KREDIT und KAPITAL - Issue 4/2004


Contents


Articles

Altunbas, Yener and de Bondt, Gabe and Marqués-Ibánez, David
Bank Capital, Bank Lending, and Monetary Policy in the Euro Area

Kapapoulos, Panayotis and Paleologos, John
The Saving Retention Coefficient After the Advent of Euro

Nehls, Hiltrud and Schmidt, Thorsten
Credit Crunch in Germany?

Flögel, Volker and Kesy, Christoph
Organisation des Sekundärhandels von Bundeswertpapieren: Historisch gewachsen! Ökonomisch begründbar?

Schöning, Stephan
Der Grundsatz II der BaFin - eine kritische Beurteilung (Teil II)


Reports

Tillmann, Peter
Konstanz Seminar on Monetary Theory and Monetary Policy 2004


Book Reviews

Fritz, Barbara
Entwicklung durch wechselkurs-basierte Stabilisierung? Der Fall Brasilien
(Martina Metzger)

Rehkugler, Heinz (Hrsg.)
Die Immobilien-AG, Bewertung und Marktattraktivität
(Markus Spiwoks)

Frowen, Stephen F.
Economists in Discussion. The Correspondence between G.L.S. Shackle and Stephen F. Frowen, 1951-1992
(Norbert Kloten)


Summaries

Altunbas, Yener and de Bondt, Gabe and Marqués-Ibánez, David
"Bank Capital, Bank Lending, and Monetary Policy in the Euro Area" This paper provides arguments and evidence in favour of the hypothesis that bank capital matters for euro area banks' loan response change in monetary policy. Bank-level panel data estimates for 1991-1999 show that the lending behaviour of the least-capitalised banks in France and Italy is more responsive to a change in monetary policy than that of better-capitalised banks. The degree of capitalisation also matters for the monetary policy impact on lending of the key players in the German and euro area banking system. These findings suggest that the new Basle capital requirements can affect the monetary transmission channel through bank capital. (JEL C 23, E 52, G 21)

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Kapapoulos, Panayotis and Paleologos, John
"The Saving Retention Coefficient After the Advent of Euro"

The introduction of the euro marks a milestone in the process of European financial market integration. Capital mobility is helpful to cope with the loss of fiscal adjustment instruments in EMU. High capital mobility in the sense of Felstein and Horioka can limit the negative consequences of shocks affecting the saving capacity of an economy in the Euro zone. In other words, if capital mobility is high, a country's growth prospect will not be constrained by its ability to save. This paper empirically examines the magnitude of the saving retention coefficient in a setting of an institutionally targeted near-perfect capital mobility and capital market integration, Euro Area countries. We also try to clarify whether the adoption of the euro and the previously completed financial liberalisation has changed the slope of saving-investment association. For this purpose, the Fedlstein/ Horioka approach is extended and updated. We find that the savings retention coefficient is relatively low for the whole EMS period but significantly different from zero. Also, the empirical findings support a new puzzle. Domestic saving and investment within EMU is less correlated than they were before the advent of the euro. This result does not support the Frankel's (1992) proposition that the correlation observed between savings and investment is partly due to a non-zero currency premium. However, this result could be considered as preliminary, given the short sample size after the advent of euro. (F 32, E 22, G 15)

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Nehls, Hiltrud and Schmidt, Thorsten
"Credit Crunch in Germany?"

This paper evaluates whether the German economy was affected by a credit crunch from 2001 to 2003, i.e. a supply-side restriction of loans that is not in line with market interest rates and profitability of investment projects. With the help of a disequilibrium-model, we calculate a credit supply and a demand-function. We have compared estimated demand with estimated supply, finding evidence for a substantial supply side restriction of the German credit market, particularly since the end of 2002. The main reason for this restriction is the drop in earnings in the banking sector. Applying the model to Großbanken (big banks) and other credit institutions separately shows that the former were more affected than the latter. (JEL C 32, E 51, G 21)

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Flögel, Volker and Kesy, Christoph
"Organising the German Secondary Trade in Federal Assets: Historically Grown! Economically Justifiable? An Empirical Analysis" This article analysis for the first time the phenomenon of several trading channels existing side by side in the field of bond trading. For the secondary trade of federal bonds of several decades, we have observed grown organisational structures both on and off the floor, and we wish to pose the question whether these are economically justifiable. The three parallel transaction channels - exchange-floor trading, off-floor bilateral trading and off-floor trading by independent intermediaries - show substantial differences in respect of pricing mechanisms and the anonymity of contracting parties. We have been able to win significant empirical data showing that the three parallel transaction channels are actually regarded as non-interchangeable by certain market actors, but that each secondary market segment is able to satisfy special transaction requirements of market participants.

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Schöning, Stephan
"Principle II of the German Financial Supervisory Authority (BaFin) - A Critical Review (Part II)"

Proceeding from Part I of the critical review describing the basic structure and contents of the redesigned principle II governing the limitation of credit institutions' liquidity risks of the German Financial Supervisory Authority (BaFin), this article subjects the rules so redesigned to a critical review. It begins by underlining that this principle henceforth focuses on the short-term area and forces credit institutions to hold a minimum of liquidity resources to cover liquidity outflows. This basic system design corresponds to international standards and is, for this reason, considered to be reasonable because possibilities for obtaining liquidity in the short term may be limited and because there may be the threat of insolvency in the absence of a liquidity buffer. Nonetheless, there is room for criticising the basic structure as well as individual rules on points of detail. For instance, neglect of the short-term and the medium-term areas results in incentives being created for changing maturity bands and for accepting interest variation risks. Further shortcomings are a continued failure to take account of important risks (from large-scale investments and from foreign-exchange positions, for instance) as well as an insufficient coverage of major payment flows stemming from the derivatives business and the profit and loss statement in the main. In this context, this article suggests to subject existing internal banking risk management systems to official supervision and, thus, to introduce qualitative supervision in this field as well. Having subjected a number of detailed rules to a critical review, this article expresses doubts about whether the liquidity principle in its present version is appropriate for successfully managing emerging critical situations especially against the background of the experiences gained on September 11, 2001. It suggests in this regard that the respective rules are hardly to the point for assuming that markets are unconditionally functionating and, in addition, for imposing restrictions on the money market that is so important for the handling of crises. Against this background, the article demands a thorough reform of the liquidity provisions.

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