Working Papers
"Not All Oil Types Are Alike" (joint with Michael Irlacher, JKU Linz, CESifo, and Peter Öhlinger, JKU Linz), JKU Working Paper No. 2311, September 2023, forthcoming in Nature Communications.
Abstract: Motivated by the European Union's debate on sanctioning crude oil imports from Russia, we estimate the elasticity of substitution between different crude oil types. Using European data on country-level crude oil imports by field of origin, we argue that crude oil is not a homogenous good and that the relevant substitutability for analyzing the impact of trade sanctions must account for the quality of different oil types in terms of their API gravity and sulfur content. Our results suggest that, by neglecting these differences in quality, standard estimates significantly underestimate the production disruptions in crude oil refining resulting from sanctions.
"Sudden Stop: Supply and Demand Shocks in the German Natural Gas Market" (joint with Magnus Reif, Bundesbank and CESifo and Maik Wolters, Uni Kiel, Kiel Institute, ifo Institute and IMFS Frankfurt), Bundesbank Discussion Paper 22/2024, forthcoming in the Journal of Applied Econometrics.
Abstract: We propose a structural vector-autoregressive model for the natural gas market to investigate the impact of the 2022 Russian supply stop on the German economy. We combine conventional and narrative sign restrictions to leverage information about supply cuts for identification and find that supply and demand shocks have large and persistent price effects, whereas output effects are rather short-lived. The 2022 natural gas price spike was driven by negative supply and positive storage demand shocks. Counterfactual simulations of an earlier embargo on Russian gas imports indicate only moderately larger negative output effects compared to what we observe in the data.
"The Bond Agio Premium" (joint with Benjamin Karner, JKU Linz), JKU Working Paper No. 2313, September 2023.
Abstract: Bonds issued in high and low interest-rate environments often list at different prices despite very similar characteristics. From a risk-neutral investor’s perspective, higher current prices imply higher losses in case of default, which must be compensated, if markets are efficient. We call this the "bond agio premium" and use constituent-level bond index data for January 1997 through December 2022 to show that — holding issuer and maturity fixed — it is reflected by bond prices. Higher premia for lower rating buckets imply that different estimates for US dollar- and euro-denominated bonds are consistent with different fractions of sovereign and corporate debt.
"The Chronology of Brexit and UK Monetary Policy" (joint with Martin Geiger, Liechtenstein Institute), JKU Working Paper No. 2206, May 2022, Journal of Monetary Economics 142, 103516, March 2024, Article at Elsevier.
Abstract: The outcome of the Brexit referendum in June 2016 was largely unanticipated. Even after the "Leave" vote, surprises regarding the withdrawal process affected the UK economy. We draw on an official list of political events published by the House of Commons Library and daily data on asset prices and economic policy uncertainty to construct a novel instrument for Brexit surprises. Including a monthly aggregate of this instrument into a vector-autoregressive model of the UK economy, an adverse Brexit surprise lowers GDP growth while raising CPI inflation. We provide evidence that the Bank of England fended off a worse economic contraction.
Permanent Working Papers
"Ease on the cannons, tighten on the trumpets: Geopolitical risk and the transmission of monetary policy shocks" (joint with Johannes Henßler, JKU Linz), JKU Working Paper No. 2109, April 2021.
Abstract: Recent advances in the use of high-frequency external instruments to separate the signaling channel of monetary policy from exogenous interest rate changes have solved a number of puzzling responses to supposedly contractionary monetary policy shocks. We show that their effects on U.S. banks' balance sheets, asset markets, and economic activity hinge on the level of geopolitical risk at the time of the FOMC announcement. The S&P 500 falls and credit spreads rise by more, while bank balance sheets contract, if geopolitical risk is above its sample median in the quarter or month of the shock. The state-dependent effects are due to a tightening of credit- and risk-related national financial conditions and imply that, while preparing its monetary policy decisions, the Board of Governors should also keep track of the geopolitical environment.
"Hedging with commodity futures and the end of normal backwardation" (joint with Benjamin Karner, JKU Linz), JKU Working Paper No. 2021, November 2020.
Abstract: Using the S&P GSCI and its five component sub-indices, we show that considering each commodity separately yields nontrivial hedging gains in and out of sample. During1999-2019, the maximum Sharpe ratio portfolio assigns positive weights to the GSCI Energy, Industrial and Precious Metals, whereas only precious metals enter the optimal portfolio after the .nancial crisis. In out-of-sample optimizations based on dynamic conditional correlations, a subset of commodity futures excluding the GSCI Agriculture and Livestock outperforms conventional stock-bond portfolios with and without the overall GSCI. We argue that the "normal backwardation" in commodity markets has broken down during our sample period.
"The toll of voting in a pandemic: Municipal elections and the spread of COVID-19 in Bavaria", JKU Working Paper No. 2015, August 2020.
Abstract: Elections may take place in precarious environments that even pose health risks. I consider the case of Bavaria, where close to ten million people were asked to vote in the municipal elections on March 15 of 2020, to quantify the toll of elections in a pandemic. Despite declaring a state of emergency on the very next day, two weeks later, Bavaria had left behind any other German state in terms of COVID-19 infections and deaths per capita. Using district-level health, demographic, and economic data, I .find that at least 3,700 or 15% of the cumulative increase in positive test results between March 15 and April 4 are explained by a dummy variable for Bavaria. Across Bavarian districts, a 1% increase in voter participation is associated with an additional 13.6 positive tests and 1.2 deaths per 100,000 inhabitants over the following three weeks.
"How are oil supply shocks transmitted to the U.S. economy?" (joint with Martin Geiger, Liechtenstein Institute), JKU Working Paper No. 1913, May 2019, new version, February 2020.
Abstract: We investigate how exogenous oil supply shocks are transmitted to U.S. output, consumer prices, and interest rates. Using a structural VAR approach with a combination of sign and zero restrictions, we distinguish between domestic aggregate demand and supply channels in the transmission of unpredictable changes in world oil production. We find that the adverse e.ects of negative oil supply shocks on U.S. output and interest rates are propagated mainly through shifts of the aggregate demand curve, whereas shifts of the aggregate supply curve dominate in the direct transmission of oil supply shocks to U.S. consumer prices.
"The international dimension of confidence shocks" (joint with Stéphane Dées, European Central Bank), ECB Working Paper No. 1669, European Central Bank, April 2014.
updated July 2024