Analyzing credit risk transmission to the nonfinancial sector in Europe: A network approach

We use a factor model and elastic net shrinkage to model a high-dimensional network of European credit default swap (CDS) spreads. Our empirical approach allows us to assess the joint transmission of bank and sovereign risk to the nonfinancial corporate sector. Our findings identify a sectoral clustering in the CDS network, where financial institutions are in the center and nonfinancial entities as well as sovereigns are grouped around the financial center. The network has a geographical component reflected in different patterns of real-sector risk transmission across countries. Our framework also provides dynamic estimates of risk transmission, a useful tool for systemic risk monitoring.     

Allocation of research grants to university research proposals

In this paper we examine the optimal allocation of research money to incoming research proposals in a university environment. Since a university has no obvious objective to maximize when allocating research money, but rather has several, possibly conflicting, goals it would like to achieve, the method of goal programming is proposed as a solution technique, and the meaning and estimation of the priority weights in the resulting objective function in the goal programming problem, with regard to tradeoffs between goals, are discussed thoroughly. Finally, calculations based upon hypothetical sample data re presented in order to test the sensitivity of the model to different sets of priority weights.     

Interorganisational project dynamics: A longitudinal study of perceptual distance and client-contractor collaborative relationships

Despite the importance of good collaborative relationships in interorganisational projects, clients and contractors often develop adversarial relationships due to perceptual distance about key project issues. In this case study research, we investigated how perceptual distance emerges and changes over time, and how the collaborative relationship between client and contractor develops alongside these dynamics. In this exploration, we built upon agency theory and stewardship theory as complementary perspectives for understanding client-contractor collaborative relationships. We gathered quantitative and qualitative data in two projects, conducting three assessments in about one year. We found that perceptual distance increased and decreased over time, and that a reduction was typically associated with the collaborative relationship being characterized by stewardship rather than agency. These findings suggest that a regular assessment and evaluation of partners’ perceptions of critical project issues is warranted to timely detect and counteract perceptual distance. Moreover, partners would best adopt a stewardship orientation to reduce perceptual distance, although this may take considerable effort given the distributive nature of many pre-project negotiations.     

The effect of capital requirement regulation on the transmission of monetary policy: evidence from Austria

This paper analyzes the role of banks’ regulatory capitalization in the transmission of monetary policy. We use a confidential dataset for Austrian banks spanning from the first quarter of 1997 to the fourth quarter of 2003. We find evidence that Austrian banks react in an asymmetric way to monetary policy depending on their regulatory excess capitalization, i.e. low capitalized banks react more restrictively to a monetary tightening than their highly capitalized peers.

Poverty Traps, Indeterminacy, and the Wealth Distribution

We consider a one-sector growth model in continuous time with a production externality and endogenous labor supply. There is a continuum of households who have identical preferences but differ with respect to their initial wealth. We show that there exist economies such that an indeterminate steady state exists for some wealth distribution but not for others. A second result is that a redistribution of wealth may drive the economy from a steady state with strictly positive output to a poverty trap in which output converges asymptotically to zero. These results indicate that differences in the wealth distribution may be responsible for drastic differences in the long-run standard of living. Journal of Economic Literature Classification Numbers: D31, D50, O41.     

Economic globalization and the change of electoral rules

This paper takes up an argument from Ronald Rogowski about the “natural affinity” between trade and an electoral system with proportional representation. We draw on literature on the historical determinants of electoral system choice to advance the general argument that trade integration and PR are related because the adoption of PR helps to secure gains from trade. Our specific model of electoral rule changes in the age of globalization predicts that the likelihood of electoral rule change towards more proportionality increases with levels of trade integration in the world economy. The theoretical model draws on a micro model of the distributive effects of increased economic integration. Because more proportional systems are more credibly able to commit to compensate the losers of globalization processes, there will be increased demand to change the electoral system towards more proportionality under economic circumstances that increase the costs of maintaining a closed economy. In accordance with our model, our empirical tests find a positive association between (a) trade integration and the proportionality of the electoral system, (b) proportionality and social spending, and (c) global integration levels and the probability of electoral rules changes that render voting rules more proportional.     

Kursprognose mit Hilfe der Technischen Analyse — Eine empirische Untersuchung

Ohne Zusammenfassung     

Sectoral linking of carbon markets: A trade-theory analysis

The linking of emission trading systems (ETS) is a widely discussed policy option for future international cooperation on climate change. Benefits are expected from efficiency gains and the alleviation of concerns over competitiveness. However, from trade-theory it is known that due to general equilibrium effects and market distortions, linking may not always be beneficial for all participating countries. Following-up on this debate, we use a Ricardo-Viner type general equilibrium model to study the implications of sectoral linking on carbon emissions (‘leakage’), competitiveness, and welfare. By comparing pre- and post-linking equilibria, we show analytically how global emissions can increase if one of the ‘linked’ countries lacks an economy-wide emissions cap, although in case of a link across idiosyncratic sectors a decrease of emissions (‘anti-leakage’) is also possible. If – as a way to address concerns about competitiveness – a link between the EU ETS and a hypothetical US system is established, the partial emission coverage of the EU ETS can lead to the creation of new distortions between the non-covered domestic and international sector. Finally, we show how the welfare effect from linking can be decomposed into gains-from-trade and terms-of-trade contributions, and how the latter can make the overall effect ambiguous.