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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.
This thesis consist of three chapters of which each investigates a topic from financial and monetary economics. In the first chapter a novel method to analyze the monetary policy of central banks is presented. In the second chapter (joint work with Professor Michael Binder, Goethe-University Frankfurt) the effects of conditional loan programs of the International Monetary Fund (IMF) on participating countries' output growth are investigated. In the third chapter (joint work with Professor Jan Pieter Krahnen, Goethe-University Frankfurt) a network model of interconnected bank balance sheets which gives rise to systemic risk is developed and used to analyze the implications of a bank levy related to banks' contribution to systemic risk. All three chapters give important insights to the policy design of macroeconomic institutions such as central banks, the IMF, and agencies charged with macroprudential supervision.
We show that average excess returns during the last two years of the presidential cycle are significantly higher than during the first two years: 9.8 percent over the period 1948 – 2008. This pattern in returns cannot be explained by business-cycle variables capturing time-varying risk premia, differences in risk levels, or by consumer and investor sentiment. In this paper, we formally test the presidential election cycle (PEC) hypothesis as the alternative explanation found in the literature for explaining the presidential cycle anomaly. PEC states that incumbent parties and presidents have an incentive to manipulate the economy (via budget expansions and taxes) to remain in power. We formulate eight empirically testable propositions relating to the fiscal, monetary, tax, unexpected inflation and political implications of the PEC hypothesis. We do not find statistically significant evidence confirming the PEC hypothesis as a plausible explanation for the presidential cycle effect. The existence of the presidential cycle effect in U.S. financial markets thus remains a puzzle that cannot be easily explained by politicians employing their economic influence to remain in power. JEL Classification: E32; G14; P16 Keywords: Political Economy, Market Efficiency, Anomalies, Calendar Effects
Capturing the zero: a new class of zero-augmented distributions and multiplicative error processes
(2010)
We propose a novel approach to model serially dependent positive-valued variables which realize a non-trivial proportion of zero outcomes. This is a typical phenomenon in financial time series observed on high frequencies, such as cumulated trading volumes or the time between potentially simultaneously occurring market events. We introduce a flexible pointmass mixture distribution and develop a semiparametric specification test explicitly tailored for such distributions. Moreover, we propose a new type of multiplicative error model (MEM) based on a zero-augmented distribution, which incorporates an autoregressive binary choice component and thus captures the (potentially different) dynamics of both zero occurrences and of strictly positive realizations. Applying the proposed model to high-frequency cumulated trading volumes of liquid NYSE stocks, we show that the model captures both the dynamic and distribution properties of the data very well and is able to correctly predict future distributions. Keywords: High-frequency Data , Point-mass Mixture , Multiplicative Error Model , Excess Zeros , Semiparametric Specification Test , Market Microstructure JEL Classification: C22, C25, C14, C16, C51
It is theoretically clear and may be verified empirically that efficient financial markets can make it less necessary for policy to try and offset the welfare effects of labour income risk and unequal consumption dynamics. The literature has also pointed out that, since international competition exposes workers to new sources of risk at the same time as it makes it easier for individual choices to undermine collective policies, international economic integration makes insurance-oriented government policies more beneficial as well as more difficult to implement. This paper reviews the economic mechanisms underlying these insights and assesses their empirical relevance in cross-country panel data sets. Interactions between indicators of international economic integration, of government economic involvement, and of financial development are consistent with the idea that financial market development can substitute public schemes when economic integration calls for more effective household consumption smoothing. The paper’s theoretical perspective and empirical evidence suggest that to the extent that governments can foster financial market development by appropriate regulation and supervision, they should do so more urgently at times of intense and increasing internationalization of economic relationships. JEL Classification: G1, E21
This paper provides an overview of conceptual issues and recent research findings concerning the structure and the role of financial systems and an introduction into the new research area of comparative financial systems. The authors start by pointing out the importance of financial systems in general and then sketch different ways of describing and analysing national financial systems. They advocate using what they call a “systemic approach”. This approach focuses on the fit between the various elements that constitute any financial system as a major determinant of how well a given financial system performs its functions. In its second part the paper discusses recent research concerning the relationships between financial sector development and general economic growth and development. The third part is dedicated to comparative financial systems. It first analyses the similarities and, more importantly, the differences of the financial systems of major industrialised countries and points out that these differences seem to remain in existence in spite of the current wave of liberalisation, deregulation and globalisation. This leads to the concluding discussion of what the systemic approach suggests with respect to the question of whether the financial systems of different countries are likely to converge to a common structure. Key words: Financial sector, financial system, growth and development, convergence JEL classification: G32, G34, G38
What constitutes a financial system in general and the German financial system in particular?
(2003)
This paper is one of the two introductory chapters of the book "The German Financial System". It first discusses two issues that have a general bearing on the entire book, and then provides a broad overview of the German financial system. The first general issue is that of clarifying what we mean by the key term "financial system" and, based on this definition, of showing why the financial system of a country is important and what it might be important for. Obviously, a definition of its subject matter and an explanation of its importance are required at the outset of any book. As we will explain in Section II, we use the term "financial system" in a broad sense which sets it clearly apart from the narrower concept of the "financial sector". The second general issue is that of how financial systems are described and analysed. Obviously, the definition of the object of analysis and the method by which the object is to be analysed are closely related to one another. The remainder of the paper provides a general overview of the German financial system. In addition, it is intended to provide a first indication of how the elements of the German financial system are related to each other, and thus to support our claim from Section II that there is indeed some merit in emphasising the systemic features of financial systems in general and of the German financial system in particular. The chapter concludes by briefly comparing the general characteristics of the German financial system with those of the financial systems of other advanced industrial countries, and taking a brief look at recent developments which might undermine the "systemic" character of the German financial system.
Major differences between national financial systems might make a common monetary policy difficult. As within Europe, Germany and the United Kingdom differ most with respect to their financial systems, the present paper addresses its topic under the assumption that the United Kingdom is already a part of EMU. Employing a comprehensive concept of a financial system, the author shows that there are indeed profound differences between the national financial systems of Germany and the United Kingdom. But he argues that these differences are not likely to create great problems for a common monetary policy. In the context of the present paper, one important difference between the two financial systems refers to the structure of the respective financial sector and, as a consequence, to the strength with which a given monetary policy impulse set by the central bank is passed on to the financial sector. The other important difference refers to the typical relationship between the banks and the business sector in each country which determines to what extent the financial sectors and especially the banks pass on pressure exerted on them by a monetary policy authority to their clients in their national business sector. In Germany, the central bank has a stronger influence on the financial sector than in England, while, for systemic reasons, German banks tend to soften monetary policy pressures on their customers more than British banks do. As far as the transmission of a restrictive monetary policy of the ECB to the real economy is concerned, these two differences tend to offset each other. This is good news for the advocates of a monetary union as it eases the task of the ECB when it comes to determining the strength of its monetary policy measures.