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The currrent debate on monetary and fiscal policy is heavily influenced by estimates of the equilibrium real interest rate. Beyer and Wieland re-estimate the U.S. equilibrium rate with the methodology of Laubach and Williams and further modifications. They provide new estimates for the United States, the euro area and Germany and subject them to sensitivity tests. Beyer and Wieland conclude that due to the great uncertainty and sensitivity, the observed decline in the estimates is not a reliable indicator of a need for expansionary monetary and fiscal policy. Yet, if those estimates are employed to determine the appropriate monetary policy stance, such estimates are better used together with the consistent estimate of the level of potential output.
This paper reviews social network analysis (SNA) as a method to be utilized in biographical research which is a novel contribution. We argue that applying SNA in the context of biography research through standardized data collection as well as visualization of networks can open up participants’ interpretations of relations throughout their lives, and allow a creative and innovative way of data collection that is responsive to participants’ own meanings and associations while allowing the researchers to conduct systematical data analysis. The paper discusses the analytical potential of SNA in biographical research, where the efficacy of this method is critically discussed, together with its limitations, and its potential within the context of biographical research.
The impact of network connectivity on factor exposures, asset pricing and portfolio diversification
(2017)
This paper extends the classic factor-based asset pricing model by including network linkages in linear factor models. We assume that the network linkages are exogenously provided. This extension of the model allows a better understanding of the causes of systematic risk and shows that (i) network exposures act as an inflating factor for systematic exposure to common factors and (ii) the power of diversification is reduced by the presence of network connections. Moreover, we show that in the presence of network links a misspecified traditional linear factor model presents residuals that are correlated and heteroskedastic. We support our claims with an extensive simulation experiment.
For some time now, structural macroeconomic models used at central banks have been predominantly New Keynesian DSGE models featuring nominal rigidities and forwardlooking decision-making. While these features are widely deemed crucial for policy evaluation exercises, most central banks have added more detailed characterizations of the financial sector to these models following the Great Recession in order to improve their fit to the data and their forecasting performance. We employ a comparative approach to investigate the characteristics of this new generation of New Keynesian DSGE models and document an elevated degree of model uncertainty relative to earlier model generations. Policy transmission is highly heterogeneous across types of financial frictions and monetary policy causes larger effects, on average. The New Keynesian DSGE models we analyze suggest that a simple policy rule robust to model uncertainty involves a weaker response to inflation and the output gap in the presence of financial frictions as compared to earlier generations of such models. Leaning-against-the-wind policies in models of this class estimated for the Euro Area do not lead to substantial gains. With regard to forecasting performance, the inclusion of financial frictions can generate improvements, if conditioned on appropriate data. Looking forward, we argue that model-averaging and embracing alternative modelling paradigms is likely to yield a more robust framework for the conduct of monetary policy.
Causality is a widely-used concept in theoretical and empirical economics. The recent financial economics literature has used Granger causality to detect the presence of contemporaneous links between financial institutions and, in turn, to obtain a network structure. Subsequent studies combined the estimated networks with traditional pricing or risk measurement models to improve their fit to empirical data. In this paper, we provide two contributions: we show how to use a linear factor model as a device for estimating a combination of several networks that monitor the links across variables from different viewpoints; and we demonstrate that Granger causality should be combined with quantile-based causality when the focus is on risk propagation. The empirical evidence supports the latter claim.
We propose a long-run risk model with stochastic volatility, a time-varying mean reversion level of volatility, and jumps in the state variables. The special feature of our model is that the jump intensity is not affine in the conditional variance but driven by a separate process. We show that this separation of jump risk from volatility risk is needed to match the empirically weak link between the level and the slope of the implied volatility smile for S&P 500 options.
Rechtspopulistische Bewegungen machen sich zur Zeit in vielen westlichen Staaten zum Sprachrohr angeblich bisher unterdrückter Bevölkerungsgruppen und Meinungen. Die identitäre Bewegung entwickelt diesen Ansatz weiter zu einem Projekt der autoritären Staatlichkeit gegen Multikulturalismus, Islam und Einwanderung. Dabei verbindet sie ihre Kampagne für einen ethnisch geschlossen Nationalstaat mit der Kritik an der kapitalistischen Globalisierung. Mit einem Sprachduktus, der Politik emotionalisiert, wird durch «geistige Verschärfung» das Programm eines defensiven Ethnonationalismus entfaltet. Dieser beruft sich auf Traditionsbestandteile eines völkischen Antimodernismus und eine von dem russischen Philosophen Alexander Dugin entworfene eurasische Geopolitik.
Ein europäischer Keynesianismus als Grundlage für ein gesamteuropäisches Wirtschaftskonzept würde als offensive Gegenstrategie die Idee einer sozialstaatlichen Erneuerung propagieren können. Zudem sind Akteure aus der Zivilgesellschaft aufgefordert, gegen Fremdenfeindlichkeit und Orientierungsverlust aufklärerisch zu wirken.
Das Clearing von Euro-OTC-Derivaten post Brexit – eine Analyse der vorliegenden Kostenschätzungen
(2017)
Im Zusammenhang mit dem Brexit wird über die Kosten einer Relokation des Clearing des Euro-OTC-Derivate-Geschäftes auf ein EU-CCP diskutiert. Das vorliegende Papier zeigt, dass die bislang vorliegenden Kostenschätzungen, die von Kosten in Höhe von bis zu USD 100 Mrd. für einen Zeitraum von fünf Jahren ausgehen, viel zu hoch sind. Die erwarteten Kosten einer Relokation liegen vielmehr bei ca. USD 0,6 Mrd. p.a. bzw. ca. USD 3,2 Mrd. für eine Übergangsphase von fünf Jahren. Angesichts der hohen Bedeutung von systemrelevanten CCPs für die Stabilität der Eurozone sollten diese Kosten nicht entscheidungsrelevant für eine Relokation sein.
In the context of the upcoming Brexit, a relocation of the clearing of euro-OTC derivatives for EU-based firms is the subject of controversial discussion. The opponents of a relocation argue that a relocation would cause additional costs for market participants of up to USD 100 bn over a period of 5 years. This paper shows that this cost estimate is fairly unrealistic and that relocation costs would amount to approximately USD 0.6 bn p.a., which translates to cumulative costs of around USD 3.2 bn for a transition period of 5 years. In light of the strategic importance of systemically relevant CCPs for the financial stability of the eurozone, the potential relocation costs should not be a decision criterion.
Financial market interactions can lead to large and persistent booms and recessions. Instability is an inherent threat to economies with speculative financial markets. A central bank’s interest rate setting can amplify the expectation feedback in the financial market and this can lead to unstable dynamics and excess volatility. The paper suggests that policy institutions may be well-advised to handle tools like asset price targeting with care since such instruments might add a structural link between asset prices and macroeconomic aggregates. Neither stock prices nor indices are a good indicator to base decisions on.