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We investigate whether the bank crisis management framework of the European banking union can effectively bar the detrimental influence of national interests in cross-border bank failures. We find that both the internal governance structure and decision making procedure of the Single Resolution Board (SRB) and the interplay between the SRB and national resolution authorities in the implementation of supranationally devised resolution schemes provide inroads that allow opposing national interests to obstruct supranational resolution. We also show that the Single Resolution Fund (SRG), even after the ratification of the reform of the European Stability Mechanism (ESM) and the introduction of the SRF backstop facility, is inapt to overcome these frictions. We propose a full supranationalization of resolution decision making. This would allow European authorities in charge of bank crisis management to operate autonomously and achieve socially optimal outcomes beyond national borders.
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.
This paper investigates the potential implications of say on pay on management remuneration in Germany. We try to shed light on some key aspects by presenting quantitative data that allows us to gauge the pertinent effects of the German natural experiment that originates with the 2009 amendments to the Stock Corporation Act of 1965. In order to do this, we deploy a hand-collected data set for Germany's major firms (i.e. DAX 30), for the years 2006-2012. Rather than focusing exclusively on CEO remuneration we collected data for all members of the management board for the whole period under investigation. We observe that the compensation packages of management board members of Germany's DAX30-firms are quite closely linked to key performance measures. In addition, we find that salaries increase with the size of the company and that ownership concentration has no significant effect on compensation. Also, our findings suggest that the two-tier system seems to matter a lot when it comes to compensation. However, it would be misleading to state that we see no significant impact of the introduction of the German say on pay-regime. Our findings suggest that supervisory boards anticipate shareholder-behavior.
Für eine möglichst vollständige analytische Beschreibung werden in der statistischen Klimatologie beobachtete Klimazeitreihen als Realisation eines stochastischen Prozesses, das heißt als eine Folge von Zufallsvariablen verstanden. Die Zeitreihe soll im wesentlichen durch eine analytische Funktion der Zeit beschrieben werden können und die Beobachtung nur durch Zufallseinflüsse von dieser Funktion abweichen. Diese analytische Funktion setzt sich aus der Summe zeitlich strukturierter Komponenten zusammen, welche aus klimatologischem Blickwinkel interpretierbar erscheinen. Es werden Funktionen zugelassen, die den Jahresgang, Trends, episodische Komponenten und deren Änderung beschreiben. Die Extremereignisse sind als eine besondere weitere Komponente in die Zeitreihenanalyse aufgenommen und als von Änderungen in den Parametern der Verteilung unabhängige, extreme Werte definiert. Die Zufallseinflüsse sollen zunächst als Realisierungen unabhängiger normalverteilter Zufallsvariablen mit dem Erwartungswert Null und im Zeitablauf konstanter Varianz interpretiert werden können. In diesem Fall beschreibt die analytische Funktion der Zeit, die Summe detektierter strukturierter Komponenten, den zeitlichen Verlauf des Mittels. Ein zu einem bestimmten Zeitpunkt tatsächlich beobachteter Wert kann dann als eine mögliche Realisation einer Zufallsvariablen interpretiert werden, die der Gaußverteilung mit dem Mittelwert µ(t) zur Zeit t und konstanter Varianz genügt. Da die zugrundeliegenden Annahmen, unter Verwendung klimatologisch interpretierbarer Basisfunktionen, in der Analyse von Klimazeitreihen, die nicht die Temperatur betreffen, zumeist nicht erfüllt sind, wird in eine Verallgemeinerung des Konzepts der Zeitreihenzerlegung in einen deterministischen und einen statistischen Anteil eingeführt. Zeitlich strukturierte Änderungen werden nun in verschiedenen Verteilungsparametern frei wählbarer Wahrscheinlichkeitsdichtefunktionen gesucht. Die gängige Beschränkung auf die Schätzung einer zeitlich veränderlichen Lokation wird aufgehoben. Skalenschätzer sowie Schätzer fär den Formparameter spielen ebenso relevante Rollen fär die Beschreibung beobachteter Klimavariabilität. Die Klimazeitreihen werden wieder als Realisation eines Zufallprozesses verstanden, jedoch genügen die Zufallsvariablen nun einer frei wählbaren Wahrscheinlichkeitsdichtefunktion. Die zeitlich strukturierten Änderungen in den Verteilungsparametern werden auf Basis der gesamten Zeitreihe für jeden Zeitpunkt geschätzt. Die aus der Analyse resultierende analytische Beschreibung in Form einer zeitabhängigen Wahrscheinlichkeitsdichtefunktion ermöglicht weiterhin die Schätzung von Über- und Unterschreitungswahrscheinlichkeiten beliebig wählbarer Schwellenwerte für jeden Zeitpunkt des Beobachtungszeitraums. Diese Methode erlaubt insbesondere eine statistische Modellierung monatlicher Niederschlagsreihen durch die Zerlegung in einen deterministischen und einen statistischen Anteil. In dem speziellen Fall von 132 Reihen monatlicher Niederschlagssummen deutscher Stationen 1901-2000 gelingt eine vollständige analytische Beschreibung der Reihen durch ihre Interpretation als Realisation einer Gumbel-verteilten Zufallsvariablen mit variablem Lage- und Streuparameter. Auf Basis der gewonnenen analytischen Beschreibung der Reihen kann beispielsweise im Westen Deutschlands auf Verschiebungen der jährlichen Überschreitungsmaxima des 95%-Perzentils von den Sommer- in die Wintermonate geschlossen werden. Sie werden durch relativ starke Anstiege in der Überschreitungswahrscheinlichkeit (bis 10%) in den Wintermonaten und nur geringe Zunahmen oder aber Abnahmen in den Sommermonaten hervorgerufen. Dies geht mit einer Zunahme der Unterschreitungswahrscheinlichkeit in den Winter- und einer Abnahme in den Sommermonaten einher. Monte-Carlo-Simulationen zeigen, daß jahreszeitlich differenzierte Schätzungen von Änderungen im Erwartungswert, also gebräuchliche Trends, auf Basis der Kleinst-Quadrate-Methode systematischen Bias und hohe Varianz aufweisen. Eine Schätzung der Trends im Mittel auf Basis der statistischen Modellierung ist somit ebenso den Kleinst-Quadrate-Schätzern vorzuziehen. Hinsichtlich der Niederschlagsanalysen stellen jedoch aride Gebiete, mit sehr seltenen Niederschlägen zu bestimmten Jahreszeiten, die Grenze der Methode dar, denn zu diesen Zeitpunkten ist eine vertrauenswürdige Schätzung einer Wahrscheinlichkeitsdichtefunktion nicht möglich. In solchen Fällen ist eine grundsätzlich andere Herangehensweise zur Modellierung der Reihen erforderlich.
This paper analyses the long-term effects of improved small-scale lending, often provided by microfinance institutions set up with the support of development aid. The analysis shows that some common assumptions about microfinance are not true at all: First, it shows that the impact on income will accrue not to the microenterprises themselves, but rather to the consumers of their products. Second, microfinance will have a significant positive effect on the wage levels of employees in the informal sector. Third, microfinance will cause high growth rates in the informal production sector, whereas the trade sector will either contract or at best grow very little.
The theoretical derivation of credit market segmentation as the result of a free market process
(2003)
Information asymmetries make it difficult for banks to assess accurately whether specific entrepreneurs are able and/or willing to repay their loans. This leads to implicit interest rate ceilings, i.e. banks "refuse" to increase their interest rates beyond this ceiling as this would lower their net returns. Although the maximum interest rate increases as the size of enterprises decreases, such ceilings nonetheless constrain the banks’ ability to set interest rates at a level that would enable them to cover costs. If transaction costs are high, the total costs associated with granting small and medium-sized loans will exceed the maximum average return which the banks can earn by issuing such loans. For this reason, banks do not lend to small and medium-sized enterprises, and, as a consequence, these businesses have no access to formal sector loans. Because micro and small enterprises have a very high RoI, it is worthwhile for them to rely on expensive informal loans to finance their operations, at least until they reach a certain size. Once they have reached this size, however, it does not make economic sense for them to continue taking out informal credits, and thus they face a growth constraint imposed by the credit market. Medium-sized enterprises earn a lower RoI than small ones, which is why borrowing in the informal credit market is not a worthwhile option for them. Moreover, they do not have access to credit from formal financial institutions, and are thus excluded from obtaining any kind of financing in either of the two credit markets. As the result of free, unregulated market forces we get a stable equilibrium in which the credit market is segmented into an informal (small loan) segment, a formal (large loan) segment and, in between, a "non-market" (medium loan) segment.
The extension of long-term loans, e.g. to finance housing, is adversely affected by inflation. For one thing, the higher nominal interest rates charged by the banks in response to inflation mean that borrowers have to make (nominally) higher interest payments, which unnecessarily reduces their borrowing capacity. For another, long-term loans with variable interest rates increase the probability that borrowers will become unable to meet their payment obligations. The present paper examines these two assertions in detail. At the same time, it presents a concept for substantially reducing the weaknesses of conventional lending methodologies. We start by investigating the consequences of a stable inflation rate on the borrowing capacity of credit clients, then go on to analyze the impact of fluctuating inflation rates on the risk of default.
Mehr als 18 Milliarden Euro hat die Commerzbank im Zuge der Finanzkrise in Form von staatlichen Garantien, Kapitalspritzen oder Einlagen erhalten. Auch die Hypo Real Estate, die WestLB, die SachsenLB und die IKB profitierten von Stützungsmaßnahmen. Die EU genehmigte diese und andere staatlichen Hilfsmaßnahmen. Grundsätzlich sind staatliche Stützungsmaßnahmen jedoch als wirtschaftlicher Vorteil zu werten und damit zunächst eine verbotene Beihilfe. In seinem Working Paper betrachtet Tuschl die rechtlichen Grundlagen des EU-Beihilferechts und zeigt die teilweise differierende Praxis der EU-Kommission auf.
Using a unique, hand-collected database of all venture-backed firms listed on Germany´s Neuer Markt, we analyze the history of venture capital financing of these firms before the IPO and the behavior of venture capitalists at the IPO. We can detect significant differences in the behavior and characteristics of German vs. foreign venture capital firms. The discrepancy in the investment and divestment strategies may be explained by the grandstanding phenomenon, the value-added hypothesis and certification issues. German venture capitalists are typically younger and smaller than their counterparts from abroad. They syndicate less. The sectoral structure of their portfolios differs from that of foreign venture capital firms. We also find that German venture capitalists typically take companies with lower offering volumes on the market. They usually finance firms in a later stage, carry through fewer investment rounds and take their portfolio firms public earlier. In companies where a German firm is the lead venture capitalist, the fraction of equity held by the group of venture capitalists is lower, their selling intensity at the IPO is higher and the committed lock-up period is longer.
We analyze the venture capitalist´s decision on the timing of the IPO, the offer price and the fraction of shares he sells in the course of the IPO. A venture capitalist may decide to take a company public or to liquidate it after one or two financing periods. A longer venture capitalist´s participation in a firm (later IPO) may increase its value while also increasing costs for the venture capitalist. Due to his active involvement, the venture capitalist knows the type of firm and the kind of project he finances before potential new investors do. This information asymmetry is resolved at the end of the second period. Under certain assumptions about the parameters and the structure of the model, we obtain a single equilibrium in which high-quality firms separate from low-quality firms. The latter are liquidated after the first period, while the former go public either after having been financed by the venture capitalist for two periods or after one financing period using a lock-up. Whether a strategy of one or two financing periods is chosen depends on the consulting intensity of the project and / or on the experience of the venture capitalist. In the separating equilibrium, the offer price corresponds to the true value of the firm. An earlier version of this paper appeared as: The Decision of Venture Capitalists on Timing and Extent of IPOs (ZEW Discussion Paper No. 03-12). This version July 2003.
This paper aims to analyze the impact of different types of venture capitalists on the performance of their portfolio firms around and after the IPO. We thereby investigate the hypothesis that different governance structures, objectives and track record of different types of VCs have a significant impact on their respective IPOs. We explore this hypothesis by using a data set embracing all IPOs which occurred on Germany's Neuer Markt. Our main finding is that significant differences among the different VCs exist. Firms backed by independent VCs perform significantly better two years after the IPO compared to all other IPOs and their share prices fluctuate less than those of their counterparts in this period of time. Obviously, independent VCs, which concentrated mainly on growth stocks (low book-to-market ratio) and large firms (high market value), were able to add value by leading to less post-IPO idiosyncratic risk and more return (after controlling for all other effects). On the contrary, firms backed by public VCs (being small and having a high book-to-market ratio) showed relative underperformance. Klassifikation: G10, G14, G24 . 29th January 2004 .
This paper sets out to analyze the influence of different types of venture capitalists on the performance of their portfolio firms around and after IPO. We investigate the hypothesis that different governance structures, objectives, and track records of different types of VCs have a significant impact on their respective IPOs. We explore this hypothesis using a data set embracing all IPOs that have occurred on Germany's Neuer Markt. Our main finding is that significant differences among the different VCs exist. Firms backed by independent VCs perform significantly better two years after IPO as compared to all other IPOs, and their share prices fluctuate less than those of their counterparts in this period of time. On the contrary, firms backed by public VCs show relative underperformance. The fact that this could occur implies that market participants did not correctly assess the role played by different types of VCs.
This paper contributes a multivariate forecasting comparison between structural models and Machine-Learning-based tools. Specifically, a fully connected feed forward non-linear autoregressive neural network (ANN) is contrasted to a well established dynamic stochastic general equilibrium (DSGE) model, a Bayesian vector autoregression (BVAR) using optimized priors as well as Greenbook and SPF forecasts. Model estimation and forecasting is based on an expanding window scheme using quarterly U.S. real-time data (1964Q2:2020Q3) for 8 macroeconomic time series (GDP, inflation, federal funds rate, spread, consumption, investment, wage, hours worked), allowing for up to 8 quarter ahead forecasts. The results show that the BVAR improves forecasts compared to the DSGE model, however there is evidence for an overall improvement of predictions when relying on ANN, or including them in a weighted average. Especially, ANN-based inflation forecasts improve other predictions by up to 50%. These results indicate that nonlinear data-driven ANNs are a useful method when it comes to macroeconomic forecasting.
Central bank intervention in the form of quantitative easing (QE) during times of low interest rates is a controversial topic. The author introduces a novel approach to study the effectiveness of such unconventional measures. Using U.S. data on six key financial and macroeconomic variables between 1990 and 2015, the economy is estimated by artificial neural networks. Historical counterfactual analyses show that real effects are less pronounced than yield effects.
Disentangling the effects of the individual asset purchase programs, impulse response functions provide evidence for QE being less effective the more the crisis is overcome. The peak effects of all QE interventions during the Financial Crisis only amounts to 1.3 pp for GDP growth and 0.6 pp for inflation respectively. Hence, the time as well as the volume of the interventions should be deliberated.
Much has been written on the success of the Indian software industry, enumerating systemic factors like first-class higher education and research institutions, both public and private; low labour costs, stimulating (state) policies etc. However, although most studies analyzing the 'Indian' software industry cover essentially the South (and West) Indian clusters, this issue has not been tackled explicitly. This paper supplements the economic geography explanations mentioned above with the additional factor social capital, which is not only important within the region, but also in transnational (ethnic) networks linking Indian software clusters with the Silicon Valley. In other words, spatial proximity is complemented with cultural proximity, thereby, extending the system of innovation. The main hypothesis is that some Indian regions are more apt to economic development and innovation due to their higher affinity to education and learning, as well as, their more general openness, which has been a main finding of my interviews. In addition, the transnational networks of Silicon Valley Indians seem to be dominated by South Indians, thus, corroborating the regional clustering of the Indian software industry. JEL Classifications: O30, R12, Z13, L86
Mit einem um die Behandlungskapazität des Gesundheitssystems erweiterten epidemiologischen SIRD-Modell werden Mechanismen und Dynamik einer Virusepidemie wie Corona anhand von stilisierten politischen Reaktionsmustern (Ignore, Shutdown, Ignore-Shutdown-Relax) simuliert. Ferner werden aus dem Modell Lehren für die statistische Analyse von Corona gezogen, wie die Aussagekraft publizierter Verdopplungszeiten und Reproduktionszahlen. Die Dunkelziffer unbestätigter Fälle und die im Epidemieverlauf variable Genauigkeit von medizinischen Infektionstests werden diskutiert. Zur Messung der medizinischen Kosten von Corona sowie für regionale und internationale Vergleiche wird ein Schadensindex der verlorenen Lebenszeit vorgeschlagen. Zuletzt geht die Arbeit kurz auf die ökonomischen Kosten von Corona in Deutschland ein.
Für Zwecke des privaten Konsums werden ständig Gegenwarts- und Zukunftsgüter bewertet und gehandelt. Ein zuverlässiges und umfassendes Maß für die allgemeine Kaufkraft des Geldes und deren Veränderung sollte diesem Grundsachverhalt Rechnung tragen. Im Unterschied zu konventionellen statistischen Verbraucherpreisindizes ist ein ökonomischer Lebenskostenindex intertemporal angelegt, da er die effektiven Konsumgüterpreise (Effektivpreise) über den Planungshorizont der privaten Haushalte bündelt. Ein Preisstabilitätsstandard, der diesen Zusammenhang ausblendet, ist tendenziell verzerrt und leistet einer asymmetrischen Geldpolitik Vorschub.
Effektivpreise sind Gegenwartspreise für künftigen Konsum, sie berücksichtigen Güterpreise und Zinsen bzw. Vermögenspreisänderungen, sind konsumtheoretisch und wohlfahrtsökonomisch fundiert und bilden die zentralen Bausteine für die Modellklasse der ökonomischen Lebenskostenindizes. Nutzentheoretisch gesehen sind Effektivpreise bewerteter Grenznutzen der letzten konsumierten Gütereinheit, und die daraus abgeleiteten Effektiven Inflationsraten sind intertemporale Grenzraten der Substitution.
Die Autoren entwickeln einen intertemporalen Lebenskostenindex auf der Grundlage des Konzepts der Effektivpreise und stellen empirische Zeitreihen und kohortenspezifische Szenarioanalysen für Deutschland vor.
Discussions regarding the planned European Deposit Insurance Scheme (EDIS), the missing third pillar of the European Banking Union, have been ongoing since the Commission published its initial legisla-tive proposal in 2015. A breakthrough in negotiations has yet to be achieved. The gridlock on EDIS is most commonly attributed to moral hazard concerns over insufficient risk reduction harboured on the side of northern member states, particularly Germany, due to the weak state of some other member states’ banking sectors. While moral hazard based on uneven risk reduction is helpful for explaining divergent member-state preferences on the scope of necessary risk reduction, this does not explain preferences on the institutional design of EDIS. In this paper, we argue that contrary to persistent differences on necessary risk reduction, preferences regarding the institutional design of EDIS have become more closely aligned. We analyse how preferences on EDIS developed in the key member states of Germany, France, and Italy. In all sampled countries, we find path-dependent benefits con-nected to the current design of national Deposit Guarantee Schemes (DGS) that shifted preferences of the banking sector or significant subsectors in favour of retaining national DGSs. Overall, given that a compromise on risk-reduction can be accomplished, we argue that current preferences in these key member states provide an opportunity to implement EDIS in the form of a reinsurance system that maintains national DGSs in combination with a supranational fund.
Self-control failure is among the major pathologies (Baumeister et al. (1994)) affecting individual investment decisions which has hardly been measurable in empirical research. We use cigarette addiction identified from checking account transactions to proxy for low self-control and compare over 5,000 smokers to 14,000 nonsmokers. Smokers self-directing their investment trade more frequently, exhibit more biases and achieve lower portfolio returns. We also find that smokers, some of which might be aware of their limited levels of self-control, exhibit a higher propensity than nonsmokers to delegate decision making to professional advisors and fund managers. We document that such precommitments work successfully.
In an earlier paper, I proposed a system for evaluating the relative descriptivity of lexical items in a consistent manner in terms of the interrelations of three metrics. The first of these, including five possible degrees of descriptivity, is based on the premise that the sum of the meaningful parts of a given form is or is not equal to the meaning of the whole. The second, also composed of five degrees, is based on paraphrase-term relations in which the logical quantifiers: all, some and no, are applied to the terms of the paraphrase in one test and to the meaningful parts of the term (linguistic form) in the reversibility test. Both tests are applied in the form of logical propositions. The third metric, with three degrees, deals with the relative explicitness of the meaningful parts of a given form: explicit, implicit or neither. […] This system was then tested in a pilot study involving the fairly limited and semantically homogeneous lexical domain of body-part terms in a specific language, Finnish. The purpose of the present paper is to subject comparable data from other languages to the same kind of analysis and compare the results in order to ascertain whether the generalizations arrived at with the Finnish data also hold for the other languages or, more specifically, which of these generalizations are more or less universal and which language or language-type specific? The additional languages to be examined here are: French, German, Ewe, Maasai and Swahili.