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Die Simpsons in China
(2014)
Selten hat mich jemand so beeindruckt wie die 17-jährige Malala Yousafzai, die heute gemeinsam mit dem indischen Kinderrechtsaktivisten Kailash Satyarthi den Friedensnobelpreis erhalten hat. Aus dem pakistanischen Swat-Tal stammend setzt sie sich seit sie 11 Jahre alt ist für Bildung ein. 2012 überlebte sie ein Attentat der Taliban. Gratulation an diese großartige, mutige junge Frau!
Zuletzt blickte die Welt gespannt zu den Demonstrationen für Demokratie in Hongkong. Doch was bedeuten die Proteste für das chinesische Kernland? Ist eine vergleichbare „Revolution“ dort auch vorstellbar? In zwei Beiträgen geht es um die Situation in Hongkong und mögliche Auswirkungen auf China. Heute: Teil 2.
In den letzten Wochen richtet sich der internationale Fokus auf die Studierendenproteste in Hongkong, die eine Demokratisierung verlangen. Werden die ProtestlerInnen Erfolg haben? Was bedeuten die Proteste für das chinesische Kernland? Ist eine vergleichbare „Revolution“ dort vorstellbar? In zwei Beiträgen geht es um die Situation in Hongkong und die Auswirkungen auf China. Heute: Teil 1.
Letzte Woche argumentierte Stefan Engert in seinem Gastbeitrag für das Bretterblog, Deutsche dürften Israel nicht kritisieren. Das glaube ich nicht. Denn die Lehren aus dem Holocaust können nicht in der Zementierung von Täter- und Opferrolle liegen. Gemeinsame Verantwortung für ein mitmenschliches Umgehen – das ist die Antwort.
Kriege in der Ukraine, Israel/Palästina, im Irak und in Syrien – die Lage um Europa herum ist so dramatisch und tödlich wie lange nicht mehr. Das führt nun auch in Deutschland zu ersten überfälligen Ansätzen einer Diskussion um die eigene außenpolitische Rolle. Was heißt Verantwortung übernehmen heute? Ein Plädoyer.
Schweden hat gewählt. Gravierender als der Regierungswechsel ist aber die Frage nach einem paradigmatischer Wandel in Skandinaviens politisch gewichtigstem Land: Welche Rolle soll der Staat spielen? Was kann dem Markt überlassen werden? Welche Rolle spielen die Rechtsradikalen? Im Zentrum der Diskussion: Bildungs- und Flüchtlingspolitik.
Was wird aus dem Staat und der Souveränität? Dieser Frage geht eine viel versprechende Kasseler Tagung im Januar nach. Das Konferenzthema passt auch hervorragend zu einem der beliebtesten Bretterblog-Beiträge vom Oktober 2012 als ich fragte: Was bleibt von der Souveränität? Ein kurzer Aus- und Rückblick.
Über Ägypten hört man dieser Tage viel. Aber selten scheint es mir derart zum Verständnis beizutragen, wie dann, wenn die Ägypten-Expertin Irene Weipert-Fenner spricht. Im Bretterblog-Interview erläutert sie vor allem ökonomische Hintergründe, die erst die ganze Dimension der Revolutionen von 2011 und 2013 erahnen lassen.
Aus dem Opfer-Ghetto will er raus, will keine Sonderrolle, sondern dass Sinti und Roma endlich als normaler Bestandteil unserer Gesellschaft angesehen werden. Der das im Bretterbloginterview sagt, ist Romani Rose, Vorsitzender des Zentralrats Deutscher Sinti und Roma, von dessen Familie 13 Personen während des Holocausts ermordet wurden. Für mich war es ein sehr bewegendes Gespräch über Geschichte und Gegenwart, Demokratie, Europa, NSU-Mordserie und vieles mehr…
Fragt die Menschen!
(2013)
Die IB hat in den letzten Jahren ein Legitimitätsdefizit internationalen Regierens festgestellt. Häufig gelinge es nicht, die Probleme nachhaltig zu lösen (fehlende Output-Legitimität) und die Beteiligungsmöglichkeiten der Betroffenen seien ebenfalls zu gering (mangelnde Input-Legitimität). Ich meine, wir brauchen vor allem eine Erweiterung der Input-Perspektive: fragt endlich die Menschen!
The effects of public policy programmes which aim at internalising spill-overs due to successful innovation are analysed in a sequential double-sided moral hazard double-sided adverse selection framework. The central focus lies in analysing their impact on contract design. We show that in our framework only ex post grants are a robust instrument for implementing the first-best situation, whereas the success of guarantee programmes, ex ante grants and some public-private partnerships depends strongly on the characteristics of the project: in certain cases they not only give no further incentives but even destroy contract mechanisms and so worsen the outcome.
Over-allotment arrangements are nowadays part of almost any initial public offering. The underwriting banks borrow stocks from the previous shareholders to issue more than the initially announced number of shares. This is combined with the option to cover this short position at the issue price. We present empirical evidence on the value of these arrangements to the underwriters of initial public offerings on the Neuer Markt. The over-allotment arrangement is regarded as a portfolio of a long call option and a short position in a forward contract on the stock, which is different from other approaches presented in the literature.
Given the economically substantial values for these option-like claims we try to identify benefits to previous shareholders or new investors when the company is using this instrument in the process of going public. Although we carefully control for potential endogeneity problems, we find virtually no evidence for a reduction in underpricing for firms using over-allotment arrangements. Furthermore, we do not find evidence for more pronounced price stabilization activities or better aftermarket performance for firms granting an over-allotment arrangement to the underwriting banks.
Discussions of the international dimension of the global economic crisis have frequently focused on the build-up of large current account "imbalances" since the mid-1990s. This paper examines the extent to which the U.S. current account can be understood in a purely real open-economy DSGE model, were agents' perception of long-run growth evolves over time in response to changes in productivity. We first show that long-run growth forecasts based on
ltering actual productivity growth comove strongly with survey measures of expectations. Simulating the model, we
nd that including data on U.S. TFP growth and the world real interest rate can, under standard parametrizations of our model, explain the evolution of the U.S. current account quite closely. With household preference that allow positive labor supply e¤ects after favorable news of future income, we can also generate output movements in line with the data.
The recent financial crisis highlighted the limits of the "originate to distribute" model of banking, but its nexus with the macroeconomy remains unexplored. I build a business cycle model with banks engaging in credit risk transfer (CRT) under informational externalities. Markets for CRT provide liquidity insurance to banks, but the emergence of a pooling equilibrium can also impair the banks’ monitoring incentives. In normal times and in face of standard macro shocks the insurance benefits of CRT prevail and the business cycle is stabilized. In face of financial/liquidity shocks the extent of informational asymmetries is larger and the business cycle is amplified. The macro model with CRT can also reproduce well a number of macro and banking statistics over the period of rapid growth of this banks’ business model.
Traditional New Keynesian models prescribe that optimal monetary policy should aim at price stability. In the absence of a labor market frictions, the monetary authority faces no unemployment/inflation trade-off. I study the design of optimal monetary policy in a framework with sticky prices and matching frictions in the labor market. Optimal policy features deviations from price stability in response to both productivity and government expenditure shocks. When the Hosios 1990 condition is not met, search externalities make the flexible price allocation unfeasible. Optimal deviations from price stability increase with workers’ bargaining power, as firms´ incentives to post vacancies fall and unemployment fluctuates above the Pareto efficient one.
Recent empirical research suggests that measures of investor sentiment have predictive power for future stock returns over the intermediate and long term. Given the widespread publication of sentiment indicators, smart investors should trade on the information conveyed by such indicators and thus trigger an immediate market response to their publication. The present paper is the first to empirically analyze whether an immediate response can be identified from the data. We use survey-based sentiment indicators from two countries (Germany and the US). Consistent with previous research we find there is predictability at intermediate time horizons. For the US, however, the predictability all but disappears after 1994. Using event study methodology we find that the publication of sentiment indicators affects market returns. The sign of the immediate response is the same as that of the predictability over the intermediate term. This finding is consistent with the idea that sentiment is related to mispricing, but is inconsistent with the idea that the sentiment indicator provides information about future expected returns.
Recent empirical research suggests that measures of investor sentiment have predictive power for future stock returns at intermediate and long horizons. Given that sentiment indicators are widely published, smart investors should exploit the information conveyed by the indicator and thus trigger an immediate market response to the publication of the sentiment indicator. The present paper is the first to empirically analyze whether this immediate response can be identified in the data. We use survey-based sentiment indicators from two countries (Germany and the US). Consistent with previous research we find predictability at intermediate horizons. However, the predictability in the US largely disappears after 1994. Using event study methodology we find that the publication of sentiment indicators affects market returns. The sign of this immediate response is the same as the sign of the intermediate horizon predictability. This is consistent with sentiment being related to mispricing but is inconsistent with the sentiment indicator providing information about future expected returns.
JEL-Classification: G12, G14
We introduce a new measure of systemic risk, the change in the conditional joint probability of default, which assesses the effects of the interdependence in the financial system on the general default risk of sovereign debtors. We apply our measure to examine the fragility of the European financial system during the ongoing sovereign debt crisis. Our analysis documents an increase in systemic risk contributions in the euro area during the post-Lehman global recession and especially after the beginning of the euro area sovereign debt crisis. We also find a considerable potential for cascade effects from small to large euro area sovereigns. When we investigate the effect of sovereign default on the European Union banking system, we find that bigger banks, banks with riskier activities, with poor asset quality, and funding and liquidity constraints tend to be more vulnerable to a sovereign default. Surprisingly, an increase in leverage does not seem to influence systemic vulnerability.
In this paper, we investigate the implications of providing loan officers with a compensation structure that rewards loan volume and penalizes poor performance. We study detailed transactional information of more than 45,000 loans issued by 240 loan officers of a large commercial bank in Europe. We find that when the performance of their portfolio deteriorates, loan officers shift their efforts towards monitoring poorly-performing borrowers and issue fewer loans. However, these new loans are of above-average quality, which suggests that loan officers have a pecking order and process loans only for the very best clients when they are under time constraints.
Financing asset growth
(2012)
We document the existence of a debt anomaly that is in addition to the asset growth anomaly: for a given asset growth rate, firms that issue more debt, as well as firms that retire more debt, have lower stock returns in the 12 months starting 6 months after the calendar year of asset growth. Exploring the reasons for debt issuance, we find that managers of firms for which analyst expectations are more over-optimistic, which suffer from declining investment profitability, and whose earnings-price ratios are relatively high are inclined to rely more heavily on debt financing. On the other hand, firms that retire more debt for a given asset growth rate tend to have improving profitability but to be over-priced. We also find that the financing decision is influenced by the prior debt ratio, the asset growth rate, profitability, and CEO pay sensitivity. We interpret our results in terms of managerial incentives, signaling, and market timing.
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.
In the aftermath of the global financial crisis and great recession, many countries face substantial deficits and growing debts. In the United States, federal government outlays as a ratio to GDP rose substantially from about 19.5 percent before the crisis to over 24 percent after the crisis. In this paper we consider a fiscal consolidation strategy that brings the budget to balance by gradually reducing this spending ratio over time to the level that prevailed prior to the crisis. A crucial issue is the impact of such a consolidation strategy on the economy. We use structural macroeconomic models to estimate this impact. We consider two types of dynamic stochastic general equilibrium models: a neoclassical growth model and more complicated models with price and wage rigidities and adjustment costs. We separate out the impact of reductions in government purchases and transfers, and we allow for a reduction in both distortionary taxes and government debt relative to the baseline of no consolidation. According to the initial model simulations GDP rises in the short run upon announcement and implementation of this fiscal consolidation strategy and remains higher than the baseline in the long run.
Dieser Text hinterfragt das Paradox des „sicheren Risikosports“ Hallenklettern anhand soziologischer Reflexion. Dazu werden mathematisch-logische, ethnographische und juristische Perspektiven eingenommen, um einer naiven Statistikgläubigkeit entgegenzuwirken, den gesunden Menschenverstand nach GEERTZ in Zweifel zu ziehen und das Konstrukt der eigenverantwortlichen Selbstgefährdung auf seine Passfähigkeit hin zu prüfen. Die Analyse zeigt auf, dass die momentane Verantwortungszuweisung nur eine mögliche Alternative darstellt und leider nicht die optimalste. Denn sie verhindert letztlich eine effektive Unfallprävention.
This paper shows that a capital budgeting process in which the division manager is required to engage in personally costly influence activities prior to a project approval has beneficial incentive effects: It provides the manager with incentives to acquire costly information about project prospects and helps to elicit the revelation of the acquired information. As a consequence, imposing influence costs on the manager can lead to improved capital allocations. The optimal level of influence costs, chosen by the firm, trades off ex ante incentives for information acquisition against efficient use of the acquired information ex post.
Collateral, default risk, and relationship lending : an empirical study on financial contracting
(1999)
This paper provides further insights into the nature of relationship lending by analyzing the link between relationship lending, borrower quality and collateral as a key variable in loan contract design. We used a unique data set based on the examination of credit files of five leading German banks, thus relying on information actually used in the process of bank credit decision-making and contract design. In particular, bank internal borrower ratings serve to evaluate borrower quality, and the bank's own assessment of its housebank status serves to identify information-intensive relationships. Additionally, we used data on workout activities for borrowers facing financial distress. We found no significant correlation between ex ante borrower quality and the incidence or degree of collateralization. Our results indicate that the use of collateral in loan contract design is mainly driven by aspects of relationship lending and renegotiations. We found that relationship lenders or housebanks do require more collateral from their debtors, thereby increasing the borrower's lock-in and strengthening the banks' bargaining power in future renegotiation situations. This result is strongly supported by our analysis of the correlation between ex post risk, collateral and relationship lending since housebanks do more frequently engage in workout activities for distressed borrowers, and collateralization increases workout probability.
We analytically show that a common across rich/poor individuals Stone-Geary utility function with subsistence consumption in the context of a simple two-asset portfolio-choice model is capable of qualitatively explaining: (i) the higher saving rates of the rich, (ii) the higher fraction of personal wealth held in stocks by the rich, and (iii) the higher volatility of consumption of the wealthier. On the contrary, time-variant "keeping-up with the Joneses" weighted average consumption playing the role of moving benchmark subsistence consumption gives the same portfolio composition and saving rates across the rich and the poor, failing to reconcile the model with what micro data say.
Evaluating the quality of credit portfolio risk models is an important question for both banks and regulators. Lopez and Saidenberg (2000) suggest cross-sectional resampling techniques in order to make efficient use of available data and to produce measures of forecast accuracy. We first show that their proposal disregards crosssectional dependence in simulated subportfolios, which renders standard statistical inference invalid. We proceed by suggesting another evaluation methodology which draws on the concept of likelihood ratio tests. Specifically, we compare the predictive quality of alternative models by comparing the probabilities that observed data have been generated by these models. The distribution of the test statistic can be derived through Monte Carlo simulation. To exploit differences in cross-sectional predictions of alternative models, the test can be based on a linear combination of subportfolio statistics. In the construction of the test, the weight of a subportfolio depends on the difference in the loss distributions which alternative models predict for this particular portfolio. This makes efficient use of the data, and reduces computational burden. Monte Carlo simulations suggest that the power of the tests is satisfactory.
JEL classification: G2; G28; C52
Divergierende Ansprüche an Kletterrouten führen derzeit zu Konflikten im Alpenraum. Da aus sozialgeographischer Sicht keine Raum-, sondern nur Handlungsprobleme existieren, lohnt ein Blick auf die im Hintergrund wirksamen sozialen Strukturen. Unter Rückgriff auf WERLENs Modell der "'gemachten' Räume“, SCHIMANKs "Werkzeugkasten" und die Neue Phänomenologie nach SCHMITZ analysiert dieser Text die zum Teil handgreiflichen Querelen inmitten alpiner Wildnis und beantwortet aus handlungstheoretisch-phänomenologischer Perspektive die Frage, wem die alpinen Kletterfelsen "gehören".
Is wider access to stockholding opportunities related to reduced wealth inequality, given that it creates challenges for small and less sophisticated investors? Counterfactual analysis is used to study the influence of changes in the US stockholder pool and economic environment, on the distribution of stock and net household wealth during a period of dramatic increase in stock market participation. We uncover substantial shifts in stockholder pool composition, favoring smaller holdings during the 1990s upswing but larger holdings around the burst of the Internet bubble. We find no evidence that widening access to stocks was associated with reduced net wealth inequality.
We propose a novel approach on how to estimate systemic risk and identify its key determinants. For US financial companies with publicly traded equity options, we extract option-implied value-at-risks and measure the spillover effects between individual company value-at-risks and the option-implied value-at-risk of a financial index. First, we study the spillover effect of increasing company risks on the financial sector. Second, we analyze which companies are mostly affected if the tail risk of the financial sector increases. Key metrics such as size, leverage, market-to-book ratio and earnings have a significant influence on the systemic risk profiles of financial institutions.
We study consumption-portfolio and asset pricing frameworks with recursive preferences and unspanned risk. We show that in both cases, portfolio choice and asset pricing, the value function of the investor/ representative agent can be characterized by a specific semilinear partial differential equation. To date, the solution to this equation has mostly been approximated by Campbell-Shiller techniques, without addressing general issues of existence and uniqueness. We develop a novel approach that rigorously constructs the solution by a fixed point argument. We prove that under regularity conditions a solution exists and establish a fast and accurate numerical method to solve consumption-portfolio and asset pricing problems with recursive preferences and unspanned risk. Our setting is not restricted to affine asset price dynamics. Numerical examples illustrate our approach.
We build on previous work on operational performance evaluation of private equity portfolio companies as we are able to at least partially decrypt the black box consisting of restructuring tools these investors use and the corresponding impact on their portfolio companies. Beyond answering whether private equity improves operating efficiency we figure out which of the typical restructuring tools drive operating efficiency. Using a set of over 300 international leveraged buyout transactions in the last thirty years we find that while there is vast improvement in operational efficiency these gains vary considerably. Our top performing transactions are subject to strong equity incentives, frequent asset restructuring and tight control by the investor. Furthermore, investors experience has a positive and financial leverage a negative influence on operational performance.
Homestead exemptions to personal bankruptcy allow households to retain their home equity up to a limit determined at the state level. Households that may experience bankruptcy thus have an incentive to bias their portfolios towards home equity. Using US household data from the Survey of Income and Program Participation for the period 1996-2006, we find that especially households with low net worth maintain a larger share of their wealth as home equity if a larger homestead exemption applies. This home equity bias is also more pronounced if the household head is in poor health, increasing the chance of bankruptcy on account of unpaid medical bills. The bias is further stronger for households with mortgage finance, shorter house tenures, and younger household heads, which taken together reflect households that face more financial uncertainty.
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.
Trust in policy makers fluctuates signi
cantly over the cycle and affects the transmission mechanism. Despite this it is absent from the literature. We build a monetary model embedding trust cycles; the latter emerge as an equilibrium phenomenon of a game-theoretic interaction between atomistic agents and the monetary authority. Trust affects agents' stochastic discount factors, namely the price of future risk, and through this it interacts with the monetary transmission mechanism. Using data from the Eurobarometer surveys, we analyze the link between trust and the transmission mechanism of macro and monetary shocks: Empirical results are in line with theoretical ones.
We develop a dynamic network model with heterogenous banks which undertake optimizing portfolio decisions subject to liquidity and capital constraints and trade in the interbank market whose equilibrium is governed by a tatonnement process. Due to the micro-funded structure of the decisional process as well as the iterative dynamic adjustment taking place in the market, the links in the network structures are endogenous and evolve dynamically. We use the model to assess the diffusion of systemic risk, the contribution of each bank to it as well as the evolution of the network in response to financial shocks and across different prudential policy regimes.
We develop a dynamic network model with heterogenous banks which undertake optimizing portfolio decisions subject to liquidity and capital constraints and trade in the interbank market whose equilibrium is governed by a tatonnement process. Due to the micro-funded structure of the decisional process as well as the iterative dynamic adjustment taking place in the market, the links in the network structures are endogenous and evolve dynamically. We use the model to assess the diffusion of systemic risk (measured as default probability), the contribution of each bank to it as well as the evolution of the network in response to financial shocks and across different prudential policy regimes.
This paper analyzes the equilibrium pricing implications of contagion risk in a two-tree Lucas economy with CRRA preferences. The dividends of both trees are subject to downward jumps. Some of these jumps are contagious and increase the risk of subsequent jumps in both trees for some time interval. We show that contagion risk leads to large price-dividend ratios for small assets, a joint movement of prices in the case of a regime change from the calm to the contagion state, significantly positive correlations between assets, and large positive betas for small assets. Whereas disparities between the assets with respect to their propensity to trigger contagion barely matter for pricing, the prices of robust assets that are hardly affected by contagion and excitable assets that are severely hit by contagion differ significantly. Both in absolute terms and relatively to the market, the price of a small safe haven increases if the economy reaches the contagion state. On the contrary, the price of a small, contagion-sensitive asset exhibits a pronounced downward jump.
This paper presents a theory that explains why it is beneficial for banks to engage in circular lending activities on the interbank market. Using a simple network structure, it shows that if there is a non-zero bailout probability, banks can significantly increase the expected repayment of uninsured creditors by entering into cyclical liabilities on the interbank market before investing in loan portfolios. Therefore, banks are better able to attract funds from uninsured creditors. Our results show that implicit government guarantees incentivize banks to have large interbank exposures, to be highly interconnected, and to invest in highly correlated, risky portfolios. This can serve as an explanation for the observed high interconnectedness between banks and their investment behavior in the run-up to the subprime mortgage crisis.
The paper analyzes the mutual influence of the capital structure and the investment decision of a bank, as well as the incentive effects of the bank executives compensation schemes on these decisions. In case the government implicitly or explicitly insures deposits and/or the banks debt, banks are incentivized to invest in risky assets and to have a high leverage. Capital regulation could potentially solve this excessive risk taking problem. However, this is only possible if the regulator can observe and properly measure the investment risks of the bank, which was called into question during the 2008-09 financial crisis. Hence, we propose a regulatory approach that is also able to implement the first best risk taking levels by the bank, but does not require the regulator to know the investment risk of the bank. The regulatory approach involves the implementation of capital requirements, which are made contingent on the management compensation.
Euro area data show a positive connection between sovereign and bank risk, which increases with banks’ and sovereign long run fragility. We build a macro model with banks subject to moral hazard and liquidity risk (sudden deposit withdrawals): banks invest in risky government bonds as a form of capital buffer against liquidity risk. The model can replicate the positive connection between sovereign and bank risk observed in the data. Central bank liquidity policy, through full allotment policy, is successful in stabilizing the spiraling feedback loops between bank and sovereign risk.
Option-implied information and predictability of extreme returns : [Version 24 September 2012]
(2012)
We study whether option-implied conditional expectation of market loss due to tail events, or tail loss measure, contains information about future returns, especially the negative ones. Our tail loss measure predicts future market returns, magnitude, and probability of the market crashes, beyond and above other option-implied variables. Stock-specific tail loss measure predicts individual expected returns and magnitude of realized stock-specific crashes in the cross-section of stocks. An investor, especially the one who cares about the left tail of her wealth distribution (e.g., disappointment-averse), benefits from using the tail loss measure as an information variable to construct managed portfolios of a risk-free asset and market index. The tail loss measure is motivated by the results of the extreme value theory, and it is computed from observed prices of out-of-the-money put as the risk-neutral expected value of a loss beyond a given relative threshold.