The Centre for European Economic Research (ZEW) in Mannheim recently presented the Heinz König Young Scholar Award for the 20th time. This year the research award went to Michael Stiefel from the University of Zurich. The doctoral student was awarded the prize by ZEW for his excellent investigation into the role of the European Central Bank (ECB) in instilling confidence for government bonds of European countries such as Spain and Italy during the government debt crisis of 2012. Michael Stiefel’s paper constitutes a significant contribution to research on confidence building on the European financial market in times of crisis.
The annual Heinz König Young Scholar Award of ZEW comes with an endowment of 5,000 euros and includes the opportunity to spend an extended research visit at ZEW. This year, the prize was sponsored by HIMA Paul Hildebrandt GmbH. Steffen Philipp, managing partner and owner of HIMA, congratulated the winner: “I and my colleagues in the ZEW Sponsors’ Association are delighted to have the opportunity to support young up-and-coming researchers dealing with issues of such high relevance for our economy.”
The winning paper focuses on the acute phase of the government debt crisis of 2012 and tries to determine how public announcements and market interventions from the ECB may influence public confidence in the future development of the market. By looking at public statements pertaining to the ECB’s activities, the paper traces the process of confidence building and links this to the expected returns on government bonds from five European countries: Portugal, Italy, Ireland, Greece and Spain.
With this purpose in mind, Michael Stiefel and his co-author examined short comments or “tweets” published on the social media platform Twitter, which they analysed with the help of modern machine learning based techniques. The results of the analysis showed that both the ECB’s Outright Monetary Transactions programme and ECB President Mario Draghi’s “whatever it takes” speech in July 2012 helped to restore confidence in an intervention from the central bank among market participants. The paper also provides evidence that the risk surcharges on the Portuguese, Italian, Irish, Greek and Spanish government bonds are related to public confidence in the ECB’s readiness to intervene; the greater public confidence is, the smaller the risk surcharges are.
“Michael Stiefel’s paper stands out because it deals with an issue of high political relevance and applies an innovative approach to track the confidence building process,” says Dr. Georg Licht, head of the ZEW Research Department “Economics of Innovation and Industrial Dynamics”, explaining the jury’s decision.
The Heinz König Young Scholar Award is named after the late founding director of ZEW, Professor Heinz König, who died in 2002. The award recognises excellent empirical research papers by up-and-coming researchers. In keeping with Heinz König’s legacy, ZEW has no intention of adding yet another award to the multitude of prizes for established researchers, but instead awards the Heinz König Young Scholar Award to promote talented economists in the early stages of their career.
The 2018 Heinz König Young Scholar Award was presented during the 20th Summer Workshop for Young Economists. This year, the workshop focused on the use of online data and other modern approaches such as machine learning in economic analyses. The aim of the ZEW Summer Workshop is to provide young researchers with valuable experience and qualifications for their future careers. From a large number of submissions received this year, 21 researchers were chosen to present their papers at the ZEW Summer Workshop to be discussed with other young researchers and renowned economists.