The fourth première of the Human Development Index

The United Nations Development Program has published its Human Development Index values for most countries of the world for the past five years. It claims the index provides information that goes beyond the widely-used GDP data and is relevant for policy-making. Critical examination shows that the index does not yet live up to this claim.     

Effiziente Finanzmärkte und soziale Dynamik

This year’s Nobel laureates in economics have a different understanding about the functioning of financial markets. However, this overall contradiction — which is even more pronounced in their policy statements — is no contradiction regarding scientific insights. In this respect they rather complement each other, even regarding the topic of (in)efficient financial markets.     

The Liability Regime of Insurance Pools and Its Impact on Pricing

This work formally derives fairly priced premiums for the policyholder of an insurance pool and the risk-adequate equity contributions of the pool insurers’ equity holders in a contingent claims approach. The approach distinguishes between two liability regimes: joint liability and several liability. These regimes regulate the pool’s indemnification when one or more of the pool insurers cannot meet their full obligations because of insolvency. Joint liability is deduced to be the preferable regime for the policyholder in cost-savings terms if corporate income taxation is introduced as a market friction. This regime advantage vanishes if the pool insurers’ asset correlation is substantial or if their risk sharing becomes unbalanced. Additionally, we address risk-shifting problems and their regime-dependent effects on both stakeholder groups.     

Einsparpotenziale bei Verwaltungs- und Verfahrenskosten durch die Fusion von gewerblichen Berufsgenossenschaften — eine empirische Analyse für Deutschland

We analyze the cost savings potential with regard to administration and management costs by merging Commercial Employment Accident Insurance Funds (Berufsgenossenschaften) in Germany. We use data from the German Federation of institutions for statutory accident insurance and prevention (HVBG) for 1999 to 2004. Large Berufsgenossenschaften (BGs) have lower administration and management costs per insured person. However, costs per insured person are negatively correlated with insured risk of the BGs which in turn is an important source of administration and management costs.Results of a multivariate regression analysis help to identify cost drivers and the existence of economies of scale. Notifiable accidents, occupational diseases and risk explain administration and management costs. All estimation results are highly significant and allow to conclude that remarkable economies of scale are likely to be present in the organization of the BGs. Our results are robust to alternative specifications. Also, risk turns out to be an important cost driver with regard to management costs.A hypothetical policy reform is considered that reduces the number of BGs from formerly 35 to 18. We come up with an estimate of expected cost savings (without cutting benefits) of 83 million euros, about 10 % of the current management costs of the BGs under consideration.     

A note on testing instrument validity for the identification of LATE

In this paper, we show that the testable implications derived in Huber and Mellace (Rev Econ Stat 97:398, 2015) are the best possible to detect invalid instruments in the presence of heterogeneous treatment effects and endogeneity. We also provide formal proof of the fact that those testable implications are only necessary, but not sufficient, conditions for instrument validity.     

Does the “Bund” dominate price discovery in Euro bond futures? Examining information shares

This paper examines the relative information shares of the Bund, i.e. the 10-year Euro bond future contract on German sovereign debt, versus two futures with shorter maturity. We find that the Bund is most important but does not dominate price discovery. The other contracts also have relevant - and at many days even higher - information shares. In examining determinants of information shares, we add order flow measures to market state variables and macroeconomic news. More order flow in a contract consistently increases this contract’s information share.     

The advantages of a small European Monetary Union

The question whether European Monetary Union should include all the EC countries from the start or should initially be limited to a few core countries is again being discussed more intensely. What advantages would a small EMU have from an economic point of view? Which countries should be its founder members?     

Reforms,Exchange Rates and Monetary Commitment: A Panel Analysis for OECD Countries

The paper investigates the link between monetary policy and structural reforms in open economies. We test three hypotheses: (a) the Calmfors hypothesis that the degree of reforms is higher in the case of autonomous policy and lower in the case of commitment, (b) the TINA hypothesis which implies a positive impact of a monetary policy rule on the extent of reforms, and (c) a third factors hypothesis. In our empirical analysis on panel data of 23 OECD countries from 1980–2000 we find little evidence for the Calmfors hypothesis, but evidence in favor of the TINA argument for labor market and regulatory reform.

HIGH‐FREQUENCY ANALYSIS OF FOREIGN EXCHANGE INTERVENTIONS: WHAT DO WE LEARN?

Abstract.  The high-frequency analysis of foreign exchange dynamics is helpful in order to better identify the impact of central bank interventions. Evidence robustly shows that interventions do indeed move the exchange rate level in the desired direction. Interventions increase volatility in the short run as they are regarded as information; but they can reduce volatility overall. Ways of transmission may reach beyond the signalling channel and also include the portfolio balance and a damping channel. Finally, interventions are more successful if they obey certain conditions, such as being coordinated among central banks and going with the market and fundamentals.