Book and Chapter on Environmental Finance and Sustainability out!

Posted on December 7, 2015 by Harald Sander

Just in time to the United Nations Conference on Climate Change the Handbook of Environmental and Sustainable Finance, edited by Vikash Ramiah and Greg Gregorio has been published to which I have contributes a chapter on “What Holds Back Eco-Innovations? A “Green Growth Diagnostics” Approach”.

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New Working Paper: Deposit Insurance in Times of Crises: Safe Haven or Regulatory Arbitrage?

Posted on October 14, 2015 by Harald Sander

In a new working paper, co-authered with Stefanie Stefanie Kleimeier and Shusen Qi, we examine the impact of deposit insurance (DI) schemes on bilateral cross-border deposits. Our results suggest that not only the existence of explicit DI, but also DI design features, which reflect its credibility have an impact on cross-border deposits, and that the relative differences between reporting and depositor countries also matter. More importantly, in times of crises, depositors rely more on DI in general, but DI acts primarily as a “Safe Haven” rather than enabling “Regulatory Arbitrage”. During the global financial crisis of 2008/09 the emergency actions of bank country governments, which supply and maintain these safe havens, have led to substantial relocations of cross-border deposits.

The full text version is available via SSRN or directly via the website of the GLOBUS Institute.

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The use of overly intrusive conditionality in Greece is threatening the European project

Posted on May 31, 2015 by Harald Sander

A Greek default may be only a matter of weeks away unless an agreement on the reform programme between Greece and “the institutions” will be reached. But Greece demands to renegotiate the whole programme, while the institutions, fearing a precedent, insist on sticking to the obligations. Thus, a default could simply result from a fundamental disagreement on the institutions’ conditionality, finally triggered by a deliberate decision of the creditors.

Prominent economists like Barry Eichengreen, Paul Krugman, or those organised in the Eiffel Group have recently urged for a less intrusive conditionality and more self-responsibility of debtors, though with varying intensity and differing arguments. What is wrong in asking Greece to fulfil its obligations as articulated forcefully by German finance minister Wolfgang Schäuble? Or it should we agree with Yanis Varoufakis who blames austerity as the only deal-breaker?

Against this background, this piece for LSE EUROPE I argues that using deeply intrusive policy conditionality is a flawed approach in the context of European integration for at least three reasons: first and most evidently, the institutions’ conditionality has often proven dysfunctional and too painful for debtor countries; second, the use of extensive policy conditionality is an ad-hoc approach with unequal burden sharing between debtors and creditors; third, too intrusive conditionality is in conflict with democratic decisions in debtor countries, which can put the idea of a Europe in which nations participate as equals in jeopardy.

Read more here…

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The ‘Juncker plan’ does not offer a genuine path to boosting the Eurozone’s recovery

Posted on March 22, 2015 by Harald Sander

The €315 billion European investment initiative – the so called ‘Juncker plan’ – was accepted by EU finance ministers on 10 March and is expected to go operational as a new “European Fund for Strategic Investment” (EFSI) by mid-2015. Is this finally good news for Eurozone recovery? Unfortunately, the Juncker plan has been widely misunderstood as a recovery programme for the crisis-ridden Eurozone: it is in fact no more and no less than a (welcome) investment initiative for Europe. The Juncker plan should be welcomed as a long-run strategy to address investment weakness and to promote (green) growth in Europe. But since Lord Keynes constantly reminds us that in the long run we are all dead, it must be made crystal clear that the plan does not solve the Eurozone’s current economic problems.

In this piece, written for LSE EUROPP, I review the pro and cons of the Juncker initative as an investment plan and discuss why it will not boost the Eurozone’s recovery. I conclude that a fiscal pillar of a Eurozone recovery plan would look quite different and there is widespread consensus among many economists as to what it would entail: fiscal stimulus from countries that can afford it, the return of the golden rule of public finance at the national level, which allows for debt finance of public investment if required, thus giving more fiscal leeway beyond the Maastricht rules, and an additional boost in European/Eurozone public investment.

Read more…

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Quantitative easing: Germans have nothing to lose but their fears!

Posted on January 22, 2015 by Harald Sander

The European Central Bank is due to decide whether and how to undertake quantitative easing (QE) via large-scale purchases of government debt on secondary markets. For Germany – as the Eurozone’s largest economy and one with a decidedly conservative monetary stance – this seems to be the ultimate nightmare. But the markets are already betting that QE will come. With the Eurozone sitting close to deflation, the ECB must react to reach its inflation target of 2%. What are the German fears and do they withstand serious scrutiny?

In this piece, written for The Conversation, I discuss the validity of the these fears and their potentially negative impact on the details of a QE program.

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On the road to Asia: why Germany and the Eurozone want a trade deal with Australia

Posted on January 7, 2015 by Harald Sander

Shortly after the G20 summit in Brisbane, German Chancellor Angela Merkel and Australian Prime Minister Tony Abbott announced initiatives to increase trade and investment relations between Germany and Australia. Both parties agreed to set up a joint working group to identify future initiatives. What can we reasonably expect from it?

In this piece, written for The Conversation, I discuss three major motivations behind the initiative from the German and European point of view.

Read  more… 

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The case for using public investment to boost growth in the Eurozone is overwhelming

Posted on October 28, 2014 by Harald Sander

One year after the Eurozone’s much hyped ‘recovery’, signalled by some green shoots in the second quarter of 2013, the region’s quarterly economic growth is flat again. Even Germany’s growth prospects have been revised downward, and recent IMF estimates point to an almost 40 per cent chance of recession for the Eurozone. The main reason is the lack of determination of policy makers to end the Eurozone crisis. Will they continue to muddle through and pave the way for decades of low growth? Or will governments and the European Commission do ‘whatever it takes’ and change the fiscal stance as demanded recently also by ECB president Mario Draghi?

In this piece, written for LSE EUROPP, I review three different explanations for the lack of recovery in the Eurozone, and argue that there is now an overwhelming case or using public investment to boost growth in the Eurozone, both at the regional and at the national level.

However, while economically the case for public investment is crystal clear, I also note that policy makers need now to find ways to communicate to their electorates that it is time to change both faulty narratives about the Eurozone crisis, debts and deficits, and faulty policies.

Read more…

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Draghi calls for spending to rescue Euro – but will governments do ‘whatever it takes’?

Posted on September 7, 2014 by Harald Sander

In July 2012 European Central Bank president Mario Draghi famously announced that the ECB would do “whatever it takes” to rescue the Euro. And he added: “Believe me, it will be enough.” In fact, it has so far been enough to avoid the break-up of the eurozone. It has, however, not been enough to push the eurozone out of the recession.

On August 22, 2014, Draghi again suggested something remarkable, which has not been in his initial official script: fiscal policy should take a much more active role in ending the recession.

Does the eurozone need a different fiscal policy? And if yes, will European politicians do whatever it takes? And will it be enough?

In this column, written for The Conversation I will argue, that Draghi’s call is ultimately a call for changing Eurozone governance also with respect to fiscal policy.

Read more…

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Comparative Economic Studies dedicates a special issue to global banking symposium

Posted on June 11, 2014 by Harald Sander

Comparative Economic Studies dedicates a special issue to the Maastricht symposium “Global Banking, Financial Stability, and Post-Crisis Policy Challenges” in the June 2014 issue. In this special issue the panelists reflect on the symposium discussions and share their views on the lessons learned from the financial crisis of 2008 with the broader audience in the profession as well as with policy makers and an interested civil society. Many thanks are due to the contributors and the journal editors, in particular Paul Wachtel. The following papers are included in the special issues :

Harald Sander and Stefanie Kleimeier, Introduction: Global Banking, Financial Stability, and Post-Crisis Policy Challenges Symposium, Comparative Economic Studies 56 (2014): 253-256.

Robert McCauley, De-internationalizing Global Banking? Comparative Economic Studies 56 (2014): 257-270.

Ralph De Haas, The Dark and the Bright Side of Global Banking: A (Somewhat) Cautionary Tale from Emerging Europe, Comparative Economic Studies 56 (2014): 271-282. 

Freddy Van Den Spiegel, Can We Make Global Banks Safer? A Practitioner’s View, Comparative Economic Studies 56 (2014): 283-294.

Brian M Lucey, Charles Larkin and Constantin Gurdgiev, Learning from the Irish Experience – A Clinical Case Study in Banking Failure, Comparative Economic Studies 56 (2014): 295-312

Ansgar Belke and Florian Verheyen, The Low-Interest-Rate Environment, Global Liquidity Spillovers and Challenges for Monetary Policy Ahead, Comparative Economic Studies 56 (2014): 313-334.

 

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Cultural borders limit financial integration during financial crises times

Posted on May 24, 2014 by Harald Sander

In a recent working paper, co-authored with Stefanie Kleimeier and Sylvia Heuchemer, we provide new evidence on the “resurgence of cultural borders in international finance during the financial crisis”. We show that cultural differences across countries act as invisible borders that limit financial integration in European cross-border depositing. This limiting effect has become weaker during the first years after the Euro notes went into circulation, most likely indicating some “Europhoria”. However, the financial crisis, and in particular the Euro crisis, has led to a strong resurgence of the limiting role of cultural differences.

Our results suggest that integrating cultural variables into theoretical and empirical research can enhance our understanding of financial retrenchment during financial crises and the often-observed over-optimism during stable periods. With respect to political implications, the study suggests that policymakers should acknowledge that cultural barriers have the potential to limit the effectiveness of integration policies. Nevertheless, the paper also indicates that they have effective instruments at their disposal: building confidence in institutions to overcome cultural borders.

 

 

 

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