively on price margins, the difference between lending and deposit rates in foreign markets. The effect of funding cost margins, the gap between local deposit rates faced by affiliates abroad and the funding costs of their parents, on internal capital market funding is positive but statistically weak. Interest margins are central to explain the interaction between internal capital markets and foreign affiliates lending.
Artikel Lesen
Unemployment and Business Cycles
Lawrence J. Christiano, Martin S. Eichenbaum, Mathias Trabandt
Econometrica,
Nr. 4,
2016
Abstract
We develop and estimate a general equilibrium search and matching model that accounts for key business cycle properties of macroeconomic aggregates, including labor market variables. In sharp contrast to leading New Keynesian models, we do not impose wage inertia. Instead we derive wage inertia from our specification of how firms and workers negotiate wages. Our model outperforms a variant of the standard New Keynesian Calvo sticky wage model. According to our estimated model, there is a critical interaction between the degree of price stickiness, monetary policy, and the duration of an increase in unemployment benefits.
Artikel Lesen
Taxation, Corruption, and Growth
Philippe Aghion, Ufuk Akcigit, Julia Cagé, William R. Kerr
European Economic Review,
2016
Abstract
We build an endogenous growth model to analyze the relationships between taxation, corruption, and economic growth. Entrepreneurs lie at the center of the model and face disincentive effects from taxation but acquire positive benefits from public infrastructure. Political corruption governs the efficiency with which tax revenues are translated into infrastructure. The model predicts an inverted-U relationship between taxation and growth, with corruption reducing the optimal taxation level. We find evidence consistent with these predictions and the entrepreneurial channel using data from the Longitudinal Business Database of the US Census Bureau. The marginal effect of taxation for growth for a state at the 10th or 25th percentile of corruption is significantly positive; on the other hand, the marginal effects of taxation for growth for a state at the 90th percentile of corruption are much lower across the board. We make progress towards causality through Granger-style tests and by considering periphery counties where effective tax policy is largely driven by bordering states. Finally, we calibrate our model and find that the calibrated taxation rate of 37% is fairly close to the model׳s estimated welfare maximizing taxation rate of 42%. Reducing corruption provides the largest potential impact for welfare gain through its impact on the uses of tax revenues.
Artikel Lesen
