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DIW Discussion Papers 1364 / 2014
How do banks choose their debt maturity structure when credit markets are subject to information frictions? This paper proposes a model of equilibrium maturity choice with asymmetric information and endogenous roll-over risk. We show that in the presence of public signals about firms' creditworthiness (credit ratings), firms choose to expose themselves to positive roll-over risk in order to minimize ...
2014| Philipp König, David Pothier
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DIW Discussion Papers 1362 / 2014
A canonical two country-two good model with standard preferences does not address three classic international macroeconomic puzzles as well as two well-known asset pricing puzzles. Specifically, under financial autarky, it does not account for the high real exchange rate (RER) volatility relative to consumption volatility (RER volatility puzzle), the negative RER-consumption differentials correlation ...
2014| Guglielmo Maria Caporale, Michael Donadelli, Alessia Varani
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DIW Discussion Papers 1360 / 2014
In this paper, we evaluate the forecasting ability of 115 indicators to predict the housing prices and rents in 71 German cities. Above all, we are interested in whether the local business confidence indicators can allow substantially improving the forecasts, given the local nature of the real-estate markets. The forecast accuracy of different predictors is tested in a framework of a quasi out-of-sample ...
2014| Konstantin A. Kholodilin, Boriss Siliverstovs
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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 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