Determinants of bank interest margins in Central and Eastern Europe: A comparison with the West

We investigate the determinants of bank interest margins in the Central and Eastern European countries (CEEC). We assess to what extent the relatively high bank margins in CEEC can be attributed to low efficiency or non-competitive market conditions, controlling for the macroeconomic environment and the influence of foreign and state-owned banks. We systematically compare CEEC banks with Western European banks. Our results indicate that banking in the CEEC is on a virtuous path, at least in the EU accession countries: Increased efficiency benefits customers, while capital adequacy supports systemic stability. In the non-accession countries, important policy actions are required.     

Won’t we scare them? The impact of communicating uncontrollable risks on the public’s perception

Authorities often refrain from communicating risks out of fear to arouse negative feelings amongst the public and to create negative reactions in terms of the public’s behavior. This study examines the impact of communicating risks on the public’s feelings and behavioral intentions regarding an uncontrollable risk related to fresh produce. In addition, the impact of risk communication is compared between a situation in which the risk either does or does not develop into a crisis, by means of a 2 (risk communication vs. no risk communication)?×?2 (crisis communication vs. no crisis communication) between-subjects factorial design. The results show that communicating risks has a positive impact on the behavioral intention to keep on eating fresh produce compared to when no risk communication was provided, as it reduces negative feelings amongst the public. In addition, the findings illustrate that when a risk develops into an actual crisis, prior risk communication can result in greater trust in the government and reduce perceived government responsibility for the crisis when the crisis hits. Based on these findings, it can be suggested that risk communication is an effective tool for authorities in preparing the public for potential crises. The findings indicate that communicating risks does not raise negative reactions amongst the public, on the contrary, and that it results in more positive perceptions of the authorities.     

The Great COVID-19 Divergence: Managing a Sustainable and Equitable Recovery in the EU

Intereconomics - The COVID-19 pandemic has led to the biggest global recession since the Second World War. Forecasts show the European Union underperforming economically relative to the United...     

SMEs,foreign direct investment and financial constraints: The case of Belgium

This paper explores the problems experienced by small and medium-sized enterprises (SMEs) with international ambitions in gaining access to debt and equity finance for foreign direct investment (FDI) projects. We develop several arguments for why such small businesses are expected to face severe financing constraints for foreign investments and provide an explorative empirical study with both the demand and supply side of FDI finance. We have interviewed thirty-two Belgian SMEs that carry out FDI, five banks and five venture capitalists. Based on the SME discussions, we have composed a questionnaire that was sent to the interviewed SMEs. The information problems and lack of collateral that often characterize international investment, the home bias of financiers and the capital gearing method used by banks to evaluate small firms’ foreign projects give rise to financial constraints for SMEs’ FDI projects. The reported finance gap hinders small firms’ (international) development and leads to suboptimal home and FDI host country development.     

What makes crisis response strategies work? The impact of crisis involvement and message framing

This study investigates the moderating impact of crisis involvement and message framing on the effect of crisis response strategies on post-crisis attitude toward an organization. In the experiment, 274 respondents participate in a 2 (crisis response strategy: match vs. mismatch) × 2 (crisis involvement: low vs. high) × 2 (message framing: emotional vs. rational) between-subjects factorial design. The results show that in the case of high crisis involvement or in the case of rational framing of crisis communication, crisis response strategies that match the crisis type increase the post-crisis attitude toward the organization. In the case of low crisis involvement or in the case of emotional framing of crisis communication, the impact of a matched or mismatched crisis response strategy on the post-crisis attitude toward the organization does not differ. In addition, the study suggests that crisis involvement has a moderating impact on the efficacy of message framing in terms of post-crisis attitude toward the organization, which depends on whether the crisis response strategy matches the crisis type or not.     

Policy mix and debt sustainability: evidence from fiscal policy rules

This paper characterizes rules-based fiscal policy setting for G-3 and large EMS countries. We set up a simple fiscal policy rule and then infer on the policymakers’ reaction coefficients by testing with GMM. Our results qualify existing evidence on systematic fiscal policy in two respects. First, fiscal policy usually stabilizes public debt; and there is indeed substantial interaction between fiscal and monetary policies via the policy mix or the debt channel. Second, sustainability is achieved with a “stop–go” cycle of consolidation. Unless debt ratios are high, consolidation does not come at the cost of less cyclical stabilization.     

Modes of foreign bank entry and effects on lending rates: Theory and evidence

Policy makers who decide to liberalize foreign bank entry frequently put limitations on the mode of entry. We study how different entry modes affect the lending rates of foreign and domestic banks. In our model, the mode of entry determines whether a foreign bank inherits a customer base. This, in turn, affects how information is distributed between foreign and domestic banks. We show that this distribution of information about incumbent customers leads to stronger competition if foreign entry occurs through a greenfield investment. As a result, domestic bank lending rates are lower after greenfield entry. We find empirical support for this prediction for a sample of banks from 10 Eastern European countries for the period 1995–2003.