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557
We reconsider the role for human capital in accounting for cross-country income differences. Our contribution is to bring to bear new data on the pre- and post- migration labor market experiences of immigrants to the U.S. Immigrants from poor countries experience wage gains that are only 40 percent of the GDP per worker gap, which implies that “country" accounts for 40 percent of income differences, while human capital accounts for 60 percent. Our approach handles selection by comparing the wage of the same individual in two different countries. We also provide evidence on and a correction for skill transfer.
2011, 02
This paper reconsiders the effect of investor sentiment on stock prices. Using survey-based sentiment indicators from Germany and the US we confirm previous findings of predictability at intermediate time horizons. The main contribution of our paper is that we also analyze the immediate price reaction to the publication of sentiment indicators. We find that the sign of the immediate price reaction is the same as that of the predictability at intermediate time horizons. This is consistent with sentiment being related to mispricing but is inconsistent with the alternative explanation that sentiment indicators provide information about future expected returns. JEL Classification: G12, G14 Keywords: Investor Sentiment , Event Study , Return Predictability
1998, 07
Banks increasingly recognize the need to measure and manage the credit risk of their loans on a portfolio basis. We address the subportfolio "middle market". Due to their specific lending policy for this market segment it is an important task for banks to systematically identify regional and industrial credit concentrations and reduce the detected concentrations through diversification. In recent years, the development of markets for credit securitization and credit derivatives has provided new credit risk management tools. However, in the addressed market segment adverse selection and moral hazard problems are quite severe. A potential successful application of credit securitization and credit derivatives for managing credit risk of middle market commercial loan portfolios depends on the development of incentive-compatible structures which solve or at least mitigate the adverse selection and moral hazard problems. In this paper we identify a number of general requirements and describe two possible solution concepts.
504
Empirical credit demand analysis undertaken at the aggregate level obscures potential behavioral heterogeneity between various borrowing sectors. Looking at disaggregated data and analyzing bank loans to non-financial companies, to financial companies, to households for consumption and for house purchases separately with respect to a common set of macroeconomic determinants may facilitate more accurate empirical relationships and more reliable insights for economic policy. Using quarterly Euro area panel data between 2003 and 2013, empirical evidence for heterogeneity in borrowing behavior across sectors and the credit cycle with respect to interest rates, output and house prices is found. The results motivate sector-specific, counter-cyclical capital requirements.
2009, 06
Suppliers play a major role in innovation processes. We analyze ownership allocations and the choice of R&D technology in vertical R&D cooperations. Given incomplete contracts on the R&D outcome, there is a tradeoff between R&D specifically designed towards a manufacturer (increasing investment productivity) and a general technology (hold-up reduction). We find that the market solution yields the specific technology in too few cases. More intense product market competition shifts optimal ownership towards the supplier. The use of exit clauses increases the gains from the collaboration. JEL Classification: L22, L24, O31, O32
663
As part of the Next Generation EU (NGEU) program, the European Commission has pledged to issue up to EUR 250 billion of the NGEU bonds as green bonds, in order to confirm their commitment to sustainable finance and to support the transition towards a greener Europe. Thereby, the EU is not only entering the green bond market, but also set to become one of the biggest green bond issuers. Consequently, financial market participants are eager to know what to expect from the EU as a new green bond issuer and whether a negative green bond premium, a so-called Greenium, can be expected for the NGEU green bonds. This research paper formulates an expectation in regards to a potential Greenium for the NGEU green bonds, by conducting an interview with 15 sustainable finance experts and analyzing the public green bond market from September 2014 until June 2021, with respect to a potential green bond premium and its underlying drivers. The regression results confirm the existence of a significant Greenium (-0.7 bps) in the public green bond market and that the Greenium increases for supranational issuers with AAA rating, such as the EU. Moreover, the green bond premium is influenced by issuer sector and credit rating, but issue size and modified duration have no significant effect. Overall, the evaluated expert interviews and regression analysis lead to an expected Greenium for the NGEU green bonds of up to -4 bps, with the potential to further increase in the secondary market.
No. 712
In order to reach climate neutrality by 2050, the European Union is taking action in the form of extensive sustainability regulations with the aim to push the private sector towards sustainable economic activities. In this context, a new instrument to finance a company’s sustainability transition has been developed: the sustainability-linked bond (SLB). This paper analyzes the SLB market’s efficiency in attracting those companies that are most crucial for a successful sustainability transition, namely carbon-intensive companies and companies that are lagging behind in their sustainability transition, defined as ESG laggards. By developing a conceptual framework for the SLB market and running a probit and logit regression estimation, this paper shows that the SLB market efficiently attracts carbon-intensive companies, but fails to attract ESG laggards. Moreover, the paper identifies four success factors for the SLB market to improve its future accessibility and credibility.
637
Differences in euro-area household finances and their relevance for monetary-policy transmission
(2019)
This paper quantifies the extent of heterogeneity in consumption responses to changes in real interest rates and house prices in the four largest economies in the euro area: France, Germany, Italy, and Spain. We first calibrate a life-cycle incomplete-markets model with a financial asset and housing to match the large heterogeneity of households asset portfolios, observed in the Household Finance and Consumption Survey (HFCS) for these countries. We then show that the heterogeneity in household finances implies that responses of consumption to changes in the real interest rate and in house prices differ substantially across countries, and within countries by household characteristics such as age, housing tenure, and asset positions. The different consumption responses quantified in this paper point towards important heterogeneity in monetary-policy transmission in the euro area.
519
We show that the size of collateralized household debt determines an economy’s vulnerability to crises of confidence. The house price feeds back on itself by contributing to a liquidity effect, which operates through the value of housing in a collateral constraint. Over a specific range of debt levels this liquidity feedback effect is strong enough to give rise to multiplicity of house prices. In a dynamic setup, we conceptualize confidence as a realization of rationally entertainable belief-weightings of multiple future prices. This delivers debt-level-dependent bounds on the extent to which confidence may drive house prices and aggregate consumption.
2008, 02
Generally, information provision and certification have been identified as the major economic functions of rating agencies. This paper analyzes whether the “watchlist" (rating review) instrument has extended the agencies' role towards a monitoring position, as proposed by Boot, Milbourn, and Schmeits (2006). Using a data set of Moody's rating history between 1982 and 2004, we find that the overall information content of rating action has indeed increased since the introduction of the watchlist procedure. Our findings suggest that rating reviews help to establish implicit monitoring contracts between agencies and borrowers and as such enable a finer partition of rating information, thereby contributing to a higher information quality.