Finance and Insurance Seminar WS 2015/16
Jeweils Dienstags, 12.00-13.00 Uhr in der Faculty Lounge, Juridicum, Adenauerallee 24-42, 53113 Bonn
Steven Ongena, University of Zurich, In Lands of Foreign Currency Credit, Bank Lending Channels Run Through?” (with Ibolya Schindele & Dzsamila Vonntak).
We study the impact of monetary policy on the supply of bank credit when bank lending is also denominated in foreign currencies. Accessing a comprehensive supervisory dataset from Hungary, we find that the supply of bank credit in a foreign currency is less sensitive to changes in domestic monetary conditions than the equivalent supply in the domestic currency. Changes in foreign monetary conditions similarly affect bank lending more in the foreign than in the domestic currency. Hence when banks lend in multiple currencies the domestic bank lending channel is weakened and international bank ending channels become operational.
Isabel Schnabel, Universität Bonn, “Banks‘ Trading after the Lehman Crisis – Flight to Liquidity but no Fire Sales” (with Natalia Podlich & Johannes Tischer).
Based on a detailed trade-level dataset, we analyze the proprietary trading behavior of German banks in the months directly preceding and following the Lehman collapse in September 2008. We consider both the immediate reaction after the event and the response to unconventional monetary policy measures introduced shortly after - the introduction of full allotment and the change in eligibility criteria for collateral in central bank refinancing operations. We do not find any evidence of fire sales in the German banking sector. The analysis rather suggests that trading behavior was driven by a flight to liquidity and possibly a search for yield. Reactions differ across bank groups: Relatively illiquid banks moved into liquid assets and out of ineligible assets, whereas relatively liquid banks shifted into stocks and higher-yielding assets.
19.01.2016Eva Schliephake, "Capital Regulation, Shadow Lending and Competition" (joint work with David Martinez-Miera).
Abstract: We analyze endogenous competition and capital regulation of banks that are confronted with the competitive pressure of shadow banks and its impact on the stability of the whole financial system. We define banks as those financial institutions that have access to the safety net and underlie banking regulation in exchange. Shadow banks are those institutions that are not covered by the safety net but also do not have to comply with regulation. Tightening regulation may increase bank stability but can also result in higher funding cost, which can translate into lower credit. Bank regulators trade-off these two effects when setting the optimal regulation. A more competitive shadow banking sector might negatively affect the stability but can absorb a part of the credit loss steaming from tighter regulation. We show, how, when the banking sector is not competitive enough, a more competitive shadow banking sector can result in tighter bank regulation, safer banks and higher welfare. However, in already highly competitive banking sectors the coexistence of shadow banking may be detrimental for welfare.
15. Dezember 2015
Geraldo Cerqueiro, Universidade Católica Portuguesa: "Collateral Damage? On Collateral, Corporate Financing and Performance" (with Steven Ongena & Kasper Roszbach).
Abstract: Using a panel dataset that covers all incorporated firms in Sweden, we find that the loss in collateral value reduces both the amount and the maturity of firm debt and leads firms to contract investment, employment, and assets. The legal reform may distort investment and asset allocation decisions, as firms that reduce their holdings of assets with low collaterizable value and firms that hold more liquid assets consequently become less productive and innovative. Our results therefore document the potency of a collateral channel during normal times.
8. Dezember 2015
Joel Shapiro, Saïd Business School, University of Oxford (joint work with Jens Josephson: "Credit Ratings and Structure Finance"
Abstract: The poor performance of credit ratings on structured finance products has prompted investigation into the role of Credit Rating Agencies (CRAs) in designing and marketing these products. We analyze a two-period reputation model where a CRA both designs and rates securities that are sold to different clienteles: unconstrained investors and investors constrained by minimum quality requirements. Ratings inflation increases when quality requirements for constrained investors are higher and decreases when the quality of the asset pool is higher. Securities for both types of investors may have inflated ratings. The motivation for pooling assets derives from tailoring to clienteles and from reputational incentives.
1. Dezember 2015
Hengjie Ai, Carlson School of Management: "Financial Intermediation and Capital Misallocation" (joint work with Kai Li and Fang Yang).
To understand the link between financial intermediation activities and the real economy, we put forward a general equilibrium model where agency frictions in the financial sector affect the efficiency of capital reallocation across firms and generate aggregate economic fluctuations. We develop a recursive policy iteration approach to fully characterize the nonlinear equilibrium dynamics and the off-steady state crisis behavior. In our model, adverse shocks to agency frictions exacerbate capital misallocation and manifest themselves as variations in total factor productivity at the aggregate level. Our model endogenous generate counter-cyclical volatility in aggregate time series and counter-cyclical dispersion of marginal product of capital and asset returns in the cross-section.
Tobias Berg, University of Bonn, "Causal Identification in Panel Data Sets" (with A. Neuhierl)
Abstract: We propose a new method for causal identification in panel data sets that allows to control for unobserved common factors. Our methodology is particularly applicable to difference-in-differences set-ups and event studies where treatment is not assigned randomly, but might be correlated with unobservable factors. Our methodology leads to consistent estimates under more general assumptions than currently used difference-in-differences and event study estimators. Furthermore, the methodology yields lower standard errors than prior tests and can thus significantly increase the power of difference-in-differences and event study estimators.
24. November 2015
Reint E. Gropp, Halle Institute for Economic Research (IWH), „Banks’ financial distress, credit supply and consumption expenditure” (mit Evran Damar und Adi Mordel).
Abstract: We employ a unique identification strategy linking survey data on household consumption expenditure to bank-level data to estimate the effects of bank financial distress on consumer credit and consumption expenditures. We show that households whose banks were more exposed to funding shocks report lower levels of non-mortgage liabilities. This, however, only translates into lower levels of consumption for low income, low liquid asset households. Wealthier households compensate by drawing down liquid assets to smooth consumption. Hence, adverse credit supply shocks are associated with significant redistributive effects.
20. Oktober 2015
John Boyd, University of Minnesota Inflation, “Real Growth, and Distortions of Corporate Decision-Making: Evidence from the Micro Data”.
Abstract: Using a large sample of international firms, we study the effects of sustained inflation on corporate decision making. In particular, we attempt to resolve the debate in the literature whether inflation is good or bad for firms. We find that as inflation goes up, firms are less likely to commit to potentially risky investment in both capital and labor. As inflation increases firms become less profitable (in real terms) and Tobin’s Q falls. We also find the presence of non-linearity in some of these relationships. Our results suggest that sustained high inflation is unlikely to be good for economic development. We explain the channel through which inflation affects economic growth. We show that as inflation increases, it becomes harder for corporations to raise the funding needed to support their growth. This, in turn, affects economic growth of the country.