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DIW Discussion Papers 1359 / 2014
This paper discusses the type of trajectory a country's public debt path follows. In particular, a Markov switching ADF model is used to assess the sustainability of public debt by testing whether a government's present value borrowing constraint holds. Building on the work of Raybaudi et al. (2004) and Chen (2011), the model in this paper generalizes their methodology. The number of lags and states ...
2014| Anton Velinov
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DIW Discussion Papers 1358 / 2014
Through an intertemporal budget constraint, jurisdictions may gain advantages in tax and spending competition by 'competing' on debt. While the existing spatial econometric literature focuses on tax and spending competition, very little is known about spatial interaction via public debt. This paper estimates the spatial interdependence of public debt among German municipalities using a panel on municipalities ...
2014| Frank M. Fossen, Ronny Freier, Thorsten Martin
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DIW Discussion Papers 1357 / 2014
This paper investigates to what extent the R&D behavior of manufacturing companies was influenced by the 2008/09 crisis. Based on a broad official data set for German manufacturing companies, only a few companies that engaged in R&D during 2008 gave it up in the following year. Some companies even started R&D during crisis. R&D expenditures declined in 2009 compared to 2008, but expanded in 2010. The ...
2014| Alexander Eickelpasch
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DIW Discussion Papers 1356 / 2014
Long-run restrictions have been used extensively for identifying structural shocks in vector autoregressive (VAR) analysis. Such restrictions are typically just-identifying but can be checked by utilizing changes in volatility. This paper reviews and contrasts the volatility models that have been used for this purpose. Three main approaches have been used, exogenously generated changes in the unconditional ...
2014| Helmut Lütkepohl, Anton Velinov
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DIW Discussion Papers 1355 / 2014
Jobs offer different wages and different non-monetary working conditions. This paper investigates how the demand for non-monetary aspects evolves over changing wealth levels. Wages do not perfectly compensate individuals for differential utility of jobs in a labour market with informational frictions. Changes in wealth may then affect preferences for different jobs. Willingness to pay for non-monetary ...
2014| Luke Haywood
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DIW Discussion Papers 1354 / 2014
In impulse response analysis estimation uncertainty is typically displayed by constructing bands around estimated impulse response functions. These bands may be based on frequentist or Bayesian methods. If they are based on the joint distribution in the Bayesian framework or the joint asymptotic distribution possibly constructed with bootstrap methods in the frequentist framework often individual confidence ...
2014| Helmut Lütkepohl, Anna Staszewska-Bystrova, Peter Winker
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DIW Discussion Papers 1353 / 2014
We analyze the role of public support in the financing pattern of R&D in German SMEs and their assessment of financing conditions in the context of other framework conditions for innovation. In Germany, there is a diversity of overall well-funded technology-neutral and technology-specific programs providing grants to R&D and innovation projects. Different types of SMEs access public funding for R&D ...
2014| Heike Belitz, Anna Lejpras
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DIW Discussion Papers 1352 / 2014
We analyze the transmission of the financial crisis of 2007 to 2009 to 415 country-industry equity portfolios. We use a factor model to predict crisis returns, defining unexplained increases in factor loadings and residual correlations as indicative of contagion. While we find evidence of contagion from the U.S. and the global financial sector, the effects are small. By contrast, there has been substantial ...
2014| Geert Bekaert, Michael Ehrmann, Marcel Fratzscher, Arnaud Mehl
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DIW Discussion Papers 1351 / 2014
Large panels of variables are used by policy makers in deciding on policy actions. Therefore it is desirable to include large information sets in models for economic analysis. In this survey methods are reviewed for accounting for the information in large sets of variables in vector autoregressive (VAR) models. This can be done by aggregating the variables or by reducing the parameter space to a manageable ...
2014| Helmut Lütkepohl
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DIW Discussion Papers 1350 / 2013
Structural identification schemes are of essential importance to vector autoregressive (VAR) analysis. This paper tests a commonly used structural parameter identification scheme to assess whether it can properly capture fundamental and non-fundamental shocks to stock prices. In particular, five related structural models, which are widely used in the literature on assessing stock price determinants ...
2013| Anton Velinov
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DIW Discussion Papers 1349 / 2013
This paper investigates the factors influencing banks' decision to engage in advanced risk management, from both a theoretical and an empirical perspective. In recent decades, credit risk management in banks has become highly sophisticated and banks have become more active and advanced in the management of credit risks. We identify two driving factors for risk management: bank competition and sector ...
2013| Dilek Bülbül, Hendrik Hakenes, Claudia Lambert
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DIW Discussion Papers 1348 / 2013
Does the mere presence of big banks affect macroeconomic outcomes? In this paper, we develop a theory of granularity (Gabaix, 2011) for the banking sector, introducing Bertrand competition and heterogeneous banks charging variable markups. Using this framework, we show conditions under which idiosyncratic shocks to bank lending can generate aggregate fluctuations in the credit supply when the banking ...
2013| Franziska Bremus, Claudia M. Buch, Katheryn N. Russ, Monika Schnitzer
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DIW Discussion Papers 1347 / 2013
This paper tests whether an increase in insured deposits causes banks to become more risky. We use variation introduced by the U.S. Emergency Economic Stabilization Act in October 2008, which increased the deposit insurance coverage from $100,000 to $250,000 per depositor and bank. For some banks, the amount of insured deposits increased significantly; for others, it was a minor change. Our analysis ...
2013| Claudia Lambert, Felix Noth, Ulrich Schüwer
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DIW Discussion Papers 1346 / 2013
We explore the impact of large banks and of financial openness for aggregate growth. Large banks matter because of granular effects: if markets are very concentrated in terms of the size distribution of banks, idiosyncratic shocks at the bank-level do not cancel out in the aggregate but can affect macroeconomic outcomes. Financial openness may affect GDP growth in and of itself, and it may also influence ...
2013| Franziska Bremus, Claudia M. Buch
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DIW Discussion Papers 1345 / 2013
This paper investigates the empirical relevance of different unemployment theories in three major economies, namely the UK, the US and Japan, by estimating the degree of dependence in the unemployment series. Both univariate and multivariate long memory methods are used. The results vary depending on whether the former or the latter approach is followed. Specifically, when taking a univariate approach, ...
2013| Guglielmo Maria Caporale, Luis A. Gil-Alana, Yuliya Lovcha
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DIW Discussion Papers 1344 / 2013
Patterns in cross-border banking have changed since the global financial crisis. This may affect domestic bank market structures and macroeconomic stability in the longer term. In this study, I theoretically and empirically analyze how different modes of cross-border banking impact bank concentration. I use a two- country general equilibrium model with heterogeneous banks developed by De Blas and Russ ...
2013| Franziska Bremus
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DIW Discussion Papers 1343 / 2013
Are capital controls and macroprudential measures successful in achieving their objectives? Assessing their effectiveness is complicated by selection bias and endogeneity; countries which change their capital-flow management measures (CFMs) often share specific characteristics and are responding to changes in variables that the CFMs are intended to influence. This paper addresses these challenges by ...
2013| Kristin Forbes, Marcel Fratzscher, Roland Straub
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DIW Discussion Papers 1342 / 2013
We analyse a stylized model of the world grain market characterized by a small oligopoly of traders with market power on both the supply and demand side. Crops are stochastic and exporting countries can impose export tariffs to protect domestic food prices. Our first results is that export tariffs are strategic complements and that for poor harvests equilibrium tariffs can explode (shedding some light ...
2013| Pio Baake, Steffen Huck
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DIW Discussion Papers 1341 / 2013
The Chinese growth miracle was based on exports and investment in recent years. While strong output growth has been maintained even during the financial crisis, the imbalances within the country increased. To return to a more sustainable path of development, policies are directed to improve the role of private consumption. However, the institutional framework is an impediment to the transformation, ...
2013| Christian Dreger, Tongsan Wang, Yanqun Zhang
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DIW Discussion Papers 1340 / 2013
It is a longstanding debate whether members of parliament (MPs) should be allowed to follow sideline jobs in addition to their mandate. Critics claim that politicians already face binding time constraints and that moonlighting might lead to a neglect of inner-parliamentary duties. The purpose of this study is therefore to investigate whether politicians with more sideline jobs show less effort inside ...
2013| Felix Arnold