Macroeconomics

The department of macroeconomics analyses economic fluctuations of important economic indicators as GDP, employment, and interest rates in the short and medium horizon, the impact of economic policy on these, and the institutional framework that determines long term growth and the business cycle. Founded on this research, the department offers policy advice.

Employing 20 experts, the department is able to cover a wide range of macroeconomic issues. The research is focused on development, implementation and application of quantitative macroeconomic models and the analysis of the interaction between the financial markets and the real economy.

Your contact

Professor Dr Oliver Holtemöller
Professor Dr Oliver Holtemöller
Leiter - Department Macroeconomics
Send Message +49 345 7753-800 Personal page

Refereed Publications

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Switching to Good Policy? The Case of Central and Eastern European Inflation Targeters

Andrej Drygalla

in: Macroeconomic Dynamics, forthcoming

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The Effects of Fiscal Policy in an Estimated DSGE Model – The Case of the German Stimulus Packages During the Great Recession

Andrej Drygalla Oliver Holtemöller Konstantin Kiesel

in: Macroeconomic Dynamics, forthcoming

Abstract

In this paper, we analyze the effects of the stimulus packages adopted by the German government during the Great Recession. We employ a standard medium-scale dynamic stochastic general equilibrium (DSGE) model extended by non-optimizing households and a detailed fiscal sector. In particular, the dynamics of spending and revenue variables are modeled as feedback rules with respect to the cyclical components of output, hours worked and private investment. Based on the estimated rules, fiscal shocks are identified. According to the results, fiscal policy, in particular public consumption, investment, and transfers prevented a sharper and prolonged decline of German output at the beginning of the Great Recession, suggesting a timely response of fiscal policy. The overall effects, however, are small when compared to other domestic and international shocks that contributed to the economic downturn. Our overall findings are not sensitive to considering fiscal foresight.

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Deleveraging and Consumer Credit Supply in the Wake of the 2008-2009 Financial Crisis

Reint E. Gropp J. Krainer E. Laderman

in: International Journal of Central Banking, forthcoming

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Should Forecasters Use Real‐time Data to Evaluate Leading Indicator Models for GDP Prediction? German Evidence

Katja Heinisch Rolf Scheufele

in: German Economic Review, forthcoming

Abstract

In this paper, we investigate whether differences exist among forecasts using real‐time or latest‐available data to predict gross domestic product (GDP). We employ mixed‐frequency models and real‐time data to reassess the role of surveys and financial data relative to industrial production and orders in Germany. Although we find evidence that forecast characteristics based on real‐time and final data releases differ, we also observe minimal impacts on the relative forecasting performance of indicator models. However, when obtaining the optimal combination of soft and hard data, the use of final release data may understate the role of survey information.

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On the Risk of a Sovereign Debt Crisis in Italy

Oliver Holtemöller Tobias Knedlik Axel Lindner

in: Intereconomics, forthcoming

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Working Papers

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(Since When) Are East and West German Business Cycles Synchronised?

Stefan Gießler Katja Heinisch Oliver Holtemöller

in: IWH Discussion Papers, No. 7, 2019

Abstract

This paper analyses whether and since when East and West German business cycles are synchronised. We investigate real GDP, unemployment rates and survey data as business cycle indicators and employ several empirical methods. Overall, we find that the regional business cycles have synchronised over time. GDP-based indicators and survey data show a higher degree of synchronisation than the indicators based on unemployment rates. However, recently synchronisation among East and West German business cycles seems to become weaker, in line with international evidence.

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Potential International Employment Effects of a Hard Brexit

Hans-Ulrich Brautzsch Oliver Holtemöller

in: IWH Discussion Papers, No. 4, 2019

Abstract

We use the World Input Output Database (WIOD) to estimate the potential employment effects of a hard Brexit in 43 countries. In line with other studies we assume that imports from the European Union (EU) to the UK will decline by 25% after a hard Brexit. The absolute effects are largest in big EU countries which have close trade relationships with the UK like Germany and France. However, there are also large countries outside the EU which are heavily affected via global value chains like China, for example. The relative effects (in percent of total employment) are largest in Malta and Ireland. UK employment will also be affected via intermediate input production. Within Germany, the motor vehicle industry and in particular the “Autostadt” Wolfsburg are most affected.

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An Evaluation of Early Warning Models for Systemic Banking Crises: Does Machine Learning Improve Predictions?

Johannes Beutel Sophia List Gregor von Schweinitz

in: IWH Discussion Papers, No. 2, 2019

Abstract

This paper compares the out-of-sample predictive performance of different early warning models for systemic banking crises using a sample of advanced economies covering the past 45 years. We compare a benchmark logit approach to several machine learning approaches recently proposed in the literature. We find that while machine learning methods often attain a very high in-sample fit, they are outperformed by the logit approach in recursive out-of-sample evaluations. This result is robust to the choice of performance measure, crisis definition, preference parameter, and sample length, as well as to using different sets of variables and data transformations. Thus, our paper suggests that further enhancements to machine learning early warning models are needed before they are able to offer a substantial value-added for predicting systemic banking crises. Conventional logit models appear to use the available information already fairly effciently, and would for instance have been able to predict the 2007/2008 financial crisis out-of-sample for many countries. In line with economic intuition, these models identify credit expansions, asset price booms and external imbalances as key predictors of systemic banking crises.

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China’s Monetary Policy Communication: Frameworks, Impact, and Recommendations

Michael McMahon Alfred Schipke Xiang Li

in: IMF Working Paper No. 18/244, 2018

Abstract

Financial markets are eager for any signal of monetary policy from the People’s Bank of China (PBC). The importance of effective monetary policy communication will only increase as China continues to liberalize its financial system and open its economy. This paper discusses the country’s unique institutional setup and empirically analyzes the impact on financial markets of the PBC’s main communication channels, including a novel communication channel. The results suggest that there has been significant progress but that PBC communication is still evolving toward the level of other major economies. The paper recommends medium-term policy reforms and reforms that can be adopted quickly.

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Within Gain, Structural Pain: Capital Account Liberalization and Economic Growth

Xiang Li Dan Su

in: New Structural Economics Working Paper No. E2018010, 2018

Abstract

This paper is the first to study the effects of capital account liberalization on structural transformation and compare the contribution of within term and structural term to economic growth. We use a 10-sector-level productivity dataset to decomposes the effects of opening capital account on within-sector productivity growth and cross-sector structural transformation. We find that opening capital account is associated with labor productivity and employment share increment in sectors with higher human capital intensity and external financial dependence, as well as non-tradable sectors. But it results in a growth-reducing structural transformation by directing labor into sectors with lower productivity. Moreover, in the ten years after capital account liberalization, the contribution share of structural transformation decreases while that of within productivity growth increases. We conclude that the relationship between capital account liberalization and economic growth is within gain and structural pain.

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