Geld und Finanzmärkte

Christian Beer, Steven Ongena and Marcel Peter: Borrowing in Foreign Currency: Austrian Households as Carry Traders

Description: 

Household borrowing in a foreign currency is a widespread phenomenon in Austria. Twelve percent of Austrian households report their housing loan to be denominated in either Swiss franc or Japanese yen for example. Yet, despite its importance, peculiar character, and immediate policy concerns, we know too little about the attitudes and characteristics of the households involved in this type of carry trade. We analyze a uniquely detailed financial wealth survey of 2,556 Austrian households to sketch a comprehensive profile of the attitudes and characteristics of the households involved. We employ both univariate tests and multivariate multinomial logit models. The survey data suggests that risk-loving, wealthy, and married households are more likely to take a housing loan in a foreign currency. High-income households are more likely to take a housing loan in general. These findings may partially assuage policy concerns about household default risk on foreign-currency housing loans.

Raphael Anton Auer and Andreas M. Fischer: The Effect of Low-Wage Import Competition on U.S. Inflationary Pressure

Description: 

This paper develops a new methodology to estimate the effect of low-wage import competition on U.S. producer prices. We first document that when low-wage countries grow, their exports to the United States increase most in labor-intensive sectors. Second, we demonstrate that the temporary and relative component of imports induced by labor intensity and output growth in low-wage countries is orthogonal to U.S. supply and demand shocks and can, therefore, be utilized to identify the causal impact of import competition on prices. In a panel covering 325 manufacturing industries from 1997 to 2006, we find that imports from nine low-wage countries are associated with strong downward pressure on U.S. prices. When these nations capture 1% U.S. market share, producer prices decrease by 3.1%, which is nearly fully accounted by a 2.4% increase in labor productivity and a 0.4% decrease in markups. Overall, we find that imports from the examined countries have decreased U.S. manufacturing PPI inflation by around two percentage points each year.

Ernst Fehr, Martin Brown and Christian Zehnder: On Reputation: A Microfoundation of Contract Enforcement and Price Rigidity

Description: 

We study the impact of reputational incentives in markets characterized by moral hazard problems. Social preferences have been shown to enhance contract enforcement in these markets, while at the same time generating considerable wage and price rigidity. Reputation powerfully amplifies the positive effects of social preferences on contract enforcement by increasing contract efficiency substantially. This effect is, however, associated with a considerable bilateralisation of market interactions, suggesting that it may aggravate price rigidities. Surprisingly, reputation in fact weakens the wage and price rigidities arising from social preferences. Thus, in markets characterized by moral hazard, reputational incentives unambiguously increase mutually beneficial exchanges, reduce rents, and render markets more responsive to supply and demand shocks.

Katrin Assenmacher-Wesche and Stefan Gerlach: Financial Structure and the Impact of Monetary Policy on Asset Prices

Description: 

We study the responses of residential property and equity prices, inflation and economic activity to monetary policy shocks in 17 countries, using data spanning 1986-2006, using single-country VARs and panel VARs in which we distinguish between groups of countries depending on their financial systems. The effect of monetary policy on property prices is only about three times as large as its impact on GDP. Using monetary policy to guard against financial instability by offsetting asset-price movements thus has sizable effects on economic activity. While the financial structure influences the impact of policy on asset prices, its importance appears limited.

Daniel Kaufmann: Price-Setting Behaviour in Switzerland Evidence from CPI Micro Data

Description: 

This paper investigates price-setting behaviour of firms based on the individual price quotes underlying the Swiss consumer price index. The data set covers the years from 1993 to 2005. Six main findings emerge from the analysis. (i) Prices are sticky; the median duration amounts to 4.6 quarters. (ii) Price-setting behaviour is heterogeneous across sectors and outlet characteristics. (iii) Price changes are sizeable; the median absolute size amounts to 9.4%. (iv) There is no indication of general downward price stickiness; even in the case of positive inflation, 41.3% of all price adjustments are decreases and the distributions of price changes do not show substantial asymmetries. (v) Firms respond to expected cost shocks at the date of their occurrence; VAT rate changes do not lead to more price adjustments before they take effect. (vi) There is some evidence that firms adjust their behaviour according to the state of the economy; in particular, firms facing higher rates of inflation adjust prices more frequently.

Samuel Reynard: What Drives the Swiss Franc?

Description: 

This paper analyzes the behavior of the Swiss franc (CHF) over the past 35 years. It relates the evolution of the CHF exchange rates to economic fundamentals like the relative competitiveness of the Swiss export sector, accumulated current accounts, interest rate differentials and oil prices. Some factors like the introduction of the euro, a relative increase in Swiss domestic productivity and higher oil prices seem to have modified the CHF behavior in the last decade, but more data will be needed to draw definitive conclusions. The paper relies on different data sources and assesses potential exchange rate determinants under different angles. Overall, measurement and econometric issues would make it difficult to determine a unique econometric specification or specific values for equilibrium exchange rates.

Thomas Bolli and Mathias Zurlinden: Measuring growth of labour quality and the quality-adjusted unemployment rate in Switzerland

Description: 

This paper presents results on human capital accumulation for the Swiss economy. We find that the index of labour quality has grown at a rate of 0.5% per year from 1991 to 2006. The main sources are the growth in average levels of education and the passing of the baby boom cohort through the age structure of the workforce. Projections over the period 2006-2050 suggest that labour quality growth will slow down with time. We also calculate a quality-adjusted unemployment rate and find that the unemployment rate is reduced by about 0.3 pp when human capital accumulation is taken into account.

Philip Sauré: How to Use Industrial Policy to Sustain Trade Agreements

Description: 

With the help of a simple Ricardian model, this paper explores the role of industrial policy in self-enforcing trade agreements. A first part shows that the optimal self-enforcing trade agreement includes subsidies to inefficient, import-competing sectors. Second, when by some exogenous or endogenous force the comparative advantage deepens, subsidies go to declining industries. Key assumptions driving these results are: essentiality of imported goods and a high flexibility of the countries' industrial structure. A final part relaxes the latter assumption and shows that under rigid industrial structures subsidies favoring import competing sectors actually destabilize trade agreements.

Barbara Rudolf and Mathias Zurlinden: Measuring capital stocks and capital services in Switzerland

Description: 

This paper presents estimates of the aggregate net (wealth) capital stock and aggregate capital services for Switzerland. We derive these estimates in a consistent manner using the perpetual inventory method. Due to changes in data availability, the time series cover the period 1970-2005 for a 2-asset breakdown (equipment and structures) and 1990-2005 for a 12-asset breakdown (nine categories of equipment and three of structures). The sensitivity of the results is examined by varying assumptions on the initial capital stocks, the length of asset lives, the method for calculating service prices, and the choice of ICT deflators. Differences to the estimates published recently by the Federal Statistical Office are summarised in the appendix.

Charlotte Christiansen and Angelo Ranaldo: Extreme Coexceedances in New EU Member States' Stock Markets

Description: 

We analyze the financial integration of the new European Union (EU) member states' stock markets using the negative (positive) coexceedance variable that counts the number of large negative (large positive) returns on a given day across the countries. We use a multinomial logit model to investigate how persistence, asset classes, and volatility are related to the coexceedance variables. We find that the effects differ (a) between negative and positive coexceedance variables (b) between old and new EU member states, and (c) before and after the EU enlargement in 2004 suggesting a closer connection of new EU stock markets to those in Western Europe.

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