Location Matters: An Examination of Trading Profits

The electronic trading system Xetra of the German Security Exchange provides a unique data source on the equity trades of 756 professional traders located in 23 different cities and eight European countries. We explore informational asymmetries across the trader population: Traders located outside Germany in non-German-speaking cities show lower proprietary trading profit. Their underperformance is not only statistically significant, it is also of economically significant magnitude and occurs for the 11 largest German blue-chip stocks. We also examine whether a trader location in Frankfurt as the financial center, or local proximity of the trader to the corporate headquarters of the traded stock, or affiliation with a large financial institution results in superior trading performance. The data provide no evidence for a financial center advantage or of increasing institutional scale economies in proprietary trading. However, we find evidence for an information advantage due to corporate headquarters proximity for high-frequency (intraday) trading.     

Management buy-outs as an instrument of privatization in Eastern Europe

Privatizing government enterprises is one of the most difficult tasks in the transformation process taking place in the former socialist economies. What contribution do management buy-outs have to make in coping with that task?     

Growth Effects of Economic Integration: Evidence from the EU Member States

After compiling an index of economic integration that accounts for global (GATT) as well as regional (European) integration of the EU member states we test for permanent and temporary growth effects in a growth accounting framework, using a panel of fifteen EU member states over the period 1950–2000. While the hypothesis of permanent growth effects is rejected, the results—though not completely robust to controlling for time-specific effects—suggest sizeable level effects: GDP per capita of the EU would be approximately one-fifth lower today if no integration had taken place since 1950. JEL no. C33, F15, F43, O52     

Der streit um keynes im lichte unserer erfahrungen

Summary The Keynes Controversy in the Light of Our Experience. — In 1953, Erich Schneider in an important paper tried to “solve” the Keynes controversy in Germany. He defended Keynes against attacks by R?pke, Hahn, Meyer, and others, who pretend that an application of his theory inevitably leads to permanent inflation, and he maintained, logically arguing, that Keynes’s theory is “general” in the sense that it leads to certain results in depression as well as inflation. In the present paper it is suggested that the Keynesian revolution changed the attitudes of entrepreneurs, trade unions and politicians considerably so that today the government is expected to run a full employment policy, the result of which is a tendency towards creeping inflation. Though in theory applicable to both depression and inflation, employment of Keynesian tools to control overall monetary demand is really successful in depressions only. Thus, given the above-mentioned expectations of trade unions and entrepreneurs, Keynesian policies have to be sustained by policies on the microeconomic level to allow for steady growth of national incomes and a stable price level.

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Résumé La controverse sur Keynes à la lumière de nótres expériences. -En 1953, Erich Schneider entreprit de ?résoudre?, en un article important, la controverse en Allemagne sur Keynes. Il y défend Keynes contre les attaques de R?pke, Hahn, Meyer, et d’autres, qui disent que le Keynesianisme aboutit nécessairement en une inflation permanente; et il appuie sur la Symmetrie logique des analyses Keynes pour la dépression et l’inflation. Dans l’article que voici, l’auteur maintient que la révolution Keynesienne, tout en avan?ant la théorie, a modifié considérablement les attitudes des entrepreneurs, des syndicats, et des politiciens, de sorte qu’on exige actuellement que le gouvernement adopte toujours une politique de plein emploi, ce qui, à son tour, crée une tendance vers l’inflation lente. Quoi que théoriquement applicables à l’inflation aussi bien qu’à la dépression, les instruments Keynesiens pour le contróle de la demande totale d’argent ne s’appliquent avec le succès désiré qu’à la dépression. Plus on s’approche du plein emploi, plus il est nécessaire d’ajouter aux mesures macroéconomiques Keynesiennes des mesures microéconomiques afin d’assurer un accroissement économique constant avec un niveau stable des prix.

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Resumen La controversia por Keynes vista a través de nuestras experiencias. -En un artfculo publicado en 1953 bajo el titulo ?La controversia por Keynes? Erich Schneider trat? de reducir la teoria económica de Keynes a su justo valor, con el fin de objetivizar las discusiones a que dicha teoria habia dado lugar en Alemania. Defendió a Keynes contra la critica de R?pke, Hahn, Meyer y otros, segün la cual el keynesianismo produciria inevitablemente una inflation permanente, demostrando que la teoria keynesiana era aplicable no solo en situaciones de depresi?n sino también, anàlogamente, en situaciones de inflation. En el présente articulo el autor opina que la ?Teoria General? de Keynes, además de hacer progresar la teoria económica, ha influido en la actitud de empresarios, sindicatos y politicos, por cuanto prédomina la idea de que el gobierno se encargará siempre de asegurar el pleno empleo. Esta expectatita y el comportamiento correspondiente del gobierno producen una tendencia permanente de inflation. A pesar de que la teoria keynesiana es lógicamente simétrica, cabe esperar que la adoption de medidas keynesianas para controlar la demanda total monetaria solo tendràn éxito en fases de depresión. Habiendo pleno empleo, las medidas keynesianas, macroecon?micas, necesitan ser complementadas por medidas microecon?micas con el fin de hacer factible un crecimiento económico adecuado, manteniendo a la vez la estabilidad del nivel de precios.

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Riassunto La controversia su Keynes alla luce délie nostre esperienze. -In un articolo ?La controversia su Keynes?, Erich Schneider nel 1953 ha tentato di ricondurre la discussione sulla teoria economica di Keynes alla sua vera origine. Egli difende quindi Keynes dal rimprovero di R?pke, Hahn, Meyer e di altri che il keynesianesimo conduca inevitabilmente ad una permanente inflazione mettendo in evidenza la simmetria logica dell’analisi di Keynes per depressione ed inflazione. Qui viene supposto che la ?General Theory? di Keynes oltre ai progressi délia teoria produsse anche modificazioni délie opinioni di imprenditori, sindacati e politici che condueono all’attesa che il governo si preoccupi sempre délia piena occupazione. Questa attesa e il corrispondente comportamento del governo producono una permanente tendenza d’inflazione. Sebbene la teoria lógicamente sia simmetrica, i modi di procedere dei soggetti economici condurrebbero a questo che l’applicazione di misure di Keynes per il controllo dell’intera domanda monetaria abbiano il successo desiderato soltanto in depressione. Con alta occupazione, misure macroeconomiche di Keynes devono essere integrate con intervenu sul micropiano per rendere possibile una sufficiente crescenza economica in stabilità di prezzi.

     

Should We Be Afraid of Friedman's Rule?

Should one think of zero nominal interest rates as an undesirable liquidity trap or as the desirable Friedman rule? I use three different frameworks to discuss this issue. First, I restate H. L. Cole and N. Kocherlakota's (1998, Fed. Res. Bank Minn. Quart. Rev., Spring, 2–10) analysis of Friedman's rule: short run increases in the money stock—whether through issuing spending coupons, open market operations, or foreign exchange intervention—change nothing as long as the money stock shrinks in the long run. Second, two simple Keynesian models of the inflationary process with a zero lower bound on nomianl interest rates imply either that deflationary spirals should be common or that a policy close to the Friedman rule and thus some deflation is optimal. Finally, a formal baby-sitting coop model implies multiple equilibria, but does not support the injection of liquidity to restore the good equilibrium, in contrast to P. Krugman (1998, Slate, August 13). J. Japan. Int. Econ., December 2000, 14(4), pp. 261–303. CenER, Tilburg University; Humboldt University, Berlin, Germany; and CEPR Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E31, E41, E50, E51, E52.     

Developments of the German Heat Market of Private Households Until 2030: A Simulation Based Analysis

The paper at hand studies the future development of the German heat market of private households until 2030 using a microeconomic simulation model developed by the authors. The model simulates the development of insulation measures and installed heating systems in the building stock, thereby incorporating a discrete choice model to represent the household decisions for heating systems. Because of the long lifetime of heating systems, the residential heating market adopts slowly. Natural gas fired burners still remain the most important heating system until 2030 whereas fuel oil technologies further lose market shares. Final energy consumption is projected to decrease by about 20?% between 2010 and 2030 primarily due to modernization of heating systems and therefore a higher fuel efficiency. Accordingly, sectoral greenhouse gas emissions will decrease by 24?%.     

Trade policy: Home market effect versus terms-of-trade externality

We study trade policy in a two-sector Krugman (1980) trade model, allowing for wage, import and export subsidies/taxes. We study non-cooperative trade policies, first for each individual instrument and then for the situation where all instruments can be set simultaneously, and contrast those with the efficient allocation. We show that in this general context there are four motives for non-cooperative trade policies: the correction of monopolistic distortions; the terms-of-trade manipulation; the delocation motive for protection (home market effect); the fiscal-burden-shifting motive. The Nash equilibrium when all instruments are available is characterized by first-best-level wage subsidies, and inefficient import subsidies and export taxes, which aim at relocating firms to the other economy and improving terms of trade. Thus, the dominating incentives for non-cooperative trade policies are the fiscal-burden-shifting motives and terms-of-trade effects.