Stefanie Kleimeier

New Publication

Banking market integration is essential for a stable European Monetary Union but was severely disrupted during the Eurozone crisis.

In our paper "Twenty Years with the Euro: Eurozone Banking Market Integration Revisited" in Economic Modelling, Harald Sander (Cologne University of Applied Sciences) and I present our latest research on the retail banking market integration in the Eurozone.

With heterogeneous national banking markets, interpreting the recent post-crisis convergence of national interest rates as restored integration has been challenged in the literature. We therefore scrutinize integration under the condition of market heterogeneity for 12 Eurozone countries before, during and after the Eurozone crisis from 2003 to 2019, employing a novel combination of state-of-the-art network analyses and estimates of bilateral interest rate linkages. We measure integration as bi-directional (Granger) causality relations between lending rates or margins in order to identify crisis-resilient arbitrage mechanisms. Their extent, disruption and restoration inform our subsequent network analysis, which unveils that the Eurozone crisis has fundamentally and persistently disrupted this network beyond the crisis period even when interest rates and margins are converging. Our approach complements and extends existing integration analyses by revealing policy-relevant but otherwise undetected disintegration.

New Publication

Despite awareness of the detrimental impact of CO2 pollution on the world climate, countries vary widely in how they design and enforce environmental laws.

In our paper "Exporting Pollution: Where Do Multinational Firms Emit CO2?" in Economic Policy, Itzhak Ben-David (Ohio State University & NBER), Yeejin Jang (University of New South Wales), Michael Viehs (Federated Hermes International) and I explore how firms respond to environmental regulation.

Using novel microdata about multinational firms' CO2 emissions across countries, we document that firms headquartered in countries with strict environmental policies perform their polluting activities abroad in countries with relatively weaker policies. These effects are largely driven by tightened environmental policies in home countries that incentivize firms to pollute abroad rather than lenient foreign policies that attract those firms. Although firms headquartered in countries with strict domestic environmental policies are more likely to export pollution to foreign countries, they nevertheless emit somewhat less overall CO2 globally.

New Publication

To what extent does corporate environmental performance affect a company’s cost of capital?

Whilst institutional investors increasingly recognize that corporate environmental performance matters, there remains skepticism in how far sustainable business practices translate into immediate financial outcomes. This is, in part, driven by a lacking consensus in academic research on the relationship between corporate environmental perfor-mance and financial outcomes, including cost of capital.

In our paper "Pricing Carbon Risk: Investor Preferences or Risk Mitigation?" in Economics Letters, Michael Viehs (Federated Hermes International) and I find that companies with relatively higher carbon emissions pay higher loan spreads. Higher spreads are charged by all lenders suggesting an environmental risk premium rather than investor preferences. Risk premia are lower for companies with board-level environmental responsibility suggesting ways for companies to manage their cost of debt.