In 2001, government guarantees for savings banks in Germany were removed following a law suit. We use this natural experiment to examine the effect of government guarantees on bank risk taking, using a large data set of matched bank/borrower information. The results suggest that banks whose...

We propose a new method for measuring the quality of banks credit portfolios. This method makes use of information impounded in bank share prices by exploiting differences in their sensitivity to credit default swap spreads of borrowers of varying quality. The method allows us to derive a credit...

Bayesian model averaging attempts to combine parameter estimation and model uncertainty in one coherent framework. The choice of prior is then critical. Within an explicit framework of ignorance we define a ‘suitable’ prior as one which leads to a continuous and suitable analog to the...

This paper discusses the joint estimation of the long run equilibrium coe cients and the parameters governing the short run dynamics of a fully parametric cointegrated system formulated in continuous time.The model allows the stationary disturbances to be generated by a stochastic di erential...

This article is concerned with the estimation of linear regression models with uncertainty about the choice of the explanatory variables. We introduce the Stata commands bma and wals which implement, respectively, the exact Bayesian Model Averaging (BMA) estimator and the Weighted Average Least...

The question whether exchange rate risk a¤ects trade has received considerable attention in the literature. However, the conclusions are still mixed. This paper analyzes why it is so difficult to obtain a clear answer from time series analyses. We use data on bilateral aggregate US exports to...

Empirical growth research faces a high degree of model uncertainty. Apart from the neoclassical growth model, many new (endogenous) growth models have been proposed. This causes a lack of robustness of the parameter estimates and makes the determination of the key determinants of growth...

This paper proposes to estimate the effects of monetary policy shocks by a new \agnostic" method, imposing sign restrictions on the impulse responses of prices, nonborrowed reserves and the federal funds rate in response to a monetary policy shock. No restrictions are imposed on the response of...

In this paper we confront sensitivity analysis with diagnostic testing.Every model is misspecified, but a model is useful if the parameters of interest (the focus) are not sensitive to small perturbations in the underlying assumptions. The study of the e ect of these violations on the focus is...