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By focusing on the cost conditions at issuance, I find that not only the Covid-19 pandemic effects were different across bonds and firms at different stages, but also that the market composition was significantly affected, collapsing on investment- grade bonds, a segment in which the share of bonds eligible to the ECB corporate programmes strikingly increased from 15% to 40%. At the same time the high-yield segment shrunk to almost disappear at 4%. In addition to a market segmentation along the bond grade and the eligibility to the ECB programmes, another source of risk detected in the pricing mechanism is the weak resilience to pandemic: the premium requested is around 30 basis points and started to be priced only after the early containment actions taken by the national authorities. On the contrary, I do not find evidence supporting an increased risk for corporations headquartered in countries with a reduced fiscal space, nor the existence of a premium in favour of green bonds, which should be the backbone of a possible “green recovery”.
This note argues that the European Central Bank should adjust its strategy in order to consider broader measures of inflation in its policy deliberations and communications. In particular, it points out that a broad measure of domestic goods and services price inflation such as the GDP deflator has increased along with the euro area recovery and the expansion of monetary policy since 2013, while HICP inflation has become more variable and, on average, has declined. Similarly, the cost of owner-occupied housing, which is excluded from the HICP, has risen during this period. Furthermore, it shows that optimal monetary policy at the effective lower bound on nominal interest rates aims to return inflation more slowly to the inflation target from below than in normal times because of uncertainty about the effects and potential side effects of quantitative easing.
The paper examines the importance of international labour standards for ESG reporting. International labour standards exist today for almost all working conditions. There are many reasons why ESG criteria should be based on these standards. This is already happening to some extent. However, the references to international labor standards should be expanded and the existing references deepened.
We study the design features of disclosure regulations that seek to trigger the green transition of the global economy and ask whether such regulatory interventions are likely to bring about sufficient market discipline to achieve socially optimal climate targets.
We categorize the transparency obligations stipulated in green finance regulation as either compelling the standardized disclosure of raw data, or providing quality labels that signal desirable green characteristics of investment products based on a uniform methodology. Both categories of transparency requirements can be imposed at activity, issuer, and portfolio level.
Finance theory and empirical evidence suggest that investors may prefer “green” over “dirty” assets for both financial and non-financial reasons and may thus demand higher returns from environmentally-harmful investment opportunities. However, the market discipline that this negative cost of capital effect exerts on “dirty” issuers is potentially attenuated by countervailing investor interests and does not automatically lead to socially optimal outcomes.
Mandatory disclosure obligations and their (public) enforcement can play an important role in green finance strategies. They prevent an underproduction of the standardized high-quality information that investors need in order to allocate capital according to their preferences. However, the rationale behind regulatory intervention is not equally strong for all categories and all levels of “green” disclosure obligations. Corporate governance problems and other agency conflicts in intermediated investment chains do not represent a categorical impediment for green finance strategies.
However, the many forces that may prevent markets from achieving socially optimal equilibria render disclosure-centered green finance legislation a second best to more direct forms of regulatory intervention like global carbon taxation and emissions trading schemes. Inherently transnational market-based green finance concepts can play a supporting role in sustainable transition, which is particularly important as long as first-best solutions remain politically unavailable.
The US Tax Cuts and Jobs Act (TCJA) led to a drastic reduction in the corporate tax and improved the treatment of C corporations compared to S corporations. We study the differential effect of the TCJA on these types of corporations using key economic variables of US banks, such as the number of employees, average salaries and benefits, profit/loss before taxes, and net income. Our analysis suggests that the TCJA increased the net-of-tax profits of C corporation banks compared to S corporations and, to a lesser extent, their pre-tax profits. At the same time, the reform triggered no significantly differential effect on the employment and average wages.
Many equity markets combine continuous trading and call auctions. Oftentimes designated market makers (DMMs) supply additional liquidity. Whereas prior research has focused on their role in continuous trading, we provide a detailed analysis of their activity in call auctions. Using data from Germany’s Xetra system, we find that DMMs are most active when they can provide the greatest benefits to the market, i.e., in relatively illiquid stocks and at times of elevated volatility. Their trades stabilize prices and they trade profitably.
Die BaFin hat im August 2021 eine Richtlinie für nachhaltige Investmentvermögen vorgelegt. Diese soll regeln, unter welchen Voraussetzungen ein Fonds als „nachhaltig“, „grün“ o.ä. bezeichnet und vermarktet werden darf. Zwar sind aufsichtsrechtliche Maßnahmen, die darauf abzielen, die Qualität von Informationen zu Nachhaltigkeitscharakteristika von Finanzprodukten zu erhöhen, grundsätzlich zu begrüßen. Der Erlass der konsultierten Richtlinie ist jedoch nicht zu befürworten. Im Lichte der einschlägigen unionsrechtlichen Regelwerke und Initiativen ist unklar, welchen informationellen Mehrwert diese rein nationale Maßnahme schaffen soll. Ferner bleibt auf Grundlage des Entwurfs unklar, anhand welcher Maßstäbe die „Nachhaltigkeit“ eines Investmentvermögens beurteilt werden soll, sodass das primäre Regelungsziel einer verbesserten Anlegerinformation nicht erreicht würde.
This paper argues that the key mechanisms protecting retail investors’ financial stake in their portfolio investments are indirect. They do not rely on actions by the investors or by any private actor directly charged with looking after investors’ interests. Rather, they are provided by the ecosystem that investors (are legally forced to) inhabit, as a byproduct of the mostly self-interested, mutually and legally constrained behavior of third parties without a mandate to help the investors (e.g., speculators, activists). This elucidates key rules, resolves the mandatory vs. enabling tension in corporate/securities law, and exposes passive investing’s fragile reliance on others’ trading.
Although the elderly are more vulnerable to COVID-19, the empirical evidence suggests that they do not behave more cautiously in the pandemic than younger individuals. This theoretical model argues that some individuals might not comply with the COVID-19 measures to reassure themselves that they are not vulnerable, and that the incentives for such self-signaling can be stronger for the elderly. The results suggest that communication strategies emphasizing the dangers of COVID-19 could backfire and reduce compliance among the elderly.
In Germany, traffic planning still follows the tradition of modernist urban planning theory from the beginning of the 1930s and car-oriented city planning during the post-war period in West Germany. From a methodological perspective, the prevailing narrative is that traffic can be abstracted and modelled under laboratory conditions (in vitro) as a spatial movement process of individual neutral particles. The use of these laboratory experiments in traffic planning cannot be understood as a neutral application of experimental results, assumed to be true, in a variety of spatial contexts. Rather, it is an active practice of staging traffic according to a particular social interactionist paradigm.
According to this, traffic is staged through interventions in planning authorities as well as the practices of people on the streets. In order to describe these staging conduits, traffic is ontologically thought of as a social order that is continuously reproduced situationally through interactions, following Erving Goffman and Harold Garfinkel. To investigate the staging conduits empirically, an ethnographic-inspired field study was conducted at Willy-Brandt-Platz in Frankfurt am Main in May and June 2020. Through situational mapping and observation of social interactions (in situ), knowledge about the staging of social orders was generated.
These empirical findings are further embedded in debates that discuss traffic not only as a staging but also as an enactment of certain realities. Understanding planning practice as a political enactment, through which realities are not only described but also made, makes it possible for us to think and design alternative realities.
Ziel der vorliegenden Studie war es, herauszufinden, in welcher Weise ein im Sommer 2020 durchgeführter Verkehrsinfrastruktureingriff an einer Hauptverkehrsstraße in Frankfurt zu einer Verbesserung der wahrgenommenen Lebensqualität der Anwohnenden beiträgt. Es wurde geprüft, ob der Wegfall einer Fahrspur für den motorisierten Individualverkehr (MIV) und der gleichzeitige Bau eines Radfahrstreifens einen positiven Effekt auf die Lebensqualität der Anwohnenden hat. Insgesamt wurden 445 Haushalte an der Friedberger Landstraße vor und nach dem Umbau befragt. Die Lebensqualität wurde in Bezug auf das Konfliktpotenzial und Sicherheitsempfinden im Verkehr, die Aufenthaltsqualität sowie den wahrgenommenen Lärm und die Luftqualität vor und nach dem Bau der Fahrradspur erhoben. Es zeigt sich, dass die wahrgenommene Lebensqualität nach dem Eingriff in fast all diesen Bereichen positiver bewertet wurde als vor dem Eingriff. Dies deutet darauf hin, dass die reduzierte Infrastruktur für den MIV und die gleichzeitige Errichtung einer Fahrradspur einen positiven Effekt auf die Lebensqualität der Anwohnenden haben.
Plastikmüll ist ein zentrales Umweltproblem des 21. Jahrhunderts. Ein Großteil dieses Mülls stammt aus lediglich kurzzeitig genutzten Einwegverpackungen. Lebensmittelhersteller und Lebensmittelhandel stehen vor der Herausforderung, eine nachhaltige Gestaltung, Nutzung und Reduktion von Kunststoffverpackungen voranzutreiben. Drei Überlegungen sind hier zentral. Erstens muss der Einsatz von kurzlebigen Einwegverpackungen möglichst vermieden und reduziert werden. Zweitens müssen in den Bereichen, in denen Vermeidung nicht möglich oder ökologisch sinnvoll ist, Materialien nach Nachhaltigkeitskriterien (Ökobilanzen, toxikologische Tests) ausgewählt und Verpackungen dementsprechend gestaltet werden. Drittens müssen Unternehmen Ressourcen für betriebliche Innovation bereitstellen und Veränderungsprozesse möglichst transparent und partizipativ gestalten. Neben technischen Innovationen sollten soziale Innovationen und organisatorische Anpassungen im Mittelpunkt stehen. Dieser Policy Brief bietet eine wissenschaftlich fundierte Grundlage insbesondere für Unternehmen und Verbände in der Lebensmittelversorgung, aber auch für politische Entscheidungsträger*innen sowie Mitarbeitende in
Behörden, die sich diesen Erfordernissen stellen und damit als Pioniere der Nachhaltigkeit zu einer Lösung des Plastikmüllproblems beitragen wollen.
Despite the increasing use of cashless payment instruments, the notion that cash loses importance over time can be unambiguously refuted. In contrast, the authors show that cash demand increased steeply over the past 30 years. This is not only true on a global scale, but also for the most important currencies in advanced countries (USD, EUR, CHF, GBP and JPY). In this paper, they focus especially on the role of different crises (technological crises, financial market crises, natural disasters) and analyse the demand for small and large banknote denominations since the 1990s in an international perspective. It is evident that cash demand always increases in times of crises, independent of the nature of the crisis itself. However, largely unaffected from crises we observe a trend increase in global cash aligned with a shift from transaction balances towards more hoarding, especially in the form of large denomination banknotes.
The salience of ESG ratings for stock pricing: evidence from (potentially) confused investors
(2021)
We exploit the a modification to Sustainanlytics’ environmental, social, and governance (ESG) rating methodology, which is subsequently adopted by Morningstar, to study whether ESG ratings are salient for stock pricing. We show that the inversion of the rating scale but not new information leads some investors to make incorrect assessments about the meaning of the change in ESG ratings. They buy (sell) stocks they misconceive as ESG upgraded (downgraded) even when the opposite is true. This trading behavior exerts transitory price pressure on affected stocks. Our paper highlights the importance of ESG ratings for investors and consequently for asset prices.
The authors present evidence of a new propagation mechanism for wealth inequality, based on differential responses, by education, to greater inequality at the start of economic life. The paper is motivated by a novel positive cross-country relationship between wealth inequality and perceptions of opportunity and fairness, which holds only for the more educated. Using unique administrative micro data and a quasi-field experiment of exogenous allocation of households, the authors find that exposure to a greater top 10% wealth share at the start of economic life in the country leads only the more educated placed in locations with above-median wealth mobility to attain higher wealth levels and position in the cohort-specific wealth distribution later on. Underlying this effect is greater participation in risky financial and real assets and in self-employment, with no evidence for a labor income, unemployment risk, or human capital investment channel. This differential response is robust to controlling for initial exposure to fixed or other time-varying local features, including income inequality, and consistent with self-fulfilling responses of the more educated to perceived opportunities, without evidence of imitation or learning from those at the top.
Historical evidence like the global financial crisis from 2007-09 highlights that sector concentration risk can play an important role for the solvency of insurers. However, current microprudential frameworks like the US RBC framework and Solvency II consider only name concentration risk explicitly in their solvency capital requirements for asset concentration risk and neglect sector concentration risk. We show by means of US insurers’ asset holdings from 2009 to 2018 that substantial sectoral asset concentrations exist in the financial, public and real estate sector, and find indicative evidence for a sectoral search for yield behavior. Based on a theoretical solvency capital allocation scheme, we demonstrate that the current regulatory approaches can lead to inappropriate and biased levels of solvency capital for asset concentration risk, and should be revised. Our findings have also important implications on the ongoing discussion of asset concentration risk in the context of macroprudential insurance regulation.
The merchant language of the Georgian Jews deserves scholarly attention for several reasons. The political and social developments of the last fifty years have caused the extinction of this very interesting form of communication, as most Georgian Jews have emigrated to Israel. In a natural interaction, the type of language described in this article can be found very rarely, if at all. Records of this communication have been preserved in various contexts and received different levels of scholarly attention. Our interest concerns the linguistic aspects as well as the classification.
In the following paper we argue that the specific merchant language of Georgian Jews belongs to the pragmatic phenomenon of “very indirect language.” The use of mostly Hebrew lexemes in Georgian conversation leads to an unfounded assumption that the speakers are equally competent in Hebrew and Georgian. It is reported that a high level of linguistic competence in Hebrew does not guarantee understanding of the Jewish merchant language. In the Georgian context, the decisive factors are membership in the professional interest group of merchants and residential membership in the Jewish community. These factors seem to be equivalent, because Jewish members of other professional groups (and those from outside the particular urban residential area) have difficulties in following the language that are similar to those of the Georgian majority. We describe the pragmatic structure of interactions conducted with the help of the merchant language and take into account the purpose of the language’s use or the intention of the speakers. Relevant linguistic examples are analysed and their sociocultural contexts explained.
Der Beitrag erläutert die Fragestellung, die Kernthesen und den juristischen Erkenntniswert einer „Ontologie des Immaterialgüterrechts“. Ihr Untersuchungsgegenstand ist die Frage, auf welchem Verständnis der Wirklichkeit, genauer: seines Schutzgegenstands, das IP-Recht beruht. Nicht die Seinsweise des Rechts wird analysiert, sondern die hiervon zu unterscheidende Seinsweise einer bestimmten Klasse von Rechtsobjekten, nämlich Immaterialgütern und insbesondere urheberrechtlichen Werken. Die diesbezügliche ontologische und historische Betrachtung ergibt, dass es sich beim abstrakt-unkörperlichen Werk um eine sprachbasierte Konstruktion handelt, die als sozial-institutionelle Tatsache wirkmächtig ist, weil und soweit Menschen seit ca. 200 Jahren so sprechen und denken, als gäbe es unkörperliche Werke – obwohl diese metaphysische Annahme nicht plausibel ist. Der Beitrag erläutert weiter, dass sich das Urheber- und IP-Recht auf der Basis dieser Einsichten und einer alternativen, handlungs- und artefaktbasierten IP-Theorie besser erklären lässt als auf dem Boden des herrschenden Paradigmas vom abstrakten Immaterialgut bzw. Werk. Dies gilt sowohl im Hinblick auf die Dogmatik und Anwendungspraxis des geltenden Rechts als auch im Hinblick auf die ökonomische Analyse und den Rechtsvergleich. Die normativen Implikationen dieser deskriptiven Erkenntnisse sind hingegen begrenzt und richten sich vor allem an die Urheberrechtswissenschaft. Diese sollte tunlichst nicht mehr so reden und argumentieren, als existierten abstrakte Werke, die dem Berechtigten wie Sachen exklusiv zugeordnet sind.
This article provides a novel explanation for the global intellectual property (IP) paradox, i.e. the consistent growth of the multilateral IP system in spite of mounting evidence that its effects are at best neutral if not disadvantageous for low-income and most middleincome countries and thus the majority of contracting states. It demonstrates that the multilateral IP system is deliberately structured as a virtual network that exhibits network effects similar to a social media platform, for example. The more members an IP treaty has, the more IP protection acceding states can secure for their nationals. Conversely, every accession enlarges the territory in which nationals of previous members can enjoy protection. Due to these increasing returns to adoption, signing up to and remaining part of the global IP network is attractive, irrespective of the immediate effects of a treaty.
According to the standard account, IPRs allocate objects to owners, just like ownership allocates real property. In this paper, I explain that this simplistic paradigm operates on the basis of three fictions: The first – truly Polanyian – fiction concerns IP subject matter that was originally not produced for sale but created for other purposes, e.g. private pleasure. The second fiction is that IP is treated as a marketable good whereas much IP, in particular works and signs, are embedded in communication. Finally, IP is a fictitious concept in that we speak of works, inventions, and other IP objects as of tangible commodities, where in fact IP objects only exist insofar and because we speak and regulate as if they exist as abstract “goods” of value.
Das LG Mannheim hat in einer Entscheidung einen sog. Faktencheck auf Facebook für lauterkeitsrechtlich unbedenklich erklärt. Die folgende Urteilsbesprechung zeigt jedoch, dass die Entscheidung weder in der Begründung noch im Ergebnis zu überzeugen vermag. Denn der konkrete Faktencheck ist geeignet, den Wettbewerb zwischen Nachrichtenseiten zu verfälschen.
Tail-correlation matrices are an important tool for aggregating risk measurements across risk categories, asset classes and/or business segments. This paper demonstrates that traditional tail-correlation matrices—which are conventionally assumed to have ones on the diagonal—can lead to substantial biases of the aggregate risk measurement’s sensitivities with respect to risk exposures. Due to these biases, decision-makers receive an odd view of the effects of portfolio changes and may be unable to identify the optimal portfolio from a risk-return perspective. To overcome these issues, we introduce the “sensitivity-implied tail-correlation matrix”. The proposed tail-correlation matrix allows for a simple deterministic risk aggregation approach which reasonably approximates the true aggregate risk measurement according to the complete multivariate risk distribution. Numerical examples demonstrate that our approach is a better basis for portfolio optimization than the Value-at-Risk implied tail-correlation matrix, especially if the calibration portfolio (or current portfolio) deviates from the optimal portfolio.
We conducted a large-scale household survey in November 2020 to study how altering the time frame of a message (temporal framing) regarding an imminent positive income shock affects consumption plans. The income shock derives from the abolishment of the German solidarity surcharge on personal income taxes, effective in January 2021. We randomize across survey participants whether their extra disposable income is presented in Euros per month, Euros per year, or Euros per ten year-period. Our main findings are as follows: In General, we find our respondents’ intended Marginal Propensity to Consume (MPC) is 28.2%. Across all three treatments, the MPC is a positive function of age and being female while it is a negative function of the income increase’s size, self- control, and being unemployed. Temporal framing effects are statistically and economically highly significant as we find the monthly treatment groups’ average MPC 5.6 and 8.7 percentage points higher compared to the yearly and 10-yearly treatment groups. We will be able to analyze the real consumption behavior of households throughout 2021 based on re-surveying the participants as well as by using transaction-based bank data.
Using the pandemic as a laboratory, we show that asset markets assign a time- varying price to firms' disaster risk exposure. In 2020 the cross-section of realized and expected stock returns reflected firms' different exposure to the pandemic, as measured by their vulnerability to social distancing. Realized and expected return differentials initially widened and then narrowed, but disaster exposure still commanded a risk premium in December 2020. When inferred from market outcomes, resilience correlates not only with social distancing, but also with cash and environmental ratings. However, vulnerability to social distancing is the only characteristic that identifies persistently scarred firms.
We empirically examine the Capital Purchase Program (CPP) used by the US gov- ernment to bail out distressed banks with equity infusions during the Great Recession. We find strong evidence that a feature of the CPP – the government’s ability to ap- point independent directors on the board of an assisted bank that missed six dividend payments to the Treasury – helped attenuate bailout-related moral hazard. Banks were averse to these appointments – the empirical distribution of missed payments exhibits a sharp discontinuity at five. Director appointments by the Treasury led to improved bank performance, lower CEO pay, and higher stock market valuations.
This policy white paper shows, using data on European Commission (EC) lobby meetings, that financial institutions and finance trade associations have substantial access to EC policymakers. While lobbying could transfer policy-relevant information and expertise to policymakers, it could also result in the capture of policymakers by the industry, which could harm consumers and taxpayers. How could policymakers prevent regulatory capture, but retain the benefits of the sector expertise in policy decisions? Awareness of regulatory capture by policymakers is one of the most important remedies. This paper provides an overview of the origins of the regulatory capture theory and recent academic evidence. The paper shows that regulatory capture could emerge in a variety of institutions and policy areas but is not ubiquitous and depends on the incentives of policymakers and the policy environment. Subsequently, the paper discusses various measures to prevent regulatory capture, such as more transparency, diverse expert groups, and cooling-off periods.
Target date funds in corporate retirement plans grew from $5B in 2000 to $734B in 2018, partly because federal regulation sanctioned these as default investments in automatic enrollment plans. We show that adopters delegated pension investment decisions to fund managers selected by plan sponsors. Including these funds in retirement saving menus raised equity shares, boosted bond exposures, curtailed cash/company stock holdings, and reduced idiosyncratic risk. The adoption of low-cost target date funds may enhance retirement wealth by as much as 50 percent over a 30-year horizon.
The authors examine the effectiveness of labor cost reductions as a means to stimulate economic activity and assesses the differences which may occur with the prevailing exchange rate regime. They develop a medium-scale three-region DSGE model and show that the impact of a cut in the employers’ social security contributions rate does not vary significantly under different exchange rate regimes. They find that both the interest rate and the exchange rate channel matters. Furthermore, the measure appears to be effective even if it comes along with a consumption tax increase to preserve long-term fiscal sustainability.
Finally, they assess whether obtained theoretical results hold up empirically by applying the local projection method. Regression results suggest that changes in employers’ social security contributions rates have statistically significant real effects – a one percentage point reduction leads to an average cumulative rise in output of around 1.3 percent in the medium term. Moreover, the outcome does not differ significantly across the different exchange rate regimes.
On the accuracy of linear DSGE solution methods and the consequences for log-normal asset pricing
(2021)
This paper demonstrates a failure of standard, generalized Schur (or QZ) decomposition based solutions methods for linear dynamic stochastic general equilibrium (DSGE) models when there is insufficient eigenvalue separation about the unit circle. The significance of this is demonstrated in a simple production-based asset pricing model with external habit formation. While the exact solution afforded by the simplicity of the model matches post-war US consumption growth and the equity premium, QZ-based numerical solutions miss the later by many annualized percentage points.
Non-standard errors
(2021)
In statistics, samples are drawn from a population in a data-generating process (DGP). Standard errors measure the uncertainty in sample estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence-generating process (EGP). We claim that EGP variation across researchers adds uncertainty: non-standard errors. To study them, we let 164 teams test six hypotheses on the same sample. We find that non-standard errors are sizeable, on par with standard errors. Their size (i) co-varies only weakly with team merits, reproducibility, or peer rating, (ii) declines significantly after peer-feedback, and (iii) is underestimated by participants.
Retail investors pay over twice as much attention to local companies than non-local ones, based on Google searches. News volume and volatility amplify this attention gap. Attention appears causally related to perceived proximity: first, acquisition by a nonlocal company is associated with less attention by locals, and more by nonlocals close to the acquirer; second, COVID-19 travel restrictions correlate with a drop in relative attention to nonlocal companies, especially in locations with fewer fights after the outbreak. Finally, local attention predicts volatility, bid-ask spreads and nonlocal attention, not viceversa. These findings are consistent with local investors having an information-processing advantage.
As 2021 draws to a close, Covid-19 continues to prevail worldwide. With the proverbial return to normalcy still appearing distant, there is now a tacit acceptance globally that at least for the foreseeable future, we must live with Covid-19. Given that Covid-19 is an infectious disease—which by definition is transmitted from person to person—the continued prevalence of Covid-19 has implications for how local authorities, communities, and individuals around the world will approach public spaces. While it may be premature to assume a so-called coronacene (see Higgins et al. 2020), going into the future our use of public spaces will be overshadowed by the possibility, even if remote, of illness or death by virtue of close proximity to other individuals.
Along with parks and squares, streets and avenues, bazaars constitute ubiquitous public spaces, including in countries of the developing world, such as Armenia and Georgia, our countries of discussion here. Although there is not a clear bifurcation between bazaars and other types of marketplaces, bazaars will usually be comprised of a multitude of nonfranchised, self-owned, small businesses that are variously family-run or rely on family labor. They are usually perceived as chaotic places that lack hygiene (the purportedly unhygienic character of the bazaar was brought to the forefront with the pandemic, given how Covid-19’s origin is widely assumed to be a Wuhan wet market).
In Armenia and Georgia, and indeed, across the former Soviet Union, bazaars are a source of employment for the urban and peri-urban population; they also offer goods at price points attractive to a wide demographic. This working paper builds on the premise that the bazaar is an informal institution. Bazaar traders will typically assemble networks by themselves (with manufacturers and wholesalers, buyers and transporters). These networks will usually vary from one business to another. Also, ownership and rent structures are frequently opaque, and the majority of commercial transactions are in cash, which does not appear in state records. As a consequence, for the state, many small businesses do not exist (Fehlings and Karrar 2016, 2020).
For those of us researching bazaar trading, Covid-19 has given rise to a basic question: How have independent businesses been transformed by the pandemic? This working paper is an attempt to parse this question in light of developments in Armenia and Georgia. In this working paper, we suggest that the Covid-19 pandemic has deepened informality in the bazaar. That being said, we want to underscore that the present discussion is exploratory. Our ethnography remains limited, and we look forward to returning to the field as soon as it is safe to do so.
The pricing of an ambiguous asset, whose cash flow stream is uncertain, may be affected by three factors: the belief regarding the realization likelihood of cash flows, the subjective attitude towards risk, and the attitude towards ambiguity. While previous literature looks at the total price discount under ambiguity, this paper investigates with laboratory experiments how much effect each factor can induce. We apply both non-parametric and parametric methods to cleanly separate the belief effects, the risk premiums, and the ambiguity premiums from each other. Both methods lead to similar results: Overall, subjects have substantial ambiguity aversion, and ambiguity premiums account for the largest price deviation component when the degree of ambiguity is high. As information accumulates, ambiguity premiums decrease. We also find that beliefs do influence prices under ambiguity. This is not because beliefs are biased towards either good or bad scenarios per se, but because subjects display sticky belief updating as new information becomes available. The clear separation performed in this paper between belief and attitude also enables a more accurate estimation of the parameter of ambiguity aversion compared to previous studies, since the effect of beliefs is partialled out. Overall, we find empirically that both factors, belief and attitude towards ambiguity, are important factors in pricing under ambiguity.
This paper sets up an experimental asset market in the laboratory to investigate the effects of ambiguity on price formation and trading behavior in financial markets. The obtained trading data is used to analyze the effect of ambiguity on various market outcomes (the price level, volatility, trading activity, market liquidity, and the degree of speculative trading) and to test the quality of popular empirical market-based measures for the degree of ambiguity. We find that ambiguity decreases market prices and trading activity; ambiguity leads to lower market liquidity through wider bid-ask spreads; and ambiguity leads to less speculative trading. We also find that popular market-based measures of ambiguity used in the empirical literature do not seem to correctly capture the true degree of ambiguity.
Central banks normally accept debt of their own governments as collateral in liquidity operations without reservations. This gives rise to a valuable liquidity premium that reduces the cost of government finance. The ECB is an interesting exception in this respect. It relies on external assessments of the creditworthiness of its member states, such as credit ratings, to determine eligibility and the haircut it imposes on such debt. The authors show how such features in a central bank’s collateral framework can give rise to cliff effects and multiple equilibria in bond yields and increase the vulnerability of governments to external shocks. This can potentially induce sovereign debt crises and defaults that would not otherwise arise.
The authors embed human capital-based endogenous growth into a New-Keynesian model with search and matching frictions in the labor market and skill obsolescence from long-term unemployment. The model can account for key features of the Great Recession: a decline in productivity growth, the relative stability of inflation despite a pronounced fall in output (the "missing disinflation puzzle"), and a permanent gap between output and the pre-crisis trend output.
In the model, lower aggregate demand raises unemployment and the training costs associated with skill obsolescence. Lower employment hinders learning-by-doing, which slows down human capital accumulation, feeding back into even fewer vacancies than justified by the demand shock alone. These feedback channels mitigate the disinflationary effect of the demand shock while amplifying its contractionary effect on output. The temporary growth slowdown translates into output hysteresis (permanently lower output and labor productivity).
I measure the effects of workers’ mobility across regions of different productivity through the lens of a search and matching model with heterogeneous workers and firms estimated with administrative data. In an application to Italy, I find that reallocation of workers to the most productive region boosts productivity at the country level but amplifies differentials across regions. Employment rates decline as migrants foster job competition, and inequality between workers doubles in less productive areas since displacement is particularly severe for low-skill workers. Migration does affect mismatch: mobility favors co-location of agents with similar productivity but within-region rank correlation declines in the most productive region. I show that worker-firm complementarities in production account for 33% of the productivity gains. Place-based programs directed to firms, like incentives for hiring unemployed or creating high productivity jobs, raise employment rates and reduce the gaps in productivity across regions. In contrast, subsidies to attract high-skill workers in the South have limited effects.
Life insurance convexity
(2021)
Life insurers massively sell savings contracts with surrender options which allow policyholders to withdraw a guaranteed amount before maturity. These options move toward the money when interest rates rise. Using data on German life insurers, we estimate that a 1 percentage point increase in interest rates raises surrender rates by 17 basis points. We quantify the resulting liquidity risk in a calibrated model of surrender decisions and insurance cash flows. Simulations predict that surrender options can force insurers to sell up to 3% of their assets, depressing asset prices by 90 basis points. The effect is amplified by the duration of insurers' investments, and its impact on the term structure of interest rates depends on life insurers' investment strategy.
This paper documents that the bond investments of insurance companies transmit shocks from insurance markets to the real economy. Liquidity windfalls from household insurance purchases increase insurers’ demand for corporate bonds. Exploiting the fact that insurers persistently invest in a small subset of firms for identification, I show that these increases in bond demand raise bond prices and lower firms’ funding costs. In response, firms issue more bonds, especially when their bond underwriters are well connected with investors. Firms use the proceeds to raise investment rather than equity payouts. The results emphasize the significant impact of investor demand on firms’ financing and investment activities.
We analyze the impact of decreases in available lending resources on quantitative and qualita- tive dimensions of firms’ patenting activities. We thereby make use of the European Banking Authority?s capital exercise to carve out the causal effect of bank lending on firm innovation. In order to do so we combine various datasets to derive information on firms’ financials, their patenting behaviors, as well as their relationships with their lenders. Building on this self- generated dataset, we provide support for the “less finance, less innovation” view. At the same time, we show that lower available financial resources for firms lead to improvement in the qualitative dimensions of their patents. Hence, we carve out a “less finance, less but better innovation” pattern.
We characterize the optimal linear tax on capital in an Overlapping Generations model with two period lived households facing uninsurable idiosyncratic labor income risk. The Ramsey government internalizes the general equilibrium effects of private precautionary saving on factor prices and taxes capital unless the weight on future generations in the social welfare function is sufficiently high. For logarithmic utility a complete analytical solution of the Ramsey problem exhibits an optimal aggregate saving rate that is independent of income risk, whereas the optimal time-invariant tax on capital implementing this saving rate is increasing in income risk. The optimal saving rate is constant along the transition and its sign depends on the magnitude of risk and on the Pareto weight of future generations. If the Ramsey tax rate that maximizes steady state utility is positive, then implementing this tax rate permanently induces a Pareto-improving transition even if the initial equilibrium capital stock is below the golden rule.
The FOMC risk shift
(2021)
We identify a component of monetary policy news that is extracted from high-frequency changes in risky asset prices. These surprises, which we call “risk shifts”, are uncorrelated, and therefore complementary, to risk-free rate surprises. We show that (i) risk shifts capture the lion’s share of stock price movements around FOMC announcements; (ii) that they are accompanied by significant investor fund flows, suggesting that investors react heterogeneously to monetary policy news; and (iii) that price pressure amplifies the stock market response to monetary policy news. Our results imply that central bank information effects are overshadowed by short-term dynamics stemming from investor rebalancing activities and are likely to be more difficult to identify than previously thought.
We raise some critical points against a naïve interpretation of “green finance” products and strategies. These critical insights are the background against which we take a closer look at instruments and policies that might allow green finance to become more impactful. In particular, we focus on the role of a taxonomy and investor activism. We also describe the interaction of government policies with green finance practice – an aspect, which has been mostly neglected in policy debates but needs to be taken into account. Finally, the special case of green government bonds is discussed.
We raise some critical points against a naïve interpretation of “green finance” products and strategies. These critical insights are the background against which we take a closer look at instruments and policies that might allow green finance to become more impactful. In particular, we focus on the role of a taxonomy and investor activism. We also describe the interaction of government policies with green finance practice – an aspect, which has been mostly neglected in policy debates but needs to be taken into account. Finally, the special case of green government bonds is discussed.
The Sustainable Urban Mobility Plan (SUMP) is a concept of the European Union. The non-binding guidelines formulated within this framework aim to help municipalities and cities to strategically define a local and long term transport and mobility plan. From the European Union's point of view, citizen participation plays a pivotal role during all phases – from the development of the plan until its implementation. This intends to achieve greater support and acceptance from the community for the plan, and to facilitate its implementation.
This paper investigates whether the planning and political SUMP approach guarantees successful participatory processes, and what conclusions can be drawn to amend the SUMP process and general transport planning practice. It discusses how citizen participation is defined in the SUMP guidelines and how these elements are reflected in the SUMP guidelines of 2013 and 2019. In a second step, this paper shows how successful citizen participation is defined in an academic context and to what extent the SUMP reflects these findings. The findings derived from the academic context are then applied to the case studies of Ghent and Limburg in order to evaluate how successfully participation procedures were implemented in these SUMP processes. Finally, the question - what conclusions can be drawn from this to improve the SUMP process and general transport planning practice - is assessed.
Rising temperatures, falling ratings: the effect of climate change on sovereign creditworthiness
(2021)
How will a changing climate impact the creditworthiness of governments over the very long term? Financial markets need credible, digestible information on how climate change translates into material risks. To bridge the gap between climate science and real-world financial indicators, the authors simulate the effect of climate change on sovereign credit ratings for 108 countries, creating the world’s first climate-adjusted sovereign credit rating. The study offers a first methodological approach to extend the long-term rating to an ultra-long-term reality, aiming at long-term investors, but also regulators and rating agencies.
Seit dem 1. Januar 2018 erhalten alle aktiven Beamt*innen, Richter*innen, Tarifbeschäftigte und Auszubildende des Landes Hessen eine Freifahrtberechtigung, sodass sie den öffentlichen Personennah- und Regionalverkehr im gesamten Bundesland kostenlos nutzen können. Diese Umstellung stellt den Anlass für die Fallstudie dar, die die Auswirkungen der Einführung eines solchen Tickets am Beispiel der Beschäftigten der Goethe-Universität Frankfurt untersucht. Im Frühjahr 2019 wurde eine quantitative Online-Befragung an der Goethe-Universität durchgeführt (n=1686). Als Grundlage und Vergleichsdatensatz diente eine Studie, die im Jahr 2015 an der Goethe-Universität durchgeführt worden ist.
Ziel der Befragung war es, Informationen über die Verkehrsmittelnutzung sowie die Einstellungen zu unterschiedlichen Mobilitätsangeboten zu erhalten. Der Schwerpunkt der Befragung lag dabei auf der Nutzung des hessischen Landestickets, sodass die Forschungsfrage untersucht wurde, welche mobilitätsbezogenen Verhaltensänderungen das hessische Landesticket hervorruft. Im Vergleich der Befragungen unter den Beschäftigten der Goethe-Universität 2015 und 2019 lässt sich in der Studie von 2019, ein Jahr nach der Einführung des hessischen Landestickets, ein signifikanter Anstieg der regelmäßigen Nutzung des öffentlichen Verkehrs erkennen. Im Hinblick auf eine erhoffte Verkehrswende weg von motorisiertem Individualverkehr hin zu ökologisch freundlicherem, öffentlichem Personennahverkehr lassen sich aus diesem Ergebnis politische Implikationen ableiten.
Die Lincoln-Siedlung, eine ehemalige Housing Area der US-Army im Süden von Darmstadt, wird seit dem amerikanischen Truppenabzug im Jahr 2008 als autoreduziertes Wohnquartier entwickelt. Der Autobesitz der Bewohner*innen wird über eine zentrale Stellplatzvergabe mit einem Stellplatzschlüssel von 0,65 Parkplätzen pro Wohneinheit reglementiert. Gleichzeitig stehen zahlreiche Alternativen, wie eine verbesserte Fuß- und Radverkehrsinfrastruktur, eine eng getaktete ÖPNV-Verbindung in die Innenstadt, mehrere (teils vergünstigte) Carsharing- und Fahrradverleihangebote sowie eine Mobilitätsberatung zur Verfügung. Die vorliegende Studie stützt sich auf eine quantitative Haushaltsbefragung (N = 166), evaluiert die genannten Elemente alternativer Mobilität aus Bewohner*innensicht und untersucht die umzugsbedingten Veränderungen im Mobilitätsverhalten der Bewohner*innen. Diese befürworten die Maßnahmen grundsätzlich, bezweifeln jedoch teilweise deren Wirksamkeit, etwa hinsichtlich der Minderung von Verkehrsaufkommen und Schadstoffbelastung. Im Hinblick auf das Mobilitätsverhalten zeigen die Daten eine signifikante Verringerung von Besitz und Nutzung privater Pkw im Vergleich zum Zeitraum vor dem Umzug in die Lincoln-Siedlung. Die Nutzung von Carsharing-Angeboten sowie Bus und Bahn ist hingegen signifikant angewachsen. Diese Veränderungen sind hinsichtlich der überwiegend kurzen Wohndauer der befragten Personen sowie der andauernden Quartiersentwicklung bemerkenswert. Als künftige Maßnahmen konnten bessere Informationen über das Gesamtkonzept und die einzelnen Mobilitätsangebote sowie die Kommunikation von Visionen der fertiggestellten Siedlung identifiziert werden.
Predictions of oil prices reaching $100 per barrel during the winter of 2021/22 have raised fears of persistently high inflation and rising inflation expectations for years to come. We show that these concerns have been overstated. A $100 oil scenario of the type discussed by many observers, would only briefly raise monthly headline inflation, before fading rather quickly. However, the short-run effects on headline inflation would be sizable. For example, on a yearover- year basis, headline PCE inflation would increase by 1.8 percentage points at the end of 2021 under this scenario, and by 0.4 percentage points at the end of 2022. In contrast, the impact on measures of core inflation such as trimmed mean PCE inflation is only 0.4 and 0.3 percentage points in 2021 and 2022, respectively. These estimates already account for any increases in inflation expectations under the scenario. The peak response of the 1-year household inflation expectation would be 1.2 percentage points, while that of the 5-year expectation would be 0.2 percentage points.
Since the 1970s, exports and imports of manufactured goods have been the engine of international trade and much of that trade relies on container shipping. This paper introduces a new monthly index of the volume of container trade to and from North America. Incorporating this index into a structural macroeconomic VAR model facilitates the identification of shocks to domestic U.S. demand as well as foreign demand for U.S. manufactured goods. We show that, unlike in the Great Recession, the primary determinant of the U.S. economic contraction in early 2020 was a sharp drop in domestic demand. Although detrended data for personal consumption expenditures and manufacturing output suggest that the U.S. economy has recovered to near 90% of pre-pandemic levels as of March 2021, our structural VAR model shows that the component of manufacturing output driven by domestic demand had only recovered to 59% of pre-pandemic levels and that of real personal consumption only to 76%. The difference is mainly accounted for by unexpected reductions in frictions in the container shipping market.
A series of recent articles has called into question the validity of VAR models of the global market for crude oil. These studies seek to replace existing oil market models by structural VAR models of their own based on different data, different identifying assumptions, and a different econometric approach. Their main aim has been to revise the consensus in the literature that oil demand shocks are a more important determinant of oil price fluctuations than oil supply shocks. Substantial progress has been made in recent years in sorting out the pros and cons of the underlying econometric methodologies and data in this debate, and in separating claims that are supported by empirical evidence from claims that are not. The purpose of this paper is to take stock of the VAR literature on global oil markets and to synthesize what we have learned. Combining this evidence with new data and analysis, I make the case that the concerns regarding the existing VAR oil market literature have been overstated and that the results from these models are quite robust to changes in the model specification.
Using hand-collected data on CEO appointments during shareholder activism campaigns, this study examines whether shareholder involvement in CEO recruiting affects frictions in CEO hiring decisions. The results indicate that appointments of CEOs who are recruited with shareholder activist influence are followed by more favorable stock market reactions and stronger profitability improvements than CEO appointments that also occur during activism campaigns but without the influence of activists. I find little evidence that shareholder activists increase hiring frictions by facilitating the recruiting of CEOs who will implement myopic corporate policies. Analyses of recruiting process characteristics reveal that activist influence is associated with more resources being dedicated to the CEO search process and with a higher propensity to recruit CEOs from outside the firm. These findings contribute to the CEO labor market literature, which tends to focus on the decision to remove incumbent CEOs but provides limited insights into CEO recruiting.
In this paper we put forward a legal argument in favour of granting more independence to BaFin, the German securities market supervisor. Following the Wirecard scandal, our reform proposal aims at strengthening the impartiality and credibility of the German supervisor and, as a consequence, at restoring capital market integrity. In order to achieve the necessary degree of democratic legitimacy for giving BaFin more independence and disassociating it from the Ministry of Finance, the paper sets out the necessary steps for a legal reform that creates accountability of BaFin vis-à-vis the Parliament, subjecting it to strict disclosure and reporting obligations.
This paper discusses policy implications of a potential surge in NPLs due to COVID-19. The study provides an empirical assessment of potential scenarios and draws lessons from previous crises for effective NPL treatment. The paper highlights the importance of early and realistic assessment of loan losses to avoid adverse incentives for banks. Secondary loan markets would help in this process and further facilitate bank resolution as laid down in the BRRD, which should be uphold even in extreme scenarios.
Dieser Artikel behandelt das Zusammenspiel von staatlich organisierten sozialen Sicherungssystemen und der privaten Eigenvorsorge durch Vermögensbildung als Grundpfeiler der sozialen Marktwirtschaft in Deutschland. Die jährlichen Ausgaben der verschiedenen staatlichen Sicherungssysteme belaufen sich auf rund ein Drittel des erwirtschafteten Bruttosozialprodukts, wobei die umlagefinanzierten Alterssicherungssysteme für die Arbeitsnehmer den größten Anteil ausmachen. Sachvermögen in Form von selbst genutzten Wohnungen sowie Finanzvermögen in Form von Bankeinlagen und Ansprüche gegen private Versicherungen machen den größten Anteil der Eigenversorge aus. Aufgrund des niedrigen Zinsniveaus sowie des demografischen Wandels der Gesellschaft wird die Eigenvorsorge durch Anlagen an den internationalen Wertpapiermärkten sowohl für Selbständige als auch Arbeitsnehmer immer bedeutender.
Smart(phone) investing? A within investor-time analysis of new technologies and trading behavior
(2021)
Using transaction-level data from two German banks, we study the effects of smartphones on investor behavior. Comparing trades by the same investor in the same month across different platforms, we find that smartphones increase purchasing of riskier and lottery-type assets and chasing past returns. After the adoption of smartphones, investors do not substitute trades across platforms and buy also riskier, lottery-type, and hot investments on other platforms. Using smartphones to trade specific assets or during specific hours contributes to explain our results. Digital nudges and the device screen size do not mechanically drive our results. Smartphone effects are not transitory.
Ten species of the lichen family Graphidaceae are treated in the ninth contribution to this series. Four species are new to science: Allographa cameroonensis Kalb & Schumm from Cameroon differs from A. grandis in having larger ascospores and in the lack of secondary lichen products. Allographa kuetchangiana Kalb & Schumm from Thailand differs from A. mexicana in having a permanent thalline cover of the ascomata and in having a whitish pruina on their top. Cruentotrema siamense Lücking & Kalb from Thailand differs from C. amazonum in having smaller ascomata and smaller ascospores. Ocellularia striata Kalb & Schumm from Thailand differs from O. jutaratiae in having smaller ascospores and in lacking the purplish, K+ greenish pigment which covers the remnants of the split proper exciple. Rhabdodiscus exutus (Hale) Kalb & Schumm is a new combination (Bas.: Ocellularia exuta Hale). Photographs of Allographa mexicana (Hale) Lücking & Kalb (including an isotype) show the variation of the ascomata and the differences to A. kuetchangiana. Allographa isidiata (Hale) Lücking & Kalb is reported from Ecuador, which is a new addition to the lichenobiota of this country and the second finding of this species after its description. Allographa plagiocarpa (Fée) Lücking & Kalb, before misidentified as A. mexicana, from Cartago Province is the second report of this species from Costa Rica. The chemistry of Ocellularia kohphanganensis Papong, Mangold & Lücking and the exact spelling of the specific epithet are corrected. Ocellularia macrocrocea Kalb is a new addition to the lichenobiota of Thailand where it is sometimes growing together with O. striata. The intraspecific variation of Ocellularia thelotremoides (Leight.) Hale ist discussed and the name is put on the correct place of the amended key to Thai Ocellularia species. Cochromatography of some Ocellularia species with a deep orange-yellow pigment together with a pure sample of skyrin in solvents A, B' and C showed identical Rf-values in all three solvent systems.
New lichens from Africa
(2021)
The following species are described as new to science, mostly based on specimens collected by the first author: Candelariella flavosorediata from Réunion, Chiodecton leprarioides from Réunion, Lecanactis leprarica from Cameroon, Multisporidea nitida, which is a new species and a new, monotypic genus in the Malmideaceae from Réunion, Neoprotoparmelia fuscosorediata from Kenya, Pyrrhospora endaurantia from Kenya, and Tapellaria isidiata from Cameroon.
In a continuation of my investigation of tropical lichenized fungi, a treatment of new or otherwise interesting lichens mainly from Brazil and Venezuela is presented. A total of 34 species are reported here, most of them new discoveries for at least one the two countries or a new discovery for a state, including 11 species new to science. These are Malmidea albomarginata Kalb & Hernández from Venezuela, differing from M. granifera by the thin, white apothecial margins and a white to yellowish medulla, M. allobakeri Kalb & M. Cáceres from Brazil, differing from M. bakeri in lacking atranorin and in having smaller ascospores, M. allopapillosa Kalb from Venezuela, differing from M. papillosa in having atranorin as a major metabolite, M. atlanticoides Kalb & M. Cáceres from Brazil, differing from M. atlantica in containing atranorin and an unknown anthraquinone as major metabolites, M. hechicerae from Venezuela, differing from M. coralliformis by the K+ lemon-yellow medulla of the thallus, M. hernandeziana Kalb from Venezuela, differing from M. fellhaneroides in having a chocolate-brown hypothecium, larger apothecia and larger ascospores, M. isidiifera Kalb from Brazil and Venezuela, differing from M. piperis in having granular to coralloid isidia and atranorin as a major metabolite, M. leucopiperis Kalb from Brazil and Venezuela, differing from M. piperis in the pale-colored hypothecium, M. rhodopisoides Kalb from Brazil, differing from M. rhodopis in having granular isidia, M. subcinerea Kalb from Venezuela, differing from M. cinerea in producing no lichen substances, and M. volcaniana Kalb & Hernández from Venezuela and Brazil, differing from M. sulphureosorediata in having an alternative anthraquinone-chemistry. In addition, the new combination Stigmatochroma glaucothecum (Fée) Kalb is proposed. New reports for Venezuela include Bacidiopsora microphylla Kalb, B. silvicola (Malme) Kalb (new also for Guatemala), Buellia albula (Nyl.) Müll. Arg., Coenogonium pyrophthalmum (Mont.) Lücking, Aptroot & Sipman, Dirinaria rhodocladonica Kalb, Schumm & Elix, Malmidea badimioides (M. Cáceres & Lücking) M. Cáceres & Kalb (new also for Mexico), M. leptoloma (Müll. Arg.) Kalb & Lücking, M. nigromarginata (Malme) Lücking & Breuss, M. perplexa Kalb, M. polycampia (Tuck.) Kalb & Lücking, M. rhodopis (Tuck.) Kalb, Rivas Plata & Lumbsch, M. sulphureosorediata M. Cáceres, D. A. Mota & Aptroot, M. vinosa (Eschw.) Kalb, Rivas Plata & Lumbsch, Psilolechia lucida (Ach.) Choisy, Rhizocarpon sipmanianum Kalb & Aptroot, Sipmaniella sulfureofusca (Fée) Kalb, Stigmatochroma glaucothecum (Fée) Kalb and Vainionora aemulans (Vain.) Kalb. A collection of Pyxine caesiopruinosa (Nyl.) Imsh. from Venezuela is mentioned and its differentiation from P. albovirens (G. Mey.) Aptroot is discussed. New reports for Brazil include Malmidea atlantica (M. Cáceres & Lücking) M. Cáceres & Kalb (for Bahia state) and M. sulphureosorediata (for São Paulo state). A morphological, anatomical and chemical comparison of type material of Malmidea polycampia (Tuck.) Kalb & Lücking and M. flavopustulosa (M. Cáceres & Lücking) M. Cáceres & Kalb revealed that both names are synonym, the first one having priority. For many species revised descriptions and revised chemistry are presented based on South American material. To facilitate the identification of anthraquinones occurring in Malmidea species a table of relative Rfvalues in solvents A, B' and C is presented.
The so-called Troika, consisting of the EU-Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF), was supposed to support the member states of the euro area which had been hit hard by a sovereign debt crisis. For that purpose, economic adjustment programs were drafted and monitored in order to prevent the break-up of the euro area and sovereign defaults. The cooperation of these institutions, which was born out of necessity, has been partly successful, but has also created persistent problems. With the further increase of public debt, especially in France and Italy, the danger of a renewed crisis in the euro area was growing. The European Stability Mechanism (ESM) together with the European Commission will replace the Troika in the future, following decisions of the EU Summit of December 2018. It shall play the role of a European Monetary Fund in the event of a crisis. The IMF, on the other side, will no longer play an active role in solving sovereign debt crises in the euro area. The current course is, however, inadequate to tackle the core problems of the euro zone and to avoid future crises, which are mainly structural in nature and due to escalating public debt and lack of international competitiveness of some member countries. The current Corona crisis will aggravate the institutional problems. It has led to a common European fiscal response ("Next Generation EU"). This rescue and recovery program will not be financed by ESM resources and will not be monitored by the ESM. One important novelty of this package is that it involves the issuance of substantial common European debt.
The species, Bactrospora lamprospora (Nyl.) Lendemer is treated as a synonym of B. metabola (Nyl.) Egea & Torrente. The comparission of characters of all accessible materials and type specimens confirmed that B. lamprospora is conspecific with B. metabola. The distinguishing characters of B. metabola from other species in this group are initially a Homalotropa-type ascospores becomes muriform at maturity, with up to 24–30 transverse septa and ascospore size of 48–105 × 7–14 μm.
We show that the COVID-19 pandemic triggered a surge in the elasticity of non-financial corporate to sovereign credit default swaps in core EU countries, characterized by strong fiscal capacity. For peripheral countries with lower budgetary slackness, the pandemic had essentially no impact on such elasticity. This evidence is consistent with the disaster-induced repricing of government support, which we model through a rare-disaster asset pricing framework with bailout guarantees and defaultable public debt. The model implies that risk-adjusted guarantees in the core were 2.6 times those in the periphery, suggesting that fiscal capacity buffers provide relief to firms’ financing costs.
This paper studies the behavior of competing firms in a duopoly with rational inattentive consumers. Firms play a sequential game in which they decide to obfuscate their individual prices before competing on price. Probabilistic demand functions are endogenously determined by the consumers’ optimal information strategy, which depends on the firms’ obfuscation choice and the consumers’ unrestricted prior beliefs. We show that the game may result in an obfuscation equilibrium with high prices where both firms obfuscate and a transparency equilibrium with low prices and no obfuscation, providing an argument for market regulation. Lower information costs and asymmetric prior beliefs about prices reduce the probability of an obfuscation equilibrium. Using data on Sweden, we document a decrease in price complexity and corresponding prices in the market for mobile phone subscriptions in the last two decades. Our model rationalizes these changes and explains why complexity and high prices persist in some but not all digitalized markets.
Historically Central Bank Independence (CBI) was anything but the norm. CBI seems to contradict core principles of democracy. Most economists were also against CBI. After the Great Inflation of the 1970ies many empirical studies demonstrated that there is a strong negative correlation between the degree of CBI and the rate of inflation. In 1990 most major countries had endowed their central bank with the status of independence. Overburdening with elevated expectations and additional competences are threatening the reputation of central banks and undermining the case for CBI.
Several recent studies have expressed concern that the Haar prior typically imposed in estimating sign-identi.ed VAR models may be unintentionally informative about the implied prior for the structural impulse responses. This question is indeed important, but we show that the tools that have been used in the literature to illustrate this potential problem are invalid. Speci.cally, we show that it does not make sense from a Bayesian point of view to characterize the impulse response prior based on the distribution of the impulse responses conditional on the maximum likelihood estimator of the reduced-form parameters, since the the prior does not, in general, depend on the data. We illustrate that this approach tends to produce highly misleading estimates of the impulse response priors. We formally derive the correct impulse response prior distribution and show that there is no evidence that typical sign-identi.ed VAR models estimated using conventional priors tend to imply unintentionally informative priors for the impulse response vector or that the corre- sponding posterior is dominated by the prior. Our evidence suggests that concerns about the Haar prior for the rotation matrix have been greatly overstated and that alternative estimation methods are not required in typical applications. Finally, we demonstrate that the alternative Bayesian approach to estimating sign-identi.ed VAR models proposed by Baumeister and Hamilton (2015) su¤ers from exactly the same conceptual shortcoming as the conventional approach. We illustrate that this alternative approach may imply highly economically implausible impulse response priors.
Our starting point is the following simple but potentially underappreciated observation: When assessing willingness to pay (WTP) for hedonic features of a product, the results of such measurement are influenced by the context in which the consumer makes her real or hypothetical choice or in which the questions to which she replies are set (such as in a contingent valuation analysis). This observation is of particular relevance when WTP regards sustainability, the “non-use value” of which does not derive from a direct (physical) sensation and where perceived benefits depend heavily on available information and deliberations. The recognition of such context sensitivity paves the way for a broader conception of consumer welfare (CW), and our proposed standard of “reflective WTP” may materially change the scope for private market initiatives with regards to sustainability, while keeping the analytical framework within the realm of the CW paradigm. In terms of practical implications, we argue, for instance, that actual purchasing decisions may prove insufficient to measure consumer appreciation of sustainability, as they may rather echo learnt but unreflected heuristics and may be subject to the specific shopping context, such as heavy price promotions. Also, while it may reflect current social norm, the latter may change considerably over time as more consumers adopt their behavior.
The working paper reflects on the status that "sciences" have held at different points in time, and on the normative orders found in scientific works, as well as on the normative orders imposed by the sciences of a particular place and time on their environment. The latter is also suggested by recent developments concerning the influence (or lack thereof) of scientists on daily life and politics. The paper touches on several fundamental issues in the history of science as a discipline that have been or are still being intensely debated.
The crisis management and deposit insurance (CMDI) framework in the euro area requires a reset. Although its policy objectives remain valid, the means of achieving them do not. As the euro area comes the end of the long transition period taken to implement the BRRD/SRMR, it should take the opportunity to reset expectations about resolution.
Above all, resolution should be for the many, not just the few. There should be a single presumptive path for dealing with failed banks: the use of bail-in to facilitate orderly liquidation under a solvent-wind down strategy. This will protect deposits and set the stage – together with the backstop that the European Stability Mechanism provides to the Single Resolution Fund (SRF) -- for the transformation of the SRF into the Single Deposit Guarantee Scheme (SDGS). To avoid forbearance, responsibility for emergency liquidity assistance (ELA) should rest, not with national central banks, but with the ECB as a single lender of last resort. Finally, national deposit guarantee schemes should function as institutional protection schemes and become investors of last resort in their member banks. Together, these measures would complete Banking Union, promote market discipline, avoid imposing additional burdens on taxpayers, help untie the doom loop between weak banks and weak governments, strengthen the euro and enhance financial stability.
Do required minimum distribution 401(k) rules matter, and for whom? Insights from a lifecylce model
(2021)
Tax-qualified vehicles helped U.S. private-sector workers accumulate $25Tr in retirement assets. An often-overlooked important institutional feature shaping decumulations from these retirement plans is the “Required Minimum Distribution” (RMD) regulation, requiring retirees to withdraw a minimum fraction from their retirement accounts or pay excise taxes on withdrawal shortfalls. Our calibrated lifecycle model measures the impact of RMD rules on financial behavior of heterogeneous households during their worklives and retirement. We show that proposed reforms to delay or eliminate the RMD rules should have little effects on consumption profiles but more impact on withdrawals and tax payments for households with bequest motives.
The authors identify U.S. monetary and fiscal dominance regimes using machine learning techniques. The algorithms are trained and verified by employing simulated data from Markov-switching DSGE models, before they classify regimes from 1968-2017 using actual U.S. data. All machine learning methods outperform a standard logistic regression concerning the simulated data. Among those the Boosted Ensemble Trees classifier yields the best results. The authors find clear evidence of fiscal dominance before Volcker. Monetary dominance is detected between 1984-1988, before a fiscally led regime turns up around the stock market crash lasting until 1994. Until the beginning of the new century, monetary dominance is established, while the more recent evidence following the financial crisis is mixed with a tendency towards fiscal dominance.
As part of the Next Generation EU (NGEU) program, the European Commission has pledged to issue up to EUR 250 billion of the NGEU bonds as green bonds, in order to confirm their commitment to sustainable finance and to support the transition towards a greener Europe. Thereby, the EU is not only entering the green bond market, but also set to become one of the biggest green bond issuers. Consequently, financial market participants are eager to know what to expect from the EU as a new green bond issuer and whether a negative green bond premium, a so-called Greenium, can be expected for the NGEU green bonds. This research paper formulates an expectation in regards to a potential Greenium for the NGEU green bonds, by conducting an interview with 15 sustainable finance experts and analyzing the public green bond market from September 2014 until June 2021, with respect to a potential green bond premium and its underlying drivers. The regression results confirm the existence of a significant Greenium (-0.7 bps) in the public green bond market and that the Greenium increases for supranational issuers with AAA rating, such as the EU. Moreover, the green bond premium is influenced by issuer sector and credit rating, but issue size and modified duration have no significant effect. Overall, the evaluated expert interviews and regression analysis lead to an expected Greenium for the NGEU green bonds of up to -4 bps, with the potential to further increase in the secondary market.
This in-depth analysis provides evidence on differences in the practice of supervising large banks in the UK and in the euro area. It identifies the diverging institutional architecture (partially supranationalised vs. national oversight) as a pivotal determinant for a higher effectiveness of supervisory decision making in the UK. The ECB is likely to take a more stringent stance in prudential supervision than UK authorities. The setting of risk weights and the design of macroprudential stress test scenarios document this hypothesis. This document was provided by the Economic Governance Support Unit at the request of the ECON Committee.
This document was requested by the European Parliament's Committee on Economic and Monetary Affairs. It was originally published on the European Parliament’s webpage: www.europarl.europa.eu/RegData/etudes/IDAN/2021/689443/IPOL_IDA(2021)689443_EN.pdf
This in-depth analysis proposes ways to retract from supervisory COVID-19 support measures without perils for financial stability. It simulates the likely impact of the corona crisis on euro area banks’ capital and predicts a significant capital shortfall. We recommend to end accounting practices that conceal loan losses and sustain capital relief measures. Our in-depth analysis also proposes how to address the impending capital shortfall in resolution/liquidation and a supranational recapitalisation.
In this study, we analyze the trading behavior of banks with lending relationships. We combine detailed German data on banks’ proprietary trading and market making with lending information from the credit register and then examine how banks trade stocks of their borrowers around important corporate events. We find that banks trade more frequently and also profitably ahead of events when they are the main lender (or relationship bank) for the borrower. Specifically, we show that relationship banks are more likely to build up positive (negative) trading positions in the two weeks before positive (negative) news events, and also that they unwind these positions shortly after the event. This trading pattern is more pronounced for unscheduled earnings events, M&A transactions, and after borrower obtain new bank loans. Our results suggest that lending relationships endow banks with important information, highlighting the potential for conflicts of interest in banking, which has been a prominent concern in the regulatory debate.
The authors present evidence of a new propagation mechanism for wealth inequality, based on differential responses, by education, to greater inequality at the start of economic life. The paper is motivated by a novel positive cross-country relationship between wealth inequality and perceptions of opportunity and fairness, which holds only for the more educated. Using unique administrative micro data and a quasi-field experiment of exogenous allocation of households, the authors find that exposure to a greater top 10% wealth share at the start of economic life in the country leads only the more educated placed in locations with above-median wealth mobility to attain higher wealth levels and position in the cohort-specific wealth distribution later on. Underlying this effect is greater participation in risky financial and real assets and in self-employment, with no evidence for a labor income, unemployment risk, or human capital investment channel. This differential response is robust to controlling for initial exposure to fixed or other time-varying local features, including income inequality, and consistent with self-fulfilling responses of the more educated to perceived opportunities, without evidence of imitation or learning from those at the top.
Climate change is one of the highest-ranking issues on the political and social agenda. Vulnerabilities of the world ecosystem laid bare by the COVID-19 pandemic and the potential damage for the human and business life made the need for urgent action clear once again. Corporations are one of the main actors that will play a major role in the decarbonisation of the economy. They need to put forward a net zero strategy and targets, transitioning to net-zero by 2050. Yet, an important but rather overlooked stakeholder group in the sustainability debates can pose a significant stumbling block in this transition: employees. Although climate action has huge benefits by ameliorating adverse environmental events and is expected to have overall positive impact on employment, net zero transition in companies, especially in certain sectors and regions, will cause substantial adverse employment effects for the workforce. This has the potential to slow down or even derail the necessary climate action in companies. In this regard, just transition is a promising concept, which calls for a swift and decisive climate action in corporations while taking account of and mitigating adverse effects for their workforce. If well implemented, it can accelerate net zero transition in companies. This potential clash of environmental (E) and social (S) aspects of ESG agenda, materialised in the companies’ net zero transition, and its potential remedy, just transition, have important implications for corporate governance and finance, especially for directors’ duties & executive remuneration, sustainability disclosures, institutional investors’ engagement and green finance.
This paper studies the consumption response to an increase in the domestic value of foreign currency household debt during a large depreciation. We use detailed consumption survey data that follows households for four years around Hungary’s 2008 currency crisis. We find that, relative to similar local currency debtors, foreign currency debtors reduce consumption approximately one-for-one with increased debt service, suggesting a role for liquidity constraints. We document a variety of margins of adjustment to the shock. Foreign currency debtors reduce both the quantity and quality of expenditures, consistent with nonhomothetic preferences and “flight from quality.” We find no effect on overall household labor supply, consistent with a weak wealth effect on labor supply. However, a small subset of households adjusts labor supply toward foreign income streams. Affected households also boost home pro- duction, suggesting a shift in consumption from money-intensive to time-intensive goods.
We consider an additively time-separable life-cycle model for the family of power period utility functions u such that u0(c) = c−θ for resistance to inter-temporal substitution of θ > 0. The utility maximization problem over life-time consumption is dynamically inconsistent for almost all specifications of effective discount factors. Pollak (1968) shows that the savings behavior of a sophisticated agent and her naive counterpart is always identical for a logarithmic utility function (i.e., for θ = 1). As an extension of Pollak’s result we show that the sophisticated agent saves a greater (smaller) fraction of her wealth in every period than her naive counterpart whenever θ > 1 (θ < 1) irrespective of the specification of discount factors. We further show that this finding extends to an environment with risky returns and dynamically inconsistent Epstein-Zin-Weil preferences.
Market risks account for an integral part of life insurers' risk profiles. This paper explores the market risk sensitivities of insurers in two large life insurance markets, namely the U.S. and Europe. Based on panel regression models and daily market data from 2012 to 2018, we analyze the reaction of insurers' stock returns to changes in interest rates and CDS spreads of sovereign counterparties. We find that the influence of interest rate movements on stock returns is more than 50% larger for U.S. than for European life insurers. Falling interest rates reduce stock returns in particular for less solvent firms, insurers with a high share of life insurance reserves and unit-linked insurers. Moreover, life insurers' sensitivity to interest rate changes is seven times larger than their sensitivity towards CDS spreads. Only European insurers significantly suffer from rising CDS spreads, whereas U.S. insurers are immunized against increasing sovereign default probabilities.
Broad, long-term financial and economic datasets are a scarce resource, in particular in the European context. In this paper, we present an approach for an extensible, i.e. adaptable to future changes in technologies and sources, data model that may constitute a basis for digitized and structured long- term, historical datasets. The data model covers specific peculiarities of historical financial and economic data and is flexible enough to reach out for data of different types (quantitative as well as qualitative) from different historical sources, hence achieving extensibility. Furthermore, based on historical German company and stock market data, we discuss a relational implementation of this approach.
We examine how often and why some audit partners rotate off client engagements before the end of the maximum five-year cycle period. Specifically, we investigate whether audit quality issues play a role for engagement partners and clients to separate prematurely. For a sample of about 4,000 within-audit firm partner rotations for Big 6 clients over the 2008 to 2014 period, we find that client characteristics such as financial leverage or performance have little explanatory power. In contrast, severe audit quality issues such as financial restatements or PCAOB inspection findings are associated with early partner rotations. These associations are more pronounced for early rotations that are not explained by scheduled retirements, promotions, or temporary leaves as well as for large clients and when partners are less experienced. We also find that female partners have a higher likelihood of early rotation for audit quality reasons. Early rotations have career consequences. Partners are assigned to fewer SEC issuer clients, manage fewer audit hours, receive lower partner ratings, and are more likely to be internally inspected after being rotated early. Our results suggest that audit quality concerns are an important factor for early partner rotations with ensuing negative career consequences for partners’ client assignments and management responsibilities.
Extant research shows that CEO characteristics affect earnings management. This paper studies how investors infer a specific characteristic of CEOs, namely moral commitment to honesty, from earnings management and how this perception – in conjunction with their own social and moral preferences – shapes their investment choices. We conduct two laboratory experiments simulating investment choices. Our results show that participants perceive a CEO to be more committed to honesty when they infer that the CEO engaged less in earnings management. For investment decisions, a one standard deviation increase in a CEO's perceived commitment to honesty compared to another CEO reduces the relevance of differences in the CEOs’ claimed future returns by 40%. This effect is most prominent among investors with a proself value orientation. To prosocial investors, their own honesty values and those attributed to the CEO matter directly, while returns play a secondary role. Overall, perceived CEO honesty matters to different investors for distinct reasons.
We define a sentiment indicator that exploits two contrasting views of return predictability, and study its properties. The indicator, which is based on option prices, valuation ratios and interest rates, was unusually high during the late 1990s, reflecting dividend growth expectations that in our view were unreasonably optimistic. We interpret it as helping to reveal irrational beliefs about fundamentals. We show that our measure is a leading indicator of detrended volume, and of various other measures associated with financial fragility. We also make two methodological contributions. First, we derive a new valuation-ratio decomposition that is related to the Campbell and Shiller (1988) loglinearization, but which resembles the traditional Gordon growth model more closely and has certain other advantages for our purposes. Second, we introduce a volatility index that provides a lower bound on the market's expected log return.
Using a structural life-cycle model, we quantify the heterogeneous impact of school closures during the Corona crisis on children affected at different ages and coming from households with different parental characteristics. In the model, public investment through schooling is combined with parental time and resource investments in the production of child human capital at different stages in the children’s development process. We quantitatively characterize the long-term consequences from a Covid-19 induced loss of schooling, and find average losses in the present discounted value of lifetime earnings of the affected children of close to 1%, as well as welfare losses equivalent to about 0.6% of permanent consumption. Due to self-productivity in the human capital production function, skill attainment at a younger stage of the life cycle raises skill attainment at later stages, and thus younger children are hurt more by the school closures than older children. We find that parental reactions reduce the negative impact of the school closures, but do not fully offset it. The negative impact of the crisis on children’s welfare is especially severe for those with parents with low educational attainment and low assets. The school closures themselves are primarily responsible for the negative impact of the Covid-19 shock on the long-run welfare of the children, with the pandemic-induced income shock to parents playing a secondary role.
Using a structural life-cycle model and data on school visits from Safegraph and school closures from Burbio, we quantify the heterogeneous impact of school closures during the Corona crisis on children affected at different ages and coming from households with different parental characteristics. Our data suggests that secondary schools were closed for in-person learning for longer periods than elementary schools (implying that younger children experienced less school closures than older children), and that private schools experienced shorter closures than public schools, and schools in poorer U.S. counties experienced shorter school closures. We then extend the structural life cycle model of private and public schooling investments studied in Fuchs-Schündeln, Krueger, Ludwig, and Popova (2021) to include the choice of parents whether to send their children to private schools, empirically discipline it with data on parental investments from the PSID, and then feed into the model the school closure measures from our empirical analysis to quantify the long-run consequences of the Covid-19 school closures on the cohorts of children currently in school. Future earnings- and welfare losses are largest for children that started public secondary schools at the onset of the Covid-19 crisis. Comparing children from the topto children from the bottom quartile of the income distribution, welfare losses are ca. 0.8 percentage points larger for the poorer children if school closures were unrelated to income. Accounting for the longer school closures in richer counties reduces this gap by about 1/3. A policy intervention that extends schools by 3 months (6 weeks in the next two summers) generates significant welfare gains for the children and raises future tax revenues approximately sufficient to pay for the cost of this schooling expansion.
The article traces and analyzes the negative globality of pandemic fears. It follows them through literary texts, psychological theories of individual and collective fears as well as legal documents. Rather than treating fears as law’s other, notably pandemic fears are included in the controversial discussion on how law protects (or should protect) peoples’ freedom in a pandemic. In closing, the article presents different forms of fear defense and fear denial such as conspiracy myths.
In diesem Text werden, ausgehend von der Unterscheidung von Autorität und Autoritarismus, zunächst Entwicklungen im Gefahrenabwehrrecht (Polizeirecht) rekonstruiert, die sich autoritär kennzeichnen lassen. Die Entfesselung des (rechtsstaatlich gebändigten) Leviathan wird dann weiterverfolgt im Recht des Infektionsschutzes. Der Fokus liegt hier auf den anti-corona Gesetzen zum Schutz der Bevölkerung der Jahre 2020 und 2021. In einer Art Gegenprobe wird der infektionsschutzrechtliche Autoritarismus daraufhin überprüft, ob er alternativlos war, problemlos auf die rechtsstaatliche Spur zurückgeführt werden oder sich als demokratisches Gemeinschaftsprojekt interpretieren lassen könnte.
The purpose of this chapter is to analyze the concept of solidarity and distinguish various conceptions of solidarity that differ depending on social and normative contexts. The analysis helps to clarify both the different meanings of the term “solidarity” (and the different normative conceptions) and to avoid some of its pitfalls. The latter stem from making false connections between these conceptions, such as the assumption that solidarity must always be of an ethical or nationalist nature, that it is categorially different from justice or is always supererogatory. Solidarity as a virtue comes in many forms and with many justifications and grounds, and one must not reduce this plurality, but instead describe it properly. As already indicated, this opens up the possibility of conflicts between these contexts and dimensions of solidarity. The (as argued) “normatively dependent” concept of solidarity does not tell us to which form we ought to accord priority.
Relying on a perspective borrowed from monetary policy announcements and introducing an econometric twist in the traditional event study analysis, we document the existence of an .event risk transfer., namely a significant credit risk transmission from the sovereign to the corporate sector after a sovereign rating downgrade. We find that after the delivery of the downgrade, corporate CDS spreads rise by 36% per annum and there is a widespread contagion across countries, in particular among those which were most exposed to the sovereign debt crisis. This effect exists on top of the standard relation between sovereign and corporate credit risk.
Managed portfolios that exploit positive first-order autocorrelation in monthly excess returns of equity factor portfolios produce large alphas and gains in Sharpe ratios. We document this finding for factor portfolios formed on the broad market, size, value, momentum, investment, prof- itability, and volatility. The value-added induced by factor management via short-term momentum is a robust empirical phenomenon that survives transaction costs and carries over to multi-factor portfolios. The novel strategy established in this work compares favorably to well-known timing strategies that employ e.g. factor volatility or factor valuation. For the majority of factors, our strategies appear successful especially in recessions and times of crisis.
How people form beliefs is crucial for understanding decision-making un- der uncertainty. This is particularly true in a situation such as a pandemic, where beliefs will affect behaviors that impact public health as well as the aggregate economy. We conduct two survey experiments to shed light on potential biases in belief formation, focusing in particular on the tone of information people choose to consume and how they incorporate this information into their beliefs. In the first experiment, people express their preferences over pandemic-related articles with optimistic and pessimistic headlines, and are then randomly shown one of the articles. We find that respondents with more pessimistic prior beliefs about the pandemic are substantially more likely to prefer pessimistic articles, which we interpret as evidence of confirmation bias. In line with this, respondents assigned to the less preferred article rate it as less reliable and informative (relative to those who prefer it); they also discount information from the article when it is less preferred. We further find that these motivated beliefs end up impacting incentivized behavior. In a second experiment, we study how partisan views interact with information selection and processing. We find strong evidence of source dependence: revealing the news source further distorts information acquisition and processing, eliminating the role of prior beliefs in article choice.
Central banks sometimes evaluate their own policies. To assess the inherent conflict of interest, the authors compare the research findings of central bank researchers and academic economists regarding the macroeconomic effects of quantitative easing (QE). They find that central bank papers report larger effects of QE on output and inflation. Central bankers are also more likely to report significant effects of QE on output and to use more positive language in the abstract. Central bankers who report larger QE effects on output experience more favorable career outcomes. A survey of central banks reveals substantial involvement of bank management in research production.
Careers in finance
(2021)
The finance wage premium since the 1990s has arguably lured talent away from other industries. However, the allocation of talent is likely to respond to differences in career paths, not in wages at a given date. We use resume data to reconstruct the careers of 11,255 professionals in finance, high-tech and services from 1980 to 2017, and find that careers mostly develop within sectors. Careers in asset management feature higher and steeper pay profiles than those of employees in banking, insurance and non-finance, yet this career premium cannot be explained by higher risk. Labor market entry responds positively to career premia in asset management and high-tech, and these sectors are regarded as substitutes by potential entrants, consistently with high-tech competing with asset management in attracting talent.
We investigate the differential effect of the COVID-19 shock to the stock market shock on the share prices of firms with different levels of ESG (Environmental, Social and Governance) scores. Thereby, we analyse whether and to what extent better ESG ratings provided insurance for investors in the stocks of those firms during this shock. We focus our analysis on the European market in which ESG investment plays a particularly important role. Using a broad sample of listed firms we provide mixed evidence. On the one hand, we show that immediately after the start of the shock firms with a higher ESG score outperformed their peers. On the other hand, this effect faded less than six weeks later. Given the quick recovery of the market our finding supports the idea that ESG stocks provide limited insurance in severe crises.
“Right to Buy” (RTB), a large-scale natural experiment by which incumbent tenants in public housing could buy properties at heavily-subsidised prices, increased the UK homeownership rate by over 10 percentage points between 1980 and the late 1990s. This paper studies its impact on crime, showing that RTB generated significant reductions in property and violent crime that persist up to today. The behavioural changes of incumbent tenants and the renovation of public properties were the main drivers of the crime reduction. This is evidence of a novel means by which subsidised homeownership and housing policy may contribute to reduce criminality.
We assess the effect and the timing of the corporate arm of the ECB quantitative easing (CSPP) on corporate bond issuance. Because of several contemporaneous measures, to isolate the programme effects we rely on one key eligibility feature: the euro denomination of newly issued bonds. We find that the significant increase in bonds issuance by eligible firms is due to the CSPP and that this effect took at least six months to unfold. This result holds even when comparing firms with similar ratings, thus providing evidence that unconventional monetary policy can foster a financing diversification regardless of firms’ risk profile. We also highlight the impact of the programme on the real economic activity. The evidence suggests that while all firms increased investment in capital expenditures and intangible assets, the CSPP induced eligible firms to invest in marketable and equity securities, to repurchase their own stocks, to hold cash and to carry out short-term investment.
Expectations about economic variables vary systematically across genders. In the domain of inflation, women have persistently higher expectations than men. We argue that traditional gender roles are a significant factor in generating this gender expectations gap as they expose women and men to different economic signals in their daily lives. Using unique data on the participation of men and women in household grocery chores, their resulting exposure to price signals, and their inflation expectations, we document a tight link between the gender expectations gap and the distribution of grocery shopping duties. Because grocery prices are highly volatile, and consumers focus disproportionally on positive price changes, frequent exposure to grocery prices increases perceptions of current inflation and expectations of future inflation. The gender expectations gap is largest in households whose female heads are solely responsible for grocery shopping, whereas no gap arises in households that split grocery chores equally between men and women. Our results indicate that gender differences in inflation expectations arise due to social conditioning rather than through differences in innate abilities, skills, or preferences.