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In the last issue of Intereconomics, a first article by the present authors looked into the measures that central banks have taken in support of the financial sector in an effort to mitigate the effects of the financial crisis. This second article describes the measures taken by governments to contain the impact of the financial crisis and discusses potential exit strategies. Although the focus is on the measures implemented by euro area governments, the article also compares these measures with the ones taken in the United Kingdom and the United States.

The extensive public support measures for the financial sector have been key for the management of the current financial crisis. This paper gives a detailed description of the measures taken by central banks and governments and attempts a preliminary assessment of the effectiveness of such measures. The geographical focus of the paper is on the European Union (EU) and the United States. The crisis response in both regions has been largely similar in terms of both tools and scope, and monetary policy actions and bank rescue measures have become increasingly intertwined. However, there are important differences, not only between the EU and the United States (e.g. with regard to the involvement of the central bank), but also within the EU (e.g. asset relief schemes).

The extensive public support measures for the financial sector have been key for the management of the current financial crisis. This paper gives a detailed description of the measures taken by central banks and governments and attempts a preliminary assessment of the effectiveness of such measures. The geographical focus of the paper is on the European Union (EU) and the United States. The crisis response in both regions has been largely similar in terms of both tools and scope, and monetary policy actions and bank rescue measures have become increasingly intertwined. However, there are important differences, not only between the EU and the United States (e.g. with regard to the involvement of the central bank), but also within the EU (e.g. asset relief schemes).

The extensive public sector measures in support of the fi nancial sector have been key to managing the fi nancial crisis that erupted in mid-2007 and intensified after the bankruptcy of Lehman Brothers. This article looks into the measures taken by central banks to contain the impact of the crisis. This article reviews and compares the measures adopted by the Eurosystem, the Bank of England (BoE) and the Federal Reserve System (Fed). A complementary article, to appear in a subsequent issue, will deal with governments' responses to the crisis.

We test if unconventional monetary policy instruments influence the competitive conduct of banks. Between q2:2010 and q1:2012, the ECB absorbed €218 billion worth of government securities from five EMU countries under the Securities Markets Programme (SMP). Using detailed security holdings data at the bank level, we show that banks exposed to this unexpected (loose) policy shock mildly gained local loan and deposit market shares. Shifts in market shares are driven by banks that increased SMP security holdings during the lifetime of the program and that hold the largest relative SMP portfolio shares. Holding other securities from periphery countries that were not part of the SMP amplifies the positive market share responses. Monopolistic rents approximated by Lerner indices are lower for SMP banks, suggesting a role of the SMP to re-distribute market power differentially, but not necessarily banking profits.

This paper investigates the influence of political regimes on personality, using the separation of Germany into the socialist GDR and the democratic FRG and its reunification in 1990 as a natural experiment. We show that there are significant differences between former GDR and FRG residents regarding important attributes of personality (particularly the locus of control, neuroticism, conscientiousness, and openness). To understand the inuence of the GDR's socialist regime on personality, we test an important channel by exploiting regional variation in the number of unofficial state-security collaborators across East German counties. Our results indicate that local surveillance intensity is indeed an important determinant of the personality of former GDR citizens. The differences in personality imply that former citizens of the GDR have economic prospects rather different from former FRG citizens and help to understand behavioral differences established in the prior literature.

This paper investigates the influence of political regimes on personality, using the separation of Germany into the socialist GDR and the democratic FRG and its reunification in 1990 as a natural experiment. We establish significant differences between former GDR and FRG residents regarding important attributes of personality (particularly neuroticism, conscientiousness, openness, and the locus of control). To understand the influence of the GDR's political regime on personality, we test an important channel by exploiting regional variation in the number of unofficial state-security collaborators across East German counties. Our results indicate that local surveillance intensity is an important determinant of the personality of former GDR citizens indeed. The observed significant differences in personality imply that former citizens of the GDR have economic prospects very different from former FRG citizens and help to understand behavioral differences established in the prior literature.

This paper investigates the influence of political regimes on personality, using the separation of Germany into the socialist GDR and the democratic FRG and its reunification in 1990 as a natural experiment. We show that there are significant differences between former GDR and FRG residents regarding important attributes of personality (particularly the locus of control, neuroticism, conscientiousness, and openness). To understand the influence of the GDR's socialist regime on personality, we test an important channel by exploiting regional variation in the number of unofficial state-security collaborators across East German counties. Our results indicate that local surveillance intensity is indeed an important determinant of the personality of former GDR citizens. The differences in personality imply that former citizens of the GDR have economic prospects rather different from former FRG citizens and help to understand behavioral differences established in the prior literature.

We identify the connections between financial institutions from different sectors of the financial industry based on joint extreme movements in credit default swap (CDS) spreads. First, we estimate pairwise co-crash probabilities (CCP) to identify significant connections among 193 international financial institutions and explain CCPs with shared country and/or sectoral origin indicators. Second, we use network centrality measures to identify systemically important financial institutions. Third, we test if bailouts stabilized network neighbors and thus this financial system. Financial firms from the same sector and country are most likely significantly connected. Inter-sector and intra-sector connectivity across countries also increase the likelihood of significant links. Central network indicators based on significant CCPs identify many institutions that failed during the 2007/2008 crisis. Excess equity returns in response to bank bailouts are overall negative and significantly lower for connected banks.