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DIW Discussion Papers 1550 / 2016
The theoretical literature remains inconclusive on whether changes in bank exposure towards the domestic sovereign have an adverse effect on the sovereign risk position via a diabolic loop in the sovereign-bank nexus or reduce perceived default risk by acting as a disciplinary device for the sovereign. In this paper we empirically analyze the impact of exogenous changes in bank exposure on the risk ...
2016| Maximilian Podstawski, Anton Velinov
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DIW Discussion Papers 1549 / 2016
We propose a new instrument to identify the impact of uncertainty shocks in a SVAR model with external instruments. We construct the instrument for uncertainty shocks by exploiting variations in the price of gold around selected events. The events capture periods of changes in uncertainty unrelated to other macroeconomic shocks. The variations in the price of gold around such events provide a measure ...
2016| Michele Piffer, Maximilian Podstawski
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DIW Discussion Papers 1491 / 2015
This article analyses how the presence of a dominant group of voters within the electorate affects voter turnout. Theoretically, we argue that both the absolute size and the relative power of a dominant group influence voters' decision-making process. The former effect derives from increased free-riding incentives and reduced social pressure to vote within a larger dominant group, while the latter ...
2015| Peter Bönisch, Benny Geys, Claus Michelsen
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DIW Discussion Papers 1490 / 2015
This article sheds light on the interaction of media, economic actors, and economic experts. Based on a unique data set of 86,000 news items rated by professional analysts of Media Tenor International and survey data, we first analyze the overall tone of the media, consumers’, firms’, and economic experts’ opinions on the state and outlook of the economy. Second, we assess the protagonist’s ability ...
2015| Konstantin A. Kholodilin, Christian Kolmer, Tobias Thomas, Dirk Ulbricht
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DIW Discussion Papers 1488 / 2015
The exchange rate fluctuations strongly affect the Russian economy, given its heavy dependence on foreign trade and investment. Since January 2014, the Ruble lost 50% of its value against the US Dollar. The fall of the currency started with the conflict between Russia and Ukraine. The impact of the conflict on Russia may have been amplified by sanctions imposed by Western countries. However, as Russia ...
2015| Christian Dreger, Jarko Fidrmuc, Konstantin Kholodilin, Dirk Ulbricht
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DIW Discussion Papers 1448 / 2015
The paper analyses the empirical relationship between bank risk and sovereign credit risk in the euro area. Using structural VAR with daily financial markets data for 2003-13, the analysis confirms two-way causality between shocks to sovereign risk and bank risk, with the former being overall more important in explaining bank risk, than vice versa. The paper focuses specifically on the impact of non-standard ...
2015| Marcel Fratzscher, Malte Rieth
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DIW Discussion Papers 1436 / 2014
This paper studies the bank-sovereign link in a dynamic stochastic general equilibrium set-up with strategic default on public debt. Heterogeneous banks give rise to an interbank market where government bonds are used as collateral. A default penalty arises from a breakdown of interbank intermediation that induces a credit crunch. Government borrowing under limited commitment is costly ex ante as bank ...
2014| Philipp Engler, Christoph Große Steffen
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DIW Discussion Papers 1417 / 2014
The surge in the German house prices starting in 2010 raised fears about the emergence of a speculative bubble. Given a local nature of housing markets, it is not clear to what extent the bubble, if any, is spread across different cities. In this paper, we test for speculative house price bubbles in 127 large German cities over the last 20 years. Along with testing bubbles for each city separately, ...
2014| Konstantin A. Kholodilin, Claus Michelsen, Dirk Ulbricht
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DIW Discussion Papers 1414 / 2014
This paper presents a revised version of the DIW Economic Barometer, the business cycle index of the German Institute for Economic Research (DIW Berlin). As in earlier versions, we put forward a factor model on a monthly frequency to filter the latent state of the aggregate economy. In the new version, the resulting business cycle factor is based on more than 300 variables. The main methodological ...
2014| Paul Viefers, Ferdinand Fichtner, Simon Junker, Maximilian Podstawski
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DIW Discussion Papers 1412 / 2014
The use of log-transformed data has become standard in macroeconomic forecasting with VAR models. However, its appropriateness in the context of out-of-sample forecasts has not yet been exposed to a thorough empirical investigation. With the aim of filling this void, a broad sample of VAR models is employed in a multi-country set up and approximately 42 Mio. pseudo-out-of-sample forecasts of GDP are ...
2014| Johannes Mayr, Dirk Ulbricht