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The corporate governance systems in Europe differ markedly. Economists tend to use stylized models and distinguish between the Anglo-American, the German and the Latinist model.1 In this view, for instance, the Austrian, Dutch, German, and Swiss systems are said to be variations of one model. For lawyers the picture is of course, much more detailed as particular rules may vary even where common principles prevail. Many comparative studies on these differences have been undertaken meanwhile.2 I do not want to add another study but to treat a different question. Are there as a consequence of growing internationalization, globalization of markets and technological change, also tendencies of convergence of our corporate governance systems? My answer will be in two parts. As corporate governance systems are traditionally mainly shaped by legislation, the first part will analyze the influence of the economic and technological change on the rule-setting process itself. How does this process react to the fundamental environmental change? That includes a short analysis of the solution of centralized harmonizing of company law within the EU as well as the question of whether EU-wide competition between national corporate law legislators can be observed or be expected in the future. The second part will then turn to the national level. It deals with actual tendencies of convergence or, more correctly, of approach by the German corporate governance system to the Anglo-American one.
The purpose of the paper is to survey and discuss inflation targeting in the context of monetary policy rules. The paper provides a general conceptual discussion of monetary policy rules, attempts to clarify the essential characteristics of inflation targeting, compares inflation targeting to the other monetary policy rules, and draws some conclusions for the monetary policy of the European system of Central Banks.
No one seems to be neutral about the effects of EMU on the German economy. Roughly speaking, there are two camps: those who see the euro as the advent of a newly open, large, and efficient regime which will lead to improvements in European and in particular in German competitiveness; those who see the euro as a weakening of the German commitment to price stability. From a broader macroeconomic perspective, however, it is clear that EMU is unlikely to cause directly any meaningful change either for the better in Standort Deutschland or for the worse in the German price stability. There is ample evidence that changes in monetary regimes (so long as non leaving hyperinflation) induce little changes in real economic structures such as labor or financial markets. Regional asymmetries of the sorts in the EU do not tend to translate into monetary differences. Most importantly, there is no good reason to believe that the ECB will behave any differently than the Bundesbank.
This paper reviews the factors that will determine the shape of financial markets under EMU. It argues that financial markets will not be unified by the introduction of the euro. National central banks have a vested interest in preserving local idiosyncracies (e.g. the Wechsels in Germany) and they might be allowed to do so by promoting the use of so-called tier two assets under the common monetary policy. Moreover, a host of national regulations (prudential and fiscal) will make assets expressed in euro imperfect substitutes across borders. Prudential control will also continue to be handled differently from country to country. In the long run these national idiosyncracies cannot survive competitive pressures in the euro area. The year 1999 will thus see the beginning of a process of unification of financial markets that will be irresistible in the long run, but might still take some time to complete.
Major differences between national financial systems might make a common monetary policy difficult. As within Europe, Germany and the United Kingdom differ most with respect to their financial systems, the present paper addresses its topic under the assumption that the United Kingdom is already a part of EMU. Employing a comprehensive concept of a financial system, the author shows that there are indeed profound differences between the national financial systems of Germany and the United Kingdom. But he argues that these differences are not likely to create great problems for a common monetary policy. In the context of the present paper, one important difference between the two financial systems refers to the structure of the respective financial sector and, as a consequence, to the strength with which a given monetary policy impulse set by the central bank is passed on to the financial sector. The other important difference refers to the typical relationship between the banks and the business sector in each country which determines to what extent the financial sectors and especially the banks pass on pressure exerted on them by a monetary policy authority to their clients in their national business sector. In Germany, the central bank has a stronger influence on the financial sector than in England, while, for systemic reasons, German banks tend to soften monetary policy pressures on their customers more than British banks do. As far as the transmission of a restrictive monetary policy of the ECB to the real economy is concerned, these two differences tend to offset each other. This is good news for the advocates of a monetary union as it eases the task of the ECB when it comes to determining the strength of its monetary policy measures.
All-over in Europe, unemployment became a growing problem from the mid 1980s to the mid 1990s. Nevertheless, the effects on the economical situation of the unemployed and the whole population are quite different in European countries. In this paper we first give a brief overview over the development of unemployment rates in eight member states of the European Union and over the different reactions to provide the social protection of the unemployed. Therefore we look at the social security expenditures, the level of income replacement for the unemployed and recent social policy reforms concerning them. In the second section of the paper, we examine the development of income distribution and poverty taking different poverty lines into consideration. There is no general pattern neither for the relationship of inequality among the unemployed to the whole economically active population nor for the development from the 80s to the 90s. But one can say that in countries with increasing income inequality also poverty is rising (especially in the UK) and that where inequality among the unemployed is less pronounced the proportions of the poor went down from the mid 80s to the mid 90s (France and Ireland). In nearly all countries the risk of being poor is ernormously high for the unemployed, Denmark is the only exception.
Although the world of banking and finance is becoming more integrated every day, in most aspects the world of financial regulation continues to be narrowly defined by national boundaries. The main players here are still national governments and governmental agencies. And until recently, they tended to follow a policy of shielding their activities from scrutiny by their peers and members of the academic community rather than inviting critical assessments and an exchange of ideas. The turbulence in international financial markets in the 1980s, and its impact on U.S. banks, gave rise to the notion that academics working in the field of banking and financial regulation might be in a position to make a contribution to the improvement of regulation in the United States, and thus ultimately to the stability of the entire financial sector. This provided the impetus for the creation of the “U.S. Shadow Financial Regulatory Committee”. In the meantime, similar shadow committees have been founded in Europe and Japan. The specific problems associated with financial regulation in Europe, as well as the specific features which distinguish the European Shadow Financial Regulatory Committee from its counterparts in the U.S. and Japan, derive from the fact that while Europe has already made substantial progress towards economic and political integration, it is still primarily a collection of distinct nation-states with differing institutional set-ups and political and economic traditions. Therefore, any attempt to work towards a European approach to financial regulation must include an effort to promote the development of a European culture of co-operation in this area, and this is precisely what the European Shadow Financial Regulatory Committee (ESFRC) seeks to do. In this paper, Harald Benink, chairman of the ESFRC, and Reinhard H. Schmidt, one of the two German members, discuss the origin, the objectives and the functioning of the committee and the thrust of its recommendations.
This paper provides a broad empirical examination of the major currencies' roles in international capital markets, with a special emphasis on the first year of the euro. A contribution is made as to how to measure these roles, both for international financing as well as for international investment. The times series collected for these measures allow for the identification of changes in the role of the euro during 1999 compared to the aggregate of euro predecessor currencies, net of intra -euro area assets/liabilities, before stage 3 of EMU. A number of key factors determining the currency distribution of international portfolio investments, such as relative market liquidity and relative risk characteristics of assets, are also examined empirically. It turns out that for almost all important market segments for which data are available, the euro immediately became the second most widely used currency for international financing and investment. For the flow of international bond and note issuance it experienced significant growth in 1999 even slightly overtaking the US dollar in the second half of the year. The euro's international investment role appears more static though, since most of the early external asset supply in euro is actually absorbed by euro area residents.
We present an empirical study focusing on the estimation of a fundamental multi-factor model for a universe of European stocks. Following the approach of the BARRA model, we have adopted a cross-sectional methodology. The proportion of explained variance ranges from 7.3% to 66.3% in the weekly regressions with a mean of 32.9%. For the individual factors we give the percentage of the weeks when they yielded statistically significant influence on stock returns. The best explanatory power – apart from the dominant country factors – was found among the statistical constructs „success“ and „variability in markets“.