Template-Type: ReDIF-Paper 1.0 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: Ownership and purchase intention of crypto-assets – survey results Abstract: The paper employs a survey among Austrian households to study ownership and purchase intentions of crypto-assets. About 1.5% of Austrians own crypto-assets and about 5% can be viewed as potential adopters. Owners, on average, have higher financial knowledge and are
more risk-tolerant than non-owners. Distrust in banks or in conventional currencies is not found to be an important driver of ownership. Intentions to adopt are strongly affected by profit expectations and by beliefs that crypto-assets offer advantages for payments – most adopters or potential adopters hold both beliefs. Perceptions of high volatility or the risk of fraud and online theft dampen the demand for crypto-assets. Classification-JEL: D12; D14; G11; E41 Keywords: crypto-currencies, crypto-assets, Bitcoin, payment, trust, financial literacy, risk, consumer survey Length: 49 Creation-Date: 2019-05-22 File-URL: https://www.oenb.at/dam/jcr:7d5679c5-17b8-427b-af6d-c4859d3e1ebb/WP226.pdf File-Format: application/pdf File-Size: 542 kb Handle: RePEc:onb:oenbwp:226 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas Breuer Author-Name-First: Thomas Author-Name-Last: Breuer Author-Email: thomas.breuer@fhv.at Author-Workplace-Name: Research Centre PPE, Fachhochschule Vorarlberg, Hochschulstr. 1, A-6850 Dornbirn, Austria. Author-Name: Martin Summer Author-Name-First: Martin Author-Name-Last: Summer Author-Email: martin.summer@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7212 Author-Workplace-Fax: +43-1-40420-7299 Title: Systematic Systemic Stress Tests Abstract: For a given set of banks, which economic and financial scenarios
will lead to big losses? How big can losses in such scenarios possibly get? These are the two central questions of macro stress tests. We
believe that most current macro stress testing models have deficits in
answering these questions. They select stress scenarios in a way which
might leave aside many dangerous scenarios and thus create an illusion
of safety; and which might consider highly implausible scenarios and
thus trigger a false alarm. With respect to loss evaluation most stress
tests do not include tools to analyse systemic risk arising from the
interactions of banks with each other and with the markets. We make
a conceptual proposal how these shortcomings may be addressed and
how stress tests could be made both systematic and systemic. We
demonstrate the application of our concepts using publicly available
data on European banks and capital markets, in particular the EBA
2016 stress test results. Classification-JEL: C18, C44, C60, G01, G32, M48 Keywords: Stress Testing, Risk Measures, Scenario Analysis, Systemic Risk Length: 30 Creation-Date: 2018-12-20 File-URL: https://www.oenb.at/dam/jcr:f4a72b04-d343-4e00-9c4d-89bdd0bdc848/WP225.pdf File-Format: application/pdf File-Size: 814 kb Handle: RePEc:onb:oenbwp:225 Template-Type: ReDIF-Paper 1.0 Author-Name: Philipp Poyntner Author-Name-First: Philipp Author-Name-Last: Poyntner Author-Name: Thomas Reininger Author-Name-First: Thomas Author-Name-Last: Reininger Author-Email: Thomas.Reininger@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5234 Author-Workplace-Fax: +43-1-40420-5299 Title: Bail-in and Legacy Assets: Harmonized rules for targeted partial compensation to strengthen the bail-in regime Abstract: In the wake of the global financial crisis, several large bank rescues by governments further entrenched bail-out expectations in the wider public. Then, following a problematic ad-hoc bail-in in Cyprus early 2013, EU rules introduced provisions for ‘bail-in’, that is, the administrative power to require write-down or conversion into equity of non-equity claims – a significant regime change to deal with banks failing or likely to fail. This paper focuses on the implications of this regime change for consumer/investor protection, especially for socially more vulnerable households, and on the resulting risk for political acceptance and the achievement of the bail-in objective. Therefore, it reviews these rules and their application in recent cases, focusing on the treatment of retail bond holders. Moreover, it explores the
distribution of retail holders of bank bonds across economy-wide income quantiles in the euro area and various euro area countries. We find that neither the share of below-medianincome households with bank bonds in the total number of households with bank bonds nor the relative vulnerability to ‘bail-in’ of these households that tend to have higher levels of
financial illiterateness are negligible. Recent applications of bail-in-rules, while diverse with respect to legal basis, scope and purpose, have barely gone beyond the write-down and conversion of capital instruments, thus excluding senior bonds. Nevertheless, in all these cases, some sort of compensation scheme for retail investors was deemed necessary and implemented, varying in design, but mostly benefiting almost all retail holders. In two
prominent cases there was no effective bail-in of retail holders. In conclusion, following a lesser-known example from Italy, we propose EU harmonized partial compensation rules for socially more vulnerable retail holders of bank debt securities acquired before 2016. They would render implementation of bail-in socially more acceptable, politically more feasible and economically more efficient. During the transition period until household investment
behaviour will have fully adjusted to the new world of bail-in, the proposed compensation rules would help avoid effective non-application of bail-in that otherwise results from excluding senior bonds and/or granting excessive compensation. Classification-JEL: D14, D18, D31, D63, E44, G21, G28, H81 Keywords: banking regulation, bail-in, retail holders, consumer protection, income Length: 32 Creation-Date: 2018-10-29 File-URL: https://www.oenb.at/dam/jcr:74b1eeff-b6f6-4074-9453-addc7dabb882/WP224.pdf File-Format: application/pdf File-Size: 364 kb Handle: RePEc:onb:oenbwp:224 Template-Type: ReDIF-Paper 1.0 Author-Name: Pirmin Fessler Author-Name-First: Pirmin Author-Name-Last: Fessler Author-Email: Pirmin.Fessler@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Name: Martin Schürz Author-Name-First: Martin Author-Name-Last: Schürz Author-Email: martin.schuerz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Title: The functions of wealth: renters, owners and capitalists across Europe and the United States Abstract: Piketty (2017) argues in favor of a multidimensional and relational approach to the analysis of wealth inequality. Specifically, he suggests that social classes should be analyzed in terms of the power and production relations between social groups, not just the percentiles in statistical distributions into which various groups fall. We propose such a relational approach by focusing on different functions of wealth. We operationalize functions of wealth by empirically analyzing the groups of renters, owners, and capitalists. Employing recent European and US data, we find that classifying households based on these decisive functions of wealth aligns well with the wealth distribution, in ways that vary considerably across countries. We discuss many potential advantages of this class typology in measuring and analyzing wealth and wealth inequality in particular. Classification-JEL: D14, D15, D31, D63, Z13 Keywords: wealth, inequality, households, survey data, class, economic strati cation Length: 44 Creation-Date: 2018-10-18 File-URL: https://www.oenb.at/dam/jcr:78835e0a-af08-4bfe-aae4-9cd847eec57b/WP223_rev1.pdf File-Format: application/pdf File-Size: 4258 kb Handle: RePEc:onb:oenbwp:223 Template-Type: ReDIF-Paper 1.0 Author-Name: Christian Alexander Belabed Author-Name-First: Christian Alexander Author-Name-Last: Belabed Author-Name: Mariya Hake Author-Name-First: Mariya Author-Name-Last: Hake Author-Email: mariya.hake@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Income inequality and trust in national governments in Central, Eastern and Southeastern Europe Abstract: Using unique evidence from the OeNB Euro Survey, this paper sheds light on the correlation between the distribution of income and trust in national governments in ten Central, Eastern and Southeastern European (CESEE) countries between 2009 and 2015. By applying multilevel modeling to account for the hierarchical structure of the data, our main findings indicate that trust in national institutions increases with the individual’s position in the regional income distribution but it overall declines with the increase of regional and country income inequality. This result is valid across different measures of income inequality and despite the slight decrease of income inequality over the period. Our analysis shows that perceived high corruption and weak rule of law are key determinants of distrust in national governments, while the negative link between income inequality and trust in national governments is more pronounced in the non-EU countries in our sample. Classification-JEL: D1, D63, E24, H21, P23 Keywords: Income inequality, Institutional trust, Multilevel models Length: 49 Creation-Date: 2018-05-25 File-URL: https://www.oenb.at/dam/jcr:7dc0585f-2bb4-4bf6-8980-c032b0ff4770/WP222.pdf File-Format: application/pdf File-Size: 1007 kb Handle: RePEc:onb:oenbwp:222 Template-Type: ReDIF-Paper 1.0 Author-Name: Peter Lindner Author-Name-First: Peter Author-Name-Last: Lindner Author-Email: peter.lindner@oenb.at Author-Workplace-Name: Economic Analysis Division Author-Name: Axel Loeffler Author-Name-First: Axel Author-Name-Last: Loeffler Author-Email: axel.loeffler@bundesbank.de Author-Name: Esther Segalla Author-Name-First: Esther Author-Name-Last: Segalla Author-Email: esther.segalla@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Name: Guzel Valitova Author-Name-First: Guzel Author-Name-Last: Valitova Author-Email: valitovaguzel@gmail.com Author-Name: Ursula Vogel Author-Name-First: Ursula Author-Name-Last: Vogel Author-Email: u.vogel@fs.de Author-Workplace-Name: Frankfurt School of Finance & Management Title: International monetary policy spillovers through the bank funding channel Abstract: In this paper, we examine the international transmission of monetary policies of major advanced economies (US, UK, euro area) through banks in Austria and Germany. In particular, we compare the role of banks’ funding structure, broken down by country of origin as well as by currency denomination, in the international transmission of monetary policy changes to bank lending. We find weak evidence for inward spillovers. The more a bank is funded in US dollars, the more its domestic real sector lending is affected by monetary policy changes in the US. This effect is more pronounced in Germany than in Austria. We do not find evidence for outward spillovers of euro area monetary policy through a bank funding channel. Classification-JEL: E52, F33, G21 Keywords: monetary policy spillover, global banks, bank funding channel Length: 31 Creation-Date: 2018-05-22 File-URL: https://www.oenb.at/dam/jcr:b2b3d032-bf77-41f7-af03-576002a4aac6/WP221.pdf File-Format: application/pdf File-Size: 523 kb Handle: RePEc:onb:oenbwp:221 Template-Type: ReDIF-Paper 1.0 Author-Name: Andrej Cupak Author-Name-First: Andrej Author-Name-Last: Cupak Author-Email: cupak@lisdatacenter.org Author-Workplace-Name: LIS Cross-National Data Center Author-Workplace-Homepage: http://www.lisdatacenter.org/ Author-Name: Pirmin Fessler Author-Name-First: Pirmin Author-Name-Last: Fessler Author-Email: Pirmin.Fessler@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Name: Maria Antoinette Silgoner Author-Name-First: Maria Antoinette Author-Name-Last: Silgoner Author-Email: Maria.Silgoner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Name: Elisabeth Ulbrich Author-Name-First: Elisabeth Author-Name-Last: Ulbrich Author-Email: elisabeth.ulbrich@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: https://www.oenb.at/ Title: Exploring differences in financial literacy across countries: the role of individual characteristics and institutions Abstract: We examine recently compiled microdata from the OECD/INFE survey covering information on the financial literacy of adult individuals from twelve countries around the globe. We find large differences in financial literacy across countries and decompose them into those explainable by differences in individual characteristics and those that cannot be explained by such differences. We show that individual characteristics matter with regard to differences in average financial literacy, but do not fully explain the observed differences. We further relate the unexplained differences in our microeconometric analysis to institutional differences across countries. We find strong relationships between the differences in financial literacy not explained by individual characteristics and life expectancy, social contribution rate, PISA math scores, internet usage, and to a lesser degree by GDP per capita, the gross enrolment ratio and stock market capitalization. Our results suggest that there is room for harmonization of economic environments across countries regarding decreasing inequality in the population's financial literacy. Classification-JEL: D14, D91, I20 Keywords: financial literacy gaps, inequality, decomposition analysis, counterfactual methods, personal finance, survey data Length: 45 Creation-Date: 2018-02-26 File-URL: https://www.oenb.at/dam/jcr:c6506da3-61d3-4be8-abee-cf19468c13fa/WP220.pdf File-Format: application/pdf File-Size: 482 kb Handle: RePEc:onb:oenbwp:220 Template-Type: ReDIF-Paper 1.0 Author-Name: Burkhard Raunig Author-Name-First: Burkhard Author-Name-Last: Raunig Author-Email: Burkhard.Raunig@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7219 Author-Workplace-Fax: +43-1-40420-7299 Title: Economic Policy Uncertainty and the Volatility of Sovereign CDS Spreads Abstract: Multipliers estimated for sixteen major economies predict that 1% more economic policy uncertainty (EPU) produces about 0.3% - 0.8% more sovereign CDS volatility. The impact of EPU is strong but short-lived. US EPU is an important additional source of CDS volatility for European countries, Japan, China, and South Korea. European EPU does, in contrast, not affect the CDS volatility of other countries. Classification-JEL: D80, E66, G18 Keywords: Credit default swap, Economic policy uncertainty, Sovereign credit risk, Volatility Length: 28 Creation-Date: 2018-01-25 File-URL: https://www.oenb.at/dam/jcr:5f276176-b95c-4a69-a333-c88915985487/WP219.pdf File-Format: application/pdf File-Size: 219 kb Handle: RePEc:onb:oenbwp:219 Template-Type: ReDIF-Paper 1.0 Author-Name: Stefan Niemann Author-Name-First: Stefan Author-Name-Last: Niemann Author-Email: sniem@essex.ac.uk Author-Workplace-Name: Department of Economics, University of Essex, United Kingdom. Author-Name: Paul Pichler Author-Name-First: Paul Author-Name-Last: Pichler Author-Email: paul.pichler@oenb.at Author-Workplace-Name: Economic Studies Division, Oesterreichische Nationalbank, Austria Title: Optimal fiscal policy and sovereign debt crises Abstract: This paper studies how sovereign risk – both fundamental and self-fulfilling – shapes the cyclical behavior of optimalfiscal policy. We develop a model with endogenous default costs where market sentiment can induce belief-driven debt rollover crises. Optimal taxes and public spending are generally procyclical, but the incidence of rollover risk gives rise to infrequent episodes of severely countercyclicaliscal activity. These endogenous regime changes are associated with pronounced countercyclical changes in the level of debt. Debt buildups are triggered already by relatively mild recessions, but successful fiscal consolidations occur only in exceptionally good times. Classification-JEL: E62, F34, H63 Keywords: Fiscal policy, sovereign debt, rollover crises, regime switches Length: 42 Creation-Date: 2017-12-07 File-URL: https://www.oenb.at/dam/jcr:8f7be62c-e8e4-4617-a93b-2b9377e53552/WP218_screen.pdf File-Format: application/pdf File-Size: 926 kb Handle: RePEc:onb:oenbwp:218 Template-Type: ReDIF-Paper 1.0 Author-Name: Engelbert Dockner Author-Name-First: Engelbert Author-Name-Last: Dockner Author-Name: Manuel Mayer Author-Name-First: Manuel Author-Name-Last: Mayer Author-Email: manuel.mayer@oenb.at Author-Name: Josef Zechner Author-Name-First: Josef Author-Name-Last: Zechner Author-Workplace-Name: University of Vienna Title: Sovereign Bond Risk Premiums Abstract: Sovereign credit risk has become an important factor driving government bond returns. We therefore introduce an empirical asset pricing model which exploits information contained in both forward interest rates and forward CDS spreads. Our analysis covers euro-zone countries with German government bonds as credit risk-free assets. We construct a market factor from the first three principal components of the German forward curve as well as credit risk factors from the principal components of forward CDS curves. Our results show that predictability of risk premiums of sovereign euro-zone bonds improves substantially if the market risk factor is augmented by a common euro zone and an orthogonal country-specific credit risk factor, measured by an increase in the average R2 over euro-zone sovereigns from 0.21 to 0.61. Furthermore, we find that most of the variation of sovereign bond risk premiums is attributable to the common euro-zone credit risk factor while country-specific credit risk factors play a subordinate role. Keywords: Sovereign bond risk premiums, market and credit risk factors, euro-zone debt crisis Length: 37 Creation-Date: 2017-11-17 File-URL: https://www.oenb.at/dam/jcr:805fc218-84ee-4d78-b7e6-a8e7b55ce936/WP217.pdf File-Format: application/pdf File-Size: 460 kb Handle: RePEc:onb:oenbwp:217 Template-Type: ReDIF-Paper 1.0 Author-Name: Markus Knell Author-Name-First: Markus Author-Name-Last: Knell Author-Email: markus.knell@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7218 Author-Workplace-Fax: +43-1-40420-7299 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: Perceptions of Inequality Abstract: Although people's perception of (income or wealth) inequality has important e_ects on their decisions as economic agents or voters, little is known about how perceptions relate to measured inequality. We present a novel formal framework that is based on the assumption that people typically do not observe the entire income (wealth) distribution and that their guesses about the extent of inequality are based on reference groups. This framework predicts that perceptions of inequality will change along positions in the income distribution and that for a speci_c position various dimensions of inequality perception are related to each other. First, low (high) income individuals overestimate (underestimate) their own position. Second, subjective estimates of average earnings increase with the own income position. Third, high or low income people have di_erent perceptions about the \distributional shape" of society (e.g. pyramid or diamond). Fourth, the subjective perception of inequality is lower for high-income individuals. Survey data from 40 countries provide strong support for the framework Classification-JEL: D31, D63, D83, C81 Keywords: Income distribution, perception of inequality, reference groups Length: 58 Creation-Date: 2017-10-17 File-URL: https://www.oenb.at/dam/jcr:be84bb33-494a-4849-8f1b-46d94b51d0d5/WP216.pdf File-Format: application/pdf File-Size: 2432 kb Handle: RePEc:onb:oenbwp:216 Template-Type: ReDIF-Paper 1.0 Author-Name: Markus Knell Author-Name-First: Markus Author-Name-Last: Knell Author-Email: markus.knell@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7218 Author-Workplace-Fax: +43-1-40420-7299 Title: Actuarial Deductions for Early Retirement Abstract: The paper studies how the rates of deduction for early retirement have to be determined in PAYG systems in order to keep their budget stable. I show that the budget-neutral deductions depend on the speci_c rules of the pension system and on the choice of the discount rate which itself depends on the collective retirement behavior. For the commonly used _ction of a single individual deviating from the target retirement age the right choice is the market interest rate while for the alternative scenario of a stationary retirement distribution it is the internal rate of return of the PAYG system. In this case the necessary budget-neutral deductions are lower than under the standard approach used in the related literature. This is also true for retirement ages that uctuate randomly around a stationary distribution. Long-run shifts (e.g. increases in the average retirement age) might cause problems for the pension system but these have to be dealt with by the general pension formulas not by the deduction rates. Classification-JEL: H55, J1, J18, J26 Keywords: Pension System, Demographic Change, Financial Stability Length: 71 Creation-Date: 2017-10-17 File-URL: https://www.oenb.at/dam/jcr:78999490-a990-449a-80f0-0e1e6611575d/WP215.pdf File-Format: application/pdf File-Size: 903 kb Handle: RePEc:onb:oenbwp:215 Template-Type: ReDIF-Paper 1.0 Author-Name: Jean-Marie Meier Author-Name-First: Jean-Marie Author-Name-Last: Meier Author-Email: jmeier@london.edu Author-Homepage: http://www.jean-mariemeier.com/ Author-Workplace-Name: London Business School Title: Regulatory Integration of International Capital Markets Abstract: I examine the financial and real effects of regulatory integration of international capital markets using a unique policy plan by the European Union, which creates a common European market for financial services and capital, through, e.g., passporting rights. For identification, I exploit the bilateral and staggered nature of laws that are passed at the European level but are implemented by national governments. Over its implementation, regulatory integration leads to
large increases in external financing, investment and employment for publicly listed firms. These results highlight the importance of regulatory integration of international capital markets for firms' financing decisions and real outcomes.
Length: 46 Creation-Date: 2017-06-16 File-URL: https://www.oenb.at/dam/jcr:3fac5bd5-814e-405d-bf98-f66f44397f57/Working-Paper-214.pdf File-Format: application/pdf File-Size: 464 kb Handle: RePEc:onb:oenbwp:214 Template-Type: ReDIF-Paper 1.0 Author-Name: Filippo De Marco Author-Name-First: Filippo Author-Name-Last: De Marco Author-Email: filippo.demarco@unibocconi.it Author-Workplace-Name: Bocconi University Title: Bank Lending and the European Sovereign Debt Crisis Length: 49 Creation-Date: 2017-05-29 File-URL: https://www.oenb.at/dam/jcr:8f9d06b4-2357-480e-a5d4-fec0b15236c1/Working-Paper-213.pdf File-Format: application/pdf File-Size: 680 kb Handle: RePEc:onb:oenbwp:213 Template-Type: ReDIF-Paper 1.0 Author-Name: Steven Ambler Author-Name-First: Steven Author-Name-Last: Ambler Author-Email: ambler.steven@uqam.ca Author-Workplace-Name: ESG UQAM, C.D. Howe Institute, Rimini Centre for Economic Analysis Author-Workplace-Homepage: http://www.uqam.ca/ Author-Name: Fabio Rumler Author-Name-First: Fabio Author-Name-Last: Rumler Author-Email: fabio.rumler@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Title: The Effectiveness of Unconventional Monetary Policy Announcements in the Euro Area: An Event and Econometric Study Length: 58 Creation-Date: 2017-02-09 File-URL: https://www.oenb.at/dam/jcr:774a56cf-aff2-4064-b0c3-4b3a55bae7c4/Working-Paper-212.pdf File-Format: application/pdf File-Size: 542 kb Handle: RePEc:onb:oenbwp:212 Template-Type: ReDIF-Paper 1.0 Author-Name: Markus Knell Author-Name-First: Markus Author-Name-Last: Knell Author-Email: markus.knell@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7218 Author-Workplace-Fax: +43-1-40420-7299 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: Inequality, Perception Biases and Trust Abstract: We present a theoretical framework that links trust, trustworthiness and inequality.
It is assumed that an individual's level of interpersonal trust is related to expected
trustworthiness among his reference group and that trustworthiness decreases when
interpersonal income differences increase. As a consequence, inequality affects trust
via the individual-specific perception of inequality which might not coincide with
aggregate measures of inequality like the Gini coefficient. We work out the implications
of our model for empirical estimations of the trust-inequality nexus and show
that such regressions are very likely to understate the true effect of inequality. This
might lead to the erroneous conclusion that inequality exerts no effect on trust. Survey
data from Austria support the predictions of our framework. Individual-specific
perceptions of inequality have a strong negative effect on trust while aggregate measures
of inequality show no significant relation. Length: 82 Creation-Date: 2017-01-31 File-URL: https://www.oenb.at/dam/jcr:12ae3f67-37c4-4c12-9478-a41be43c966a/Working-Paper-211.pdf File-Format: application/pdf File-Size: 847 kb Handle: RePEc:onb:oenbwp:211 Template-Type: ReDIF-Paper 1.0 Author-Name: Maria Coelho Author-Name-First: Maria Author-Name-Last: Coelho Author-Email: mcoelho@econ.berkeley.edu Author-Workplace-Name: Department of Economics, University of California at Berkeley. Title: Fiscal Stimulus in a Monetary Union: Evidence from Eurozone Regions Abstract: On the occasion of the 65th birthday of Governor Klaus Liebscher and in recognition of his commitment to Austria’s participation in European monetary union and to the cause of European integration, the Oesterreichische Nationalbank (OeNB) established a “Klaus Liebscher Award”. It has been offered annually since 2005 for up to two excellent scientific papers on European monetary union and European integration issues. The authors must be less than 35 years old and be citizens from EU member or EU candidate countries. Each “Klaus Liebscher Award” is worth EUR 10,000. The two winning papers of the twelfth Award 2016 were written by Maria Coelho and by François de Soyres. The first paper is presented in this Working Paper while François de Soyres’ contribution is contained in Working Paper 209. Length: 51 Creation-Date: 2016-11-25 File-URL: https://www.oenb.at/dam/jcr:13d70309-9bb3-4374-961e-eca2cb6899aa/Working%20Paper%20210_web.pdf File-Format: application/pdf File-Size: 1222 kb Handle: RePEc:onb:oenbwp:210 Template-Type: ReDIF-Paper 1.0 Author-Name: François de Soyres Author-Name-First: François Author-Name-Last: de Soyres Author-Email: francois.de.soyres@gmail.com Author-Workplace-Name: Toulouse School of Economics Title: Value Added and Productivity Linkages Across Countries Abstract: What is the relationship between international trade and business cycle synchronization? Using data from OECD countries, I find that trade in intermediate inputs plays a significant role in synchronizing GDP fluctuations across countries while trade in final goods is found insignificant. Motivated by this new fact, I build a model of international trade in intermediates that is able to replicate more than 70% of the empirical trade-comovement slope, making a significant step toward solving the “Trade Comovement Puzzle”. The model relies on two key assumptions: (i) price distortions due to monopolistic competition and (ii) fluctuations in the mass of firms serving each country. The combination of those ingredients creates a link between domestic productivity and foreign shocks through trade linkages. Finally, I provide evidence for the importance of those elements in the link between foreign shocks and domestic GDP and test other predictions of the model. Classification-JEL: F12, F17, F4, F62, L22 Keywords: International Trade, International Business Cycle Comovement, Networks, Input- Output Linkages Length: 60 Creation-Date: 2016-11-24 File-URL: https://www.oenb.at/dam/jcr:17bca8b9-7f65-461d-95a2-42005bce37a5/Working%20Paper%20209_web.pdf File-Format: application/pdf File-Size: 783 kb Handle: RePEc:onb:oenbwp:209 Template-Type: ReDIF-Paper 1.0 Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Florian Huber Author-Name-First: Florian Author-Name-Last: Huber Author-Email: fhuber@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business (WU) Title: Unconventional US Monetary Policy: New Tools Same Channels? Abstract: In this paper we compare the transmission of a conventional monetary policy shock with that of an unexpected decrease in the term spread, which mirrors quantitative easing. Employing a time-varying vector autoregression with stochastic volatility, our results are two-fold: First, the spread shock works mainly through a boost to consumer wealth growth, while a conventional monetary policy shock affects real output growth via a broad credit / bank lending channel. Second, both shocks exhibit a distinct pattern over our sample period. More specifcally, we find small output effects of a conventional monetary policy shock during the period of the global fnancial crisis and stronger effects in its aftermath. This might imply that when the central bank has left the policy rate unaltered for an extended period of time, a policy surprise might boost output particularly strongly. By contrast, the spread shock has affected output growth most strongly during the period of the global financial crisis and less so thereafter. This might point to diminishing effects of large scale asset purchase programs. Classification-JEL: C32, E52, E32 Keywords: Unconventional monetary policy, transmission channel, Bayesian TVP-SV-VAR Length: 47 Creation-Date: 2016-07-20 File-URL: https://www.oenb.at/dam/jcr:4937f015-3bbc-4577-983d-d8dc76b7c4a2/Working%20Paper%20208_web.pdf File-Format: application/pdf File-Size: 735 kb Handle: RePEc:onb:oenbwp:208 Template-Type: ReDIF-Paper 1.0 Author-Name: Apostolos Thomadakis Author-Name-First: Apostolos Author-Name-Last: Thomadakis Author-Email: a.thomadakis@warwick.ac.uk Author-Workplace-Name: Department of Economics, University of Warwick Title: Determinants of Credit Constrained Firms: Evidence from Central and Eastern Europe Region Abstract: Based on survey data covering 6,547 firms in 10 Central and Eastern European countries we examine the impact of the banking sector environment, as well as the institutional and regulatory environment, on credit constrained firms. We find that small and foreign-owned firms are less likely to demand credit compared to audited and innovative firms. On the other hand, small, medium, publicly listed, sole proprietorship and foreign-owned firms had a higher probability of being credit constrained in 2008-2009 than in 2012-2014. The banking sector's environment analysis reveals that firms operating in more concentrated banking markets are less likely to be credit constrained. However, higher capital requirements, increased levels of loan loss reserves and a higher presence of foreign banks have a negative impact on the availability of bank credit. The evaluation of the institutional and regulatory environment in which firms operate shows that credit information sharing is negatively correlated with access to credit. Furthermore, we show that banking sector contestability can mitigate this negative effect. Finally, we find that in a better credit information sharing environment, foreign banks are more likely to provide credit. Classification-JEL: E51, G21, F34, L10 Keywords: access to credit, credit constraints, credit demand, credit information sharing Length: 53 Creation-Date: 2016-05-13 File-URL: https://www.oenb.at/dam/jcr:2a892308-7cb7-4a20-82f2-4c711dec2924/Working%20Paper%20207_web.pdf File-Format: application/pdf File-Size: 500 kb Handle: RePEc:onb:oenbwp:207 Template-Type: ReDIF-Paper 1.0 Author-Name: Helmut Elsinger Author-Name-First: Helmut Author-Name-Last: Elsinger Author-Email: helmut.elsinger@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://finance2.bwl.univie.ac.at/members/elsinger/elsinger.htm Author-Workplace-Phone: +43-1-4277 38057 Author-Workplace-Fax: +43-1-4277 38054 Author-Name: Philipp Schmidt-Dengler Author-Name-First: Philipp Author-Name-Last: Schmidt-Dengler Author-Email: p.schmidt-dengler@lse.ac.uk Author-Workplace-Name: The London School of Economics and Political Science Author-Name: Christine Zulehner Author-Name-First: Christine Author-Name-Last: Zulehner Author-Email: christine.zulehner@univie.ac.at Author-Workplace-Name: University of Vienna Title: Competition in Treasury Auctions Abstract: We investigate the role of competition on the outcome of Austrian Treasury auctions. Austria's EU accession led to an increase in the number of banks participating in treasury auctions. We use structural estimates of bidders' private values to examine the effect of increased competition on auction performance: We find that increased competition reduced bidder surplus substantially, but less than reduced form estimates would suggest. A significant component of the surplus reduction is due to more aggressive bidding. Counterfactuals establish that as competition increases, concerns regarding auction format play a smaller role. Length: 43 Creation-Date: 2016-03-04 File-URL: https://www.oenb.at/dam/jcr:ef73e8c7-6674-4725-a331-3667977ef700/Working_Paper_206_Web_neu.pdf File-Format: application/pdf File-Size: 784 kb Handle: RePEc:onb:oenbwp:206 Template-Type: ReDIF-Paper 1.0 Author-Name: Jesús Crespo Cuaresma Author-Name-First: Jesús Crespo Author-Name-Last: Cuaresma Author-Email: jcrespo@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business, Institute for Fiscal and Monetary Policy Author-Name: Gernot Doppelhofer Author-Name-First: Gernot Author-Name-Last: Doppelhofer Author-Email: gernot.doppelhofer@nhh.no Author-Workplace-Name: Norwegian School of Economics and Business Administration Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Florian Huber Author-Name-First: Florian Author-Name-Last: Huber Author-Email: fhuber@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business (WU) Title: US Monetary Policy in a Globalized World Abstract: We analyze the interaction between monetary policy in the US and the global economy proposing a new class of Bayesian global vector autoregressive models that accounts for time-varying parameters and stochastic volatility (TVP-SV-GVAR). We find that a contractionary US monetary policy shock leads to a persistent fall in international output, a drop in global inflation rates, a rise in international interest rates and a strengthening of the US dollar in real terms. There is considerable evidence for heterogeneity of spillovers across countries, as well as for changes in the transmission of monetary policy shocks over time. We also examine the reverse question, namely how US monetary policy responds to international shocks. Here we find that US short-term rates decrease significantly in response to a monetary policy tightening abroad or a negative shock to foreign real GDP growth. Classification-JEL: C18, C26, E21 Keywords: Global vector autoregression, time-varying parameters, stochastic volatility, monetary policy, international spillovers Creation-Date: 2016-02-22 Price: The price is Free subject to availability. File-URL: https://www.oenb.at/dam/jcr:36ef6e2f-a9f4-49c8-997c-853d424f588c/WP205_WEB.pdf File-Format: application/pdf File-Size: 1764 kb Handle: RePEc:onb:oenbwp:205 Template-Type: ReDIF-Paper 1.0 Author-Name: Burkhard Raunig Author-Name-First: Burkhard Author-Name-Last: Raunig Author-Email: Burkhard.Raunig@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7219 Author-Workplace-Fax: +43-1-40420-7299 Title: Background Indicators Abstract: Indicators of latent variables are usually assumed to be driven by the latent variable and some random noise. Background indicators are in contrast also systematically driven by variables outside the structural model of interest. This paper assesses instrumental variable estimates of effects of latent variables when a background indicator is substituted for the latent variable. It turns out that such estimates become inconsistent in empirically important cases. In certain cases the estimates capture causal effects of the indicator rather than effects of the latent variable. A simulation experiment that considers the effect of economic uncertainty on aggregate consumption illustrates some of the results. Classification-JEL: C18, C26, E21 Keywords: Graphical methods, indicator, instrumental variable, financial development, stock market volatility Creation-Date: 2016-02-22 Price: The price is Free subject to availability. File-URL: https://www.oenb.at/dam/jcr:c77fecd2-80ee-4de8-8d95-6181528c08a1/WP204_WEB.pdf File-Format: application/pdf File-Size: 293 kb Handle: RePEc:onb:oenbwp:204 Template-Type: ReDIF-Paper 1.0 Author-Name: Matteo Crosignani Author-Name-First: Matteo Author-Name-Last: Crosignani Author-Email: mcrosign@stern.nyu.edu Author-Workplace-Name: NYU Stern School of Business Title: Why Are Banks Not Recapitalized During Crises? Abstract: I develop a model where governments might prefer to have an undercapitalized domestic financial sector during crises. Weak banks optimally tilt their sovereign bond portfolio towards domestic securities that are positively correlated with banks’ other sources of revenues. Governments anticipate this gambling-forresurrection motive and therefore face a trade-off when setting capital regulation. Undercapitalized banks act as buyers of last resort for home public debt at the cost of crowding-out private lending. Following recapitalizations, governments may face lower debt capacity and higher sovereign yields. European stress test data support the proposed mechanism as high leverage banks increased domestic government bond holdings relative to low leverage banks during the crisis. The general equilibrium model can rationalize, in the context of the Eurozone periphery, the increased banks’ holdings of domestic public debt, the ecreasing private lending, and the prolonged undercapitalization of the banking sector. Creation-Date: 2015-06-29 Price: The price is Free subject to availability. File-URL: https://www.oenb.at/dam/jcr:f04922d8-81ca-49d0-b732-f95010faa19c/Working%20Paper%20203_WEB.pdf File-Format: application/pdf File-Size: 860 kb Handle: RePEc:onb:oenbwp:203 Template-Type: ReDIF-Paper 1.0 Author-Name: Anil Ari Author-Name-First: Anil Author-Name-Last: Ari Author-Email: aa531@cam.ac.uk Author-Workplace-Name: Faculty of Economics, University of Cambridge Title: Sovereign Risk and Bank Risk-Taking Abstract: In European countries recently hit by a sovereign debt crisis, the share of domestic sovereign debt held by the national banking system has sharply increased. This paper examines the banking equilibrium in a model with optimizing banks and depositors, deriving implications for economic vulnerability to crisis and policy design. It shows that under-capitalized banks have an incentive to gamble on domestic sovereign bonds when they expect to suffer from non-bond losses in the aftermath of sovereign default. Depositor reactions to insolvency risk impose discipline, but also leave the economy susceptible to self-fulfilling shifts in sentiments, where sovereign default also causes a banking crisis. In an adverse equilibrium, sovereign risk shocks simultaneously raise bank funding costs and drive banks to increase their purchases of domestic debt, crowding out bank lending. Subsidized loans to banks, similar to the ECB's non-targeted longer-term refinancing operations (LTRO), strengthen gambling incentives and may even eliminate the good equilibrium. Targeted interventions have the capacity to eliminate adverse equilibria. Classification-JEL: E44, E58, F34, G21, H63 Keywords: Sovereign Debt Crises, Bank Risk-Taking, Financial Constraints, Eurozone Creation-Date: 2015-06-29 Price: The price is Free subject to availability. File-URL: https://www.oenb.at/dam/jcr:a5e4a781-63fa-456f-8020-d997cf76531f/Working%20Paper%20202.pdf File-Format: application/pdf File-Size: 1351 kb Handle: RePEc:onb:oenbwp:202 Template-Type: ReDIF-Paper 1.0 Author-Name: Markus Knell Author-Name-First: Markus Author-Name-Last: Knell Author-Email: markus.knell@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7218 Author-Workplace-Fax: +43-1-40420-7299 Title: The Return on Social Security with Increasing Longevity Abstract: In this paper I study the impact of increasing longevity on pay-as-you-go pension
systems. First, I show that increasing longevity increases their internal rate of
return. The size of the e ect di ers for di erent policy regimes. It is higher for the
case where the retirement age is increased in order to keep the system in balance
than for the case where the necessary adjustment is achieved by reducing pension
bene ts. Second, I study optimally chosen retirement decisions and I show that the
socially optimal policy involves a shorter working life than the private optimum. The
social optimum can be implemented by the use of a PAYG system that combines
an actuarial and a
at pension. Classification-JEL: H55; J1; J18; D630 Keywords: Pension System, Demographic Change, Increasing Life Expectancy, Re- tirement Decision Creation-Date: 2015-06-10 Price: The price is Free subject to availability. File-URL: https://www.oenb.at/dam/jcr:2f24db8c-a1c8-4332-bec7-5196b51368cf/wp201.pdf File-Format: application/pdf File-Size: 2251 kb Handle: RePEc:onb:oenbwp:201 Template-Type: ReDIF-Paper 1.0 Author-Name: Jonas Dovern Author-Name-First: Jonas Author-Name-Last: Dovern Author-Workplace-Name: Alfred-Weber-Institute for Economics, Heidelberg University Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Florian Huber Author-Name-First: Florian Author-Name-Last: Huber Author-Email: fhuber@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business (WU) Title: Does Joint Modelling of the World Economy Pay Off? Evaluating Global Forecasts from a Bayesian GVAR Abstract: We analyze how modeling international dependencies improves forecasts for the global economy based on a Bayesian GVAR with SSVS prior and stochastic volatility. To analyze the source of performance gains, we decompose the predictive joint density into its marginals and a copula term capturing the dependence structure across countries. The GVAR outperforms forecasts based on country-specific models. This performance is solely driven by superior predictions for the dependence structure across countries, whereas the GVAR does not yield better predictive marginal densities. The relative performance gains of the GVAR model are particularly pronounced during volatile periods and for emerging economies. Classification-JEL: C53, E37, F47 Keywords: GVAR, global economy, forecast evaluation, log score, copula Length: 49 Creation-Date: 2015-03-19 Price: The price is Free subject to availability. File-URL: https://www.oenb.at/dam/jcr:eaf839af-342e-428f-842f-f25d4aab71b7/WP200_screen.pdf File-Format: application/pdf File-Size: 690 kb Handle: RePEc:onb:oenbwp:200 Template-Type: ReDIF-Paper 1.0 Author-Name: Esther Segalla Author-Name-First: Esther Author-Name-Last: Segalla Author-Email: esther.segalla@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Title: Shock Transmission through International Banks: Austria Abstract: This study provides findings on the transmission of liquidity shocks by Austrian parent banks through the lending channel. I investigate how different types of parent banks adjust their balance sheet positions in response to a liquidity shock and how such an adjustment is transmitted into destination countries. I distinguish between three definitions of crossborder lending activities. In the most general definition I analyze changes in total lending, which consists of the two components - lending to banks and lending to non-banks. In a second step I concentrate on a narrower definition of lending, that is lending to nonaffiliated banks. Finally I focus on an even more targeted definition, such as lending to affiliated banks (lending to branches and subsidiaries). I find that (1) smaller banks (parent banks without affiliates) did not adjust their balance sheet composition in a very pronounced manner in response to a liquidity shock. (2) Large banks (parent banks with affiliates) did decrease moderately their cross-border loan share to other, non-affiliated banks. (3) Internal capital markets are important for the funding structure of Austrian parent banks and their foreign affiliates. (4) Destination countries matter. Countries signing the Vienna Initiative do receive strong support through the internal capital market. Classification-JEL: E44, F30, G18, G21, G32 Keywords: cross-border lending, liquidity risk, shock transmission, internal capital markets, Vienna Initiative. Length: 43 Creation-Date: 2015-01-27 Price: The price is Free subject to availability. File-URL: https://www.oenb.at/dam/jcr:6d3b6474-ccec-48d1-acaf-79a01832c886/WP199_screen.pdf File-Format: application/pdf File-Size: 5203 kb Handle: RePEc:onb:oenbwp:199 Template-Type: ReDIF-Paper 1.0 Author-Name: Ludmila Fadejeva Author-Name-First: Ludmila Author-Name-Last: Fadejeva Author-Email: ludmila.fadejeva@bank.lv Author-Workplace-Name: Latvijas Banka, Monetary Policy Department Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Thomas Reininger Author-Name-First: Thomas Author-Name-Last: Reininger Author-Email: Thomas.Reininger@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5234 Author-Workplace-Fax: +43-1-40420-5299 Title: Spillovers from Euro Area and U.S. Credit and Demand Shocks: Comparing Emerging Europe on the Basis of a GVAR Model Abstract: We examine the international effects of adverse loan supply and aggregate demand shocks originating in the euro area and the U.S.A. For that purpose, we use a global vector autoregressive (GVAR) model and isolate disturbances stemming from loan supply from those of four other macroeconomic shocks by means of sign restrictions. Our general results are as follows: Domestic and international responses of total credit and output to an adverse loan supply shock are substantial. They are more pronounced than the responses to an aggregate demand shock. Under both types of shocks, total credit decreases considerably more strongly than output in the long run, implying a reduction in financial deepening. This deleveraging process is particularly pronounced in the case of loan supply shocks. Taking a regional angle, Central-, Eastern- and Southeastern Europe (CESEE) and even considerably more the Commonwealth of Independent States (CIS) are the most strongly affected regions, and their total credit and output responses are stronger than in the country of shock origin. This is true for both types of structural shocks in the euro area and in the U.S.A. Last, historical decompositions of deviations from trend growth show that for the euro area developments, foreign shocks originating in the U.S.A., the UK and the CESEE and CIS regions feature most prominently, while for the U.S. developments, foreign shocks emanating from the euro area and China play a considerable role. Length: 45 Creation-Date: 2015-01-22 Price: The price is Free subject to availability. File-URL: https://www.oenb.at/dam/jcr:3dd7d44d-f12e-49d2-8b68-975b02362ded/WP198.pdf File-Format: application/pdf File-Size: 736 kb Handle: RePEc:onb:oenbwp:198 Template-Type: ReDIF-Paper 1.0 Author-Name: Martin Brown Author-Name-First: Martin Author-Name-Last: Brown Author-Email: martin.brown@unisg.ch Author-Workplace-Name: Swiss Institute of Banking and Finance, University of St. Gallen Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: The Euroization of Bank Deposits in Eastern Europe Abstract: In Eastern Europe a substantial share of bank deposits are denominated in foreign currency. Deposit euroization poses key challenges for monetary policy and financial sector supervision. On the one hand, it limits the effectiveness of monetary policy interventions. On the other hand, it increases financial sector fragility by exposing banks to currency risk or currency induced credit risk. Policymakers disagree on whether Eastern European countries should tackle deposit euroization with “dedollarization” policies or should rather strive to adopt the Euro as their legal tender. Assessing the potential effectiveness of “dedollarization” policies requires a clear understanding of which households hold foreign currency deposits and why they do so.
Based on survey data covering 16,375 households in ten countries in 2011 and 2012, we provide the first household-level analysis of deposit euroization in Eastern Europe. We examine how households’ preferences for and holding of foreign currency deposits are related to individual expectations about monetary conditions and network effects. We also examine to what extent monetary expectations, network effects and deposit euroization are the legacy of past financial crises or the outflow of current policies and institutions in the region. Our findings suggest that deposit euroization in Eastern Europe can be partly tackled by prudent monetary and economic decisions by today’s policymakers. The preferences of households for Euro deposits are partly driven by their distrust in the stability of their domestic currency, which in turn is related to their assessment of current policies and institutions. However, our findings also suggest that a stable monetary policy may not be sufficient to deal with the hysteresis of deposit euroization across the region. First, we confirm that the holding of foreign currency deposits has become a “habit” in the region. Second, we find that deposit euroization is still strongly influenced by households’ experiences of financial crises in the 1990s. Length: 56 Creation-Date: 2014-11-03 Price: The price is Free subject to availability. File-URL: https://www.oenb.at/dam/jcr:c30da0fc-beab-40e6-b8b5-d3d707bc81cf/WP197_screen.pdf File-Format: application/pdf File-Size: 670 kb Handle: RePEc:onb:oenbwp:197 Template-Type: ReDIF-Paper 1.0 Author-Name: Kim P. Huynh Author-Name-First: Kim P. Author-Name-Last: Huynh Author-Email: khuynh@bankofcanada.ca Author-Workplace-Name: Bank of Canada Author-Workplace-Phone: +1 (613) 782 8698 Author-Name: Philipp Schmidt-Dengler Author-Name-First: Philipp Author-Name-Last: Schmidt-Dengler Author-Email: p.schmidt-dengler@lse.ac.uk Author-Workplace-Name: The London School of Economics and Political Science Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: The Role of Card Acceptance in the Transaction Demand for Money Abstract: The use of payment cards, either debit or credit, is becoming more and more widespread in developed economies. Nevertheless, the use of cash remains significant. We hypothesize that the lack of card acceptance at the point of sale is a key reason why cash continues to play an important role. We formulate a simple inventory model that predicts that the level of cash demand falls with an increase in card acceptance. We use detailed payment diary data from Austrian and Canadian consumers to test this model while accounting for the endogeneity of acceptance. Our results confirm that card acceptance exerts a substantial impact on the demand for cash. The estimate of the consumption elasticity (0.23 and 0.11 for Austria and Canada, respectively) is smaller than that predicted by the classic Baumol-Tobin inventory model (0.5).
We conduct counterfactual experiments and quantify the effect of increased card acceptance on the demand for cash. Acceptance reduces the level of cash demand as well as its consumption elasticity. Classification-JEL: E41, C35, C83 Keywords: Inventory models of money,counterfactual distributions,endogenous switching regressions. Length: 47 Creation-Date: 2014-09-23 Price: The price is Free subject to availability. File-URL: https://www.oenb.at/dam/jcr:5cbab734-1d67-4d43-921e-9d063d9de3e2/Working%20Paper%20196_screen.pdf File-Format: application/pdf File-Size: 315 kb Handle: RePEc:onb:oenbwp:196 Template-Type: ReDIF-Paper 1.0 Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Florian Huber Author-Name-First: Florian Author-Name-Last: Huber Author-Email: fhuber@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business (WU) Title: The International Transmission of U.S. Structural Shocks – Evidence from Global Vector Autoregressions Abstract: In this paper we analyze the impact of three U.S. structural shocks on, and its transmission 0to, the world economy. For that purpose we use a Bayesian version of the global vector autoregressive (GVAR) model coupled with a prior specification that explicitly treats uncertainty regarding variable choice in the estimation stage of the model. Based on sign restrictions, we identify positive U.S. aggregate demand and supply shocks and a contractionary U.S. monetary policy shock. Our results are three-fold: First, we find significant spillovers of U.S. based shocks on the global economy. Responses of international output to a U.S. monetary policy shock are most pronounced, while those related to aggregate demand and supply shocks are more modest. Second, the dynamics of the receiving countries’ responses depend on the structural interpretation of the respective shock. More specifically, whereas responses to the U.S. demand shock are rather short-lived, the remaining shocks produce spillovers that impact permanently on domestic output. Third, U.S. shocks tend to spread globally through interest rates which resembles the pivotal role of the economy in shaping international financial markets. Co-movements in output and indirect effects via the oil price are additional important channels through which U.S. shocks feed into the domestic economy. Classification-JEL: C30, E52, F41, E32 Keywords: Transmission of external shocks,Global vector autoregressions,stochastic search variable selection,sign restrictions,model uncertainty Length: 41 Creation-Date: 2014-07-04 Price: The price is Free subject to availability. File-URL: https://www.oenb.at/dam/jcr:b917f144-46e7-44ff-abd7-4b8446547222/Working%20Paper%20195_screen.pdf File-Format: application/pdf File-Size: 801 kb Handle: RePEc:onb:oenbwp:195 Template-Type: ReDIF-Paper 1.0 Author-Name: Burkhard Raunig Author-Name-First: Burkhard Author-Name-Last: Raunig Author-Email: Burkhard.Raunig@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7219 Author-Workplace-Fax: +43-1-40420-7299 Author-Name: Johann Scharler Author-Name-First: Johann Author-Name-Last: Scharler Author-Email: Johann.Scharler@jku.at Author-Workplace-Name: Department of Economics, University of Linz Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: (+43-0) 732-2468-8360 Author-Workplace-Fax: (+43-0) 732-2468-9679 Author-Name: Friedrich Sindermann Author-Name-First: Friedrich Author-Name-Last: Sindermann Author-Email: friedrich.sindermann@uibk.ac.at Title: Do Banks Lend Less in Uncertain Times? Abstract: We study the development of bank lending in the U.S. after four large jumps in uncertainty
using an event study approach. We find that more liquid banks reduce lending less
than banks with smaller liquidity ratios after a surge in uncertainty. Lending by smaller
banks is also less responsive to increases in uncertainty. Banks with a higher capitalization
ratio keep up lending to a greater extent, but the effect is only significant for banks which are not part of a multi-bank holding company. This heterogeneity across banks suggests that declines in bank lending following increases in uncertainty are partly the result of a reduced supply of bank loans. Classification-JEL: E44, E20, E30 Keywords: uncertainty, bank loan supply, event study Length: 45 Creation-Date: 2014-06-26 Price: The price is Free subject to availability. File-URL: https://www.oenb.at/dam/jcr:e1927057-edce-47bc-9879-fc22292abf28/WP194_screen.pdf File-Format: application/pdf File-Size: 521 kb Handle: RePEc:onb:oenbwp:194 Template-Type: ReDIF-Paper 1.0 Author-Name: Konstantins Benkovskis Author-Name-First: Konstantins Author-Name-Last: Benkovskis Author-Email: konstantins.benkovskis@bank.lv Author-Workplace-Name: Latvijas Banka, Monetary Policy Department Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: “Made in China” – How Does it Affect Measures of Competitiveness? Abstract: We propose a comprehensive analysis of a country’s price and non-price competitiveness that accounts for changes in the value added content of trade by combining two datasets – highly disaggregated trade data from UN Comtrade with internationally integrated Supply and Use Tables from the WIOD database. When we focus attention to the traditional measure of gross exports of goods, the analysis shows that advanced economies lost non-price competitiveness relative to emerging economies over the period 1995 to 2011. This picture changes when the fragmentation of production is considered. We find that the relative quality of production from the US, Canada, Germany and the UK when tracing value added in exports remained unchanged or even increased over
this period. Likewise, the seemingly unchanged or improving relative quality of Brazil’s, Russia’s and India’s export goods largely arose from outsourcing rather than from improvements in the quality of domestic production. However, gains in Chinese non-price competitiveness remain impressive even after accounting for global value chain integration. Classification-JEL: C43, F12, F15, L15, O47 Keywords: value added content of trade, fragmentation, non-price competitiveness, China, BRIC, G7 Length: 47 Creation-Date: 2014-05-26 Price: The price is Free subject to availability. File-URL: https://www.oenb.at/dam/jcr:d0d313aa-1ef3-40f6-a1cf-c803bd738666/WP193_19.5.2014_screen.pdf File-Format: application/pdf File-Size: 762 kb Handle: RePEc:onb:oenbwp:193 Template-Type: ReDIF-Paper 1.0 Author-Name: John Bagnall Author-Name-First: John Author-Name-Last: Bagnall Author-Email: BagnallJ@rba.gov.au Author-Workplace-Name: Reserve Bank of Australia Author-Workplace-Phone: +61 2 9551 8794 Author-Name: David Bounie Author-Name-First: David Author-Name-Last: Bounie Author-Email: david.bounie@telecom-paristech.fr Author-Workplace-Name: Telecom ParisTech. 46 Author-Workplace-Phone: +33 1 45 81 73 32 Author-Name: Kim P. Huynh Author-Name-First: Kim P. Author-Name-Last: Huynh Author-Email: khuynh@bankofcanada.ca Author-Workplace-Name: Bank of Canada Author-Workplace-Phone: +1 (613) 782 8698 Author-Name: Anneke Kosse Author-Name-First: Anneke Author-Name-Last: Kosse Author-Email: j.c.m.kosse@dnb.nl Author-Workplace-Name: De Nederlandsche Bank Author-Workplace-Phone: +31-(0)20-5242827 Author-Name: Tobias Schmidt Author-Name-First: Tobias Author-Name-Last: Schmidt Author-Email: tobias.schmidt@bundesbank.de Author-Workplace-Name: Deutsche Bundesbank Author-Workplace-Phone: +49 (0) 69 9566 3730 Author-Name: Scott Schuh Author-Name-First: Scott Author-Name-Last: Schuh Author-Email: Scott.Schuh@bos.frb.org Author-Workplace-Name: Federal Reserve Bank of Boston Author-Workplace-Phone: +1 617-973- 3941 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: Consumer Cash Usage: A Cross-Country Comparison with Payment Diary Survey Data Abstract: We measure consumers’ use of cash by harmonizing payment diary surveys from seven
countries. The seven diary surveys were conducted in 2009 (Canada), 2010 (Australia),
2011 (Austria, France, Germany and the Netherlands), and 2012 (the United States). Our
paper finds cross-country differences – for example, the level of cash usage differs across
countries. Cash has not disappeared as a payment instrument, especially for low-value
transactions. We also find that the use of cash is strongly correlated with transaction
size, demographics, and point-of-sale characteristics such as merchant card acceptance
and venue. Classification-JEL: E41, D12, E58 Keywords: Money Demand, Payment Systems, Harmonization Length: 59 Creation-Date: 2014-05-26 Price: The price is Free subject to availability. File-URL: https://www.oenb.at/dam/jcr:ca5a831c-d876-4603-b029-b02489b7a3bf/WP192_16.5.2014_screen.pdf File-Format: application/pdf File-Size: 452 kb Handle: RePEc:onb:oenbwp:192 Template-Type: ReDIF-Paper 1.0 Author-Name: Saleem A. Bahaj Author-Name-First: Saleem A. Author-Name-Last: Bahaj Author-Email: sab202@cam.ac.uk Title: Systemic Sovereign Risk: Macroeconomic Implications in the Euro Area Abstract: What are the macroeconomic implications of changes in sovereign risk premia? In this paper, I use a novel identification strategy coupled with a new dataset for the Euro Area to answer this question. I show that exogenous innovations in sovereign risk premia were an important driver of the economic dynamics of crisis-hit countries, explaining 30-50% of the forecast error of unemployment. I also shed light on the mechanisms through which this occurs. Fluctuations in sovereign risk premia explain 20-40% of the variance of private borrowing costs. Increases in sovereign risk result in substantial capital flight, external adjustment and import compression. In contrast, governments appear not to increase their primary balances in response to increases in sovereign risk. Identifying these causal effects involves isolating a source of Fluctuations in sovereign borrowing costs exogenous to the economy in question. I address this problem by relying upon the transmission of country-specific events during the crisis in Europe to the sovereign risk premia in the remainder of the union. I construct a new dataset of critical events in foreign crisis-hit countries and I measure the impact of these events on yields in the economy of interest at an intraday frequency. An aggregation of foreign events serves as a proxy variable for structural innovations to the yield to identify shocks in a proxy SVAR. I extend this methodology into a Bayesian setting to allow for flexible panel assumptions. A counterfactual analysis is used to remove the impact of foreign events from the bond yields of crisis hit countries: I find that 40-60% of the trough-to-peak moves in bond yields in crisis-hit countries are explained by foreign events, thereby suggesting that the crisis was not purely a function of weak local economic conditions. Classification-JEL: E44, E65, F42 Keywords: High frequency identi cation, Narrative identi cation, Contagion, Bayesian VARs, Proxy SVARs, Panel VARs. Length: 67 Creation-Date: 2014-05-12 Price: The price is Free subject to availability. File-URL: https://www.oenb.at/dam/jcr:900ed783-23eb-4e14-acfe-738542970590/Working%20Paper%20191_screen.pdf File-Format: application/pdf File-Size: 1148 kb Handle: RePEc:onb:oenbwp:191 Template-Type: ReDIF-Paper 1.0 Author-Name: Claudia Steinwender Author-Name-First: Claudia Author-Name-Last: Steinwender Author-Email: c.steinwender@lse.ac.uk Title: Information Frictions and the Law of One Price: “When the States and the Kingdom became United” Abstract: How do information frictions distort international trade? This paper exploits a unique historical
experiment to estimate the magnitude of these distortions: the establishment of the transatlantic
telegraph connection in 1866. I use a newly collected data set based on historical newspaper records that
provides daily data on information flows across the Atlantic together with detailed, daily information
on prices and trade flows of cotton. Information frictions result in large and volatile deviations from
the Law of One Price. What is more, the elimination of information frictions has real effects: Exports
respond to information about foreign demand shocks. Average trade flows increase after the telegraph
and become more volatile, providing a more efficient response to demand shocks. I build a model of
international trade that can explain the empirical evidence. In the model, exporters use the latest news
about a foreign market to forecast expected selling prices when their exports arrive at the destination.
Their forecast error is smaller and less volatile the more recent the available information. I estimate the
welfare gains from information transmission through the telegraph to be roughly equivalent to those
from abolishing a 6% ad valorem tariff. Length: 63 Creation-Date: 2014-05-12 Price: The price is Free subject to availability. File-URL: https://www.oenb.at/dam/jcr:838db71d-1e7b-42c1-a8bb-cff17531c44e/Working%20Paper%20190_screen.pdf File-Format: application/pdf File-Size: 1925 kb Handle: RePEc:onb:oenbwp:190 Template-Type: ReDIF-Paper 1.0 Author-Name: Jesús Crespo Cuaresma Author-Name-First: Jesús Crespo Author-Name-Last: Cuaresma Author-Email: jcrespo@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business, Institute for Fiscal and Monetary Policy Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Florian Huber Author-Name-First: Florian Author-Name-Last: Huber Author-Email: fhuber@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business (WU) Title: Forecasting with Bayesian Global Vector Autoregressive Models: A Comparison of Priors Abstract: This paper puts forward a Bayesian version of the global vector autoregressive model
(B-GVAR) that accommodates international linkages across countries in a system of vector
autoregressions. We compare the predictive performance of B-GVAR models for the
one- and four-quarter ahead forecast horizon for standard macroeconomic variables (real
GDP, inflation, the real exchange rate and interest rates). Our results show that taking
international linkages into account improves forecasts of inflation, real GDP and the real
exchange rate, while for interest rates forecasts of univariate benchmark models remain
difficult to beat. Our Bayesian version of the GVAR model outperforms forecasts of the
standard cointegrated VAR for practically all variables and at both forecast horizons. The
comparison of prior elicitation strategies indicates that the use of the stochastic search
variable selection (SSVS) prior tends to improve out-of-sample predictions systematically.
This finding is confirmed by density forecast measures, for which the predictive ability of
the SSVS prior is the best among all priors entertained for all variables at all forecasting
horizons. Classification-JEL: C32, F44, E32, O54 Keywords: Forecasting with Bayesian Global Vector Autoregressive Models: A Comparison of Priors Length: 34 Creation-Date: 2014-03-18 Price: The price is Free subject to availability. File-URL: https://www.oenb.at/dam/jcr:a27bd5b7-6594-45d1-9f47-de9cee9f8207/WP189_screen.pdf File-Format: application/pdf File-Size: 646 kb Handle: RePEc:onb:oenbwp:189 Template-Type: ReDIF-Paper 1.0 Author-Name: Elisabeth Beckmann Author-Name-First: Elisabeth Author-Name-Last: Beckmann Author-Email: elisabeth.beckmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: Foreign currency borrowing and knowledge about exchange rate risk Abstract: Foreign currency borrowing is widespread in many regions of the world. This raises
the question whether unhedged borrowers do not understand the exchange rate risk
emanating from such loans. Employing household level micro-data from eight Central
and Eastern European countries the authors study how agents’ knowledge about
exchange rate risk affects the currency denomination of loans. Results show, first, that
a majority of respondents is aware that depreciations increase loan installments and,
secondly, that knowledge about the exchange rate risk lowers the demand for foreign
currency borrowing. To assess the causal effect of literacy on loan demand the authors
utilize information on agents’ exchange rate expectations. Overall, results suggest that
financial literacy exerts a strong impact on the choice of the loan currency. However,
from an aggregate perspective, a misunderstanding of the underlying risks is not the
main cause of foreign currency borrowing. Classification-JEL: D12, G11, D80 Keywords: Foreign currency borrowing and knowledge about exchange rate risk Length: 39 Creation-Date: 2014-03-18 Price: The price is Free subject to availability. File-URL: https://www.oenb.at/dam/jcr:0bb31530-14bb-4163-9cb8-83808806dd6c/WP188_screen.pdf File-Format: application/pdf File-Size: 389 kb Handle: RePEc:onb:oenbwp:188 Template-Type: ReDIF-Paper 1.0 Author-Name: Stefan Niemann Author-Name-First: Stefan Author-Name-Last: Niemann Author-Email: sniem@essex.ac.uk Author-Workplace-Name: Department of Economics, University of Essex, United Kingdom. Author-Name: Paul Pichler Author-Name-First: Paul Author-Name-Last: Pichler Author-Email: paul.pichler@oenb.at Author-Workplace-Name: Economic Studies Division, Oesterreichische Nationalbank, Austria Title: Collateral, Liquidity and Debt Sustainability Abstract: We study the sustainability of public debt in a closed production economy where a benevolent government chooses scal policies, including haircuts on its outstanding debt, in a discretionary manner. Government bonds are held by domestic agents to smooth consumption over time and because they provide collateral and liquidity services. We characterize a recursive equilibrium where public debt amounts to a sizeable fraction of output in steady state and is nevertheless fully serviced by the government. In a calibrated economy, steady state debt amounts to around 84% of output, the government's default threshold is at around 94% of output, and the haircut on outstanding debt at this threshold is around 40%. Both reputational costs of default and contemporaneous costs due to lost collateral and liquidity are essential to generate these empirically plausible predictions. Classification-JEL: E44, E62, H21, H63 Keywords: sustainability,nancial frictions,sovereign default,domestic debt,endogenous haircut Length: 53 Creation-Date: 2013-12-30 Price: The price is Free subject to availability. File-URL: https://www.oenb.at/dam/jcr:539234e8-389a-4e36-941c-0d2c794d25ac/WP187_screen.pdf File-Format: application/pdf File-Size: 1278 kb Handle: RePEc:onb:oenbwp:187 Template-Type: ReDIF-Paper 1.0 Author-Name: Martin Gächter Author-Name-First: Martin Author-Name-Last: Gächter Author-Email: martin.gaechter@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Aleksandra Riedl Author-Name-First: Aleksandra Author-Name-Last: Riedl Author-Email: aleksandra.riedl@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: One Money, One Cycle? The EMU Experience Abstract: We examine whether the introduction of the euro had a significantly positive impact on the synchronization of business cycles among members of Economic and Monetary Union (EMU) which might arise due to the lack of country-specific monetary policy shocks in the euro area. Empirical evidence on this relationship is rare so far and su ers from methodical weaknesses, such as the absence of time variability, which is crucial for addressing this issue. Using a synchronization index that is constructed on a year-by-year basis (1993{2011), we uncover a strong and robust empirical finding: the adoption of the euro has significantly increased the correlation of member countries' business cycles above and beyond the e ect of higher trade integration. Thus, our results substantially strengthen the conclusion by Frankel & Rose (1998), i.e. a country is more likely to satisfy the criteria for entry into a currency union ex post rather than ex ante. Remarkably, however, this reasoning is even verified when controlling for the e ect of increased trade linkages implied by entering a currency union. Classification-JEL: E02,E32,E58,F15,F33 Keywords: Business cycles,EMU,endogeneity,optimum currency areas Length: 39 Creation-Date: 2013-09-25 Price: The price is Free subject to availability File-URL: https://www.oenb.at/dam/jcr:bae54c85-0df9-4cba-82d6-d54ecea192bd/wp186_screen_tcm14-258129.pdf File-Format: application/pdf File-Size: 631 kb Handle: RePEc:onb:oenbwp:186 Template-Type: ReDIF-Paper 1.0 Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: A Global Macro Model for Emerging Europe Abstract: This paper puts forward a global macro model comprising 43 countries and covering the period from Q1 1995 to Q4 2011. Our regional focus is on countries in Central, Eastern and Southeastern Europe (CESEE) and the Commonwealth of Independent States (CIS). Applying a global VAR (GVAR) model, we are able to assess the spatial propagation and the time profile of foreign shocks to the region. Our results show that first, the region’s real economy reacts nearly equally strongly to an U.S. output shock as it does to a corresponding euro area shock. The pivotal role of the U.S.A. in shaping the global business cycle thus seems to partially offset the region’s comparably stronger trade integration with the euro area. Second, an increase in the euro area’s short-term interest rate has a negative effect on output in the long run throughout the region. This effect is stronger in the CIS as well as in Southeastern Europe, while it is comparably milder in Central Europe. Third, the region is negatively affected by an oil price hike, with the exception of Russia, one of the most important oil exporters worldwide. The oil-driven economic expansion in Russia seems to spill over to other – oil-importing – economies in CIS, thereby offsetting the original drag brought about by the hike in oil prices. Finally, our results corroborate the strong integration of advanced economies with the global economy. By contrast, the responses in emerging Europe are found to be more diverse, and country-specifics seem to play a more important role. Classification-JEL: C32, F44, E32, O54 Keywords: Global VAR,transmission of international shocks,Eastern Europe,CESEE,great recession,emerging Europe,global macro model,foreign shock Length: 54 Creation-Date: 2013-09-23 Price: The price is Free subject to availability File-URL: https://www.oenb.at/dam/jcr:f53b8525-5a02-419c-b91b-988c1d8bba7d/WP185.pdf File-Format: application/pdf File-Size: 870 kb Handle: RePEc:onb:oenbwp:185 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas Breuer Author-Name-First: Thomas Author-Name-Last: Breuer Author-Email: thomas.breuer@fhv.at Author-Workplace-Name: Research Centre PPE, Fachhochschule Vorarlberg, Hochschulstr. 1, A-6850 Dornbirn, Austria. Author-Name: Martin Summer Author-Name-First: Martin Author-Name-Last: Summer Author-Email: martin.summer@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7212 Author-Workplace-Fax: +43-1-40420-7299 Author-Name: Hans-Joachim Vollbrecht Author-Name-First: Hans-Joachim Author-Name-Last: Vollbrecht Author-Email: hans-joachim.vollbrecht@fhv.at Author-Workplace-Name: University of Applied Sciences Vorarlberg Author-Workplace-Phone: +43-5572-7927111 Author-Workplace-Fax: +43-5572-792-9510 Title: Endogenous Leverage and Asset Pricing in Double Auctions Abstract: We study the trading of real assets financed by collateralized loans in an agent based model of a continuous double auction. This approach provides a complementary perspective on recent advances in the general equilibrium theory of endogenous leverage by studying a model that simultaneously describes dynamic and equilibrium properties of the market. Rather than taking prices as parametric there is an explicit price formation process which can be simulated or studied empirically. This is important because the economics of leverage is key to the understanding of financial crisis. We find that simulated double auctions converge to stable final states close to the theoretical equilibrium state. Consistent with equilibrium theory, real assets are traded at a price above fundamental value in the double auction. The equilibrium level of leverage also emerges in the simulations of the double auction. Classification-JEL: D53, G12, G14, C63 Keywords: Leverage, Asset Pricing, Double Auction, Agent Based Modeling Length: 29 Creation-Date: 2013-07-31 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:2fb1fdaf-2555-4503-a5d6-ac5c267710d3/wp184_screen_tcm16-256982.pdf File-Format: application/pdf File-Size: 1898 kb Handle: RePEc:onb:oenbwp:184 Template-Type: ReDIF-Paper 1.0 Author-Name: Jenny Simon Author-Name-First: Jenny Author-Name-Last: Simon Author-Email: jenny.simon@hhs.se Author-Workplace-Name: Stockholm Institute of Transition Economics and CESifo Author-Name: Justin M. Valasek Author-Name-First: Justin M. Author-Name-Last: Valasek Author-Email: justin.valasek@wzb.eu Author-Workplace-Name: WZB Berlin Title: Efficient Fiscal Spending by Supranational Unions Abstract: We study fiscal spending by supranational unions, where participation is voluntary and countries bargain over contributions to and the allocation of a central budget. We establish and explore the link between the budget's allocation and nations' contributions that occurs since bargaining power is endogenous, and a country's outside option during budget negotiations is to withdraw its contribution and consume its full income. Generically, it follows that unstructured bargaining gives an inefficient result in the presence of income asymmetry between member nations. Interestingly, redistribution arises endogenously, despite nations being purely self-interested. However, there exists a trade-off between increasing equality and decreasing efficiency, which becomes more severe as the centralized budget increases. We also analyze partial ex-ante commitment through alternative decision-making institutions: Both majority rule and exogenous tax rules can improve efficiency. Classification-JEL: H77, H87, D71 Keywords: Supranational Unions, Efficiency, Public Goods, Redistribution, Federalism, Legislative Bargaining Length: 57 Creation-Date: 2013-06-10 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:ef9f0db0-7c1c-4ea6-b7e6-2f4ad4e0f7b3/working_paper_183_screen_tcm16-255980.pdf File-Format: application/pdf File-Size: 1289 kb Handle: RePEc:onb:oenbwp:183 Template-Type: ReDIF-Paper 1.0 Author-Name: Luca Fornaro Author-Name-First: Luca Author-Name-Last: Fornaro Author-Email: l.fornaro@lse.ac.uk Title: International Debt Deleveraging Abstract: I provide a framework for understanding debt deleveraging in a group of _nancially integrated countries. During an episode of international deleveraging world consumption demand is depressed and the world interest rate is low, reecting a high propensity to save. If exchange rates are allowed to oat, deleveraging countries can depreciate their nominal exchange rate to increase production and mitigate the fall in consumption associated with debt reduction. The key insight of the paper is that in a monetary union this channel of adjustment is shut o_, and therefore the falls in consumption demand and in the world interest rate are ampli_ed. Hence, monetary unions are especially prone to hit the zero lower bound on the nominal interest rate and enter a liquidity trap during deleveraging. In a liquidity trap deleveraging gives rise to a union-wide recession, which is particularly severe in high-debt countries. The model suggests several policy interventions that mitigate the negative impact of deleveraging on output in monetary unions. Classification-JEL: E31, E44, E52, F32, F34, F41, G01, G15 Keywords: Global Debt Deleveraging, Liquidity Trap, Monetary Union, Precautionary Savings, Debt Deflation Length: 53 Creation-Date: 2013-06-10 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:c37883da-72f5-47ae-be42-8c135002ed92/wp182_screen_tcm16-255978.pdf File-Format: application/pdf File-Size: 628 kb Handle: RePEc:onb:oenbwp:182 Template-Type: ReDIF-Paper 1.0 Author-Name: Elisabeth Beckmann Author-Name-First: Elisabeth Author-Name-Last: Beckmann Author-Email: elisabeth.beckmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Jarko Fidrmuc Author-Name-First: Jarko Author-Name-Last: Fidrmuc Author-Email: jarko.fidrmuc@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5218 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: Foreign Currency Loans and Loan Arrears of Households in Central and Eastern Europe Abstract: Given recent adverse developments, widespread foreign currency borrowing in CEECs poses a serious challenge for financial stability. Against this background, we use survey data to study the determinants of loan arrears of private households. Our data confirm a non-negligible impact of foreign currency loans on financial vulnerability. However, higher loan delinquency rates in depreciation countries can only partly be explained by foreign currency borrowing. Employing survey information about the reasons for households’ financial difficulties, we show that income shocks exert a stronger impact on loan delinquency rates than the direct effect which works through increased installments on foreign currency loans. Classification-JEL: G21, D14, C25 Keywords: Foreign currency loans, arrears, dollarization, euroization, household debt, non-performing loans, financial vulnerability, CEECs Length: 53 Creation-Date: 2012-11-09 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:9e73cfba-02d8-4913-b53b-c5965b9c9fa8/wp181_screen_tcm16-251629.pdf File-Format: application/pdf File-Size: 381 kb Handle: RePEc:onb:oenbwp:181 Template-Type: ReDIF-Paper 1.0 Author-Name: Fabio Rumler Author-Name-First: Fabio Author-Name-Last: Rumler Author-Email: fabio.rumler@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Name: Walter Waschiczek Author-Name-First: Walter Author-Name-Last: Waschiczek Author-Email: walter.waschiczek@oenb.at. Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Title: Have Changes in the Financial Structure Affected Bank Profitability? Evidence for Austria Abstract: We examine the impact of changes in the financial structure of the Austrian banking sector over the past 15 years, such as disintermediation, internationalization and privatization, on the profitability of banks. Several proxies based on bank balance sheet data at the micro level as well as macroeconomic variables are used to capture these changes. The case of Austria is particularly interesting because country-specific developments, such as the opening-up of the banking sector due to EU accession, coincided with the global deregulation of banking activities. Our estimation results, which are based on dynamic panel regression methods, indicate that disintermediation (a lower percentage of loans over total assets) and higher market concentration in the banking sector had a positive effect on bank profitability, while, surprisingly, changes in the ownership structure (privatization and increased foreign ownership) as well as more foreign lending by Austrian banks did not have a clear-cut or significant impact on bank profits. Classification-JEL: G21, E44, D40, G32, C33 Keywords: Bank Profitability, Banking Market Structure, Dynamic Panel Estimation Length: 41 Creation-Date: 2012-09-26 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:770b4269-9ef1-4b2f-875d-c9c8b71d3472/wp180_internet_tcm16-250288.pdf File-Format: application/pdf File-Size: 428 kb Handle: RePEc:onb:oenbwp:180 Template-Type: ReDIF-Paper 1.0 Author-Name: Markus Knell Author-Name-First: Markus Author-Name-Last: Knell Author-Email: markus.knell@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7218 Author-Workplace-Fax: +43-1-40420-7299 Title: Increasing Life Expectancy and Pay-As-You-Go Pension Systems Abstract: In this paper I study how PAYG pension systems of the notional defined contribution type can be designed such that they remain financially stable in the presence of increasing life expectancy. For this to happen two crucial parameters must be set in an appropriate way. First, the remaining life expectancy has to be based on a crosssection measure and, second, the notional interest rate has to include a correction for labor force increases that are only due to rises in the retirement age which are necessary to "neutralize" the increase in life expectancy. It is shown that the selfstabilization is effective for various patterns of retirement behavior and also – under certain assumptions – if life expectancy reaches an upper limit. Classification-JEL: H55, J1, J18, J26 Keywords: Pension System, Demographic Change, Financial Stability Length: 46 Creation-Date: 2012-08-28 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:b8a16909-2bd2-496f-9167-f1af0cd54a14/working_paper_179_internet_tcm16-249865.pdf File-Format: application/pdf File-Size: 2122 kb Handle: RePEc:onb:oenbwp:179 Template-Type: ReDIF-Paper 1.0 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: Why Do People Save in Cash? Distrust, Memories of Banking Crises, Weak Institutions and Dollarization Abstract: The paper analyzes why households in transition economies prefer to hold sizeable shares of their assets in cash at home rather than in banks. Using survey data from ten Central, Eastern and Southeastern European countries, I document the relevance of this behavior and show that cash preferences cannot be fully explained by whether people are banked or unbanked. The analysis reveals that a lack of trust in banks, memories of past banking crises and weak tax enforcement are important factors. Moreover, cash preferences are stronger in dollarized economies where a “safe” foreign currency serves as a store of value. Classification-JEL: E41, O16, G11, D12, P34 Keywords: Cash demand, cash hoarding, household finance, trust in banks, social capital, dollarization Length: 61 Creation-Date: 2012-07-27 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:71d323d6-3720-4abf-ba7a-f206ba35052b/working_paper_178_tcm16-249425.pdf File-Format: application/pdf File-Size: 2077 kb Handle: RePEc:onb:oenbwp:178 Template-Type: ReDIF-Paper 1.0 Author-Name: Gerhard Fenz Author-Name-First: Gerhard Author-Name-Last: Fenz Author-Email: gerhard.fenz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Divison Author-Workplace-Homepage: http://www.oenb.at Author-Name: Lukas Reiss Author-Name-First: Lukas Author-Name-Last: Reiss Author-Email: lukas.reiss@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Name: Martin Schneider Author-Name-First: Martin Author-Name-Last: Schneider Author-Email: martin.schneider@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Divison Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7436 Title: A structural interpretation of the impact of the great recession on the Austrian economy using an estimated DSGE model Abstract: In this paper we present an analysis of the impact of the great recession of the years 2008 and 2009 on the Austrian economy. For this purpose, we utilize the new estimated DSGE model of the OeNB for the Austrian economy within the Euro area. This model is a small open-economy version of Smets & Wouters (2003), where the domestic economy is linked to a highly stylized representation of the rest of the Euro area via trade and financial flows. The model identifies foreign demand and confidence shocks as the main transmission channels. Moreover the risk premium shock contributed significantly to the downturn of the Austrian economy. In contrast price shocks (price markup and raw material shocks) were supportive throughout the crisis. The strong resilience of the Austrian labour market during the crisis and the subsequent upswing is reected in a series of negative technology shocks. Length: 43 Creation-Date: 2012-01-30 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:4594479f-5c24-480e-aa03-e52504e3f6d3/wp177_internet_tcm16-243304.pdf File-Format: application/pdf File-Size: 848 kb Handle: RePEc:onb:oenbwp:177 Template-Type: ReDIF-Paper 1.0 Author-Name: Nicolas Albacete Author-Name-First: Nicolas Author-Name-Last: Albacete Author-Email: Nicolas.Albacete@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Title: Multiple Imputation in the Austrian Household Survey on Housing Wealth Abstract: This paper presents the multiple imputation model for the imputation of the missing values of the Austrian Household Survey on Housing Wealth 2008. It is based on Bayesian inference and on the fully conditional specification approach. Both theoretical framework and model specification are discussed in detail and,finally, some results about the performance of our imputations are presented. Classification-JEL: D10, C81 Keywords: Household wealth survey, imputation methods Length: 36 Creation-Date: 2012-01-17 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:5ca29833-8fd4-44fc-9fdf-ce322c7b3a70/wp176_internet_tcm16-242939.pdf File-Format: application/pdf File-Size: 805 kb Handle: RePEc:onb:oenbwp:176 Template-Type: ReDIF-Paper 1.0 Author-Name: Konstantins Benkovskis Author-Name-First: Konstantins Author-Name-Last: Benkovskis Author-Email: konstantins.benkovskis@bank.lv Author-Workplace-Name: Latvijas Banka, Monetary Policy Department Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: How Does Quality Impact on Import Prices? Abstract: Understanding the dynamics of import price developments is an important but challenging issue which affects the way we look on consumers' welfare, real exchange rates and exchange rate pass-through. In this paper we propose an exact import price index which extends the approach by Broda and Weinstein (2006) who adjust price developments for changes in varieties of imported products. We relax two assumptions still underlying the Broda and Weinstein (2006) approach, thus allowing the set of imported goods and the quality to vary. This variety-, set-of-products-, and quality-adjusted import price index shows that gains from variety in European G7 countries, although positive, are rather small compared to calculated gains from quality. Using HS 07 (vegetables) as our benchmark group of products with unchanged quality, we find significant gains from quality for Germany, France, Italy and the UK between 1995 and 2010. Although these results are not invariant to the choice of the benchmark category, they clearly stress the importance of incorporating the quality issues in empirical literature. Ignoring changes in import quality can give misleading estimates of import prices and consumers' welfare. Classification-JEL: C43, D60, F12, F14, L15 Keywords: import variety, price index, quality, welfare gains from trade Length: 45 Creation-Date: 2011-12-31 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:4fca7404-b93e-4bba-895e-fb98516b450f/wp175_tcm16-242934.pdf File-Format: application/pdf File-Size: 498 kb Handle: RePEc:onb:oenbwp:175 Template-Type: ReDIF-Paper 1.0 Author-Name: Stefan Kerbl Author-Name-First: Stefan Author-Name-Last: Kerbl Author-Email: stefan.kerbl@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, On-Site Banking Inspections Division – Large Banks Title: Regulatory Medicine Against Financial Market Instability: What Helps And What Hurts? Abstract: Do we know if a short selling ban or a Tobin Tax result in more stable asset prices? Or do they in fact make things worse? Just like medicine regulatory measures in financial markets aim at improving an already complex system, cause side effects and interplay with other measures. In this paper an agent based stock market model is built that tries to find answers to the questions above. In a stepwise procedure regulatory measures are introduced and their implications on market liquidity and stability examined. Particularly, the effects of (i) a ban on short selling (ii) a mandatory risk limit, i.e. a Value-at-Risk limit, (iii) an introduction of a Tobin Tax, i.e. transaction tax on trading, and (iv) any arbitrary combination of the measures are observed and discussed. The model is set up to incorporate non-linear feedback effects of leverage and liquidity constraints leading to fire sales. In its unregulated version the model outcome is capable of reproducing stylised facts of asset returns like fat tails and clustered volatility. Introducing regulatory measures shows that only a mandatory risk limit is beneficial from every perspective, while a short selling ban – though reducing volatility – increases tail risk. The contrary holds true for a Tobin Tax: it reduces the occurrence of crashes but increases volatility. Furthermore, the interplay of measures is not negligible: measures block each other and a well chosen combination can mitigate unforeseen side effects. Concerning the Tobin Tax the findings indicate that an overdose can do severe harm. Classification-JEL: E37, G01, G12, G14, G18 Keywords: Tobin Tax, transaction tax, short selling ban, Value-at-Risk limits, risk management herding, agent based models Length: 39 Creation-Date: 2011-10-18 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:aefbbe58-021b-4514-b96c-6ffb4aaefc0a/wp174_tcm16-240232.pdf File-Format: application/pdf File-Size: 752 kb Handle: RePEc:onb:oenbwp:174 Template-Type: ReDIF-Paper 1.0 Author-Name: Peter Lindner Author-Name-First: Peter Author-Name-Last: Lindner Author-Email: peter.lindner@oenb.at Author-Workplace-Name: Economic Analysis Division Title: Decomposition of Wealth and Income using Micro Data from Austria Abstract: This paper analyses Austrian data on (financial) wealth and income. The main focus lays on the distribution of these indicators. Using a decomposition procedure of the Gini Index first proposed by Lerman and Yitzhaki (1985), it is possible to recover the effect of specific forms of investments of assets and of certain sources of income on the overall distribution (in terms of an elasticity) of wealth and income in Austria. For the first time Austrian wealth and income data are used to decompose the total distribution into various categories. Additionally, there are, due to the lack of available data on household wealth, internationally only very few attempts to compare wealth and income using decomposition methods. The analysis shows that specific forms of assets (mainly more sophisticated ones) as well as income from sources that are concentrated on a small group tend to increase inequality whereas the others have an equalizing effect. Classification-JEL: D3 Keywords: Wealth distribution, income distribution, decomposition by components/ Length: 49 Creation-Date: 2011-10-06 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:5956c4e6-7c34-4678-b200-8f2f1a21a59b/wp173_tcm16-239683.pdf File-Format: application/pdf File-Size: 881 kb Handle: RePEc:onb:oenbwp:173 Template-Type: ReDIF-Paper 1.0 Author-Name: Jürgen Eichberger Author-Name-First: Jürgen Author-Name-Last: Eichberger Author-Email: juergen.eichberger@awi.uni-heidelberg.de Author-Workplace-Name: University of Heidelberg, Alfred-Weber-Institut für Wirtschaftswissenschaften Author-Name: Klaus Rheinberger Author-Name-First: Klaus Author-Name-Last: Rheinberger Author-Email: klaus.rheinberger@fhv.at Author-Workplace-Name: Research Centre PPE, Fachhochschule Vorarlberg, Hochschulstr. 1, A-6850 Dornbirn, Austria. Author-Name: Martin Summer Author-Name-First: Martin Author-Name-Last: Summer Author-Email: martin.summer@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7212 Author-Workplace-Fax: +43-1-40420-7299 Title: Credit Risk in General Equilibrium Abstract: Credit risk models used in quantitative risk management treat credit risk analysis conceptually like a single person decision problem. From this perspective an exogenous source of risk drives the fundamental parameters of credit risk: probability of default, exposure at default and the recovery rate. In reality these parameters are the result of the interaction of many market participants: They are endogenous. The authors develop a general equilibrium model with endogenous credit risk that can be viewed as an extension of the capital asset pricing model. They analyze equilibrium prices of securities as well as equilibrium allocations in the presence of credit risk. The authors use the model to discuss the conceptual underpinnings of the approach to risk weight calibration for credit risk taken by the Basel Committee. Classification-JEL: G32, G33, G01, D52 Keywords: Credit Risk, Endogenous Risk, Systemic Risk, Banking Regulation Length: 41 Creation-Date: 2011-09-09 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:33782bd9-84a5-4f36-83e2-57fb19fba322/wp172_tcm16-239052.pdf File-Format: application/pdf File-Size: 1608 kb Handle: RePEc:onb:oenbwp:172 Template-Type: ReDIF-Paper 1.0 Author-Name: Jarko Fidrmuc Author-Name-First: Jarko Author-Name-Last: Fidrmuc Author-Email: jarko.fidrmuc@zeppelin-university.de Author-Workplace-Name: Zeppelin University Friedrichshafen, CESifo Munich, Institute for Eastern European Studies, Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5218 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Mariya Hake Author-Name-First: Mariya Author-Name-Last: Hake Author-Email: mariya.hake@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: Households’ Foreign Currency Borrowing in Central and Eastern Europe Abstract: Foreign currency loans represent an important feature of recent financial developments in CEECs. This might pose a serious challenge for macroeconomic stability. Against this background, the authors study the determinants of foreign currency loans of households, using data on the behavior of households in nine CEECs. Their results reveal that foreign currency loans are driven by households’ lack of trust in the stability of the local currency and in domestic financial institutions. Moreover, special factors including remittances and expectations of euro adoption play an important role in selected regions. The financial crisis reduced foreign currency borrowing, but there is some indication this effect might be only temporary. Classification-JEL: G18, G21, C25 Keywords: Foreign currency loans, dollarization, euroization, monetary credibility, trust, CEEC Length: 47 Creation-Date: 2011-09-01 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:ee6bbe5c-a474-4d75-9536-ba18fb849444/wp171_tcm16-239053.pdf File-Format: application/pdf File-Size: 795 kb Handle: RePEc:onb:oenbwp:171 Template-Type: ReDIF-Paper 1.0 Author-Name: Friederike Niepmann Author-Name-First: Friederike Author-Name-Last: Niepmann Author-Email: Friederike.Niepmann@eui.eu Author-Workplace-Name: European University Institute Author-Name: Tim Schmidt-Eisenlohr Author-Name-First: Tim Author-Name-Last: Schmidt-Eisenlohr Author-Email: Tim.Schmidt-Eisenlohr@sbs.ox.ac.uk Author-Workplace-Name: University of Oxford Title: Bank Bailouts, International Linkages and Cooperation Abstract: On the occasion of the 65th birthday of Governor Klaus Liebscher and in recognition of his commitment to Austria’s participation in European monetary union and to the cause of European integration, the Oesterreichische Nationalbank (OeNB) established a “Klaus Liebscher Award”. It has been offered annually since 2005 for up to two excellent scientific papers on European monetary union and European integration issues. The authors must be less than 35 years old and be citizens from EU member or EU candidate countries. Each “Klaus Liebscher Award” is worth EUR 10,000. The winning papers of the seventh Award 2011 were written by Friederike Niepmann and Tim Schmidt-Eisenlohr (shared award) and by Steffen Osterloh. Friederike Niepmann’s and Tim Schmidt-Eisenlohr’s paper is presented in this Working Paper while Steffen Osterloh’s contribution is contained in Working Paper 169 . In this paper Friederike Niepmann and Tim Schmidt-Eisenlohr start from the observation that financial institutions are increasingly linked internationally. As a result, financial crisis and government intervention have stronger effects beyond borders. The authors provide a model of international contagion allowing for bank bailouts. While a social planner trades off tax distortions, liquidation losses and intraand intercountry income inequality, in the non-cooperative game between governments there are inefficiencies due to externalities, no burden sharing and freeriding. The authors show that, in absence of cooperation, stronger interbank linkages make government interests diverge, whereas cross-border asset holdings tend to align them. The authors analyze different forms of cooperation and their effects on global and national welfare. Classification-JEL: F36, F42, G01, G28 Keywords: bailout, contagion, financial crisis, international institutional arrangements Length: 47 Creation-Date: 2011-05-23 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:6ce1fb83-54ef-46f8-9f9e-7f576552af61/wp170_tcm16-232986.pdf File-Format: application/pdf File-Size: 474 kb Handle: RePEc:onb:oenbwp:170 Template-Type: ReDIF-Paper 1.0 Author-Name: Steffen Osterloh Author-Name-First: Steffen Author-Name-Last: Osterloh Author-Email: osterloh@zew.de Author-Workplace-Name: Centre for European Economic Research Author-Workplace-Phone: (+49) 621 1235 165 Author-Workplace-Fax: (+49) 621 1235 223 Title: Can Regional Transfers Buy Public Support? Evidence from EU Structural Policy Abstract: On the occasion of the 65th birthday of Governor Klaus Liebscher and in recognition of his commitment to Austria’s participation in European monetary union and to the cause of European integration, the Oesterreichische Nationalbank (OeNB) established a “Klaus Liebscher Award”. It has been be offered annually since 2005 for up to two excellent scientific papers on European monetary union and European integration issues. The authors must be less than 35 years old and be citizens from EU member or EU candidate countries. Each “Klaus Liebscher Award” is worth EUR 10,000. The winning papers of the seventh Award 2011 were written by Steffen Osterloh and by Friederike Niepmann and Tim Schmidt-Eisenlohr (shared award). Steffen Osterloh’s paper is presented in this Working Paper while Friederike Niepmann’s and Tim Schmidt-Eisenlohr’s contribution is contained in Working Paper 170. In this paper Steffen Osterloh starts from the observation that regional transfers are often assumed to have an impact on the public opinion towards the benefactor, but that empirical evidence is still scarce. In his paper the author tests this hypothesis for the structural funds of the European Union (EU) by combining detailed data on regional transfers with public opinion surveys. A positive impact of transfers on public support for the EU can be confirmed. Moreover, the author scrutinizes the role of awareness of being a recipient of funds in this process. In particular, he finds that the impact of the amount of transfers on the individual’s awareness is heterogenous and particularly depends on education. Finally, the author shows that the type of information source which arouses the citizen’s awareness of the transfers affects the impact on his opinion. Classification-JEL: D72, F59, H73 Keywords: regional policy, vote purchasing, public opinion, European Union Length: 45 Creation-Date: 2011-05-23 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:83e40374-13fd-459c-b8ee-a9c10fcb1099/wp169_tcm16-232985.pdf File-Format: application/pdf File-Size: 1205 kb Handle: RePEc:onb:oenbwp:169 Template-Type: ReDIF-Paper 1.0 Author-Name: Burkhard Raunig Author-Name-First: Burkhard Author-Name-Last: Raunig Author-Email: Burkhard.Raunig@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7219 Author-Workplace-Fax: +43-1-40420-7299 Author-Name: Johann Scharler Author-Name-First: Johann Author-Name-Last: Scharler Author-Email: Johann.Scharler@jku.at Author-Workplace-Name: Department of Economics, University of Linz Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: (+43-0) 732-2468-8360 Author-Workplace-Fax: (+43-0) 732-2468-9679 Title: Stock Market Volatility, Consumption and Investment; An Evaluation of the Uncertainty Hypothesis Using Post-War U.S. Data Abstract: We estimate the effects of stock market volatility on the growth rates of durable consumption, non-durable consumption and invest- ment using post-war US data. Our results indicate that high levels of stock market volatility exert large adverse effects on the growth rates of investment and durable consumption, whereas the in uence on non-durable consumption growth is rather limited. The ordering of the magnitudes of the effects of stock market volatility across the three components of aggregate demand supports the idea that stock mar- ket volatility is closely related to uncertainty about future economic developments. Classification-JEL: E44, E20, E30 Keywords: uncertainty hypothesis, stock market volatility, consumption, investment Length: 43 Creation-Date: 2011-05-11 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:f98d7e10-1e41-40c2-ae1d-775154ebb7d8/wp168_tcm16-232941.pdf File-Format: application/pdf File-Size: 351 kb Handle: RePEc:onb:oenbwp:168 Template-Type: ReDIF-Paper 1.0 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: Does the Broad Public Want to Consolidate Public Debt? – The Role of Fairness and of Policy Credibility Abstract: The paper tests selected long-standing hypotheses about why voters support or oppose fiscal consolidation. Deviating from most of the empirical literature which mainly focuses on cross-sectional and time series evidence, this paper employs data from a public opinion survey that has been conducted in spring 2010 in Austria. The results show (i) that voters are fiscally prudent, that (ii) they behave rationally in the sense that self-interest matters, that (iii) they care for the next generation (this effect is surprisingly small), that (iv) the distributional fairness among the current generation is as at least as important as the intergenerational aspect and that (v) the low credibility of medium-term fiscal policy plans can be a serious impediment to voters’ support for consolidation. These results bear direct implications on the design of fiscal consolidation plans. Classification-JEL: H63, H31, D12 Keywords: Public debt, fiscal adjustment, political economy, fairness, credibility Length: 47 Creation-Date: 2011-05-10 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:b4a596d1-d728-4bdf-9601-bc9d34fa1ecb/wp167_tcm16-232939.pdf File-Format: application/pdf File-Size: 368 kb Handle: RePEc:onb:oenbwp:167 Template-Type: ReDIF-Paper 1.0 Author-Name: Claudia Kwapil Author-Name-First: Claudia Author-Name-Last: Kwapil Author-Email: claudia.kwapil@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: (+43-1) 404 20-7415 Author-Workplace-Fax: (+43-1) 404 20-7499 Title: Firms’ Reactions to the Crisis and their Consequences for the Labour Market. Results of a Company Survey conducted in Austria Abstract: This article is based on the results of two company surveys - the first was conducted in 2007, before the recession 2008/2009 hit Austria, and the second was conducted in 2009 shortly after the trough of it. We analyse firms' reactions to the crisis and focus on their labour market relevant decisions. Although base wages were cut more frequently than in economically calm times, wage reductions continued to be the exception rather than the rule. This indicates the existence of nominal wage rigidities in Austria. Instead of wage cuts, firms preferred to reduce working hours and to dismiss employees. We find that firm specific characteristics as well as characteristics of the workforce help explaining a firm's probability of dismissing employees. However, the force of the shock by which an individual firm is hit (during the 2008/2009 recession) does not in fluence the likelihood of dismissals. Classification-JEL: C25, E24, J30 Keywords: Wage Rigidity, Demand Shock, Micro Survey Data Length: 49 Creation-Date: 2010-12-14 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:83af53b8-424f-4ca5-a35a-a9a989871bc1/wp166_tcm16-216689.pdf File-Format: application/pdf File-Size: 382 kb Handle: RePEc:onb:oenbwp:166 Template-Type: ReDIF-Paper 1.0 Author-Name: Helmut Elsinger Author-Name-First: Helmut Author-Name-Last: Elsinger Author-Email: helmut.elsinger@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://finance2.bwl.univie.ac.at/members/elsinger/elsinger.htm Author-Workplace-Phone: +43-1-4277 38057 Author-Workplace-Fax: +43-1-4277 38054 Title: Independence Tests based on Symbolic Dynamics Abstract: New methods to test whether a time series is i.i.d. are proposed in a recent series of papers (Matilla-García [2007], Matilla-García and Marín [2008], Matilla-García and Marín [2009], and Matilla-García et al. [2010]). The main idea is to map m-histories of a time series onto elements of the symmetric group. The observed frequencies of the different elements are then used to detect dependencies in the original series. The author will demonstrate that the results presented in the above papers are not correct in the suggested generality. Moreover, simulation results indicate that the performance of the original tests are not as good as betoken. Classification-JEL: C12, C52 Keywords: Independence Tests, Symbolic Dynamics, Permutation Entropy Length: 67 Creation-Date: 2010-09-15 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:5390f35e-bf75-43c4-9d1a-248a26728d2a/wp165_screen_tcm16-208851.pdf File-Format: application/pdf File-Size: 1227 kb Handle: RePEc:onb:oenbwp:165 Template-Type: ReDIF-Paper 1.0 Author-Name: Sylvia Kaufmann Author-Name-First: Sylvia Author-Name-Last: Kaufmann Author-Email: sylvia.kaufmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7222 Author-Workplace-Fax: +43-1-40420-7299 Author-Name: Johann Scharler Author-Name-First: Johann Author-Name-Last: Scharler Author-Email: Johann.Scharler@jku.at Author-Workplace-Name: Department of Economics, University of Linz Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: (+43-0) 732-2468-8360 Author-Workplace-Fax: (+43-0) 732-2468-9679 Title: Bank-Lending Standards, the Cost Channel and Inflation Dynamics Abstract: If firms borrow working capital to finance production, then nominal interest rates have a direct influence on in inflation dynamics, which appears to be the case empirically. However, interest rates may only partly mirror the cost of working capital. In this paper we explore the role of bank lending standards as a potential additional cost source and evaluate their empirical importance in explaining in ation dynamics in the US and in the euro area. Classification-JEL: E40, E50 Keywords: New Keynesian Phillips Curve, Cost Channel, Bank Lending Standards, Bayesian Length: 35 Creation-Date: 2010-09-08 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:33c330eb-5d4e-4a79-a35a-a971fce51cce/wp164_tcm16-205277.pdf File-Format: application/pdf File-Size: 413 kb Handle: RePEc:onb:oenbwp:164 Template-Type: ReDIF-Paper 1.0 Author-Name: Marianna Cervená Author-Name-First: Marianna Author-Name-Last: Cervená Author-Name: Martin Schneider Author-Name-First: Martin Author-Name-Last: Schneider Author-Email: martin.schneider@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Divison Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7436 Title: Short-term forecasting GDP with a DSGE model augmented by monthly indicators Abstract: DSGE models are useful tools for evaluating the impact of policy changes but their use for (short-term) forecasting is still at an infant stage. Besides theory based restrictions, the timeliness of data is an important issue. Since DSGE models are based on quarterly data, they are vulnerable to a publication lag of quarterly national accounts. In this paper we propose a framework for a short-term forecasting of GDP based on a medium-scale DSGE model for a small open economy within a currency area that utilizes the timely information available in monthly conjunctural indicators. To this end we adopt a methodology proposed by Giannone, Monti and Reichlin (2009). Using Austrian data we find that the forecasting performance of the DSGE model can be improved considerably by conjunctural indicators while still maintaining the story-telling capability of the model. Keywords: DSGE models, nowcasting, short-term forecasting, monthly indicators Length: 55 Creation-Date: 2010-08-25 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:53f305df-2b33-4348-961d-9aab98b6767c/wp163_tcm16-205276.pdf File-Format: application/pdf File-Size: 847 kb Handle: RePEc:onb:oenbwp:163 Template-Type: ReDIF-Paper 1.0 Author-Name: Zeno Enders Author-Name-First: Zeno Author-Name-Last: Enders Author-Email: zeno.enders@uni-bonn.de Author-Workplace-Name: University of Bonn Author-Name: Gernot J. Müller Author-Name-First: Gernot J. Author-Name-Last: Müller Author-Email: gernot.mueller@uni-bonn.de Author-Workplace-Name: University of Bonn Title: Has the Euro changed the Business Cycle? Abstract: In this paper we analyze European business cycles before and under EMU. Across the two periods we find 1) a significant decline in real exchange rate volatility, 2) significant changes in cross-country correlations, and 3) the volatility of macroeconomic fundamentals largely unchanged. We develop a two-country business cycle model and show that the calibrated model is able to replicate key features of the data prior to and under EMU.We find that the euro has a strong bearing on the transmission mechanism as cross-country spillovers increase substantially under EMU. As a result, foreign shocks become more and domestic shocks less important in accounting for the (unchanged) volatility of macroeconomic fundamentals. Classification-JEL: F41, F42, E32 Keywords: European business cycles, Euro, Optimum Currency Area, EMU, Monetary Policy, Exchange rate regime, Cross-country spillovers Length: 49 Creation-Date: 2010-05-31 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:8a92a434-ad66-49cd-858d-12abdad1a14b/wp_162_screen_enders_tcm16-192502.pdf File-Format: application/pdf File-Size: 740 kb Handle: RePEc:onb:oenbwp:162 Template-Type: ReDIF-Paper 1.0 Author-Name: Markus Knell Author-Name-First: Markus Author-Name-Last: Knell Author-Email: markus.knell@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7218 Author-Workplace-Fax: +43-1-40420-7299 Title: Nominal and Real Wage Rigidities. In Theory and in Europe Abstract: In this paper I study the relation between real wage rigidity (RWR) and nominal price and wage rigidity. I show that in a standard DSGE model RWR is mainly affected by the interaction of the two nominal rigidities and not by other structural parameters. The degree of RWR is, however, considerably influenced by the modelling assumption about the structure of wage contracts (Calvo vs. Taylor) and about other institutional characteristics of wage-setting (clustering of contracts, heterogeneous contract length, indexation). I use survey evidence on price- and wage-setting for 15 European countries to calculate the degrees of RWR implied by the theoretical model. The average levels of RWR are broadly in line with empirical estimates based on macroeconomic data. In order to be able to also match the observed cross-country variation in RWR it is, however, essential to move beyond the country-specific durations of price and wages and to take more institutional details into account. Classification-JEL: E31, E32, E24, J51 Keywords: Inflation Persistence, RealWage Rigidity, NominalWage Rigidity, DSGE models, Staggered Contracts Length: 53 Creation-Date: 2010-03-29 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:5e87f130-bbec-4b0a-9f11-12c271f91405/wp_161_screen_knell_tcm16-188543.pdf File-Format: application/pdf File-Size: 415 kb Handle: RePEc:onb:oenbwp:161 Template-Type: ReDIF-Paper 1.0 Author-Name: Jesús Crespo Cuaresma Author-Name-First: Jesús Crespo Author-Name-Last: Cuaresma Author-Email: jcrespo@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business, Institute for Fiscal and Monetary Policy Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Spatial Filtering, Model Uncertainty and the Speed of Income Convergence in Europe Abstract: In this paper we put forward a Bayesian Model Averaging method dealing with model uncertainty in the presence of potential spatial autocorrelation. The method uses spatial filtering in order to account for different types of spatial links. We contribute to existing methods that handle spatial dependence among observations by explicitly taking care of uncertainty stemming from the choice of a particular spatial structure. Our method is applied to estimate the conditional speed of income convergence across 255 NUTS-2 European regions for the period from 1995 to 2005. We show that the choice of a spatial weight matrix - and in particular the choice of a class thereof - can have an important effect on the estimates of the parameters attached to the model covariates. We also show that estimates of the speed of income convergence across European regions depend strongly on the form of the spatial patterns which are assumed to underlie the dataset. When we take into account this dimension of model uncertainty, the posterior distribution of the speed of convergence parameter has a large probability mass around a rate of convergence of 1%, approximately half of the value which is usually reported in the literature. Classification-JEL: C11, C15, C21, R11, O52 Keywords: Model uncertainty, spatial filtering, determinants of economic growth, European regions Length: 37 Creation-Date: 2010-01-11 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:64b56008-61a2-472f-aa7b-21caa6c33389/wp160_tcm16-180631.pdf File-Format: application/pdf File-Size: 441 kb Handle: RePEc:onb:oenbwp:160 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas Scheiber Author-Name-First: Thomas Author-Name-Last: Scheiber Author-Email: thomas.scheiber@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5247 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: Euroization in Central, Eastern and Southeastern Europe – New Evidence On Its Extent and Some Evidence On Its Causes Abstract: We present new evidence on de facto euroization in eleven Central, Eastern and Southeastern European countries. Estimates of the extent of foreign currency cash holdings are derived from survey data. Furthermore, we define overall euroization indices, relating both assets and cash holdings. Results confirm that some countries are heavily euroized and that euro cash holdings constitute a sizeable share of local currency in circulation. Euroization levels in other –mainly Central European– countries are low and economically insignificant. Evidently, high euroization bears various significant consequences for economic policies. Therefore, we inquire on the determinants of euroization. We find that euroization is highly correlated with the quality of past economic governance, reflecting past periods of instabilities. In contrast, the more recent –pre-financial crisis– course of economic history had only limited impact. Thus, our results are in line with the view that policy makers in highly euroized countries are severely constrained by past events and that euroization levels might be difficult to revert through stable macroeconomic policies. Classification-JEL: E41, E50, D14 Keywords: Dollarization, Euroization, Currency Substitution, Survey Data, Central,Eastern, Southeastern, Europe, CEE, SEE Length: 41 Creation-Date: 2009-11-27 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:7a9b8c11-8ff1-40af-9035-e6ecab3a6dc1/wp159_tcm16-144505.pdf File-Format: application/pdf File-Size: 635 kb Handle: RePEc:onb:oenbwp:159 Template-Type: ReDIF-Paper 1.0 Author-Name: Markus Knell Author-Name-First: Markus Author-Name-Last: Knell Author-Email: markus.knell@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7218 Author-Workplace-Fax: +43-1-40420-7299 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: Trust in Banks? Evidence from normal times and from times of crises Abstract: Trust in financial institutions is of great importance for financial intermediation. Against this background, we study two questions: Has trust in banks declined during the global financial crisis and what factors determine the level of trust in banks? Employing survey evidence from Austrian households, we show that trust in banks is mainly affected by "subjective" variables like the individuals' assessment of the current economic and financial situation and by their future outlooks. After controlling for these variables we show that the financial crisis has caused a reduction in trust (around -7.5pp) which is sizable but not dramatic. Even at its lowest point (in the first quarter of 2009) 65% still report to have trust in the banking system, which is a higher percentage than for many other institutions. Furthermore, the drop is only slightly larger than the drop observed after a small, non-systemic crisis that occurred in 2006. Thus, the much-stressed notion of a genuine "trust crisis" is not reflected in our data. Finally, we provide evidence that the degree of individual information does not influence trust, that banking trust is contagious and that the extension of deposit insurance coverage in October 2008 had a positive effect on trust. Classification-JEL: G01, G21, Z13, O16 Keywords: Trust, Banking Sector, Financial Crisis Length: 49 Creation-Date: 2009-11-10 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:a7c15481-85b8-4854-b263-b27a6a075e41/wp158_tcm16-143616.pdf File-Format: application/pdf File-Size: 1050 kb Handle: RePEc:onb:oenbwp:158 Template-Type: ReDIF-Paper 1.0 Author-Name: Simona Delle Chiaie Author-Name-First: Simona Delle Author-Name-Last: Chiaie Author-Email: simona.delle-chiaie@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division, P.O. Box 61, A-1010 Vienna Title: The sensitivity of DSGE models’ results to data detrending Abstract: This paper aims to shed light on potential pitfalls of different data filtering and detrending procedures for the estimation of stationary DSGE models. For this purpose, a medium-sized New Keynesian model as the one developed by Smets and Wouters (2003) is used to assess the sensitivity of the structural estimates to preliminary data transformations. To examine the question, we focus on two widely used detrending and filtering methods, the HP filter and linear detrending. After comparing the properties of business cycle components, we estimate the model through Bayesian techniques using in turn the two different sets of transformed data. Empirical findings show that posterior distributions of structural parameters are rather sensitive to the choice of detrending. As a consequence, both the magnitude and the persistence of theoretical responses to shocks depend upon preliminary filtering. Classification-JEL: E3 Keywords: DSGE models; Filters; Trends; Bayesian estimates Length: 29 Creation-Date: 2009-07-20 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:6846d6d0-067a-4bb3-8bae-6483fbc1cf2d/wp157_tcm16-140824.pdf File-Format: application/pdf File-Size: 300 kb Handle: RePEc:onb:oenbwp:157 Template-Type: ReDIF-Paper 1.0 Author-Name: Helmut Elsinger Author-Name-First: Helmut Author-Name-Last: Elsinger Author-Email: helmut.elsinger@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://finance2.bwl.univie.ac.at/members/elsinger/elsinger.htm Author-Workplace-Phone: +43-1-4277 38057 Author-Workplace-Fax: +43-1-4277 38054 Title: Financial Networks, Cross Holdings, and Limited Liability Abstract: I discuss a network of banks which are linked with each other by financial obligations and cross holdings. Given an initial endowment the value of the obligations and the equity values of the banks are determined endogenously in a way consistent with the priority of debt and the limited liability of equity. Even though neither equity values nor debt values are necessarily unique the value of debt and equity holdings of outside investors is uniquely determined. An algorithm to calculate debt and equity values is developed. Classification-JEL: G21, G33; Keywords: Financial Network; Credit Risk; Systemic Risk. Length: 37 Creation-Date: 2009-05-29 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:b2f1721c-7af9-4646-9568-d93faec67bac/wp156_tcm16-138413.pdf File-Format: application/pdf File-Size: 416 kb Handle: RePEc:onb:oenbwp:156 Template-Type: ReDIF-Paper 1.0 Author-Name: Anton Korinek Author-Name-First: Anton Author-Name-Last: Korinek Author-Workplace-Name: 4118F Tydings Hall, University of Maryland, College Park, MD 20742,USA, Title: Systemic Risk: Amplification Effects, Externalities, and Policy Responses Abstract: The worst financial crises since the Great Depression has forced central bankers and policymakers across Europe and around the globe to take unprecedented policy measures to deal with systemic risk, i.e. the risk that the financial system ceases to perform its function of allocating capital to the most productive use because of financial difficulties among a significant number of financial institutions. This paper develops a parsimonious model of systemic risk in the form of amplification effects whereby adverse developments in financial markets and in the real economy mutually reinforce each other and lead to a feedback cycle of falling asset prices, deteriorating balance sheets and tightening financing conditions. The paper shows that the free market equilibrium in such an environment is generically inefficient because constrained market participants do not internalize that their actions entail amplification effects. Therefore they undervalue the social benefits of liquidity during crises and take on too much systemic risk. We use our framework to shed light on a number of current policy issues. We show that banks face socially insufficient incentives to raise more capital during systemic crises, that bailouts which are anticipated can be ineffective, and that expectational errors are considerably more costly during crises than in normal times. Furthermore we develop an analytical framework for macro-prudential capital adequacy requirements that take into account systemic risk. We also analyze a new channel of financial contagion and explain why private agents will take insufficient precautions against contagion from other sectors in the economy. Classification-JEL: E31, E32, E24, J51 ; Keywords: financial crises, amplification effects, liquidity, systemic risk, systemic externalities, social pricing kernel, macroprudential regulation. Length: 31 Creation-Date: 2009-05-14 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:8db50a61-8035-41cb-a401-b7f756233fb0/wp155_tcm16-111934.pdf File-Format: application/pdf File-Size: 432 kb Handle: RePEc:onb:oenbwp:155 Template-Type: ReDIF-Paper 1.0 Author-Name: Tarek A. Hassan Author-Name-First: Tarek A. Author-Name-Last: Hassan Author-Email: thassan@fas.harvard.edu Author-Workplace-Name: Harvard University, Department of Economics; Postal Address: Littauer Center G4, 1875 Cambridge Street, Cambridge MA 02138, USA, Title: Country Size, Currency Unions, and International Asset Returns Abstract: The fact that economies differ in size has important implications for international asset returns. I solve for the spread on international bonds and stocks in an endowment economy with complete asset markets and non-traded goods. The model predicts that larger countries have lower real interest rates because their bonds provide insurance against shocks that affect a larger fraction of the world economy. Larger countries' bonds must therefore pay lower excess returns in equilibrium and uncovered interest parity fails. By a similar logic, stocks in the non-traded sector of larger countries also tend to pay lower excess returns. If asset markets are segmented, the introduction of a currency union lowers real interest rates and expected returns on stocks in the non-traded sector of participating countries. I test the predictions of the model for a panel of OECD countries and show that they are strongly supported by the data: Investors earn lower excess returns on bonds and stocks in the non-traded sector of larger countries. Similarly, excess returns on EMU member countries'bonds and stocks in the non-traded sector fell after European monetary integration. Classification-JEL: F3, G0 ; Keywords: International return differentials, country size, currency unions, uncovered interest parity, market segmentation. Length: 69 Creation-Date: 2009-05-14 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:7e974ada-d900-444c-b1fb-dede2e7a01bf/wp154_tcm16-111932.pdf File-Format: application/pdf File-Size: 689 kb Handle: RePEc:onb:oenbwp:154 Template-Type: ReDIF-Paper 1.0 Author-Name: Markus Knell Author-Name-First: Markus Author-Name-Last: Knell Author-Email: markus.knell@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7218 Author-Workplace-Fax: +43-1-40420-7299 Author-Name: Alfred Stiglbauer Author-Name-First: Alfred Author-Name-Last: Stiglbauer Author-Email: alfred.stiglbauer@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7435 Title: The Impact of Reference Norms on Inflation Persistence When Wages are Staggered Abstract: In this paper we present an extension of the Taylor model with staggered wages in which wage-setting is also influenced by reference norms (i.e. by benchmark wages). We show that reference norms can considerably increase the persistence of inflation and the extent of real wage rigidity but that these effects depend on the definition of reference norms (e.g. how backward-looking they are) and on whether the importance of norms differs between sectors. Using data on collectively bargained wages in Austria from 1980 to 2006 we show that wage-setting is strongly influenced by reference norms, that the wages of other sectors seem to matter more than own past wages and that there is a clear indication for the existence of wage leadership (i.e. asymmetries in reference norms). Classification-JEL: E31, E32, E24, J51 ; Keywords: Inflation Persistence, Real Wage Rigidity, Staggered Contracts, Wage Leadership. Length: 63 Creation-Date: 2009-03-11 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:00f033a9-93cb-4a5b-9f00-d6885fa4e754/wp153_tcm16-98524.pdf File-Format: application/pdf File-Size: 927 kb Handle: RePEc:onb:oenbwp:153 Template-Type: ReDIF-Paper 1.0 Author-Name: Burkhard Raunig Author-Name-First: Burkhard Author-Name-Last: Raunig Author-Email: Burkhard.Raunig@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7219 Author-Workplace-Fax: +43-1-40420-7299 Author-Name: Martin Scheicher Author-Name-First: Martin Author-Name-Last: Scheicher Author-Email: martin.scheicher@ecb.int Author-Workplace-Name: European Central Bank, Kaiserstrasse 29, D – 60311, Frankfurt am Main, Germany, Title: Are Banks Different? Evidence from the CDS Market Abstract: This paper uses regression analysis to compare the market pricing of the default risk of banks to that of other firms. We study how CDS traders discriminate between banks and other type of firms and how their judgement changes over time, in particular, since the start of the recent financial turmoil. We use monthly data on the Credit Default Swaps (CDS) of 41 major banks and 162 non-banks. By means of panel analysis, we decompose the CDS premia into the expected loss and the risk premium. Our primary result is that market participants indeed viewed banks differently and that they drastically changed their mind during the recent turmoil that started in August 2007. Classification-JEL: E43, G12, G13; Keywords: Credit default swap, market discipline, default risk, risk premium Length: 47 Creation-Date: 2009-02-16 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:b5adbc57-67bf-474e-9fbe-91f23f3b8031/wp152_tcm16-97773.pdf File-Format: application/pdf File-Size: 343 kb Handle: RePEc:onb:oenbwp:152 Template-Type: ReDIF-Paper 1.0 Author-Name: Christian Ragacs Author-Name-First: Christian Author-Name-Last: Ragacs Author-Email: christian.ragacs@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Name: Martin Schneider Author-Name-First: Martin Author-Name-Last: Schneider Author-Email: martin.schneider@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Divison Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7436 Title: Why did we fail to predict GDP during the last cycle? A breakdown of forecast errors for Austria Abstract: This paper proposes an informal taxonomy to break down forecast errors of institutional forecasts. This breakdown is demonstrated for the forecasts of the Oesterreichische Nationalbank (OeNB) for Austrian GDP. The main result is that the largest part of the forecast errors can be explained by erroneous projections of the international environment. Data revisions also substantially contribute to the forecasting error for the forecast of the current year. Domestic exogenous variables play a minor role only. The inclusion of judgement improves the forecasting performance. Keywords: Forecast error taxonomy; Breakdown; Austria; Judgement; Technical forecast. Length: 21 Creation-Date: 2009-02-11 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:594c7acb-cf61-42b3-bb71-56a5856012ab/wp151_tcm16-97772.pdf File-Format: application/pdf File-Size: 339 kb Handle: RePEc:onb:oenbwp:151 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas Breuer Author-Name-First: Thomas Author-Name-Last: Breuer Author-Email: thomas.breuer@fhv.at Author-Workplace-Name: Research Centre PPE, Fachhochschule Vorarlberg, Hochschulstr. 1, A-6850 Dornbirn, Austria. Author-Name: Martin Jandacka Author-Name-First: Martin Author-Name-Last: Jandacka Author-Email: martin.jandacka@fhv.at Author-Workplace-Name: Research Centre PPE, Fachhochschule Vorarlberg, Hochschulstr. 1, A-6850 Dornbirn, Austria. Author-Name: Klaus Rheinberger Author-Name-First: Klaus Author-Name-Last: Rheinberger Author-Email: klaus.rheinberger@fhv.at Author-Workplace-Name: Research Centre PPE, Fachhochschule Vorarlberg, Hochschulstr. 1, A-6850 Dornbirn, Austria. Author-Name: Martin Summer Author-Name-First: Martin Author-Name-Last: Summer Author-Email: martin.summer@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7212 Author-Workplace-Fax: +43-1-40420-7299 Title: How to find plausible, severe, and useful stress scenarios Abstract: We give a precise operational definition to three requirements the Basel Committee on Banking Supervision specifies for stress tests: Plausibility and severity of stress scenarios as well as suggestiveness of risk reducing actions. The basic idea of our approach is to define a suitable region of plausibility in terms of the risk factor distribution and search systematically for the worst portfolio loss over this region. One key innovation compared to the existing literature is the solution of two open problems. We suggest a measure of plausibility that is not prone to the problem of dimensional dependence of maximum loss and we derive a way to consistently deal with situations where some but not all risk factors are stressed. Among the various approaches used for partial scenarios, plausibility is maximised by setting the non stressed risk factors to their conditional expected value given the value of the stressed risk factors. Classification-JEL: G28, G32, G20, C15. Keywords: Stress testing, maximum loss, risk management, banking regulation. Length: 29 Creation-Date: 2009-02-05 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:514ec0e3-987d-4d08-8da2-4cccb096f422/wp150_tcm16-97771.pdf File-Format: application/pdf File-Size: 447 kb Handle: RePEc:onb:oenbwp:150 Template-Type: ReDIF-Paper 1.0 Author-Name: Claudia Kwapil Author-Name-First: Claudia Author-Name-Last: Kwapil Author-Email: claudia.kwapil@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: (+43-1) 404 20-7415 Author-Workplace-Fax: (+43-1) 404 20-7499 Author-Name: Johann Scharler Author-Name-First: Johann Author-Name-Last: Scharler Author-Email: Johann.Scharler@jku.at Author-Workplace-Name: Department of Economics, University of Linz Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: (+43-0) 732-2468-8360 Author-Workplace-Fax: (+43-0) 732-2468-9679 Title: Expected Monetary Policy and the Dynamics of Bank Lending Rates Abstract: In this paper we explore empirically to what extent expected monetary policy matters for the dynamics of bank lending rates in the U.S., the U.K. and Germany. We find that banks have increasingly behaved in a forward-looking fashion by taking expected changes in monetary policy rates into account when setting lending rates. We document that along with the shifts in monetary policy regimes towards inflation targeting, expected monetary policy has become more important as a determinant of bank lending rates. Overall, our results provide support for the hypothesis that monetary policy has become more effective by successfully influencing private sector expectations. Classification-JEL: E52, E58 Keywords: Monetary Policy, Expectations, Interest Rate Pass-Trough Length: 33 Creation-Date: 2009-01-30 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:6a7cecec-5430-41a1-8d12-109011594ca6/wp149_tcm16-97770.pdf File-Format: application/pdf File-Size: 309 kb Handle: RePEc:onb:oenbwp:149 Template-Type: ReDIF-Paper 1.0 Author-Name: Fabio Rumler Author-Name-First: Fabio Author-Name-Last: Rumler Author-Email: fabio.rumler@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Name: Maria Teresa Valderrama Author-Name-First: Maria Teresa Author-Name-Last: Valderrama Author-Email: maria.valderrama@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Title: Comparing the New Keynesian Phillips Curve with Time Series Models to Forecast Inflation Abstract: The New Keynesian Phillips Curve, as a structural model of inflation dynamics, has mostly been used to explain past inflation developments, but has hardly been used for forecasting purposes. We propose a method of forecasting inflation based on the present-value formulation of the hybrid New Keynesian Phillips Curve. To evaluate the forecasting performance of this model we compare it with forecasts generated from time series models at different forecast horizons. As state-of-the-art time series models used in inflation forecasting we employ a Bayesian VAR, a traditional VAR and a simple autoregressive model. We find that the New Keynesian Phillips Curve delivers relatively more accurate forecasts compared to the other models for longer forecast horizons (more than 3 months) while they are outperformed by the time series models only for the very short forecast horizon. This is consistent with the finding in the literature that structural models are able to outperform time series models only for longer horizons. Classification-JEL: E31, C32, C53 Keywords: New Keynesian Phillips Curve, Inflation Forecasting, Forecast Evaluation, Bayesian VAR Length: 37 Creation-Date: 2008-09-30 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:d149cc9d-9e09-4a72-998f-77caf4d3ea7d/wp148_tcm16-92824.pdf File-Format: application/pdf File-Size: 432 kb Handle: RePEc:onb:oenbwp:148 Template-Type: ReDIF-Paper 1.0 Author-Name: Markus Knell Author-Name-First: Markus Author-Name-Last: Knell Author-Email: markus.knell@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7218 Author-Workplace-Fax: +43-1-40420-7299 Title: The Optimal Mix Between Funded and Unfunded Pensions System When People Care About Relative Consumption Abstract: In this paper I derive the optimal portfolio mix between a funded and an unfunded pension system when people care about their consumption relative to a reference group. Pay-as-you-go systems with fixed contribution rates have the property that pension benefits are tied to labor income. This lowers the uncertainty of individuals’future relative position and thus increases the attractiveness of unfunded systems. The paper shows analytically that in an OLG model the optimal share of funding decreases with the strength of individuals’ concern for relative standing. A calibrated version of the model that uses data for various countries and time periods suggests that the sensitivity of the optimal share of funding to the concern of relative standing is also quantitatively important. For reasonable assumptions about reference standards it is typically around 20%. Classification-JEL: H55; G11; E60 ; Keywords: Pension Systems; Social Security; Risk sharing; Portfolio Choice; Relative Consumption. Length: 43 Creation-Date: 2008-09-01 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:08d744ca-b49b-457a-a2be-e75e1a2e4849/wp146_tcm16-92027.pdf File-Format: application/pdf File-Size: 639 kb Handle: RePEc:onb:oenbwp:146 Template-Type: ReDIF-Paper 1.0 Author-Name: Gerhard Fenz Author-Name-First: Gerhard Author-Name-Last: Fenz Author-Email: gerhard.fenz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Divison Author-Workplace-Homepage: http://www.oenb.at Author-Name: Martin Schneider Author-Name-First: Martin Author-Name-Last: Schneider Author-Email: martin.schneider@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Divison Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7436 Title: Transmission of business cycle shocks between the US and the euro area Abstract: We analyze the transmission of structural shocks between the US and the euro area within a two-country VAR framework. For that purpose, we simultaneously identify cost-push, demand and monetary policy shocks for both countries using sign restrictions. Our results show that domestic shocks explain the largest share of the forecast error variances for GDP, consumer prices and the interest rate in both countries in the short run, whilst spillovers from the other country and global factors gain importance in the medium run. The strength of the shock transmission between the two countries is quite symmetric. Our approach to the identification of structural shocks allows us to construct confidence bands that account both for estimation and identification uncertainty. We find impulse responses to domestic shocks to be significant while spillovers across countries are insignificant. Classification-JEL: C32; E37; E40; Keywords: VAR, shock transmission, sign restrictions, Metropolis-Hastings, confidence intervals, bootstrap. Length: 29 Creation-Date: 2008-07-21 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:5366269c-f98a-4f9a-b491-8d92a7b73db1/wp145_tcm16-88722.pdf File-Format: application/pdf File-Size: 483 kb Handle: RePEc:onb:oenbwp:145 Template-Type: ReDIF-Paper 1.0 Author-Name: Sylvia Kaufmann Author-Name-First: Sylvia Author-Name-Last: Kaufmann Author-Email: sylvia.kaufmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7222 Author-Workplace-Fax: +43-1-40420-7299 Title: Dating and forecasting turning points by Bayesian clustering with dynamic structure: A suggestion with an application to Austrian data. Abstract: The information contained in a large panel data set is used to date historical turning points of the Austrian business cycle and to forecast future ones. We estimate groups of series with similar time series dynamics and link the groups with a dynamic structure. The dynamic structure identifies a group of leading and a group of coincident series. Robust results across data vintages are obtained when series specific information is incorporated in the design of the prior group probability distribution. The results are consistent with common expectations, in particular the group of leading series includes Austrian confidence indicators and survey data, German survey indicators, some trade data, and, interestingly, the Austrian and the German stock market indices. The forecast evaluation confirms that the Markov switching panel with dynamic structure performs well when compared to other specifications. Classification-JEL: C23, E32; Keywords: Bayesian clustering, parameter heterogeneity, latent dynamic structure, Markov switching, panel data, turning points. Length: 49 Creation-Date: 2008-06-19 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:49334027-4571-492a-af56-04f9ddc08c6b/wp144_tcm16-88579.pdf File-Format: application/pdf File-Size: 539 kb Handle: RePEc:onb:oenbwp:144 Template-Type: ReDIF-Paper 1.0 Author-Name: Christian Wagner Author-Name-First: Christian Author-Name-Last: Wagner Author-Email: christian.wagner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Title: Risk-Premia, Carry-Trade Dynamics, and Speculative Efficiency of Currency Markets Abstract: Foreign exchange market efficiency is commonly investigated by Fama-regression tests of uncovered interest parity (UIP). In this paper, we conjecture a speculative UIP relationship which implies that exchange rate changes comprise a time-varying risk component in addition to the forward premium.This suggests that the forward premium anomaly reported in previous research potentially stems from omitting this component in UIP tests and that the popular carry-trade strategy can be rationalized to some extent. Moreover, while related work focuses on the Fama-regression slope coefficient, we show that also the intercept is important for judging the economic significance of currency speculation. Empirically, we find support for speculative UIP and the existence of a risk-premium. Furthermore, although carry-traders are able to collect some risk-premia, currency speculation does not yield economically significant excess returns, which suggests that foreign exchange markets are speculatively efficient. Disregarding the Fama-regression constant, however, leads to distortions in the assessment of economic significance and induces spurious rejection of speculative efficiency. Classification-JEL: F31; Keywords: Exchange rates; Uncovered interest parity; Speculative efficiency; Risk-premia; Carry-trade. Length: 43 Creation-Date: 2008-05-15 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:3365425c-ddfc-4949-9ab6-1ab15788886f/wp143_tcm16-88211.pdf File-Format: application/pdf File-Size: 727 kb Handle: RePEc:onb:oenbwp:143 Template-Type: ReDIF-Paper 1.0 Author-Name: Aleksandra Riedl Author-Name-First: Aleksandra Author-Name-Last: Riedl Author-Email: aleksandra.riedl@wu-wien.ac.at Author-Workplace-Name: Institute for Economic Geography and GIScience, Vienna University of Economics and Business Administration, Author-Name: Silvia Rocha-Akis Author-Name-First: Silvia Author-Name-Last: Rocha-Akis Author-Email: silvia.rocha@wu-wien.ac.at Author-Workplace-Name: Department of Economics, Vienna University of Economics and Business Administration, Title: Testing the tax competition theory: How elastic are national tax bases in Western Europe? Abstract: In this paper, we test one of the fundamental assumptions in the tax competition literature, namely, that a country's taxable income depends on the tax policies pursued in the domestic and in neighbouring countries. Based on a panel of annual data of 14 Western European countries spanning the period 1982 to 2004, we show that the common trend in falling corporate income tax (CIT) rates can in part be explained by the existence of fiscal externalities in the form of international resource flows. Our results confirm the presumption put forward in recent empirical tax reaction function studies, that interdependent tax setting behaviour is evidence of tax competition. However, taxable corporate income is shown to react inelastically to domestic and to foreign tax rates. Thus, the observed rise in CIT revenues in Europe between 1982 and 2004 cannot be explained by the trend in falling CIT rates. Moreover, we find that large countries' tax bases are more responsive to neighbouring countries' tax policies, which is in contrast to the classic asymmetric tax competition literature. Classification-JEL: H71, H72, H77, H87, C21, C23 Keywords: tax competition, corporate income tax base elasticity, asymmetric countries, instrumental variables, spatial econometrics. Length: 36 Creation-Date: 2008-04-29 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:53b36c96-30d5-40c3-975b-ffd56cdec020/wp142_tcm16-84945.pdf File-Format: application/pdf File-Size: 983 kb Handle: RePEc:onb:oenbwp:142 Template-Type: ReDIF-Paper 1.0 Author-Name: Kerstin Gerling Author-Name-First: Kerstin Author-Name-Last: Gerling Author-Email: gerling@vwl.uni-mannheim.de. Author-Workplace-Name: University of Mannheim, Department of Economics Title: The Real Consequences of Financial Market Integration when Countries Are Heterogeneous Abstract: This paper studies the mechanisms through which financial integration affects the pattern of international capital flows and the domestic economic performances when explicitly accounting for wealth inequality on imperfect capital markets. Balancing the impact of a firm size and a credit rationing effect on the net credit position and on aggregate production will help predicting the distribution of gains and losses among and within countries on the basis of a country’s aggregate wealth and its distribution. Altogether, the results contribute new explanations for some empirical puzzles. They also bear important implications for policy making, supranational treaty design and financial stability. Classification-JEL: D24, D31, D61, E44, F36 Keywords: international financial integration, inequality, imperfect capital markets and allocative efficiency Length: 36 Creation-Date: 2008-04-28 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:00d8c151-0f1b-456a-996a-1db60da897c1/wp141_tcm16-84944.pdf File-Format: application/pdf File-Size: 773 kb Handle: RePEc:onb:oenbwp:141 Template-Type: ReDIF-Paper 1.0 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: Euroization: What Factors drive its Persistence? Abstract: The question asked in this paper is why people continue to use foreign currencies even after their economies have stabilized. Survey data for Croatia, Slovenia and Slovakia are employed to provide an answer. The results confirm the role of network effects and of remittances. Furthermore, the extent of currency substitution is found to be positively associated with the level of income and education. An important aspect of euroization seems to be age (the older are more likely to hold foreign currencies). In contrast, neither expectations about inflation rates, nor about exchange rates, do seem to affect the degree of euroization in a systematic and predictable way. Trust in the banking system is found to affect the choice between foreign currency cash and foreign currency deposits. Overall, the results support the view that the persistence in the use of foreign currencies is driven to a large extent by factors that are related to the past. Classification-JEL: E41, E50, D14 Keywords: Dollarization, euroization, currency substitution, survey data. Length: 59 Creation-Date: 2008-03-06 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:dd3719ce-2927-4d38-a075-4e45c8fb0fd0/wp140_tcm16-84943.pdf File-Format: application/pdf File-Size: 466 kb Handle: RePEc:onb:oenbwp:140 Template-Type: ReDIF-Paper 1.0 Author-Name: Michal Brzoza-Brzezina Author-Name-First: Michal Author-Name-Last: Brzoza-Brzezina Author-Email: Michal.Brzoza-Brzezina@mail.nbp.pl Author-Workplace-Name: National Bank of Poland and Warsaw School of Economics Author-Name: Jesus Crespo Cuaresma Author-Name-First: Jesus Crespo Author-Name-Last: Cuaresma Author-Email: jesus.crespo-cuaresma@univie.ac.at Author-Workplace-Name: Department of Economics, University of Vienna, Bruennerstrasse 72, A-1210 Vienna (Austria) Title: Mr. Wicksell and the global economy: What drives real interest rates? Abstract: We use a Bayesian dynamic latent factor model to extract world, regional and country factors of real interest rate series for 22 OECD economies. We find that the world factor plays a privileged role in explaining the variance of real rates for most countries in the sample, and accounts for the steady decrease in interest rates in the last decades. Moreover, the relative contribution of the world factor is rising over time. We also find relevant differences between the group of countries that follow fixed exchange rate strategies and those with flexible regimes. Classification-JEL: E43, C11, E58 Keywords: Real interest rates, natural rate of interest, Bayesian dynamic factor models. Length: 35 Creation-Date: 2008-01-29 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:31341ece-84b6-41f7-b3d2-12de35544acd/wp139_tcm16-81420.pdf File-Format: application/pdf File-Size: 433 kb Handle: RePEc:onb:oenbwp:139 Template-Type: ReDIF-Paper 1.0 Author-Name: Balázs Égert Author-Name-First: Balázs Author-Name-Last: Égert Author-Email: balazs.egert@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Real Convergence, Price Level Convergence and Inflation Differentials in Europe Abstract: This paper provides a comprehensive review of the factors that can cause price levels to diverge and which are at the root of different inflation rates in Europe including the EU-27. Among others, we study the structural and cyclical factors influencing market and non-market-based service, house and goods prices, and we summarise some stylised facts emerging from descriptive statistics. Subsequently, we set out the possible mismatches between price level convergence and inflation rates. Having described in detail the underlying economic factors, we proceed to demonstrate the relative importance of these factors on observed inflation rates first in an accounting framework and then by relying on panel estimations. Our estimation results provide the obituary notice for the Balassa-Samuelson effect. Nevertheless, we show that other factors related to economic convergence may push up inflation rates in transition economies. Cyclical effects and regulated prices are found to be important drivers of inflation rates in an enlarged Europe. House prices matter to some extent in the euro area, whereas the exchange rate plays a prominent (but declining) role in transition economies. Classification-JEL: E43, E50, E52, C22, G21, O52 Keywords: price level, inflation, Balassa-Samuelson, tradables, house prices, regulated prices, Europe, transition Length: 61 Creation-Date: 2007-07-05 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:84b5882e-0c14-414d-ae48-5abfd90f2a2a/wp138_tcm16-58143.pdf File-Format: application/pdf File-Size: 707 kb Handle: RePEc:onb:oenbwp:138 Template-Type: ReDIF-Paper 1.0 Author-Name: Gerhard Fenz Author-Name-First: Gerhard Author-Name-Last: Fenz Author-Email: gerhard.fenz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Divison Author-Workplace-Homepage: http://www.oenb.at Author-Name: Martin Schneider Author-Name-First: Martin Author-Name-Last: Schneider Author-Email: martin.schneider@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Divison Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7436 Title: Transmission of Business Cycle Shocks between Unequal Neighbours: Germany and Austria Abstract: This paper analyses the comovement of the German and Austrian economies and the transmission of German shocks to Austria. Static and dynamic correlation measures show a strong comovement and a change of the relative position in time of these two economies. The transmission of German shocks to Austria is analysed with a two-country VAR model. Using sign restrictions on impulse response functions, we identify German supply, demand and monetary policy shocks. We find that the average reaction of the Austrian economy to German shocks amounts to 44% of the German reaction and remains broadly stable over time. Classification-JEL: C32, E32, F41 Keywords: business cycle, synchronization, vector autoregression, shock transmission, Austria, Germany. Length: 34 Creation-Date: 2007-05-14 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:720f29a4-f663-466c-89f8-cbab9fecb25f/wp137_tcm16-56846.pdf File-Format: application/pdf File-Size: 559 kb Handle: RePEc:onb:oenbwp:137 Template-Type: ReDIF-Paper 1.0 Author-Name: Gert Peersman Author-Name-First: Gert Author-Name-Last: Peersman Author-Email: gert.peersman@ugent.be Author-Workplace-Name: Ghent University Title: The Relative Importance of Symmetric and Asymmetric Shocks: the Case of United Kingdom and Euro Area Abstract: In this paper, we show how a simple model with sign restrictions can be used to identify symmetric and asymmetric supply, demand and monetary policy shocks in a two-country structural VAR. The results can be used to deal with several issues that are important in the OCA-literature. Whilst the method can be applied to many countries, we provide evidence for the UK versus the Euro Area which are compared versus the US as a benchmark. An important role for symmetric shocks with the Euro Area in explaining UK output fluctuations is found. However, the relative importance of asymmetric shocks, being around 20 percent in the long-run, cannot be ignored. In contrast, the degree of business cycle synchronization seems to have been higher with the US. Moreover, the historical average reaction of the policy rate to symmetric aggregate demand shocks was stronger in the UK than the Euro Area. We also confirm existing evidence of the exchange rate being an important independent source of shocks in the economy. Classification-JEL: C32, E42, F31, F33 Keywords: optimal currency areas, symmetric and asymmetric shocks, vector autoregressions Length: 32 Creation-Date: 2007-05-10 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:503baf20-f4c7-4541-b80f-0d45a87db6c8/wp136_tcm16-56845.pdf File-Format: application/pdf File-Size: 614 kb Handle: RePEc:onb:oenbwp:136 Template-Type: ReDIF-Paper 1.0 Author-Name: Harald Badinger Author-Name-First: Harald Author-Name-Last: Badinger Author-Email: harald.badinger@wu-wien.ac.at Author-Workplace-Name: Europainstitut/Department of Economics, Wirtschaftsuniversität Wien Title: Has the EU’s Single Market Programme Fostered Competition? Testing for a Decrease in Markup Rations in EU Industries Abstract: We use a panel approach, covering 10 EU Member States over the period 1981 to 1999, for each of three major industry groups (manufacturing, construction, and services) and 18 more detailed industries to test whether the EU’s Single Market Programme has led to a reduction in firms’ markups over marginal costs. We address explicitly the uncertainty with respect to the timing of the changeover and allow for a possibly continuous regime shift in a smooth transition analysis. Where regime shifts can be found, the velocity of transition is extremely high, making the linear model a justifiable approximation. We also test for discrete structural breaks in the time window from 1988 to 1996, taking up endogeneity concerns in a GMM framework. Markup reductions are found for aggregate manufacturing (though it is also suggested that markups increased in some manufacturing industries in the pre-completion period at the end of the 1980s) and – less robustly – for construction. In contrast, markups have gone up in most service industries since the early 90s, which confirms the weak state of the Single Market for services and suggests that anti-competitive defense strategies have emerged in the 1990s in service industries. Classification-JEL: L11, F15 Keywords: EU, markup, Single Market Length: 40 Creation-Date: 2007-05-08 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:67fda6c8-a0d6-4fef-a9a1-47feac9602a9/wp135_tcm16-56844.pdf File-Format: application/pdf File-Size: 465 kb Handle: RePEc:onb:oenbwp:135 Template-Type: ReDIF-Paper 1.0 Author-Name: Balázs Égert Author-Name-First: Balázs Author-Name-Last: Égert Author-Email: balazs.egert@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Central Bank Interventions, Communication and Interest Rate Policy in Emerging European Economies Abstract: This paper analyses the effectiveness of foreign exchange interventions in Croatia, the Czech Republic, Hungary, Romania, Slovakia and Turkey using the event study approach. Interventions are found to be effective only in the short run when they ease appreciation pressures. Central bank communication and interest rate steps considerably enhance their effectiveness. The observed effect of interventions on the exchange rate corresponds to the declared objectives of the central banks of Croatia, the Czech Republic, Hungary and perhaps also Romania, whereas this is only partially true for Slovakia and Turkey. Finally, interventions are mostly sterilized in all countries except Croatia. Interventions are not much more effective in Croatia than in the other countries studied. This suggests that unsterilized interventions do not automatically influence the exchange rate. Classification-JEL: F31 Keywords: central bank intervention, communication, foreign exchange intervention, verbal intervention Length: 56 Creation-Date: 2006-12-22 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:6cb1bd09-0fd3-4b9d-b246-01cc916838a5/wp134_tcm16-51029.pdf File-Format: application/pdf File-Size: 756 kb Handle: RePEc:onb:oenbwp:134 Template-Type: ReDIF-Paper 1.0 Author-Name: Erwin Jericha Author-Name-First: Erwin Author-Name-Last: Jericha Author-Email: jericha@ati.ac.at Author-Workplace-Name: Vienna University of Technology Author-Name: Martin Schürz Author-Name-First: Martin Author-Name-Last: Schürz Author-Email: martin.schuerz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Title: A Deliberative Independent Central Bank Abstract: The paper develops a communication game that is applied to the question of central bank policy and independence. The game is about the preferred degree of conservatism of monetary policy and the game setting consists of a principal (politics), an agent (central bank) and an observer (financial market participants). The extent of the welfare losses depends on the degree of knowledge, the endogenized signaling of financial market participants and the probability whether the degree of conservatism in monetary policy is adequate to nature. Consequently, a mechanism to minimize welfare losses of the principal has to be implemented. It is shown how the introduction of an institutional control mechanism with a countervailing goal function will improve the utilities for the principal. Classification-JEL: E58, E59, E61, C79 Keywords: accountability, agency losses, principal agent model Length: 30 Creation-Date: 2006-11-06 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:49de8efb-5945-4bb1-af1a-1e30bb19fd8b/wp133_tcm16-49232.pdf File-Format: application/pdf File-Size: 503 kb Handle: RePEc:onb:oenbwp:133 Template-Type: ReDIF-Paper 1.0 Author-Name: Markus Leibrecht Author-Name-First: Markus Author-Name-Last: Leibrecht Author-Email: mleibrec@wu-wien.ac.at Author-Workplace-Name: WU Wien Author-Name: Martin Schneider Author-Name-First: Martin Author-Name-Last: Schneider Author-Email: martin.schneider@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Divison Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7436 Title: AQM-06: The Macro economic Model of the OeNB Abstract: This paper gives an overview of the current version of the quarterly macroeconomic model of the Oesterreichische Nationalbank for Austria. The model is a small to medium size macroeconomic model. It is in the tradition of the neoclassical synthesis and is therefore in line with most models used by euro system central banks. The model has been extended in several ways compared with the previous version. The most important changes concern the use of oil and import competitor’s prices in the supply block, a more detailed treatment of government receipts, the use of tax rates as policy instruments as well as a dynamic import demand indicator. In the empirical part, the paper presents some simulation results to show the impact of tax increases on the Austrian economy and the reaction of the model to five standard macroeconomic shocks: Increases of the value added tax, the personal income tax and the corporate income tax by the same amount have different effects on the Austrian economy. The reaction of the model to macroeconomic shocks is characterized by a high demand multiplier and a low negative impact of price competitiveness on exports. Classification-JEL: C3, C5, E1, E2 Keywords: Macroeconometric Model, AUstria Length: 138 Creation-Date: 2006-09-18 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:44792030-38b0-4e42-ab64-0eabdb0d6162/wp132_tcm16-46515.pdf File-Format: application/pdf File-Size: 927 kb Handle: RePEc:onb:oenbwp:132 Template-Type: ReDIF-Paper 1.0 Author-Name: Sylvia Kaufmann Author-Name-First: Sylvia Author-Name-Last: Kaufmann Author-Email: sylvia.kaufmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7222 Author-Workplace-Fax: +43-1-40420-7299 Author-Name: Peter Kugler Author-Name-First: Peter Author-Name-Last: Kugler Author-Email: peter.kugler@unibas.ch Author-Workplace-Name: University of Basel, WWZ, Petersgraben 51, CH-4003 Basel Title: Expected Money Growth, Markov Trends and the Instability of Money Demand in the Euro Area Abstract: This paper analyzes the recently documented instability of money demand in the euro area in the framework of a Markov switching trend model. First, we consider a standard flexible price model with stable money demand, rational expectations, and an exogenous income-money ratio which follows a Markov trend. This framework, which implies an influence of expected future money on prices, leads to a cointegrating relationship between (log) prices and the (log of the) money-income ratio with a switching intercept term. Of course, this likely leads to a rejection of cointegration by standard tests and to the erroneous conclusion of an unstable money demand. Second, a more general model allowing for endogeneity and more general dynamics is estimated with Bayesian methods for euro area data from 1975-2003. This exercise provides support for our model and a stable demand for M3 in the euro area. Classification-JEL: C11, C32, E41 Keywords: Bayesian cointegration analysis, Markov trend, Markov chain Monte Carlo, money demand. Length: 24 Creation-Date: 2006-09-15 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:dca5bacc-22a7-4db0-8f36-f2d655bba434/wp131_tcm16-46514.pdf File-Format: application/pdf File-Size: 543 kb Handle: RePEc:onb:oenbwp:131 Template-Type: ReDIF-Paper 1.0 Author-Name: John Williamson Author-Name-First: John Author-Name-Last: Williamson Author-Workplace-Name: Institute for International Economics Title: A Worldwide System of Reference Rates Length: 29 Creation-Date: 2006-08-31 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:154677f1-a8a7-44f1-abaf-b775d70d0b16/wp130_tcm16-45729.pdf File-Format: application/pdf File-Size: 477 kb Handle: RePEc:onb:oenbwp:130 Template-Type: ReDIF-Paper 1.0 Author-Name: Ansgar Belke Author-Name-First: Ansgar Author-Name-Last: Belke Author-Email: belke@uni-hohenheim.de Author-Workplace-Name: University of Hohenheim (Department of Economics), Stuttgart/Germany Author-Workplace-Phone: +49(0)711-459-3247 Author-Workplace-Fax: +49(0)711-459-3815 Author-Name: Bernhard Herz Author-Name-First: Bernhard Author-Name-Last: Herz Author-Workplace-Name: University of Bayreuth Author-Name: Lukas Vogel Author-Name-First: Lukas Author-Name-Last: Vogel Author-Workplace-Name: University of Bayreuth Title: Are Monetary Rules and Reforms Complements or Substitutes? A Panel Analysis for the World versus OECD Countries Abstract: This paper investigates the relationship between the exchange rate regime and the degree of structural reforms using panel data techniques. We look at a broad sample of countries (the “world sample”) and also an OECD sample. Our main findings suggest that adopting a fixed exchange rate rule is positively correlated with the degree of overall structural reforms and the trade component. The paper also highlights the fact that considering a heterogeneous panel of countries as opposed to a limited does not matter for this results. Classification-JEL: D78, E52, E61 Keywords: exchange rates, monetary policy regime, liberalisation, panel data, Length: 51 Creation-Date: 2006-07-06 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:fff2cb40-f810-4226-a02a-55bf525d6fc3/wp129_tcm16-45583.pdf File-Format: application/pdf File-Size: 494 kb Handle: RePEc:onb:oenbwp:129 Template-Type: ReDIF-Paper 1.0 Author-Name: David Laidler Author-Name-First: David Author-Name-Last: Laidler Title: Three Lectures on Monetary Theory and Policy: Speaking Notes and Background Papers Abstract: In order to promote the exchange of ideas and to support its own research capacity, the Oesterreichische Nationalbank regularly invites internationally renowned economists for short guest professorships. This year, from June 12 -14 2006, David Laidler gave three public lectures on topics related to monetary theory and monetary policy. The first lecture was on “Monetary Policy and the Austrians”, the second on “The Rise and Fall of Monetarism” and the third has dealt with the question “Is there a Role for Money in Monetary Policy in the 21st Century?”. The lectures were based on three background papers, which are contained in this OeNB Working Paper that also includes the lecture notes that were prepared for the lecture series. Length: 125 Creation-Date: 2006-06-19 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:cc5fa3b5-43ac-4ac4-ae58-606731cdc66d/wp128_tcm16-43013.pdf File-Format: application/pdf File-Size: 654 kb Handle: RePEc:onb:oenbwp:128 Template-Type: ReDIF-Paper 1.0 Author-Name: Michael D. Bordo Author-Name-First: Michael D. Author-Name-Last: Bordo Author-Email: bordo@economics.rutgers.edu Author-Workplace-Name: Department of Economics, Rutgers University Author-Workplace-Homepage: http://econweb.rutgers.edu/bordo/ Author-Name: Richard N. Cooper Author-Name-First: Richard N. Author-Name-Last: Cooper Author-Workplace-Name: Harvard University Title: Proposal for a Common Currency among Rich Democracies Abstract: Paper 1: This paper suggests that some time in the not-too-distant future the governments of the industrialized democracies – concretely, the United States, the European Union, and Japan – should consider establishing a common currency for their collective use. A common currency would credibly eliminate exchange rate uncertainty and exchange rate movements among major currencies, both of which are significant sources of disturbance to important economies. One currency would of course entail one monetary policy for the currency area, and a political mechanism to assure accountability. This proposal is not realistic today, but is set as a vision for the second or third decade into the 21st century. Europeans, in creating EMU, have taken a major step in the direction indicated. Their idea could be taken further. Paper 2: In this paper, we look at the major arguments for monetary simplification and unification before explaining why the nineteenth century utopia is an idea whose time has gone, not come. Length: 59 Creation-Date: 2006-06-09 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:09789978-0f3a-42fe-b85c-4366a75512fd/wp127_tcm16-42690.pdf File-Format: application/pdf File-Size: 582 kb Handle: RePEc:onb:oenbwp:127 Template-Type: ReDIF-Paper 1.0 Author-Name: Sebastian Edwards Author-Name-First: Sebastian Author-Name-Last: Edwards Author-Email: sedwards@agsm.ucla.edu Author-Workplace-Name: University of California, Los Angeles Author-Workplace-Homepage: http://www.anderson.ucla.edu/faculty/sebastian.edwards/ Author-Workplace-Phone: +1 (310) 206 6797 Author-Workplace-Fax: +1 (310) 206 5825 Title: Monetary Unions, External Shocks and Economic Performance Abstract: During the last few years there has been a renewed analysis in currency unions as a form of monetary arrangement. This new interest has been largely triggered by the Euro experience. Scholars and policy makers have asked about the optimal number of currencies in the world economy. They have analyzed whether different countries satisfy the traditional “optimal currency area” criteria. These include: (a) the synchronization of the business cycle; (b) the degree of factor mobility; and (c) the extent of trade and financial integration. In this paper I analyze the desirability of a monetary union from a Latin American perspective. First, I review the existing literature on the subject. Second, I use a large data set to analyze the evidence on economic performance in currency union countries. I investigate these countries’ performance on four dimensions: (a) whether countries without a national currency have a lower occurrence of “sudden stop” episodes; (b) whether they have a lower occurrence of “current account reversal” episodes; (c) what is their ability to absorb international terms of trade shocks; and (d) what is their ability to absorb “sudden stops” and “current account reversals” shocks. I find that belonging to a currency union does not lower the probability of facing a sudden stop or a current account reversal. I also find that external shocks are amplified in currency union countries. The degree of amplification is particularly large when compared to flexible exchange rate countries. Length: 59 Creation-Date: 2006-06-05 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:cdaf9310-28a3-497d-82e1-82066805b133/wp126_tcm16-42689.pdf File-Format: application/pdf File-Size: 529 kb Handle: RePEc:onb:oenbwp:126 Template-Type: ReDIF-Paper 1.0 Author-Name: Josef Christl Author-Name-First: Josef Author-Name-Last: Christl Author-Email: Josef.Christl@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: Regional Currency Arrangements: Insights from Europe Abstract: This paper focuses on the requirements and features of a successful monetary union on the basis of the optimum currency area theory, the “logical roadmap” for integration as proposed by Balassa as well as the economic and institutional framework of the European Economic and Monetary Union (EMU). The analysis suggests that monetary union is contingent upon high economic integration and strong political commitment. However, political union is not an ex-ante requirement. Outside factors such as systemic shocks and globalization seem to speed up the pooling of sovereignty in the economic domain. A firm commitment to stability-oriented monetary and fiscal policies is a precondition for gaining credibility and trust within and outside a monetary union. Last, but not least, convergence criteria, fiscal rules and strong institutions are necessary to help ensure and monitor the participants’ compliance. However, the European experience is not a blueprint for regional integration that can be directly and entirely applied to other regions. Classification-JEL: E50, E61, F02, F33 Keywords: Economic and Monetary Integration; International Monetary Arrangements and Institutions; Monetary Policy and Central Banking; Macroeconomic Policy Formation. Length: 39 Creation-Date: 2006-06-01 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:ef7e74a1-1b62-4801-a996-6cea6d748d87/wp125_tcm16-42688.pdf File-Format: application/pdf File-Size: 550 kb Handle: RePEc:onb:oenbwp:125 Template-Type: ReDIF-Paper 1.0 Author-Name: Marek Jarocinski Author-Name-First: Marek Author-Name-Last: Jarocinski Author-Workplace-Name: Universitat Pompeu Fabra, Barcelona and CASE - Center for Social and Economic Research, Warsaw Title: Responses to Monetary Policy Shocks in the East and the West of Europe: A Comparison Abstract: This paper compares responses to monetary shocks in the EMU countries (in the pre-EMU sample) and in the New Member States (NMS) from Central Europe. The small-sample problem, especially acute for the NMS, is mitigated by using a Bayesian estimation procedure which combines information across countries. A novel identification scheme for small open economies is used. The estimated responses are quite similar across regions, but there is some evidence of more lagged, but ultimately stronger price responses in the NMS economies. This contradicts the common belief that monetary policy is less effective in post-transition economies, because of their lower financial development. NMS also have a probably lower sacrifice ratio, which is consistent with the predictions of both the imperfect information model of Lucas (1973) and the New-Keynesian model of Ball et al. (1988). Classification-JEL: C11, C15, C33, E40, E52 Keywords: monetary policy transmission, Structural VAR, Bayesian estimation, exchangeable prior Length: 43 Creation-Date: 2006-05-17 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:f0711da9-8160-4278-9149-cd7e0eeba7d8/wp124_tcm16-42285.pdf File-Format: application/pdf File-Size: 542 kb Handle: RePEc:onb:oenbwp:124 Template-Type: ReDIF-Paper 1.0 Author-Name: Petra M. Geraats Author-Name-First: Petra M. Author-Name-Last: Geraats Author-Email: Petra.Geraats@econ.cam.ac.uk Author-Workplace-Name: Faculty of Economics, University of Cambridge, Cambridge Title: The Mystique of Central Bank Speak Abstract: Despite the recent trend towards greater transparency of monetary policy, in many respects mystique still prevails in central bank speak. This paper shows that the resulting perception of ambiguity could be desirable. Under the plausible assumption of imperfect common knowledge about the degree of central bank transparency, economic outcomes are affected by both the actual and perceived degree of transparency. It is shown that actual transparency is beneficial while it may be useful to create the perception of opacity. The optimal communication strategy for the central bank is to provide clarity about the inflation target and to communicate information about the output target and supply shocks with perceived ambiguity. In this respect, the central bank benefits from sustaining transparency misperceptions, which helps to explain the mystique of central bank speak. Classification-JEL: E52, E58, D82 Keywords: Transparency, monetary policy, communication Length: 44 Creation-Date: 2006-05-15 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:de5a7fdd-bb6c-4361-b52e-099ddafd9758/wp123_tcm16-42284.pdf File-Format: application/pdf File-Size: 478 kb Handle: RePEc:onb:oenbwp:123 Template-Type: ReDIF-Paper 1.0 Author-Name: Hans Genberg Author-Name-First: Hans Author-Name-Last: Genberg Author-Workplace-Name: Executive Director (Research), Hong Kong Monetary Authority Title: Exchange-Rate Arrangements an Financial Integration in East Asia: On a Collision Course? Abstract: Financial integration in Ease Asia is actively being pursued and will in due course lead to substantial mobility of capital between economies in the region. Plans for monetary cooperation as a prelude to monetary integration and ultimately monetary unification are also proposed. These plans often suggest that central banks should adopt some form of common exchange rate policy in the transition period towards full monetary union. This paper argues that this is a dangerous path in the context of highly integrated financial markets. An alternative approach is proposed where independent central banks coordinate their monetary policies through the adoption of common objectives and by building an appropriate institutional framework. When this coordination process has progressed to the point where interest rate developments are similar across the region, and if in the meantime the required institutional infrastructure has been build, the next step towards monetary unification can be taken among those central banks that so desire. The claim is that this transition path is likely to be robust and will limit the risk of currency crises. Length: 50 Creation-Date: 2006-05-05 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:3b528ba1-689b-4557-b7e2-989982b96c2f/wp122_tcm16-42283.pdf File-Format: application/pdf File-Size: 728 kb Handle: RePEc:onb:oenbwp:122 Template-Type: ReDIF-Paper 1.0 Author-Name: Sven Arndt Author-Name-First: Sven Author-Name-Last: Arndt Author-Workplace-Name: The Lowe Institute of Political Economy, Claremont McKenna College Title: Regional Currency Arrangements in North America Length: 64 Creation-Date: 2006-05-02 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:a59e2750-b6cf-4e4d-8923-41cddb4cb80a/wp121_tcm16-42282.pdf File-Format: application/pdf File-Size: 743 kb Handle: RePEc:onb:oenbwp:121 Template-Type: ReDIF-Paper 1.0 Author-Name: Otmar Issing Author-Name-First: Otmar Author-Name-Last: Issing Author-Workplace-Name: European Central Bank Title: Europe’s Hard Fix: The Euro Area Length: 46 Creation-Date: 2006-04-28 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:4300c508-70df-4bde-b740-b57274595b2f/wp120_tcm16-42281.pdf File-Format: application/pdf File-Size: 707 kb Handle: RePEc:onb:oenbwp:120 Template-Type: ReDIF-Paper 1.0 Author-Name: Gerhard Fenz Author-Name-First: Gerhard Author-Name-Last: Fenz Author-Email: gerhard.fenz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Divison Author-Workplace-Homepage: http://www.oenb.at Author-Name: Martin Spitzer Author-Name-First: Martin Author-Name-Last: Spitzer Author-Email: Martin.Spitzer@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7433 Title: An Unobserved Components Model to Forecast Austrian GDP Abstract: This paper deals with forecasting quarterly Austrian GDP growth using monthly conjunctural indicators and state space models. The latter provide an efficient econometric framework to analyse jointly data with different frequencies. Based on a Kalman filter technique we estimate a monthly GDP growth series as an unobserved component using monthly conjunctural indicators as explanatory variables. From a large data set of more than 150 monthly indicators the following six explanatory variables were selected on the basis of their in-sample fit and out of sample forecast performance: the ifo-index, credit growth, vacancies, the real exchange rate, the number of employees and new car registrations. Subsequently, quarterly GDP figures are derived from the monthly unobserved component using a weighted aggregation scheme. Several tests for forecasting accuracy and forecasting encompassing indicate that the unobserved components model (UOC-model) is able to outperform simple ARIMA and Naïve models. Length: 28 Creation-Date: 2006-03-24 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:cc80d9d4-913c-4864-acce-1bb2429ef347/wp119__tcm16-40483.pdf File-Format: application/pdf File-Size: 540 kb Handle: RePEc:onb:oenbwp:119 Template-Type: ReDIF-Paper 1.0 Author-Name: Claudia Kwapil Author-Name-First: Claudia Author-Name-Last: Kwapil Author-Email: claudia.kwapil@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: (+43-1) 404 20-7415 Author-Workplace-Fax: (+43-1) 404 20-7499 Author-Name: Johann Scharler Author-Name-First: Johann Author-Name-Last: Scharler Author-Email: johann.scharler@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: (+43-0) 732-2468-8360 Author-Workplace-Fax: (+43-0) 732-2468-9679 Title: Interest Rate Pass-Through, Monetary Policy Rules and Macroeconomic Stability Abstract: In this paper we analyze equilibrium determinacy in a sticky price model in which the pass-through from policy rates to retail interest rates is sluggish and potentially incomplete. In addition, we empirically characterize and compare the interest rate pass-through process in the euro area and the U.S. We find that if the pass-through is incomplete in the long run, the standard Taylor principle is insufficient to guarantee equilibrium determinacy. Our empirical analysis indicates that this result might be particularly relevant for bank-based financial systems as for instance that in the euro area. Classification-JEL: E32, E52, E58 Keywords: Interest Rate Pass-Through, Interest Rate Rules, Equilibrium Determinacy, Stability Length: 40 Creation-Date: 2007-03-20 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:74817f3f-cd8d-49fc-ae7c-043e99f528cb/wp118__tcm16-40482.pdf File-Format: application/pdf File-Size: 458 kb Handle: RePEc:onb:oenbwp:118 Template-Type: ReDIF-Paper 1.0 Author-Name: Johann Scharler Author-Name-First: Johann Author-Name-Last: Scharler Author-Email: johann.scharler@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: (+43-0) 732-2468-8360 Author-Workplace-Fax: (+43-0) 732-2468-9679 Title: Do Bank-Based Financial Systems Reduce Macroeconomic Volatility by Smoothing Interest Rates? Abstract: This paper investigates the business cycle implications of limited pass-through to retail interest rates based on a calibrated sticky price model. Although limited interest rate pass-through can in principle reduce output and inflation volatility at the same time, large reductions in output volatility are likely to be accompanied by a more volatile inflation rate. Limited pass-through gives rise to two counteracting effects: It partially insulates the economy from adverse liquidity shocks and thereby leads to lower output volatility. However, it also reduces the stabilizing effect of monetary policy which implies higher inflation volatility. Classification-JEL: E32, E44, E52 Keywords: Financial Systems, Interest Rate Pass-Through, Business Cycle Length: 32 Creation-Date: 2006-03-17 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:61d322bf-1a9f-4435-9ba4-cc87a6b7d2b3/wp117__tcm16-40481.pdf File-Format: application/pdf File-Size: 393 kb Handle: RePEc:onb:oenbwp:117 Template-Type: ReDIF-Paper 1.0 Author-Name: Sylvia Kaufmann Author-Name-First: Sylvia Author-Name-Last: Kaufmann Author-Email: sylvia.kaufmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7222 Author-Workplace-Fax: +43-1-40420-7299 Author-Name: Johann Scharler Author-Name-First: Johann Author-Name-Last: Scharler Author-Email: johann.scharler@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: (+43-0) 732-2468-8360 Author-Workplace-Fax: (+43-0) 732-2468-9679 Title: Financial Systems and the Cost Channel Transmission of Monetary Policy Shocks Abstract: In this paper we study the role of financial systems for the cost channel transmission of monetary policy in a calibrated business cycle model. We analyze the different effects that monetary policy has on the economy, in particular on output and inflation, which are due to differences in country-specific financial systems. For a plausible calibration of the model, differences in financial systems have a rather limited effect on the transmission mechanism and do not appear to give rise to cross country differences in the strength of the cost channel. Classification-JEL: E40, E50 Keywords: Financial Systems, Cost Channel, Transmission Mechanism Length: 36 Creation-Date: 2007-03-14 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:1641133c-54b1-4bef-a23b-4a47bce6be02/wp116__tcm16-40477.pdf File-Format: application/pdf File-Size: 423 kb Handle: RePEc:onb:oenbwp:116 Template-Type: ReDIF-Paper 1.0 Author-Name: Larry Neal Author-Name-First: Larry Author-Name-Last: Neal Author-Workplace-Name: University of Illinois at Urbana-Champaign; Research Associate, NBER Title: The London Stock Exchange in the 19th Century: Ownership Structures, Growth and Performance Abstract: Over the course of the nineteenth century the London Stock Exchange evolved from a market dealing primarily in new issues of British government debt to become the preeminent exchange of the first global capital market. By 1914, one-third of the public capital available to investors anywhere in the world was listed and traded on the London Stock Exchange. In contrast to these examples of spectacular growth of the business conducted within the exchange, however, the microstructure of the London Stock Exchange remained remarkably constant over the entire century. The remarkable expansion in scale and diversification of activity in the London Stock Exchange was sustained over the century with such minimal organizational change due to three factors. First, the evolution of the London Stock Exchange's microstructure was path dependent – the initial conditions for membership set the incentives for the owners and operators of the exchange, and these determined how they responded to successive shocks over time. Second, the continued success of the exchange was due to the peculiar structure of property rights in the exchange. Ownership of the exchange by the Proprietors was separated from governance of the operation of the exchange by the Members. Innovations were spurred by the owners of the exchange, who sought constantly to expand the membership. Newer members were then induced to take risky searches for new sources of revenue. This is how foreign securities were added permanently to the listings of the exchange in the 1820s. The third factor, the exchange’s insistence on separating members in to two classes – brokers and jobbers (dealers) – with different incentives led to the increasing ineffectiveness of the exchange over time. By the turn of the 20th century, brokers increasingly outweighed jobbers within the membership and exercised their political power to restrict membership, enforce minimum commissions, and confine arbitrage to a limited class of members. In short, the adverse consequences of a self-regulating club of self-interested members began to appear, but only after a century of remarkable growth, innovation, and effectiveness in mobilizing the savings of the world to realize the material benefits of the first industrial revolution. Length: 38 Creation-Date: 2006-02-13 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:728ab5d7-b672-44d9-8dea-7ad33d428027/wp115__tcm16-38822.pdf File-Format: application/pdf File-Size: 416 kb Handle: RePEc:onb:oenbwp:115 Template-Type: ReDIF-Paper 1.0 Author-Name: Stefano Battilossi Author-Name-First: Stefano Author-Name-Last: Battilossi Author-Email: stefano.battilossi@uc3m.es Author-Workplace-Name: Department of Economic History and Institutions, Universidad Carlos III Madrid Title: The Determinants of Multinational Banking during the First Globalization, 1870–1914 Abstract: What determined the multinational expansion of European banks in the pre-1914 era of globalization? And how were banks’ foreign investments related to other facets of the globalizing world economy such as trade and capital flows? The paper reviews both the contemporary and historical literature, and empirically investigates these issues by using an original panel data based on a sample of more than 50 countries. The dependent variable, aiming at measuring the intensity of cross-border activities operated by banks from foreign locations, is the number of foreign branches and subsidiaries of British, French and German banks. Explanatory variables are mainly selected on the base of the eclectic theory of multinational banking, but also include geographical factors (as suggested by gravity models) and institutional indicators advanced by recent studies inspired by new institutional economics, such as legal families and adherence to the Gold Standard. These regressors captures the impact of economic integration (trade and capital flows), informational development, institutional and economic characteristics of the host-market, as well as exchange rate and country risk factors, on banks’ foreign investment decisions. The results suggest that, due to its prevailing ‘colonial’ features, pre-1914 multinational banking does not fit easily into augmented gravity models. The role of trade as a key determinant of banks expansion overseas is qualified, and both institutional factors as well as competitive interaction emerge as critical determinants of banks’ decisions to invest in foreign countries. Moreover, the systematic comparison of determinants of foreign investiments of banks from major core countries reveals that multinational banking was not a homogenous phenomenon, as banks of different nationality responded differently to economic, geographical and institutional factors. Classification-JEL: F21, F23, G21 Keywords: augmented gravity models, multinational banking, pre-1914 globalization Length: 74 Creation-Date: 2006-02-09 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:1dfaddc1-b61b-4742-a75c-a742d12ba422/wp114__tcm16-38818.pdf File-Format: application/pdf File-Size: 769 kb Handle: RePEc:onb:oenbwp:114 Template-Type: ReDIF-Paper 1.0 Author-Name: James Foreman-Peck Author-Name-First: James Author-Name-Last: Foreman-Peck Author-Email: foreman-peckj@cf.ac.uk Author-Workplace-Name: Cardiff Business School Title: Lessons from Italian Monetary Unification Abstract: This paper examines whether the states brought together in the Italian monetary union of the nineteenth century constituted an optimum monetary area, either before or after unification. Interest rate shocks indicate close relations between states in northern Italy but negative correlations between the North and the South before unification, suggesting some advantages of continued Southern monetary independence. The proportion of Southern Italian trade with the North was small, in contrast to intra- Northern trade, and therefore monetary independence imposed a light burden. Changes in the wheat market indicate that the South and North after unification (though not probably because of it) increasingly specialised according to their comparative advantages. Coupled with differences in economic behaviour of the Southern economy, this meant that monetary policies appropriate for the North were less so for the South. In the face of agricultural shocks originating in the New World and in France, the South would have gained from depreciating its exchange rate against the North or against the non-Italian world. As it was, nineteenth century Italian monetary union did not create the conditions for its own success, contrary to the findings of Frankel and Rose (1998) for the later twentieth century. Classification-JEL: E42, N23, F15, F33 Length: 40 Creation-Date: 2006-01-23 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:6543a336-b8ab-4232-9569-51b81b63f4dc/wp113_tcm16-38082.pdf File-Format: application/pdf File-Size: 638 kb Handle: RePEc:onb:oenbwp:113 Template-Type: ReDIF-Paper 1.0 Author-Name: Michele Fratianni Author-Name-First: Michele Author-Name-Last: Fratianni Author-Workplace-Name: Indiana University, Kelley School of Business, Department of Business Economics and Public Policy Author-Name: Franco Spinelli Author-Name-First: Franco Author-Name-Last: Spinelli Author-Workplace-Name: Università degli Studi di Brescia, Dipartimento di economia. Title: Did Genoa and Venice Kick a Financial Revolution in the Quattrocento? Abstract: Did the city-states of Genoa and Venice kick a financial revolution all the way back in the Quattrocento, much sooner than the financial revolutions of the Netherlands, England and America? To answer this question we analyze the classic revolutions in terms of three key criteria: credibility of debtor’s promises, the role of national banks in facilitating the development of financial markets, and the extent and depth of financial and monetary innovations. We then compare the record of Genoa and Venice with the benchmark from the three classic financial revolutions. The upshot is that the two maritime city-states had developed many of the features that were to be found later on in the Netherlands, England and the United States. The importance of Genoa and Venice as financial innovators has been eclipsed by the fact that these two city-states did not survive politically. Instead, the innovations were absorbed in the long chain of financial evolution and, in the process, lost the identity of their creators. Classification-JEL: F34, H63, N13 Keywords: financial revolution, credibility, debt, public bank, Genoa, Venice. Length: 60 Creation-Date: 2006-01-18 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:36061deb-b375-42d6-b1cb-13989f6ed5a1/wp112_tcm16-38081.pdf File-Format: application/pdf File-Size: 531 kb Handle: RePEc:onb:oenbwp:112 Template-Type: ReDIF-Paper 1.0 Author-Name: Markus Baltzer Author-Name-First: Markus Author-Name-Last: Baltzer Author-Email: markus.baltzer@uni-tuebingen.de Author-Workplace-Name: Department of Economics, University of Tuebingen Title: European Financial Market Integration in the Gründerboom and Gründerkrach: Evidence from European Cross-Listings Classification-JEL: F3; G15; N23 Keywords: cross-listing; financial market integration; information transfer; price building Length: 61 Creation-Date: 2006-01-13 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:09edc228-acf1-4058-851e-b78fef1c987e/wp111_tcm16-38080.pdf File-Format: application/pdf File-Size: 1051 kb Handle: RePEc:onb:oenbwp:111 Template-Type: ReDIF-Paper 1.0 Author-Name: Evelyn Hayden Author-Name-First: Evelyn Author-Name-Last: Hayden Author-Email: Evelyn.Hayden@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Banking Analysis and Inspections Division Author-Name: Daniel Porath Author-Name-First: Daniel Author-Name-Last: Porath Author-Email: Daniel.Porath@bundesbank.de Author-Workplace-Name: Deutsche Bundesbank, Banking and Financial Supervision Department Author-Name: Natalja von Westernhagen Author-Name-First: Natalja von Author-Name-Last: Westernhagen Author-Email: Natalja.von-Westernhagen@bundesbank.de Author-Workplace-Name: Deutsche Bundesbank, Banking and Financial Supervision Department Title: Does Diversification Improve the Performance of German Banks? Evidence from Individual Bank Loan Portfolios Abstract: Should banks be diversified or focused? Does diversification indeed lead to increased performance and therefore greater safety on the part of banks as traditional portfolio and banking theory would suggest? This paper investigates the link between banks’ profitability and their portfolio diversification across different industries, broader economic sectors and geographical regions. To explore this issue, we use a unique data set of the individual bank loan portfolios of 983 German banks for the period from 1996 to 2002. The overall evidence we provide shows that there are no large performance benefits associated with diversification since each type of diversification tends to reduce the banks’ returns. Additionally, we find that banks do not use diversification to operate at a constant level of risk-return efficiency, which implies that banks are not risk-return efficient. Moreover, we find that the impact of diversification strongly depends on the risk level. However, only for moderate risk levels and in the case of industrial diversification does diversification significantly improve the banks’ returns. Classification-JEL: G21, G28, G32 Keywords: focus, diversification, monitoring, bank returns, bank risk Length: 37 Creation-Date: 2006-01-09 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:29720c1a-2452-49da-8eae-709d620319e8/wp110_tcm16-38079.pdf File-Format: application/pdf File-Size: 346 kb Handle: RePEc:onb:oenbwp:110 Template-Type: ReDIF-Paper 1.0 Author-Name: Jérôme Sgard Author-Name-First: Jérôme Author-Name-Last: Sgard Author-Email: sgard@cepii.fr Author-Workplace-Name: CEPII and Université de Paris-Dauphine. Title: Bankruptcy Law, Creditors’ Rights and Contractual Exchange in Europe, 1808–1914 Abstract: Recent historical research on bankruptcy has been centred almost exclusively on Common law countries, especially the United States. The consequence is that the research agenda includes issues which may, or may not, have broader relevance. This paper is an attempt at including within a larger historical and comparative perspective the evolution observed in continental Europe, during the 19th century. A data set has thus been assembled which includes the main features of a total of 51 codes or statutes, in 15 countries of all legal traditions. An early conclusion is that all these laws defended strongly creditors’ rights during bankruptcy, during the whole period under review. This goes against the thesis defended i.a. by La Porta et alii (1998) which state that “legal origins” have a strong, differentiated effect on property and creditors’ rights, which would be permanent over history. Two dimensions are then analysed. First, the status of the failed debtor, and whether he was subjected to repression; second, the degree to which the law supported or not the attempts of the parties to negotiate a composition, or continuation arrangement. An early period witnessed repressive, highly regulated frameworks: the paradigm is the Napoleonic, 1808 Code de commerce, though its main features were still highly visible half a century latter, in almost all countries. Then emerged a liberal model, between 1865 and 1885 with again a fair degree of convergence: the personal and civic fate of the debtor became much more immune to commercial failure; and the parties get more autonomy to bargain, though a bifurcation emerged between a “menu approach” to re-negotiation in England and in the French law countries, and a “single-option” procedure in German law countries. Beyond, it is proposed that these broad trends reflect the growing capacity of the institutional environment to reduce risks of moral hazards, and more generally transaction costs. By the end of the century, bargaining on bankruptcy had become easier and safer, so that judicial guarantees could be eased. Length: 41 Creation-Date: 2006-05-01 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:40a4d296-d664-46d6-aefe-2c02f7a007ba/wp109_tcm16-38078.pdf File-Format: application/pdf File-Size: 410 kb Handle: RePEc:onb:oenbwp:109 Template-Type: ReDIF-Paper 1.0 Author-Name: Ignacio Briones Author-Name-First: Ignacio Author-Name-Last: Briones Author-Workplace-Name: Business School, Universidad Adolfo Ibáñez, Chile Author-Name: André Villela Author-Name-First: André Author-Name-Last: Villela Author-Workplace-Name: Escola de Pós-Graduação em Economia, Fundação Getulio Vargas, Brazil Title: European Banks and their Impact on the Banking Industry in Chile Abstract: The history of foreign banks in Chile and Brazil in the late XIXth century and early XXth century is the history of British and German banks. Their penetration in both countries was significant, and not neutral in terms of its impact on the Chilean and Brazilian banking industry. In the main, we found that in both countries foreign banks appear to have had a positive effect at least in some of the dimensions identified by the current literature. However, the extent of this influence is different depending on the country. First, even if a formal banking industry emerged roughly simultaneously in both countries, foreign bank entry in Chile was a more recent phenomenon than in Brazil. Second, while from a financial point of view native and foreign banks in Chile behaved in a relatively similar fashion, in Brazil we observe differences, although a tendency towards convergence was observable by the eve of WWI. Length: 63 Creation-Date: 2006-01-04 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:e0030cd2-1833-4dd2-8b16-af07d4392ca2/wp108_tcm16-38077.pdf File-Format: application/pdf File-Size: 693 kb Handle: RePEc:onb:oenbwp:108 Template-Type: ReDIF-Paper 1.0 Author-Name: Michael D. Bordo Author-Name-First: Michael D. Author-Name-Last: Bordo Author-Email: bordo@economics.rutgers.edu Author-Workplace-Name: Department of Economics, Rutgers University Author-Workplace-Homepage: http://econweb.rutgers.edu/bordo/ Author-Name: Peter L. Rousseau Author-Name-First: Peter L. Author-Name-Last: Rousseau Author-Email: peter.l.rousseau@vanderbilt.edu Author-Workplace-Name: Vanderbilt University, Nashville, TN and Research Associate, NBER. Title: Legal-Political Factors and the Historical Evolution of the Finance-Growth Link Abstract: Recent cross-country investigations of the role of institutional fundamentals such as the protection of property rights in promoting financial development have extended a literature that has for decades maintained that financial factors can affect real outcomes. In this paper we pursue this new direction by considering relationships between finance, growth, legal origin, and political environment in a historical cross-section of 17 countries covering the period from 1880 to 1997. We find that relationships between a county's legal origin (i.e., English, French, German, or Scandinavian) and financial development are roughly consistent with earlier findings but are not persistent. At the same time, political variables such as proportional representation election systems, frequent elections, universal female suffrage, and infrequent revolutions or coups seem linked to larger financial sectors and higher conditional rates of economic growth. Despite the explanatory power of some of our measures of the deeper "fundamentals", however, a significant part of the growth-enhancing role of financial development remains unexplained by them. Length: 57 Creation-Date: 2006-01-02 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:e7097101-4f88-4021-9256-10263a4efd95/wp107_tcm16-38076.pdf File-Format: application/pdf File-Size: 609 kb Handle: RePEc:onb:oenbwp:107 Template-Type: ReDIF-Paper 1.0 Author-Name: Balázs Égert Author-Name-First: Balázs Author-Name-Last: Égert Author-Email: balazs.egert@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: László Halpern Author-Name-First: László Author-Name-Last: Halpern Author-Email: halpern@econ.core.hu Author-Workplace-Name: Institute of Economics, Hungarian Academy of Sciences; CEPR, Central European University and William Davidson Institute Author-Name: Ronald MacDonald Author-Name-First: Ronald Author-Name-Last: MacDonald Author-Email: r.macdonald@socsci.gla.ac.uk Author-Workplace-Name: University of Glasgow and CESifo Title: Equilibrium Exchange Rates in Transition Economies: Taking Stock of the Issues Abstract: In this paper we present an overview of a number of issues relating to the equilibrium exchange rates of transition economies of the former soviet bloc. In particular, we present a critical overview of the various methods available for calculating equilibrium exchange rates and discuss how useful they are likely to be for the transition economies. Amongst our findings is the result that the trend appreciation usually observed for the exchange rates of these economies is affected by factors other than the usual Balassa-Samuelson effect, such as the behaviour of the real exchange rate of the open sector and regulated prices. We then consider three main sources of uncertainty relating to the implementation of an equilibrium exchange rate model, namely: differences in the theoretical underpinnings; differences in the econometric estimation techniques; and differences relating to the time series and cross-sectional dimensions of the data. The ensuing three-dimensional space of real misalignments is probably a useful tool in determining the direction of a possible misalignment rather than its precise size. Classification-JEL: C15, E31, F31, O11, P17. Keywords: equilibrium exchange rate, Purchasing Power Parity, trend appreciation, Balassa-Samuelson Length: 57 Creation-Date: 2005-11-15 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:6d61b5b0-c0bf-47fa-8f9d-d4f8f8e91407/wp106_tcm16-36593.pdf File-Format: application/pdf File-Size: 840 kb Handle: RePEc:onb:oenbwp:106 Template-Type: ReDIF-Paper 1.0 Author-Name: Matthieu Bussière Author-Name-First: Matthieu Author-Name-Last: Bussière Author-Workplace-Name: European Central Bank Author-Name: Jarko Fidrmuc Author-Name-First: Jarko Author-Name-Last: Fidrmuc Author-Email: jarko.fidrmuc@lrz.uni-muenchen.de Author-Workplace-Name: Ludwig-Maximilians-Universität München Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5218 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Bernd Schnatz Author-Name-First: Bernd Author-Name-Last: Schnatz Author-Workplace-Name: European Central Bank Title: Trade Integration of Central and Eastern European Countries: Lessons from a Gravity Model Abstract: The aim of the paper is to analyse the factors behind the rapid trade integration of the Central and Eastern European countries with the euro area in the past ten years and to gauge the potential for further integration. We use as benchmark an enhanced gravity model estimated with a large sample of bilateral trade flows across 61 countries since 1980. We show that a careful examination of the fixed effects of the model is crucial for the proper interpretation of the results: simply extracting the predicted values of the regression (“in-sample”) – as commonly done in the literature – leads to distorted results as it fails to take the transition process properly into account. As an alternative, we propose a two-stage “out-of-sample” approach. The results suggest that trade integration between most of the largest Central and Eastern European countries and the euro area is already relatively advanced, while the Baltic countries as well as the South Eastern European countries still have significant scope for integration. Classification-JEL: C23, F15, F14. Keywords: Gravity Model, Panel Data, Central and Eastern European Countries, Free Trade Length: 43 Creation-Date: 2005-10-25 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:0e5ca0f8-d987-4769-995e-a09178fa6e12/wp105_tcm16-36591.pdf File-Format: application/pdf File-Size: 551 kb Handle: RePEc:onb:oenbwp:105 Template-Type: ReDIF-Paper 1.0 Author-Name: Gerhard Fenz Author-Name-First: Gerhard Author-Name-Last: Fenz Author-Email: gerhard.fenz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Divison Author-Workplace-Homepage: http://www.oenb.at Author-Name: Martin Spitzer Author-Name-First: Martin Author-Name-Last: Spitzer Author-Email: Martin.Spitzer@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7433 Title: AQM – The Austrian Quarterly Model of the Oesterreichische Nationalbank Abstract: The modelling strategy of the Austrian Quarterly Model (AQM) is in the tradition of the ”neoclassical synthesis”, a combination of Keynesian short-run analysis and neoclassical long-run analysis. The short run dynamics are based on empirical evidence, the long run relationships are derived from a neoclassical optimization framework. Adjustment processes to the real equilibrium are sluggish. Imperfections on goods and labour markets typically prevent the economy to adjust instantaneously to the long run equilibrium. In the current version of the AQM the formation of expectations is strictly backward looking. The relatively small scale of the model keeps the structure simple enough for projection and simulation purposes while incorporating a suffciently detailed structure to capture the main characteristics of the Austrian economy. The main behavioural equations are estimated using the two-step Engle-Granger technique. The AQM constitutes the Austrian block of the ESCB multi-country model (MCM). Length: 63 Creation-Date: 2005-09-28 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:797fbe41-cb7b-489f-b57b-608f3e0ce4aa/wp104_tcm16-32144.pdf File-Format: application/pdf File-Size: 2706 kb Handle: RePEc:onb:oenbwp:104 Template-Type: ReDIF-Paper 1.0 Author-Name: Sylvia Kaufmann Author-Name-First: Sylvia Author-Name-Last: Kaufmann Author-Email: sylvia.kaufmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7222 Author-Workplace-Fax: +43-1-40420-7299 Author-Name: Peter Kugler Author-Name-First: Peter Author-Name-Last: Kugler Author-Email: kugler@ubaclu.unibas.ch Author-Workplace-Name: University of Basel, Petersplatz 1, CH-4003 Basel,Switzerland Title: Does Money Matter for Inflation in the Euro Area? Abstract: This paper analyses the role of M3 as an indicator for future inflation and correspondingly for current monetary policy in the euro area. We analyse the short and long run interrelationship between inflation and money growth in an error correction framework taking into account the output gap and short and long term interest rates. We find robust cointegration between money growth and inflation. In the long run, shocks in M3-growth account for 33 percent to 40 percent of the inflation forecast error variance. The effects of output gap and interest rate shocks on inflation are mainly transitory and there forecasting variance shares are negligible for medium term horizons. There is evidence for a second regime prevailing at the end of the seventies and beginning of the eighties which relates to periods of high interest rate and inflation rate levels and decreasing rates in real money growth. Overall, we present firm evidence for a stable dynamic relationship between money growth and inflation which implies that the deviation of the real money growth from its long run average is a good indicator of future inflation acceleration or deceleration. Of course, this finding provides evidence in favour of the recently de-emphasised first pillar of the ECB strategy. According to our results, however, an M3-growth rate of slightly above 5% is compatible with a non-accelerating average rate of inflation of 2%. Length: 35 Creation-Date: 2005-09-19 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:37677ef8-f533-4da4-9468-aec4c08fb0dc/wp103_tcm16-32143.pdf File-Format: application/pdf File-Size: 374 kb Handle: RePEc:onb:oenbwp:103 Template-Type: ReDIF-Paper 1.0 Author-Name: Fabio Rumler Author-Name-First: Fabio Author-Name-Last: Rumler Author-Email: fabio.rumler@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Title: Estimates of the Open Economy New Keynesian Phillips Curve for Euro Area Countries Abstract: This paper extends the existing literature on the open economy New Keynesian Phillips Curve by incorporating three different factors of production, domestic labor and imported as well as domestically produced intermediate goods, into a general model which nests existing closed economy and open economy models as special cases. The model is then estimated for 9 euro area countries and the euro area aggregate. We find that structural price rigidity is systematically lower in the open economy specification of the model than in the closed economy specification indicating that when firms face more variable input costs they tend to adjust their prices more frequently. However, when the model is estimated in its general specification including also domestic intermediate inputs, price rigidity increases again compared to the open economy specification without domestic intermediate inputs. Classification-JEL: E31; C22; E12 Keywords: New Keynesian Phillips Curve; Open Economy; GMM Length: 47 Creation-Date: 2005-08-08 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:351b7ad6-4c1b-4e99-b225-ee6afbe87fce/wp102_tcm16-30802.pdf File-Format: application/pdf File-Size: 478 kb Handle: RePEc:onb:oenbwp:102 Template-Type: ReDIF-Paper 1.0 Author-Name: Josef Baumgartner Author-Name-First: Josef Author-Name-Last: Baumgartner Author-Email: Josef.Baumgartner@wifo.at Author-Workplace-Name: Austrian Institute of Economic Research (WIFO), Arsenal Objekt 20, POB 91, 1103 Vienna, Austria Author-Workplace-Homepage: http://www.wifo.at Author-Name: Ernst Glatzer Author-Name-First: Ernst Author-Name-Last: Glatzer Author-Email: ernst.glatzer@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Name: Fabio Rumler Author-Name-First: Fabio Author-Name-Last: Rumler Author-Email: fabio.rumler@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Name: Alfred Stiglbauer Author-Name-First: Alfred Author-Name-Last: Stiglbauer Author-Email: alfred.stiglbauer@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7435 Title: How Frequently Do Consumer Prices Change in Austria? Evidence from Micro CPI Data Abstract: In this paper a data set with price records collected for the computation of the Austrian CPI is used to estimate the average frequency of price changes and the duration of price spells to provide empirical evidence on the degree and characteristics of price rigidity in Austria. Depending on the estimation method applied, on average, prices are unchanged for 10 to 14 months. We find a strong heterogeneity across sectors and products. Price increases occur only slightly more often than price decreases. For both cases the typical size of the weighted average price change is quite large (11 and 15 percent, respectively). Like in related contributions we find that the aggregate hazard function is decreasing with time. Apart from heterogeneity across products and price setters, this is due to oversampling of products with a high frequency of price changes. Accounting for the unobserved heterogeneity in estimating the probability of a price change with a panel logit model (with fixed elementary product effects), we find a small but positive effect of the duration of a price spell on the probability of a price change. We also find that during the Euro cash changeover period the probability of price changes was higher. Classification-JEL: C41; D21; E31; L11 Keywords: Consumer prices; sticky prices; frequency and synchronization of price changes; duration of price spells Length: 83 Creation-Date: 2005-07-25 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:41b739be-60d4-4200-b2a0-20c9d5e8911d/wp101_tcm16-30801.pdf File-Format: application/pdf File-Size: 1089 kb Handle: RePEc:onb:oenbwp:101 Template-Type: ReDIF-Paper 1.0 Author-Name: Josef Baumgartner Author-Name-First: Josef Author-Name-Last: Baumgartner Author-Email: Josef.Baumgartner@wifo.at Author-Workplace-Name: Austrian Institute of Economic Research (WIFO), Arsenal Objekt 20, POB 91, 1103 Vienna, Austria Author-Workplace-Homepage: http://www.wifo.at Author-Name: Claudia Kwapil Author-Name-First: Claudia Author-Name-Last: Kwapil Author-Email: claudia.kwapil@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: (+43-1) 404 20-7415 Author-Workplace-Fax: (+43-1) 404 20-7499 Author-Name: Johann Scharler Author-Name-First: Johann Author-Name-Last: Scharler Author-Email: johann.scharler@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: (+43-0) 732-2468-8360 Author-Workplace-Fax: (+43-0) 732-2468-9679 Title: The Price-Setting Behavior of Austrian Firms: Some Survey Evidence Abstract: This paper explores the price-setting behavior of Austrian firms based on survey evidence. Our main result is that customer relationships are a major source of price stickiness in the Austrian economy. We also find that the majority of firms in our sample follows a timedependent pricing strategy. However, a substantial fraction of firms deviates from time-dependent pricing in the case of large shocks and switches to a state-dependent pricing strategy. In addition, we present evidence suggesting that the price response to various shocks is subject to asymmetries. Classification-JEL: C25; E30 Keywords: Price-setting behavior; Price rigidity Length: 75 Creation-Date: 2005-07-11 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:af5b8947-069b-4897-9e27-ae37d858b6d5/wp100_tcm16-30800.pdf File-Format: application/pdf File-Size: 833 kb Handle: RePEc:onb:oenbwp:100 Template-Type: ReDIF-Paper 1.0 Author-Name: Philipp Engler Author-Name-First: Philipp Author-Name-Last: Engler Author-Workplace-Name: Free University Berlin Author-Name: Terhi Jokipii Author-Name-First: Terhi Author-Name-Last: Jokipii Author-Workplace-Name: Institute for International Integration Studies, Trinity College Dublin Author-Name: Pablo Rovira Kaltwasser Author-Name-First: Pablo Rovira Author-Name-Last: Kaltwasser Author-Workplace-Name: Catholic University of Leuven Author-Name: Christian Merkl Author-Name-First: Christian Author-Name-Last: Merkl Author-Workplace-Name: Kiel Institute for World Economics and Kiel University Author-Name: Lúcio Vinhas de Souza Author-Name-First: Lúcio Vinhas de Author-Name-Last: Souza Author-Workplace-Name: Kiel Institute for World Economics. Title: The Effect of Capital Requirement Regulation on the Transmission of Monetary Policy: Evidence from Austria Abstract: This paper analyzes the role of bank capitalization on the transmission of monetary policy, using a quarterly dataset for Austrian banks spanning from 1997 to 2003. A substantial understanding of the transmission mechanism in different countries of the euro zone is not only of academic interest, but also an important prerequisite for central bankers to effectively accomplish their monetary policy goals. While we do find evidence in favor of the bank lending channel, with an important role active for capitalization, we are unable to confirm whether the bank capital channel is in force in Austria. Our results indicate some counter-cyclicality in lending activity, a finding that is in line with the existing Austrian literature. Classification-JEL: E4; E5 Keywords: Transmission of monetary policy; Bank capital regulation; Austria Length: 63 Creation-Date: 2005-05-23 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:a35fa769-df00-42fb-a705-f8c919a43eeb/wp99_tcm16-28885.pdf File-Format: application/pdf File-Size: 591 kb Handle: RePEc:onb:oenbwp:99 Template-Type: ReDIF-Paper 1.0 Author-Name: Federico Ravenna Author-Name-First: Federico Author-Name-Last: Ravenna Author-Email: fravenna@ucsc.edu Author-Workplace-Name: Economics Department, University of California Author-Workplace-Homepage: http://www.ic.ucsc.edu Title: The European Monetary Union as a Commitment Device for New EU Member States Abstract: We show that the credibility gain from permanently committing to a fixed exchange rate by joining the European Monetary Union can outweigh the loss from giving up independent monetary policy if the domestic monetary authority does not enjoy full credibility. Using a DSGE model, this paper shows that when the central bank enjoys only limited credibility a pegged exchange rate regime yields a lower loss compared to an inflation targeting policy, even if this policy ranking would be reversed in a full-credibility environment. There exists an initial stock of credibility that must be achieved for a policy-maker to adopt inflation targeting over a strict exchange rate targeting regime. Full credibility is not a precondition, but exposure to foreign and financial shocks and high steady state inflation make joining the EMU relatively more attractive for a given level of credibility. The theoretical results are consistent with empirical evidence we provide on the relationship between credibility and monetary regimes using a Bank of England survey of 81 central banks. Classification-JEL: E52; E31; F02; F41. Keywords: Inflation targeting, Credibilty, Open Economy, Exchange Rate Regimes, Monetary Policy Length: 52 Creation-Date: 2005-05-12 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:c92f84fb-13ff-4066-8788-266bef5ef57c/wp98_tcm16-28195.pdf File-Format: application/pdf File-Size: 678 kb Handle: RePEc:onb:oenbwp:98 Template-Type: ReDIF-Paper 1.0 Author-Name: Ester Faia Author-Name-First: Ester Author-Name-Last: Faia Author-Email: ester.faia@upf.edu Author-Workplace-Name: Department of Economics and Business, Universitat Pompeu Fabra Author-Workplace-Homepage: http://www.econ.upf.es Title: Financial Differences and Business Cycle Co-Movements in A Currency Area Abstract: I propose a unitary framework to interpret the links between differences in financial structures and the monetary policy regimes on the one hand, and the correlation of business cycles on the other. Using a two-country micro-founded model with financial frictions I predict that a greater financial diversity should reduce cyclical correlation under a given monetary regime, and that moving from independent monetary policies to a hard peg or a common currency should increase it, for any given degree of financial diversity. I use the recent experience of EMU to test these ideas, and show that my model explains reasonably well the broad patterns of business cycle correlation observed recently among the main euro area countries. Classification-JEL: E3, E42, E44, E52, F41. Keywords: financial diversity, monetary regimes, differential transmission mechanism Length: 50 Creation-Date: 2005-05-12 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:b8ba1a3e-b4ea-4ea2-945d-320f777b4919/wp97_tcm16-27320.pdf File-Format: application/pdf File-Size: 862 kb Handle: RePEc:onb:oenbwp:97 Template-Type: ReDIF-Paper 1.0 Author-Name: Stefania P.S. Rossi Author-Name-First: Stefania P.S. Author-Name-Last: Rossi Author-Workplace-Name: Economics at the Faculty of Economics, University of Cagliari Author-Workplace-Homepage: http://economia.uninav.it Author-Name: Markus Schwaiger Author-Name-First: Markus Author-Name-Last: Schwaiger Author-Email: markus.schwaiger@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Financial Markets Analysis and Surveillance Division Author-Workplace-Homepage: http://www.oenb.at Author-Name: Gerhard Winkler Author-Name-First: Gerhard Author-Name-Last: Winkler Author-Email: gerhard.winkler@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Credit Division Author-Workplace-Homepage: http://www.oenb.at Title: Managerial Behavior and Cost/Profit Efficiency in the Banking Sectors of Central and Eastern European Countries Abstract: This paper analyzes cost and profit efficiency level and the managerial behavior of banks in nine Central and Eastern European countries (the Czech Republic, Estonia, Hungary, Latvia, Lithuania Poland, Romania, Slovakia and Slovenia), providing cross-country and time series evidence on the period 1995-2002. A stochastic frontier analysis based on a Fourier flexible form indicates a generally low level of cost efficiency and an even lower level of profit efficiency. However, we also find significant differences among countries and some evidence of an increasing tendency over time in profit efficiency and, to an even stronger extent, in cost efficiency. Cost and profit efficiency scores are negatively correlated both on a country wide as well as on a bank by bank basis. Furthermore, instead of just looking at the determinants of cost and profit efficiency (e.g. asset quality, problem loans and risk), we test several hypotheses of managerial behavior using the Granger causality approach based on the intertemporal relation between bank efficiency, capitalization and problem loans, as proposed by Berger and DeYoung (1997). Even though a static analysis shows a negative correlation between problem loan and efficiency, we find no evidence of bad management hypothesis. Results provide evidence for the bad luck hypothesis suggesting the exogeneity of bad loans triggering inefficiency. Classification-JEL: G21; G28; C14; D21 Keywords: Cost and profit efficiency; CEECs; Stochastic frontier analysis; Managerial behavior Length: 47 Creation-Date: 2005-03-04 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:0c81fef8-c381-4dc8-a527-7462da792b43/wp96_tcm16-27319.pdf File-Format: application/pdf File-Size: 522 kb Handle: RePEc:onb:oenbwp:96 Template-Type: ReDIF-Paper 1.0 Author-Name: Markus Knell Author-Name-First: Markus Author-Name-Last: Knell Author-Email: markus.knell@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7218 Author-Workplace-Fax: +43-1-40420-7299 Title: On the Design of Sustainable and Fair PAYG Pension Systems When Cohort Sizes Change Abstract: In this paper, the author deals with the question how to make PAYG pension systems financially resistant to fluctuating fertility rates. The author presents two pension schemes that lead to a permanently balanced budget but differ in the mixture of changes in the contribution rates and replacement rates they require in order to achieve this result. After analyzing the variations in the central parameters (both over time and across generations) for each of the schemes he discusses which consequences they have with regard to intergenerational burden sharing and fairness. In particular, the author is interested in how a generation is affected by changes in the size of proceeding and succeeding cohorts. He introduces a proportionality measure(defined as the ratio of relative inputs to relative outputs) that can be used as an indicator to study this impact. The author shows that the schemes have quite different implications concerning how past and future cohorts influence the proportionality measure. Finally he discusses how suitable the formulas are to be implemented in either traditional PAYG or in notional defined contribution (NDC) systems. Classification-JEL: H55; J1; J18; D630 Keywords: Pension System; Demographic Change; Intergenerational Fairness Length: 52 Creation-Date: 2005-02-07 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:7daa718c-8589-4350-812c-ff6fc44414f3/wp95_tcm16-24794.pdf File-Format: application/pdf File-Size: 1141 kb Handle: RePEc:onb:oenbwp:95 Template-Type: ReDIF-Paper 1.0 Author-Name: Harald Grech Author-Name-First: Harald Author-Name-Last: Grech Author-Email: harald.grech@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.suerf.com/Hochreiter/ Author-Workplace-Phone: +43-1-40420-7213 Author-Workplace-Fax: +43-1-40420-7299 Title: What Do German Short-Term Interest Rates Tell Us About Future Inflation? Abstract: In this paper, the author empirically assesses the predictive power of short-term interest rates and term spreads for future inflation in Germany. Based on a multivariate term structure framework, a vector error forecasting equation for inflation forecasts of up to two years is constructed. The results of the alternative error correction reveal that the level of the shortterm interest rates conveys much more information on future inflation than the yield curve spreads. In particular, the one-month and three-month nominal interest rates seem to be informative on future inflation at a two-year horizon. Classification-JEL: E31, C51 Keywords: inflation, interest rates Length: 45 Creation-Date: 2004-12-31 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:fbe16ad9-2628-4885-a2df-9bfeaf409544/wp94_tcm16-24793.pdf File-Format: application/pdf File-Size: 1757 kb Handle: RePEc:onb:oenbwp:94 Template-Type: ReDIF-Paper 1.0 Author-Name: Johann Scharler Author-Name-First: Johann Author-Name-Last: Scharler Author-Email: johann.scharler@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: (+43-0) 732-2468-8360 Author-Workplace-Fax: (+43-0) 732-2468-9679 Title: Understanding the Stock Market’s Response to Monetary Policy Shocks Abstract: This paper explores whether a limited participation model of the monetary transmission mechanism can account for the observed response of stock market returns to monetary policy shocks. It is found that the model generates responses that broadly match the empirical counterparts, although the magnitudes are somewhat too small. Moreover, the results suggest that the increased exposure of bank-dependent firms to liquidity shocks cannot fully account for the heterogenous responses of returns that are observed across firms. Classification-JEL: E4, E5, G1 Keywords: limited participation, asset pricing, stock market Length: 32 Creation-Date: 2004-12-29 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:18e9d8d2-92cb-4bf3-9420-4c53acbe9adc/wp93_tcm16-24128.pdf File-Format: application/pdf File-Size: 414 kb Handle: RePEc:onb:oenbwp:93 Template-Type: ReDIF-Paper 1.0 Author-Name: Michael D. Bordo Author-Name-First: Michael D. Author-Name-Last: Bordo Author-Email: bordo@economics.rutgers.edu Author-Workplace-Name: Department of Economics, Rutgers University Author-Workplace-Homepage: http://econweb.rutgers.edu/bordo/ Author-Name: Josef Christl Author-Name-First: Josef Author-Name-Last: Christl Author-Email: Josef.Christl@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Name: Christian Just Author-Name-First: Christian Author-Name-Last: Just Author-Email: christian.just@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, European Affaires and International Financial Organizations Division Author-Workplace-Homepage: http://www.oenb.at Title: Exchange Rate Regimes Past, Present and Future Length: 100 Creation-Date: 2004-11-03 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:c9287943-c99f-455f-a506-6281f77692f4/wp92_tcm16-22389.pdf File-Format: application/pdf File-Size: 782 kb Handle: RePEc:onb:oenbwp:92 Template-Type: ReDIF-Paper 1.0 Author-Name: Gabriel Moser Author-Name-First: Gabriel Author-Name-Last: Moser Author-Email: gabriel_moser@aon.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5214 Author-Name: Fabio Rumler Author-Name-First: Fabio Author-Name-Last: Rumler Author-Email: fabio.rumler@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Name: Johann Scharler Author-Name-First: Johann Author-Name-Last: Scharler Author-Email: johann.scharler@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: (+43-0) 732-2468-8360 Author-Workplace-Fax: (+43-0) 732-2468-9679 Title: Forecasting Austrian Inflation Abstract: In this paper we apply factor models proposed by Stock and Watson [18] and VAR and ARIMA models to generate 12-month out of sample forecasts of Austrian HICP inflation and its subindices processed food, unprocessed food, energy, industrial goods and services price inflation. A sequential forecast model selection procedure tailored to this specific task is applied. It turns out that factor models possess the highest predictive accuracy for several subindices and that predictive accuracy can be further improved by combining the information contained in factor and VAR models for some indices. With respect to forecasting HICP inflation, our analysis suggests to favor the aggregation of subindices forecasts. Furthermore, the subindices forecasts are used as a tool to give a more detailed picture of the determinants of HICP inflation from both an ex-ante and ex-post perspective. Classification-JEL: C52, C53, E31 Keywords: Inflation Forecasting, Forecast Model selection, Aggregation Length: 56 Creation-Date: 2004-10-04 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:fd904f7f-0944-4a24-a147-83060bb4c1ea/wp91_tcm16-22388.pdf File-Format: application/pdf File-Size: 3861 kb Handle: RePEc:onb:oenbwp:91 Template-Type: ReDIF-Paper 1.0 Author-Name: Sylvia Kaufmann Author-Name-First: Sylvia Author-Name-Last: Kaufmann Author-Email: sylvia.kaufmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7222 Author-Workplace-Fax: +43-1-40420-7299 Author-Name: Maria Teresa Valderrama Author-Name-First: Maria Teresa Author-Name-Last: Valderrama Author-Email: maria.valderrama@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Title: Modeling Credit Aggregates Abstract: The purpose of this paper is to model both loans to households and to non-financial corporations as well as their relation to interest rates and demand variables for Austria, Germany, the Netherlands and the United Kingdom. Credit aggregates are modeled using a Markov-switching vector autoregressive model, which allows testing as to whether shocks to the economy have stronger effects during tight credit regimes or economic downturns. The analysis of the above-mentioned countries makes it possible to assess the differences in the amplifying and asymmetric effects of credit aggregates between marketbased and bank-based financial systems. Classification-JEL: C32; E44; E51 Keywords: Asymmetry and amplification, credit aggregates, market-based and bank-based financial systems Length: 58 Creation-Date: 2004-09-20 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:ff4fb5a9-7a20-42b9-8e5e-62f3bb415546/wp90_1__tcm16-20425.pdf File-Format: application/pdf File-Size: 660 kb Handle: RePEc:onb:oenbwp:90 Template-Type: ReDIF-Paper 1.0 Author-Name: Martin Schneider Author-Name-First: Martin Author-Name-Last: Schneider Author-Email: martin.schneider@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Divison Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7436 Author-Name: Martin Spitzer Author-Name-First: Martin Author-Name-Last: Spitzer Author-Email: Martin.Spitzer@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7433 Title: Forecasting Austrian GDP using the generalized dynamic factor model. Abstract: In this paper, a generalized dynamic factor model is utilized to produce short-term forecasts of real Austrian GDP. The model follows the frequency domain approach proposed by Forni, Hallin, Lippi and Reichlin (2000, 2003). The forecasting performance of the model with a large data set of 143 variables has been assessed relative to simple univariate time-series forecasts. The results show that the factor model can barely outperform the much simpler benchmark model, given the usuall levels of significance. Thus we followed a line of research proposed by Boivin and Ng (2003) and Watson (2000), who suggested that the use of a small data set may increase the forecasting performance. The main finding from our extensive out-of-sample forecasting experiment that we have conducted is that the best forecasting performance can be achieved with small data sets with a handful of variables only. These models perform signifi- cantly better than the large model. This result seems to contradict the basic idea of dynamic factor models, which have been constructed to exploit the potentially useful information of a large data set. Length: 40 Creation-Date: 2004-08-27 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:c8336503-a27e-441e-8c4d-36eb2bc0f91c/wp89_1__tcm16-20424.pdf File-Format: application/pdf File-Size: 822 kb Handle: RePEc:onb:oenbwp:89 Template-Type: ReDIF-Paper 1.0 Author-Name: Markus Knell Author-Name-First: Markus Author-Name-Last: Knell Author-Email: markus.knell@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7218 Author-Workplace-Fax: +43-1-40420-7299 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: Three Decades of Money Demand Studies. Some Differences and Remarkable Similarities. Abstract: By analyzing almost 1000 money demand estimations this paper attempts to summarize the disperse findings of this literature. Using both descriptive statistics and meta-regressions we derive several stylized facts about the two most prominent determinants of money demand–income and interest rate elasticities. In particular, we show that the size and signs of average elasticities are systematically related to the choice of included variables (e.g., M1 or M3, short-run or long-run interest rates), the country grouping (e.g., US vs. Germany) and the empirical specification (e.g., the inclusion of one or two interest rates). Classification-JEL: E41; E52 Keywords: Money Demand, Meta Analysis, Empirical Methods Length: 43 Creation-Date: 2004-06-07 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:69279372-c975-4d40-8dba-304201ce2287/wp88_internet_1__tcm16-9848.pdf File-Format: application/pdf File-Size: 430 kb Handle: RePEc:onb:oenbwp:88 Template-Type: ReDIF-Paper 1.0 Author-Name: Juergen Eichberger Author-Name-First: Juergen Author-Name-Last: Eichberger Author-Email: Juergen.Eichberger@awi.uni-heidelberg.de Author-Workplace-Name: University of Heidelberg, Department of Economics Author-Name: Martin Summer Author-Name-First: Martin Author-Name-Last: Summer Author-Email: martin.summer@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7212 Author-Workplace-Fax: +43-1-40420-7299 Title: Bank Capital, Liquidity and Systemic Risk Abstract: We analyze the impact of capital adequacy regulation on bank insolvency and aggregate investment. We develop a model of the banking system that is characterized by the interaction of many heterogeneous banks with the real sector, interbank credit relations as a consequence of bank liquidity management and an insolvency mechanism. This allows us to study the impact of capital adequacy regulation on systemic risk. In particular we can analyze the impact of regulation on contagious defaults arising from mutual credit relations. We show that the impact of capital adequacy on systemic stability is ambiguous and that systemic risk might actually increase as a consequence of imposing capital constraints on banks. Furthermore we analyze the indirect consequences of capital adequacy regulation that are transmitted to the real economy by their impact on equilibrium interbank rates and thus the opportunity costs of liquidity within the banking system. Classification-JEL: G21, G28, E44. Keywords: Capital Adequacy, Systemic Risk, Banking Regulation, Financial Stability Length: 49 Creation-Date: 2004-05-03 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:7ba9dde2-4329-4705-a683-f295dfb93556/wp87_1__tcm16-9846.pdf File-Format: application/pdf File-Size: 555 kb Handle: RePEc:onb:oenbwp:87 Template-Type: ReDIF-Paper 1.0 Author-Name: Burkhard Raunig Author-Name-First: Burkhard Author-Name-Last: Raunig Author-Email: Burkhard.Raunig@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7219 Author-Workplace-Fax: +43-1-40420-7299 Title: Testing for Longer Horizon Predictability of Return Volatility with an Application to the German Abstract: Volatility of financial returns as a measure of risk is a key parameter in asset pricing and risk management and holding periods for financial instruments of several weeks or month are common. Nevertheless, little is known about the predictability of return volatility at longer horizons. This paper investigates the predictability of return volatility of the German DAX for forecasting horizons from one day to 45 days with a new model-free test procedure that avoids joint assessments of predictability and assumed volatility models. In Monte Carlo simulatiost is compared with two alternative model-free test procedures. The simulations indicate that the new test has good statistical properties and is more powerful then the other two tests if the distribution of returns is fat tailed. Contrary to earlier findings according to which the return volatility of the DAX is only predictable for 10 to 15 trading days, the empirical evidence provided in this study suggests that the volatility of DAX returns is predictable for horizons of up to 35 trading days and may be forecastable at even longer horizons. Classification-JEL: G10,C53 Keywords: financial returns volatility, predictability, forecasting, interval forecast evaluation, density forecast evaluation Length: 40 Creation-Date: 2003-09-22 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:3bc4e091-d3f2-4fa9-a77c-9e012c58cb8b/wp86_tcm16-6180.pdf File-Format: application/pdf File-Size: 404 kb Handle: RePEc:onb:oenbwp:86 Template-Type: ReDIF-Paper 1.0 Author-Name: Sylvia Fruehwirth-Schnatter Author-Name-First: Sylvia Author-Name-Last: Fruehwirth-Schnatter Author-Email: sylvia.fruehwirth-schnatter@jku.at Author-Workplace-Name: Johannes Kepler Universitaet Linz, Department of Applied Statistics and Econometrics Author-Name: Sylvia Kaufmann Author-Name-First: Sylvia Author-Name-Last: Kaufmann Author-Email: sylvia.kaufmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7222 Author-Workplace-Fax: +43-1-40420-7299 Title: Investigating asymmetries in the bank lending channel. An analysis using Austrian banks’ balance sheet data. Abstract: In the present paper we use a balanced bank panel data set to obtain an inference on two dimensions of the asymmetric response of bank lending to interest rate changes. The cross-sectional dimension is captured by group-specific parameters whereby each bank’s group membership is estimated along with the model parameters. Moreover, the asymmetric response over time is modelled with switching parameters that depend on a latent state variable. The presence of two latent indicators calls for Bayesian simulation methods. The results show that three bank groups, characterized by the groups' average asset total, differ in their lending reaction to interest rate changes. Some sensitivity analysis comparing the results for different group specifications and the models' out-of-sample forecasting performance confirms our model specification. Classification-JEL: C11,C15,E44,E51 Keywords: Bank lending, clustering, forecasting, Markov switching, Markov chain Monte Carlo, panel data. Length: 43 Creation-Date: 2003-07-28 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:8fe8532c-b5c9-478e-9fd5-f3f1901ddf9b/wp85_tcm16-6179.pdf File-Format: application/pdf File-Size: 1505 kb Handle: RePEc:onb:oenbwp:85 Template-Type: ReDIF-Paper 1.0 Author-Name: Jesus Crespo Cuaresma Author-Name-First: Jesus Crespo Author-Name-Last: Cuaresma Author-Email: jesus.crespo-cuaresma@univie.ac.at Author-Workplace-Name: Department of Economics, University of Vienna, Bruennerstrasse 72, A-1210 Vienna (Austria) Author-Name: Ernest Gnan Author-Name-First: Ernest Author-Name-Last: Gnan Author-Email: ernest.gnan@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7400 Author-Name: Doris Ritzberger-Grünwald Author-Name-First: Doris Author-Name-Last: Ritzberger-Grünwald Author-Email: doris.ritzberger-gruenwald@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5201 Author-Workplace-Fax: +43-1-40420-5299 Title: Searching for the Natural Rate of Interest: a Euro-Area Perspective Abstract: A time-varying natural rate of interest is estimated for the euro area using a multivariate unobserved components model. The problem of aggregating interest rate data for the pre-EMU period is directly addressed, and a simple method in order to adjust the risk premia in the interest rate data prior to 1999 is proposed. We show that, for the pre-EMU period, using risk-unadjusted policy rates leads to periods of high risk premia being erroneously taken as monetary policy replies to the output gap; by contrast, using risk-adjusted policy rates yields an estimate of the reaction of monetary policy to the output gap corresponding approximately to an increase of 40 basis points for a 1% positive deviation of output from potential output. A positive deviation of inflation from its trend of 1% is estimated to have triggered approximately a 1.2% increase in short-term interest rates. Classification-JEL: E43, E52, C32 Keywords: Natural rate of interest, unobserved components models, monetary policy, Taylor rule Length: 33 Creation-Date: 2003-07-21 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:2d16f188-9f7b-451a-a73c-74d5fcffe8d0/wp84_tcm16-6177.pdf File-Format: application/pdf File-Size: 356 kb Handle: RePEc:onb:oenbwp:84 Template-Type: ReDIF-Paper 1.0 Author-Name: Sylvia Kaufmann Author-Name-First: Sylvia Author-Name-Last: Kaufmann Author-Email: sylvia.kaufmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7222 Author-Workplace-Fax: +43-1-40420-7299 Title: The business cycle of European countries Bayesian clustering of country - individual IP growth series Abstract: In the present paper, time series on industrial production growth of individual countries are used to investigate the following questions: (i) Is there a common growth cycle for the euro area countries? (ii) Did the synchronization change over time? (iii) Can we discriminate between a "European" and an "overseas" cycle? (iv) Which countries follow the "overseas" rather than the "European" cycle? To obtain the inference, I use an autoregressive panel data framework whereby the groups of co-moving countries are estimated adaptively along with the model parameters using Bayesian simulation methods. Classification-JEL: C15, C33, E32 Keywords: Business cycle, Bayesian clustering, Markov switching, Markov chain Monte Carlo, panel data. Length: 45 Creation-Date: 2003-07-14 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:a6773427-1199-488a-8dda-83dd625bc216/wp83_tcm16-6176.pdf File-Format: application/pdf File-Size: 503 kb Handle: RePEc:onb:oenbwp:83 Template-Type: ReDIF-Paper 1.0 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: How Do Debit Cards Affect Cash Demand? Survey Data Evidence Abstract: This paper analyzes how EFT-POS payments and ATM withdrawals affect purse cash demand. In particular, survey data about Austrian individuals are employed to estimate a cash demand equation which takes account of sample selection effects. The results reveal that purse cash demand is significantly affected by debit card usage and that there are significant differences in cash demand for individuals with different debit card usage frequencies. For example, the point estimates imply that individuals who pay frequently with their debit card hold about 20% less purse cash than all others while frequent ATM withdrawals are associated with about 18% less purse cash demand. Due to the relative small share of frequent users, currently, aggregate purse cash demand is not very strongly affected by EFT-POS payments. However, if usage behavior shifts towards higher usage frequencies, then the findings of this study suggest that purse cash demand will decrease substantially. Classification-JEL: E41, E58, D12 Keywords: Cash Demand, Payment Cards, Cash Substitution Length: 46 Creation-Date: 2003-07-07 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:84577ce9-e4bb-496f-a6e7-c840fd4a6a45/wp82_tcm16-6175.pdf File-Format: application/pdf File-Size: 354 kb Handle: RePEc:onb:oenbwp:82 Template-Type: ReDIF-Paper 1.0 Author-Name: Markus Knell Author-Name-First: Markus Author-Name-Last: Knell Author-Email: markus.knell@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7218 Author-Workplace-Fax: +43-1-40420-7299 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: How Robust are Money Demand Estimations? A Meta-Analytic Approach Abstract: In this paper we perform a meta-analysis of empirical money demand studies involving almost 500 individual money demand estimations. We analyze whether the wide variety of results can be explained by characteristics of the studies, different macroeconomic environments or the imprecision of individual estimates. We find that estimates for the income elasticity of money are systematically related to various study characteristics (e.g., broadness of the monetary aggregate, inclusion of financial innovation and wealth, etc). Also, the macroeconomic environment (inflation, nominal and real uncertainties) seems to play a role. Nevertheless, a substantial part of the variability remains unexplained. Our findings thus raise some doubts about the robustness and reliability of money demand estimations. Classification-JEL: E41; E52 Keywords: Money Demand, Meta Analysis, Empirical Methods Length: 54 Creation-Date: 2003-06-30 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:72ecb8a7-6bde-4559-836d-ed7d8d9f4ce4/wp81_tcm16-6174.pdf File-Format: application/pdf File-Size: 524 kb Handle: RePEc:onb:oenbwp:81 Template-Type: ReDIF-Paper 1.0 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: Does Central Bank Intervention Influence the Probability of a Speculative Attack? Evidence from the EMS Abstract: This paper studies the effects of central bank intervention during the 1992- 1993 EMS crises on the D-mark/peseta and D-mark/French franc exchange rate. In particular, it is analyzed how interventions affected the probability of a speculative attack and market participants’ expectations about realignments. The findings provide evidence that interventions seem to have increased both the expected realignment rate and the probability of a speculative attack. Furthermore, there is some evidence that this effect arises for publicly known but not for secret interventions. Classification-JEL: E58, F31, F33 Keywords: Foreign Exchange Intervention, European Monetary System, Markov Switching Length: 52 Creation-Date: 2002-11-04 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:47e7a378-4d58-4bc4-b511-f5ff22e51f19/wp80_tcm16-6173.pdf File-Format: application/pdf File-Size: 649 kb Handle: RePEc:onb:oenbwp:80 Template-Type: ReDIF-Paper 1.0 Author-Name: Helmut Elsinger Author-Name-First: Helmut Author-Name-Last: Elsinger Author-Email: helmut.elsinger@univie.ac.at Author-Workplace-Name: University of Vienna, Department of Business Studies Author-Workplace-Homepage: http://finance2.bwl.univie.ac.at/members/elsinger/elsinger.htm Author-Workplace-Phone: +43-1-4277 38057 Author-Workplace-Fax: +43-1-4277 38054 Author-Name: Alfred Lehar Author-Name-First: Alfred Author-Name-Last: Lehar Author-Email: alfred.lehar@commerce.ubc.ca Author-Workplace-Name: University of British Columbia, Faculty of Commerce Author-Workplace-Phone: (604) 822 8344 Author-Workplace-Fax: (604) 822 4695 Author-Name: Martin Summer Author-Name-First: Martin Author-Name-Last: Summer Author-Email: martin.summer@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7212 Author-Workplace-Fax: +43-1-40420-7299 Title: Risk Assessment for Banking Systems Abstract: In this paper we suggest a new approach to risk assessment for banks. Rather than looking at them individually we try to undertake an analysis at the level of the banking system. Such a perspective is necessary because the complicated network of mutual credit obligations can make the actual risk exposure of banks invisible at the level of individual institutions. We apply our framework to a cross section of individual bank data as they are usually collected at the central bank. Using standard risk management techniques in combination with a network model of interbank exposures we analyze the consequences of macroeconomic shocks for bank insolvency risk. In particular we consider interest rate shocks, exchange rate and stock market movements as well as shocks related to the business cycle. The feedback between individual banks and potential domino effects from bank defaults are taken explicitly into account. The model determines endogenously probabilities of bank insolvencies, recovery rates and a decomposition of insolvency cases into defaults that directly result from movements in risk factors and defaults that arise indirectly as a consequence of contagion. Classification-JEL: G21, C15, C81, E44 Keywords: Systemic Risk, Interbank Market, Financial Stability, Risk Management Length: 53 Creation-Date: 2002-10-28 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:c1c1c578-ff73-4b43-829f-ee780d33857c/wp79_tcm16-6172.pdf File-Format: application/pdf File-Size: 819 kb Handle: RePEc:onb:oenbwp:79 Template-Type: ReDIF-Paper 1.0 Author-Name: Florian Stahl Author-Name-First: Florian Author-Name-Last: Stahl Author-Email: Florian.Stahl@unisg.ch Author-Workplace-Name: University of Zurich Author-Name: Alfred Stiglbauer Author-Name-First: Alfred Author-Name-Last: Stiglbauer Author-Email: alfred.stiglbauer@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7435 Author-Name: Rudolf Winter-Ebmer Author-Name-First: Rudolf Author-Name-Last: Winter-Ebmer Author-Email: rudolf.winterebmer@jku.at Author-Workplace-Name: University of Linz Author-Name: Josef Zweimüller Author-Name-First: Josef Author-Name-Last: Zweimüller Author-Email: zweim@iew.unizh.ch Author-Workplace-Name: University of Zürich Title: Job Creation and Job Destruction in a Regulated Labor Market: The Case of Austria Abstract: We study Austrian job reallocation in the period of 1978 to 1998, using a large administrative dataset where we correct for “spurious” entries and exits of firms. We find that on average 9 out of 100 randomly selected jobs were created within the last year, and that about 9 out of randomly selected 100 jobs were destroyed within the next year. Hence, the magnitude of Austrian job flows seems to be comparable to other countries, similar to the well-known results of Davis, Haltiwanger, and Schuh (1996) for the United States. Job reallocation appears to be driven primarily by idiosyncratic shocks. However, job creation increases significantly during cyclical upswings whereas job destruction rises in downturns. We also find substantial persistence of job creation and destruction. We show that the pronounced pattern of job reallocation rates falling with firm size and age continues to hold when we use a set of controls. Finally, we show that - controlling for sector and for firm size composition - Austrian job reallocation rates are only half the rates for the U. S. This result is not surprising given the impact of tighter regulation and labor law in Austria. Classification-JEL: D21, J23, L11 Keywords: Labor Reallocation, Job Flows, Labor Market Regulation. Length: 39 Creation-Date: 2002-10-21 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:ac399a9c-78e8-400e-b7f4-72a817ebb4f4/wp78_tcm16-6171.pdf File-Format: application/pdf File-Size: 398 kb Handle: RePEc:onb:oenbwp:78 Template-Type: ReDIF-Paper 1.0 Author-Name: Peter Brandner Author-Name-First: Peter Author-Name-Last: Brandner Author-Email: peter.brandner@aon.at Author-Workplace-Name: Institute for Advanced Studies, Vienna Author-Workplace-Homepage: http://www.wifo.ac.at Author-Workplace-Phone: +43(1) 798-2601-0 Author-Workplace-Fax: +43(1)798-9386 Author-Name: Harald Grech Author-Name-First: Harald Author-Name-Last: Grech Author-Email: harald.grech@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.suerf.com/Hochreiter/ Author-Workplace-Phone: +43-1-40420-7213 Author-Workplace-Fax: +43-1-40420-7299 Title: Why did Central Banks Intervene in the EMS? The Post 1993 Experience Abstract: In this paper, we present stylized facts of exchange rate and intervention behavior in the Exchange Rate Mechanism I (ERM I), in particular in light of the recent literature on multilateral target zone models. We estimate bilateral exchange rate distributions of the maximum spot rate deviations of six ERM-currencies explicitly taking the multilateral setting of the ERM I into account. In a further analysis, we estimate short term reaction functions for the Banque de Belgique, the Danmarks Nationalbank, the Banco dÂ’Espa˜na, the Banque de France, the Central Bank of Ireland and the Banco de Portugal by applying a Tobit analysis. The period under review ranges from August 1993 to April 1998. Daily exchange rate and intervention data are used. The exchange rate position in the band (deviation of the DEM-spot rates from the DEM-central parity) significantly induces intervention activity. There is less evidence that changes in volatility trigger central bank intervention. Classification-JEL: E58, F31, F33 Keywords: Foreign Exchange Intervention, European Monetary System, Central Bank’s Reaction Function Length: 47 Creation-Date: 2002-10-14 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:5507ab7a-d1ad-45ca-a257-76d665091e53/wp77_tcm16-6170.pdf File-Format: application/pdf File-Size: 941 kb Handle: RePEc:onb:oenbwp:77 Template-Type: ReDIF-Paper 1.0 Author-Name: Eduard Hochreiter Author-Name-First: Eduard Author-Name-Last: Hochreiter Author-Email: Eduard.Hochreiter@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.suerf.com/Hochreiter/ Author-Workplace-Phone: +43-1-40420-7200 Author-Workplace-Fax: +43-1-40420-7299 Author-Name: Anton Korinek Author-Name-First: Anton Author-Name-Last: Korinek Author-Workplace-Name: 4118F Tydings Hall, University of Maryland, College Park, MD 20742,USA, Author-Name: Pierre L. Siklos Author-Name-First: Pierre L. Author-Name-Last: Siklos Author-Email: psiklos@wlu.ca Author-Workplace-Name: Wilfried Laurier University and Viessmann Research Centre on Modern Europe Title: The Potential Consequences of Alternative Exchange Rate Regimes: A Study of Three Candidate Regions Abstract: The paper examines the macroeconomic consequences of selecting alternative exchange rate regimes of countries in three regions. In particular, it studies whether Austria, the Netherlands, Canada and New Zealand made the right monetary regime choices between 1970 and 2000. We focus on the role of asymmetric shocks as a core determinant for the evaluation of various monetary regimes by studying the impact of a hard peg, a full monetary union, or floating exchange rates (with or without inflation targeting) on selected macroeconomic variables. Estimates of structural VARs are used to ascertain if the countries under review meet the essential ingredients of an optimum currency area (OCA) and thus are candidates for a monetary union. Counterfactual experiments help to study economic outcomes had these countries pursued alternative monetary strategies. We conclude that a floating regime with inflation targeting is best for Canada, a monetary union with Australia is the best course of action for New Zealand, and monetary union is the appropriate choice for the Netherlands while there are reasons to believe that Austria might have been better off with a floating regime, at least for a time. We also find that good monetary policy is not confined to any particular exchange rate regime and that political and institutional factors weigh heavily in this decision. Classification-JEL: E30, F30 Keywords: Exchange rate regimes, Monetary Union, SVARs Length: 63 Creation-Date: 2002-10-10 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:b899fb84-e6c7-42b9-96c9-e7b9ab474fb3/wp76_tcm16-6169.pdf File-Format: application/pdf File-Size: 828 kb Handle: RePEc:onb:oenbwp:76 Template-Type: ReDIF-Paper 1.0 Author-Name: George Kopits Author-Name-First: George Author-Name-Last: Kopits Author-Workplace-Name: International Monetary Fund Author-Workplace-Homepage: http://www.imf.org Title: Central European EU Accession and Latin American Integration: Mutual Lessons in Macro-Economic Policy Design Abstract: Design options in exchange rate, monetary and fiscal policies, are explored for economies in Central Europe and Latin America that aspire to engage in monetary unification. Recent experience in these regions suggests that, absent a model of institutional harmonization and a road map for policy convergence, Latin American economies would benefit from following internally consistent macroeconomic policies—possibly in the context of a rules-based framework—and from adopting widely accepted standards of best practice. Unilateral adoption of a hard currency (dollarization or euroization) tends to be counterproductive unless it is supported by fiscal discipline and wage flexibility. Empirical evidence is presented on the effect of expected monetary unification on sovereign risk. Classification-JEL: E61; E63; F33 Keywords: Economic and Monetary Union; Policy Convergence; Determinants of Sovereign Risk Length: 61 Creation-Date: 2002-10-03 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:127982dc-ca07-477e-8aed-b2ffc38e5b53/wp75_tcm16-6167.pdf File-Format: application/pdf File-Size: 1026 kb Handle: RePEc:onb:oenbwp:75 Template-Type: ReDIF-Paper 1.0 Author-Name: Sebastian Edwards Author-Name-First: Sebastian Author-Name-Last: Edwards Author-Email: sedwards@agsm.ucla.edu Author-Workplace-Name: University of California, Los Angeles Author-Workplace-Homepage: http://www.anderson.ucla.edu/faculty/sebastian.edwards/ Author-Workplace-Phone: +1 (310) 206 6797 Author-Workplace-Fax: +1 (310) 206 5825 Title: The Great Exchange Rate Debate after Argentina Abstract: In this paper I discuss in what way, if any, the collapse of Argentina’s experience with a currency board has affected the policy debate on the appropriate exchange rate regime in emerging and transition countries. More specifically, I deal with three issues: (1) I discuss some important aspects of the Argentine experience. (2) I provide a comparative evaluation of economic performance under strict dollarization. And (3), I analyze emerging countries’ experiences with flexible exchange rates, including the issue of a fear of floating. Length: 36 Creation-Date: 2002-09-30 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:b67c8e1f-6a42-4866-ac3d-0220e6b3ab6a/wp74_tcm16-6164.pdf File-Format: application/pdf File-Size: 406 kb Handle: RePEc:onb:oenbwp:74 Template-Type: ReDIF-Paper 1.0 Author-Name: Friedrich Fritzer Author-Name-First: Friedrich Author-Name-Last: Fritzer Author-Email: friedrich.fritzer@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7417 Author-Name: Gabriel Moser Author-Name-First: Gabriel Author-Name-Last: Moser Author-Email: gabriel_moser@aon.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5214 Author-Name: Johann Scharler Author-Name-First: Johann Author-Name-Last: Scharler Author-Email: scharler@sfu.ca Author-Workplace-Name: Simon Fraser University, Department of Economics, 8888 University Drive, Burnaby, B.C., Canada V5A 1S6 Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: (+43-0) 732-2468-8360 Author-Workplace-Fax: (+43-0) 732-2468-9679 Title: Forecasting Austrian HICP and its Components using VAR and ARIMA Models Abstract: The purpose of this paper is to evaluate the performance of VAR and ARIMA models to forecast Austrian HICP inflation. Additionally, we investigate whether disaggregate modelling of five subcomponents of inflation is superior to specifications of headline HICP inflation. Our modelling procedure is to find adequate VAR and ARIMA specifications that minimise the 12 months out-of-sample forecasting error. The main findings are twofold. First, VAR models outperform the ARIMA models in terms of forecasting accuracy over the longer pro- jection horizon (8 to 12 months ahead). Second, a disaggregated ap- proach improves forecasting accuracy substantially for ARIMA mod- els. In case of the VAR approach the superiority of modelling the five subcomponents instead of just considering headline HICP inflation is demonstrated only over the longer period (10 to 12 months ahead). Classification-JEL: C53, E31 Keywords: VAR and ARIMA models; in ation forecasting; automatic modelling; forecasting accuracy. Length: 49 Creation-Date: 2002-08-26 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:c385b784-c1eb-4b82-8e4e-83eec7e42a75/wp73_tcm16-6163.pdf File-Format: application/pdf File-Size: 476 kb Handle: RePEc:onb:oenbwp:73 Template-Type: ReDIF-Paper 1.0 Author-Name: Ansgar Belke Author-Name-First: Ansgar Author-Name-Last: Belke Author-Email: belke@uni-hohenheim.de Author-Workplace-Name: University of Hohenheim (Department of Economics), Stuttgart/Germany Author-Workplace-Phone: +49(0)711-459-3247 Author-Workplace-Fax: +49(0)711-459-3815 Author-Name: Daniel Gros Author-Name-First: Daniel Author-Name-Last: Gros Author-Email: daniel.gros@ceps.be Author-Workplace-Name: Centre for European Policy Studies (CEPS), Brussels/Belgium Author-Workplace-Phone: (+32/2)229.39.38 Title: Monetary Integration in the Southern Cone: Mercosur is not like the EU? Abstract: Evaluating the costs and benefits of exchange rate stability requires a somewhat different approach for Mercosur than for the EU. EU member countries are highly integrated in terms of trade in goods and services. By contrast, trade integration within Mercosur is much more limited, intra-area exchange rates are thus less important than the exchange rate vis-a-vis the dollar and the euro. This contribution analyses the impact of both aspects of financial volatility (exchange rate and interest rate volatility) on investment and labour markets in the Southern Cone, finding that both exchange rate variability (mainly against the dollar and the euro) and (domestic) interest rate volatility have a significant dampening impact on employment and investment, as predicted by our theoretical model. Classification-JEL: E42, F36, F42 Keywords: currency union, exchange rate and interest rate variability, job creation, Mercosur,option value effects Length: 88 Creation-Date: 2002-08-19 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:d39a4ba1-a0e6-411a-b86d-c017779a7e8f/wp72_tcm16-6162.pdf File-Format: application/pdf File-Size: 1556 kb Handle: RePEc:onb:oenbwp:72 Template-Type: ReDIF-Paper 1.0 Author-Name: Dimitri Boreiko Author-Name-First: Dimitri Author-Name-Last: Boreiko Author-Workplace-Name: Department of Economics, European University Institute, Via dei Roccettini, 9, San Domenico (FI), 50016, Italy. Title: EMU and Accession Countries: Fuzzy Cluster Analysis of Membership Abstract: This paper estimates the readiness of the Accession Countries of Central and East Europe for EMU or for unilateral euroisation using a fuzzy clustering algorithm. The variables to which the algorithm is applied are suggested alternately by the criteria in the Maastricht Treaty (nominal convergence) and by Optimum Currency Area theory (real convergence). The algorithm reveals that Estonia and Slovenia are the leaders in both nominal and real convergence, whereas the other countries from the 1998 Accession Wave have achieved substantial results only in real convergence. Moreover, Poland is excluded from the leading group in the most recent years due to its worsened economic performance. Keywords: CEECs, Optimum currency area, EMU, fuzzy cluster analysis, nominal and real convergence. Length: 42 Creation-Date: 2002-08-12 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:dfba4d77-a7ef-4558-b173-8fa982fd2f93/wp71_tcm16-6161.pdf File-Format: application/pdf File-Size: 633 kb Handle: RePEc:onb:oenbwp:71 Template-Type: ReDIF-Paper 1.0 Author-Name: Jürgen von Hagen Author-Name-First: Jürgen von Author-Name-Last: Hagen Author-Email: vonhagen@uni-bonn.de Author-Workplace-Name: ZEI, University of Bonn, Indiana University, and CEPR Author-Workplace-Phone: +49-228-739199 Author-Workplace-Fax: +49-228-731809 Author-Name: Susanne Mundschenk Author-Name-First: Susanne Author-Name-Last: Mundschenk Author-Email: smundsch@uni-bonn.de Author-Workplace-Name: ZEI, University of Bonn Title: Fiscal and Monetary Policy Coordination in EMU Length: 47 Creation-Date: 2002-08-05 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:13e8506f-a563-4fbb-9dec-c96af72a381b/wp70_tcm16-6160.pdf File-Format: application/pdf File-Size: 714 kb Handle: RePEc:onb:oenbwp:70 Template-Type: ReDIF-Paper 1.0 Author-Name: Michael J. Artis Author-Name-First: Michael J. Author-Name-Last: Artis Author-Email: artis@iue.it Author-Workplace-Name: Department of Economics, European University Institute, Badia Fiesolana, Via dei Roccettini 9, I-50016 San Domenico di Fiesole (FI), Italy; CEPR Author-Workplace-Homepage: http://www.iue.it/Personal/Artis/Welcome.html Author-Workplace-Phone: +39-055-4685-221/777 Title: Reflections on the Optimal Currency Area (OCA) criteria in the light of EMU Length: 36 Creation-Date: 2002-07-29 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:bb4c0c61-cd61-4a34-9054-8cdc79c742a1/wp69_tcm16-6158.pdf File-Format: application/pdf File-Size: 406 kb Handle: RePEc:onb:oenbwp:69 Template-Type: ReDIF-Paper 1.0 Author-Name: Eduard Hochreiter Author-Name-First: Eduard Author-Name-Last: Hochreiter Author-Email: Eduard.Hochreiter@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.suerf.com/Hochreiter/ Author-Workplace-Phone: +43-1-40420-7200 Author-Workplace-Fax: +43-1-40420-7299 Author-Name: Klaus Schmidt-Hebbel Author-Name-First: Klaus Author-Name-Last: Schmidt-Hebbel Author-Email: kschmidt@bcentral.cl Author-Workplace-Name: Economic Research Division, Central Bank of Chile, Agustinas 1180, Santiago, CHILE Author-Workplace-Homepage: http://schmidt-hebbel.com/ Author-Workplace-Phone: (56-2) 670-2386 Author-Workplace-Fax: (56-2) 670-2853 Author-Name: Georg Winckler Author-Name-First: Georg Author-Name-Last: Winckler Author-Email: georg.winckler@univie.ac.at Author-Workplace-Name: Rektorat der Universität Wien, Dr. Karl Lueger-Ring 1, 1010 Wien Author-Workplace-Phone: +43-1-01/4277-0 Title: Monetary Union: European Lessons, Latin American Prospects Abstract: In this paper selective issues of long-run sustainability of monetary unions are analyzed. Using theoretical insights and the experience of EMU up to now we argue that empirical evidence on OCA criteria for EMU suggests that benefits for the countries participating in EMU outweigh costs by a relatively large margin although by varying degrees from country to country. Fiscal policy rules are necessary for EMU to succeed. We also conclude that EMU has been driven by political considerations. A sound financial sector is a precondition. With regard to lessons to be drawn for Latin America and the Caribbean we first find that there has been a strong push towards the floating cum inflation-targeting corner and to regional trade integration. Moreover, it seems that, in contrast to EMU, the benefit-cost balance of a move to monetary union is much less favorable in Latin America and the Caribbean and, most important, the political dimension missing. Classification-JEL: E42, E52, E58, F33 Keywords: Exchange rate regimes, Monetary Union, Transition, Emerging Market Economies Length: 56 Creation-Date: 2002-07-22 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:72b419dd-d465-4b42-898e-5ac7244408e4/wp68_tcm16-6157.pdf File-Format: application/pdf File-Size: 407 kb Handle: RePEc:onb:oenbwp:68 Template-Type: ReDIF-Paper 1.0 Author-Name: Andrew Berg Author-Name-First: Andrew Author-Name-Last: Berg Author-Email: aberg@imf.org Author-Workplace-Name: Research Department, International Monetary Fund Author-Name: Eduardo Borensztein Author-Name-First: Eduardo Author-Name-Last: Borensztein Author-Email: eborensztein@imf.org Author-Workplace-Name: Research Department, International Monetary Fund Author-Name: Paolo Mauro Author-Name-First: Paolo Author-Name-Last: Mauro Author-Email: pmauro@imf.org Author-Workplace-Name: Research Department, International Monetary Fund Title: An Evaluation of Monetary Regime Options for Latin America Length: 62 Creation-Date: 2002-07-15 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:03e0719a-1fc1-445d-b2eb-4b145357ef63/wp67_tcm16-6156.pdf File-Format: application/pdf File-Size: 1063 kb Handle: RePEc:onb:oenbwp:67 Template-Type: ReDIF-Paper 1.0 Author-Name: David Begg Author-Name-First: David Author-Name-Last: Begg Author-Email: dbegg@econ.bbk.ac.uk Author-Workplace-Name: Birkbeck College, University of London Author-Workplace-Homepage: http://www.econ.bbk.ac.uk/faculty/begg/ Author-Workplace-Phone: +44 (0) 20 7631 6414 Author-Workplace-Fax: +44 (0) 20 7631 6416 Title: Growth, Integration, and Macroeconomic Policy Design: Some Lessons for Latin America Length: 36 Creation-Date: 2002-07-10 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:a971a4f9-c27d-4613-bd04-b62e00eb31cf/wp66_tcm16-6155.pdf File-Format: application/pdf File-Size: 315 kb Handle: RePEc:onb:oenbwp:66 Template-Type: ReDIF-Paper 1.0 Author-Name: Sebastian Edwards Author-Name-First: Sebastian Author-Name-Last: Edwards Author-Email: sedwards@agsm.ucla.edu Author-Workplace-Name: University of California, Los Angeles Author-Workplace-Homepage: http://www.anderson.ucla.edu/faculty/sebastian.edwards/ Author-Workplace-Phone: +1 (310) 206 6797 Author-Workplace-Fax: +1 (310) 206 5825 Author-Name: I. Igal Magendzo Author-Name-First: I. Igal Author-Name-Last: Magendzo Author-Email: imagendzo@bcentral.cl Author-Workplace-Name: Central Bank of Chile Title: Dollarization and Economic Performance: What Do We Really Know? Abstract: In this paper we analyze the macroeconomic record of dollarized economies. In particular, we investigate whether, as its supporters’ claim, dollarization is associated with lower inflation and faster growth. We analyze this issue by using a matching estimator technique developed in the training evaluation literature. Our findings suggest that inflation has been significantly lower in dollarized nations than in non-dollarized ones. We also find that dollarized nations have had a lower rate of economic growth than non-dollarized ones. Finally, we find that macroeconomic volatility is not significantly different across dollarized and non-dollarized economies. We conjecture that the lower rate of economic growth in dollarized countries is due, at least in part, to these countries’ difficulties in accommodating external disturbances, such as major term of trade and capital flows shocks. Length: 52 Creation-Date: 2002-07-01 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:2f4473c8-6502-4108-887b-696a4601ef08/wp65_tcm16-6154.pdf File-Format: application/pdf File-Size: 429 kb Handle: RePEc:onb:oenbwp:65 Template-Type: ReDIF-Paper 1.0 Author-Name: Sylvester C.W. Eijffinger Author-Name-First: Sylvester C.W. Author-Name-Last: Eijffinger Author-Email: s.c.w.eijffinger@kub.nl Author-Workplace-Name: CentER, Tilburg University, P.O. Box 90153, 5000 LE Tilburg, The Netherlands Author-Workplace-Homepage: http://cwis.kub.nl/~few5/center/staff/eijffing/ Author-Workplace-Phone: +31 13 4662411 Author-Workplace-Fax: +31 13 4663042 Title: The Federal Design of a Central Bank in Monetary Union: The Case of the European System of Central Banks Abstract: In this paper we analyse the ESCB as a federal central bank system. First, the degree of decentralization of the ESCB will be briefly compared with its predecessor, the Deutsche Bundesbank, and its counterweight in the US, the Federal Reserve System. Moreover, the development during the period 1990-99 of the total, economics and research staffing of the ECB and the national central banks in the EU will be investigated and also the staff ratios of the national central banks in 1999. Furthermore, the research activities of the central banks in the European Union over the period 1990-99 will be analysed both in terms of input (economics and research staff) and output (quaility-weighted number of articles in scientific journals). The share of economics research staff in total staff of the national central banks varies between 0.02 and 0.17. The ECB has the highest ratio between economists and researchers and other staff. A ranking of research performance based on the quality-weighted number of scientific articles per economics and research employee reveals that the Bank of Finland has the best research performance of European central banks, followed by De Nederlandsche Bank, the Banco de Portugal and the Oesterreichische Nationalbank. There is only a weak relationship between the research performance and the share of research staff. The conclusion small is beautiful also seems to hold for the economics and research departments of the European central banks. Length: 39 Creation-Date: 2002-06-19 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:09af4543-6de8-4b27-9203-ceba6d3b41e9/wp64_tcm16-6153.pdf File-Format: application/pdf File-Size: 341 kb Handle: RePEc:onb:oenbwp:64 Template-Type: ReDIF-Paper 1.0 Author-Name: Markus Knell Author-Name-First: Markus Author-Name-Last: Knell Author-Email: markus.knell@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7218 Author-Workplace-Fax: +43-1-40420-7299 Title: Wage Formation in Open Economies and the Role of Monetary and Wage-Setting Institutions Abstract: The paper studies the determinants of unemployment in a two-country model, where real wages are the outcome of the strategic interaction between various institutional players (firms, unions, central banks). We show that: (i) the results derived in the recent literature on this topic are not generally robust against the introduction of openness; (ii) the shape of the Calmfors- Driffill curve not only depends on a country’s own centralization of wage-bargaining (CWB) but rather on home and foreign characteristics; (iii) the model challenges the established belief that a shift to a monetary union (MU) will (negatively) affect unemployment in all member countries by fundamentally changing the nature of strategic interactions. Under certain assumptions our open-economy model suggests that the formation of a MU has no effect whatsoever on structural unemployment. Classification-JEL: E50, E58, F41, F42, J51 Keywords: Wage-Setting, Unemployment, Monetary Union Length: 45 Creation-Date: 2002-05-29 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:a3789fcb-10e9-473c-a3eb-f4ff4d48767d/wp63_tcm16-6152.pdf File-Format: application/pdf File-Size: 538 kb Handle: RePEc:onb:oenbwp:63 Template-Type: ReDIF-Paper 1.0 Author-Name: Jesus Crespo Cuaresma Author-Name-First: Jesus Crespo Author-Name-Last: Cuaresma Author-Email: jesus.cuaresma@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Name: Maria Antoinette Dimitz Author-Name-First: Maria Antoinette Author-Name-Last: Dimitz Author-Email: maria.dimitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division, Otto-Wagner-Platz 3, POB 61, A-1011 Vienna, Austria Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5231 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Doris Ritzberger-Grünwald Author-Name-First: Doris Author-Name-Last: Ritzberger-Grünwald Author-Email: doris.ritzberger-gruenwald@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5201 Author-Workplace-Fax: +43-1-40420-5299 Title: Growth, Convergence and EU Membership Abstract: The effect of European integration on long-term growth of the current EU member states is studied by means of panel data methods. The length of EU membership is found to have a significant positive effect on economic growth, which is relatively higher for poorer countries. The existence of a growth bonus from EU membership appears inconsistent with neoclassical exogenous growth theory. While previous empirical studies tend not to find positive growth effects of regional integration, the present study suggests an asymmetric, convergence-stimulating impact of EU membership on long-term growth. Classification-JEL: F15, F43, C23 Keywords: Convergence, Economic Growth, European Union, Threshold panel data regression Length: 31 Creation-Date: 2002-04-08 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:5db9b9bd-1113-4312-8e42-a210e58cebc8/wp62_tcm16-6151.pdf File-Format: application/pdf File-Size: 418 kb Handle: RePEc:onb:oenbwp:62 Template-Type: ReDIF-Paper 1.0 Author-Name: Peter Backé Author-Name-First: Peter Author-Name-Last: Backé Author-Email: peter.backe@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5212 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Jarko Fidrmuc Author-Name-First: Jarko Author-Name-Last: Fidrmuc Author-Email: jarko.fidrmuc@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5218 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Thomas Reininger Author-Name-First: Thomas Author-Name-Last: Reininger Author-Email: Thomas.Reininger@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5234 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Franz Schardax Author-Name-First: Franz Author-Name-Last: Schardax Author-Email: Franz.Schardax@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division, Otto-Wagner-Platz 3, POB 61, A-1011 Vienna, Austria Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5232 Author-Workplace-Fax: +43-1-40420-5299 Title: Price Dynamics in Central and Eastern European EU Accession Abstract: In this paper we review the developments of prices in the Central and Eastern European EU accession countries between 1990 and 2001. The paper starts with an analysis of the short-term and long-term (dis)inflation dynamics. This is complemented by an appraisal of price level convergence. The major driving forces of price formation in the accession countries are found to be related to price liberalization during the transition to a market economy, to the prospective EU accession, and to the catching-up process (Balassa-Samuelson effect). Finally, the paper draws conclusions about future monetary and exchange rate policy options in the run-up to EU accession and beyond. Classification-JEL: E31, E42, F41. Keywords: Price liberalization, core inflation, Balassa-Samuelson effect, EU enlargement. Length: 47 Creation-Date: 2002-02-28 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:139ac1b1-8935-4e16-9f5f-d19300888b45/wp61_tcm16-6150.pdf File-Format: application/pdf File-Size: 394 kb Handle: RePEc:onb:oenbwp:61 Template-Type: ReDIF-Paper 1.0 Author-Name: Ben R. Craig Author-Name-First: Ben R. Author-Name-Last: Craig Author-Email: Ben.Craig@bundesbank.de Author-Workplace-Name: Research Centre, Deutsche Bundesbank, Wilhelm-Epstein-Strasse 14, D-60431 Frankfurt/M. Author-Name: Joachim G. Keller Author-Name-First: Joachim G. Author-Name-Last: Keller Author-Email: Joachim.Keller@bundesbank.de Author-Workplace-Name: Research Centre, Deutsche Bundesbank, Wilhelm-Epstein-Strasse 14, D-60431 Frankfurt/M. Title: The Empirical Performance of Option Based Densities of Foreign Exchange Abstract: In this study we first estimate the volatility diffusion process of the underlying futures contracts that fit best daily observed American option prices. We then calculate for each day risk neutral densities for different points of time in the future by simulating these processes. To assess how good these denisities are in forcasting, we suggest non-parametric tests based on the inverse probability function. These tests account for the correlation of the inverse probabilities due to the overlapping window problem that always arises when the forecasting horizon is longer than the sample frequency. We find that our densities do considerably well for the thirty to sixty day horizon while doing less well for shorter horizons. Length: 39 Creation-Date: 2002-02-25 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:2bcb0b09-4fd2-44c9-9154-41d79ee50dd3/wp60_tcm16-6148.pdf File-Format: application/pdf File-Size: 456 kb Handle: RePEc:onb:oenbwp:60 Template-Type: ReDIF-Paper 1.0 Author-Name: Gabriela de Raaij Author-Name-First: Gabriela de Author-Name-Last: Raaij Author-Email: gabriela.raaij@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Banking Analysis and Inspections Division, Otto-Wagner-Platz 3, POB 61, A-1011 Vienna, Austria Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-3249 Author-Workplace-Fax: +43-1-40420-3299 Author-Name: Burkhard Raunig Author-Name-First: Burkhard Author-Name-Last: Raunig Author-Email: Burkhard.Raunig@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7219 Author-Workplace-Fax: +43-1-40420-7299 Title: Evaluating Density Forecasts with an Application to Stock Market Returns Abstract: Density forecasts have become quite important in economics and finance. For example, such forecasts play a central role in modern financial risk management techniques like Value at Risk. This paper suggests a regression based density forecast evaluation framework as a simple alternative to other approaches. In simulation experiments and an empirical application to in- and out-of-sample one-step-ahead density forecasts of daily returns on the S&P 500, DAX and ATX stock market indices, the regression based evaluation strategy is compared with a recently proposed methodology based on likelihood ratio tests. It is demonstrated that misspecifications of forecasting models can be detected within the proposed regression framework. It is further demonstrated that the likelihood ratio methodology without additional misspecification tests has no power in many practical situations and therefore frequently selects incorrect forecasting models. The empirical results provide some evidence that GARCH-t models provide good density forecasts. The results further suggest that extensions of statistical models with fat-tailed conditional distributions to models that incorporate higher order conditional moments beyond the conditional variance might be appropriate to capture the empirical regularities in financial time series in some cases. Classification-JEL: G10, C52, C53 Keywords: Density forecasting, Forecast evaluation, Risk management, GARCH-models Length: 39 Creation-Date: 2002-02-18 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:a937b701-6e68-403e-944f-43e08c759957/wp59_tcm16-6147.pdf File-Format: application/pdf File-Size: 283 kb Handle: RePEc:onb:oenbwp:59 Template-Type: ReDIF-Paper 1.0 Author-Name: Maria Teresa Valderrama Author-Name-First: Maria Teresa Author-Name-Last: Valderrama Author-Email: maria.valderrama@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Workplace-Homepage: http://www.oenb.at Title: Credit Channel and Investment Behavior in Austria: A Micro-Econometric Approach Abstract: Using individual firm data, this study analyzes the credit channel in Austria. The estimation is based on an accelerator specification of investment demand augmented by the liquidity ratio and a firm specific user cost of capital. The results show that there is a credit channel in Austria affecting all firms, while the interest rate channel is significant as long as the liquidity ratio is not included in the regression. Taking into account trade credit or lending relationships increases the significance but not necessarily the size of the interest rate channel. The interest rate channel is not significant for young firms due mainly to the fact that young firms rely more heavily on sales to increase investment. In general it is found that firms can reduce the sensitivity of investment to their liquidity position by building lending relationships with a housebank or using trade credit as a substitute for bank loans. Classification-JEL: C23, D92, E22, E52, G31, G32 Keywords: credit channel, investment demand, panel data Length: 44 Creation-Date: 2002-01-28 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:14bc3b6f-ab1b-4c00-9d20-faef442b8dda/wp58_tcm16-6146.pdf File-Format: application/pdf File-Size: 360 kb Handle: RePEc:onb:oenbwp:58 Template-Type: ReDIF-Paper 1.0 Author-Name: Martin Summer Author-Name-First: Martin Author-Name-Last: Summer Author-Email: martin.summer@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7212 Author-Workplace-Fax: +43-1-40420-7299 Title: Banking Regulation and Systemic Risk Abstract: The term Systemic Risk belongs to the standard rhetoric of economic policy discussions related to the banking industry. Besides of the goal of protecting small depositors control of systemic risk is given as one of the main arguments for banking regulation. Various recent financial crises have increasingly focussed the regulatory debate on issues of systemic risk and financial stability. In this paper, however, we argue that there is no generally accepted definition of systemic risk and the effectiveness and the economic consequences of various instruments of banking regulation that are intended to attenuate it are still only partially understood both theoretically and empirically. Furthermore we discuss some of the issues raised in this debate by reviewing recent contributions to the academic literature. Classification-JEL: G21, K23, L51, E58 Keywords: Banking Regulation, Systemic Risk, Banking Crises Length: 42 Creation-Date: 2002-01-07 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:9672ee8e-9f92-4bab-853e-065bf0e9eaa6/wp57_tcm16-6145.pdf File-Format: application/pdf File-Size: 370 kb Handle: RePEc:onb:oenbwp:57 Template-Type: ReDIF-Paper 1.0 Author-Name: Sylvia Kaufmann Author-Name-First: Sylvia Author-Name-Last: Kaufmann Author-Email: sylvia.kaufmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7222 Author-Workplace-Fax: +43-1-40420-7299 Title: Asymmetries in Bank Lending Behaviour. - Austria During the 1990s Abstract: This paper investigates both cross-sectional asymmetry (related to bank-speci.c characteristics like size and liquidity) and asymmetries over time (potentially related to the overall state of the economy) in Austrian bank lending reaction to monetary policy. The first type of asymmetry is accounted for by including interaction terms, and the second type is captured by latent state-dependent parameters. Estimation is cast into a Bayesian framework, and the posterior inference is obtained using Markov chain Monte Carlo simulation methods. The results document a significant asymmetric effect of interest rate changes over time on bank lending. During economic recovery, lagged interest rate changes have no significant effect on lending. Where the effects are significant, liquidity emerges as the bank characteristic that determines cross-sectional asymmetry. Classification-JEL: C11, C23, E51 Keywords: Asymmetry, bank lending, Markov switching, Markov chain Monte Carlo Length: 44 Creation-Date: 2002-01-02 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:67f3c06e-2b4a-49e1-98b9-909dbe8076f2/wp56_tcm16-6144.pdf File-Format: application/pdf File-Size: 582 kb Handle: RePEc:onb:oenbwp:56 Template-Type: ReDIF-Paper 1.0 Author-Name: Peter Brandner Author-Name-First: Peter Author-Name-Last: Brandner Author-Email: Peter.Brandner@wifo.ac.at Author-Workplace-Name: Institut fuer Wirtschaftsforschung (WIFO) Author-Workplace-Homepage: http://www.wifo.ac.at Author-Workplace-Phone: +43(1) 798-2601-0 Author-Workplace-Fax: +43(1)798-9386 Author-Name: Harald Grech Author-Name-First: Harald Author-Name-Last: Grech Author-Email: harald.grech@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.suerf.com/Hochreiter/ Author-Workplace-Phone: +43-1-40420-7213 Author-Workplace-Fax: +43-1-40420-7299 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: The Effectiveness of Central Bank Intervention in the EMS: The Post 1993 Experience Abstract: We analyze the effectiveness of intervention in the European Monetary System by using daily data on the DEM-intervention activity of six European central banks, covering the period from August 1993 to April 1998. To test for the influence of intervention we apply EGARCH models. To allow for regime specific intervention effects we also estimate Markov Switching autoregressive conditional heteroscedasticity models. The results from the EGARCH models show that interventions influenced the conditional mean in only one case. Both volatility increasing and decreasing effects are found for the conditional variance. In the MS-ARCH model more effects on the mean are found. If significant, intervention tends to affect the level of the six ERM I exchange rates only in periods of low and medium volatility. For the conditional variance more volatility decreasing than increasing effects are found. Overall, given our approaches (EGARCH and MS-ARCH), the results show that even in the same institutional framework, intervention does not seem to affect the means and variances in a consistent and predictable manner. Classification-JEL: E58, F31, F33 Keywords: Foreign Exchange Intervention, European Monetary System, EGARCH, Markov Switching ARCH Length: 49 Creation-Date: 2001-12-03 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:87020fdc-b48e-48df-bbe5-7d0d4d828d8a/wp55_tcm16-6142.pdf File-Format: application/pdf File-Size: 593 kb Handle: RePEc:onb:oenbwp:55 Template-Type: ReDIF-Paper 1.0 Author-Name: Tommaso Monacelli Author-Name-First: Tommaso Author-Name-Last: Monacelli Author-Email: monacelt@bc.edu Author-Workplace-Name: Department of Economics, Boston College Carney Hall, Chestnut Hill, MA 02467-3806. Author-Workplace-Homepage: http://www2.bc.edu/~monacelt Author-Workplace-Phone: +1-617-552-3690 Author-Workplace-Fax: +1-617-552-2308 Title: New International Monetary Arrangements and the Exchange Rate Abstract: I show how to implement in a simple manner the comparison of alternative monetary policy rules in a two- country model of the new generation. These rules are: Full Price Stability, Taylor, Fixed and Managed Exchange Rates. I find, first, that the exchange rate dynamic is non-stationary unless some form of management is undertaken by the respective monetary authorities of the two countries. However, eliminating the excess volatility of the exchange rate does not significantly alter the overall macroeconomic volatility. Second, a floating exchange rate regime based on a Taylor-type rule seems to better approximate the full price stability benchmark, but at the cost of boosting interest rate volatility. In this respect limiting exchange rate flexibility is desirable. Finally, in all cases the model delivers positive cross-country correlation of interest rates but negative cross-country correlation of output. Classification-JEL: E52, F41 Keywords: monetary policy rules, exchange rate Length: 45 Creation-Date: 2001-10-10 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:a7483bab-a128-4cb6-ab57-5bc6491c808e/wp54_tcm16-6141.pdf File-Format: application/pdf File-Size: 836 kb Handle: RePEc:onb:oenbwp:54 Template-Type: ReDIF-Paper 1.0 Author-Name: Luca Dedola Author-Name-First: Luca Author-Name-Last: Dedola Author-Email: dedola.luca@insedia.interbusiness.it Author-Workplace-Name: Research Department, Bank of Italy Author-Name: Sylvain Leduc Author-Name-First: Sylvain Author-Name-Last: Leduc Author-Email: Sylvain.Leduc@phil.frb.org Author-Workplace-Name: Federal Reserve Bank of Philadelphia Author-Workplace-Phone: +1-215-574-6440 Author-Workplace-Fax: +1-215-574-4364 Title: Why Is the Business-Cycle Behavior of Fundamentals Alike Across Exchange-Rate Regimes? Abstract: Since the adoption of flexible exchange rates, real exchange rates have been much more volatile than they were under Bretton Woods. However, the volatilities of most other macroeconomic variables have remained approximately unchanged. This poses a puzzle for standard international business cycle models. This paper develops a two-country, two-sector model with nominal rigidities featuring deviations from the law of one price due to firms setting prices in buyersÂ’ currencies. By partially insulating goods markets across countries and thus mitigating the international expenditure-switching effect, this pricing behavior is found to considerably dampen the responses of quantities to shocks hitting the economies therefore helping to account for the puzzle. Classification-JEL: E32, E52, F31, F33, F41 Length: 45 Creation-Date: 2001-10-01 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:4ab70b8a-4173-460d-8291-4fa1069b09d4/wp53_tcm16-6140.pdf File-Format: application/pdf File-Size: 481 kb Handle: RePEc:onb:oenbwp:53 Template-Type: ReDIF-Paper 1.0 Author-Name: Kenneth N. Kuttner Author-Name-First: Kenneth N. Author-Name-Last: Kuttner Author-Email: kenneth.kuttner@ny.frb.org Author-Workplace-Name: Research Department, Federal Reserve Bank of New York, 33 Liberty Street, New York, NY 10045 Title: Beyond Bipolar: A Three-Dimensional Assessment of Monetary Frameworks Abstract: A great deal of attention has been focused recently on the impact of exchange rate regimes, just as previous empirical research examined central bank autonomy and announced targets for domestic monetary policy. To date, however, these three elements of monetary frameworks have been assessed in isolation from one another, and all have been viewed in terms of a unidimensional spectrum of fixity versus flexibility. Using a newly-constructed dataset, this paper jointly analyzes and compares all three elementsÂ’ effects on inflation and exchange rate behavior. The results show that each of the three elements has independent and distinct effects on nominal outcomes. Key findings include: (1) although hard pegs do tend to reduce inflation and attenuate exchange rate fluctuations within some range, they are clearly characterized by large devaluations; (2) central bank autonomy is associated with a more stable exchange rate and lower inflation; and (3) explicit inflation targeting reduces both inflation and its persistence, consistent with the view that inflation targeting increases flexibility through transparency. These results raise the possibility that a combination of central bank autonomy, inflation targeting, and a free float might offer the same benefits as any intermediate exchange rate regime on its own, without the proclivity to occasional large depreciations. Classification-JEL: E52, E61, F33 Length: 51 Creation-Date: 2001-09-25 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:3edeaa41-a0f1-45e6-9354-946e6fc1bcab/wp52_tcm16-6139.pdf File-Format: application/pdf File-Size: 306 kb Handle: RePEc:onb:oenbwp:52 Template-Type: ReDIF-Paper 1.0 Author-Name: Vittorio Corbo Author-Name-First: Vittorio Author-Name-Last: Corbo Author-Email: vcorbo@rdc.cl Author-Workplace-Name: Catholic University of Chile Author-Name: Oscar Landerretche Author-Name-First: Oscar Author-Name-Last: Landerretche Author-Email: peque@MIT.EDU Author-Workplace-Name: Massachusetts Institute of Technology Author-Name: Klaus Schmidt-Hebbel Author-Name-First: Klaus Author-Name-Last: Schmidt-Hebbel Author-Email: kschmidt@bcentral.cl Author-Workplace-Name: Economic Research Division, Central Bank of Chile, Agustinas 1180, Santiago, CHILE Author-Workplace-Homepage: http://schmidt-hebbel.com/ Author-Workplace-Phone: (56-2) 670-2386 Author-Workplace-Fax: (56-2) 670-2853 Title: Assessing Inflation Targeting after a Decade of World Experience Abstract: Ten years of inflation targeting worldwide provide valuable lessons. Inflation targeters (ITers) have been very successful in meeting their inflation targets (ITs). Industrial output sacrifice during inflation stabilization and industrial output volatility has frequently been lowered after IT adoption. ITers have consistently reduced inflation forecast errors after IT adoption. The influence of price and output shocks on the behavior of inflation and output gaps has changed much more strongly among ITers than in non-targeting industrial countries in the course of the 1990s. IT has played a role in strengthening the effect of forward-looking expectations on inflation, hence weakening the weight of past inflation inertia. Central bankersÂ’ aversion to inflation is on average not different among ITers in comparison to NITers but has risen in emerging-country ITers. ITers have gradually reaped a credibility gain, allowing them to achieve their targets with smaller changes in interest rates in the late 1990s than the changes that were required in the early 1990s. Classification-JEL: E52, E58 Length: 67 Creation-Date: 2001-09-08 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:8c1accd2-ec1d-4729-8739-271b458d6e14/wp51_tcm16-6138.pdf File-Format: application/pdf File-Size: 292 kb Handle: RePEc:onb:oenbwp:51 Template-Type: ReDIF-Paper 1.0 Author-Name: Roman Frydman Author-Name-First: Roman Author-Name-Last: Frydman Author-Email: roman.frydman@nyu.edu Author-Workplace-Name: New York University, 269 Mercer Street, New York, New York 10002 Author-Workplace-Homepage: http://www.nyu.edu/fas/Faculty/FrydmanRoman.html Author-Workplace-Phone: +1-212-998-8967 Author-Name: Michael D. Goldberg Author-Name-First: Michael D. Author-Name-Last: Goldberg Author-Email: michaelg@cisunix.unh.edu Author-Workplace-Name: Whittemore School of Business and Economics, University of New Hampshire, McConnell Hall, Durham, NH 03824 Author-Workplace-Homepage: http://orbit.unh.edu/econ/facdetail.cfm?Last_Name=Goldberg Author-Workplace-Phone: +1-603-862-3385 Title: Macroeconomic Fundamentals and the DM/$ Exchange Rate: Temporal Instability and the Monetary Model Length: 39 Creation-Date: 2001-09-01 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:24bd113a-ddd5-46d6-b43f-6b2985392180/wp50_tcm16-6143.pdf File-Format: application/pdf File-Size: 439 kb Handle: RePEc:onb:oenbwp:50 Template-Type: ReDIF-Paper 1.0 Author-Name: Helmut Elsinger Author-Name-First: Helmut Author-Name-Last: Elsinger Author-Email: helmut.elsinger@univie.ac.at Author-Workplace-Name: University of Vienna, Department of Business Studies Author-Workplace-Homepage: http://finance2.bwl.univie.ac.at/members/elsinger/elsinger.htm Author-Workplace-Phone: +43-1-4277 38057 Author-Workplace-Fax: +43-1-4277 38054 Author-Name: Martin Summer Author-Name-First: Martin Author-Name-Last: Summer Author-Email: martin.summer@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7212 Author-Workplace-Fax: +43-1-40420-7299 Title: Arbitrage and Optimal Portfolio Choice with Financial Constraints Abstract: We analyze the pricing of risky income streams in a world with competitive security markets where investors are constrained by restrictions on possible portfolio holdings. We investigate how we can transfer concepts and pricing techniques from a world without frictions to such a more realistic situation. We show that basically two new aspects arise: First, portfolio constraints can lead to situations where not all arbitrage opportunities are necessarily eliminated in equilibrium. For a world with portfolio constraints the concept of no arbitrage has to be replaced by a weaker concept which we call no unlimited arbitrage. Second, though we can characterize prices which allow no unlimited arbitrage by the existence of certain state prices as in the unconstrained case, additional computational work is needed for deriving from this fact a pricing theory for contingent claims. We propose a technique which can achieve this task and which renders itself for a computationally simple implementation for many constraint situations which are of practical interest. The power of no arbitrage techniques is preserved in the sense that no specific assumptions about utility functions of investors have to be made. We relate our analysis to the optimal decision problem of an investor and show the various relations between the properties of an optimal solution to this problem and the arbitrage-free values of risky income streams. This opens a unified view on the different approaches to asset pricing under portfolio constraints used in the literature and conveys their common underlying logic. Classification-JEL: G11, G12, G13, C61, C63 Keywords: Arbitrage, Portfolio Constraints, Asset Pricing Length: 41 Creation-Date: 2001-08-24 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:b0f7a8c0-ec80-4bb1-a854-722ce4ddafde/wp49_tcm16-6137.pdf File-Format: application/pdf File-Size: 434 kb Handle: RePEc:onb:oenbwp:49 Template-Type: ReDIF-Paper 1.0 Author-Name: David T. Llewellyn Author-Name-First: David T. Author-Name-Last: Llewellyn Author-Email: D.T.Llewellyn@lboro.ac.uk Author-Workplace-Name: Loughborough University, Loughborough, Leics, LE11 3TU, UK Author-Workplace-Homepage: http://www.lboro.ac.uk/ Author-Workplace-Phone: +44-1509-222700 Author-Workplace-Fax: +44-1509-223910 Title: A regulatory regime for financial stability Abstract: As bank failures clearly involve avoidable costs, there is a welfare benefit to be derived from lowering their probability and reducing the cost of those that do occur. The paper suggests a paradigm for enhanced financial stability. A central theme is that, what are often viewed as alternatives, are in fact complements within an overall regulatory strategy. The discussion is set within the context of what is termed a regulatory regime which is wider than the rules and monitoring conducted by regulatory agencies. Just as the causes of banking crises are multi-dimensional, so the principles of an effective regulatory regime also need to incorporate a wider range of issues than externally imposed rules on bank behaviour. The key components of the regime are: (1) the rules established by regulatory agencies; (2) monitoring and supervision by official agencies; (3) the incentive structures faced by regulatory agencies, consumers and banks; (4) the role of market discipline and monitoring; (5) intervention arrangements in the event of bank failures; (6) the role of internal corporate governance arrangements within banks, and (7) the disciplining and accountability arrangements applied to regulatory agencies. The central theme is that the components of the regulatory regime need to be combined in an overall regulatory strategy, and that while all are necessary, none alone are sufficient. The objective is to optimise a regulatory strategy by combining the components of the regime, bearing in mind that negative trade-offs may be encountered. Thus, if regulation is badly constructed or taken too far, there may be negative impacts on other components to the extent that the overall effect is diluted. The paper also argues that the optimum mix of the components of the regime will vary between countries, over time for all countries, and between banks. The proposed New Basel Capital Accord is discussed in terms of the regulatory regime paradigm. Length: 49 Creation-Date: 2001-07-27 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:bc10155e-3de6-480f-a3f4-577948588420/wp48_tcm16-6134.pdf File-Format: application/pdf File-Size: 138 kb Handle: RePEc:onb:oenbwp:48 Template-Type: ReDIF-Paper 1.0 Author-Name: Vítor Gaspar Author-Name-First: Vítor Author-Name-Last: Gaspar Author-Workplace-Name: European Central Bank Author-Workplace-Homepage: http://www.ecb.int Author-Name: Gabriel Perez-Quiros Author-Name-First: Gabriel Author-Name-Last: Perez-Quiros Author-Workplace-Name: Universitaet Bonn Author-Workplace-Homepage: http://www.ecb.int Author-Name: Jorge Sicilia Author-Name-First: Jorge Author-Name-Last: Sicilia Author-Workplace-Name: European Central Bank Author-Workplace-Homepage: http://www.ecb.int Title: The ECB monetary policy strategy and the money market Abstract: This paper aims at contributing to the understanding of how the ECB conducts monetary policy as seen from a money market perspective. More specifically it covers two different issues. First, it looks at the learning period for banks since the Eurosystem started implementing the single monetary policy. It shows that during the first three weeks of 1999 the narrow corridor in place during this period was effective in limiting daily volatility of the money market overnight rates. In addition, the behaviour of banks and market rates during this period provides evidence that learning was taking place. Second, it looks at how well money market participants have anticipated the monetary policy decisions taken by the ECB. To do so, the paper analyses whether the announcements of monetary policy decisions to maintain or change interest rates impact on the stochastic behaviour of interest rates. Looking at the EONIA rates within the reserve maintenance periods, we find that the announcement of monetary policy decisions does not change significantly the level or volatility of overnight rates. Length: 53 Creation-Date: 2001-06-25 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:8181c1e4-c573-478a-aca3-52d679b30720/wp47_tcm16-6131.pdf File-Format: application/pdf File-Size: 345 kb Handle: RePEc:onb:oenbwp:47 Template-Type: ReDIF-Paper 1.0 Author-Name: Paul De Grauwe Author-Name-First: Paul Author-Name-Last: De Grauwe Author-Email: Paul.Degrauwe@econ.kuleuven.ac.be Author-Workplace-Name: University of Leuven and CEPR Author-Workplace-Homepage: http://www.econ.kuleuven.ac.be/ew/academic/intecon/staff/PaulDeGrauwe/PaulDeGrauwe.htm Author-Name: Marianna Grimaldi Author-Name-First: Marianna Author-Name-Last: Grimaldi Author-Email: Maria.Grimaldi@econ.kuleuven.ac.be Author-Workplace-Name: University of Leuven Title: Exchange Rates, Prices and Money. A Long Run Perspective Length: 63 Creation-Date: 2001-05-31 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:ef4cf0d2-fcd4-4aa9-83cc-72f8feccfd34/wp46_tcm16-6130.pdf File-Format: application/pdf File-Size: 533 kb Handle: RePEc:onb:oenbwp:46 Template-Type: ReDIF-Paper 1.0 Author-Name: Sylvia Kaufmann Author-Name-First: Sylvia Author-Name-Last: Kaufmann Author-Email: sylvia.kaufmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7222 Author-Workplace-Fax: +43-1-40420-7299 Title: Is there an asymmetric effect on monetary policy over time? A bayesian analysis using Austrian data Abstract: The present paper assesses whether monetary policy effects are asymmetric over the business cycle by estimating a univariate model for GDP including additionally the first difference of the 3-month Austrian interest rate as a measure for monetary policy. The asymmetry of the effects is captured by allowing for state-dependent parameters where the latent state variable follows a Marov switching process. The model is estimated within a Bayesian framework using Markov Chain Monte Carlo simulation methods. Model selection and specification tests are performed by means of marginal likelihood. The results document significant negative effects of monetary policy during periods of below-average growth, while the effect seems insignificant during periods of normal- or above-average growth. These results corroborate those derived in theoretical models assuming price rigidities and implying a convex supply curve. Additionally, the concern of using appropriate state-identifying restrictions is raised to obtain an unbiased posterior inference. Finally, the analysis concludes by assessing the robustness of the results w.r.t. alternative measures of monetary policy. Keywords: Asymmetry, monetary policy, Markov switching, Markov Chain Monte Carlo, marginal likelihood Length: 35 Creation-Date: 2001-05-18 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:d9640da6-e091-4a01-9af8-48c9d9ff0ef7/wp45_tcm16-6128.pdf File-Format: application/pdf File-Size: 785 kb Handle: RePEc:onb:oenbwp:45 Template-Type: ReDIF-Paper 1.0 Author-Name: Otmar Issing Author-Name-First: Otmar Author-Name-Last: Issing Author-Workplace-Name: European Central Bank Title: The EURO Area and the single monetary policy Length: 30 Creation-Date: 2001-05-01 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:9399232b-b86e-42da-b74f-f0e98ce16f4e/wp44_tcm16-6127.pdf File-Format: application/pdf File-Size: 83 kb Handle: RePEc:onb:oenbwp:44 Template-Type: ReDIF-Paper 1.0 Author-Name: Marc Flandreau Author-Name-First: Marc Author-Name-Last: Flandreau Author-Email: flandreau@ofce.sciences-po.fr Author-Workplace-Name: University of Lille; Research Fellow, OFCE (Paris); CEPR (London) Title: The Bank, the States, and the Market: An Austro-Hungarian Tale for Euroland, 1867-1914 Abstract: In 1867, the "Compromise" between Austria and Hungary laid the foundation of a single currency system with a common central bank. As in todayÂ’s euroland, each part of the monarchy remained sovereign in fiscal matters. Moreover, the borrowing needs of both parts of the monarchy were quite large, since Austria and Hungary sought to promote their own economic development through government spending. Yet no ‘fiscal stability pactÂ’ existed: the two countries could run deficits to the extent of the public's willingness to lend to them. They were thus only subjected to the discipline of the capital market. This paper documents the record of the Austro-Hungarian monetary union and shows how this discipline led to a process of increased power of the central bank. Classification-JEL: D92, E22, C23, G31, G32 Keywords: Credit channel, balance sheet channel, investment, panel data Length: 58 Creation-Date: 2001-03-26 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:74416f32-58e2-4933-89cd-bbfaa76f1817/wp43_tcm16-6125.pdf File-Format: application/pdf File-Size: 147 kb Handle: RePEc:onb:oenbwp:43 Template-Type: ReDIF-Paper 1.0 Author-Name: Jarko Fidrmuc Author-Name-First: Jarko Author-Name-Last: Fidrmuc Author-Email: jarko.fidrmuc@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5218 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Jan Fidrmuc Author-Name-First: Jan Author-Name-Last: Fidrmuc Author-Email: Fidrmuc@united.econ.uni-bonn.de Author-Workplace-Name: Center for European Integration Studies (ZEI), University of Bonn Author-Workplace-Homepage: http://www.zei.de/ Author-Workplace-Phone: +49(228)73-1821 Author-Workplace-Fax: +49(228)73-1809 Title: Integration, Disintegration and Trade in Europe: Evolution of Trade Relations During the 1990s Abstract: The gravity model of trade is used to assess the economic consequences of new borders, which arose in the wake of break-ups of multinational federations in Eastern Europe. The intensity of trade relations among the constituent parts of Czechoslovakia, Soviet Union and the Baltics was very high around the time of disintegration, exceeding the normal level of trade approximately 40 times. Disintegration has been followed by a sharp fall in trade intensity. On the other hand, the trade liberalization between East and West has lead to gradual normalization of trade relations, and liberalization within CEFTA has reversed the fall in trade intensity among Central European countries. Classification-JEL: F13, F15, F41 Keywords: Gravity Model, International Trade, European Integration, Disintegration Length: 37 Creation-Date: 2000-06-20 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:7c86a9f7-4a58-4450-9ec4-10a4fcbeb58c/wp42_tcm16-6122.pdf File-Format: application/pdf File-Size: 125 kb Handle: RePEc:onb:oenbwp:42 Template-Type: ReDIF-Paper 1.0 Author-Name: Katrin Wesche Author-Name-First: Katrin Author-Name-Last: Wesche Author-Email: wesche@iiw.uni-bonn.de Author-Workplace-Name: Universitaet Bonn Author-Workplace-Homepage: http://www.uni-bonn.de Author-Workplace-Phone: +49(228)73-0 Author-Workplace-Fax: +49(228)73-5579 Title: Is there a Credit Channel in Austria? The Impact of Monetary Policy on Firms' Investment Decisions Abstract: Though most economists agree that monetary policy has significant effects on the real sector in the short run, interest-rate elasticities of macroeconomic aggregates in general are found to be low. Recently, the credit channel has been discussed as an additional channel through which monetary impulses can exert influence on the real economy. Though the credit channel is difficult to uncover with aggregate data, its distributional implications can be tested with micro data. We investigate balance sheet and income statement data for Austrian firms. Descriptive statistics do not re-ject the notion that monetary policy could have an effect through the so-called bal-ance sheet channel. Panel estimation results show that firms, which are expected to be affected more by asymmetric information and moral hazard problems, are more responsive to internal funds in their investment decisions. Moreover, financial con-straints become more severe in times of restrictive monetary policy. Classification-JEL: D92, E22, C23, G31, G32 Keywords: Credit channel, balance sheet channel, investment, panel data Length: 37 Creation-Date: 2000-03-20 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:2df6def0-7955-4465-a631-1dba7c79138d/wp41_tcm16-6119.pdf File-Format: application/pdf File-Size: 122 kb Handle: RePEc:onb:oenbwp:41 Template-Type: ReDIF-Paper 1.0 Author-Name: Eduard Hochreiter Author-Name-First: Eduard Author-Name-Last: Hochreiter Author-Email: Eduard.Hochreiter@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.suerf.com/Hochreiter/ Author-Workplace-Phone: +43-1-40420-7200 Author-Workplace-Fax: +43-1-40420-7299 Author-Name: Tadeusz Kowalski Author-Name-First: Tadeusz Author-Name-Last: Kowalski Author-Workplace-Name: Poznan University of Economics Title: Central Banks in European Emerging Market Economies in the 1990s Abstract: This paper analyzes the institutional framework of central banks in ten Central and East European countries using the ECB as benchmark. It looks at the legislated objectives of these central banks, assesses the degree of political and functional independence and the status of their democratic legitimization and accountability. We find that while much progress has been made in making the statutes "Maastricht compatible", all of them will have to be adapted once again before EMU entry. The legislation provides for democratic accountability comparable to that of the ESCB. In recent years the enacted limitations of fiscal financing have become more binding. Rescue operations in the financial sector might be seen as encroaching the independence of the central bank. Classification-JEL: E52, E58 Keywords: central bank independence, central bank accountability, emerging market economies Length: 33 Creation-Date: 2000-03-01 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:ff8cb5c1-7a70-4b86-9a97-906de88e6991/wp40_tcm16-6118.pdf File-Format: application/pdf File-Size: 117 kb Handle: RePEc:onb:oenbwp:40 Template-Type: ReDIF-Paper 1.0 Author-Name: John R. Freeman Author-Name-First: John R. Author-Name-Last: Freeman Author-Email: freeman@policsi.umn.edu Author-Workplace-Name: University of Minnesota Author-Workplace-Homepage: http://www.polisci.umn.edu/ Author-Name: Jude C. Hays Author-Name-First: Jude C. Author-Name-Last: Hays Author-Workplace-Name: University of Michigan Author-Workplace-Homepage: http://www.umich.edu/ Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: Democracy and Markets: The Case of Exchange Rates Abstract: The relationships between the workings of democratic institutions and currency markets are studied. Several competing propositions about how political (re)equilibration affects currency markets are derived and tested. The results support the view that democratic politics affects currency markets. Expectations and uncertainty about electoral outcomes and government survival affect the probability of switching between currency market equilibria. Additionally, opinion polls about chief executive performance have a direct effect on the probabilities of switches between currency regimes suggesting that these polls cause currency traders to revise their expectations about the stability of governments and (or) the contents of public policies. Electoral institutions mitigate the impact of politics on currency market equilibria. Political effects are weaker in countries with proportional representation electoral systems than in countries with majority-plurality systems. There is less evidence that central bank independence, consensual-corporatist systems, or "political coherency" reduces the effect of politics on currency markets. Length: 49 Creation-Date: 1999-12-01 File-URL: https://www.oenb.at/dam/jcr:7929df00-6f43-4805-8e30-71339fafe715/wp39_tcm16-6116.pdf File-Format: application/pdf File-Size: 155 kb Handle: RePEc:onb:oenbwp:39 Template-Type: ReDIF-Paper 1.0 Author-Name: Javier Valles Author-Name-First: Javier Author-Name-Last: Valles Author-Email: Valles@bde.es Author-Workplace-Name: Banco de Espana Author-Workplace-Homepage: http://www.bde.es Author-Workplace-Phone: +34(91)338-6059 Author-Workplace-Fax: +34(91)338-5678 Author-Name: Jose Vinals Author-Name-First: Jose Author-Name-Last: Vinals Author-Email: jimeno@fedea.es Author-Workplace-Name: Banco de Espana Author-Workplace-Homepage: http://www.bde.es Author-Workplace-Phone: +34(91)338-5614 Author-Workplace-Fax: +34(91)338-5678 Title: On the real effects of the monetary policy: A central banker's view Abstract: This paper deals with an old issue which nevertheless continues to be of great relevance for central bankers: the impact of monetary policy on the economy. The empirical evidence discussed in the paper suggests that since, over the medium term, inflation is primarily a monetary phenomenon and entails significant economic costs, the best contribution that monetary policy can make to societyÂ’s welfare is to maintain price stability. Still, over the short-term, monetary policy seems to affect real economic variables regardless of whether policy moves are systematic responses to the state of the economy or exogenous shocks, presumably as a result of the coexistence of nominal and real rigidities. While these general results appear quite reasonable, beyond this it would be much harder to find any agreement concerning what the precise timing and magnitudes of the output and price effects of monetary policy are over the short-term. From a central banker's viewpoint, a sensible reading of the evidence would be that while the medium-term monetary stance must be set consistently with the maintenance of price stability, this does not preclude central banks prudently exercising a certain margin of flexibility to respond to macroeconomic disturbances in the short-run, provided this does not jeopardize the primary goal of price stability. Finally, our discussion of the potential uncertainties surrounding the impact of monetary policy in a low inflation, low interest rate environment -like that prevailing today in many countries and economic areas- reaches the highly tentative conclusion that a monetary policy easing may become less effective in promoting economic activity in that context, even when such a move does not place at risk the maintenance of price stability. An implication of the above would be that, in the present circumstances, monetary policy should not be overburdened with the responsibility of solving problems which are better tackled through other policies which directly aim at improving the functioning of the economy. Keywords: monetary policy, central banking, price stability Length: 42 Creation-Date: 1999-07-29 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:dd7844e7-d35f-4087-b10b-a38b0141ac5d/wp38_tcm16-6112.pdf File-Format: application/pdf File-Size: 227 kb Handle: RePEc:onb:oenbwp:38 Template-Type: ReDIF-Paper 1.0 Author-Name: Alois Geyer Author-Name-First: Alois Author-Name-Last: Geyer Author-Email: alois.geyer@wu-wien.ac.at Author-Workplace-Name: Institut fuer quantitative Unternehmensfuehrung Author-Workplace-Homepage: http://www.wu-wien.ac.at Author-Workplace-Phone: +43(1)313-36-4559 Author-Workplace-Fax: +43(1)313-36-9045-59 Author-Name: Richard Mader Author-Name-First: Richard Author-Name-Last: Mader Author-Email: Richard.Mader@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-6200 Author-Workplace-Fax: +43(1)404-20-6299 Title: Estimation of the term structure of interest rates - A parametric approach Abstract: Readily available information about the current term structure of interest rates, its level and recent trends in important countries has become a standard tool of monetary policy analysis. Interest rate curves can be used for inflation and output forecasts, they may give useful indications about the differences in regional monetary stance and contain information about market expectations of future changes in interest rates. This information can facilitate the implementation of monetary policy, for example by judging the timing of the central bank's market operations. For comparative purposes it is important to use a common technique to estimate the term structure for all countries. This report presents the results of using parametric estimating models of the term structure for Austria, Germany, UK, USA and Japan over the period 1993 to 1998. Keywords: term structure of interest rates, estimation, econometric models Length: 41 Creation-Date: 1999-05-21 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:e2a71f3a-6805-4c22-9e65-1721bb67d4df/wp37_tcm16-6110.pdf File-Format: application/pdf File-Size: 150 kb Handle: RePEc:onb:oenbwp:37 Template-Type: ReDIF-Paper 1.0 Author-Name: Dennis Mueller Author-Name-First: Dennis Author-Name-Last: Mueller Author-Email: dennis.mueller@univie.ac.at Author-Workplace-Name: University of Vienna, Department of Economics Author-Workplace-Homepage: http://www.univie.ac.at Author-Workplace-Phone: +43(1)4277-37484 Author-Workplace-Fax: +43(1)4277-37498 Author-Name: Burkhard Raunig Author-Name-First: Burkhard Author-Name-Last: Raunig Author-Email: Burkhard.Raunig@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-7219 Author-Workplace-Fax: +43-1-40420-7299 Title: Heterogeneities within industries and structure-performance models Abstract: This paper tests whether the results from standard structure-conduct-performance [SCP] models estimated at the industry level are sensitive to the degree of heterogeneity of the firms in the industries. Industries are separated into homogeneous and heterogeneous categories depending on whether the profit rates of firms within an industry converge on a common value or not. In "homogeneous" industries we find that both the long-run projected returns on assets for the industries and Bureau of Census price-cost-margins are well explained by variables usually included in SCP models, as in particular industry concentration. In contrast, few if any of the usual SCP-model variables are statistically significant in the regressions for heterogeneous industries. Keywords: structure-conduct-performance models, heterogeneous industries Length: 25 Creation-Date: 1998-12-21 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:194946a6-b06f-4a06-8df7-13a045ddd621/wp36_tcm16-6108.pdf File-Format: application/pdf File-Size: 76 kb Handle: RePEc:onb:oenbwp:36 Template-Type: ReDIF-Paper 1.0 Author-Name: Helene Schuberth Author-Name-First: Helene Author-Name-Last: Schuberth Author-Email: helene.Schuberth@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7405 Author-Workplace-Fax: +43(1)404-20-7499 Title: Room for manoeuvre of economic policy in EU countries are there costs of joining EMU? Abstract: Costs of a monetary union are typically analysed in the context of the optimum currency area approach, looking at the likelihood of asymmetric real disturbances, the degree of real wage flexibility and of labour mobility. But it is also important to consider the leeway of monetary and fiscal policy to respond to country-specific real shocks prior to entering the monetary union. Applying a structural VAR model to Austria, the Netherlands, Belgium, Sweden, Finland, Italy, United Kingdom, France and Spain indicates that costs of giving up autonomous monetary policy in a European Monetary Union (EMU) would generally not be too high. However, in Belgium, Finland, Italy, France and Spain autonomous monetary policy has shown positive short-run output effects in the past, in all other countries such effects are negligible or not significant. Some cushioning influence of adverse EMU effects, then, could be expected from autono-mous fiscal policy measures, since results suggest that autonomous fiscal policy had positive short-run output ratio effects in the past, those effects being pronounced in Sweden, Finland, United Kingdom and France. It is also shown that autonomous monetary and fiscal policy were both capable of dampening country-specific business cycles. Consequently, EMU could reduce the degree of synchronisation of output fluctuations across Europe. Length: 38 Creation-Date: 1998-12-11 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:576af12e-bd6f-4ff3-aa19-e2cf12ffe311/wp35_tcm16-6105.pdf File-Format: application/pdf File-Size: 418 kb Handle: RePEc:onb:oenbwp:35 Template-Type: ReDIF-Paper 1.0 Author-Name: Juan F. Jimeno Author-Name-First: Juan F. Author-Name-Last: Jimeno Author-Email: jimeno@fedea.es Author-Workplace-Name: Universidad de Alcala, FEDEA and CEPR Author-Workplace-Homepage: http://www.fedea.es Author-Workplace-Phone: +34(91)435 04 01 Author-Workplace-Fax: +34(91)577 95 75 Author-Name: Jose Vinals Author-Name-First: Jose Author-Name-Last: Vinals Author-Email: vinals@bde.es Author-Workplace-Name: Banco de Espana, CEPR Author-Workplace-Homepage: http://www.bde.es Author-Workplace-Phone: +34(91)338-5614 Author-Workplace-Fax: +34(91)338-5678 Title: The impact of EMU on European unemployment Length: 29 Creation-Date: 1998-11-05 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:9935b61a-7d35-4a54-acf5-902974ecc78e/wp34_tcm16-6104.pdf File-Format: application/pdf File-Size: 259 kb Handle: RePEc:onb:oenbwp:34 Template-Type: ReDIF-Paper 1.0 Author-Name: Christine Gartner Author-Name-First: Christine Author-Name-Last: Gartner Author-Email: christine.gartner@ecb.int Author-Workplace-Name: European Central Bank (ECB) Author-Workplace-Homepage: http://www.ecb/int Author-Workplace-Phone: +49(69)1344-7916 Author-Workplace-Fax: +49(69)1344-7604 Author-Name: Gert Wehinger Author-Name-First: Gert Author-Name-Last: Wehinger Author-Email: Gert.WEHINGER@oecd.org Author-Workplace-Name: OECD-Organisation for Economic Co-operation and Development Author-Workplace-Homepage: http://www.oecd.org Author-Workplace-Phone: +33(1)4524-8768 Author-Workplace-Fax: +33(1)4430-6379 Title: Core Inflation in Selected European Union Countries Abstract: We calculate core inflation indicators for Austria, Belgium, Finland, France, Germany, Italy, the Netherlands, Sweden and the United Kingdom using two structural vector-autoregression (SVAR) models. In the first one we use out-put and prices to identify supply and demand shocks by long-run identifying restrictions, for the second one we add short-term nominal interest rates to capture effects of monetary disturbances. Core inflation is then defined as driven by demand and, respectively, monetary shocks. Comparing our results to other studies we conclude that the resulting core inflation indicator can be regarded as helpful for monetary policy. Length: 47 Creation-Date: 1998-09-30 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:44d0a463-3752-4746-8772-ea69a9d218e2/wp33_tcm16-6103.pdf File-Format: application/pdf File-Size: 611 kb Handle: RePEc:onb:oenbwp:33 Template-Type: ReDIF-Paper 1.0 Author-Name: Stephen Cecchetti Author-Name-First: Stephen Author-Name-Last: Cecchetti Author-Email: stephen.cecchetti@ny.frb.org Author-Workplace-Name: Federal Reserve Bank of New York, Department of Economics Author-Workplace-Homepage: http://www.ny.frb.org Author-Workplace-Phone: +1(212)720-6130 Author-Name: Nelson C. Mark Author-Name-First: Nelson C. Author-Name-Last: Mark Author-Email: mark.1@osu.edu Author-Workplace-Name: The Ohio State University Author-Name: Robert Sonora Author-Name-First: Robert Author-Name-Last: Sonora Author-Email: rjsonora@cc.owu.edu Author-Workplace-Name: Ohio Wesleyan University Author-Workplace-Homepage: http://web.owu.edu Author-Workplace-Phone: +1(740)368-2000 Title: Price Level Convergence Among United States Cities: Lessons for the European Central Bank Abstract: We study the dynamics of price indices for major U.S. cities. Using panel econometric methods, we find that relative price levels among cities mean revert, but at a surprisingly slow rate. In a panel of 15 cities from 1918 to 1995, we estimate the half life of convergence to be approximately 9 years. The following hypotheses are investigated as explanations for the slow convergence: (i) Arbitrage impediments induced by transportation costs, and (ii) and the inclusion of nontraded goods prices in the overall price index as suggested by the Balassa-Samuelson hypothesis. Our estimates provide an upper bound on convergence rates that participants in European Monetary Union may experience. Keywords: Purchasing power parity, Convergence, European Monetary Union Length: 34 Creation-Date: 1998-07-30 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:d8c19e33-761f-453c-b453-1dadf938f9b1/wp32_tcm16-6102.pdf File-Format: application/pdf File-Size: 286 kb Handle: RePEc:onb:oenbwp:32 Template-Type: ReDIF-Paper 1.0 Author-Name: Menzie David Chinn Author-Name-First: Menzie David Author-Name-Last: Chinn Author-Email: chinn@cats.ucsc.edu Author-Workplace-Name: University of California, Santa Cruz Author-Workplace-Homepage: http://www.ucsc.edu Author-Workplace-Phone: +1(831) 459-2079 Author-Workplace-Fax: +1(831) 459-5900 Title: The Usual Suspects? Productivity and Demand Shocks and Asia-Pacific Real Exchange Rates Abstract: The evidence for a productivity-based explanation for real exchange rate behavior of East Asian currencies is examined. Using sectoral output and employment data, relative prices and relative productivity levels are calculated for China, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand. Time series regressions of the real exchange rate on relative prices indicate a role for relative prices for Indonesia, Japan and Korea. When examining real exchange rates and relative productivity ratios, one finds a relationship for Japan, Malaysia, the Philippines. Only when augmenting the regressions with real oil prices significant relationships are obtained for Indonesia and Korea. Relative per capita income, a proxy for preferences towards services, does not appear to be an important determinant in this sample. Panel regression results are slightly more supportive of a relative price view of real exchange rates. However, the panel regressions incorporating productivity variables, as well as other demand side factors, provide less encouraging results, except for a subset of countries (Indonesia, Japan, Korea, Malaysia and the Philippines). Surprisingly, neither government spending nor the terms of trade appear to be a determinant of regional real exchange rates. Classification-JEL: F31, F41 Keywords: real exchange rate, productivity, tradables, nontradables, purchasing power parity Length: 29 Creation-Date: 1998-07-20 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:0f359806-8ad7-4c35-8c1a-8a9fe95341ba/wp31a_tcm16-6100.pdf File-Format: application/pdf File-Size: 302 kb Handle: RePEc:onb:oenbwp:31 Template-Type: ReDIF-Paper 1.0 Author-Name: David Papell Author-Name-First: David Author-Name-Last: Papell Author-Email: dpapell@uh.edu Author-Workplace-Name: University of Houston Author-Workplace-Homepage: http://www.uh.edu Author-Workplace-Phone: +1(713) 743-3807 Author-Workplace-Fax: +1(713) 743-3798 Title: The Great Appreciation, the Great Depreciation, and the Purchasing Power Parity Hypothesis Abstract: Although there has been much recent work on Purchasing Power Parity (PPP), neither univariate nor panel methods have produced strong rejections of unit roots in U.S. dollar real exchange rates for industrialized countries during the post-1973 period. We investigate the hypothesis that these non-rejections can be explained by one episode, the large appreciation and depreciation of the dollar in the 1980s, by developing unit root tests which account for this event and maintain long-run PPP. Using panel methods, we can reject the unit root null for those countries which adhere to the typical pattern of the dollar's rise and fall. Length: 35 Creation-Date: 1998-07-03 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:8630a4b2-4051-4559-885d-ae5daabecd5e/wp30_tcm16-6097.pdf File-Format: application/pdf File-Size: 142 kb Handle: RePEc:onb:oenbwp:30 Template-Type: ReDIF-Paper 1.0 Author-Name: Jose Campa Author-Name-First: Jose Author-Name-Last: Campa Author-Email: jcampa@stern.nyu.edu Author-Workplace-Name: New York University, Department of Economics Author-Workplace-Homepage: http://www.stern.nyu.edu Author-Workplace-Phone: +1(212)998-0429 Author-Workplace-Fax: +1(212)995-4218 Author-Name: Holger Wolf Author-Name-First: Holger Author-Name-Last: Wolf Author-Workplace-Name: New York University Author-Workplace-Homepage: http://www.stern.nyu.edu Author-Workplace-Phone: +1(212)338-3526 Author-Workplace-Fax: +1(212)995-4221 Title: Goods Arbitrage and Real Exchange Rate Stationarity Abstract: Recent evidence suggests that while real exchange rates exhibit mean reversion, the reversion only sets in once a minimum "threshold" distance from the mean has been exceeded. The non-linearity has generally been attributed to costly arbitrage, which requires a minimum divergence before the costs of arbitrage can be recouped. In this paper, we examine this reasoning. If arbitrage was indeed the cause of mean reversion, one would expect to see a quantity respose of trade flows at the thresholds. We conduct an array of formal and informal tests of the presence of such quantity responses. We fail to unearth any significant evidence of trade flows changing at the points of mean reversion. Alternative explanations of mean reversion, notably exchange market intervention, would thus seem to warrant further attention. Keywords: PPP, Trade, Arbitrage Length: 24 Creation-Date: 1998-06-30 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:ca259ac1-d352-4691-b8f1-fc3beda7bd24/wp29_tcm16-6096.pdf File-Format: application/pdf File-Size: 93 kb Handle: RePEc:onb:oenbwp:29 Template-Type: ReDIF-Paper 1.0 Author-Name: Ronald Mac Donald Author-Name-First: Ronald Mac Author-Name-Last: Donald Author-Email: r.r.macdonald@strath.ac.uk Author-Workplace-Name: University of Strathclyde, Department of Economics Author-Workplace-Homepage: http://www.economics.strath.ac.uk Author-Workplace-Phone: +44(141)548-3861 Author-Workplace-Fax: +44(141)552-5589 Title: What Do We Really Know About Real Exchange Rates? Abstract: This paper seeks to provide a comprehensive overview of the recent literature on the economics of real exchange rates. In particular, the paper attempts to provide answers to the following questions: to what extent are real exchange rates mean reverting and how may the degree of observed mean reversion be explained?; do real exchange rates have a business cycle component and, in particular, are they related to real interest differentials?; how important are real, relative to nominal shocks, in driving real exchange rates?; is the systematic component of the real exchange rate related to factors such as productivity, net foreign asset accumulation, national savings imbalances and terms of trade effects? Classification-JEL: F31, E30 Keywords: Real Exchange Rates; Mean Reversion. Length: 57 Creation-Date: 1998-06-20 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:29992b6d-06bc-47e0-ac8e-a1defba6efa8/wp28_tcm16-6095.pdf File-Format: application/pdf File-Size: 138 kb Handle: RePEc:onb:oenbwp:28 Template-Type: ReDIF-Paper 1.0 Author-Name: Matthew Canzoneri Author-Name-First: Matthew Author-Name-Last: Canzoneri Author-Email: canzonem@gunet.georgetown.edu Author-Workplace-Name: Georgetown University, Washington D.C. Author-Workplace-Homepage: http://www.georgetown.edu Author-Workplace-Phone: +1(202)687-5911 Author-Workplace-Fax: +1(202)687-6102 Author-Name: Robert Cumby Author-Name-First: Robert Author-Name-Last: Cumby Author-Email: cumbyr@gunet.georgetown.edu Author-Workplace-Name: Georgetown University, Washington D.C. Author-Workplace-Homepage: http://www.georgetown.edu Author-Workplace-Phone: +1(202)687-2990 Author-Workplace-Fax: +1(202)687-6102 Author-Name: Behzad Diba Author-Name-First: Behzad Author-Name-Last: Diba Author-Email: dibab@gunet.georgetown.edu Author-Workplace-Name: Georgetown University, Washinton D.C. Author-Workplace-Homepage: http://www.georgetown.edu Author-Workplace-Phone: +1(202)687-5682 Author-Workplace-Fax: +1(202)687-6102 Author-Name: Gwen Eudey Author-Name-First: Gwen Author-Name-Last: Eudey Author-Workplace-Name: Federal Reserve Board, Washington D.C. Author-Workplace-Homepage: http://www.federalreserve.gov Author-Workplace-Phone: +1(202) 452-22-06 Title: Trends in European Productivity: Implications for Real Exchange Rates, Real Interest Rates and Inflation Differentials Abstract: The price of home goods relative to traded goods has risen faster in countries like Belgium, Italy, and Spain than it has in Germany. The observed relative-price trends are in line with sectoral trends in relative labor productivity. A neoclassical model with marginal-cost pricing, long run labor mobility within each country, and long-run PPP in the traded sector can account for the observed trends. As long as the productivity trends continue, countries like Belgium, Italy and Spain will experience equilibrium real appreciations against Germany and will have lower equilibrium real interest rates compared to Germany. Convergence in national inflation rates would require nominal appreciations against the DM to avoid competitiveness problems. In a monetary union, the equilibrium real appreciations and real interest-rate differentials can only come out in inflation differentials. The implied inflation differentials are five to ten times larger than those implied by differences in productivity trends across US regions. Length: 38 Creation-Date: 1998-06-06 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:4fef6f18-4b03-4500-9832-a3d715871338/wp27_tcm16-6094.pdf File-Format: application/pdf File-Size: 81 kb Handle: RePEc:onb:oenbwp:27 Template-Type: ReDIF-Paper 1.0 Author-Name: Peter Brandner Author-Name-First: Peter Author-Name-Last: Brandner Author-Email: Peter.Brandner@wifo.ac.at Author-Workplace-Name: Institut fuer Wirtschaftsforschung (WIFO) Author-Workplace-Homepage: http://www.wifo.ac.at Author-Workplace-Phone: +43(1) 798-2601-0 Author-Workplace-Fax: +43(1)798-9386 Author-Name: Leopold Diebalek Author-Name-First: Leopold Author-Name-Last: Diebalek Author-Email: leopold.diebalek@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at/ Author-Workplace-Phone: +43(1)404-20-7413 Author-Workplace-Fax: +43(1)404-20-7499 Author-Name: Helene Schuberth Author-Name-First: Helene Author-Name-Last: Schuberth Author-Email: helene.Schuberth@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7405 Author-Workplace-Fax: +43(1)404-20-7499 Title: Structural Budget Deficits and Sustainability of Fiscal Positions in the European Union Abstract: According to the Pact for Stability and Growth (PSG), in the medium term the net deficit should be close to balance or in surplus. We question the use of the net deficit as the only medium-term budgetary objective and as the main indicator for the assessment of fiscal policy. Hence, for assessing the short-term fiscal stance, we propose to analyze cyclically adjusted budget balances, whereas an assessment of sustainability of fiscal positions in the medium-term should be based on structural primary gaps. The OECD, the EU and the IMF calculate structural budget balances by subtracting the balance of several cyclical revenue components and only one cyclical expenditure component from the overall net deficit, under the assumption of constant output elasticities. By means of a bootstrapping simulation we demonstrate that the assumptions of these traditional methods are too restrictive. They do not even allow to determine the sign of the cyclical balances for the EU-countries. To estimate structural budget balances, we suggest an alternative approach which is based on a statistical concept and identifies structural balances as a smooth trend. Medium term sustainability of fiscal policy is analysed within the concept of structural primary gaps. This indicator shows to what extent the current structural primary balance deviates from the primary surplus that stabilizes the debt to GDP ratio. Again, the meaning of structural is based on the same statistical concept of trend extraction. For the EU-countries structural primary gaps are calculated, referring to the net debt and gross debt concept. According to the gross debt concept and based on forecasts of the OECD Economic Outlook (December 1997), fiscal policy of all EU-countries can be considered as sustainable at least in 1999. Even if fiscal policy is already deemed sustainable in the medium-term, in some of the EU-countries structural balances will have to be further improved in order to bring fiscal positions close to balance or in surplus. Only then, compliance with the provisions of the PSG is assured. Length: 62 Creation-Date: 1998-05-28 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:08c10ff1-2982-441d-826b-a4c416fbb6f9/wp26_tcm16-6092.pdf File-Format: application/pdf File-Size: 736 kb Handle: RePEc:onb:oenbwp:26 Template-Type: ReDIF-Paper 1.0 Author-Name: Axel A. Weber Author-Name-First: Axel A. Author-Name-Last: Weber Author-Email: aweber@wiwi.uni-frankfurt.de Author-Workplace-Name: Johann Wolfgang Goethe-Universitaet, Frankfurt Author-Workplace-Homepage: http://www.rz.uni-frankfurt.de/unihome/ Author-Workplace-Phone: +49(69)2429-410 Author-Workplace-Fax: +49(69)2429-4177 Title: Sources of Currency Crises: An Empirical Analysis Length: 50 Creation-Date: 1998-04-15 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:f52bee21-6e1e-47ff-b64d-c6c4f7275038/wp25_tcm16-6090.pdf File-Format: application/pdf File-Size: 674 kb Handle: RePEc:onb:oenbwp:25 Template-Type: ReDIF-Paper 1.0 Author-Name: Elmar B. Koch Author-Name-First: Elmar B. Author-Name-Last: Koch Author-Email: Elmar.Koch@bis.org Author-Workplace-Name: Bank for International Settlements Author-Workplace-Homepage: http://www.bis.org Author-Workplace-Phone: +41(612)80-8080 Author-Workplace-Fax: +41(612)80-9100 Title: Exchange Rates and Monetary Policy in Central Europe - a Survey of Some Issues Length: 61 Creation-Date: 1997-09-19 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:0e14c62c-d39d-4ecc-8148-19d5023220fa/wp24_tcm16-6088.pdf File-Format: application/pdf File-Size: 246 kb Handle: RePEc:onb:oenbwp:24 Template-Type: ReDIF-Paper 1.0 Author-Name: Franz Pauer Author-Name-First: Franz Author-Name-Last: Pauer Author-Email: franz.pauer@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at/ Author-Workplace-Phone: +43(1)404-20-3118 Author-Workplace-Fax: +43(1)404-20-3199 Title: Will Asymmetric Shocks Pose a Serious Problem in EMU? Length: 95 Creation-Date: 1996-06-25 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:33e7364d-3358-480b-a968-06c8893084be/wp23_tcm16-6087.pdf File-Format: application/pdf File-Size: 202 kb Handle: RePEc:onb:oenbwp:23 Template-Type: ReDIF-Paper 1.0 Author-Name: Rutger Wissels Author-Name-First: Rutger Author-Name-Last: Wissels Author-Email: rutger.wissels@cec.eu.int Author-Workplace-Name: Commission of the European Community, Economic and Financial Affairs Author-Workplace-Homepage: http://www.cc.ce Author-Workplace-Phone: +32(2)299- 3482 Author-Workplace-Fax: +32(2)295-3644 Title: Recovery in Eastern Europe: Pessimism Confounded? Length: 23 Creation-Date: 1996-03-05 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:349e40de-482e-49aa-9c0d-4fb9e434d5df/wp22_tcm16-6086.pdf File-Format: application/pdf File-Size: 64 kb Handle: RePEc:onb:oenbwp:22 Template-Type: ReDIF-Paper 1.0 Author-Name: Hans Groeneveld Author-Name-First: Hans Author-Name-Last: Groeneveld Author-Email: h.m.groeneveld@rn.rabobank.nl Author-Workplace-Name: Rabobank Utrecht, Sector Strategy Author-Workplace-Homepage: http://www.rabobank.com Author-Workplace-Phone: +31(30) 216 1223 Author-Workplace-Fax: +31(30) 216 1899 Title: Monetary Spill-over Effects in the ERM: The Case of Austria, a Former Shadow Member Length: 15 Creation-Date: 1995-10-03 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:1ba71188-ce97-4936-95e4-05e0cb774452/wp20_tcm16-6083.pdf File-Format: application/pdf File-Size: 60 kb Handle: RePEc:onb:oenbwp:20 Template-Type: ReDIF-Paper 1.0 Author-Name: Eduard Hochreiter Author-Name-First: Eduard Author-Name-Last: Hochreiter Author-Email: Eduard.Hochreiter@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.suerf.com/Hochreiter/ Author-Workplace-Phone: +43-1-40420-7200 Author-Workplace-Fax: +43-1-40420-7299 Title: Austrian Exchange Rate Policy and European Monetary Integration - Selected Issues Length: 48 Creation-Date: 1995-01-30 Price: Free subject to availability File-URL: https://www.oenb.at/dam/jcr:f3815a54-47ee-4e6b-90c7-bb43ed31477c/wp19_tcm16-6084.pdf File-Format: application/pdf File-Size: 163 kb Handle: RePEc:onb:oenbwp:19