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Venture capital and the innovative power of a state : econometric study including Google data
(2015)
This article focuses on venture capital investments and the innovative power of a state defined by its public infrastructure. The economic implications are evaluated by estimating several panel regression models. The novelty is twofold: on the one hand the research approach and on the other hand the new data set. The data ranges from 1995 to 2014 and consists of 10 European countries plus the US and Canada. For the first time we include Google search data on Venture Capital. The results show a significant increase in Venture Capital is mainly determined by economic conditions such as real GDP growth. The impact of the innovative power of a state is not significant. We find that Google data is positively related and significant in respect to Venture Capital investments too. Consequently, we confirm that private business investments cannot be created by government policy alone rather via solid macroeconomic conditions.
This article studies the effects of reverse factoring in a supply chain when the buyer company facilitates its lower short-term borrowing rates to the supplier corporation in return for extended payment terms. We explore the role of interest rate changes, rating changes, and the business cycle position on the cost and benefit trade-off from a supplier perspective. We utilize a combined empirical approach consisting of an event study in Step 1 and a simulation model in Step 2. The event study identifies the quantitative magnitude of central bank decisions and rating changes on the interest rate differential. The simulation computes with a rolling-window methodology the daily cost and benefits of reverse factoring from 2010 to 2018 under the assumption of the efficient market hypothesis. Our major finding is that changes of crucial financial variables such as interest rates, ratings, or news alerts will turn former win-win into win-lose situations for the supplier contingent to the business cycle. Overall, our results exhibit sophisticated trade-offs under reverse factoring and consequently require a careful evaluation in managerial decisions.
This paper studies the power of online search intensity metrics, measured by Google, for examining and forecasting exchange rates. We use panel data consisting of quarterly time series from 2004 to 2018 and ten international countries with the highest currency trading volume. Newly, we include various Google search intensity metrics to our panel data. We find that online search improves the overall econometric models and fits. First, four out of ten search variables are robustly significant at one percent and enhance the macroeconomic exchange rate models. Second, country regressions corroborate the panel results, yet the predictive power of search intensity with regard to exchange rates vary by country. Third, we find higher prediction performance for our exchange rate models with search intensity, particularly in regard to the direction of the exchange rate. Overall, our approach reveals a value-added of search intensity in exchange rate models.
Whither the german council of economic experts? The past and future of public economic advice
(2014)
The article discusses the development and impact of the German Council of Economic Experts (GCEE). Firstly, the author studies the historical origins and the institutional setup of the GCEE. In the second step, an analyse of the impact of the annual reports of the German Council is given, along with the international comparison with other advisory boards. Finally, the paper discusses the current economic challenges and the need of modernization of the GCEE in special and political advisory boards in general.
This paper is a brief review on the book ‘Capital in the Twenty-First Century’ by the French scholar Thomas Piketty. The book has started a new debate about inequality and capital taxation in Europe. It provides interesting empirical facts and develops a theory of the functioning of capitalist economies. However, I personally think the book is less convincing than recognized in the public debate. The demonstrated theory of economic growth in the book is elusive and lacks a psychological and behavioral underpinning. In fact, I do think that the increasing inequality and economic divergence are caused by capitalism but the psychological and behavioral aspects of humans are of similar or greater significance. Therefore, Piketty’s argument does not stimulate an open and scientifically founded debate in all aspects.
This paper examines the relationship of asset Price determination via Google data. To capture this relation, I create a model and estimate several time series’ regressions. I use weekly data from 2004 to 2010 from 30 international banks. To my knowledge this is the first study which differentiates between Google’s search volume and Google’s search clicks. I show that asset prices are positively related to the rate of change in Google’s search volume, trading volume and the level of Google search clicks. Secondly, I demonstrate that the absolute level of Google’s search volume and Google’s search clicks
behave differently regarding the asset price dynamics. Google’s search volume, which measures long-run searches, is negatively related while Google’s search clicks have a positive relationship to asset prices. Hence, Google’s data offer new insights on both measuring attention and pricing financial assets.
This paper develops a new governance scheme for a stable and lasting European Monetary Union (EMU). I demonstrate that existing economic governance is based on flawed incentives especially due to insufficient macroeconomic coordination, failures of institutional enforcement and animal spirit in financial markets. All this caused the European sovereign debt crisis in 2010. Consequently, the EMU crisis is not a conundrum at all rather a failure of national and supranational governance. To tackle this problem, I propose a return to flexible but compulsory rules driven by market forces. The new governance principles shall promote the compliance and effective enforcement of rules.
Applied mathematical theory for monetary-fiscal interaction in a supranational monetary union
(2014)
I utilize a differentiable dynamical system á la Lotka-Voletrra and explain monetary and fiscal interaction in a supranational monetary union. The paper demonstrates an applied mathematical approach that provides useful insights about the interaction mechanisms in theoretical economics in general and a monetary union in particular. I find that a common central bank is necessary but not sufficient to tackle the new interaction problems in a supranational monetary union, such as the free-riding behaviour of fiscal policies. Moreover, I show that upranational institutions, rules or laws are essential to mitigate violations of decentralized fiscal policies.
This paper provides new evidence on the formation and anchoring of inflation expectations. I conduct a game experiment and analyze the adjustment as well as the impact of credible targets on expectations. In addition, I evaluate the idiosyncratic determinants on the formation of expectations. The analysis reveals six results: First, I find evidence that long-term inflation expectations are firmly anchored to a credible target. Second, a temporary deviation due to unexpected monetary policy might trigger a decline in credibility, and third a de-anchoring of expectations due to uncertainty. Fourth, I find that people change their expectations little if a credible target exists. Fifth, expectations exhibit a large degree of time-variance only in environments without a target. Sixth, the dynamic adjustment to an ‘incomplete’ equilibrium, which is theoretically unstable, is nevertheless rapid and persistent in case of credible targets. All in all, I demonstrate a unique game setup with contributions to both experimental and monetary economics.
A major lesson of the recent financial crisis is that money market freezes have major macroeconomic implications. This paper develops a tractable model in which we analyze the microeconomic and macroeconomic implications of a systemic banking crisis. In particular, we consider how the systemic crisis affects the optimal allocation of funding for businesses. We show that a central bank should reduce the interest rate to manage a systemic shock and hence smooth the macroeconomic consequences. Moreover, the analysis offers insight on the rational of bank behavior and the role of markets in a systemic crisis. We find that the failure to adopt the optimal policy can lead to economic fragility.