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DIW Discussion Papers 1872 / 2020
We reexamine whether pre-Volcker U.S. fiscal policy was active or passive. To do so, we estimate a DSGE model with monetary and fiscal policy interactions employing a sequential Monte Carlo algorithm (SMC) for posterior evaluation. Unlike existing studies, we do not have to treat each policy regime as distinct, separately estimated, models. Rather, SMC enables us to estimate the DSGE model over its entire ...
2020| Stephanie Ettmeier, Alexander Kriwoluzky
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DIW Discussion Papers 1869 / 2020
This paper analyzes the causal relationship between institutional diversity in domestic banking sectors and bank stability. We use a large bank- and country-level unbalanced panel data set covering the EU member states’ banking sectors between 1998 and 2014. Constructing two distinct indicators for measuring institutional diversity, we find that a high degree of institutional diversity in the domestic ...
2020| Christopher F. Baum, Caterina Forti Grazzini, Dorothea Schäfer
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DIW Discussion Papers 1866 / 2020
The use of futures exchange contracts instead of forwards completes the maturity spectrum of the correlation between the spot yield and the premium. We find that the forward premium puzzle (FFP) depends significantly on the maturity horizon of the futures contract and the choice of sampling period. The FFP appears to be a pre-crisis phenomenon and is only observed for maturities longer than about one ...
2020| Kerstin Bernoth, Jürgen von Hagen, Casper G. de Vries
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DIW Discussion Papers 1861 / 2020
We construct a news-based viral disease index and study the dynamic impact of epidemics on the world economy, using structural vector autoregressions. Epidemic shocks have persistently negative effects, both directly and indirectly, on affected countries and on world output. The shocks lead to a significant fall in global trade, employment, and consumer prices for three quarters, and the losses are ...
2020| Konstantin A. Kholodilin, Malte Rieth
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DIW Discussion Papers 1860 / 2020
I study the effects of labor market outcomes on firms' loan demand and credit intermediation. I first show in partial equilibrium that the presence of frictions in the banking sector lowers the capital factor demand elasticity to changes in real wages. This finding helps to connect the substitutability of labor and capital with credit conditions. Second, I use a new Keynesian banking model with an ...
2020| Tobias König
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DIW Discussion Papers 1854 / 2020
Evidence on the effectiveness of FX interventions is either limited to short horizons or hampered by debatable identification. We address these limitations by identifying a structural vector autoregressive model for the daily frequency with an external instrument. Generally, we find, for freely floating currencies, that FX intervention shocks significantly affect exchange rates and that this impact ...
2020| Lukas Menkhoff, Malte Rieth, Tobias Stöhr
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DIW Discussion Papers 1846 / 2020
Following World War I, rent control became a standard policy response to the housing shortage and the resulting rent increases. Typically, economists blame it for creating inefficiencies in the housing market and beyond. We investigate whether rental market regulations (including rent control, protection of tenants from eviction, and housing rationing) had any effects in a middle-income Latin American ...
2020| Alejandro D. Jacobo, Konstantin A. Kholodilin
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DIW Discussion Papers 1844 / 2020
This paper links banking systems development to the colonial and legal history of African countries. Specifically, we investigate the impact of differing legal traditions on the development of existing investor and creditor protection, and on African banking systems. Based on a sample of 40 African countries from 2000 to 2016, our empirical findings show a significant dependence of current financial ...
2020| Samuel Mutarindwa, Dorothea Schäfer, Andreas Stephan
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DIW Discussion Papers 1842 / 2020
Multivariate Adaptive Regression Spline (MARS) is a simple and powerful non-parametric technique that automatizes the selection of non-linear terms in regression models. Non-linearities and spatial effects are natural characteristics in numerous spatial hedonic pricing models. In this paper, we propose using the MARS data-driven methodology combined with the Instrumental Variables method in order to ...
2020| Fernando A. López, Konstantin A. Kholodilin
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DIW Discussion Papers 1841 / 2020
We use US household survey data from 2001-2017 to investigate whether monetary policy has heterogeneous effects on women's and men's financial portfolio decisions by analyzing their equity investment. On the one hand, monetary policy significantly affects the entry decisions of women, but not of men: after a contractionary shock, the probability of women entering the stock market decreases. On the ...
2020| Caterina Forti Grazzini, Chi Hyun Kim