a b s t r a c tIn this study, we test whether regional growth in 11 European countries depends on financial development and suggest the use of cost-and profit-efficiency estimates as quality measures of financial institutions. Contrary to the usual quantitative proxies of financial development, the quality of financial institutions is measured in this study as the relative ability of banks to intermediate funds. An improvement in bank efficiency spurs five times more regional growth then an identical increase in credit does. More credit provided by efficient banks exerts an independent growth effect in addition to direct quantity and quality channel effects.

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Political risk represents an important hidden transaction cost that reduces international trade. This paper investigates the claim that German public export credit guarantees (Hermes guarantees) mitigate this friction to trade ows and hence promote exports. We employ an empirical trade gravity model, where we explicitly control for political risk in the importing country in order to evaluate the eect of export guarantees. The idea behind export promotion through public export credit agencies (ECAs) is that the private market is unable to provide adequate insurance for all risks associated with exports. As a consequence, rms' export activities are limited in the absence of insurance provision. Using a novel data set on guarantees we estimate the eect of guarantees in a static and dynamic panel model. We nd a statistically and economically signicant positive eect of public export guarantees on exports which indicates that export promotion is indeed eective. Furthermore, political risk turns out to be a robust determinant of exports and hence should be taken into account in any empirical model of trade.

With this paper we seek to contribute to the literature on the relation betweennance and growth. We argue that most studies in the eld fail to measure the quality of nancial intermediation but rather resort to using proxies on the size of nancial systems. Moreover, cross-country comparisons suer from the disadvantage that systematic dierences between markedly dierent economies may drive the result that nance matters. To circumvent these two problems we examine the importance of the quality of banks' nancial intermediation in the regions of one economy only: Germany. To approximate the quality of nancial intermediation we use cost eciency estimates derived with stochastic frontier analysis. We nd that the quantity of supplied credit is indeed insignicant when a measure of intermediation quality is included. In turn, the eciency of intermediation is robust, also after excluding banks likely to operate in multiple regions and distinguishing between dierent banking pillars active in Germany.

Political risk represents an important hidden transaction cost that reduces international trade. This paper investigates the claim that German public export credit guarantees (Hermes guarantees) mitigate this friction to trade ows and hence promote exports. We employ an empirical trade gravity model, where we explicitly control for political risk in the importing country in order to evaluate the eect of export guarantees. The idea behind export promotion through public export credit agencies (ECAs) is that the private market is unable to provide adequate insurance for all risks associated with exports. As a consequence, rms' export activities are limited in the absence of insurance provision. Using a novel data set on guarantees we estimate the eect of guarantees in a static and dynamic panel model. We nd a statistically and economically signicant positive eect of public export guarantees on exports which indicates that export promotion is indeed eective. Furthermore, political risk turns out to be a robust determinant of exports and hence should be taken into account in any empirical model of trade.

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We use a unique and comprehensive data set on open-end real estate funds in Germany to study a liquidity crisis that hit this industry between 2005 and 2006. Since this industry is comparably unregulated our data set permits us to contrast competing explanations of liquidity crisis. We nd that fundamental factors matter for the liquidity out ow in normal times. During the crisis, however, they do not play a role. During the panic only strategic complementarities drive withdrawals. Furthermore, we nd that funds with a higher load fee su er from substantially larger out ows in the crisis period, while a higher load fee reduces gross out ows in normal times. As institutional investors predominately invest in funds with a low load fee this is in line with recent theory arguing that complementarities are mitigated by the involvement of large institutional investors who can at least partially correct for the coordination failure resulting from complementarities.Keyword Liquidity Crisis, Runs, Strategic Complementarities JEL: G11, G12, G14, G23 Non-Technical Summary The lack of liquidity, though not the origin, is at least an important ampli er of nancial crises. Liquidity risks on the balance sheet of various nancial intermediaries also played a crucial role in spreading the subprime crisis. As a consequence there are growing demands for a stronger regulation of liquidity risk, in particular for higher regulatory liquidity requirements for banks.However, from an academic perspective it is far from clear whether a higher regulatory liquidity ratio is indeed preferable or not. One main perspective taken in the literature for instance argues that banking crises are mainly driven by bad fundamentals or bad performance of banks. Although banks' liquidity transformation increases the destabilizing e ect of a bad performance, it is exactly this greater fragility which serves as an important device to discipline the bank management according to this view. Only the threat that a bad performance leads to massive liquidity out ows, to a crisis at the respective bank and ultimately to a job loss incentivizes the bank management to do the best they can to improve the bank's performance. A high regulatory liquidity holding undermines this threat and predominantly impairs banks' e ciency.An opposing view suggests that a higher liquidity ratio can reduce destabilizing self-enforcing e ects. The larger the liquidity transformation of a nancial intermediary (the more illiquid and long-term the assets relative to the liabilities) the larger the fear of investors that the long-term return of their claims is reduced by a large scale withdrawal by other investors. Accordingly, if investors expect massive withdrawals by others, they have a strong incentive to withdraw their funds themselves.The expectations of a (liquidity) crisis become self-ful lling. A higher liquidity ratio contains these self-enforcing crisis moments and fosters funds' stability. This paper tries to assess the explanatory power of these two contrasting views...