Financial Stability in European Banking: The Role of Common Factors

In this paper, I investigate the development and determinants of CDS spreads for 18 major European banks between December 2001 and January 2004 applying factor analysis to daily data. Two clear-cut conclusions can be drawn. First, the dominating first common factor that explains 88 percent of all variation in the system, impacts on all banks in a similar direction. This suggests a strong market integration. However the size of the response of each bank’s CDS spread to the first common factor differs substantially, probably reflecting differences in individual bank’s exposure and riskiness. Second, the first common factor appears significantly related to the European P/E ratio and the European-wide 2-year nominal interest rate. This finding suggests that the common factor may be interpreted as a general indicator of market conditions. JEL Classification Numbers: G12, G15, G21, C30     

The magic of the new: How job changes affect job satisfaction

We investigate a crucial event for job satisfaction: changing one's workplace. For representative German panel data, we show that the reason why the previous employment ended is strongly linked to satisfaction with the new job. Workers initiating a change of employer experience extraordinarily high job satisfaction, though in the short term only. To investigate causality, we exploit the event of plant closure as an exogenous trigger of job switching. In this case, we find no significantly positive effect of job changes on job satisfaction. Our findings complement research on workers’ well‐being and concern labor market policies and human resource management.     

Is a flat tax reform feasible in a grown-up democracy of Western Europe? A simulation study for Germany

The success of the flat rate income tax in eastern Europe suggests that this concept could also be a model for countries of western Europe. The present paper uses a simulation model to analyze the effects of revenue neutral flat rate tax reforms on equity and efficiency for the case of Germany. We find that a flat rate tax with a low tax rate and a low basic allowance yields positive static welfare effects amounting to approximately 1.8% of income tax revenue but increases income inequality. The increase in income inequality can be avoided by combining a higher tax rate with a higher basic allowance. But in this case, the efficiency gains vanish. We conclude that due to their limited efficiency effects and their problematic distributional impact, flat tax reforms are unlikely to spill over to the grown-up democracies of western Europe.      

Chebyshev interpolation for parametric option pricing

Recurrent tasks such as pricing, calibration and risk assessment need to be executed accurately and in real time. We concentrate on parametric option pricing (POP) as a generic instance of parametric conditional expectations and show that polynomial interpolation in the parameter space promises to considerably reduce run-times while maintaining accuracy. The attractive properties of Chebyshev interpolation and its tensorized extension enable us to identify broadly applicable criteria for (sub)exponential convergence and explicit error bounds. The method is most promising when the computation of the prices is most challenging. We therefore investigate its combination with Monte Carlo simulation and analyze the effect of (stochastic) approximations of the interpolation. For a wide and important range of problems, the Chebyshev method turns out to be more efficient than parametric multilevel Monte Carlo. We conclude with a numerical efficiency study.     

Der Luxus »intellektueller Boheme« Zum Tod von Alphons Silbermann (1909–2000)

Ohne Zusammenfassung     

Steuerpolitik und Wirtschaftswachstum

The design of the tax system matters for economic growth. During times of economic crisis, tax instruments such as temporary tax cuts can be used to soften adverse effects on the economy by stimulating private and corporate spending. However, empirical evidence suggests that the overall impact of short term tax policies is limited. In the long run, the structure of the tax system is essential to building up an investment friendly and innovation-stimulating environment, which will promote sustainable economic growth.     

Blockchain in Additive Manufacturing and its Impact on Supply Chains

Additive manufacturing (AM) appears to be a particularly attractive use case for blockchain. This research combines inductive in‐depth interviews with the Delphi method to explore what potentials blockchain technology in AM creates, which adoption barriers firms need to overcome, and how supply chains will be affected by the integration of these two potentially disruptive technologies. The results suggest opportunities that are related to intellectual property (IP) rights management, the monitoring of printed parts throughout their lifecycle, process improvements, and data security. The most important barriers for blockchain adoption in AM are an absence of blockchain‐skilled specialists on the labor market, missing governance mechanisms, and a lack of firm‐internal technical expertise. By addressing important limitations of AM, blockchain is expected to improve the competitiveness of AM in parts’ production, catalyzing the trend toward more decentralized manufacturing resulting in more agile, resilient, and flexible supply chains and reduced logistics costs. Beyond that, blockchain‐based AM platforms are expected to enhance supply chain visibility, drive supply chain digitalization, support supply chain finance, and contribute to the emergence of shared factory systems.