Volume 22, Issue 1

Patients often rely on the advice of their general practitioner (GP) to decide which treatment best fits their needs. Hospitals, in turn, might influence GPs’ referral decision through kickbacks. We present a model with a monopolistic hospital and competitive GPs who vary in the degree of altruism towards their heterogeneous patients and show that an equilibrium without crowding out exists that separates GPs into referrers and care providers. Naïve patients visit purely selfish (referring) GPs, while rational patients sort themselves between the two groups of GPs. Finally, we investigate the scope for regulation, including an optimal coinsurance rate.

Incomplete capital markets and credit constraints for small and medium-sized enterprises (SMEs) are often considered obstacles to economic growth, thus motivating government interventions in capital markets. While such policies are common, it is less clear to what extent these interventions result in firm growth or to which firms interventions should be targeted. Using a unique dataset with information about state bank loans targeting credit-constrained SMEs in Sweden with and without complementary private bank loans, this paper contributes to the literature by studying how these loans affect the targeted firms for several outcome variables. The results suggest that the loans create a one-off increase in investments, with long-term, positive effects for sales and labor productivity but only for firms with 10 or fewer employees. Increased access to capital by firms can therefore produce increases in economic output but only in a specific type of firm. This insight is of key importance in designing policy if the aim is to increase economic growth.

Using unique data of a survey among small and medium-sized German banks, we analyze various aspects of risk management. We especially analyze the effect of a 200-bp increase in the interest level. We find that banks seem to reduce the volatility of their net interest margin by exposing themselves to interest rate risk, that they act as if they have a risk budget which they allocate either to interest rate risk or credit risk and that banks’ exposures to interest rate risk and to credit risk are remunerated. In addition, we find that, in the first year, the impairments of banks’ bond portfolios are much larger than the reductions in their net interest income, that banks attenuate the resulting write-downs by liquidating hidden reserves and that banks which use interest derivatives have lower impairments in their bond portfolios.

We provide evidence for a risk-taking channel of monetary policy transmission in the euro area that works through an increase in shadow banks’ total asset growth and their risk assets ratio. Our dataset covers the period 2000Q1–2018Q3 and includes, in addition to the standard variables for real GDP growth, inflation, and the monetary policy stance, the aforementioned two indicators for the shadow banking sector. Based on vector autoregressive models for the euro area as a whole, we find a portfolio reallocation effect towards riskier assets and evidence for a general expansion of assets. Both effects last for roughly six quarters in the case of conventional monetary policy shocks, whereas for unconventional monetary policy shocks the responses are significant for two quarters only. Country-specific as well as sector-specific estimations confirm these findings for most of the euro area countries and all non-bank types, but also reveal some heterogeneity in the reaction of financial institutions.