KREDIT und KAPITAL - Issue 1/2005


Contents


Articles

Herz, Bernhard
The Logic of Twin Debt and Currency Crises

Plötscher, Michael and Seidel, Tobias and Westermann, Frank
Fiskalpolitik in Deutschland: Eine empirische Analyse am Beispiel des Vorziehens der Steuerreform

Schmidt, Robert and Wollmershäuser, Timo
Sterilized Foreign Exchange Market Interventions in a Chartist-Fundamentalist Exchange Rate Model

Scholz, Hendrik and Baule, Rainer and Wilkens, Marco
Innovative Turbo-Zertifikate am deutschen Kapitalmarkt - Preisstellung, Bewertung, Hedging und Gewinnpotenzial

Hahn, Franz R.
The Effects of Bank Capital on Bank Credit Creation - Panel Evidence from Austria


Reports

Kann, Johann Sebastian and Mundstein, Sascha
"Bank-based"-Modell schafft Finanzmarktstabilität - Erkenntnisse am Beispiel Österreich


Book Reviews

Hallensleben, Philip Moritz Valentin
Interpretationsprobleme der Zwei-Säulen-Strategie der Europäischen Zentralbank (Emil Usmanov)

Wöster, Christoph
Die Bewertung von Convertible und Exchangeable Bonds bei stochastischer Zinsentwicklung (Wolfgang Breuer)


Summaries

Herz, Bernhard
"The Logic of Twin Debt and Currency Crises"

While the well-known twin currency and banking crises has drawn a lot of interest a second type of twin crises, the simultaneous occurrence of currency and debt crises, has so far been neglected in the literature. The decision of a government to devalue and/ or to default is closely interlinked through the government's intertemporal budget constraint and the market expectations. On the one hand, debt and currency crises negatively interlinked as a debt crises eases the fiscal burden of the government thereby making a currency crises less likely and vice versa. On the other hand, debt and currency crises are positively interlinked, as the expectation of a debt crises can increase the fiscal burden by rising interest tares so that an additional currency crises becomes more likely. (JEL F 31, F 33, F 34, F 41)

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Plötscher, Michael and Seidel, Tobias and Westermann, Frank
"Fiscal Policy in Germany: An Empirical Analysis Based on the Example of an Advanced Tax Reform"

In this article we show that the empirically measured multiplier effect of fiscal policy is significant for Germany in statistical terms, although it is only small in size. For example, a one-euro government spending increase results in a positive effect on the Gross Domestic Product of 1.37 euro in the first year, whilst a tax increase generates a negative effect of -0,62 euro. In the medium-term, the positive effect of increased government spending will tend towards zero, whereas the negative effect of the tax increase will gain in strength falling to -1.63 euro. We show that these comparably minor effects must be attributed mainly to interactions among policy instruments. Counterfinancing and quickly repealed policy measures substantially contribute to the small multiplier effect. We demonstrate by means of a counterfactual analysis that the Keynesian multiplier effect of government spending is 2.44, whilst the multiplier effect of tax revenues stands at -1.78 when leaving these politico-economic response patterns aside. This analysis is based on a structural VAR (vector autoregressive) model. As a topical example, we have examined the cyclical effects of the December 2003 tax reform on the Gross Domestic Products of the subsequent years.

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Schmidt, Robert and Wollmershäuser, Timo
"Sterilized Foreign Exchange Market Interventions in a Chartist-Fundamentalist Exchange Rate Model"

Sterilized foreign exchange market interventions are commonly dismissed by economists as an ineffective policy instrument - despite its frequent use by many central banks. We argue that the scepticism of many economists can be ascribed to their orientation on fundamentals-based, efficient-market exchange rate models. Given their weak empirical support, however, it is unreasonable to evaluate the effectiveness of sterilized foreign exchange interventions on this basis. The purpose of this paper is to investigate the effectiveness of sterilized foreign exchange market interventions using a chartist-fundamentalist model. We show that turning points occur earlier and that exchange rate misalignments are substantially reduced. (JEL D 84, E 58, F 31)

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Scholz, Hendrik and Baule, Rainer and Wilkens, Marco
"Innovative Turbo Certificates at the German Capital Market - Pricing, Valuation, Hedging and Profit Potential"

An overview shows that the enormous success of turbo certificates at the German retail market. This article is concerned with the valuation and analysis of these innovative financial instruments. In doing so we focus on the recently disclosed pricing formulas of some issuers during the lifetimes of the products from issuance to maturity. Furthermore, we analyse a simple hedging strategy which shows the potential gains for the issuers depending on the turbo certificates' lifetimes.

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Hahn, Franz R.
"The Effects of Bank Capital on Bank Credit Creation - Panel Evidence from Austria"

This paper is aimed to assess the impact of risk-weighted bank capital on credit growth in Austria for the period from 1996 to 2000 by using a panel-econometric approach. For this purpose, we use a sample consisting of a balanced panel of annual report data from 1996 to 2000 for 750 Austrian universal banks. To disentangle the impact of bank capital from other effects we control for impacts caused by supply-side and demand-side variables such as the commercial loan rate, aggregate output gap and the collateral value of real estate, respectively. The estimates show that bank capital holding as a percentage of risk-weighted assets according to Basel I has a negative impact on bank credit creation in Austria. Thus the paper provides evidence that risk-based bank capital may work as a binding constraint on liquidity and bank credit creation. This is a remarkable result against the backdrop of the ongoing overhaul of the Basel Accord. (JEL C 23, E 51, G 21, N 20).

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Reports

Kann, Johann Sebastian and Mundstein, Sascha
"Bank-based Models Resulting in Financial Market Stability - The Austrian Example"

Modern financial theory in particular shows that efficient financial institutions often perform functions that cannot be performed by markets. Such functions stem from incomplete markets, externalities and informational asymmetries. For this reason, decision-makers should pay special attention to developing an efficient banking system even though this may not be regarded as an alternative to developing financial markets.

Since banks play an important role also when securities markets are created, developing an efficient banking system will render a valuable contribution to the further development of financial markets. This has been confirmed by a recent IMF study based on the Austrian example.

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