Professor Dr. Makram El-Shagi

Professor Dr. Makram El-Shagi
Aktuelle Position

seit 1/15


Leibniz-Institut für Wirtschaftsforschung Halle (IWH)

seit 8/14


Henan University, School of Economics, China


  • Finanzmarktstabilität bzw. - instabilität: Regulierung und realwirtschaftliche Folgen
  • Währungs- und Geldpolitik

Makram El-Shagi ist seit Januar 2015 Forschungsprofessor am IWH. Seine Forschungsschwerpunkte liegen im Bereich monetäre Makroökonomik, internationale Makroökonomik und Ökonometrie.

Makram El-Shagi ist Professor an der Henan University in China und Leiter des "Center for Financial Development and Stability". Zuvor war er Gastprofessor an der California State University, Long Beach sowie wissenschaftlicher Mitarbeiter am IWH.

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Professor Dr. Makram El-Shagi
Professor Dr. Makram El-Shagi
Mitglied - Abteilung Makroökonomik
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Trade Effects of Silver Price Fluctuations in 19th-Century China: A Macro Approach

Makram El-Shagi Lin Zhang

in: China Economic Journal, 2020


We assess the role of silver price fluctuations in Chinese trade and GDP during the late Qing dynasty, when China still had a bimetallic (silver/copper) monetary system, in which silver was mostly used for international trade. Using a structural VAR (SVAR) with blockwise recursive identification, we identify the impact of silver price shocks on the Chinese economy from 1867, when trade data became available, to 1910, one year before the Qing dynasty collapsed. We find that silver price shocks had a sizable impact on both imports and exports but only a very minor effect on the trade balance, only a marginal impact on growth, and almost no effect on domestic prices. Stronger effects were partly mitigated by inelastic export quantities. Generally, the effect of silver price shocks, while considerable, was only short-lived, displaying no persistence in either direction. We find that the bimetallic system in Qing China might have mitigated a potential positive effect of silver depreciation but did not reverse the effect, which – contrary to claims made in the previous literature – was responsible for neither the worsening trade balance nor the inflation and the quickly increasing imports that occurred during our sample period.

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The Joint Dynamics of Sovereign Ratings and Government Bond Yields

Makram El-Shagi Gregor von Schweinitz

in: Journal of Banking & Finance, 2018


Can a negative shock to sovereign ratings invoke a vicious cycle of increasing government bond yields and further downgrades, ultimately pushing a country toward default? The narratives of public and political discussions, as well as of some widely cited papers, suggest this possibility. In this paper, we will investigate the possible existence of such a vicious cycle. We find no evidence of a bad long-run equilibrium and cannot confirm a feedback loop leading into default as a transitory state for all but the very worst ratings. We use a bivariate semiparametric dynamic panel model to reproduce the joint dynamics of sovereign ratings and government bond yields. The individual equations resemble Pesaran-type cointegration models, which allow for valid interference regardless of whether the employed variables display unit-root behavior. To incorporate most of the empirical features previously documented (separately) in the literature, we allow for different long-run relationships in both equations, nonlinearities in the level effects of ratings, and asymmetric effects in changes of ratings and yields. Our finding of a single good equilibrium implies the slow convergence of ratings and yields toward this equilibrium. However, the persistence of ratings is sufficiently high that a rating shock can have substantial costs if it occurs at a highly speculative rating or lower. Rating shocks that drive the rating below this threshold can increase the interest rate sharply, and for a long time. Yet, simulation studies based on our estimations show that it is highly improbable that rating agencies can be made responsible for the most dramatic spikes in interest rates.

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Qual VAR Revisited: Good Forecast, Bad Story

Makram El-Shagi Gregor von Schweinitz

in: Journal of Applied Economics, Nr. 2, 2016


Due to the recent financial crisis, the interest in econometric models that allow to incorporate binary variables (such as the occurrence of a crisis) experienced a huge surge. This paper evaluates the performance of the Qual VAR, originally proposed by Dueker (2005). The Qual VAR is a VAR model including a latent variable that governs the behavior of an observable binary variable. While we find that the Qual VAR performs reasonable well in forecasting (outperforming a probit benchmark), there are substantial identification problems even in a simple VAR specification. Typically, identification in economic applications is far more difficult than in our simple benchmark. Therefore, when the economic interpretation of the dynamic behavior of the latent variable and the chain of causality matter, use of the Qual VAR is inadvisable.

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Why They Keep Missing: An Empirical Investigation of Rational Inattention of Rating Agencies

Gregor von Schweinitz Makram El-Shagi

in: IWH-Diskussionspapiere, Nr. 1, 2017


Sovereign ratings have frequently failed to predict crises. However, the literature has focused on explaining rating levels rather than the timing of rating announcements. We fill this gap by explicitly differentiating between a decision to assess a country and the actual rating decision. Thereby, we account for rational inattention of rating agencies that exists due to costs of reassessment. Exploiting information of rating announcements, we show that (i) the proposed differentiation significantly improves estimation; (ii) rating agencies consider many nonfundamental factors in their reassessment decision; (iii) markets only react to ratings providing new information; (iv) developed countries get preferential treatment.

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Much Ado About Nothing: Sovereign Ratings and Government Bond Yields in the OECD

Makram El-Shagi

in: IWH-Diskussionspapiere, Nr. 22, 2016


In this paper, we propose a new method to assess the impact of sovereign ratings on sovereign bond yields. We estimate the impulse response of the interest rate, following a change in the rating. Since ratings are ordinal and moreover extremely persistent, it proves difficult to estimate those impulse response functions using a VAR modeling ratings, yields and other macroeconomic indicators. However, given the highly stochastic nature of the precise timing of ratings, we can treat most rating adjustments as shocks. We thus no longer rely on a VAR for shock identification, making the estimation of the corresponding IRFs well suited for so called local projections – that is estimating impulse response functions through a series of separate direct forecasts over different horizons. Yet, the rare occurrence of ratings makes impulse response functions estimated through that procedure highly sensitive to individual observations, resulting in implausibly volatile impulse responses. We propose an augmentation to restrict jointly estimated local projections in a way that produces economically plausible impulse response functions.

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Regulation, Innovation and Technology Diffusion - Evidence from Building Energy Efficiency Standards in Germany

Makram El-Shagi Claus Michelsen Sebastian Rosenschon

in: Discussionpapers des DIW Berlin, Nr. 1371, 2014


The impact of environmental regulation on technology diffusion and innovations is studied using a unique data set of German residential buildings. We analyze how energy efficiency regulations, in terms of minimum standards, affects energy-use in newly constructed buildings and how it induces innovation in the residential-building industry. The data used consists of a large sample of German apartment houses built between 1950 and 2005. Based on this information, we determine their real energy requirements from energy performance certificates and energy billing information. We develop a new measure for regulation intensity and apply a panel-error-correction regression model to energy requirements of low and high quality housing. Our findings suggest that regulation significantly impacts technology adoption in low quality housing. This, in turn, induces improvements in the high quality segment where innovators respond to market signals.

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