Alfred Steinherr

On the performance of differently regulated financial institutions: Some empirical evidence

The paper raises two questions about the industrial economics of banking : first, why are financial market configurations so different across nations ? We discuss the theoretical arguments by following the sequence Regulation-Structure-Performance (section 2). Second, do the differences in regulation and structure matter ? Section 3 provides empirical evidence pertaining to that question. Throughout the paper we refer to two polar cases of financial systems : market (M)-and bank (b)- based systems. As for banks, we distinguish between specialised and universal banks. Universal banking is a particular institutional representation of B-systems. A first empirical test relating macroeconomic growth to financial variables suggests that these variables matter. We then test with a set of 88 banks the effects of regulatory and structural variables on the level and variability of bank performance. We conclude that universal banks achieve a better risk-return trade-off, due to superior monitoring and information collection capacity.

The Euro and Capital Markets: A New Era

This paper is organised as follows. Section 2 examines the forces that have changed the financial landscape at the world level over the last two decades. Section 3 summarises the arguments of how the introduction of the euro should add to these broader economic forces in reshaping euro financial markets. Section 4 verifies whether the actual experience since January 1999 has been in line with the ex ante expectations. Most of the analysis will be based on developments of the bond market. Section 5 offers some conclusions.

Capital needs in Eastern countries

This paper reviews estimated capital needs for Eastern Europe and rejects most of the claimed foreign capital contributions as too high and, in fact, unnecessary. It argues that whilst foreign investments may usefully assist reforms, they can neither substitute for reforms nor assure the success of reforms. Historically there is no evidence of sustained growth predominantly financed by foreign capital anywhere. The Wests effort should therefore focus on assisting reform efforts, providing some capital but, above all, opening its markets to Eastern products.

An Economist’s Manifesto on Unemployment in the European Union

In this Manifesto, we make a set of proposals to fight unemployment in the EU. We believe that the European unemployment problem needs to be attacked on two fronts: through a broad spectrum of supply-side policies and the demand management policy. The expansion of aggregate demand is necessary to increase both investment and employment. However, unless supply-side measures are also taken, demand expansion can result in more inflation instead of more employment, because of the mismatch between the demand and supply of labour. What is important to stress is that both demand and supply-side policies must be adopted together by all European countries, in order both to avoid beggar-thy-neighbor problems and, at the same time, to catch all the possible complementary effects of these policies.

Banking Reforms in Eastern Europe with Special Reference to Ukraine

The financial sector plays a central role in allocating resources in a market economy. As the experience not only of emerging but also of advanced economies has witnessed, a robust and efficient financial sector is a goal rarely achieved. The institutional requirements are formidable because most segments of society are directly concerned. Some of the desired features, such as efficiency, can clash with others, such as stability. Most financial systems suffer, therefore, from some shortcomings. For example, the German and Swiss financial systems are unimpressive in terms of market completeness and efficiency, but exemplary in terms of robustness. The US system has exhibited the opposite features.

The evolution of east-west trade and the role of the Ecu in Eastern Europe

ConclusionThis paper arrives at the conclusion that the expanding European Community is a dominant attraction for Eastern Europe, including the former USSR. Since the Community will have privileged trade arrangements with most, if not all, of Eastern Europe, optimal monetary solutions will be strongly influenced by trade relations. The future Western European currency therefore, is also playing a dominant role in the monetary choices of Eastern Europe. We have discussed several aspects of this choice (anchor of the exchange rate regime, management of foreign reserves, parallel currency and currency of a possible payments union) and conclude that the Ecu is the dominant contender.

ECU Financial Markets: Recent Evolution and Perspectives

One of the major brain childs of Robert Triffin is without any doubt the ECU (European Currency Unit). In Triffin’s thinking the ECU was to assume several functions: first, to provide an alternative to the US dollar in international official reserve holdings; second, to provide an alternative in private internal portfolios; third, to provide an alternative to the US dollar in international trade invoicing and payments; and, finally, to become eventually the currency of the integrated European economic and monetary union. The desirability of these functions is both obvious and debatable. The evolution of the international monetary system has redistributed the initial concentration of the key currency role of the dollar over several currencies. This redistribution has been influenced both by market forces and political decisions, although national policy makers have been hesitant to declare unequivocally their fundamental preferences concerning the international role of their currency. The authorities of the currencies which have the potential of becoming dollar substitutes are reluctant to assume the responsibility of managing an international reserve currency exposed to the risk of shifts in preferences of major holders of such a currency; tempting is the scope of seigniorage privileges.

Economic Transition in Central and Eastern Europe: From pre-war Russia to the fall of communism

Ever since the socialist takeover in Russia a debate has been raging about the profundity of the changes imposed on Russian society. However, looking back on Russias history since Peter the Great, we find that many features of Russian pre-revolutionary society survived, and indeed were sometimes reinforced, after the Revolution. The Soviet Union remained an empire with its border problems and nationality conflicts, and continued to police its population severely. Democracy was as absent and repression as regular after as before the Revolution. State organisation remained highly centralised and the problems of the periphery were, as always, ignored, misunderstood or repressed. Within the imperial borders the conflict between town and country was as acute in the 1930s as in the seventeenth century. The leadership remained divided between imperial expansion eastwards or westwards, and between opening up to or closing off foreign, mostly Western, influences. The empire invariably rooted its strength in strong ideological grounds: in pre-revolutionary days in absolute monarchy and religion and afterwards in the Marxist framework. Both regimes, each claiming to pursue a superior mission, had expansionary goals for which a strong and influential military was necessary. The need to equip the military, more than the desirability of improving the welfare of citizens, was in each case the driving force behind industrialisation.

The Evolution of Ecu Markets

This paper has three parts. Part I defines the Ecu, notes its technical features and describes the evolution of Ecu markets. Part II starts from the Maastricht Treaty and interprets the implications for the Ecu on the way to European Monetary Union (EMU). Part III attempts an outlook.

Von der Krise im EWS zur Stärkung der Europäischen Währungsunion

Aus den Wahrungsunruhen seit September und dem Ausscheiden verschiedener Wahrungen aus dem Europaischen Wahrungssystem (EWS) lassen sich eine Reihe interessanter Lehren ziehen, die Wege zur Losung der anstehenden Probleme aufzeigen.