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DNB Working Papers
DNB Working Papers report on the results of research conducted by De Nederlandsche Bank (DNB). Started in June 2004, the series replaces earlier series like DNB Staff reports, DNB Research reports, PVK Reports and the PVK Studies.
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Show publications: [1-15] [16-30] [31-45] [46-60] [61-75] ...
| Title or theme | Date |
|---|---|
260 - Fifty Years of Fiscal Planning and Implementation in the NetherlandsRoel Beetsma, Massimo Giuliodori, Mark Walschot and Peter Wierts Using real-time data from the annual budget over the period 1958-2009, we explore the planning and realization of fiscal policy in the Netherlands . Our key findings are the following. First, planned surpluses are on average unbiased, although they are overoptimistic during the first half of the sample and too pessimistic during the second half of the sample. The latter is the result of cautious real-time revenue estimates by the Dutch Ministry of Finance during this period. Second, real growth projections by the official Dutch forecasting agency are unbiased. This contrasts with the experience of the EU as a whole where biased growth projections represent an important source of fiscal slippage. Third, general economic conditions and the state of the public finances are important determinants of both fiscal plans and their implementation. Fourth, this is also the case for political and institutional factors. Expenditure overruns are partly related to political factors , whereas cautious revenue forecasts relate to the institutional setting. In particular, the most recent regime of the “trendbased budget policy” has worked well for fiscal discipline in the Netherlands . JEL codes: E6, H6. Download: English (PDF: 867,3 Kb) |
August 2010 |
259 - An Assessment of the Consistency of ECB Communication using WordscoresDavid-Jan Jansen and Jakob de Haan Wordscores uses word frequencies to extract information from texts with known policy positions. Wordscores uses this information to estimate the unknown policy positions of so - called virgin texts. We apply Wordscores to the ECB President’s introductory statements following Governing Council meetings. We code policy positions of statements from the first three years of the Economic and Monetary Union (our reference texts) using various indicators of ECB communication as well as actual rate decisions. Treating introductory statements from 2002 to July 2009 as virgin texts, Wordscores is able to present a fairly accurate picture of ECB policy decisions during that period. The results also suggest changes in ECB communications occurred: using more introductory statements as reference texts improves the match between estimated positions and actual policy. Overall, we would characterize ECB communication during the first decade of EMU as internally consistent. At the same time, communication was flexible enough to adapt to changed circumstances. Keywords: central bank communication, ECB, consistency, content analysis. JEL Classification: E52, E58. Download: English (PDF: 867,1 Kb) |
August 2010 |
258 - The impact of scale, complexity, and service quality on the administrative costs of pension funds: A cross-country comparisonJacob Bikker, Onno Steenbeek and Federico Torracchi Administrative costs per participant appear to vary widely across pension funds in different countries. These costs are important because they reduce the rate of return on the investments of pension funds, and consequently raise the cost of retirement security. Using unique data on 90 pension funds over the period 2004–2008, this paper examines the impact of scale, the complexity of pension plans, and service quality on the administrative costs of pension funds, and compares those costs across Australia , Canada , the Netherlands , and the US . We find that, except for Canada , large unused economies of scale exist. Analyses on a disaggregated level confirm economies of scale for small and medium pension funds. Even though the pension funds in the sample are among the largest in the world, further cost savings appear to be possible. Higher service quality and more complex pension plans significantly raise costs, whereas offering only one pension plan reduces costs, as does a relatively large share of deferred (or sleeping) participants. Administrative costs vary significantly across pension fund types, with differences amounting to 100%. Keywords: Pension funds; Administrative costs; Scale economies; Service level; Complexity; Optimal scale. JEL Classification: G23. Download: English (PDF: 891,4 Kb) |
August 2010 |
257 - Capital Requirements and Credit RationingItai Agur This paper analyzes the trade-off between financial stability and credit rationing that arises when increasing capital requirements. It extends the Stiglitz-Weiss model of credit rationing to allow for bank default. Bank capital structure then matters for lending incentives. With default and rationing endogenous, optimal capital requirements can be analyzed. Introducing bank financiers, the paper also shows that uninsured funding raises the sensitivity of rationing to capital requirements. In a world with much wholesale finance, capital requirements have a stronger impact on the real economy. But wholesale finance also amplifies capital requirements’ effect on default rates. Keywords: Rationing, Capital requirements, Regulation, Wholesale finance, Deposit Insurance. JEL Classification: G21, G28. Download: English (PDF: 809,3 Kb) |
August 2010 |
256 - Why the micro-prudential regulation fails? The impact on systemic risk by imposing a capital requirementChen Zhou This paper studies why the micro-prudential regulations fails to maintain a stable financial system by investigating the impact of micro-prudential regulation on the systemic risk in a cross-sectional dimension. We construct a static model for risk-taking behavior of financial institutions and compare the systemic risks in two cases with and without a capital requirement regulation. In a system with a capital requirement regulation, the individual risk-taking of the financial institutions are lower, whereas the systemic linkage within the system is higher. With a proper systemic risk measure combining both individual risks and systemic linkage, we find that, under certain circumstance, the systemic risk in a regulated system can be higher than that in a regulation-free system. We discuss a sufficient condition under which the systemic risk in a regulated system is always lower. Since the condition is based on comparing balance sheets of all institutions in the system, it can be verified only if information on risk-taking behaviors and capital structures of all institutions are available. This suggests that a macro-prudential framework is necessary for establishing banking regulations towards the stability of the financial system as a whole. Keywords: Banking regulation, systemic risk, capital requirement, macro-prudential regulation. JEL Classification: G01, G28, G32. Download: English (PDF: 898,5 Kb) |
August 2010 |
255 - The crisis as a wake-up call. Do banks tighten screening and monitoring during a financial crisis?Ralph de Haas and Neeltje van Horen To what extent was the credit contraction during the global financial crisis due to more intense screening and monitoring by banks? We address this question by analyzing changes in the structure of a large number of syndicated loans to private, non-financial corporations. We find an increase in retention rates among syndicate arrangers during the crisis that we cannot explain by borrower risk or interbank liquidity alone. This increased ‘skin in the game’ is especially pronounced when information asymmetries between the borrower and the lending syndicate – or within the syndicate – are high. This indicates that the reduction in bank lending during the crisis was at least partly caused by stricter bank screening and monitoring: a wake-up call. Keywords : bank lending, financial crisis, loan retention, screening and monitoring, syndication. JEL Classification : D82, G15, G21. Download: English (PDF: 919,7 Kb) |
August 2010 |
254 - The Zero Lower Bound, ECB Interest Rate Policy and the Financial CrisisStefan Gerlach and John Lewis This paper estimates a monetary policy reaction function for the ECB over the period 1999-2009. To allow for a potential shift in interest rate setting during the financial crisis, we permit a smooth transition from one set of parameters to another. The estimates show a swift change in the months following the collapse of Lehman brothers. They suggest that the ECB cut rates more aggressively than expected solely on the basis of the worsening of macroeconomic conditions, consistent with the theoretical literature on optimal monetary policy in the vicinity of the zero bound. Keywords: ECB, reaction functions, zero lower bound, smooth transition. JEL Codes: C2, E52. Download: English (PDF: 1,3 Mb) |
August 2010 |
253 - How has the financial crisis affected the Eurozone Accession Outlook in Central and Eastern Europe?John Lewis This paper analyses how the financial crisis has affected task of meeting the Maastricht Criteria for the eight Central and Eastern European Countries which have yet to join the euro. It identifies the channels by which the crisis has fed through to deficits, debt, interest rates and inflation and seeks to provide numerical estimates of these factors. Deficits have worsened, but for most countries the problem is still primarily structural rather than cyclical. Debts have risen, but only in the cases of Latvia and Poland has the crisis changed the outlook for meeting the criterion. Inflation has fallen, particularly in the Baltic states on account of large output gap declines. The depth of the recession is likely to depress inflation rates for several years. Lastly, the interest rate criterion is more challenging because of the rise in spreads since the crisis. Keywords: New Member States , Convergence Criteria, Euro Adoption, Financial Crisis. JEL Codes: E61 (Policy Objectives), E66 (General Outlook and Conditions). Download: English (PDF: 942,7 Kb) |
August 2010 |
252 - How much does the public know about the ECB's monetary policy? Evidence from a survey of Duch householdsCarin van der Cruijsen, David-Jan Jansen and Jakob de Haan Does the general public know what central banks do? Is this kind of knowledge relevant? Using a survey of Dutch households, we investigate these questions for the case of the European Central Bank (ECB). Our findings suggest that knowledge on the ECB’s objectives is far from perfect. B oth a weak desire to be informed and unawareness of insufficient knowledge are barriers for improving the public's understanding of monetary policy. However, our results also show that more intensive use of information improves understanding, suggesting that the media channel may play an important and constructive role in building knowledge. Finally, we find that knowledge on monetary policy objectives contributes to an individual’s ability to form realistic inflation expectations. JEL-codes: D12, D84, E52, E58. Keywords: monetary policy, knowledge, transparency, financial literacy, inflation expectations, ECB. Download: English (PDF: 977,8 Kb) |
July 2010 |
251 - Bank Profitability during RecessionsWilko Bolt, Leo de Haan, Marco Hoeberichts, Maarten van Oordt and Job Swank This paper estimates the relation between bank profitability and economic downturns using a theoretical model that takes into account the bank’s lending history as well as amortization and losses on outstanding loans. We focus on total bank profits and its components: net interest income, other income, and net provisioning plus other costs. Using both aggregate and individual bank panel datasets, our results confirm that pro-cyclicality of bank profits is stronger for deep recessions than during mild ones. Loan-losses are found to be the main driver of this nonlinearity. We find evidence that each percent contraction of real GDP during severe recessions leads to a 0.24 percent decrease in return on bank assets. JEL-code : E32, G21. Keywords : Bank profitability, Business cycle. Download: English (PDF: 899,4 Kb) |
July 2010 |
250 - Variable Selection, Estimation and Inference for Multi-period Forecasting ProblemsM. Hashem Pesaran, Andreas Pick and Allan Timmermann This paper conducts a broad-based comparison of iterated and direct multi-period forecasting approaches applied to both univariate and multivariate models in the form of parsimonious factor-augmented vector autoregressions. To account for serial correlation in the residuals of the multi-period direct forecasting models we propose a new SUREbased estimation method and modified Akaike information criteria for model selection. Empirical analysis of the 170 variables studied by Marcellino, Stock and Watson (2006) shows that information in factors helps improve forecasting performance for most types of economic variables although it can also lead to larger biases. It also shows that finitesample modifications to the Akaike information criterion can modestly improve the performance of the direct multi-period forecasts. JEL Classifications: C22, C32, C52, C53. Key Words: Multi-period forecasts, direct and iterated methods, factor augmented VARs. Download: English (PDF: 1,3 Mb) |
June 2010 |
249 - Trading off monetary and financial stability: a balance of risk frameworkJan Willem van den End This paper presents a framework that quantifies the trade-offs for a central bank that includes financial stability in its strategy and uses macroprudential instruments next to the interest rate. It is an innovative application of the Kaminsky and Reinhart early warning method, by assuming that the central bank takes into account financial variables as signals of inflation risks. The empirical application shows that trading off monetary and macroprudential policy reduces the overall costs related to inflation and financial instability. This can be achieved by changing the preferences of the central bank, lengthening the monetary policy horizon and by a more flexible inflation target. Estimation results of a probit model indicate that the monetary stance in the US and the Euro area has not adequately traded off price stability against financial stability. Key words: financial stability, macroprudential policy, monetary policy, policy co-ordination, inflation. JEL Codes: E31, E52, E61, G28. Download: English (PDF: 918,5 Kb) |
May 2010 |
248 - Peer monitoring or contagion? Interbank market exposure and bank riskF.R. Liedorp, L. Medema, M. Koetter, R.H. Koning and I. van Lelyveld We test if interconnectedness in the interbank market is a channel through which banks affect each others riskiness. The evidence is based on quarterly bilateral exposures of all banks active in the Dutch interbank market between 1998 and 2008. A spatial lag model, borrowed from regional science, is used to test if z -scores of other banks affect individual bank’s z -scores through the network of the interbank market. Larger dependence on interbank borrowing and lending increases bank risk. But only interbank funding exposures to other banks in the system exhibit significant spill-over coefficients. Spatial lags for lending are insignificant while borrowing from other banks reduces individual bank risk if neighbors are stable, too. Vice versa, stability shocks at interbank counterparties in the system spill over through the liability side of banks balance sheets. Keywords: Interbank market, bank risk, spatial lag model. JEL classification: G21, L1. Download: English (PDF: 894,3 Kb) |
May 2010 |
247 - Mean Reversion in International Stock Markets: An Empirical Analysis of the 20th CenturyLaura Spierdijk, Jacob Bikker and Pieter van den Hoek This paper analyzes mean reversion in international stock markets during the period 1900-2008, using annual data. Our panel of stock indexes in seventeen developed countries, covering a time span of more than a century, allows us to analyze in detail the dynamics of the mean-reversion process. In the period 1900-2008 it takes stock prices about 13.8 years, on average, to absorb half of a shock. However, using a rolling-window approach we establish large fluctuations in the speed of mean reversion over time. The highest mean reversion speed is found for the period including the Great Depression and the start of World War II. Furthermore, the early years of the Cold War and the period covering the Oil Crisis of 1973, the Energy Crisis of 1979 and Black Monday in 1987 are also characterized by relatively fast mean reversion. Overall, we document half-lives ranging from a minimum of 2.1 years to a maximum of 23.8 years. In a substantial number of time periods no significant mean reversion is found at all, which underlines the fact that the choice of data sample contributes substantially to the evidence in favour of mean reversion. Our results suggest that the speed at which stocks revert to their fundamental value is higher in periods of high economic uncertainty, caused by major economic and political events. Keywords: mean reversion, market efficiency. JEL classification: C23, G14, G15. Download: English (PDF: 826,1 Kb) |
April 2010 |
246 - The Forward Premium Puzzle and Latent Factors Day by DayKerstin Bernoth, Juergen von Hagen and Casper de Vries We use futures instead of forward rates to study the complete maturity spectrum of the forward premium puzzle from two days to six months. At short maturities the slope coefficient is positive, but these turn negative as the maturity increases to the monthly level. Futures data allow us to control for the influence of an unobserved factor that can be decomposed into a contract-specific and a time-to-maturity effect. Once we do this, we find that the coefficients on the forward premium are much closer to one. The latent factor is shown to be related to conventional proxies of risk. Keywords: forward premium puzzle, futures rates, latent factor. JEL classification: F31, F37, G13. Download: English (PDF: 1,1 Mb) |
April 2010 |
Show publications: [1-15] [16-30] [31-45] [46-60] [61-75] ...
