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In this paper we study the effect of institutional reform on the decision to hold risky assets at the extensive and the intensive margin. We therefore make use of the natural experiment of German Division and Reunification and, based on savings bank customer data from German savings banks, study whether the customers of East German banks differ from their West German counterparts. While we find only slight differences in the decision to hold risky assets at the extensive margin, the differences turn out to be much larger at the intensive margin. Moreover, the latter effects turn out to be quite persistent even in the age group of individuals which were too young at the time of German Reunification to have collected financial experiences in one of the previously existing systems. Our results support the view that reforms allowing individuals to get easy access to financial markets quite quickly result in increasing market participation. However, the degree and sort of risk, individuals are willing to bear, seems to change only slowly as the portfolios of East and West German savings bank customers still differ considerably 15 years after German Reunification. We attribute this finding to the only slowly changing informal institutions.

Even after four decades of research it remains unclear, whether presidential popularity depends on the state of the economy. While about half of all studies for the United States find a significant effect of unemployment and inflation on presidential popularity, the others do not. Additional economic issues have rarely been studied. In this survey article we study the likely causes for the inconclusive findings. While various factors have an influence on the results, especially the choice of the sample period is of crucial importance. While in the very long run we find unemployment, inflation and the budget deficit to have a robust effect on presidential approval, this holds not true for shorter sub-periods. This result might indicate that the popularity function is instable over time. However, the findings might also be taken as an indication that the most often employed linear estimation approach is inadequate. Further research on these issues is necessary.

Most European economies will experience significant demographic changes in the decades ahead. Due to low birth rates, populations are shrinking and ageing at the same time. This paper explores the impact of demographic change on the banking industry. A unique data set, which contains detailed information on almost 2.5 million accounts in 11 German savings banks, allows us estimating the socio-demographic determinants of retail profitability. Using a simulation model, we are able to predict the development of bank profitability due to demographic shifts up to 2025. One of the main findings is that the effects of population ageing will partially offset the impact of shrinking customer bases. While the decline in the size of the population reduces the customer base, ageing per se increases profitability as older customers typically generate higher profits for their banks.

Modern monetary economists argue that institutional aspects such as central bank independence and central bank conservatism play an important role for the performance of an economy. In order to be able to compare the effects of different institutions it is necessary to measure both central bank independence and conservatism. In this paper we propose a new methodology of uncovering the degree of effective monetary policy conservatism from observed central bank behavior. Employing a variant of the Barro-Gordon-model we derive an optimal prime rate reaction function and show that more effectively conservative monetary policy tends to react less active to shocks to the real economy. In order to illustrate the proposed methodology we then estimate a common prime rate reaction function for a sample of 11 central banks in a panel setting and allow the reaction to real disturbances to differ between countries.

Die Häufigkeit von Naturkatastrophen hat in den letzten Jahrzehnten deutlich zugenommen. Vor diesem Hintergrund gewinnt die Frage an Bedeutung, welche ökonomischen Konsequenzen mit dem Auftreten von Naturkatastrophen verbunden sind. In der Literatur werden sowohl Argumente für positive als auch negative Wachstumseffekte diskutiert. In diesem Aufsatz wird mit Hilfe von ökonometrischen Zeitreihenmodellen untersucht, inwieweit sich die Hochwasserkatastrophe vom August 2002 kurzfristig auf das Wirtschaftswachstum in Sachsen ausgewirkt hat. Den Ergebnissen zufolge überwogen die positiven Wachstumseffekte. Ohne die Flutkatastrophe wäre das Wachstum des sächsischen Bruttoinlandsproduktes in den Jahren 2002, 2003 und 2004 vermutlich um 0,6, 1,8 beziehungsweise 0,5 Prozentpunkte niedriger ausgefallen.