Default Option, Risk-Aversion and Household Borrowing Behaviour

Assuming a risk-neutral bank and assuming household utility to be exponential, we show how under information symmetry the covariance of income and loan repayments may explain higher household borrowings than in the case without default option. Under ex post information asymmetry and positive control costs, the result is less clear-cut. We also make evident that in a situation in which a household without default option would neither borrow nor save, the existence of a default option makes household borrowing behaviour unpredictable.Consumption, exponential utility, certainty equivalent, households, default option, borrowing, risk, risk aversion, risk management

The Store-of-Value-Function of Money as a Component of Household Risk Management

We analyse how money as a store of value affects the decisions of a representative household under diversifiable and non-diversifiable risks. given that the central bank successfully stabilizes the rate of inflation at a low level. Assuming exponential utility allows us to derive an explicit relationship between optimal money holdings, the household's desire to tilt, smooth and stabilize consumption as well as minimize portfolio risk. In this context we also show how the correlation between stochastic labour income and stock returns impact the store-of-value function of money. Finally we prove that the store-of-value benefits of money holdings continue to hold even if we take riskless alternatives into account.Money demand, consumption, CRRA, CARA, exponential utility, households, risk, risk management

Problems of Evaluating Small Firms’ Quality as a Reason for Unfavourable Loan Conditions

The article substantiates the hypothesis that the profitability of small firms is above all determined by qualitative variables. In this respect a low standardization of goods and even more importantly, the high significance of governance structures play a crucial role rendering the quality of the firm’s human capital, the flexibility of its machinery but also externalities of business networks, an appropriate integration of the family into business affairs as examples of qualitative information which also bear a high degree of privacy. Whereas the literature suggests relational contracts as a way how qualitative and private information can be credibly conveyed to the lender, it is shown that even in the German housebank-dominated financial system borrower- lender relationships of the kind recommended by the literature are hardly to be found. Rather, German banks, too, respond to information gaps with unfavourable loan conditions. As an alternative specialized information intermediation is briefly discussed.Small firms financing, rationing, information

Adjustment in EMU: Is Convergence Assured?

Using a modified version of the model presented by Belke and Gros (2007), we analyze the stability of adjustment in a currency union. Using econometric estimates for parameter values we check the stability conditions for the 11 original EMU countries and Greece. We found significant instability in the model for a large number of countries. We then simulate the adjustment process for some empirically observed parameter values and find that even for countries with relatively smooth adjustment, the adjustment to a price shock in EMU might take several decades. Keywords: EMU, convergence, stability.EMU, convergence, stability, inflation

Information deficits and credit supply

SIGLEAvailable from Bibliothek des Instituts fuer Weltwirtschaft, ZBW, Duesternbrook Weg 120, D-24105 Kiel W 488 (92) / FIZ - Fachinformationszzentrum Karlsruhe / TIB - Technische InformationsbibliothekDEGerman

Gibt es Geldangebotsmultiplikatoren?: Eine kritische Betrachtung gaengiger Geldangebotsmultiplikatoren

Available from Bibliothek des Instituts fuer Weltwirtschaft, ZBW, Duesternbrook Weg 120, D-24105 Kiel W 488 (90) / FIZ - Fachinformationszzentrum Karlsruhe / TIB - Technische InformationsbibliothekSIGLEDEGerman

The Role of Social Norms for the Relationship between Private Ownership and the Performance of Banking Sectors in Transition Countries: The Cases of Bulgaria and Hungary as Examples

We start with a theoretical reflection on the merits of private ownership in banking sectors concluding that the merits of private ownership in a market economy crucially depend on the overall compliance with principles of good governance. We show that it is pivotal in this respect that the underlying legal order is in action and not just on the books. Whether this is the case depends on accepted social norms which in their turn derive from cultural value orientations. We use these insights to compare the development and performance of banking sectors in Bulgaria and Hungary with the attempt to establish relationships of found differences between the countries to different basic value orientations

Finanzierungsbedingungen und Gueterangebot: ein Ueberblick ueber finanzoekonomische Ansaetze und deren geldpolitische Konsequenzen

Available from Bibliothek des Instituts fuer Weltwirtschaft, ZBW, Duesternbrook Weg 120, D-24105 Kiel W 1084 (24) / FIZ - Fachinformationszzentrum Karlsruhe / TIB - Technische InformationsbibliothekSIGLEDEGerman

A simultaneous treatment of the liquidity and portfolio motive with implications for monetary demand

SIGLEAvailable from Bibliothek des Instituts fuer Weltwirtschaft, ZBW, Duesternbrook Weg 120, D-24105 Kiel W 1084 (18) / FIZ - Fachinformationszzentrum Karlsruhe / TIB - Technische InformationsbibliothekDEGerman

Competitive supply behaviour when price information is fuzzy

SIGLEAvailable from Bibliothek des Instituts fuer Weltwirtschaft, ZBW, D-21400 Kiel W 1084 (7) / FIZ - Fachinformationszzentrum Karlsruhe / TIB - Technische InformationsbibliothekDEGerman