Midterm Projection: Economic Development and the Public Budget in the Years 2011 - 2015
Kristina vanDeuverden, Rolf Scheufele
Wirtschaft im Wandel,
No. 1,
2011
Abstract
In 2010 economic activity in Germany improved steadily. While global trade increased in the first half of the year – and, thus, German exports – domestic demand became increasingly important. Private Investment recovered and – even more important – consumption contributed to economic growth. Moreover, employment reached an all-time high and unemployment decreased further during the year.
Until 2015 economic growth will keep to be relatively high. German external trade will still gain momentum by the development of global trade. However, economic development will be driven more and more by domestic demand. Interest rates will remain relatively low and stimulate investment activity. Moreover, unemployment will continually shrink, partly reflecting demographic developments, but partly mirrored in increasing employment. Due to a higher degree of employment security and rising wages consumption will gain momentum. Real GDP will increase by 2.3% in 2011 and by 1.7% in 2012. From 2013 – 2015 it will rise by 1½% on average.
While the German economy will gain strength, public budgets will clearly improve. In 2010 the deficit ratio exceeds the Maastricht threshold only slightly; in relation to nominal GDP the German budget deficit was about 3.2%. Concerning the high fiscal stimulus, mainly given in the years 2009 and 2010, the deficit ratio is surprisingly low. While income and wage taxes as well as the receipts from social security contributions already increased, unemployment benefits already declined substantially.
The midterm projection shows a favorable development of public budgets. While employment remains high and unemployment continually decreases, the wage tax and the social security contributions will boost revenue. On contrast the same development will lessen public expenditure, especially transfers.
This projection relies heavily on the assumption that fiscal policy will trace its consolidation plans. For instance, it is assumed that the federal level will implement their plans from summer/autumn 2010 and that there will be no additional measures. In this case, in 2015 the German public budget will show a surplus of ¼% in relation to GDP.
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Konjunktur aktuell: Aufschwung in Deutschland geht weiter – Krisenprävention und Krisenmanagement in Europa unter Reformdruck
Wirtschaft im Wandel,
No. 1,
2011
Abstract
We estimate that in 2010, the German GDP has expanded by 3.7%. In all probability, growth will continue in the two following years, with output rising by 2.3% in 2011 and by 1.7% in 2012. Thus, we see the recovery of the German economy after the Great Recession as a starting point for a strong upswing. In case the fiscal crisis of peripheral euro area countries intensified, however, or if confidence in the US dollar waned due to the extremely expansive policy in the US, expectations would quickly turn pessimistic. The key task for the European economic policy is improving its ability to manage and prevent financial and fiscal crises.
The recovery of the world economy continues. This is particularly true for the US, but for the European Union as well, in spite of drastic fiscal adjustment programs in Britain and Spain. In most of emerging markets economies, economic policy has been trying to dampen frothy upswings without damaging the high growth dynamics. As a consequence, growth slowed down in Asia after last spring. Leading indicators for China and India, however, point to an acceleration of economic activity during this winter. Neighboring economies, not least the Japanese, will soon benefit from higher exports.
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Fiscal Spending Multiplier Calculations based on Input-Output Tables – with an Application to EU Members
Toralf Pusch, A. Rannberg
Abstract
Fiscal spending multiplier calculations have been revived in the aftermath of the
global financial crisis. Much of the current literature is based on VAR estimation
methods and DSGE models. The aim of this paper is not a further deepening of
this literature but rather to implement a calculation method of multipliers which is
suitable for open economies like EU member states. To this end, Input-Output tables are used as by this means the import intake of domestic demand components can be isolated in order to get an appropriate base for the calculation of the relevant import quotas. The difference of this method is substantial – on average the calculated multipliers are 15% higher than the conventional GDP fiscal spending multiplier for EU members. Multipliers for specific spending categories are comparably high, ranging between 1.4 and 1.8 for many members of the EU. GDP drops due to budget consolidation might therefore be substantial if monetary policy is not able to react in an expansionary manner.
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Möglichkeiten für Vollbeschäftigungspolitik im Rahmen des Europäischen Makroökonomischen Dialogs
Toralf Pusch, A. Heise
K. Busch (Hrsg.), Wirtschaftliche und Soziale Integration in der Europäischen Union,
2010
Abstract
A decade after its introduction the European Monetary Union is no more undisputed. While a successful record regarding price stability cannot be doubted, the EMU still suffers from high unemployment – not only related to the Financial Crisis. In this contribution we want to cast light on the question how this might be related to a dismal mix of wage policy and monetary policy. Taking a consideration of the European Macroeconomic Dialogue as a starting point, we develop a game theoretic model which can explain different macroeconomic alternatives. As a result we present a reputation equilibrium which would make full employment and price stability compatible and does not rest on overriding the actors’ independence.
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Macroeconomic Challenges in the Euro Area and the Acceding Countries
Katja Drechsel
Dissertation, Online-Publikation,
2010
Abstract
The conduct of effective economic policy faces a multiplicity of macroeconomic challenges, which requires a wide scope of theoretical and empirical analyses. With a focus on the European Union, this doctoral dissertation consists of two parts which make empirical and methodological contributions to the literature on forecasting real economic activity and on the analysis of business cycles in a boom-bust framework in the light of the EMU enlargement. In the first part, we tackle the problem of publication lags and analyse the role of the information flow in computing short-term forecasts up to one quarter ahead for the euro area GDP and its main components. A huge dataset of monthly indicators is used to estimate simple bridge equations. The individual forecasts are then pooled, using different weighting schemes. To take into consideration the release calendar of each indicator, six forecasts are compiled successively during the quarter. We find that the sequencing of information determines the weight allocated to each block of indicators, especially when the first month of hard data becomes available. This conclusion extends the findings of the recent literature. Moreover, when combining forecasts, two weighting schemes are found to outperform the equal weighting scheme in almost all cases. In the second part, we focus on the potential accession of the new EU Member States in Central and Eastern Europe to the euro area. In contrast to the discussion of Optimum Currency Areas, we follow a non-standard approach for the discussion on abandonment of national currencies the boom-bust theory. We analyse whether evidence for boom-bust cycles is given and draw conclusions whether these countries should join the EMU in the near future. Using a broad range of data sets and empirical methods we document credit market imperfections, comprising asymmetric financing opportunities across sectors, excess foreign currency liabilities and contract enforceability problems both at macro and micro level. Furthermore, we depart from the standard analysis of comovements of business cycles among countries and rather consider long-run and short-run comovements across sectors. While the results differ across countries, we find evidence for credit market imperfections in Central and Eastern Europe and different sectoral reactions to shocks. This gives favour for the assessment of the potential euro accession using this supplementary, non-standard approach.
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Finance and Growth in a Bank-Based Economy: Is It Quantity or Quality that Matters?
Michael Koetter, Michael Wedow
Journal of International Money and Finance,
No. 8,
2010
Abstract
Most finance–growth studies approximate the size of financial systems rather than the quality of intermediation to explain economic growth differentials. Furthermore, the neglect of systematic differences in cross-country studies could drive the result that finance matters. We suggest a measure of bank’s intermediation quality using bank-specific efficiency estimates and focus on the regions of one economy only: Germany. This quality measure has a significantly positive effect on growth. This result is robust to the exclusion of banks operating in multiple regions, controlling for the proximity of financial markets, when distinguishing different banking sectors active in Germany, and when excluding the structurally weaker East from the sample.
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Neo-liberalism, the Changing German Labor Market, and Income Distribution: An Institutionalist and Post Keynesian Analysis
John B. Hall, Udo Ludwig
Journal of Economic Issues,
2010
Abstract
This inquiry relies on an Institutionalist and Post Keynesian analysis to explore Germany's neo-liberal project, noting cumulative effects emerging as measurable economic and societal outcomes. Investments in technologies generate rising output-to-capital ratios. Increasing exports offset the Domar problem, but give rise to capital surpluses. National income redistributes in favor of capital. Novel labor market institutions emerge. Following Minsky, good times lead to bad: as seeming successes of neo-liberal policies are accompanied by financial instability, growing disparities in household incomes, and sharp declines in German exports on world markets, resulting in one of the deepest, recent contractions in the industrialized world.
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Reform der Aufsichtsräte von Banken - Lösung des Problems?
Reint E. Gropp, M. Köhler
Zeitschrift für das gesamte Kreditwesen,
No. 14,
2010
Abstract
Nicht nur die Regulatoren, sondern auch die große Mehrheit der Bankpraktiker gibt den Aufsichts- und Verwaltungsräten der Institute eine Mitschuld an der Finanzkrise und befürwortet Strukturänderungen in den Kontrollgremien. Der als sinnvoll erachtete Maßnahmenkatalog reicht von einer Begrenzung der Mandate über eine erfolgsabhängige Entlohnung bis hin zu verstärkten Informationsrechten gegenüber dem Vorstand. Nach Ansicht der Autoren setzen diese Vorschläge ebenso wie die Initiativen der Aufseher an den richtigen Stellen an. In Bezug auf die Abhängigkeit des Aufsichtsrats von den Aktionären und seiner stärkeren Ausrichtung auf die Nachhaltigkeit der Geschäftsstrategie sehen sie aber noch Nachbesserungsbedarf.
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Liberalization and Rules on Regulation in the Field of Financial Services in Bilateral Trade and Regional Integration Agreements
Diemo Dietrich, J. Finke, C. Tietje
Beiträge zum Transnationalen Wirtschaftsrecht Nr. 97,
2010
Abstract
The recent international financial crisis has sparked a fierce debate about its causes and about how to prevent a recurrence. As liberalization and deregulation were widely considered being among the major culprits, de-liberalization and re-regulation seemed a natural response. However, an economic approach to this issue does not support such black-and-white solutions. Although liberalizing financial services sectors may threaten a developing country's financial stability in the short run, it also fosters long-run economic growth if sound legal and economic institutions are in place that can mitigate the adverse side-effects of liberalization. For achieving this objective, states need the policy space to implement such regulatory measures. Contrary to a wide-spread belief, states are not unduly hampered by bilateral or multilateral agreements. Instead, by providing a far-reaching exception concerning prudential regulation states can define their own regulatory approach. The challange for developing countries thus is to install regulatory capacities.
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The Attractiveness of East Germany as Investment Location for Multinational Enterprises (MNEs)
Andrea Gauselmann, Björn Jindra
Wirtschaft im Wandel,
No. 6,
2010
Abstract
The article analyses the general motives of MNEs for investment in East Germany as well as the quality of selected locational factors in East Germany from multinational affiliates’ point of view. In contrast to existing studies for East Germany the article dedicates particular attention to the role of MNEs’ heterogeneity. The research draws from the third survey of the IWH FDI-Micro database in 2009, which offers a representative sample of multinational affiliates of the East German economy. The results show a fundamental shift in the relative importance of investment motives during the transition process of East Germany. Since the mid 1990s East Germany attracts increasingly investors that target economies of scope of local technological advantage rather than low-cost advantages of local production factors as the case in the early transition period. It can be demonstrated that the investment motives depends on the country of origin, the type and timing of market entry as well as the sector of the multinational affiliate. Amongst the given locational factors affiliates value the quality of the socio-cultural context highest. This group of soft factors is followed by locational aspects related the potential for technological cooperation, the availability of labour, and finally the extent of fiscal and financial incentives. There exist significant differences in the judgment about quality of different locational aspects depending on the country of origin and the underlying investment motive. Finally the article identifies possible policy measures in the area of skilled labour, technology and investment policy in order to sustain the attractiveness of East Germany as investment location in the future.
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