Monetär

Question 1

#2 The Cross-Country Incidence of the Global Crisis Research question +Focus

Accepted Answer

Is the cross-country incidence and the severity of the global recession in 08/09 related to the precrisis macroeconomic and financial factors? Focus on the cumulative shift of consumption, output and total domestic demand over 08/09 and how international financial integration has influenced macroeconimic behaviour over the period

Question 2

#2 The Cross-Country Incidence of the Global Crisis Results

Accepted Answer

• manufactured goods are more cyclical – producers suffer more • openness to trade increases the exposure to external demand shocks • financial centers have lower output and demand growth during the crisis • decline in growth performance was larger in countries with high trade openness, higher income per capita, high precrisis credit growth, current account deficits (Fig. 2) • larger pre-crisis current account deficit associated with lower private consumption growth • a greater level of financial development is associated with a smaller growth slowdown ==> trong link between the precrisis financial factors and the severity of the global recession!

Question 3

#3 Understanding the great trade collapse of 2008-09 and the subsequent trade recovery Research questions

Accepted Answer

What is the great trade collapse 08/09 and what caused it? How has the trade recovery progressed so far? What conclusions were drawn about the quantitaive importance of different factors behind the collapse and the recovery?

Question 4

#3 Understanding the great trade collapse of 2008-09 and the subsequent trade recovery Facts/Cause/Conclusion

Accepted Answer

Facts: trade collapse was really severe and steep trade decreased more than GDP global synchronicity of both -Great Recession and Trade Collapse Cause of trade collapse: decline in aggregate demand of goods (including imports) rising trade barriers difficulties in obtaining trade finance Recovery: dramatic demand-driven recovery in 09/10 (only possible because of no trade barriers in place) main reason: positive impact of the economic recovery

Question 5

#5 The unholy trinity of financial contagion Research question

Accepted Answer

Why does financial contagion across borders occur in some cases but not in others?

Question 6

#5 The unholy trinity of financial contagion Facts/Conclusion

Accepted Answer

Facts: Fast and furious contagion - some financial events (devaluation of a currency) starting a chain reaction across/within countries Theories: Herding, Trading,-and financial linkages (most important one) Unholy trinity: capital flow cycle, surprise crisis and anticipated catastrophes, common creditors Conclusion: 3 steps to reduce contagion governement shouldn't overborrow/overspend when capital market is willing to lend design institutional mechanism to discourage procyclical behavior focus on debt contracts with long maturities

Question 7

#6 The great retrenchment (Einsparung/Ausgabenkürzung): international capital flows during the global financial crisis Research questions (4)

Accepted Answer

(1) What lies behind this great retrenchment in capital flows? --> drivers and causes (2) Did flows fall evenly across countires and categories of flows?? --> homo and heterogenity (3) Can we link the great retrenchment to financial and macroeconomic behaviours of countries? (4) Is the trend towards rising financial globalization over?

Question 8

# 6 The great retrenchment: international capital flows during the global financial crisis Answers of research question (4) (1) What lies behind this great retrenchment in capital flows? --> drivers and causes (2) Did flows fall evenly acro

Accepted Answer

(1) banking activity and deleveraging (Schuldenabbau) (2) advanced vs emerging economics banking flows vs. rest (3) financial integration, net liabilities in debt instruments growth and fiscal outlook, growth in trading partners (4) financial deepening within countries rising international portfolio allocations increased cross-border activity by international financial institutions

Question 9

#7 Credit conditions and recoveries from financial crises Research question

Accepted Answer

Do stressed credit conditions affect the pace (Geschwindigkeit) of recoveries from recessions, associated with a financial crisis?

Question 10

#7 Credit conditions and recoveries from financial crises Conclusion

Accepted Answer

- Due to stressed credit conditions, financial crisis tend to have a longer duration compared to other types of crisis. - the recovery after a financial crisis is slower, with less growth compared to other kinds of crisis - also recovery differs between sectors, because some firms have easier access to finance and can use other forms of external finance. - industries that rely more on external finance grow more slowly during recoveries with stressed credit conditions - Compared to other crisis a financial crisis is a costly event - There is a more permanent shock after a financial crisis, because people lose trust in banks and because banks work with tighter credit conditions

Question 11

#8 Financial Crises and the Multilateral Response Research question

Accepted Answer

Why do crises become more frequent? Do IMF-support really help the economies? How do other econonmies respond to national crises?

Question 12

#8 Financial Crises and the Multilateral Response Answers: (1) Why do crises become more frequent? (2) Do IMF-support programs really help the economies? (3) How do other economies respond to national crises?

Accepted Answer

(1) due to financial liberalizations (also larger financial losses) (2) can be very helpful but need to be dapted over time because the states of the economies change over time (depression-->stagnation-->boom (hopefully) (3) neighbour countries affected most, fear of contagion but willing to help

Question 13

#9 European Imbalances Research question

Accepted Answer

Which factors led to imbalances in the euro area, which resulted in the current-balance-of payment crisis? How might rebalancing be achieved? How can fiscal policy accelerate (beschleunigen) this process?

Question 14

#9 European Imbalances Answers of the research question: (1) Which factors led to imbalances in the euro area, which resulted in the current balance-of-payment crisis? (2) How might rebalancing be achieved?

Accepted Answer

(1) Periphery: Current account deficit house price bubbles investment bubbles Core: CA surplus low investment declining house prices (2) Capital market no longer willing to finance their CA deficits --> periphery countries need to devalue --> gain more competitiveness and reduce dependence of foreign credits => Question now: External devaluation or Internal devaluation? ==> Internal over External is preferred!!

Question 15

#10 China's Macroeconomic Imbalances Research question

Accepted Answer

(1) How did these two imbalances (Expenditure and External imbalances) come about (zustande kommen)? (2) Can the imbalances be sustained (aufrecht erhalten) or will they unwind(rückgängig machen/kompensieren) of their own accord?

Question 16

#10 China' s Macroeconomic imbalances Answers (1) How did these two imbalances (Expenditure and External imbalances) come about (zustande kommen)? (2) Can the imbalances be sustained (aufrecht erhalten) or will they unwind(rückgängig mach

Accepted Answer

(1) expenditure: high investments and low consumption --> imbalance between expenditure and production external: positive NX (X>IM) due to rise in competitiveness (China joins 2001 the WTO->integrated to the global market) and a fixed exchange rate (2) China 2 advantages: Excess capacity (Überkapazität) Export surplus ==> China will stay the most powerful exporter of the world (long term) if they settle the imbalances

Question 17

#11 The eurozone crisis: how banks and sovereigns came to be joined at the hip Research question

Accepted Answer

How can banks and sovereigns be joined at a hip/ How are banking crisis and sovereign debt crisis intertwined?

Question 18

#11 the eurozone crisis - how banks and sovereigns came to be joined at the hip Answer:

Accepted Answer

explained by observing the rise and dispersion of sovereign spreads concerning different phases --> eurozone crisis took shape on an offshoot of the global crisis --> rescue of bear stearns 2008 --> change in the financial sector --> increase of the weakness of domestic banks --> sovereign spreads raise more and more -->nationalization of anglo irish -->the fates of financial sectors and sovereigns intertwined --> although nationalization brought short boom --> rapid increase in sovereign and banking insecurities ensued

Question 19

#12 Sovereign spreads in the eurozone: which prospects for a Eurobond? Research questions

Accepted Answer

What are the costs and benefits of eurobonds? Do we need eurobonds or not?

Question 20

#12 Sovereign spreads in the eurozone: which prospects for a Eurobond? Answer: Do we need eurobonds or not?

Accepted Answer

depends on whether yield spreads reflect market sentiment and contagion or the market’s efficient assessment of fiscal fundamentals Important pro arguments: a Eurobond jointly guaranteed by eurozone Member States could ensure market access and better borrowing conditions to weaker Member States and does not only reduce their risk of default but also the risk of crisis propagation to States with relatively better fundamentals either from contagion or interdependences in the real and financial sectors (also wegen der hohen Ansteckungsgefahr in Europa könnten solche Eurobonds durchaus sinnvoll sein inden z.B. die PIIGS Länder billiger zu Geld kommen und dadurch deren Ausfallsrisiko reduziert wird, was sich dann wieder positive auf das Ausfallsrisiko anderer Euroländer auswirkt) Aufgrund der Irrationalität der Finanzmärkte und der hohen Ansteckungsgefahr in der Eurozone sind Eurobonds laut den Autoren aus einer ökonomischen Sicht gerechtfertigt und könnten als allgemeine Absicherung vor Krisen und Krisenausbreitungen dienen.

Question 21

#12 Sovereign spreads in the eurozone: which prospects for a Eurobond? Answer: Do we need eurobonds or not?

Accepted Answer

depends on whether yield spreads reflect market sentiment and contagion or the market’s efficient assessment of fiscal fundamentals Important pro arguments: a Eurobond jointly guaranteed by eurozone Member States could ensure market access and better borrowing conditions to weaker Member States and does not only reduce their risk of default but also the risk of crisis propagation to States with relatively better fundamentals either from contagion or interdependences in the real and financial sectors (also wegen der hohen Ansteckungsgefahr in Europa könnten solche Eurobonds durchaus sinnvoll sein inden z.B. die PIIGS Länder billiger zu Geld kommen und dadurch deren Ausfallsrisiko reduziert wird, was sich dann wieder positive auf das Ausfallsrisiko anderer Euroländer auswirkt) As market irrationality and contagion play a significant role in the pricing of default risk, issuance of Eurobonds is economically justified. (Aufgrund der Irrationalität der Finanzmärkte und der hohen Ansteckungsgefahr in der Eurozone sind Eurobonds laut den Autoren aus einer ökonomischen Sicht gerechtfertigt und könnten als allgemeine Absicherung vor Krisen und Krisenausbreitungen dienen)

Question 22

#4 Exchange rate volatility, financial constraints and trade Research questions

Accepted Answer

The impact of real echange rate volatility on exporting behavior The way financial constraints and financial development influence exporting behavior

Question 23

#4 Exchange rate volatility, financial constraints and trade Research questions

Accepted Answer

The impact of real echange rate volatility on exporting behavior The way financial constraints and financial development influence exporting behavior

Question 24

#4 Exchange rate volatility, financial constraints and trade Results

Accepted Answer

export decreases with ER-volatility magnitude of the effect depends on the extent of financial constraint --> stronger for financially vulnerable firms and weaker with higher financial development development of credit markets would help firms to overcome additional export sunk costs related to rer volatility

Monetär (Subject) / Monetär (Lesson)