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 ...
Using the 2007 Mannheim innovation survey, we investigate whether family firms are more financially constrained than other firms and how this affects both innovation input as well as innovation outcomes such as market and firm novelties or process innovations. Based on the CDM framework, estimation of the recursive system of equations shows that family businesses are more likely to be constrained and ...
A growing literature stresses the importance of the "global financial cycle", a common global movement in asset prices and credit conditions, for emerging market economies (EMEs). It is argued that one of the key drivers of this global cycle is monetary policy in the U.S., which is transmitted through international capital flows. In this paper, we add to this discussion and investigate empirically ...
Countries with de jure floating exchange rate regimes are often reluctant to allow their currencies to float freely in practice. One reason why countries may wish to limit exchange rate volatility is potential negative balance sheet effects due to currency mismatches on the balance sheets of firms and households. In this paper, we show in a sample of 15 emerging market economies that countries with ...
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 ...
In line with the neoclassical growth model a persistent stream of oil revenues might have a long lasting impact on GDP per capita in oil exporting countries through higher investment activities. This relationship is explored for Iran and the countries of the Gulf Cooperation Council (GCC) using (panel) cointegration techniques. The existence of cointegration between oil revenues, GDP and investment ...
This paper explores the long run relationship between public and private investment in the euro area in terms of capital stocks and gross investment flows. Panel techniques accounting for international spillovers are employed. While private and public capital stocks are cointegrated, the evidence is quite fragile for public and private investment flows. They enter a long run relationship only after ...
The paper analyzes the effects of changes to regulatory policy and to monetary policy on cross-border bank lending since the global financial crisis. Cross-border bank lending has decreased, and the home bias in the credit portfolio of banks has risen sharply, especially among banks in the euro area. Our results suggest that expansionary monetary policy in the source countries – as measured by the ...
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 ...
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 ...
