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Telemonitoring devices can be used to screen consumer characteristics and mitigate information asymmetries that lead to adverse selection in insurance markets. Nevertheless, some consumers value their privacy and dislike sharing private information with insurers. In a secondbest efficient Miyazaki-Wilson-Spence (MWS) framework, we allow consumers to reveal their risk type for an individual subjective cost and show analytically how this affects insurance market equilibria as well as social welfare. We find that information disclosure can substitute deductibles for consumers whose transparency aversion is sufficiently low. This can lead to a Pareto improvement of social welfare. Yet, if all consumers are offered cross-subsidizing contracts, the introduction of a screening contract decreases or even eliminates cross-subsidies. Given the prior existence of a cross-subsidizing MWS equilibrium, utility is shifted from individuals who do not reveal their private information to those who choose to reveal. Our analysis informs the discussion on consumer protection in the context of digitalization. It shows that new technologies challenge cross-subsidization in insurance markets, and it stresses the negative externalities that digitalization has on consumers who are unwilling to take part in this
development
We prove the existence of an equilibrium in competitive markets with adverse selection in the sense of Miyazaki (1977), Wilson (1977), and Spence (1978) when the distribution of unobservable risk types is continuous. Our proof leverages the finite-type proof in Spence (1978) and a limiting argument akin to Hellwig (2007)’s study of optimal taxation.
Through the lens of market participants' objective to minimize counterparty risk, we provide an explanation for the reluctance to clear derivative trades in the absence of a central clearing obligation. We develop a comprehensive understanding of the benefits and potential pitfalls with respect to a single market participant's counterparty risk exposure when moving from a bilateral to a clearing architecture for derivative markets. Previous studies suggest that central clearing is beneficial for single market participants in the presence of a sufficiently large number of clearing members. We show that three elements can render central clearing harmful for a market participant's counterparty risk exposure regardless of the number of its counterparties: 1) correlation across and within derivative classes (i.e., systematic risk), 2) collateralization of derivative claims, and 3) loss sharing among clearing members. Our results have substantial implications for the design of derivatives markets, and highlight that recent central clearing reforms might not incentivize market participants to clear derivatives.
Frankfurt ist Knotenpunkt globaler Güter-, Finanz-, Wissens- und Migrationsbewegungen. Die Arbeitsmärkte und -verhältnisse in der Stadt sind Ausdruck einer globalen Verwobenheit, die diskursiv oft mit dem Label der ›Global City‹ markiert wird. In einer Zeit, in der Arbeit als Feld der Produktion und Reproduktion weitreichenden Transformationsprozessen ausgesetzt ist, in der das sogenannte Normalarbeitsverhältnis zunehmend erodiert, in der Arbeitsverhältnisse oft räumlich, sozial und zeitlich entgrenzt und flexibilisiert sind und in der gut bezahlte Jobs und schlecht- bezahlte, teils prekarisierte Formen der Beschäftigung koexistieren – zum Teil im gleichen Betrieb –, muss es Aufgabe wirtschaftsgeographischer Forschung sein, die Lebenswelten von Arbeitenden in einer räumlichen Perspektive zu beleuchten. Genau dies will der vorliegende Band tun. Er versammelt engagierte, theoretisch gesättigte und empirisch geerdete Beiträge von Studierenden des Instituts für Humangeographie, die einen kritischen Blick auf die Formen, Praktiken, Beziehungen und gesellschaftliche Einbettung von Arbeit in unterschiedlichen Branchen in der ›Global City‹ Frankfurt werfen.
The Eastern Steppe of Mongolia is one of the world's largest mostly intact grassland ecosystems and is characterised by a close coupling of societal and natural processes. In this ecosystem, mobility is one of the key characteristics of wildlife and human societies alike. The current economic development of Mongolia is accompanied by extensive societal transformation and changes in nomadic lifestyles, which potentially affects the unique steppe ecosystem and its biodiversity. The changing lifestyles are mainly characterised by rural-urban migration, resulting in reduced mobility of herders and their livestock, and presumably affecting wildlife. The question is how mobility can be fostered under these transformation processes. Time is pressing as a new generation is born which is growing up in urban environments and with new skill sets but a potential loss of the tight connection to nature and the nomadic lifestyle.
In these volumes, we are very pleased to present a collection of papers based on talks and posters at Sinn und Bedeutung 22, which took place in Berlin and Potsdam on September 7-10, 2017, jointly organized by the Leibniz-Centre for General Linguistics (ZAS) and the University of Potsdam.
SuB22 received 183 submitted abstracts. Out of these, the organizing committee selected 39 oral presentations in the main session, 4 oral presentations in the special session ‘Semantics and Natural Logic’, and 24 poster presentations. There were an additional 6 invited talks. In total, 58 of these contributions appear in paper form in the present volumes.
In these volumes, we are very pleased to present a collection of papers based on talks and posters at Sinn und Bedeutung 22, which took place in Berlin and Potsdam on September 7-10, 2017, jointly organized by the Leibniz-Centre for General Linguistics (ZAS) and the University of Potsdam.
SuB22 received 183 submitted abstracts. Out of these, the organizing committee selected 39 oral presentations in the main session, 4 oral presentations in the special session ‘Semantics and Natural Logic’, and 24 poster presentations. There were an additional 6 invited talks. In total, 58 of these contributions appear in paper form in the present volumes.
Our recently developed LRSX Tool implements a technique to automatically prove the correctness of program transformations in higher-order program calculi which may permit recursive let-bindings as they occur in functional programming languages. A program transformation is correct if it preserves the observational semantics of programs- In our tool the so-called diagram method is automated by combining unification, matching, and reasoning on alpha-renamings on the higher-order metalanguage, and automating induction proofs via an encoding into termination problems of term rewrite systems. We explain the techniques, we illustrate the usage of the tool, and we report on experiments.
We explore space improvements in LRP, a polymorphically typed call-by-need functional core language. A relaxed space measure is chosen for the maximal size usage during an evaluation. It Abstracts from the details of the implementation via abstract machines, but it takes garbage collection into account and thus can be seen as a realistic approximation of space usage. The results are: a context lemma for space improving translations and for space equivalences; all but one reduction rule of the calculus are shown to be space improvements, and the exceptional one, the copy-rule, is shown to increase space only moderately.
Several further program transformations are shown to be space improvements or space equivalences, in particular the translation into machine expressions is a space equivalence. These results are a step Forward in making predictions about the change in runtime space behavior of optimizing transformations in callbyneed functional languages.
Exploiting the natural experiment of the German reunification, we examine how consumers adapt to a new environment in their macroeconomic forecasting. We document that East Germans expect higher in inflation and make larger forecast errors than West
Germans even decades after reunification. Differences in consumption baskets, financial literacy, risk aversion or trust in the central bank cannot fully account for these patterns. We find most support for the explanation that East Germans, who were used to a strong norm of zero inflation, persistently overadjusted the level of their expectations in the face of the initial inflation shock in reunified Germany. Our findings suggest that large changes in the economic environment can permanently impede people's ability to form accurate macroeconomic expectations, with an important role for the interaction of old norms and new experiences around the event.
Policymakers attach an important role to the macroeconomic outlook of households. Using a representative online panel form the U.S., the authors examine how individuals' macroeconomic expectations causally affect their personal economic prospects and their behavior and provide them with different professional forecasts about the likelihood of a recession. The authors find that groups with the largest exposure to aggregate risk, such as individuals working in cyclical industries, are most likely to respond to an improved macroeconomic outlook, while a large fraction of the population is unlikely to react.
This paper uses unique administrative data and a quasi-field experiment of exogenous allocation in Sweden to estimate medium- and longer-run effects on financial behavior from exposure to financially literate neighbors. It contributes evidence of causal impact of exposure and of a social multiplier of financial knowledge, but also of unfavorable distributional aspects of externalities. Exposure promotes saving in private retirement accounts and stockholding, especially when neighbors have economics or business education, but only for educated households and when interaction possibilities are substantial. Findings point to transfer of knowledge rather than mere imitation or effects through labor, education, or mobility channels.
The recent sovereign debt crisis in the Eurozone was characterized by a monetary policy, which has been constrained by the zero lower bound (ZLB) on nominal interest rates, and several countries, which faced high risk spreads on their sovereign bonds. How is the government spending multiplier affected by such an economic environment?While prominent results in the academic literature point to high government spending multipliers at the ZLB, higher public indebtedness is often associated with small government spending multipliers. I develop a DSGE model with leverage constrained banks that captures both features of this economic environment, the ZLB and fiscal stress. In this model, I analyze the effects of government spending shocks. I find that not only are multipliers large at the ZLB, the presence of fiscal stress can even increase their size. For longer durations of the ZLB,multipliers in this model can be considerably larger than one.
JEL Classification: E32, E 44, E62
Higher capital ratios are believed to improve system-wide financial stability through three main channels: (i) higher loss-absorption capacity, (ii) lower moral hazard, (iii) stabilization of the financial cycle if capital ratios are increased during good times. We examine these mechanisms in a laboratory asset market experiment with indebted participants. We find support for the loss-absorption channel: higher capital ratios reduce the bankruptcy rate. However, we do not find support for the moral hazard channel. Higher capital ratios (insignificantly) increase asset price bubbles, an aggregate measure of excessive risk-taking. Additional evidence suggests that bankruptcy aversion explains this surprising result. Finally, the evidence supports the idea that higher capital ratios in good times stabilize the financial cycle.
Whither artificial intelligence? Debating the policy challenges of the upcoming transformation
(2018)
The School of Salamanca, and Iberian late Scholasticism in general, had the merit of transposing the wisdom of medieval scholasticism into the coordinates of early modernity. Due to the economic growth after the discovery of America, economic terms and moral problems become a central focus for moral theologians. In this article, I consider important key economic concepts that deliver a surprising wealth of insights into the modernization brought about by the leading scholars of the time. Social mobility, the principle of majority decision, the inviolability of property, human rights of the person, limited political power of the pope, and other key concepts that were decisive for the development of democracy and modernity are to be found in the works of the School of Salamanca in connection with economic issues.
Distributed ledger technologies rely on consensus protocols confronting traders with random waiting times until the transfer of ownership is accomplished. This time consuming settlement process exposes arbitrageurs to price risk and imposes limits to arbitrage. We derive theoretical arbitrage boundaries under general assumptions and show that they increase with expected latency, latency uncertainty, spot volatility, and risk aversion. Using high-frequency data from the Bitcoin network, we estimate arbitrage boundaries due to settlement latency of on average 124 basis points, covering 88% of the observed cross-exchange price differences. Settlement through decentralized systems thus induces non-trivial frictions affecting market efficiency and price formation.
Zum ersten Mal wurde in Deutschland eine groß angelegte wissenschaftliche Studie zur Machbarkeit und zum Nutzen einer säulenübergreifenden Renteninformationsplattform durchgeführt, unter realen Bedingungen und mit mehreren tausend Teilnehmern. Die beiden zentralen Ergebnisse sind, dass ein elektronisches Rentencockpit auch in Deutschland technisch machbar ist und beträchtlichen individuellen Zusatznutzen für die Bürgerinnen und Bürger stiften würde. Die Langfristanalysen der Pilotstudie zeigen, dass selbst die einmalige Schaffung von Rententransparenz für viele Teilnehmer Anlass genug ist, ihren Rentenplan zu überdenken und sich aktiv mit ihrer Altersvorsorge auseinanderzusetzen und ihr Verhalten zu ändern. Teilnehmer mit Zugang zu einem elektronischen Rentencockpit fühlen sich nach der Studie deutlich besser informiert und neigen dazu ihr Sparverhalten stärker anzupassen als Personen ohne Zugang. Die außerordentlich hohe Bereitschaft zur Teilnahme und die Antworten in den Online-Befragungen sind zudem Beleg für den großen Bedarf an systemgestützter, individueller Rententransparenz. Soll ein Rentencockpit Verbreitung in Deutschland finden, scheint eine automatisierte, elektronische Bereitstellung von Vertragsdaten von Seiten der Rententräger jedoch unabdingbar, da die eigenständige Suche und teilmanuelle Bereitstellung von Standmitteilungen für die meisten Studienteilnehmer ein großes Hindernis darstellt.
Much ado about nothing : a study of differential pricing and liquidity of short and long term bonds
(2018)
Are yields of long-maturity bonds distorted by demand pressure of clientele investors, regulatory effects, or default, flight-to-safety or liquidity premiums? Using data on German nominal bonds between 2005 and 2015, we study the differential pricing and liquidity of short and long maturity bonds. We find statistically significant, but economically negligible segmentation in yields and some degree of liquidity segmentation of short-term versus long-term bonds. These results have important policy implications for the e17.5 trillion European pension and insurance industries: long maturity bond yields seem appropriate for the valuation of long-term liabilities.
Das vorliegende Arbeitspapier untersucht Ungleichheit aus verschiedenen interdisziplinären Perspektiven auf Ursachen und Implikationen.
Inhaltsverzeichnis:
Philipp Harms, Claudia Landwehr, Mario Scharfbillig, Daniel Schunk: Ungleichheit: Interdisziplinäre Perspektiven auf Ursachen und Implikationen - Einleitung
Konstantin M. Wacker: Warum wir Ungleichheit verringern müssen, um globale Armut bis 2030 zu beenden
Joachim Klose: Heimatverlust als Indikator zunehmender Ungleichheit
Gunnar Otte: Bildungsforschung und Bildungsreformen
Sibylle Kalmbach: Bildungsgerechtigkeit und Ungleichheit im Hochschulbereich – am Beispiel von Stipendien
Claudia Landwehr und Oliver Tüscher: Ursachen ungleicher politischer Beteiligung
Michael Edinger: Gleicher Zugang zur Macht? Über soziale Schließungsprozesse in der Politik
Sascha Huber: Wählermobilisierung und Ungleichheit in Deutschland: Ein Feldexperiment zur Steigerung der Wahlbeteiligung bei der Landtagswahl in Baden-Württemberg 2016
Tonio Rieger: Der ganzheitliche Ansatz zur Bekämpfung von Langzeitarbeitslosigkeit
A number of recent studies have concluded that consumer spending patterns over the month are closely linked to the timing of income receipt. This correlation is interpreted as evidence of hyperbolic discounting. I re-examine patterns of spending in the diary sample of the U.S. Consumer Expenditure Survey, incorporating information on the timing of the main consumption commitment for most households - their monthly rent or mortgage payment. I find that non-durable and food spending increase with 30-48% on the day housing payments are made, with smaller increases in the days after. Moreover, households with weekly, biweekly and monthly income streams but the same timing of rent/mortgage payments have very similar consumption patterns. Exploiting variation in income, I find that households with extra liquidity decrease non-durable spending around housing payments, especially those households with a large budget share of housing.
A recent US Treasury regulation allowed deferred longevity income annuities to be included in pension plan menus as a default payout solution, yet little research has investigated whether more people should convert some of the $15 trillion they hold in employer-based defined contribution plans into lifelong income streams. We investigate this innovation using a calibrated lifecycle consumption and portfolio choice model embodying realistic institutional considerations. Our welfare analysis shows that defaulting a small portion of retirees’ 401(k) assets (over a threshold) is an attractive way to enhance retirement security, enhancing welfare by up to 20% of retiree plan accruals.
We provide the first partner tenure and rotation analysis for a large cross-section of U.S. publicly listed firms over an extended period. We analyze the effects on audit quality as well as economic tradeoffs with respect to audit hours and fees. On average, we find no evidence for audit quality declines over the tenure cycle and, consistent with the former, little support for fresh-look benefits after five-year mandatory rotations. Nevertheless, partner rotations have significant economic consequences. We find increases in audit fees and decreases in audit hours over the tenure cycle, which differ by partner experience, client size, and competitiveness of the local audit market. Our findings are consistent with efforts by the audit firms to minimize disruptions and audit failures around mandatory rotations. We also analyze special circumstances, such as audit firm or audit team switches and early partner rotations. We show that these situations are more disruptive and more likely to exhibit audit quality effects. In particular, we find that low quality audits give rise to early engagement partner rotations and in this sense have (career) consequences for partners.
Manipulative communications touting stocks are common in capital markets around the world. Although the price distortions created by so-called “pump-and-dump” schemes are well known, little is known about the investors in these frauds. By examining 421 “pump-and-dump” schemes between 2002 and 2015 and a proprietary set of trading records for over 110,000 individual investors from a major German bank, we provide evidence on the participation rate, magnitude of the investments, losses, and the characteristics of the individuals who invest in such schemes. Our evidence suggests that participation is quite common and involves sizable losses, with nearly 6% of active investors participating in at least one “pump-and-dump” and an average loss of nearly 30%. Moreover, we identify several distinct types of investors, some of which should not be viewed as falling prey to these frauds. We also show that portfolio composition and past trading behavior can better explain participation in touted stocks than demographics. Our analysis offers insights into the challenges associated with designing effective investor protection against market manipulation.
An important question in banking is how strict supervision affects bank lending and in turn local business activity. Forcing banks to recognize losses could choke off lending and amplify local economic woes, especially after financial crises. But stricter supervision could also lead to changes in how banks assess loans and manage their loan portfolios. Estimating such effects is challenging. We exploit the extinction of the thrift regulator (OTS) – a large change in prudential supervision, affecting ten percent of all U.S. depository institutions. Using this event, we analyze economic links between strict supervision, bank lending and business activity. We first show that the OTS replacement indeed resulted in stricter supervision of former OTS banks. We then analyze the lending effects of this regulatory change and show that former OTS banks increase small business lending by approximately 10 percent. This increase stems primarily from well capitalized banks and those more affected by the new regime. These findings suggest that stricter supervision operates not only through capital but can also overcome frictions in bank management, leading to more lending and a reallocation of loans. Consistent with the latter, we find increases in business entry and exit in counties with greater expose to OTS banks.
The use of evidence and economic analysis in policymaking is on the rise, and accounting standard setting and financial regulation are no exception. This article discusses the promise of evidence-based policymaking in accounting and financial markets as well as the challenges and opportunities for research supporting this endeavor. In principle, using sound theory and robust empirical evidence should lead to better policies and regulations. But despite its obvious appeal and substantial promise, evidence-based policymaking is easier demanded than done. It faces many challenges related to the difficulty of providing relevant causal evidence, lack of data, the reliability of published research, and the transmission of research findings. Overcoming these challenges requires substantial infrastructure investments for generating and disseminating relevant research. To illustrate this point, I draw parallels to the rise of evidence-based medicine. The article provides several concrete suggestions for the research process and the aggregation of research findings if scientific evidence is to inform policymaking. I discuss how policymakers can foster and support policy-relevant research, chiefly by providing and generating data. The article also points to potential pitfalls when research becomes increasingly policy-oriented.
We examine whether the economy can be insured against banking crises with deposit and loan contracts contingent on macroeconomic shocks. We study banking competition and show that the private sector insures the banking system through such contracts, and banking crises are avoided, provided that failed banks are not bailed out. When risks are large, banks may shift part of them to depositors. In contrast, when banks are bailed out by the next generation, depositors receive non-contingent contracts with high interest rates, while entrepreneurs obtain loan contracts that demand high repayment in good times and low repayment in bad times. As a result, the present generation overinvests, and banks generate large macroeconomic risks for future generations, even if the underlying productivity risk is small or zero. We conclude that a joint policy package of orderly default procedures and contingent contracts is a promising way to reduce the threat of a fragile banking system.
Following the introduction of the one-child policy in China, the capital-labor (K/L) ratio of China increased relative to that of India, and, simultaneously, FDI inflows relative to GDP for China versus India declined. These observations are explained in the context of a simple neoclassical OLG paradigm. The adjustment mechanism works as follows: the reduction in the growth rate of the (urban) labor force due to the one-child policy permanently increases the capital per worker inherited from the previous generation. The resulting increase in China's (domestic K)/L thus "crowds out" the need for FDI in China relative to India. Our paper is a contribution to the nascent literature exploring demographic transitions and their effects on FDI flows.
Based on OECD evidence, equity/housing-price busts and credit crunches are followed by substantial increases in public consumption. These increases in unproductive public spending lead to increases in distortionary marginal taxes, a policy in sharp contrast with presumably optimal Keynesian fiscal stimulus after a crisis. Here we claim that this seemingly adverse policy selection is optimal under rational learning about the frequency of rare capital-value busts. Bayesian updating after a bust implies massive belief jumps toward pessimism, with investors and policymakers believing that busts will be arriving more frequently in the future. Lowering taxes would be as if trying to kick a sick horse in order to stand up and run, since pessimistic markets would be unwilling to invest enough under any temporarily generous tax regime.
We present empirical evidence on the heterogeneity in monetary policy transmission across countries with different home ownership rates. We use household-level data together with shocks to the policy rate identified from high-frequency data. We find that housing tenure reacts more strongly to unexpected changes in the policy rate in Germany and Switzerland –the OECD countries with the lowest home ownership rates– compared with existing evidence for the U.S. An unexpected decrease in the policy rate by 25 basis points increases the home ownership rate by 0.8 percentage points in Germany and by 0.6 percentage points in Switzerland. The response of non-housing consumption in Switzerland is less heterogeneous across renters and mortgagors, and has a different pattern across age groups than in the U.S. We discuss economic explanations for these findings and implications for monetary policy.
Asset transaction prices sampled at high frequency are much staler than one might expect in the sense that they frequently lack new updates showing zero returns. In this paper, we propose a theoretical framework for formalizing this phenomenon. It hinges on the existence of a latent continuous-time stochastic process pt valued in the open interval (0; 1), which represents at any point in time the probability of the occurrence of a zero return. Using a standard infill asymptotic design, we develop an inferential theory for nonparametrically testing, the null hypothesis that pt is constant over one day. Under the alternative, which encompasses a semimartingale model for pt, we develop non-parametric inferential theory for the probability of staleness that includes the estimation of various integrated functionals of pt and its quadratic variation. Using a large dataset of stocks, we provide empirical evidence that the null of the constant probability of staleness is fairly rejected. We then show that the variability of pt is mainly driven by transaction volume and is almost unaffected by bid-ask spread and realized volatility.
Through the lens of market participants' objective to minimize counterparty risk, we provide an explanation for the reluctance to clear derivative trades in the absence of a central clearing obligation. We develop a comprehensive understanding of the benefits and potential pitfalls with respect to a single market participant's counterparty risk exposure when moving from a bilateral to a clearing architecture for derivative markets. Previous studies suggest that central clearing is beneficial for single market participants in the presence of a sufficiently large number of clearing members. We show that three elements can render central clearing harmful for a market participant's counterparty risk exposure regardless of the number of its counterparties: 1) correlation across and within derivative classes (i.e., systematic risk), 2) collateralization of derivative claims, and 3) loss sharing among clearing members. Our results have substantial implications for the design of derivatives markets, and highlight that recent central clearing reforms might not incentivize market participants to clear derivatives.
A tale of one exchange and two order books : effects of fragmentation in the absence of competition
(2018)
Exchanges nowadays routinely operate multiple, almost identically structured limit order markets for the same security. We study the effects of such fragmentation on market performance using a dynamic model where agents trade strategically across two identically-organized limit order books. We show that fragmented markets, in equilibrium, offer higher welfare to intermediaries at the expense of investors with intrinsic trading motives, and lower liquidity than consolidated markets. Consistent with our theory, we document improvements in liquidity and lower profits for liquidity providers when Euronext, in 2009, consolidated its order ow for stocks traded across two country-specific and identically-organized order books into a single order book. Our results suggest that competition in market design, not fragmentation, drives previously documented improvements in market quality when new trading venues emerge; in the absence of such competition, market fragmentation is harmful.
This paper presents new evidence on the expectation formation process from a Dutch household survey. Households become too optimistic about their future income after their income has improved, consistent with the over-extrapolation of their experience. We show that this effect of experience is persistent and that households over-extrapolate income losses more than income gains. Furthermore, older households over-extrapolate more, suggesting that they did not learn over time to form more accurate expectations. Finally, we study the relationship between expectation errors and consumption. We find that more over-optimistic households intend to consume more and subsequently report higher consumption, even though they do not consume as much as they intended to. These results suggests that overextrapolation hurts consumers and amplify business cycles.
Der Band untersucht die Ursachen, Ausprägungen und Reaktionen auf die Entstehung bzw. Erstarkung populistischer Parteien und Bewegungen in Deutschland und Ostmitteleuropa.
Inhaltsverzeichnis:
Arthur Benz: Populismus als Herausforderung für Wissenschaft und Praxis - Einleitung
Dirk Jörke: Populismus – Ursachen und falsche Antworten
Michael Edinger: Mobilisierung gegen das Establishment. Zu einem Wesensmerkmal populistischer Strömungen
Claudia Landwehr und Nils D. Steiner: Populismus – eine Nachfrageperspektive
Joachim Klose: Ein Land, zwei Perspektiven? Zum Populismusin Ost- und Westdeutschland
Petra Guasti und Lenka Buštíková: Populismus in Ostmitteleuropa und der Verzicht auf Politik
Popularity/Prestige
(2018)
What is the canon? Usually this question is just a proxy for something like, "Which works are in the canon?" But the first question is not just a concise version of the second, or at least it doesn’t have to be. Instead, it can ask what the structure of the canon is - in other words, when things are in the canon, what are they in? This question came to the fore during the project that resulted in Pamphlet 11. The members of that group were looking for morphological differences between the canon and the archive. The latter they define, straightforwardly and capaciously, as "that portion of published literature that has been preserved—in libraries and elsewhere" The canon is a slipperier concept; the authors speak instead of multiple canons, like the books preserved in the Chadwyck-Healey Nineteenth-Century Fiction Collection, the constituents of the six different "best-twentieth century novels" lists analyzed by Mark Algee-Hewitt and Mark McGurl in Pamphlet 8, authors included in the British Dictionary of National Biography, and so forth. [...] This last conundrum points the way out of these difficulties and into a workable model of the structure of the canon. It suggests two different ways of entering the canon: being read by many and being prized by an elite few—or, to use the terms arrived at in Pamphlet 11, popularity and prestige. With these two dimensions, we arrive at a canonical space [...].
The propagation of regional shocks in housing markets: evidence from oil price shocks in Canada
(2018)
Shocks to the demand for housing that originate in one region may seem important only for that regional housing market. We provide evidence that such shocks can also affect housing markets in other regions. Our analysis focuses on the response of Canadian housing markets to oil price shocks. Oil price shocks constitute an important source of exogenous regional variation in income in Canada because oil production is highly geographically concentrated. We document that, at the national level, real oil price shocks account for 11% of the variability in real house price growth over time. At the regional level, we find that unexpected increases in the real price of oil raise housing demand and real house prices not only in oil-producing regions, but also in other regions. We develop a theoretical model of the propagation of real oil price shocks across regions that helps understand this finding. The model differentiates between oil-producing and non-oil-producing regions and incorporates multiple sectors, trade between provinces, government redistribution, and consumer spending on fuel. We empirically confirm the model prediction that oil price shocks are propagated to housing markets in non-oil-producing regions by the government redistribution of oil revenue and by increased interprovincial trade.
We analytically characterize optimal monetary policy for an augmented New Keynesian model with a housing sector. In a setting where the private sector has rational expectations about future housing prices and inflation, optimal monetary policy can be characterized without making reference to housing price developments: commitment to a 'target criterion' that refers to inflation and the output gap only is optimal, as in the standard model without a housing sector. When the policymaker is concerned with potential departures of private sector expectations from rational ones and seeks to choose a policy that is robust against such possible departures, then the optimal target criterion must also depend on housing prices. In the empirically realistic case where housing is subsidized and where monopoly power causes output to fall short of its optimal level, the robustly optimal target criterion requires the central bank to 'lean against' housing prices: following unexpected housing price increases, policy should adopt a stance that is projected to undershoot its normal targets for inflation and the output gap, and similarly aim to overshoot those targets in the case of unexpected declines in housing prices. The robustly optimal target criterion does not require that policy distinguish between 'fundamental' and 'non-fundamental' movements in housing prices.
We establish that the labor market helps discipline asset managers via the impact of fund liquidations on their careers. Using hand-collected data on 1,948 professionals, we find that top managers working for funds liquidated after persistently poor relative performance suffer demotion coupled with a significant loss in imputed compensation. Scarring effects are absent when liquidations are preceded by normal relative performance or involve mid-level employees. Seen through the lens of a model with moral hazard and adverse selection, these results can be ascribed to reputation loss rather than bad luck. The findings suggest that performance-induced liquidations supplement compensation-based incentives.
In talent-intensive jobs, workers’ quality is revealed by their performance. This enhances productivity and earnings, but also increases layoff risk. Firms cannot insure workers against this risk if they compete fiercely for talent. In this case, the more risk-averse workers will choose less quality-revealing jobs. This lowers expected productivity and salaries. Public unemployment insurance corrects this inefficiency, enhancing employment in talent-sensitive industries, consistently with international evidence. Unemployment insurance dominates legal restrictions on firms’ dismissals, which penalize more talent-sensitive firms and thus depress expected productivity. Finally, unemployment insurance fosters education, by encouraging investment in risky human capital that enhances talent discovery.
We assess the relationship between finance and growth over the period 1980-2014. We estimate a cross-country growth regression for 48 countries during 20 periods of 15 years starting in 1980 (to 1995) and ending in 1999 (to 2014). We use OLS and IV estimations and we find that: 1) overall financial development had a positive effect on economic growth during all periods of our sample, i.e., we confirm that from 1980 to 2014 financial services provided by the various financial systems were significant (to various degrees) for firm creation, industrial expansion and economic growth; but that, 2) the structure of financial markets was particularly relevant for economic growth until the financial crisis; while 3) the structure of the banking sector played a major role since; and finally that, 4) the legal system is the primary determinant of the effectiveness of the overall financial system in facilitating innovation and growth in (almost) all of our sample period. Hence, overall our results suggest that the relationship between finance and growth matters but also that it varies over time in strength and in sector origination.
JEL Classification: O16, G16, G20.
Motivated by the observation that survey expectations of stock returns are inconsistent with rational return expectations under real-world probabilities, we investigate whether alternative expectations hypotheses entertained in the asset pricing literature are consistent with the survey evidence. We empirically test (1) the notion that survey forecasts constitute rational but risk-neutral forecasts of future returns, and (2) the notion that survey fore- casts are ambiguity averse/robust forecasts of future returns. We find that these alternative hypotheses are also strongly rejected by the data, albeit for different reasons. Hypothesis (1) is rejected because survey return forecasts are not in line with risk-free interest rates and because survey expected excess returns are predictable. Hypothesis (2) is rejected because agents are not al- ways pessimistic about future returns, instead often display overly optimistic return expectations. We speculate as to what kind of expectations theories might be consistent with the available survey evidence.
The German government has recently adopted a reform package for the statutory pension insurance scheme to ensure that the pension level will not fall below 48% and that the contribution rate will not exceed 20% up to 2025. In addition, there are planned improvements in maternal pensions, pensions for people with reduced earnings capacity and relief for low-income earners. The total extra cost of these measures is estimated at approximately EUR 32bn, to be financed by funds of the statutory pension system and by increased federal subsidies. It is currently unclear how the German pay-as-you-go pension system will be reformed for the period after 2025. The author suggests establishing a “Pension Fund Germany” as a capital-backed fund with a highly diversified investment portfolio. A German sovereign wealth fund of this kind could make an important contribution to greater intergenerational equity. Financing could be provided by, for example, retaining part of the solidarity surcharge on German income tax rather than abolishing it entirely, as is currently envisaged.
Europe is a key normative power. Its legitimacy as a force for ensuring the reign of rule of law in international relations is unparalleled. It also packs an economic punch. In data protection and the fight against cybercrime, European norms have been successfully globalized. The time is right to take the next step: Europe must now become the international normative leader for developing a new deal on internet governance. To ensure this, European powers should commit to rules that work in security, economic development and human rights on the internet and implement them in a reinvigorated IGF.
This paper argues that the introduction of the Banking Recovery and Resolution Directive (BRRD) improved market discipline in the European bank market for unsecured debt. The different impact of the BRRD on bank bonds provides a quasi-natural experiment that allows to study the effect of the BRRD within banks using a difference-in-difference approach. Identification is based on the fact that (otherwise identical) bonds of a given bank maturing before 2016 are explicitly protected from BRRD bail-in. The empirical results are consistent with the hypothesis that debt holders actively monitor banks and that the BRRD diminished bail-out expectations. Bank bonds subject to BRRD bail-in carry a 10 basis points bail-in premium in terms of the yield spread. While there is some evidence that the bail-in premium is more pronounced for non-GSIB banks and banks domiciled in peripheral European countries, weak capitalization is the main driver.
Die Förderung von Fahrradmobilität und öffentlichem Verkehr ist ein wesentlicher Baustein zur Gestaltung einer ökologisch nachhaltigeren, sozial verträglicheren und ökonomisch tragfähigen Verkehrs- und Siedlungsentwicklung in Deutschland. Mit einer verbesserten intermodalen Verknüpfung werden beide Verkehrsträger attraktiver und somit häufiger genutzt. Öffentliche Verkehrsunternehmen gewinnen dadurch vergrößerte Einzugsbereiche von Haltestellen, können Spitzenbelastungen abfedern und verbessern ihr Image. Fahrradfahrenden ermöglicht die Kombination mit öffentlichen Verkehrsmitteln größere Reichweiten, was gerade auch in randstädtischen, suburbanen oder ländlichen Regionen bedeutsam werden kann. Letztlich leistet die Verknüpfung der beiden Verkehrsträger einen Beitrag zur Daseinsvorsorge und für den Klimaschutz.
Der Handlungsleitfaden wurde innerhalb des Forschungsprojektes „Verbesserte Integration des Fahrrads in den öffentlichen Verkehr – Systematische Erschließung von Handlungsoptionen und Bewertung von Best-Practices“ erarbeitet. Das Projekt wurde vom Bundesministerium für Verkehr und digitale Infrastruktur (BMVI) aus Mitteln zur Umsetzung des Nationalen Radverkehrsplans gefördert.
The authors relax the standard assumption in the dynamic stochastic general equilibrium (DSGE) literature that exogenous processes are governed by AR(1) processes and estimate ARMA (p,q) orders and parameters of exogenous processes. Methodologically, they contribute to the Bayesian DSGE literature by using Reversible Jump Markov Chain Monte Carlo (RJMCMC) to sample from the unknown ARMA orders and their associated parameter spaces of varying dimensions.
In estimating the technology process in the neoclassical growth model using post war US GDP data, they cast considerable doubt on the standard AR(1) assumption in favor of higher order processes. They find that the posterior concentrates density on hump-shaped impulse responses for all endogenous variables, consistent with alternative empirical estimates and the rigidities behind many richer structural models. Sampling from noninvertible MA representations, a negative response of hours to a positive technology shock is contained within the posterior credible set. While the posterior contains significant uncertainty regarding the exact order, the results are insensitive to the choice of data filter; this contrasts with the authors’ ARMA estimates of GDP itself, which vary significantly depending on the choice of HP or first difference filter.