Wealth shocks, credit-supply shocks, and asset allocation:evidence from household and firm portfolios

We use a unique dataset with bank clients’ security holdings for all German banks to examine how macroeconomic shocks affect asset allocation preferences of households and non-financial firms. Our analysis focuses on two alternative mechanisms which can influence portfolio choice: wealth shocks, which are represented by the sovereign debt crisis in the Euro area, and credit-supply shocks which arise from reductions in borrowing abilities during bank distress. While households with large holdings of securities from stressed Euro area countries (Greece, Ireland, Italy, Portugal, and Spain) de-crease the degree of concentration in their security portfolio as a result of the Euro area crisis, non-financial firms with similar levels of holdings from stressed Euro area countries do not. Credit-supply shocks at the bank level result in lower concentration, for both households and non-financial corporations. Only shocks to corporate credit bear ramifications on bank clients’ portfolio concentration. Our results are robust to falsification tests, and instrumental variables estimation.

Wealth shocks, credit-supply shocks, and asset allocation:evidence from household and firm portfolios

We use a unique dataset with bank clients’ security holdings for all German banks to examine how macroeconomic shocks affect asset allocation preferences of households and non-financial firms. Our analysis focuses on two alternative mechanisms which can influence portfolio choice: wealth shocks, which are represented by the sovereign debt crisis in the Eurozone, and credit-supply shocks which arise from reductions in borrowing abilities during bank distress. We document het- erogeneous responses to these two types of shocks. While households with large holdings of secu- rities from stressed Eurozone countries (Greece, Ireland, Italy, Portugal, and Spain) decrease the degree of concentration in their security portfolio as a result of the Eurozone crisis, non-financial firms with similar levels of holdings from stressed Eurozone countries do not. Credit-supply shocks at the bank level (caused by bank distress) result in lower concentration, for both households and non-financial corporations. We also show that only shocks to corporate credit bear ramifications on bank clients’ portfolio concentration, while shocks in retail credit are inconsequential. Our results are robust to falsification tests, propensity score matching techniques, and instrumental variables estimation.

Directional mobility of debt ratings

In this paper we describe a method to decompose a well-known measure of debt ratings mobility into it's directional components. We show, using sovereign debt ratings as an example, that this directional decomposition allows us to better understand the underlying characteristics of debt ratings migration and, for the case of the data set used, that the standard Markov chain model is not homogeneous in either the time or cross-sectional dimensions. We find that the directional decomposition also allows us to sign the change in quality of debt over time and across sub-groups of the population.

László Csaba, Crisis in economics? Studies in European political economy. Budapest: Akadémiai Kiadó , 2009, 224pp., e35.10 h/b.

Book review

The East Asian crisis and financing corporate investment:is there a cause for concern?

In view of limited empirical evidence concerning the microeconomic aspects of corporate financial problems in the East Asian countries in the 1990s, this paper analyses the financing pattern of corporate investment in Indonesia, Korea, Malaysia, and Thailand. The analysis is based on an unbalanced panel of listed firms during the period 1989–1997. By using firm size, retention practices, and leverage as three different indicators of financial constraint on firm investment, we have examined the role of various internal and external financing variables on corporate investment in the sample countries. Results indicate that a large number of sample firms depend on free cash flow, especially in Indonesia; there was also a steady increase in debt-equity ratio in all countries. There were signs of agency costs in the use of cash flow in Korea and Malaysia and also in the use of debt financing in Malaysia and Thailand. There was also sign of over-investment among the Thai firms during 1994–1997 though it appears very little if at all was done to redress it in time.

Have the GIPSI settled down? Breaks and multivariate stochastic volatility models for, and not against, the European financial integration

We investigate the integration of the European peripheral financial markets with Germany, France, and the UK using a combination of tests for structural breaks and return correlations derived from several multivariate stochastic volatility models. Our findings suggest that financial integration intensified in anticipation of the Euro, further strengthened by the EMU inception, and amplified in response to the 2007/2008 financial crisis. Hence, no evidence is found of decoupling of the equity markets in more troubled European countries from the core. Interestingly, the UK, despite staying outside the EMU, is not worse integrated with the GIPSI than Germany or France. © 2013 Elsevier B.V.

The European Union and global governance:a handbook

The role of the European Union in global politics has been of growing interest over the past decade. The EU is a key player in global institutions such as the World Trade Organization (WTO) and NATO. It continues to construct an emerging identity and project its values and interests throughout contemporary international relations. The capacity of the EU to both formulate and realise its goals, however, remains contested. Some scholars claim the EU’s `soft power’ attitude rivals that of the USA’s `hard power’ approach to international relations. Others view the EU as insufficiently able to produce a co-ordinated position to project upon global politics. Regardless of the position taken within this debate, the EU’s relationship with its external partners has an increasingly important impact upon economic, political and security concerns on an international level. Trade negotiations, military interventions, democracy promotion, international development and responses to the global economic crisis have all witnessed the EU playing a central role. This has seen the EU become both a major force in contemporary institutions of global governance and a template for supranational governance that might influence other attempts to construct regional and global institutions. This volume brings together a collection of leading EU scholars to provide a state-of-the-art overview covering these and other debates relating to the EU’s role in contemporary global governance. The Handbook is divided into four main sections: Part I: European studies and global governance – provides an overview and critical assessment of the leading theoretical approaches through which the EU’s role in global governance has been addressed within the literature. Part II: Institutions – examines the role played by the key EU institutions in pursuing a role for the EU in contemporary international relations. Part III: Policy and issue areas – explores developments within particular policy sectors, assessing the different impact that the EU has had in different issue areas, including foreign and security policy, environmental policy, common commercial policy, the Common Agricultural Policy, development policy, accession policy, the Neighbourhood Policy and conflict transformation. Part IV: The global multilevel governance complex and the EU – focuses on the relationship between the EU and the institutions, regions and countries with which it forms a global multilevel governance complex, including chapters on the EU’s relationship with the WTO, United Nations, East Asia, Africa and the USA.

Rebuilding the city:a focus for European industrial policy?

While the city offers the potential of dynamic agglomeration economies which can spur the achievement of economic growth and act as an engine that powers the economy, it often appears as a centre of crisis in mature ‘developed’ regions and countries, even before the most recent economic downturn. This paper attempts to reconcile these two seemingly paradoxical observations by bringing in a strategic choice perspective to explain how concentrated strategic decision making in the corporate entities that dominate our cities has diminished the very diversity that Jacobs identified as being essential for cities to flourish and develop. The industrial policy implications for cities are subsequently explored in terms of building new industrial districts, developing high skill ecosystems, and fostering multinational webs of cities, all with the aim of ensuring the conditions exist in cities for creativity and development to flourish, notably a diverse and democratic economic system.

Germany at a crossroads:the gathering crisis sharpens

In our book, The Gathering Crisis: The 2005 Federal Election and the Grand Coalition (Miskimmon et al, 2009), we argued that the German political and economic systems faced a number of serious challenges. The resource crunch in public finances has been particularly problematic in a country used to consensus politics- money had previously been used to oil the wheels of German federalism (and European integration). In the light of recent events- the global financial crisis, the Eurozone crisis, the 2009 federal election- we claim that the crisis in the German political economy has sharpened. The task of Angela Merkel and subsequent chancellors will be to navigate the new era, ensuring that Germany remains a leading political and economic power in the European Union and beyond. © 2010 Macmillan Publishers Ltd.

Invalid ballots and the “crisis of representative democracy”:re-inventing protest at the 2012 Serbian elections

This article examines the ways in which invalidated electoral ballots may be articulated as acts of protest. We argue that some instances of ballot invalidation can be understood as protest and as a reaction to the broader “crises of democracy” which have also spurred on movements such as Occupy. We focus on Serbia’s 2012 elections as a case study, given the high increases in invalid ballots and calls for collective action calling for ballot invalidation. We discuss protest movements which coalesced around this election, calling for electoral ballot invalidation and using social media to frame this activity as protest. Through our case study, we explore the ways in which the ballot can become a tool of contention, and how protest can be expressed through an engagement with extant structures and institutions.

Regulating audit beyond the crisis:a critical discussion of the EU green paper

With the European Commission making global leadership claims in the field of audit regulation, the content of its 2010 Green Paper on ‘Audit Policy: Lessons from the Crisis’ warrants careful scrutiny. Important issues raised in the Green Paper include regulatory oversight, competition in the audit market, the dangers of having very few firms with the capacity to audit global transnational corporations, professional judgement, innovative audit practices and, last but not least, social responsibility. This article analyses the principal perspectives and assumptions underpinning the construction of the Green Paper. The aims are threefold: to enhance understanding of the contemporary regulatory mindset of the European Commission, contribute to policy debate and inspire future research.

The fevered novel from Balzac to Bernanos:frenetic Catholicism in crisis, delirium and revolution

Book Review: The Fevered Novel from Balzac to Bernanos: Frenetic Catholicism in Crisis, Delirium and Revolution. By Francesco Manzini. (IGRS Books). London: Institute of Germanic and Romance Studies, 2011. 264 pp. Full text: This monograph is an important and compelling account of a novelistic tradition that stretches from Georges Bernanos back to Balzac, by way of Léon Bloy, Joris-Karl Huysmans, and Barbey d'Aurevilly. Depending on a master plot that evokes Maistrean themes of blood, sacrifice, and redemption, working in a feverish female body, this canon combines Romantic freneticism and anti-Enlightenment religion to create a compound that Francesco Manzini calls ‘frenetic Catholicism’. The theme of fever, Manzini tells us, was commented on by Huysmans in writing about Barbey d'Aurevilly. When André Gide read Bernanos's Sous le soleil de Satan, he dismissed it as a rehash of Bloy and Barbey. In this present work Manzini aims to make us aware once more of the gradually intensifying themacity of fever in writings more usually classed in theologo-literary categories. His analysis encompasses (though is not restricted to) Balzac's Ursule Mirouët, Barbey d'Aurevilly's Un prêtre marié, Huysmans's En rade, Bloy's Le Désespéré and La Femme pauvre, and Bernanos's Nouvelle histoire de Mouchette. Thus, as Manzini argues in his conclusion, between the freneticism of the Romantics and that of the surrealists this corpus represents an intermediary wave of freneticism, foregrounding fever, hyperconsciousness, dreamlike episodes, and female automatism. Manzini's knowledge of, and ease amidst, the sources is constantly impressive. Much like Richard Griffiths before him (The Reactionary Revolution: The Catholic Revival in French Literature, 1870–1914 (London: Constable, 1966)), he has read both the bad novels and the good ones. For that we are in his debt. His commentary thrives on the oddities of his subjects. He points quite rightly to the peculiar hubris of writers whose contempt for the secular excesses of scientism leads them down a cul-de-sac of primitive medical quackery. Likewise, he underlines how Zola's attempt to unwrite Barbey — exorcising the former's anti-Romantic animus, as much as scratching his anticlerical itch — leads him to recapitulate Barbey's religious authoritarianism in the secular vernacular of patriarchy. Les espèces qui se rapprochent se mangent, to paraphrase Bernanos (Les Grands Cimetières sous la lune). In spite of all Manzini's tightly organized analysis, however, this reader wonders whether the fevered novel ‘best allowed contemporaries — and now […] literary critics and historians — to imagine the issues at stake in the amorphous scientistic, religious, and political debates’ of the period (p. 17). Below the ideological clashes of nineteenth-century science and religion, the two contending dynamics of anthropocentrism and theocentrism are attested and, it can be argued, even more perfectly dramatized in other Catholic literature (Charles Péguy's poetry, for example). In these terms, what distinguishes the Catholic frenetics from their Romantic or surrealist counterparts is that their fevered subject represents an attempt to build a road out of what Canadian philosopher Charles Taylor calls ‘buffered’ individuality, and back towards the theocentric porous subject who is open to divine influence. By way of minor corrections, nuns do not take holy orders (p. 94) but make religious profession by taking vows. Also, the last Eucharistic host is not extreme unction (p. 119) but viaticum.