Sylvester C W Eijffinger

Short Biography

Sylvester Eijffinger is Professor of Financial Economics and Jean Monnet Professor of European Financial and Monetary Integration at Tilburg University and President of Tilburg University Society and Cobbenhagen Summit, as well as Visiting Professor of Economics at Harvard University in Cambridge, MA. Professor Eijffinger has a keen interest in monetary and fiscal policy and European economic and financial integration, and was Visiting Scholar at the Deutsche Bundesbank, the Bank of Japan, the Banque de France, the Bank of England, the Board of Governors of the Federal Reserve System, and the Federal Reserve Bank of New York, as well as Special Advisor to the International Monetary Fund and the European Commission.

Professor Eijffinger has published widely in prestigious economics journals, such as the Journal of Money, Credit and Banking, the Journal of Banking and Finance, the Journal of Public Economics, Oxford Economic Papers, the Open Economies Review, and the European Journal of Political Economy. He is editor of several professional journals and newsletters, as well as Programm Director of the European Summer Institute of the Centre for Economic Policy Research, London. He is one of the founding fathers of the newly established European Banking Center in Tilburg. Sylvester Eijffinger was during three years a member of the Council of Economic Advisers of the Dutch Parliament and he was fifteen years a member of the Monetary Experts Panel of the European Parliament for the Monetary Dialogue with the ECB.

Selected publications

Current and future research interests (with various co-authors)

Can the Fed Talk the Hind Legs Off the Stock Market?: Deliberately or not, by providing its stance on the prospects of the economy, rationalizing past decisions or announcing future actions, central banks influence financial markets’ expectations of its future policy. In bad times, monetary policy communication inducing an upward revision of the path of future policy is good news for stocks. During an expansion the effect is weak and on average negative. The response of equities to central bank talk depends critically on the business cycle. There are strong industry specific effects of monetary policy actions and communication. These industry effects relate to the variation in cyclicality of different industries. Firm-specific effects of monetary policy relate to the leverage, the size and the price-earnings ratio of firms. I am continuing my research on Fed communication.

A Dynamic Analysis of Bank Bailouts and Constructive Ambiguity: We rationalize a constructive ambiguity approach to liquidity assistance as a solution to forbearance. Faced with a bank that chooses capital and liquidity, the institution providing liquidity assistance can commit to a mixed strategy: never bailing out is too costly and therefore not credible, while always bailing out causes moral hazard. In equilibrium, the bank chooses above minimum capital and liquidity, unless either capital costs or the opportunity cost of liquidity are too high. We also find that the probability of a bailout is higher for a regulator more concerned about bank failure, and when the bailout penalty for the bank is higher; this suggests that forbearance is not entirely eliminated by adopting ambiguity. I am continuing my research on bank bailouts and constructive ambiguity to avoid moral hazard.

The Impact of Liquidity Regulation on Bank Intermediation: We analyze the impact of non-compliance with a requirement similar to the Basel III Liquidity Coverage Ratio and its impact on bank intermediation. Using a unique dataset on Dutch banks, we show that non-compliance with a liquidity requirement causes banks to pay and charge higher interest rates as well as to increase borrowing and decrease lending on the long-term interbank market. Apart from lending rates, the short-term market is unlikely to be affected by the requirement. While non-compliance with a liquidity requirement does not seem to directly affect corporate lending rates, we find evidence that institutions with a liquidity deficiency turn to the long-term interbank rate as reference for lending to non-financial institutions. I am continuing my research on liquidity regulation and bank intermediation within the Basel III framework.

Inferring Hawks and Doves from Voting Records: We estimate spatial voting models for the analysis of the voting record of the monetary policy committee of the Bank of England. We use a flexible Bayesian approach for estimating such models. A simple modification to the standard spatial model as well as a variety of model checks are proposed to deal with the specifics of the data available. We provide evidence that extreme policy preferences are to be found among the external members. We also consider the variation in policy preferences according to career backgrounds. The median voter preference is similar for different backgrounds, except for those with a background in the industry where the median voter is more hawkish. The heterogeneity in policy preferences is the largest among academics and those with a background in the industry. The range of policy preferences is much smaller among other groups, in particular among monetary policy committee members with central bank experience. I am continuing my research on voting records, including the Fed voting.