One of the roots of the recent global financial crisis has been seen in the design of subprime mortgage contract leading to high sensitivity of such type of loans to house price changes. The market of subprime loans, especially in the last years preceding the crisis, has been highly financed by...

SUERF – The European Money and Finance Forum, the Deutsche Bundesbank and the Institute for Monetary and Financial Stability (IMFS) took the opportunity of the first anniversary of this new institution to organise a joint conference in Berlin on 8-9 November 2011. The purpose of this event was...

On 3 July 2015, SUERF organized its sixth joint conference with the Bank of Finland in Helsinki on the subject of liquidity and market efficiency. The one-day program consisted of an opening speech, six presentations, including three keynotes, and a lunchtime address. The present SUERF Study...

We analyze the relationship between firm-specific shocks and aggregate fluctuations. In particular, profitability of firms affected by a negative shock worsens. To the extent that the banks cannot distinguish between aggregate and firm-specific profitability shocks, they will adjust interest...

This paper examines the effects of expansionary technology shocks (shocks that increase labor productivity and factor inputs) as opposed to contractionary technology shocks (shocks that increase labor productivity, but decrease factor inputs). We estimate these two shocks jointly based on a...

Does the mere presence of big banks affect macroeconomic outcomes? Gabaix (2011) shows that idosyncratic shocks can have aggregate effects if the distribution of firm sizes in manufacturing follows a power law distribution. Our contribution is two-fold. First, we expand the theory of granularity...

Expectations matter for economic activity. To the extent that they are fundamentally unwarranted, they represent "undue optimism or pessimism" (Pigou, 1927). In this paper, we identify empirically the effect of undue optimism/pessism ("optimism shocks") on economic activity. In a first step, we...

The detection of business-cycle turning points is usually performed with non-linear discrete-regime models such as binary dependent variable (e.g., probit or logit) or Markov-switching methods. The probit model has the drawback that the continuous underlying target variable is discretized, with...

This paper analyzes the effects of short-time work (i.e., government subsidized working time reductions) on unemployment and output fluctuations. The central question is whether short-time work saves jobs in recessions. In our baseline scenario the rule based component of short-time work (i.e.,...