EconStor Collection:
https://hdl.handle.net/10419/195
2024-03-28T23:17:23ZSovereigns going bust: estimating the cost of default
https://hdl.handle.net/10419/169314
Title: Sovereigns going bust: estimating the cost of default
Authors: Kuvshinov, Dmitry; Zimmermann, Kaspar
Abstract: This paper estimates the cost of sovereign default by using novel econometric methods – dynamic local projections applied to a sample that is re-randomised using inverse propensity score weights. We find that the impact of default on output is negative, significant and persistent – around 2.8% of GDP on impact and 4.8% at peak. The downturn is driven by sharp falls in investment, accompanied by a collapse in gross trade. The cost rises dramatically if the default is followed by a systemic banking crisis, peaking at 9.5% GDP. Our findings suggest that while autarky costs play an important role, sovereign-banking spillovers are central to the cost of default.2016-01-01T00:00:00ZPolitical Selection and the Concentration of Political Power
https://hdl.handle.net/10419/128620
Title: Political Selection and the Concentration of Political Power
Authors: Grunewald, Andreas; Hansen, Emanuel; Pönitzsch, Gert
Abstract: This paper studies the effects of power-concentrating institutions on the quality of political selection, i.e., the voters' capacity to identify and empower well-suited politicians. In our model, candidates are heterogeneous in two unobservable quality aspects: ability and public-spiritedness. As voters can only base their ballots on the candidates' binding policy proposals, low-quality candidates face incentives to mimic their high-quality counterparts and a selection problem arises. We nd that powerconcentrating institutions amplify this selection problem as they increase electoral stakes and thus the incentives for mimicking. However, they also allocate more political power to the voters' preferred candidate. As a consequence, the optimal institutional setting depends on the con ict of interest between voters and candidates. The larger the con ict of interest, the smaller is the level of power concentration that maximizes voter welfare. A complete concentration of power in the hands of the election winner is optimal if and only if the con ict of interest is small.2015-01-01T00:00:00ZHousehold Debt and Crises of Confidence
https://hdl.handle.net/10419/128621
Title: Household Debt and Crises of Confidence
Authors: Hintermaier, Thomas; Koeniger, Winfried
Abstract: We show that the size of collateralized household debt determines an economy’s vulnerability to crises of confidence. The house price feeds back on itself by contributing to a liquidity effect, which operates through the value of housing in a collateral constraint. Over a specific range of debt levels this liquidity feedback effect is strong enough to give rise to multiplicity of house prices. In a dynamic setup, we conceptualize confidence as a realization of rationally entertainable belief-weightings of multiple future prices. This delivers debt-level-dependent bounds on the extent to which confidence may drive house prices and aggregate consumption.2015-01-01T00:00:00ZExpectation-Based Loss Aversion and Strategic Interaction
https://hdl.handle.net/10419/128617
Title: Expectation-Based Loss Aversion and Strategic Interaction
Authors: Dato, Simon; Grunewald, Andreas; Müller, Daniel
Abstract: This paper provides a comprehensive analysis regarding strategic interaction under expectation-based loss-aversion. First, we develop a coherent framework for the analysis by extending the equilibrium concepts of Koszegi and Rabin (2006, 2007) to strategic interaction and demonstrate how to derive equilibria. Second, we delineate how expectation-based loss-averse players differ in their strategic behavior from their counterparts with standard expected-utility preferences. Third, we analyze equilibrium play under expectation-based loss aversion and comment on the existence of equilibria.2015-01-01T00:00:00Z