Banks Fearing the Drought? Liquidity Hoarding as a Response to Idiosyncratic Interbank Funding Dry-ups
Helge Littke, Matias Ossandon Busch
IWH Discussion Papers,
Nr. 12,
2018
Abstract
Since the global financial crisis, economic literature has highlighted banks’ inclination to bolster up their liquid asset positions once the aggregate interbank funding market experiences a dry-up. To this regard, we show that liquidity hoarding and its detrimental effects on credit can also be triggered by idiosyncratic, i.e. bankspecific, interbank funding shocks with implications for monetary policy. Combining a unique data set of the Brazilian banking sector with a novel identification strategy enables us to overcome previous limitations for studying this phenomenon as a bankspecific event. This strategy further helps us to analyse how disruptions in the bank headquarters’ interbank market can lead to liquidity and lending adjustments at the regional bank branch level. From the perspective of the policy maker, understanding this market-to-market spillover effect is important as local bank branch markets are characterised by market concentration and relationship lending.
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What Type of Finance Matters for Growth? Bayesian Model Averaging Evidence
Iftekhar Hasan, Roman Horvath, Jan Mares
World Bank Economic Review,
Nr. 2,
2018
Abstract
We examine the effect of finance on long-term economic growth using Bayesian model averaging to address model uncertainty in cross-country growth regressions. The literature largely focuses on financial indicators that assess the financial depth of banks and stock markets. We examine these indicators jointly with newly developed indicators that assess the stability and efficiency of financial markets. Once we subject the finance-growth regressions to model uncertainty, our results suggest that commonly used indicators of financial development are not robustly related to long-term growth. However, the findings from our global sample indicate that one newly developed indicator—the efficiency of financial intermediaries—is robustly related to long-term growth.
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Public Investment Subsidies and Firm Performance – Evidence from Germany
Matthias Brachert, Eva Dettmann, Mirko Titze
Jahrbücher für Nationalökonomie und Statistik,
Nr. 2,
2018
Abstract
This paper assesses firm-level effects of the single largest investment subsidy programme in Germany. The analysis considers grants allocated to firms in East German regions over the period 2007 to 2013 under the regional policy scheme Joint Task ‘Improving Regional Economic Structures’ (GRW). We apply a coarsened exact matching (CEM) in combination with a fixed effects difference-in-differences (FEDiD) estimator to identify the effects of programme participation on the treated firms. For the assessment, we use administrative data from the Federal Statistical Office and the Offices of the Länder to demonstrate that this administrative database offers a huge potential for evidence-based policy advice. The results suggest that investment subsidies have a positive impact on different dimensions of firm development, but do not affect overall firm competitiveness. We find positive short- and medium-run effects on firm employment. The effects on firm turnover remain significant and positive only in the medium-run. Gross fixed capital formation responses positively to GRW funding only during the mean implementation period of the projects but becomes insignificant afterwards. Finally, the effect of GRW-funding on labour productivity remains insignificant throughout the whole period of analysis.
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Early-Stage Business Formation: An Analysis of Applications for Employer Identification Numbers
Kimberly Bayard, Emin Dinlersoz, Timothy Dunne, John Haltiwanger, Javier Miranda, John Stevens
NBER Working Paper,
Nr. 24364,
2018
Abstract
This paper reports on the development and analysis of a newly constructed dataset on the early stages of business formation. The data are based on applications for Employer Identification Numbers (EINs) submitted in the United States, known as IRS Form SS-4 filings. The goal of the research is to develop high-frequency indicators of business formation at the national, state, and local levels. The analysis indicates that EIN applications provide forward-looking and very timely information on business formation. The signal of business formation provided by counts of applications is improved by using the characteristics of the applications to model the likelihood that applicants become employer businesses. The results also suggest that EIN applications are related to economic activity at the local level. For example, application activity is higher in counties that experienced higher employment growth since the end of the Great Recession, and application counts grew more rapidly in counties engaged in shale oil and gas extraction. Finally, the paper provides a description of new public-use dataset, the “Business Formation Statistics (BFS),” that contains new data series on business applications and formation. The initial release of the BFS shows that the number of business applications in the 3rd quarter of 2017 that have relatively high likelihood of becoming job creators is still far below pre-Great Recession levels.
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Does Administrative Status Matter for Urban Growth? – Evidence from Present and Former County Capitals in East Germany
Bastian Heider, Martin T. W. Rosenfeld, Albrecht Kauffmann
Growth and Change,
Nr. 1,
2018
Abstract
Public sector activities are often neglected in the economic approaches used to analyze the driving forces behind urban growth. The institutional status of a regional capital is a crucial aspect of public sector activities. This paper reports on a quasi-natural experiment on county towns in East Germany. Since 1990, cities in East Germany have demonstrated remarkable differences in population development. During this same period, many towns have lost their status as a county seat due to several administrative reforms. Using a difference-in-difference approach, the annual population development of former county capitals is compared to population change in towns that have successfully held on to their capital status throughout the observed period. The estimations show that maintaining county capital status has a statistically significant positive effect on annual changes in population. This effect is furthermore increasing over time after the implementation of the respective reforms.
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Who Benefits from GRW? Heterogeneous Employment Effects of Investment Subsidies in Saxony Anhalt
Eva Dettmann, Mirko Titze, Antje Weyh
IWH Discussion Papers,
Nr. 27,
2017
Abstract
The paper estimates the plant level employment effects of investment subsidies in one of the most strongly subsidized German Federal States. We analyze the treated plants as a whole, as well as the influence of heterogeneity in plant characteristics and the economic environment. Modifying the standard matching and difference-in-difference approach, we develop a new procedure that is particularly useful for the evaluation of funding programs with individual treatment phases within the funding period. Our data base combines treatment, employment and regional information from different sources. So, we can relate the absolute effects to the amount of the subsidy paid. The results suggest that investment subsidies have a positive influence on the employment development in absolute and standardized figures – with considerable effect heterogeneity.
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Non-linearity in the Finance-Growth Nexus: Evidence from Indonesia
Nuruzzaman Arsyad, Iftekhar Hasan, Wahyoe Soedarmono
International Economics,
August
2017
Abstract
This paper investigates the finance-growth nexus where bank credit is decomposed into investment, consumption, and working capital credit. From a panel dataset of provinces in Indonesia, it documents that higher financial development measured by financial deepening and financial intermediation exhibits an inverted U-shaped relationship with economic growth. This non-linear effect of financial deepening is driven by both investment credit and consumption credit. These results suggest that too much investment credit and, to a lesser extent, consumption credit are detrimental to economic growth. Ultimately, only financial intermediation associated with working capital credit has a positive and monotonic impact on economic growth.
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From World Factory to World Investor: The New Way of China Integrating into the World
Bijun Wang, Xiang Li
China Economic Journal,
Nr. 2,
2017
Abstract
This paper argues that outward direct investment (ODI) is replacing international trade as the new way China integrates into the world. Based on two complementary datasets, we document the pattern of Chinese ODI. We argue that the rapid growth of China’s ODI is the result of strong economic development, increasing domestic constraints, and supportive government policies. Compared with trade integration, investment integration involves China more deeply in global business. As a new global investor, China’s ODI in the future is full of opportunities, risks, and challenges. The Chinese government should improve bureaucracy coordination and participate more in designing and maintaining international rules to protect ODI interests.
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The Effects of Local Elections on National Military Spending: A Cross-country Study
Liuchun Deng, Yufeng Sun
Defence and Peace Economics,
Nr. 3,
2017
Abstract
In this paper, we study the domestic political determinants of military spending. Our conceptual framework suggests that power distribution over local and central governments influences the government provision of national public goods, in our context, military expenditure. Drawing on a large cross-country panel, we demonstrate that having local elections will decrease a country’s military expenditure markedly, controlling for other political and economic variables. According to our preferred estimates, a country’s military expenditure is on average 20% lower if its state government officials are locally elected, which is consistent with our theoretical prediction.
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Banking Globalization, Local Lending, and Labor Market Effects: Micro-level Evidence from Brazil
Felix Noth, Matias Ossandon Busch
Abstract
This paper estimates the effect of a foreign funding shock to banks in Brazil after the collapse of Lehman Brothers in September 2008. Our robust results show that bank-specific shocks to Brazilian parent banks negatively affected lending by their individual branches and trigger real economic consequences in Brazilian municipalities: More affected regions face restrictions in aggregated credit and show weaker labor market performance in the aftermath which documents the transmission mechanism of the global financial crisis to local labor markets in emerging countries. The results represent relevant information for regulators concerned with the real effects of cross-border liquidity shocks.
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