In this paper we study the effect of institutional reform on the decision to hold risky assets at the extensive and the intensive margin. We therefore make use of the natural experiment of German Division and Reunification and, based on savings bank customer data from German savings banks, study...

We model EU countries' bank ratings using financial variables and allowing for intercept and slope heterogeneity. Our aim is to assess whether “old” and “new” EU countries are rated differently and to determine whether “new” ones are assigned lower ratings, ceteris paribus, than...

A growing literature documents the existence of strategic political reactions to public expenditure between rival jurisdictions. These interactions can potentially create a downward expenditure spiral (‘race to the bottom') or a rising expenditure spiral (‘race to the top'). However, in the...

Measured rates of growth in real per capita income differ drastically depending on the data source. This phenomenon occurs largely because data sets differ in whether and how they adjust for changes in relative prices across countries. Replication of several recent studies of growth determinants...

The perpetual inventory method used for the construction of education data per country leads to systematic measurement error. This paper analyses the effect of this measurement error on GDP regressions. There is a systematic difference in the education level between census data and observations...

This paper studies the aggregate and distributional implications of introducing user fees for publicly provided excludable public goods into a model with consumption and income taxes. The setup is a neoclassical growth model where agents differ in earnings and second-best policy is chosen by a...

This paper conducts a broad-based comparison of iterated and direct multi-step forecasting approaches applied to both univariate and multivariate models. Theoretical results and Monte Carlo simulations suggest that iterated forecasts dominate direct forecasts when estimation error is a...

This paper considers forecast averaging when the same model is used but estimation is carried out over different estimation windows. It develops theoretical results for random walks when their drift and/or volatility are subject to one or more structural breaks. It is shown that compared to...

Donald Trump won the election in 2016 largely because enough voters in three states, all in the Rustbelt, who had voted for Barack Obama in both 2008 and 2012, switched their vote from Democratic to Republican. Economic dislocations played a crucial role in these swing states or democratic...

We propose an analytical framework based on the Kalman Filter to quantify central distortionary effects of product-specific subsidies. In our application, we use time series of foreign and domestic order book levels during and after the temporary installation of a “cash for clunkers” subsidy...