We estimate the dynamic effects of government spending shocks, using time-varying volatility in US data modeled through a Markov switching process. We find that the average government spending multiplier is significantly and persistently above one, driven by a crowding-in of private consumption and non-residential investment. We rationalize the results empirically through a contemporaneously countercyclical ...
To finance resolution funds, the regulatory toolkit has been expanded in many countries by bank levies. In addition, these levies are often designed to reduce incentives for banks to rely excessively on wholesale funding resulting in high leverage ratios. At the same time, corporate income taxation biases banks’ capital structure towards debt financing in light of the deductibility of interest on debt. ...
This article summarises the key findings from a counterfactual exercise where the effect of removing repo assets from the leverage ratio on banks’ default probabilities is considered. The findings suggest that granting such an exemption may have adverse effects on the stability of the financial system, even when measures are introduced to compensate for the decline in capital required by the leverage ...
Alexander Kriwoluzky, Leiter der Abteilung Makroökonomie am DIW Berlin, kommentiert den Vorschlag von Kanzleramtsminister Helge Braun zur Aussetzung der Schuldenbremse wie folgt:
The European sovereign debt crisis illustrated how the stability of the entire financial system suffers when banks and sovereigns become too intertwined. However, there has been seemingly little success in reducing the bank-sovereign nexus in the decade since the crisis. As this Weekly Report shows, home bias remains strong and many European banks are still primarily purchasing domestic government ...