Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractEmpirical research over the last decade has uncovered predictive relationships between the slope of the yield curve and subsequent real activity and inflation. Some of these relationships are highly significant, but their theoretical motivations suggest that they may not be stable over time. We use recent econometric techniques for break testing to examine whether the empirical relationships are in fact stable. We consider continuous models, which predict either economic growth or inflation, and binary models, which predict either recessions or inflationary pressure. In each case, we draw on evidence from Germany and the United States. Models that predict real activity are more stable than those that predict inflation and binary models are more stable than continuous models. The model that predicts recessions is stable over our full sample period in both Germany and the United States.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractEmpirical research over the last decade has uncovered predictive relationships between the slope of the yield curve and subsequent real activity and inflation. Some of these relationships are highly significant, but their theoretical motivations suggest that they may not be stable over time. We use recent econometric techniques for break testing to examine whether the empirical relationships are in fact stable. We consider continuous models, which predict either economic growth or inflation, and binary models, which predict either recessions or inflationary pressure. In each case, we draw on evidence from Germany and the United States. Models that predict real activity are more stable than those that predict inflation and binary models are more stable than continuous models. The model that predicts recessions is stable over our full sample period in both Germany and the United States.

The global financial crisis and the policy response to it have placed a sharp spotlight on the issue of implicit guarantees for bank debt. This report discusses the incidence of implicit government guarantees for bank debt, their determinants, and estimates of their value. It shows i) that the extent of implicit guarantees differs from one banking sector to another and, within a given banking sector, from one bank to another, ii) that implicit guarantees are higher the lower the bank's stand-alone creditworthiness, the higher the creditworthiness of its sovereign and the relatively bigger the bank in its domestic context, iii) that the incidence of implicit guarantees increased since the beginning of the financial crisis, but has decreased more recently, iv) that this recent decrease can be explained to a large extent by declining sovereign strength and hence a reduced capacity of on the part of many sovereigns to provide for such guarantees, but is also consistent with ongoing efforts in many OECD countries to make bank failure resolution regimes and practices more effective, and v) that implicit guarantees persist. Implicit guarantees imply an undesirably close link between the value of bank and sovereign debt. They also imply significant funding cost advantages for the banks that benefit from them, thus implying competitive distortions and an invitation to beneficiary banks to use them and, perhaps, take on too much risk.

Government provision of a financial safety net for banks and other financial institutions has been a key element of the policy response to the current financial crisis. In the process, the design of many safety net elements, such as deposit insurance, has been redrawn in many jurisdictions. In particular, governments extended existing guarantees and introduced new ones. While these measures did not address the root causes of the lack of confidence, they were nevertheless helpful in avoiding a further accelerated loss of confidence, thus buying valuable time.

Increases in business investment rates in OECD countries in the 1990s:How much can be explained by fundamentals?In several OECD countries, investment rates in the business sector grew strongly in the second half of the 1990s. In some cases, the strength of private investment relative to output growth had raised concerns about the risk of capital overhang and the prospect of a prolonged period of slow capital formation in order to bring investment levels back to more sustainable levels. It is possible that the stock market boom has contributed to a rise of investment demand to an excessive level, not only in the United States, but also in the United Kingdom, Canada, Scandinavia and Greece. The purpose of this paper is to assess the contribution of fundamental determinants to the change in investment in the second half of the 1990s, based on the estimation of panel cointegration equations for gross business investment for 18 OECD countries from 1970 to 1999. In addition to the levels of real GDP and a measure of the cost of capital, the set of explanatory variables includes four alternative proxies for financial market development. The inclusion of the latter variables helps to identify a coefficient for output that is close to one as well as a coefficient for the cost of capital that is both negative and significant. Based on these estimation results, the rise in the volume of business investment observed in a number of countries during the second half of the 1990s can only be partly explained by the set of basic determinants. On that basis, the empirical analysis would tend to support the view that investment had exceeded its steady-state level, not least in the United States. However, as suggested by the recent pick-up in investment, the size of the capital overhang in the United States might turn out to be smaller than feared, especially once the increases in trend output growth and depreciation rates are taken into account.