What drives returns to euro area housing? Evidence from a dynamic dividend-discount model

We apply a dynamic dividend-discount model to analyse unexpected housing returns in a panel of eight euro area countries which together comprise 90% of euro area GDP. The application of this model allows for a de-composition of house price movements into movements in rent (cash-flow) and expected return news components. The empirical application of the model involves the estimation of a panel vector autoregressive model (VAR) for four variables –excess return to housing, rents, the real interest rate and real disposable per capita income– using quarterly data over the period 1985-2007. This empirical investigation yields two main findings. First, the bulk of the variability of house price move-ments in the panel of countries analysed can be attributed to movements in the rental yield. Indeed, perturbations to rents appear to result in a one-to-one analogous movement in house prices over the long term once controlling for changes in expected returns. Second, evidence from the dynamic profile of shocks along with the negative co-movement between changing rental yield expectations and changing expected returns on housing assets would suggest that euro area house prices overreact to news. JEL Classification: R21, C33, G12cash flow news, house price, housing rental yield, panel VAR estimation, return decomposition

What drives EU banks’ stock returns? Bank-level evidence using the dynamic dividend-discount model

We combine the dynamic dividend-discount model with an accounting-based vector autoregression framework that allows for a decomposition of EU banks' stock returns to cash-flow and expected return news components. The main findings are that while the bulk of the variability of EU banks' stock returns is due to cash flow shocks, the expected return shocks are relatively more important for larger than for smaller banks. Moroever, variables used in the literature as cash-flow proxies explain a higher share of the cash-flow component of the total excess returns for smaller than for larger EU banks. This suggests that large banks could be more prone to market wide news and events - that in the literature are associated with the expected return news component - as opposed to the bank-specific news, typically assumed to be incorporated in the cash-flow component. JEL Classification: C33, G12, G21Bank stock return predictability, cash flow news, panel VAR estimation, return decomposition

What drives investors’ behaviour in different FX market segments? A VAR-based return decomposition analysis

We apply the Campbell-Shiller return decomposition to exchange rate returns and fundamentals in a stationary panel vector autoregression framework. The return decomposition is then used to analyse how different investor segments react to news as captured by the different return components. The results suggest that intrinsic value news are dominating for equity investors and speculative money market investors while investors in currency option markets react strongly to expected return news. The equity and speculative money market investors seem able to distinguish between transitory and permanent FX movements while options investors mainly focus on transitory movements. We also find evidence that offsetting impact on the various return components can blur the effect of macroeconomic data releases on aggregate FX excess returns. JEL Classification: C23, F31, F32, G15FX return prediction, investor flows, news surprises, panel estimation, stationary VAR

Assessing portfolio credit risk changes in a sample of EU large and complex banking groups in reaction to macroeconomic shocks

In terms of regulatory and economic capital, credit risk is the most significant risk faced by banks. We implement a credit risk model - based on publicly available information - with the aim of developing a tool to monitor credit risk in a sample of large and complex banking groups (LCBGs) in the EU. The results indicate varying credit risk profiles across these LCBGs and over time. Furthermore, the results show that large negative shocks to real GDP have the largest impact on the credit risk profiles of banks in the sample. Notwithstanding some caveats, the results demonstrate the potential value of this approach for monitoring financial stability. JEL Classification: C02, C19, C52, C61, E32macroeconomic shock measurement, Portfolio credit risk measurement, stress testing

Kommunaler Investitionsbedarf im Freistaat Sachsen: Befragung 2016

Öffentliche Investitionen sind von großer Bedeutung für die Entwicklung des Wohlstands und des Wachstumspotenzials einer Volkswirtschaft. Ein Großteil der öffentlichen Investitionen wird hierbei traditionell von den Kommunen getragen. Dieser Anteil hat sich jedoch über die vergangenen gut 20 Jahre stark rückläufig entwickelt. Zudem reicht die kommunale Bruttoinvestitionstätigkeit seit 2003 nicht mehr aus, um die fortlaufende Abnutzung der Infrastruktur zu kompensieren. Da davon ausgegangen werden kann, dass ausbleibende Investitionen in die Infrastruktur zu einem späteren Zeitpunkt nachgeholt werden müssen, wird in der wirtschaftspolitischen Diskussion häufig von einem kommunalen Investitions- und Sanierungsstau gesprochen. Dieser geht noch über den Verzehr des vorhandenen Vermögens hinaus und beinhaltet auch weitergehende Investitionsbedarfe zur Begegnung gegenwärtiger Herausforderungen. Auf Grundlage der eigenen Datenerhebung des KIS ist der Investitionsbedarf in den kommunalen Kernhaushalten im Freistaat Sachsen in den nächsten fünf Jahren (2016-2020) auf insgesamt 6,48 Milliarden Euro zu schätzen. Die höchsten Investitionsbedarfe bestehen in den Bereichen Verkehr (23 %) und Schule (15 %). Es folgenSiedlungswasserwirtschaft/Gewässerinfrastruktur (12 %) und Sport-/Freizeiteinrichtungen (9 %). Der Anteil für Kindertagesstätten fällt mit 7 Prozent vergleichsweise gering aus. Im Rahmen der Befragung wurde zusätzlich zwischen Investitions- und Instandhaltungsbedarfen differenziert. Dies ist gerade im Kontext der kommunalen Doppik von besonderer Relevanz. Der Instandhaltungsbedarf in den nächsten fünf Jahren ist auf rund 1,38 Milliarden Euro zu beziffern. Die anteilige Zusammensetzung nach Aufgabenbereichen gestaltet sich dabei überwiegend ähnlich zu der des Investitionsbedarfs. Eine Ausnahme bildet der Bereich Verkehr, auf den gut ein Drittel des geschätzten Instandhaltungsbedarfs entfällt. Die tatsächlichen Investitionen der sächsischen Kommunen entwickeln sich seit einigen Jahren rückläufig. Seit 2013 liegt das kommunale Investitionsniveau im Freistaat Sachsen zudem im Gegensatz zu den Vorjahren nicht mehr über dem Bundesdurchschnitt, obwohl die ostdeutschen Länder und Kommunen als Gesamtheit noch bis einschließlich 2019 durch den Solidarpakt II eine überdurchschnittliche Finanzausstattung erhalten. Insofern ist auch hier ein Substanzverzehr zu vermuten. Um in den nächsten Jahren keinen weiteren Nachholbedarf aufzubauen, sollte das künftige Investitionsverhalten der Kommunen deshalb zumindest verstetigt werden. Die Ergebnisse der Studie zeigen zudem, dass die meisten Kommunen Investitionen erst mit Hilfe von Fördermitteln realisieren können. Darüber hinaus sind insbesondere kleinere Kommunen auf die Einbindung externen Sachverstandes angewiesen. Unterstützungsbedarf besteht dabei in allen Phasen des Lebenszyklus, insbesondere bei bautechnischen, betriebswirtschaftlichen und vergaberechtlichen Fragen

Characterisation of archaeological waterlogged wood by pyrolytic and mass spectrometric techniques

1) Department of Chemistry and Industrial Chemistry, University of Pisa, via Risorgimento 35. 56126 Pisa, Italy ; 2) IRNAS-CSIC, Seville, Spain; E-mail address: [email protected] combination of two techniques based on analytical pyrolysis and mass spectrometry, including direct exposure-MS (DE-MS) and pyrolysis-gas chromatography/mass spectrometry (Py-GC/MS), was used to study the chemical composition of waterlogged archaeological wood. In particular, the two techniques were used to chemically characterise samples of archaeological wood from the excavation of the Site of the Ancient Ships of Pisa San Rossore in Pisa (Italy). The data were compared to those of native sound wood of the same species. The results highlight that DE-MS is a valuable technique for the characterisation of archaeological wood. DE-MS allows us to use a minimal sample size and to perform the analysis in a few minutes, thus avoiding the long wet-chemical procedures that are commonly used to characterise wood. The results also confirm the importance of Py-GC/MS as a tool for shedding light on the chemical modifications of wood in archaeological objects. The analyses demonstrated that waterlogged wood from the site of Pisa San Rossore have undergone an extensive loss of polysaccharides together with partial demethylation of lignin units, both guaiacyl and syringyl monomers. In fact, catechols and methoxy catechols were identified among the pyrolysis products of the waterlogged wood samples.The authors wish to thank Dott.ssa G. Giachi (Restoration Laboratories of the Archaeological Superintendence of Tuscany, Florence, Italy) for providing archaeological wood samples and for her valuable support and collaboration. Funding was provided by the Archaeological Superintendence of Tuscany and by the Italian MIUR (PRIN Cofin05).Peer reviewe

Competitiveness and the export performance of the euro area

Chapter 1 provides an overview and assessment of the price competitiveness and export performance of the euro area and the larger euro area countries, as well as an evaluation of how standard equations have been able to explain actual export developments. Chapter 2 carries out a constant market share analysis for the euro area and thereby sheds light on the reasons for movements in aggregate export market shares by looking at the sectoral and geographical composition of euro area exports. Chapter 3 looks at the evolution of the technological competitiveness of the euro area and major competitors – proxied by patenting activity and R&D expenditure – and analyses some structural indicators of competitiveness using survey data. Chapter 4 then looks at the impact of FDI on competitiveness and export performance. Finally, Chapter 5 summarises the main findings of the report, but also critically evaluates their importance and implications.

Mitochondrial oxidative stress and nitrate tolerance – comparison of nitroglycerin and pentaerithrityl tetranitrate in Mn-SOD(+/- )mice

BACKGROUND: Chronic therapy with nitroglycerin (GTN) results in a rapid development of nitrate tolerance which is associated with an increased production of reactive oxygen species (ROS). According to recent studies, mitochondrial ROS formation and oxidative inactivation of the organic nitrate bioactivating enzyme mitochondrial aldehyde dehydrogenase (ALDH-2) play an important role for the development of nitrate and cross-tolerance. METHODS: Tolerance was induced by infusion of wild type (WT) and heterozygous manganese superoxide dismutase mice (Mn-SOD(+/-)) with ethanolic solution of GTN (12.5 μg/min/kg for 4 d). For comparison, the tolerance-free pentaerithrityl tetranitrate (PETN, 17.5 μg/min/kg for 4 d) was infused in DMSO. Vascular reactivity was measured by isometric tension studies of isolated aortic rings. ROS formation and aldehyde dehydrogenase (ALDH-2) activity was measured in isolated heart mitochondria. RESULTS: Chronic GTN infusion lead to impaired vascular responses to GTN and acetylcholine (ACh), increased the ROS formation in mitochondria and decreased ALDH-2 activity in Mn-SOD(+/- )mice. In contrast, PETN infusion did not increase mitochondrial ROS formation, did not decrease ALDH-2 activity and accordingly did not lead to tolerance and cross-tolerance in Mn-SOD(+/- )mice. PETN but not GTN increased heme oxygenase-1 mRNA in EA.hy 926 cells and bilirubin efficiently scavenged GTN-derived ROS. CONCLUSION: Chronic GTN infusion stimulates mitochondrial ROS production which is an important mechanism leading to tolerance and cross-tolerance. The tetranitrate PETN is devoid of mitochondrial oxidative stress induction and according to the present animal study as well as numerous previous clinical studies can be used without limitations due to tolerance and cross-tolerance