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Bond markets and economic growthFink, Gerhard, Haiss, Peter, Hristoforova, Sirma January 2003 (has links) (PDF)
This paper examines the relationship between the development of the aggregate bond markets and real GDP in 13 highly developed economies. The recent interest in the ties between the real and the financial sector has usually been on the banking sector and the stock markets, rather ignoring the bond markets as a third essential source of external finance. We fill this gap by providing empirical evidence for causality patterns supporting the supply-leading approach in the USA, UK, Switzerland, Germany, Austria, the Netherlands and Spain over the 1950 to 2000 period. In the cases of Japan, Finland and Italy we find evidence of interdependence between bond market capitalization growth and real output growth. Granger causality test and co-integration approach are employed to support this conjecture. (author's abstract) / Series: EI Working Papers / Europainstitut
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Borrower heterogeneity within a risky mortgage-lending marketRabitsch, Katrin, Punzi, Maria Teresa 02 1900 (has links) (PDF)
We propose a model of a risky mortgage-lending market in which we take explicit account of heterogeneity in household borrowing conditions, by introducing two borrower types: one with a low loan-to-value (LTV) ratio, one with a high LTV ratio, calibrated to U.S. data. We use such framework to study a deleveraging shock, modeled as an increase in housing investment risk, that falls more strongly on, and produces a larger contraction in credit for high-LTV type borrowers, as in the data. We find that this deleveraging experience produces significant aggregate effects on output and consumption, and that the contractionary effects are orders of magnitudes higher in a model version that takes account of borrower heterogeneity, compared to a more standard model version with a representative borrower. / Series: Department of Economics Working Paper Series
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Effectiveness of macroprudential policies under borrower heterogeneityPunzi, Maria Teresa, Rabitsch, Katrin 09 1900 (has links) (PDF)
We study the impact of macroprudential policies using a novel model which takes into account households´ ability to borrow under different loan-to-value ratios which are tied to their collateral values. Such model generates a larger
amplification in real and financial variables, compared to standard models that assume homogeneity in the leveraging and deleveraging process. Conditional on this model, we consider the implications of macroprudential policies that aim to lean against an excessive credit cycle. In particular, we allow macroprudential authorities to tighten excessive lending to higher leveraged households, whose riskiness had been evaluated too optimistically. We find thata policy that targets only the group of households that most strongly deleveraged after an adverse idiosyncratic housing investment risk shock, is welfare-improving
at social and individual levels, relative to a macroprudential policy which targets all households in the economy. / Series: Department of Economics Working Paper Series
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Sectoral Deleveraging in Europe and Its Economic ImplicationsGächter, Martin, Geiger, Martin, Glötzl, Florentin, Schuberth, Helene January 2015 (has links) (PDF)
We examine net lending/net borrowing and the underlying debt dynamics at the sectoral level
in the European Union. Saving and investment patterns indicate that there have been considerable
deleveraging efforts since the start of the global financial crisis, particularly in the
nonfinancial
corporate and household sectors. In many EU countries, however, this decline in
credit transactions has not yet led to a significant reduction of sectoral debt-to-GDP ratios.
Subdued output growth and low or even negative inflation rates have undermined the
deleveraging
process and increased real debt burdens in a number of European economies.
Since these are often the countries that had experienced strong credit booms prior to the
crisis,
rebalancing needs are likely to persist and may be a significant drag on the recovery in
the near future. Furthermore, most of the ongoing rebalancing - both in terms of debt levels
and current account deficits - is based on a sharp decline in investment rather than an
increase in saving, which might lead to lower potential growth in the future. Recent developments may even jeopardize the catching-up process of peripheral euro area countries and non-euro area EU Member States in Central, Eastern and Southeastern Europe.
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International Portfolios: A Comparison of Solution MethodsRabitsch, Katrin, Stepanchuk, Serhiy, Tsyrennikov, Viktor 17 August 2015 (has links) (PDF)
We compare the performance of the perturbation-based (local) portfolio solution method
of Devereux and Sutherland (2010a, 2011) with a global solution method. As a test suite
we use model specifications that broadly capture features of international financial trade, between advanced economies, and between advanced and emerging economies. We consider both symmetric country setups and asymmetric setups, that capture important empirical facts such as differences in macroeconomic volatility, differences in portfolio composition, and high equity premia. We find that the local method performs well at business cycle frequencies, both in the symmetric and asymmetric settings, while significant differences arise at long horizons in asymmetric settings. (authors' abstract)
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Nonlinearities and Parameter Instability in the Finance-Growth NexusPrettner, Catherine 05 1900 (has links) (PDF)
This paper offers a re-assessment of the finance-growth nexus in a framework that allows to distinguish between short-run versus long-run effects. Our dataset contains information on 45 developed and developing countries over the period 1995-2011. We make use of the integration and cointegration properties of the data, establish a cointegrating relation and derive the long-run elasticities of per capita GDP with respect to employment, the physical capital stock, and financial development. We employ these results to specify an error correction model and assess whether the years of crisis have changed the relationship between finance and growth. (author's abstract) / Series: Department of Economics Working Paper Series
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Interest rates, corporate lending and growth in the Euro AreaTondl, Gabriele 06 1900 (has links) (PDF)
The sluggish development of corporate lending has remained the central concern of EU monetary policy makers as it is considered to hinder seriously the resurgence of growth. This paper looks at the development of loans to large corporations vs SMEs in the pre-crisis and post-crisis period and wishes to answer: (i) to which extent do allocated loan volumes actually contribute to Output growth? (ii) which factors determine the development of loans, considering above all loan interest rates? and (iii) what causes differences in loan interest levels across the EA? The results indicate that different loan developments in the EA explain very well differences in output development, loans to SMEs contribute even more to output growth than those for large corporations. Loan development itself is negatively influenced by the interest level which differs significantly across EA members, with small loans in addition always being charged an interest premium over large loans. The capitalization of banks, the size of banks and their internationalization play a role as well. A part of the sluggish growth of loans can be explained by the increasing use of alternative financial instruments by large firms. Interest rates in turn are following the ECB interest rate, - but this link has become looser in the post-crisis period, and long term government bond rates. Different risks faced by banks and different bank structures have become important explanatories of interest rates in the post-crisis period. (author's abstract) / Series: Department of Economics Working Paper Series
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Model Uncertainty and Aggregated Default Probabilities: New Evidence from AustriaHofmarcher, Paul, Kerbl, Stefan, Grün, Bettina, Sigmund, Michael, Hornik, Kurt 01 1900 (has links) (PDF)
Understanding the determinants of aggregated default probabilities (PDs)
has attracted substantial research over the past decades.
This study addresses two major difficulties in understanding the
determinants of aggregate PDs: Model uncertainty
and multicollinearity among the regressors.
We present Bayesian Model Averaging (BMA) as a powerful tool that
overcomes model uncertainty. Furthermore, we supplement BMA with
ridge regression to mitigate multicollinearity.
We apply our approach to an Austrian dataset.
Our findings suggest that factor prices like short term interest
rates and energy prices constitute major drivers of default rates,
while firms' profits reduce the expected number of failures.
Finally, we show that the results of our baseline model are fairly
robust to the choice of the prior model size. / Series: Research Report Series / Department of Statistics and Mathematics
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The Finance-Growth-Nexus Revisited. New Evidence and the Need for Broadening the Approach.Haiss, Peter, Fink, Gerhard January 2006 (has links) (PDF)
This report describes the aim, scope, underlying literature and results of the research project "The Nexus between the Financial and the Real Sector". We studied the contribution of the financial sector as a whole and its individual segments (bank credits, the issuance of bonds and shares) to real economic growth in EU Member and Candidate Countries, the United States and Japan. We supplement existing approaches with the inclusion of the bond market and of foreign direct investment in the banking sector, wherein for the first time, we provide empirical evidence for slightly positive effects thereof. Methodically, we extend previous research by the production-function approach and document the importance of the market microstructure. We recommend to include liberalisation and integration effects, the bond and insurance sector, and effects of foreign bank entry and investment into future research on the Finance-Growth-Nexus. (author's abstract) / Series: EI Working Papers / Europainstitut
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Options for developing bond markets. Lessons from Asia for Central and Eastern Europe.Haiss, Peter, Marin, Stefan January 2005 (has links) (PDF)
Asian efforts towards bond market development are driven by the 1997-98 financial crises; Central and Eastern European efforts by the transition towards EMU. The small size of most of the economies underlying these still "emerging" bond markets poses the question of minimum efficient scale and which options to pursue. We argue that the joint bond funds and regional bond market linkups that follow existing trade, FDI and bank ties will broaden the sources of finance, can improve market discipline, provide signals to the market, and thus increase financial stability. Based upon bond market data and analysis of regional efforts like the Asian Bond Funds, we argue that bond market development should be given more attention to foster growth and stability. (author's abstract) / Series: EI Working Papers / Europainstitut
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