SPP 1578:  Financial Market Imperfections and Macroeconomic Performance

• Subject Area: Social and Behavioural Sciences
• Term: from 2012 to 2023
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 172967516

The recent financial crisis and its subsequent economic repercussions have underscored the close link between financial market performance and macroeconomic outcome. The central purpose of this Priority Programme is to advance research in Germany at the intersection of macroeconomics and financial economics. The individual research projects analyse the effect of financial market imperfections on financial market stability, macroeconomic volatility and long-run economic growth. The programme is divided into the following five research areas: (1) Incomplete Markets: the macroeconomic consequences of imperfections in credit and insurance markets, (2) Default Risk: limits on the enforceability of contracts and default risk as sources of macroeconomic volatility and as impediments to long-run growth, (3) Bubbles and Expectations: financial market imperfections as the source of expectation driven asset price movements, in particular asset price bubbles and the effect on macroeconomic performance,(4) Financial Intermediation: regulation of financial intermediaries (banks, insurance companies) and the implications for financial and macroeconomic stability, (5) Monetary Policy: the interaction between monetary-fiscal policies and financial markets.

• DFG Programme: Priority Programmes
• International Connection: China, Italy, Netherlands, Sweden, Turkey, United Kingdom, USA

Projects

• Asset prices and monetary policy (Applicant Maußner, Alfred )
• Bank Equity Issues: Determinants, Costs, Systemic and Macroeconomic Effects (Applicant Dinger, Valeriya )
• Bankregulierung und Marktdisziplin: Empirische Erkenntnisse zur Globalen Einführung von Basel II Pillar 3 (Applicant Daske, Holger )
• Boom-Bust Cycles in Housing and Credit Markets: The Role of Financial Innovation und Government Policy (Applicant Krebs, Ph.D., Tom )
• Coordination Project (Applicant Krebs, Ph.D., Tom )
• Debt market imperfections and macroeconomic implications (Applicants Faia, Ph.D., Ester ;  Krahnen, Jan Pieter )
• Financial contagion through market prices - Theory and evidence (Applicants Hakenes, Hendrik ;  Schnabel, Isabel )
• Financial Market Imperfections and the pricing decision of firms: Evidence, Theory, and Macroeconomic Implications (Applicants Balleer, Almut ;  Wollmershäuser, Timo )
• Fiscal consolidation in times of financial stress: theory and evidence (Applicant Müller, Gernot )
• Illiquidity, Insolvency, and Bank Regulation (Applicant Illing, Gerhard )
• Implications of financial market imperfections for wealth and debt accumulation in the household sector (Applicant Haliassos, Ph.D., Michael )
• Interactions between bank-specific risk and macroeconomic performance (Applicants Bremus, Franziska Maria ;  Noth, Felix )
• Internationale Integration in Modellen mit heterogenen Wirtschaftssubjekten und Kapitalmarktunvollkommenheiten (Applicant Heinemann, Maik )
• Market Structure in Banking and Macroeconomic Stability (Applicants Schnitzer, Monika ;  Tonzer, Lena )
• Monetary and fiscal policy in times of crisis (Applicant Schabert, Andreas )
• Real effects of a bank liquidity shock on bank lending decisions and corporate investments (Applicants Haselmann, Rainer ;  Weder di Mauro, Ph.D., Beatrice )
• Strategic effects of liquidity injections, lender-of-last-resort facilities and monetary policy responses to asset prices. (Applicant Heinemann, Frank )
• The Allocation of Talent to Finance: Welfare, Growth, and Employment Effects (Applicant Arnold, Lutz )
• The Macroeconomic Consequences of Sovereign and Private Default Risks (Applicants Kaas, Leo ;  Scholl, Almuth )
• The real effects of bank public guarantees (Applicant Gropp, Ph.D., Reint )
• The Role of the Financial Sector in the Transmission and Prevention of Asset Price Bubbles (Applicants Enders, Zeno ;  Hakenes, Hendrik )
• The Welfare Effects of Social Security with Individual and Aggregate Risk: A Macroeconomic Analysis (Applicant Ludwig, Alexander )

• Spokesperson: Professor Tom Krebs, Ph.D.
• Deputies: Professor Dr. Leo Kaas; Professor Dr. Andreas Schabert