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2005 Lamfalussy Fellows
The 2005 Lamfalussy fellows are: - Bo Becker, Visiting Assistant Professor, University of Illinois at Urbana-Champaign
Research project: The Productivity Consequences of Labour and Capital Market Frictions ? Evidence from Europe
Recent research has emphasised that resource allocation across firms is an important determinant of aggregate productivity. The goal of the project is to study the impact of financial and labour market frictions on aggregate output, through their effect on the re-allocation of resources across firms. The paper will look, inter alia, at the relationship between the size and input growth, on the one hand, and productivity, on the other hand. It will test if the size-productivity relation is weaker when financial frictions and labour regulations are worse. Finally, an assessment will be undertaken whether financial or labour market frictions are more important for productivity.
- Estelle Cantillon, FNRS Research Associate, ECARES, Université Libre de Bruxelles
Research project: Competition between Exchanges
Once an exchange has attracted most trades for a financial instrument it is in a strong position to maintain this dominance. Nevertheless, changes in the distribution of trades across exchanges occur. By analysing the market for the Bund future over the period 1990-2000, during which the bulk of trades switched from LIFFE to DTB/Eurex, this project aims at identifying both the factors that favour the dominance of the first mover and the factors that favour competition between exchanges. The results will have implications for the way in which financial integration affects the distribution of trading and consolidation tendencies among European exchanges.
- Sylvain Champonnois, Ph.D. student, Princeton University
Research project: EU Accession, Financial Development and Financial Integration
There is evidence suggesting an increase in the share of market financing for the G-7 and EU-12 countries. Even traditionally more 'bank-based' economies, such as Japan, Germany, France and Italy, have moved towards more 'market-based' financial structures. The same, however, cannot be observed for a number of countries in Central and Eastern Europe. This project first develops a theoretical model explaining the determinants that induce firms to opt for bank or market financing. Then, an empirical analysis will test whether the factors identified by the model are at work in practice, focusing in particular on bankruptcy codes, information asymmetries, the average size of investment and intermediation costs. The empirical part of the project covers both industrial countries and puts a special emphasis on the 10 countries that entered the European Union in May 2004.
- Christa Hainz, Assistant Professor, University of Munich
Research project: Entry Modes of Banks, Bank Competition, and Financial Development in Eastern Europe
Even before enlargement of the European Union took place in May 2004, Western European banks started to operate in Eastern Europe on a large scale. On the one hand, this could generate positive spill-overs arising from better technologies that foreign banks bring into the countries they enter. On the other hand, there is the fear that the dominance of foreign banks could leave domestic banks with the majority of bad loans, thereby inducing negative effects for financial stability. In the light of these two perspectives on foreign bank entry, the project investigates three types of issues: i) optimal entry modes (greenfield versus acquisition) for Western banks; ii) the effect of different entry modes on the degree of bank competition; and iii) the entry mode most preferable for the host country from a social-welfare perspective.
- Hélène Rey, Assistant Professor, Princeton University
Research project: Asset Prices and International Investment Flows
Recently, a lot of attention has been paid to the consequences of large US external imbalances on the global economy, how and when the US current account deficit will be corrected and what are the incentives for European and Asian investors to finance the US deficit. This project aims at building a class of general equilibrium models of international portfolio allocation, that is consistent with the observed pattern of capital flows, asset and currency prices and net exports between the US, Europe and Japan.
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