A Vicious Cycle of Manias, Crashes and Asymmetric Policy Responses - An Overinvestment View

The business cycles theories of Wicksell (1898), Schumpeter (1912), Mises (1912), Hayek (1929, 1935) and Minsky (1986, 1992) explain business cycles by distorted prices on capital markets, buoyant credit expansion and overinvestment. The exuberance during the boom endogenously causes the subsequent slump. While these theories put the emphasis on explaining the emergence of the cycle, this paper focuses on the macroeconomic policy responses during and after the crisis, when panic tightens credit supply. The paper allows an assessment of the long-term consequences of an asymmetric monetary and fiscal policy response to financial crisis.Manias; Bubbles; Austrian; Policy Responses

The theory of optimum currency areas and growth in emerging markets

We test for the impact of exchange rate volatility on growth in emerging market economies based on the theory of optimum currency areas. Our findings provide evidence for a positive impact of exchange rate stability on growth. --OCA,growth

A Vicious Cycle of Manias, Crashes and Asymmetric Policy Responses - An Overinvestment View

The business cycles theories of Wicksell (1898), Schumpeter (1912), Mises (1912), Hayek (1929, 1935) and Minsky (1986, 1992) explain business cycles by distorted prices on capital markets, buoyant credit expansion and overinvestment. The exuberance during the boom endogenously causes the subsequent slump. While these theories put the emphasis on explaining the emergence of the cycle, this paper focuses on the macroeconomic policy responses during and after the crisis, when panic tightens credit supply. The paper allows an assessment of the long-term consequences of an asymmetric monetary and fiscal policy response to financial crisis.

Monetary Policy, Vagabonding Liquidity and Bursting Bubbles in New and Emerging Markets – An Overinvestment View

Credit booms have globally fuelled hikes in stock, raw material and real estate markets which have culminated in the recent US subprime market crisis. We explain the global asset market booms since the mid 1980s based on the overinvestment theories of Hayek, Wicksell and Schumpeter. We argue that ample liquidity supply originating in the large industrialized countries has contributed to overinvestment cycles in Japan, East Asia, the new markets in the industrial countries and many emerging market economies. Expansionary monetary policies in response to the burst of bubbles are argued to have contributed to vagabonding bubbles around the globe.bubbles, boom-bust cycles, Hayek, Wicksell, Schumpeter, emerging markets, capital flows, overinvestment theories

Inflation Dynamics and the Cost Channel of Monetary Transmission

Evidence from vector autoregressions indicates that the impact of interest rate shocks on macroeconomic aggregates can substantially be affected by the so-called cost channel of monetary transmission. In this paper we apply a structural approach to examine the relevance of the cost channel for inflation dynamics in G7 countries. We augment the so-called hybrid New Keynesian Philips curve by letting firms’ costs for external funds rise with the short-run nominal interest rate. Our estimates reveal that the magnitude of this cost channel strongly varies between countries, including member countries of the EMU, in accordance with differences in their financial systems. Simulations of a New Keynesian model further show that the presence of the cost channel substantially affects the transmission of monetary policy shocks, in particular, the inflation response.

Assessing Emission Allocation in Europe: An Interactive Simulation Approach

Implementation of an EU-wide emissions trading system by means of National Allocation Plans is at the core of European environmental policy agenda. Member States are faced with the problem of allocating their national emission budgets under the EU Burden Sharing Agreement between energy-intensive sectors that are eligible for international emissions trading and the remaining segments of their economies that will be subject to complementary domestic emission regulation. The country-specific segmentation of national emission budgets between trading sectors and non-trading sectors will determine the cost efficiency of the EU emissions trading system and the gains for each Member State vis-?-vis domestic abatement policies. We present an interactive simulation model where users can specify the design of National Allocation Plans for each EU Member State and then evaluate the induced economic effects. Our numerical framework is based on marginal abatement cost curves for (emissions) trading and non-trading sectors of the EU-15 economies. Illustrative simulations highlight the importance of a coordinated design of National Allocation Plans in order to avoid substantial excess costs of regulation and drastic burden shifting between nontrading and trading sectors. --emissions trading,allowance allocation,National Allocation Plans

An e-assessment security concept for universities with a virtual, ticket-based file system.

Aufgrund des Bologna-Prozesses und der damit verbundenen Umstellung auf die BA/MA-Studiengänge spielen elektronische Prüfungen an Hochschulen eine immer größer werdende Rolle. Denn durch die Umstellung erhöhte sich die Anzahl der Prüfungen, was wiederum einen erheblichen Mehraufwand für die Lehrenden bedeutete. Der Einsatz von elektronischen Prüfungen kann dabei aber nicht nur den Mehraufwand deutlich minimieren, sondern kann auch für einen Kulturwandel im Bereich der Prüfungen an Hochschulen sorgen. Jedoch können die traditionellen papierbasierten Prüfungen nicht so ohne weiteres durch die elektronische Form ersetzt werden. Denn zum einen unterliegen die elektronischen Prüfungen den gleichen formalen Ansprüchen wie die papierbasierten Prüfungen und zum anderen sind die technischen, administrativen und datenschutzrechtlichen Anforderungen zu beachten. Ein Spezialfall ist dabei die Nichtabstreitbarkeit der Lösungen der Prüfungsteilnehmer. Was bei den papierbasierten Prüfungen im Streitfall mittels handschriftlichen Gutachtens bewiesen werden kann, muss bei den elektronischen Prüfungen durch eine vom Prüfungsteilnehmer abgegebene Unterschrift, sei es auf Papier oder elektronisch durch digitale Signaturen, erfolgen. Die derzeitigen Prüfungssysteme stellen z.B. die Rechtssicherheit nur durch Medienbrüche und hohen administrativen Aufwand sicher, was weder praktikabel noch nachhaltig ist. Das in dieser Arbeit dargestellte Sicherheitskonzept berücksichtigt sowohl die technischen, administrativen als auch die formalen Anforderungen, sowie den Datenschutz und Datensicherheit von elektronischen Prüfungen an Hochschulen. Dabei wird die Notwendigkeit der qualifizierenden digitalen Signaturen begründet und wie diese zusammen mit einem virtuellen, ticketbasierten Dateisystem verwendet werden können. Das virtuelle, ticketbasierte Dateisystem wurde dabei vom Lösungskonzept der elektronischen Gesundheitskarte adaptiert, u.a. deshalb, weil damit die Anonymität trotz Authentizität möglich ist und sowohl die Studierenden als auch die Lehrenden "Herr Ihrer Daten" bleiben. Das Sicherheitskonzept kann für bestehende Prüfungssystem verwendet werden, was durch eine prototypische Umsetzung an einem webbasierten Prüfungssystem gezeigt werden konnte. Des Weiteren bietet vor allem das virtuelle, ticketbasierte Dateisystem einen multifunktionalen Nutzen für weitere Hochschulanwendungen wie z.B. Evaluierungen und elektronische Übungssysteme

Corporate Responses to Climate Change and Financial Performance: The Impact of Climate Policy

This paper examines the relationship between corporate activities to address climate change and stock performance. By separately analyzing the US and European stock markets for different sub-periods, we highlight the impact of the underlying climate policy regime. Methodologically, we compare risk-adjusted returns of stock portfolios comprising corporations that differ in their responses to climate change. In this respect, we apply the flexible Carhart fourfactor model besides the restricted one-factor model based on the Capital Asset Pricing Model (CAPM). While our portfolio analysis shows negative relationships over the entire observation period from 2001 to 2006, we find that a trading strategy, which bought stocks of corporations with a higher level of responses to climate change and sold stocks of corporations with a lower level, led to negative abnormal returns in regions and periods with less ambitious climate policy, but to positive abnormal returns in regions and periods with stringent climate policy.Climate change, Climate policy, Corporate environmental performance, Financial performance, Portfolio analysis, Asset pricing models