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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 |
|---|---|
200 - What Institutional Structure for the Lender of Last Resort?Itai Agur This paper develops a game theory model to analyze the optimal structure of the Lender of Last Resort in Europe. When depositors are imperfectly informed, the indifference to international transmission displayed by national authorities has value. A centralized authority, because it internalizes externalities, faces a pooling equilibrium. It cannot effectively signal the motivation behind its interventions. This leads to unnecessary depositor scares. The first-best is achieved by delegation: the central authority decides when to retain control and when to delegate to the national authorities. Central coordination dominates pure centralization. Keywords: Lender of Last Resort, Bailout, Delegation, Contagion, Centralization. JEL Classification: D82, G21, G28 Download: English (PDF: 904,1 Kb) | paper version: order |
February 2009 |
199 - Simulations in the Dutch interbank payment system: A sensitivity analysisRonald Heijmans This paper presents an analysis on the sensitivity of the Dutch interbank payment system with respect to the value transferred and the amount of available collateral. The Dutch system can be characterised as a system with a few large and many relatively small participants. Historical data has been used and modified to create a stress scenario. The changes with respect to the historical data are either an increase or a decrease of payment values of one of the large participants. This change of the payment value has been applied to the three large banks in the Dutch system. The collateral level has also been modified between the different stress scenarios. In total four levels of collateral are investigated of which 2 are based on historical data and 2 on theoretical calculated values, the upper and lower bound. The results of this paper are both in terms of number of banks affected and the amount of unsettled values by the end of the day. JEL codes: C88, E58, G21 Key words: interbank, payment system, operational disruption, liquidity, stress simulations, TOP, TARGET Download: English (PDF: 1.014,4 Kb) | paper version: order |
January 2009 |
198 - Unification of the Fréchet and Weibull DistributionPeter ter Berg Well-known results for the Fréchet and Weibull distribution are streamlined using a unifying parametrisation. Expected values for order statistics follow through a fractional matrix power and the likelihood surface in case of a loglinear specification for the scale parameter is shown to have just two stationary points. K EYWORDS : Fréchet, Weibull, Gumbel, incomplete Gamma, Lorenz curve, order statistics, fractional matrix power, maximum likelihood. J EL Classification: C13, C16 Download: English (PDF: 756,3 Kb) | paper version: order |
January 2009 |
197 - Consumer Choice and Merchant Acceptance of Payment MediaWilko Bolt en Sujit Chakravorti We study the ability of banks and merchants to influence the consumer's payment instrument choice. Consumers participate in payment card networks to insure themselves against three types of shocks| income, theft, and their merchant match. Merchants choose which payment instruments to accept based on their production costs and increased profit opportunities. Our key results can be summarized as follows. The structure of prices is determined by the level of the bank's cost to provide payment services including the level of aggregate credit loss, the probability of theft, and the timing of income flows. We also identify equilibria where the bank finds it profitable to offer one or both payment cards. Our model predicts that when merchants are restricted to charging a uniform price for goods that they sell, the bank benefits while consumers and merchants are worse off. Finally, we compare welfare-maximizing price structures to those that result from the bank's profit-maximizing price structure. Key Words: Retail Financial Services, Network Effects, Social Welfare, Multihoming, Payment Card Networks JEL Codes: L11, G21, D53 Download: English (PDF: 1,0 Mb) | paper version: order |
January 2009 |
196 - Incentives at the counter: An empirical analysis of surcharging card payment and payment behaviour in the NetherlandsWilko Bolt, Nicole Jonker en Corry van Renselaar In card payment systems, no-surcharge rules prohibit merchants from charging consumers extra for card payments. However, Dutch retailers are allowed to surcharge consumers for their debit card use. This allows an empirical analysis of the impact of surcharging on the demand for debit card services, and the effect of removing the no-surcharge rule on card acceptance by retailers and on consumer payment choice. Based on consumer and retailer survey data, our analysis shows that surcharging steers consumers away from using debit cards towards cash. Half of the observed difference in debit card payment shares across retailers can be explained by this surcharge effect. First calculations suggest that removing the surcharge on debit card payments in the Netherlands may induce considerable social cost savings of more than EUR 100 million in the long run. Keywords: survey data, retail payments, no-surcharge rule, cost efficiency JEL code: D12, D61, G20 Download: English (PDF: 885,6 Kb) | paper version: order |
January 2009 |
195 - Growth, Foreign Direct Investment and Urban Concentration: Unbundling Spatial LagsSteven Poelhekke en Frederick van der Ploeg Cross-country regressions suggest that urbanization and FDI are important drivers of growth However, it is not clear that primacy eventually hurts growth performance. Since it is tough to interpret cross-country growth regressions, we provide detailed evidence on the determinants of outward FDI from the US. FDI is higher in countries that are close to the US and have good institutions, well developed financial systems, a high road density, a high income per capita and substantial natural resource exports. Countries also attract more FDI if they have more mediumsized cities and primacy is not too large. We show that good institutions in neighbouring countries are important drivers of FDI. FDI is higher if neighbours suffer from primacy. However, FDI is attracted if surrounding countries have fewer cities, restrictions on international trade and low market potential (income per capita). We tentatively conclude that cities are important drivers of FDI and growth and unbundling spatial lags matters. Robustness is verified by re-estimating our regressions with fixed effects and for the sample of OECD countries. Keywords: growth, foreign investment, cities, urbanization, primacy, spatial lags, spatial autoregression, surrounding market potential, fragmentation, export-platform JEL codes: C31, F21, F23, F43, O47, R11 Download: English (PDF: 938,9 Kb) | paper version: order |
January 2009 |
194 - Bank Competition Efficiency in Europe: A Frontier ApproachWilko Bolt en David Humphrey There are numerous ways to indicate the degree of banking competition across countries. Antitrust authorities rely on the structure-conduct-performance paradigm while academics prefer price mark-ups (Lerner index) or correlations of input costs with output prices (H-statistic). These measures are not always strongly correlated when contrasted across countries or positively correlated within countries over time. Frontier efficiency analysis is used to devise an alternative indicator of competition and rank European countries by their dispersion from a \competition frontier". The frontier is determined by how well payment and other costs explain variations in loan-deposit rate spread and non-interest activity revenues. Key Words: Banking competition, frontier analysis, European banks JEL Classification Code: E41 C53 Download: English (PDF: 940,7 Kb) | paper version: order |
December 2008 |
193 - Economics of Payment Cards: A Status ReportWilko Bolt en Sujit Chakravorti In this article, we survey the recent theoretical literature on payment cards and study their implications for public policy. Payment card networks have faced regulatory scrutiny in several countries regarding the setting of various fees including interchange fees – fees paid by the merchant’s financial institution to the cardholder’s financial institution. In addition, other common payment practices such as no-surcharge rules have also been challenged in several jurisdictions. Unlike other types of markets, card payment services are network goods where two distinct end-users (i.e. consumers and merchants) must participate for the good to be consumed. Keywords: retail financial services, payment card networks, pricing, competition JEL Codes: L11, G21, D53 Download: English (PDF: 868,1 Kb) | paper version: order |
December 2008 |
192 - Confidence in Monetary PolicyYakov Ben-Haim en Maria Demertzis In situations of relative calm and certainty, policy makers have confidence in the mechanisms at work and feel capable of attaining precise and ambitious results. As the environment becomes less and less certain, policy makers are confronted with the fact that there is a trade-off between the quality of a certain outcome and the confidence (robustness) with which it can be attained. Added to that, in the presence of Knightian uncertainty, confidence itself can no longer be represented in probabilistic terms (because probabilities are unknown). We adopt the technique of Info-Gap Robust Satisficing to first define confidence under Knightian uncertainty, and second quantify the trade-off between quality and robustness explicitly. We apply this to a standard monetary policy example and provide Central Banks with a framework to rank policies in a way that will allow them to pick the one that either maximizes confidence given an acceptable level of performance, or alternatively, optimizes performance for a given level of confidence. Keywords: Knightian Uncertainty, Satisficing, Bounded Rationality, Minmax. JEL Codes: D81, E52, E58. Download: English (PDF: 977,5 Kb) | paper version: order |
December 2008 |
191 - Did the anchor of inflation expectations in the euro area turn adrift?Gabriele Galati, Steven Poelhekke en Chen Zhou Survey evidence indicates that inflation expectations increased after HICP inflation rose markedly in the course of 2007 and the first half of 2008, underpinning a general view that inflation expectations may have become unanchored from the ECB’s target. However, until now there has been no formal test of whether this has in fact been the case. We fill this gap by testing the reaction of financial market-based measures of long-term expectations inflation expectations to news about inflation and other macroeconomic variables in the main euro area economies. If long-term inflation expectations are anchored, they should not react to the arrival of news. We find evidence that long-term inflation expectations have started to drift away from the ECB's anchor in the course of 2007. JEL Classification: E44, E52, E58. Key words: ECB, euro-area inflation and inflation compensation, anchors for expectations, news announcements. Download: English (PDF: 871,3 Kb) | paper version: order |
December 2008 |
190 - Modelling Industry-level Ccorporate Credit Risk for the NetherlandsRuud Vermeulen This paper examines corporate credit risks in the Netherlands at the industry-level, addressing two key questions. First, to what extent are corporate credit risks driven by idiosyncratic financial factors or systematic macroeconomic factors? Second, did debt financing in the late 1990s indeed push a large number of firms into bankruptcy in the subsequent years? To this end, bankruptcy rates are regressed on a number of industry-specific financial ratio’s and macroeconomic variables in a panel-regression framework covering six industries from 1992 to 2005. I find that an industry’s bankruptcy rate rises with an increase in leverage and a decrease in profitability and liquidity. Adding macroeconomic variables shows that lower GDP growth, higher interest rates, and an appreciating currency raise credit risks. Applying a model with parameter heterogeneity illustrates that systematic factors primarily account for the overall rise in bankruptcy rates between 2000 and 2003, but that idiosyncratic factors dominate in the worst-affected industries. This includes the IT industry where the build-up of debt was most pronounced and compounded losses. Download: English (PDF: 892,8 Kb) | paper version: order |
December 2008 |
189 - Are Asset Returns Predictable from the National Accounts?Pierre Lafourcade Rational expectations and the logic of budget constraints imply that the predictability of asset returns hinges on the stability and persistence of households' ratio of saving to asset wealth, not of consumption to total wealth. This misalignment undermines the rationale for Lettau and Ludvigson's estimated cay, a stationary but unduly loose approximation to the true but non-mean-reverting cay. Definitional considerations on saving, assets and returns suggest rehabilitating money in the households' flow of funds identity. Accounting for money balances in cay restores stationarity, but at the cost of drastically lower persistence and predictive potential. JEL codes: E01, E21, E41 Download: English (PDF: 1,1 Mb) | paper version: order |
December 2008 |
188 - Can subjective survival expectations explain retirement behaviour?Owen O'Donnell, Federica Teppa and Eddy van Doorslaer Theory predicts a number of mechanisms through which survival expectations influence retirement decisions: a wealth effect of a longer lifespan; an uncertainty effect through the return on savings; a longevity risk effect; and, an adverse selection effect from pooling within pensions. We use data from the first three waves of the English Longitudinal Study of Ageing to test whether the timing of retirement is responsive to subjective survival expectations. Measurement error in reported survival chances is allowed for by instrumenting using parental longevity and smoking behaviour. We find a significant concave relationship between the propensity to retire and survival expectations. Men who are extremely pessimistic about their survival chances are least likely to retire, but after initially rising steeply the propensity to retire falls as survival expectations improve over most of their range. This is consistent with some of the theory. For women, the results are more sensitive to allowing for endogeneity. Surprisingly, the retirement behaviour of the less educated is more sensitive to survival expectations. Keywords: Longevity, Retirement, Pensions, Expectations, Subjective Survival Probability. JEL Classification: D84, D91, H55, J26. Download: English (PDF: 915,7 Kb) | paper version: order |
November 2008 |
187 - A Measure for Credibility: Tracking US Monetary DevelopmentsMaria Demertzis, Massimiliano Marcellino and Nicola Viegi Our objective is to identify a way of checking empirically the extent to which expectations are de-coupled from inflation, how well they might be anchored in the long run, and at what level. This methodology allows us then to identify a measure for the degree of anchorness, and as anchored expectations are associated with credibility, this will serve as a proxy for credibility. We apply this methodology to the US history of inflation since 1963 and examine how well our measure tracks the periods for which credibility is known to be either low or high. Of particular interest to the validity of the measure is the start of the Great Moderation. Following the narrative of a number of well documented incidents in this period, we check how well our measure captures both the evolution of credibility in US monetary policy, as well as reactions to inflation scares. Keywords: Great Inflation, Great Moderation, Anchors for Expectations JEL codes: E52, E58 Download: English (PDF: 1,0 Mb) | paper version: order |
November 2008 |
186 - Europeanization or Globalization? Transnational Wage Bargaining and the Distribution of Activity in European Labor MarketsMaria Demertzis, Andrew Hughes Hallett en Nicolien Schermer This paper investigates the impact of increasing globalization on labor markets, in terms of wage inflation and the distribution of activity across regions. Specifically, we study the effects of aggregation in the labor markets on the distribution of employment and inflationary pressures, where there are differences in market structures and transmission mechanisms underpinned by relatively immobile labor. To demonstrate these ideas, we take the European experience as a “laboratory” to show what can be expected from globalization in the labor markets in practice. Using models of wage leadership vs. locational competition, we examine the extent and strength of aggregation effects on labor market costs using a sample of data from 1983 to 2007 which covers the period of the creation of the Euro. We find that the aggregation effect has decreased significantly since the start of EMU, thereby improving the tradeoff between inflation and unemployment. At the same time, while Germany played an important role in the run-up to EMU in terms of wage leader, its role has now decreased and been replaced by globalization forces. This has led to increased locational competition in terms of wage formation. We demonstrate this with the emerging role of the US as the benchmark for wage setting in Europe. JEL Classification: F15, F42, J60. Keywords: Phillips Curves, aggregation, locational competition, wage leadership. Download: English (PDF: 951,3 Kb) | paper version: order |
November 2008 |
Show publications: [1-15] [16-30] [31-45] [46-60] [61-75] ...
