Modern trade theory emphasizes firm-level productivity differentials to explain the cross-border activities of non-financial firms. This study tests whether a productivity pecking order also determines international banking activities. Using a novel dataset that contains all German banks’...

The paper derives the monetary policy reaction function implied by money growth targeting. It consists of an interest rate response to deviations of the inflation rate from target, to the change in the output gap, to money demand shocks and to the lagged interest rate. In the second part, it is...

A crucial condition for the existence of a credit channel through bank loans is that monetary policy should be able to change bank loan supply. This paper contributes to the discussion on this issue by presenting empirical evidence from dynamic panel estimations based on a dataset that comprises...

Credit risk associated with interbank lending may lead to domino effects, where the failure of one bank results in the failure of other banks not directly affected by the initial shock. Recent work in economic theory shows that this risk of contagion depends on the precise pattern of interbank...

This paper provides new evidence on the foreign direct investment stocks of German firms. We use firm-level data for the years 1990-2000 to describe the regional and sectoral patterns of German FDI through gravity-type equations. We provide evidence on the patterns of FDI by sector, by size of...