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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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English versions of DNB’s Working Papers are available for download in .pdf format (see below). On this site you can also order paper versions.
Show publications: [1-15] [16-30] [31-45] [46-60] [61-75] ...
| Title or theme | Date |
|---|---|
230 - When liquidity risk becomes a macro-prudential issue: Empirical evidence of bank behaviourJan Willem van den End and Mostafa Tabbae This paper provides empirical evidence of behavioural responses by banks and their contribution to system-wide liquidity stress. Using firm-specific balance sheet data, we construct aggregate indicators of macro-prudential risk. Measures of size and herding show that balance sheet adjustments have been pro-cyclical in the crisis, while responses became increasingly dependent across banks and concentrated on certain market segments. Banks’ reactions were shaped by decreased risk tolerance and limited flexibility in risk management. Regression analysis confirms that their behaviour contributed to financial sector stress. The behavioural measures are useful tools for monetary and macro prudential analyses and can improve the micro foundations of financial stability models. Keywords: banking, financial stability, stress-tests, liquidity risk. JEL Classification: C15, E44, G21, G32. Download: English (PDF: 1,1 Mb) |
December 2009 |
229 - Anchors for Inflation ExpectationsMaria Demertzis, Massimililano Marcellino and Nicola Viegi We identify credible monetary policy with first, a disconnect between inflation and inflation expectations and second, the anchoring of the latter at the inflation target announced by the monetary authorities. We test empirically whether this is the case for a number of countries that have an explicit inflation target and therefore include the Euro Area. We find that for the last 10 year period, the two series are less dependent on each other and that announcing inflation targets help anchor expectations at the right level. Keywords: Inflation Targets, Measures of Credibility. JEL Classification : E52, E58. Download: English (PDF: 939,5 Kb) | paper version: order |
December 2009 |
228 - Stock Market Expectations of Dutch HouseholdsMichael Hurd, Maarten van Rooij and Joachim Winter Despite its importance for the analysis of life-cycle behavior and, in particular, retirement planning, stock ownership by private households is poorly understood. Among other approaches to investigate these puzzles, recent research has started to elicit private households’ expectations of stock market returns. This paper reports findings from a study that collected data over a two-year period both on households’ stock market expectations (subjective probabilities of gains or losses) and on whether they own stocks. We document substantial heterogeneity in financial market expectations. Expectations are correlated with stock ownership. Over the two years of our data, stock market prices increased, and expectations of future stock market price changes also increased, lending support to the view that expectations are influenced by recent stock gains or losses. Keywords: Subjective Probability, Stock Market Participation, Survey Research. JEL Classification : C42, D12, D84, G11. Download: English (PDF: 915,3 Kb) | paper version: order |
December 2009 |
227 - An institutional evaluation of pension funds and life insurance companiesDirk Broeders, An Chen and Birgit Koos This paper compares two different types of annuity providers, i.e. defined benefit pension funds and life insurance companies. One of the key differences is that the residual risk in pension funds is collectively borne by the beneficiaries and the sponsor while in the case of life insurers, it is borne by the external shareholders. This paper employs a contingent claim approach to evaluate the risk return trade-off for annuitants. For that, we take into account the differences in contract specifications and in regulatory regimes. Mean-variance analysis is conducted to determine annuity choices of consumers with different preferences. Using realistic parameters we find that under linear and quadratic utility, life insurance companies always dominate pension funds, while under other utility specifications this is only true for low default probabilities. Furthermore, we find that power utility consumers are indifferent if the long term default probability of pension funds exceeds that of life insurers by 2 to 4%. Keywords : Pension plans, barrier options, contingent claim approach, mean-variance analysis. JEL Classification : G11, G23. Download: English (PDF: 1,1 Mb) | paper version: order |
December 2009 |
226 - Communication in a monetary policy committee: a noteJan Marc Berk and Beata Bierut This paper models monetary policy decisions as being taken by an interacting group of heterogeneous policy makers, organized in a committee. Disclosing the premises on which an individual view on the interest rate is based is likely to provide value added in terms of the quality of the collective decision over-and-above simultaneous voting on interest rates. However, this is not generally true, as communication also involves a trade-off in the quality of views of committee members, which can lead to a reduction in the quality of collective decisions below the outcome achieved under simple majority voting. Still, communication is a relatively effective way to implement the ’knowledge pooling’ argument pro-collective decision-making, compared to expanding the size of the MPC. Keywords: committees, deliberations, correlated votes, simple majority voting. JEL classification: E58, D71, D78. Download: English (PDF: 914,2 Kb) | paper version: order |
November 2009 |
225 - Assessing Competition with the Panzar-Rosse Model: The Role of Scale, Costs, and EquilibriumJacob Bikker, Sherrill Shaffer and Laura Spierdijk The Panzar-Rosse test has been widely applied to assess competitive conduct, often in specifications controlling for firm scale or using a price equation. We show that neither a price equation nor a scaled revenue function yields a valid measure for competitive conduct. Moreover, even an unscaled revenue function generally requires additional information about costs and market equilibrium. Our theoretical findings are confirmed by an empirical analysis of competition in banking, using a sample covering more than 110,000 bank-year observations on almost 18,000 banks in 67 countries during 1986-2004. Keywords: Panzar-Rosse test, competition, firm size JEL classification: D40, L11. Download: English (PDF: 981,6 Kb) | paper version: order |
November 2009 |
224 - Being a Foreigner among Domestic Banks: Asset or Liability?Stijn Claessens and Neeltje van Horen Do foreign banks have an advantage operating abroad? The existing literature has come up with different answers. Studying the performance of foreign banks relative to domestic banks in a large number of countries between 1999 and 2006, we find that the answer importantly depends on a number of factors. Specifically, foreign banks tend to perform better when from a high income country and when competition in the host country is limited. They also perform better when they are large and rely more on deposits for funding. Foreign banks improve their performance over time, possibly as they adapt to the local institutional environment. Foreign banks from home countries geographical or cultural close to the host country perform better than distant foreign banks. Institutional familiarity, however, does not help (improve) foreign banks’ performance. These findings show that it is important to control for heterogeneity among foreign banks when studying their performance and help reconcile some contradictory results found in the literature. Keywords : foreign direct investment, international banking, information, institutions. JEL classification : F21, F23, G21. Download: English (PDF: 874,1 Kb) | paper version: order |
November 2009 |
223 - Pension funds’ asset allocation and participant age: a test of the life-cycle modelJacob A. Bikker, Dirk W.G.A. Broeders, David A. Hollanders and Eduard H.M. Ponds This paper examines the impact of participants’ age distribution on the asset allocation of Dutch pension funds, using a unique data set of pension fund investment plans for 2007. Theory predicts a negative effect of age on (strategic) equity exposures. We observe that pension funds do indeed take the average age of their participants into account. However, the average age of active participants has been incorporated much more strongly in investment behaviour than the average ages of retired or dormant participants. This suggests that both employers and employees, who dominate pension fund boards, tend to show more interest in active participants. A one-year higher average age in active participants leads to a significant and robust reduction in the strategic equity exposure by around 0.5 percentage point. Larger pension funds show a stronger age-equity exposure effect than smaller pension funds. This age-dependent asset allocation of pension funds aligns with the original life-cycle model by which young workers should invest more in equity than older workers because of their larger human capital. Other factors, viz. fund size, funding ratio, and average pension wealth of participants, influence equity exposure positively and significantly, in line with theory. Pension plan type and pension fund type have no significant impact. JEL code: D91, G11, G23, H55, J14. Key words: Pension funds, strategic equity allocation, lifecycle saving and investing. Download: English (PDF: 847,6 Kb) | paper version: order |
October 2009 |
222 - Did the crisis affect inflation expectations?Gabriele Galati, Steven Poelhekke and Chen Zhou We investigate whether the anchoring properties of long-run inflation expectations in the United States, the euro area and the United Kingdom have changed around the economic crisis that erupted in mid-2007. We document that in these three economies, expectations measures extracted from inflation-indexed bonds and inflation swaps became much more volatile in 2007. Moreover, their sensitivity to news about inflation and other domestic macroeconomic variables – a measure of anchoring – increased first during the oil price rally in 2006–07, and then during the heightened turmoil triggered by the collapse of Lehman Brothers. Liquidity premia and technical factors have significantly influenced the behaviour of inflation-indexed markets since the outburst of the crisis. We show, however, that these factors did not contaminate the relationship between macroeconomic news and financial market-based inflation expectations at the daily frequency. By testing for structural breaks we conclude that in the United States, the euro area and the United Kingdom, long-run inflation expectations have become less firmly anchored during the crisis. JEL Classification: E31, E44, E52, E58. Key words: monetary policy, inflation and inflation compensation, anchors for expectations, crisis, liquidity. Download: English (PDF: 1.001,6 Kb) | paper version: order |
September 2009 |
nr. 221 - The impact of survey design on research outcomes: A case study of seven pilots measuring cash usage in the NetherlandsNicole Jonker and Anneke Kosse We employ a unique dataset of transaction records to analyse whether results of consumer surveys are influenced by the survey setup. We have asked more than 5,000 consumers to report their payments using seven different data collection methods. The results of the seven pilot studies were validated against actual payments data from retailers and the owner of the Dutch debit card scheme. The results of both the validation exercise and econometric analyses reveal that both the data collection mode and the length of the registration period significantly influence consumers’ registration of payments. Measurement errors are minimised when consumers are asked to use a self-reported transaction diary for one single day. Keywords: cash, efficiency, payment behaviour, survey design, measurement error. JEL-codes: C42, D12, E41 Download: English (PDF: 889,4 Kb) | paper version: order |
September 2009 |
nr. 220 - Stabilizing pay-as-you-go pension schemes in the face of rising longevity and falling fertility: an application to the NetherlandsW.L. Heeringa and A.L. Bovenberg Rising longevity and falling fertility threaten the sustainability of pay-as-you-go pension schemes. This paper shows that maintaining the intergenerational balance in the Dutch pay-as-you-go pension scheme in the face of increased longevity since the introduction of the scheme in 1957 would have required a gradual increase of the retirement age to at least 68 years for the generation born in 1945. Furthermore, we show that projected increases in labour-force participation rates do not generate sufficient additional tax revenues to subsitute for the dearth of human capital caused by falling fertility rates. J.E.L Classifcation: H5 Keywords: public pension; pay-as-you-go system Download: English (PDF: 1,2 Mb) | paper version: order |
August 2009 |
219 - Dependence structure of risk factors and diversification effectsChen Zhou In this paper, we study the aggregated risk from dependent risk factors under the multivariate Extreme Value theory (EVT) framework. We consider the heavy-tailness of the risk factors as well a non-parametric tail dependence structure. This allows a large scope of models on the dependency. We assess the Value-at-Risk of a diversified portfolio constructed from dependent risk factors. Moreover, we examine the diversification effects under this setup. Key words: Aggregated risk, diversification effect, multivariate Extreme Value Theory JEL: G11, C14 Download: English (PDF: 950,2 Kb) | paper version: order |
July 2009 |
218 - Credit and economic recoveryMichael Biggs, Thomas Meyer and Andreas Pick It has become almost a stylized fact that after financial crises, economic activity recovers without a rebound in credit. We investigate the relationship between credit and economic activity over the business cycle. In a simple model we show that a rebound in the flow of credit has closer relationship with economic recovery than a rebound in the stock of credit. Using data from developed and emerging market countries we find that the flow of credit has a higher correlation with GDP than the stock of credit, in particular during recovery periods from financial crises. Download: English (PDF: 1.013,1 Kb) | paper version: order |
July 2009 |
217 - Measuring Stock Market Contagion with an Application to the Sub-prime CrisisMark Mink and Jochen Mierau We present a new method to examine financial contagion, defined as a sudden strengthening of shock transmission between financial markets. In particular, we develop a correlation-like measure of synchronicity between markets that is straightforward to implement while being insensitive to heteroskedasticity of market returns. In fact, synchronicity would perfectly coincide with the dynamic conditional correlation (DCC) coefficient if the latter could be calculated using the `true' models for the variance and covariance of the market returns. When analysing the 1997 East Asian crisis and the current sub-prime mortgage crisis, we find no evidence that stock market returns are more contagious during periods of turmoil than during tranquil times. Keywords: Contagion, Heteroskedasticity, Dynamic Conditional Correlation, Sub-prime Crisis, East Asian Crisis. JEL Classification : C14, F36, G15. Download: English (PDF: 1,1 Mb) | paper version: order |
July 2009 |
216 - Subjective Measures of Risk Aversion, Fixed Costs, and Portfolio ChoiceArie Kapteyn and Federica Teppa The paper investigates risk attitudes among different types of individuals. We use several different measures of risk attitudes, including questions on choices between uncertain income streams suggested by Barsky et al. (1997) and a number of ad hoc measures. As in Barsky et al. (1997) and Arrondel and Calvo-Pardo (2002), we first analyse individual variation in the risk aversion measures and explain them by background characteristics (both “objective” characteristics and other subjective measures of risk preference). Next we incorporate the measured risk attitudes into a household portfolio allocation model, which explains portfolio shares, while accounting for incomplete portfolios and fixed costs. Our results show that a measure based on factor analysis of answers to a number of simple risk preference questions has the most explanatory power. The Barsky et al. (1997) measure has less explanatory power than this “a-theoretical” measure. We provide a discussion of the reasons for this finding. Fixed costs turn out to provide an economically and statistically highly significant explanation for incomplete portfolios. Keywords : Risk Aversion; Portfolio Choice; Subjective Measures; Econometric Models, Fixed Costs. JEL Classification : C5, C9, D12, G11. Download: Dutch (PDF: 1,0 Mb) | paper version: order |
July 2009 |
Show publications: [1-15] [16-30] [31-45] [46-60] [61-75] ...
