Vor der Europawahl: Wie lässt sich die demokratische Legitimität verbessern?

The EU suffers from a democratic deficit that arises not first and foremost from a lack of institutional competencies, but rather from the double weakness of politics vis-à-vis economics and law at the European level. This “functional democratic deficit” renders the existing mechanisms of democratic control increasingly ineffective. Especially for its citizens, a politically integrated Europen Union might be difficult to grasp, and it may only be reached gradually through a continuous process of dynamic development; however, “United in Diversity” seems to be the better alternative, and not only for historical reasons. The direct elections for the European Parliament, although not denying deficits of democratic legitimacy and participation at the Union level, should not be underestimated in their legitimising influence for the Union as an associated structure of members without obvious hierarchies.     

Trust and controllability in venture capital fundraising

This study discusses a model of success in venture capital (VC) fundraising. We develop this model based on agency and trust theory. The model is tested against quantitative data collected from 151 limited partners (LP) with headquarters predominantly in North America and Europe. Beyond the well-known criterion of the VC firm's track record, results suggest that trust and perceived controllability shape the investment decisions of those LPs. Moreover, antecedents of these main factors are evaluated. In sum, this study shows how fundraising VC firms can systematically manage the fundraising process.     

Socially responsible investing and stock performance: New empirical evidence for the US and European stock markets

This paper empirically examines the theoretically ambivalent relationship between socially responsible investing (SRI) and stock performance. It contributes to the existing literature by considering both the US and the entire European stock markets and by using consistent world-wide corporate sustainability performance data. Our portfolio analysis from 1998 to 2009 is based on the common four-factor model according to Carhart (1997), which comprises market return, size, value, and momentum factors. We show for the US and the European stock markets that SRI is associated with large-sized firms. The insignificant abnormal stock returns for SRI in both regions are the main result of our paper. Therefore, our study supports the view that SRI stocks are correctly priced by market participants, although we cannot rule out that a corresponding mispricing has existed before the beginning of our observation period in 1998.     

The origins of terrorism: Cross-country estimates of socio-economic determinants of terrorism

Prior research has concluded that socio-economic development does not significantly affect terrorism. We take an alternative view. First, we note that a country's socio-economic circumstances affect terrorists' behavior through terrorism's opportunity costs. We argue that this reasoning also holds for the case of supreme value terrorism. Then, we run a series of negative binomial regressions for 110 countries between 1971 and 2007 to test the hypothesis that poor socio-economic development is conducive to terrorism. We find that socio-economic variables indeed matter to terrorism, contrary to other results. Our findings imply that countries can benefit from economic development and growth in terms of a reduction in terrorism.     

The effects of the monetary policy regime shift to inflation targeting on the real interest rate in the United Kingdom

This paper studies the effects of the monetary policy regime shift to inflation targeting on the stochastic properties of the real interest rate in the U.K. The empirical analysis suggests a constant mean of the real interest rate that shifts with the monetary policy regime change to inflation targeting in October 1992. The mean-reverting level of the real interest rate has decreased from 5.1% to 2.3% per annum with the change in monetary policy to inflation targeting. In addition, the shift in monetary policy regime to inflation targeting has reduced the volatility of the real interest rate and increased the persistence of real interest rate deviations from the mean. The results suggest that the central bank can affect the stochastic properties of the real interest rate through the choice of monetary policy regime over a long period of time.     

An economic crisis?

According to estimates made by several German economic research institutes, economic growth will slow down also in the coming year. For the first half of 1967 an increase in terms of money by 5% and in real value by 2% is expected. As compared with growth rates in former years this growth is considered a very moderate one. After almost twenty years of uninterrupted prosperity this easing of the cyclical conditions is stirring up in many quarters the deep-rooted fear of an “economic crisis”. Is the Federal Republic of Germany really headed for an economic collapse? To clear up this problem INTERECONOMICS has asked Professor Dr Andreas Predohl, the German Overseas Institute, Hamburg, and Dr Hans-Jurgen Schmahl, the Hamburg Institute for International Economics, Hamburg, for their opinion.     

Market Coupling and the CWE Project

The article copes with the ongoing effort to establish implicit auctions to allocate transmission capacity on cross-border interconnectors in the power grid. By the means of implicit auctions (in contrast to explicit auctions), cross-border capacities are included in the clearing of local power exchanges. Concerning the day ahead auction, ‘market coupling’ plays an important role. Market coupling connects (formerly often national) electricity markets, simplifying cross-border trade. One of the main drivers of market coupling projects is the pursuit of European market integration i.e. allowing for convenient cross-border trade. The other reason is the perception that explicit auctions of transmission capacity (in addition to energy auctions which are often performed later) do sometimes lead to sub-optimal results. The objective function of market coupling is the maximisation of total welfare of all connected markets. Further to the explanation of different market coupling models (also regarding capacity calculation), the current development in Europe is wrapped up—including the CWE market coupling (Central Western Europe) project. The CWE market coupling is announced to start in fall 2010, coupling the day-ahead electricity markets of Belgium, France, Germany, Luxembourg and the Netherlands.     

An interest rate peg might be better than you think

Active interest rate policy is frequently recommended based on its merits in reducing macroeconomic volatility and being a simple device. Yet, it might be outperformed by an even simpler policy. A peg can be welfare-enhancing and can uniquely be implemented.