Alexander Karmann

Measuring and comparing the (in)efficiency of German and Swiss hospitals.

A nonparametric data envelopment analysis (DEA) is performed on hospitals in the federal state of Saxony (Germany) and in Switzerland. This study is of interest from three points of view. First, contrary to most existing work, patient days are not treated as an output but as an input. Second, the usual DEA assumption of a homogeneous sample is tested and rejected for a large part of the observations. The proposed solution is to restrict DEA to comparable observations in the two countries. The finding continues to be that hospitals of Saxony have higher efficiency scores than their Swiss counterparts. The finding proves robust with regard to modifications of DEA that are motivated by differences in hospital planning in Germany and Switzerland.

The Cost Efficiency of German Banks: A Comparison of Sfa and DEA

We investigate the consistency of efficiency scores derived with two competing frontier methods in the financial economics literature: Stochastic Frontier and Data Envelopment Analysis. We sample 34,192 observations for all German universal banks and analyze whether efficiency measures yield consistent results according to five criteria between 1993 and 2004: levels, rankings, identification of extreme performers, stability over time and correlation to standard accounting-based measures of performance. We find that non-parametric methods are particularly sensitive to measurement error and outliers. Furthermore, our results show that accounting for systematic differences among commercial, cooperative and savings banks is important to avoid misinterpretation about the status of efficiency of the total banking sector. Finally, despite ongoing fundamental changes in Europe?s largest banking system, efficiency rank stability is very high in the short run. However, we also find that annually estimated efficiency scores are markedly less stable over a period of twelve years, in particular for parametric methods. Thus, the implicit assumption of serial independence of bank production in most methods has an important influence on obtained efficiency rankings.

Shadow Economy and Do-it-Yourself Activities: The German Case

This paper presents a consistent structural equation (SEM) estimate of the size and development of the shadow economy and of do-it-yourself (DIY) activities in Germany from 1970 to 2005. By 2005, they reached a level of about 17% and 5% of official GDP. While the shadow economy has regularly increased over the years, DIY activities - though quite sizable - have remained more or less constant since the early 1990s. The driving forces for the shadow economy are regulation and tax burden, whereas for DIY activities the level of unemployment is the main factor.

Sovereign risk and financial crises

Sovereign Risk.- B. Scholtens: Country Risk Analysis: Principles, Practices and Policies E. Clark, A. Zenaidi: Country Default Risk and the Determinants of Sovereign Debt Discounts A. Karmann, D. Maltritz: Assessment of Sovereign Risk for South America: A Structural Approach A.N.R. Sy: Sovereign Ratings and Financial Crises R. Kraussl: The Impact of Sovereign Rating Changes during Emerging Market Crises U. Broll, M.B. Gilroy: Managing Sovereign Credit Risk with Derivatives Financial Crises.- M. Frenkel, R. Fendel: Crises and Contagion in Financial Markets R. Gaston Gelos: Contagion and the Behavior of International Equity Funds M. Fratzscher: Identifying the role of contagion in currency crises with Markov-switching models J. von Hagen, T.-k. Ho: Empirical Links between Twin Crises in the 1980s and the 1990s: Were there Differences?.- A. Belke, R. Setzer The Real Impacts of Excessive Exchange Rate Volatility in Emerging Markets P. Tillmann: The Credibility of Private Sector Involvement in the Resolution of Financial Crises M. Berlemann, N. Nenovsky: Currency Boards and Financial Stability: Experiences from Argentina and Bulgaria

Does financial activity cause economic growth

To clarify the causal links between financial activity and economic growth, three theoretical models are analyzed and a structural equation path models is estimated. In the modeling part, poverty traps result from large fixed costs or high proportions of real investment to run a financial sector. Human capital allocated to financial activities will improve long-run levels but may reduce growth rates in the short run. Empirically, based on data for 93 countries during the 1980-90 period, it is shown that during the 1980s finance was predominantly a supply-leading determinant of economic growth. Our analysis suggests, however, that this general finding cannot be confirmed for the less developed countries, thereby giving some support to the conclusions derived from the theoretical modeling.

Country Default Probabilities: Assessing and Backtesting

We address the problem how to estimate default probabilities for sovereign countries based on market data of traded debt. A structural Merton-type model is applied to a sample of emerging market and transition countries. In this context, only few and heterogeneous default probabilities are derived, which is problematic for backtesting. To deal with this problem, we construct likelihood ratio test statistics and quick backtesting procedures.

Sovereign Default Risk and Recovery Rates: What Government Bond Markets Expect for Greece

Bond market data on sovereign bond yields is used to estimate sovereign default risk and the amount of the expected “hair‐cut” for Greece between 2008 and 2011. Using a structural pricing model that relies on compound option theory short‐term and long‐term default probabilities and their dependencies can be inferred. Thereby bond yield spreads for different maturities are integrated. In addition, a reduced form model is applied to infer the recovery rate expected by bond market participants. The paper shows that sovereign default risk and recovery rate dynamics reflect events that are important for Greeces repayment capacity.

Sovereign Risk in a Structural Approach

We quantify the probability that a sovereign defaults on repayment obligations in foreign currency. Adopting the structural approach as first introduced by Merton, we consider the sovereigns ability-to-pay, characterised by the sum of discounted future payment surpluses, as the underlying process. Its implicit volatility is inferred from market spreads. We demonstrate for the case of Latin America and Russia that our approach indicates default events well in advance of agencies and markets.

Spatial barter economies under locational choice

Abstract This paper presents a model of spatial barter economy with costly transportation to the CBD and a continuum of households. The notions of competitive equilibrium under spatial choice as well as under fixed assignment of households to their place of residence are introduced. Using a formal framework which allows for a simultaneous treatment of both types, equilibrium results will be derived under natural conditions for households characteristics and transportation technologies.

A two-step approach to examine the dynamics of market convergence

We present an improved approach to examine convergence of markets such as those for equity, bonds or commodities. The approach is motivated by Monte Carlo simulations and consists of two steps. First, we test for regime-shifts in the cointegration paths and cointegration with structural breaks. If equilibrium errors are stationary, we then obtain the degree of convergence by rolling speeds of adjustment in a vector error correction model. Our approach is illustrated by an application on stock market convergence.