Publications: Discussion Papers [490]

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2018
Bargeld, Giralgeld, Vollgeld: Zur Diskussion um das Geldwesen nach der Finanzkrise
10
2018
Abstract
Der Aufsatz setzt sich kritisch mit verschiedenen Vorschlägen zur Reform des Geldwesens seit der Finanzkrise und mit den zugrundeliegenden Vorstellungen von „Geld“ auseinander. Das Wort „Geld“ wird in dieser Diskussion für verschiedene Dinge und in verschiedenen Bedeutungen gebraucht. Als paradox erweist es sich, dass die Diskussion um die Geldpolitik, auch die Rechtsprechung des Bundesverfassungsgerichts, geprägt ist von der Vorstellung, dass die Ausgabe von Bargeld eine Verbindlichkeit der Zentralbank darstellt, ebenso die Einlagen der Geschäftsbanken bei der Zentralbank, während gleichzeitig die Diskussion um die Rolle der Geschäftsbanken im Geldwesen geprägt ist von der Vorstellung, dass diese durch ihre Kreditvergabe „Geld“ schöpfen und somit die Einlagenfinanzierung von Geschäftsbanken keine Schuldenfinanzierung ist. Beide Vorstellungen sind falsch, die eine, weil die Geldschöpfung der Zentralbank diese zu nichts verpflichtet, die andere, weil die Geldschöpfung der Geschäftsbanken sehr wohl Verpflichtungen schaffen, die Liquiditäts- und Solvenzrisiken mit sich bringen. Der zweite Teil des Aufsatzes geht kritisch auf radikale Reformvorschläge zur Abschaffung des Bargelds und zur Abschaffung der Geldschöpfung der Geschäftsbanken (Vollgeld-Initiative) ein. Erstere unterschätzen die Rolle des Bargelds als Grundlage aller auf Nominalwerte gerichteten Forderungen, u.a. der Forderungen an Geschäftsbanken, letztere unterschätzen die Möglichkeiten und die Risiken einer Substitution von Sichteinlagen durch andere „geldnahe“ Titel, z.B. Geldmarktfondsanteile. Die Vorstellung, man könne durch solche Änderungen die Komplexität der Interdependenz von Geldsystem und Banksystem reduzieren und die Aufgabe der Geldpolitik vereinfachen, ist unrealistisch.
Bubbles and Financial Professionals
09
2018
Abstract
The efficiency of financial markets and their potential to produce bubbles are central topics in academic and professional debates. Yet, surprisingly little is known about the contribution of financial professionals to price efficiency. To close this gap, we run 86 experimental markets with 294 professionals and 384 students. We report that professional markets with bubble-drivers—capital inflows or high initial capital supply—are susceptible to bubbles, but they are significantly more efficient than student markets. In a survey with 245 professionals and students we show that cognitive
Delegated Decision Making and Social Competition in the Finance Industry
08
2018
Abstract
Two aspects of social context are central to the finance industry. First, financial professionals usually make investment decisions on behalf of third parties. Second, social competition, in the form of performance rankings, is pervasive. Therefore, we investigate professionals’ risk-taking behavior under social competition when investing for others. We run online and lab-in-the-field experiments with 965 financial professionals and show that professionals increase their risk taking for others when they lag behind. This effect, however, disappears when professionals’ incentives are flat. Additional survey evidence from 1,349 respondents reveals that professionals’ preferences for high rankings are significantly stronger than the general population’s.
Competition Policy and Sector-Specific Regulation in the Financial Sector
07
2018
Abstract
Reforms of financial regulation after the crisis of 2007-2009 raise the question of what is the relation between financial regulators and competition authorities. Should competition authorities play a role in financial regulation? Should they co-operate with financial regulators? Or should they keep at a distance? The paper gives an overview over some of the issues that are involved in the discussion. Drawing on the experience of the network industries, the first part of the paper discusses the relation between competition authorities and sector-specific regulators more generally. Whereas competition policy involves the application of legal norms involving prohibitions that are formulated in abstract terms, sector-specific regulation involves authorities actually prescribing desired modes of behavior. The ongoing nature of relations makes regulators more prone to capture than competition authorities. In the financial sector, the potential for capture is particularly great because everyone is tempted by the idea that banks should fund their pet projects. Following an overview over the evolution of regulation and competition in the financial industry, the paper discusses various issues that are relevant for competition policy: Technological and regulatory barriers to entry, distortions of competition by explicit or implicit government guarantees, distortions of competition by bailouts making for artificial barriers to exit. Guarantees and bailouts in particular pose special challenges for merger control and for state aid control.
Valuation reports in the context of banking resolution: What are the challenges?
06
2018
Abstract
The paper discusses the problem of valuation in bank resolution. In an overview over the most relevant principles of valuation theory, the paper notes the difficulties inherent in valuing risks and illiquidity in holding non-traded assets. Subsequently, the paper briefly reviews the resolution of Banco Popular Español, and then discusses the need for clarification of the no-investor-worse-off principle, the relation between the price in a sale of business and the presumed outcome in an insolvency procedure, and the difficulties attached to assessing the value of an illiquid asset that is held. The paper concludes with a discussion of the need for time, for valuation and in resolution, warns against a moratorium on withdrawals and payouts, and argues that time pressures would be much reduced if funding in resolution was provided for.
Debarment and Collusion in Procurement Auctions
05
2018
Abstract
This paper explores the impact of debarment as a deterrent of collusion in first-price procurement auctions. We develop a procurement auction model where bidders can form bidding rings, and derive the bidding and collusive behavior under no sanction, debarment and fines. The model's predictions are tested through a lab experiment. We find that debarment and fines both reduce collusion and bids. The deterrent effect of debarment increases in its length. However, the debarment of colluding bidders reduces effciency and increases the bids of non-debarred bidders. The latter suggests that the market size reduction resulting from debarment may trigger tacit collusion.
Evaluating intergenerational persistence of economic preferences: A large scale experiment with families in Bangladesh
04
2018
Abstract
Economic preferences – like time, risk and social preferences – have been shown to be very influential for real-life outcomes, such as educational achievements, labor market outcomes, or health status. We contribute to the recent literature that has examined how and when economic preferences are formed, putting particular emphasis on the role of intergenerational transmission of economic preferences within families. Our paper is the first to run incentivized experiments with fathers and mothers and their children by drawing on a unique dataset of 1,999 members of Bangladeshi families, including 911 children, aged 6-17 years, and 544 pairs of mothers and fathers. We find a large degree of intergenerational persistence as the economic preferences of mothers and fathers are significantly positively related to their children’s economic preferences. Importantly, we find that socio-economic status of a family has no explanatory power as soon as we control for parents’ economic preferences. A series of robustness checks deals with the role of older siblings, the similarity of parental preferences, and the average preferences within a child’s village.
Normative change and culture of hate: An experiment in online environments
03
2018
Abstract
We present an online experiment in which we investigate the impact of perceived social acceptability on online hate speech, and measure the causal effect of specific interventions. We compare two types of interventions: counter-speaking (informal verbal sanctions) and censoring (deleting hateful content). The interventions are based on the belief that individuals infer acceptability from the context, using previous actions as a source of normative information. The interventions are based on the two conceptualizations found in the literature: 1) what do others normally do, i.e., descriptive norms; and 2) what happened to those who violated the norm, i.e., injunctive norms. Participants were significantly less likely to engage in hate speech when prior hate content had been moderately censored. Our results suggest that normative behavior in online conversations might, in fact, be motivated by descriptive norms rather than injunctive norms. With this work we present some of the first experimental evidence investigating the social determinants of hate speech in online communities. The results could advance the understanding of the micro-mechanisms that regulate hate speech. Also, such findings can guide future interventions in online communities that help prevent the spread of hate.
The Proper Scope of Behavioral Law and Economics
02
2018
Abstract
Behavioral law and economics applies the conceptual tools of behavioral economics to the analysis of legal problems and legal intervention. These models, and the experiments to test them, assume an institution free state of nature. In modern societies, the law’s subjects never see this state of nature. However a rich arrangement of informal and formal institutions creates generalized trust. If individuals are sufficiently confident that nothing too bad will happen, they are freed up to interact with strangers as if they were in a state of nature. This willingness dramatically reduces transaction cost and enables division of labor. If generalized trust can be assumed, simple economic models are appropriate. But they must be behavioral, since otherwise individuals would not want to run the risk of interaction.
Cooperation with lists
01
2018
Abstract
Group tasks are often organized by a list: group members state their willingness to contribute by entering their names on a publicly visible, empty list. Alternatively, one could organize the group task by starting with a full list: every group member is already entered on the list and non-cooperators have to cross out their names. Indeed, strong behavioral differences are observed when comparing (otherwise identical) environments with empty and full lists in a laboratory experiment with repeated interaction. Cooperation in the empty list is high in early periods, but is decreasing. In the full list, cooperation starts low, but is actually increasing, surpassing cooperation in the empty list treatment in later periods. Two factors, diffusion of responsibility and unraveling of cooperation seem to drive the results.