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This contribution draws on two recent publications in which the macroeconomic model data base (www.macromodelbase.com) is employed for model comparisons. The comparative approach is used to base policy analysis on a systematic evaluation of the different implications that a certain economic policy can have when submitted to different modeling approaches. In this manner, policy recommendations are more robust to modeling uncertainty. By extending the comparative approach to forecasting, the authors investigate the accuracy of different forecasting models and obtain more reliable mean forecasts.
How to be a good European...
(2010)
Unter der Überschrift "Ich kaufe griechische Staatsanleihen weil..." sollten Persönlichkeiten aus Politik, Wirtschaft und Kultur kurz begründen, warum sie griechische Staatsanleihen gekauft haben bzw. kaufen werden--idealerweise unter Nachweis ihres finanziellen Engagements. Zum jetzigen Zeitpunkt kaufe ich keine griechischen Staatsanleihen...
Using fiscal reaction functions for 3a panel of actual euro-area countries the paper investigates whether euro membership has reduced the responsiveness of countries to increases in the level of inherited debt compared to the period prior to succession to the euro. While we find some evidence for such a loss in prudence, the results are not robust to changes in the specification, as for example an exclusion of Greece from the panel. This suggests that the current debt problems may result to a large extent from pre-existing debt levels prior to entry or from a larger need for fiscal prudence in a common currency, while an adverse change in the fiscal reaction functions for most countries does not apply.
In its decision of December 13, 2011, the Constitutional Court of the state of North Rhine-Westphalia ruled that a State Court of Auditors is granted by the constitution a broad scope of powers not only to control the immediate state administration but also entities outside the direct state administration, as far as they exercise financial responsibility for the state. This ruling may have serious implications for the capital guarantees extended by EU Member States to the newly established institutions on the European level, as for instance the European Stability Mechanism (ESM).
After initial temporary measures in support of Greece prooved insufficient to end the sovereign debt crisis, extensive countermeasures have ensued. The heads of state of the euro group have agreed to permanent support mechanims over the course of the past two years. In addition, the European Central Bank (ECB) has become involved in the assistance program. The article provides an overview of the various support mechanisms installed and cautions against the connected legal problems.
We outline a procedure for consistent estimation of marginal and joint default risk in the euro area financial system. We interpret the latter risk as the intrinsic financial system fragility and derive several systemic fragility indicators for euro area banks and sovereigns, based on CDS prices. Our analysis documents that although the fragility of the euro area banking system had started to deteriorate before Lehman Brothers' file for bankruptcy, investors did not expect the crisis to affect euro area sovereigns' solvency until September 2008. Since then, and especially after November 2009, joint sovereign default risk has outpaced the rise of systemic risk within the banking system.
The latest appointment to the ECB's Executive Board initiated a political dispute between the European Parliament and the Euro Group on the question of representation of females on the Executive Board and the Governing Council of the ECB. The dispute has raised awareness to the fact that a culture of equality and equal opportunity should be built from the ground up. A long term plan helping talented women to emerge and be prepared to take increasing responsibilities is necessary to make sure that there is a growing pool of qualified female candidates.
I investigate the effect of transparency on the borrowing costs of Emerging Market Economies. Transparency is measured by whether or not the countries publish the IMF Article IV Staff reports and the Reports on the Observance of Standards and Codes (ROSC). Using difference-in-difference estimation, I study the effect on the sovereign credit spreads for 18 Emerging Market Economies over the periods 1999-2007 and 2008-2012. I show that the effect of publishing the Article IV reports is negligible while publishing ROSC matters, leading to a reduction in the spreads of nearly 30 basis points in the pre-crisis sample 1999-2007.
The idea of appointing a non-national as Central Bank Governor remains surprisingly controversial. Nevertheless, given the skills required by the Governor in order to manage what no doubt are increasingly complex institutions, considering non-nationals makes good sense for at least two reasons. First, increasing the pool of candidates to include those with broader skills and backgrounds makes it easier to find a suitable person for the job. Second, non-nationals are less likely to be beholden to domestic pressure groups and could help better insulate the central bank from political pressures.
The exceptional circumstances in which the ECB has been operating in the past years are testing not only the currency union itself, but also its institutional design. While the Governing Council of the ECB was designed to mainly set interest rates optimally for the union as a whole, the recent crisis has expanded the tools of the ECB to include unconventional monetary policy actions that potentially increase the risk exposure of its balance sheet. Since each country would contribute to the losses according to its capital key, a different voting mechanism that takes into account the single country’s contribution to the ECB’s capital could be advisable.