Germany 2004: Only a transitory economic stimulus from moving tax cuts forward
Wirtschaft im Wandel,
No. 9,
2003
Abstract
In summer 2003 the German economy once again did not overcome the stagnation, which by now lasted three years. Only by the end of this year the German economy will begin to receive stronger support from a then further improved world economy. In the past months both US and European monetary policy have provided sufficient liquidity by lowering interest rates. In the USA, additional support is provided by fiscal policy; tax reductions and rebates increase domestic demand. Overall, Gross Domestic Product in the US will increase by 2.1% this year; in the euro area GDP will merely expand by a modest 0.8%. For Germany one of its key sectors will not be able to lift the economy as usual and GDP, when compared to last year, will only stagnate. Provided by the brought forward tax reform 2000 the coming year will begin with a stimulus to the German economy. The tax reductions, though, will have limited effect on aggregate production, as the increased consumption will not be able to stimulate investment. Accounting for calendar effects GDP in Germany will increase by at least 1% in 2004 compared with this year, but due to several additional working days in 2004, the unadjusted rate of expansion will be 1.7%. No substantial improvements are expected for the job market.
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Economic outlook for the Euro area 2003
Christian Dreger, Axel Lindner, Udo Ludwig, Klaus Weyerstraß
Wirtschaft im Wandel,
No. 7,
2003
Abstract
This article reports the spring forecast of the economic development in the Eurozone, which was carried out within the European Forecasting Network. A modest rise in GDP growth from 1.2% in 2003 up to 2.1% in 2004 is expected. The current weakness in the growth experience is caused by structural factors to a large extent. In particular, labor markets are not flexible enough in most countries.
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Die Lage der Weltwirtschaft und der deutschen Wirtschaft im Frühjahr 2003
Wirtschaft im Wandel,
No. 5,
2003
Abstract
The global economy is in the midst of a phase of weakness. In the course of next year, at the earliest, GDP will in many regions expand a little faster than potential output. The German economy, even, remains in a phase of prolonged weakness. In the second half of this year an economic recovery is expected to start here. However, it will proceed only slowly. Aggregate capacity utilisation will continue to decline, and the state of the labour market will deteriorate further. Although the recovery will firm next year and domestic demand will rise slightly, economic growth in Germany will continue to lack dynamism.
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Current economic situation: German economy continues to stagnate
Wirtschaft im Wandel,
No. 4,
2003
Abstract
This forecast updates the IWH Economic Outlook 2003. Amid the threatening war with Iraq, the sharply increased oil prices and the continued Euro appreciation, the economic forecast for Germany is lowered. Gross domestic product is will rise by 0.8% in 2003 and by 2.1% in the following year. Due to the weak economy, the downward pressure on employment continues to increase. Unemployment in 2003 and 2004 will clearly surpass the 4 million mark.
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IWH Economic Outlook 2003: Waiting for the Upswing in Germany - Waiting for Godot?
Wirtschaft im Wandel,
No. 1,
2003
Abstract
The outlook forecasts the economic developments in the world, the Euro Area and Germany in 2003. A general tendency is given for 2004. The world economy and the US-economy are recovering in 2003 and so are providing positive impulses for the Euro Area. For Germany this impetus from abroad will most likely remain the sole driving force for the revival of economic activity in 2003. Still this external stimulus will not be able to develop its full strength, as the newly restrictive fiscal policy will lower disposable income. At the earliest the economic upturn will gain strength in the summer months. This results in an initially increased burden on the labour market and only in 2004 will a decline in unemployment be observable, albeit at a slow pace. In economic terms, the recent interest rate cut by the ECB should only be able to show modest effects. Fiscal Policy in 2003 will be distinctly restrictive.
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Money and Prices: An I(2) Analysis for the Euro Area
Oliver Holtemöller
SFB 373 Discussion Paper 12/2002,
2002
Abstract
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The international and German economic situation in autumn 2002
Wirtschaft im Wandel,
No. 14,
2002
Abstract
The world economy is currently fragile. The prospects are dampened both, by the current crisis in Iraq, leading to a rising oil price, and the sharp drop of equity prices. Since last spring, the economic expansion in the United States has lost momentum. Also in Asia, the previously buoyant output growth has decelerated again. The Euro Area is recovering from the slowdown of last year; the pace of the recovery, however, is very modest. Finally, in Japan GDP expanded only gradually.
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The flood disaster and GDP in Germany
Udo Ludwig, Hans-Ulrich Brautzsch
Wirtschaft im Wandel,
No. 12,
2002
Abstract
The flood at Elbe, Danube and their tributary streams destroyed billion Euros worth of Capital Stock. GDP, though, does not include Capital Stock, but production. On the basis of plausible assumptions the production interruptions caused by the flood are estimated for Germany and the most severely affected areas of Saxony and Saxony-Anhalt. Considering the “set-aside” funds for restoration and with the help of the Input-Output-Model the direct effects on production and employment within the different economic sectors are being calculated. The results are compared with the foregone consumption due to the delayed next step of the tax reform. On balance clear effects can be observed in construction.
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Recent Developments and Risks in the Euro Area Banking Sector
Reint E. Gropp, Jukka M. Vesala
ECB Monthly Bulletin,
2002
Abstract
This article provides an overview of euro area banks’ exposure to risk and examines the effects of the cyclical downturn in 2001. It describes the extent to which euro area banks’ risk profile has changed as a result of recent structural developments, such as an increase in investment banking, mergers, securitisation and more sophisticated risk management techniques. The article stresses that the environment in which banks operated in 2001 was fairly complex due to the relatively weak economic performance of all major economies as well as the events of 11 September in the United States. It evaluates the effects of these adverse circumstances on banks’ stability and overall performance. The article provides bank balance sheet information as well as financial market prices, arguing that the latter may be useful when assessing the soundness of the banking sector in a forward-looking manner. It concludes with a review of the overall stability of euro area banks, pointing to robustness in the face of the adverse developments in 2001 and the somewhat improved forward-looking indicators of banks’ financial strength in early 2002.
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Economic Development 2002 and 2003: Investments – The Achilles Heel of the Economy
Wirtschaft im Wandel,
No. 10,
2002
Abstract
The Article analyses and forecasts the economic developments for the World and German in 2002 and 2003. During the winter 2001/2002 the World Economy was able to pull out of its trough. Nonetheless, the upswing did not reach investments and was mainly driven by consumption and exports in the USA and the remaining major economies, respectively. In the course of this and next year Investors will gradually regain their trust in the economy. The same will be the case for consumers in Germany and Europe. As a result a modest recovery on a wide front will develop. In the course of next year this recovery will start to weaken. In Germany, Wage Policy has retracted from its former moderate stance. Hence, although due to the improving economic conditions and the resulting slowed employment cuts by the end of 2002 as well as employment increases in 2003, the upswing on the labour market will not reach the dynamics of the 1999/2000 recovery. Fiscal Policy, caused by the need to consolidate the public budget, will be restrictive. Despite the low inflation risks, by the end of this year the ECB will have raised its major interest rate by 1/2 percentage point. Nonetheless, as interest rates in real terms will remain at relatively low levels a restrictive impact from the Monetary Policy in Germany and the Euro Area will is not expected. The most important Data for the World Economy and Germany are being stated in detailed tables.
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