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Research Interests
Publications
The European overnight rate (Eonia) is the operational target of the European Central Bank (ECB)
that signals the monetary policy stance and anchors the term structure of interest rates. This paper
empirically investigates the transmission of Eonia volatility to longer-term money market rates.
Distinguishing between seasonal Eonia volatility due to e.g. calendar effects and non-seasonal volatility
which may be closer related to uncertainty about the ECB's policy intentions reveals a significant
volatility transmission even for the twelve-month rate. We also examine how the ECB's new operational
framework introduced in March 2004 has influenced the Eonia and the transmission of volatility along the
yield curve.
This paper investigates how the dynamic adjustment of the European overnight rate Eonia
to the term spread and the ECB's policy rate is affected by rate expectations and the operational
framework of the ECB. In line with recent evidence found for the US and Japan, the reaction of the Eonia to the term spread is
non-symmetric. Moreover, the response of the Eonia to the policy rate depends on both, the repo auction format
and the position of the Eonia in the ECB's interest rate corridor.
This paper investigates whether German or synthetic European pre-EMU data provides the appropriate
empirical basis for evaluating Euro/Dollar exchange rate behavior. Monetary exchange rate
equations are estimated for both data sets over the pre-EMU period, and out-of-sample forecasts
are evaluated to assess their ability to explain the Euro/Dollar exchange rate from 1999 to 2004.
While forecast accuracy tests confirm the usefulness of synthetic European data for Euro exchange
rate analysis, forecasts based on the German pre-EMU experience cannot even beat a random walk.
Our results indicate that the Euro does not simply follow the German Mark, but that it has its
origins in the other pre-EMU currencies as well. Working Papers
In this paper we revisit medium- to long-run exchange rate determination, focusing on
the role of international investment positions. To do so, we develop a new econometric
framework accounting for conditional long-run homogeneity in heterogeneous dynamic
panel data models. In particular, in our model the long-run relationship between effective
exchange rates and domestic as well as weighted foreign prices is a homogeneous
function of a country’s international investment position. We find rather strong support
for purchasing power parity in environments of limited negative net foreign asset
to GDP positions; furthermore, long-run exchange rate equilibria may have little relation
to purchasing power parity outside such environments. We thus argue that the
purchasing power parity hypothesis holds conditionally, but not unconditionally, and
that international investment positions are an essential component to characterizing
this conditionality.
This paper documents the methodology underlying the construction of a global database of gross
foreign asset and liability positions for 153 countries over the period 1970 to 2004 and illustrates some
key data characteristics. The data cover both inflows and outflows of capital and thus allow for an
assessment of the degree of international financial integration. In addition to net foreign asset stocks, we
also provide details on the composition of the main asset and liability categories, namely the foreign
direct investment, equity investment and debt components. Finally, we report on valuation changes as one of
the main sources of discrepancy between transaction-based capital flow data and stock values of investment
positions. The dataset is available for download at http://www.ifk-cfs.de/fileadmin/downloads/data/cfs-icfd.zip.
This paper investigates whether there is enough homogeneity in European panel data substantiating
a common long-run equilibrium that determines the external value of 15 European currencies. We
find evidence of a homogeneous long-run relationship between multilateral exchange rates and price
indices which can be interpreted as a form of purchasing power parity. Although the parameters
deviate from unity, this can be at least partly rationalized by the impact of non-traded goods in
the sense of a Balassa-Samuelson effect. Differences in the strength of the long-run relationship
are broadly in line with the different degree of trade integration between countries, but not
necessarily with membership in the European Monetary Union.
This paper deals with the effects of structural change on workers' labor income. Based on theories of human capital, sources of income risk are determined and those parts of wages are identified which are influenced by the development of the worker's sector. It can be shown that underperformance of the sector has negative effects on both, the equilibrium level and the dynamics of the worker's wage. 
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