To preserve the benefits from globalization, global connectivity requires global coordination

Globalization has been a powerful force that has promoted sustained periods of peace and lifted many of the world’s poorest out of poverty. In their new book, The Butterfly Defect, Ian Goldin and Mike Mariathasan argue that it has also contributed to the building up of systemic risks, such as environmental hazards or a collapse of global IT architecture. To preserve the benefits of globalization, more global policy coordination to promote resilience, encourage transparent communication and prepare for contingencies, is necessary

The real effects of banks' corporate credit supply : a literature review

In this paper, we review the rapidly growing literature on the real effects of banks’corporate credit supply. We cover recent methodological advances and provide anin-depth survey of the existing evidence. The literature consistently shows that creditsupply contractions lead to adverse real outcomes, but economic magnitudes vary acrosssamples and identification strategies. This variation has become smaller in more recentwork, using highly granular data. We further document heterogeneity in firm outcomesand show that the evidence is more ambiguous for expansionary shocks. Our analysisallows us to identify current knowledge gaps and worthwhile avenues for future research

The Real Effects of Credit Supply: Review, Synthesis, and Future Directions

This paper reviews the rapidly growing literature on the real effects of bank credit supply fluctuations and identifies several worthwhile avenues for future research. In terms of the transmission of credit supply shocks into real effects, we suggest to further investigate the roles of (i) private borrower information, (ii) employment protection legislation, (iii) corporate governance, (iv) bank specialization, and (v) alternative financing sources. We also call for additional analyses of how these shocks affect (vi) investment efficiency, (vii) market structure, and (viii) the allocation of human capital, and emphasize the need for more evidence on (ix) the persistency, (x) asymmetry, and (xi) heterogeneity of their effects

The Real Effects of Credit Supply: Review, Synthesis, and Future Directions

This paper reviews the rapidly growing literature on the real effects of bank credit supply fluctuations and identifies several worthwhile avenues for future research. In terms of the transmission of credit supply shocks into real effects, we suggest to further investigate the roles of (i) private borrower information, (ii) employment protection legislation, (iii) corporate governance, (iv) bank specialization, and (v) alternative financing sources. We also call for additional analyses of how these shocks affect (vi) investment efficiency, (vii) market structure, and (viii) the allocation of human capital, and emphasize the need for more evidence on (ix) the persistency, (x) asymmetry, and (xi) heterogeneity of their effects

Monetary policy committees, universal banks, and public recapitalisations

Defence date: 16 November 2011Examining board: Arpad Abraham, EUI; Thomas Cooley, New York University, Stern Business School; Xavier Freixas, Universitat Pompeu Fabra; Ramon Marimon, Supervisor, EUIPDF of thesis uploaded from the Library digital archive of EUI PhD thesesThe three papers in this thesis differ considerably with respect to methodology and topic; yet, they all reflect my overarching interest in the design of economic policies and the institutions that execute them. They are, also, testimony of the privilege to write a PhD thesis in Economics during times that leave little doubt about the relevance of thoughtful economic policy. My first, humble, contribution to designing these are the three papers in this thesis. As an introduction, I will proceed to briefly describe their contributions. In the first paper, I address the question of how diverse opinions (“beliefs”) among members of a monetary policy committee [MPC], as well as its institutional features, in particular, its size and its decision-making process, influence macroeconomic volatility. I answer this question in two parts: first, I explain the relationship between decision-making in committees and robust, or regret-minimising, decision-making. I show that the two can be equivalent under very specific conditions (on beliefs and the potential models of the economy). These conditions are hard to test empirically; therefore, I proceed, in the second part, to simulate an empirically motivated example, and, to compare the volatility generated by a, hypothetical, robust decision-maker, with actual volatility generated by the committee of the Bank of England [BoE], and, by several, differently specified, committees. I find, that under reasonable parameterisations, committee decision-making resembles robust decision-making. In addition, it turns out that greater diversity and aspiration towards consensus make monetary policy “more robust”. At the time of writing, disagreements among MPC members were often reduced only to increment changes of the interest rate. Nowadays, however, disagreements concern, for example, acceptable debt levels and are much deeper and more fiercely debated. The framework, then, suggests, for example, that the departure of conservative central bankers from the governing council of the European Central Bank [ECB] reduces the robustness of its decisions, and that robust Federal Open Market Committee [FOMC] policies (see Ellison & Sargent, 2009) may be an artefact of institutional structures, and not, as the authors suspect, of policymakers’ mindsets. In the second chapter, I turn to the issue of bank regulation, and, in particular, to the question of how the integration of commercial lending, and, investment banking, influences underwriting quality. Contributing to an old, but re-animated debate, I introduce mergers & acquisition [M&A] as a source of investment banking revenues in a benchmark model of universal banks (Kanatas & Qi, 2003). The analysis illustrates, that, when assessing the effects of financial services integration, a distinction has to be made between the effects of administrative synergies, such as the joint use of computers or staff, and informational synergies. The latter, should also be treated differently, depending on whether they constitute strategic informational gains, e.g. from underwriting, or non-strategic gains, for example, from standardised credit applications. It turns out that, ceteris paribus, and, under perfect competition, strategic efficiency gains improve incentives for higher underwriting quality, while non-strategic gains (administrative and informational) induce banks to depreciate the quality of their provided services. In the paper, I then provide conditions for the many intermediate cases. I also show that higher monopolistic rents lead to better underwriting quality, and, that deregulation can create risks for aggregate economic activity. The model provides possible explanations for why universal banking in Germany is often considered a success, while it is often treated with scepticism in the United States [US] (the German market is less competitive); and as to why studies in the US typically find improved underwriting quality after financial integration, whilst cross-country studies and studies, for example, from Taiwan uncover evidence of reduced underwriting quality (opportunities for non-strategic efficiency gains are often higher in less developed countries, whilst technical opportunities for the strategic use of information across business sections is likely to be higher in the US). In terms of theoretical contributions, the paper reconciles the predictions of Kanatas & Qi (2003) with another prominent model (Puri, 1999), and augments the latter with the insight, that the positive effect of informational spillovers does not necessarily have to rely on previous interactions between firms and banks, but can, as well, result from anticipated benefits in M&A. The third, and last, chapter is an empirical investigation into the effect the public recapitalisations during 2008-10 had upon bank lending. The chapter is joint work with Ouarda Merrouche (European Securities and Markets Agency [ESMA], initially at The World Bank). We collect information on direct public recapitalisations from public sources (homepages of central banks, ministries, etc.) and estimate their effect on changes in credit growth, using difference-in-difference and propensity score matching models. Furthermore, we analyse the determinants of these “bailouts”, as well as, of their size and their risk-absorbing properties. We identify, a shortage of liquid assets, of Tier1 capital, but also bank size as most important predictors of public bailouts, and, thus, lend support to the current regulatory debate, that is, mostly, concerned with minimum capital requirements, maturity transformation and institutions that are considered “too big too fail”. In terms of effective recapitalisations, our results lead us to emphasise decisive interventions, i.e. interventions that cover at least 49.22% of banks’ pre-crisis equity levels, and, those, that exhibit the commitment to disburden banks of their risks (recapitalisations with common equity). Furthermore, we identify positive externalities on the interbank market, and, reject the hypothesis that locally operating banks increase lending more than globally active banks that are provided with the same amount of public capital

Survey on research funding for the social sciences in Europe

Published in collaboration with the European Economic Association, European Sociological Association and the European Consortium for Political ResearchFrom mid-2010 through early 2011, the Academic Careers Observatory (ACO) of the Max Weber Programme (MWP) carried out three separate surveys of economists, sociologists and political scientists, the majority of whom held university positions. These individuals were invited to answer an on-line questionnaire regarding research funding in the social sciences in Europe. Each distinct survey was respectively carried out in partnership with the European Economic Association (EEA), the European Sociological Association (ESA), and the European Consortium for Political Research (ECPR). Overall, we received 3,802 valid responses from among the 19,944 invitations sent: 2,384 economists, 766 sociologists and 652 political scientists. The total response rate is 19.1 per cent. This survey is divided into two parts. Part I analyses the sociology of each profession, gathering personal information and assessing the respondent’s current working position. Part II focuses on the research funding experience of the respondents, revealing both the specifics of the respondent’s research funding, as well as their subjective perceptions of the funding application and fruition processes. Both parts of the survey show remarkable consistency in the responses of economists, sociologists and political scientists; differences are small and confined to specific areas. Much more relevant is the variation across European Research Area (ERA) countries, which share distinct academic traditions, irrespective of the discipline of the respondent.• Introduction 1 • The sample 1 • The sociology of the profession 3 • Experience with funding 4 • Nationality and residence 5 • The grouping of countries 6 • Profession of respondents 7 • Gender and age profile 9 • Positions and graduation 11 • Research environment 12 • Working time 15 • Sources of funding 17 • National and regional funding 18 • Research funding 20 • Research grants size distribution per year (all sources) 20 • National Research Grants (public) and Research Funds from Own Institution 21 • National Research Grants, ERC and EC Framework Programme (not ERC) 22 • Profession, countries and grants 24 • The allocation of research funds 29 • Grants’ application process and influencing factors 32 • Evaluation 43 • The cuts ahead 45 • Conclusions 46 • Appendix 1. Selection criteria for researchers in Sociology and in the Political Sciences 49 • Appendix 2. List of agencies providing research funding, to which the respondents have recently applied 51 • Appendix 3. Selected graphs separated by discipline 55 • Appendix 4. Selected indicators on individual national research funding agencies 67 • France – French National Research Agency 71 • Germany – German Research Foundation 72 • United Kingdom – Economic and Social Research Council 73 • Denmark – Danish Agency for Science, Technology and Innovation 74 • Portugal – Foundation for Science and Technology 75 • Spain – Ministry of Science and Innovation 75 • Italy – Ministry of Education, Universities and Research 76 • The Netherlands – The Netherlands Organisation for Scientific Research 77 • Norway – Research Council of Norway 78 • Switzerland – Swiss National Science Foundation 79 • Sweden – Swedish Research Council 8

Recapitalization, credit & liquidity

This paper documents the characteristics of public recapitalizations of banks undertaken since 2008 and examines their relationship with bank lending. The analysis covers the 15 OECD countries whose banking sectors were most severely hit by the crisis and that provided the largest public bailouts relative to their national gross domestic product ( GDP). We show that the design of the interventions varied considerably across banks and countries. Larger and higher loss-absorbing capital injections were targeted at weaker banks and at banks of 'systemically relevant' size, when the state of public finances allowed. Our results encourage theoretical research with respect to non-linear and potentially adverse effects of bailouts, as well as further investigation into the link between the loss absorbing properties of bank capital and loan growth. With respect to bank lending, we find that only large recapitalizations and infusions of common equity are associated with higher total regulatory capital ratios and sustained loan growth. We find no significant relationship between public capital provisions and interbank lending and challenge the view that local banks increase loan growth relatively more in response to a recapitalization. - Mike Mariathasan and Ouarda Merrouchestatus: publishe

The Manipulation of Basel Risk-Weights

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