Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Citations: All references to documents served by this site must be appropriately cited. Abstract: We collect 2,735 estimates of the elasticity of intertemporal substitution in consumption from 169 published studies that cover 104 countries during different time periods. The estimates vary substantially from country to country, even after controlling for 30 aspects of study design. Our results suggest that income and asset market participation are the most effective factors in explaining the heterogeneity: households in rich countries and countries with high stock market participation substitute a larger fraction of consumption intertemporally in response to changes in expected asset returns. Micro-level studies that focus on sub-samples of rich households or asset holders also find systematically larger values of the elasticity. Terms of use: Documents inKeywords: Elasticity of intertemporal substitution, consumption, metaanalysis, Bayesian model averaging JEL: C83, D91, E21Acknowledgements: An online appendix with data, code, and a list of studies included in the metaanalysis is available at meta-analysis.cz/substitution.

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We examine the relation between capital and liquidity creation. This issue is interesting because of the potential impact on liquidity creation from tighter capital requirements such as those in Basel III. We perform Granger-causality tests in a dynamic GMM panel estimator framework on an exhaustive data set of Czech banks, which mainly includes small banks from 2000 to 2010. We observe a strong expansion in liquidity creation until the financial crisis that was mainly driven by large banks. We show that capital negatively Granger-causes liquidity creation in this industry, where majority of banks are small. But we also observe that liquidity creation Granger-causes a reduction in capital. These findings support the view that Basel III can reduce liquidity creation, but also that greater liquidity creation can reduce banks' solvency. Thus, we show that this reverse causality generates a trade-off between the benefits of financial stability induced by stronger capital requirements and the benefits of increased liquidity creation. JEL Classification: G21, G28Keywords: Bank capital, Liquidity creation, Basel III 2 Nontechnical SummaryThis paper examines the relation between capital and liquidity creation, which is a comprehensive measure of a bank's overall ability to finance relatively illiquid assets with relatively liquid liabilities and thereby serve as a financial intermediary. We test the relation between bank capital and liquidity creation by using an exhaustive dataset of Czech banks from the Czech National Bank from 2000 to 2010. This way we propose a broad perspective on the interactions between capital and liquidity creation in the banking industry. In doing so, we are able to provide evidence on capital requirements limiting liquidity creation, which is highly relevant for appraising the economic implications of the capital requirements in the Basel III reforms.We show, especially for small banks, that capital is found to negatively Granger-cause liquidity creation. However, we also observe that liquidity creation Granger-causes capital reduction. We thus support the view that there is a negative, bi-causal relation between capital and liquidity creation, which corroborates the importance of examining this causality.Our findings have two policy implications for small banks. First, they suggest that the Basel III Accords might lead to reduced bank liquidity creation by introducing tighter capital requirements. Second, our findings support the view that greater liquidity creation may hamper bank solvency.Overall, our primary conclusion is that there is a trade-off between the benefits of financial stability induced by stronger capital requirements and the benefits of greater liquidity creation. Therefore, any action in favor of one objective would deteriorate the other.A possible caveat is that our findings might be dependent on our sample and might not be easily generalizable. However, the Basel III rules are planned to be implemented for a vast array of countries, including that examined here an...

We analyze 1334 estimates from 67 studies that examine the effect of financial development on economic growth. Taken together, the studies imply a positive and statistically significant effect, but the individual estimates vary widely. We find that both research design and heterogeneity in the underlying effect play a role in explaining the differences in results. Studies that do not address endogeneity tend to overstate the effect of finance on growth. While the effect seems to be weaker in less developed countries, the effect decreases worldwide after the 1980s. Our results also suggest that stock markets support faster economic growth than other financial intermediaries.

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We examine whether and how selected central banks responded to episodes of financial stress over the last three decades. We employ a new monetary-policy rule estimation methodology which allows for time-varying response coefficients and corrects for endogeneity. This flexible framework applied to the USA, the UK, Australia, Canada, and Sweden, together with a new financial stress dataset developed by the International Monetary Fund, not only allows testing of whether central banks responded to financial stress, but also detects the periods and types of stress that were the most worrying for monetary authorities and quantifies the intensity of the policy response. Our findings suggest that central banks often change policy rates, mainly decreasing them in the face of high financial stress. However, the size of the policy response varies substantially over time as well as across countries, with the 2008-2009 financial crisis being the period of the most severe and generalized response. With regard to the specific components of financial stress, most central banks seemed to respond to stock-market stress and bank stress, while exchange-rate stress is found to drive the reaction of central banks only in more open economies. JEL Codes:E43, E52, E58. Nontechnical SummaryThe recent financial crisis has intensified the interest in exploring in greater detail the nexus between monetary policy and financial stability. Although keeping the financial system stable is a major task, often delegated to central banks, how to consider financial stability concerns for monetary policy decision-making remains a puzzling question. Monetary policy is likely to react to financial instability in a non-linear way. When a financial system is stable, the interest-ratesetting process largely reflects macroeconomic conditions, and financial stability considerations enter monetary policy discussions only to a limited degree. On the other hand, central banks may alter their monetary policies to reduce financial imbalances if these become severe.This paper examines the reactions of the main central banks (the US Fed, the Bank of England, the Reserve Bank of Australia, the Bank of Canada, and Sveriges Riksbank) during periods of financial stress over the last three decades. In particular, we estimate the time-varying policy rule of each bank to assess whether and how its policy rate was adjusted in the face of financial instability. We track financial stress by means of a continuous financial stress indicator developed recently by the International Monetary Fund as well as its main subcomponents (banking stress, stock-market stress, and exchange-rate stress). Therefore, our empirical framework is suitable for detecting the periods and types of stress that were perceived as the most worrying and for quantifying the intensity of the policy response.Although theoretical studies disagree about the viability of considering financial instability for interest-rate setting, our empirical results suggest that central banks often alter the course of monet...