Customer Markets, Non-Separable Utility and the Real Effects of Monetary Policy Shocks

As is well known, one of the major shortcomings of the New Keynesian model (NKM) with Calvo-type price setting is the lack of a microeconomic foundation of its most important building block - price stickiness. In this paper I investigate the ability of a monetary Customer Markets model to provide the desired microeconomic foundation and to serve as an alternative to the New Keynesian approach for analyzing positive as well as normative issues. In particular, I extend a standard monetary business cycles model with fully flexible prices along two dimensions: market share competition as proposed by Phelps and Winter (1970) and non-separability of the utility function with respect to money and consumption. For a broad range of empirically plausible parameter values the monetary nonneutrality generated by the Customer Markets model is of similar magnitude and persistence as that implied by the NKM. Furthermore, as revealed by a detailed comparison between the two frameworks, the theory developed in this paper explains a standard set of business cycles facts at least as well as the NKM does

The Ifo DSGE Model for the German Economy

This paper estimates a medium-scale open economy DSGE model for Germany and therest of the Euro Area (REA). The parameter estimates indicate that there is a modestdegree of structural heterogeneity between Germany and the rest of the Euro Area. Inparticular, (i) the private sector in Germany tends to adjust its capital stock faster thanits counterpart in the REA, (ii) the innovations to government spending as well as thoseto the degree of competition in goods markets are relatively more volatile in Germanyand (iii) nominal prices and wages appear to be slightly more flexible in Germany thanin the REA. A comparison based on marginal likelihoods shows that the DSGE modelfits the observable macroeconomic time series similarly well as unrestricted BayesianVARs (BVARs) estimated on the same data set

Lending of Last Resort, Moral Hazard and Twin Crises: Lessons from the Bulgarian Financial Crisis 1996/1997

In 1996/1997 Bulgaria was hit by a severe financial crisis, spreading from a banking crisis to a currency crisis. While being widely neglected by the financial crisis literature and the international discussion we argue that the Bulgarian Financial Crisis might serve as an illustrative example of a twin crisis primarily (but not only) due to systematic moral hazard behaviour of the banking sector. Thus, the Bulgarian Financial Crisis might be closer to the story of third generation moral hazard models of currency crises than the Asian Crisis. We also show how Bulgaria managed to overcome the crisis by introducing a second generation currency board allowing the central bank to act as a strictly limited lender of last resort thereby (hopefully) making the country less prone to a financial crisis in the future.http://deepblue.lib.umich.edu/bitstream/2027.42/39848/3/wp464.pd

Loan Supply Shocks during the Financial Crisis: Evidence for the Euro Area

This paper employs a panel vector autoregressive model for the member countries of the Euro Area to explore the role of banks during the slump of the real economy that followed the financial crisis. In particular, we seek to quantify the macroeconomic effects of adverse loan supply shocks, which are identified using sign restrictions. We find that loan supply shocks significantly contributed to the evolution of the loan volume and real GDP growth in all member countries during the financial crisis. However, concerning both, the timing and the magnitude of the shocks our results also indicate that the Euro Area was characterized by a considerable degree of cross–country heterogeneity.Euro Area, panel vector autoregressive model, sign restrictions, loan supply shocks

Lending of Last Resort, Moral Hazard and Twin Crises: Lessons from the Bulgarian Financial Crisis 1996/1997

In 1996/1997 Bulgaria was hit by a severe financial crisis, spreading from a banking crisis to a currency crisis. While being widely neglected by the financial crisis literature and the international discussion we argue that the Bulgarian Financial Crisis might serve as an illustrative example of a twin crisis primarily (but not only) due to systematic moral hazard behaviour of the banking sector. Thus, the Bulgarian Financial Crisis might be closer to the story of third generation moral hazard models of currency crises than the Asian Crisis. We also show how Bulgaria managed to overcome the crisis by introducing a second generation currency board allowing the central bank to act as a strictly limited lender of last resort thereby (hopefully) making the country less prone to a financial crisis in the future.Financial Crises, Bulgaria, Lender of Last Resort, Twin Crises, Currency Boards

Zur Kredithürde: Perzeption der Kreditvergabebereitschaft der Banken und unternehmensspezifische Kreditmarkterfahrung

Seit 2003 werden die deutschen Unternehmen im Rahmen des ifo Konjunkturtests regelmäßig auch nach ihrer Beurteilung der Kreditvergabebereitschaft der Banken gefragt. Die Antworten auf diese »Kreditfrage« werden sowohl für die Bildung makroökonomischer Indikatoren – wie der »Kredithürde« – als auch für die Analyse von Mikrodaten, d.h. von Beobachtungen auf Ebene des einzelnen Unternehmens, genutzt. Allerdings ist es dabei unklar, ob die Antwort eines Unternehmens dessen eigene Situation reflektiert oder vielmehr die sektorspezifischen, regionalen oder gar makroökonomischen Tendenzen widerspiegelt. Deshalb wird die regelmäßige Kreditfrage seit März 2017 in veränderter Form gestellt. Die Unternehmen werden explizit danach gefragt, ob sie Kreditbedarf haben und wie sie das Verhalten der Banken bei den Kreditverhandlungen einschätzen

The Interest Rate Pass-Through in the Euro Area During the Global Financial Crisis

This paper uses panel vector autoregressive models and simulations of an estimated DSGE model to explore the reaction of Euro area banks to the global financial crisis. We focus on their interest rate setting behavior in response to standard macroeconomic shocks. Our main empirical finding is that the pass through from changes in the money market rate to retail bank rates became significantly less complete during the crisis. Model simulations show that this result can be well explained by a significant increase in the frictions that the banks business is subject to

Loan supply shocks during the financial crisis: Evidence for the Euro Area

This paper employs a panel vector autoregressive model for the member countries of the Euro Area to explore the role of banks during the slump of the real economy that followed the financial crisis. In particular, we seek to quantify the macroeconomic effects of adverse loan supply shocks, which are identified using sign restrictions. We find that loan supply shocks significantly contributed to the evolution of the loan volume and real GDP growth in all member countries during the financial crisis. However, concerning both, the timing and the magnitude of the shocks our results also indicate that the Euro Area was characterized by a considerable degree of cross-country heterogeneity