The German Upswing Takes a Break
Wirtschaft im Wandel,
2. Sonderausgabe
2007
Abstract
The world economy continues to expand healthily, but risks have increased during summer. The crisis of the housing sector in the US has deepened: A revaluation of mortgage backed assets has triggered turbulences on global financial markets. The institutes expect that financial markets will calm down during the coming months, but that the downswing in the US will slow the pace of the world economy. The economy in the euro area will, in addition, be dampened by the appreciation of the euro. The German economy is, in spite of a restrictive fiscal policy, in a robust upswing. Because wage setting and inflation continues to be moderate, there will be no need for a restrictive monetary policy. Thus the German economy will, due to slower demand from the US and higher costs of financing, lose momentum, but chances are good that the upswing will only take a break. In the coming year private consumption is expected to be the main contributor to growth, because wage incomes will expand strongly. Unemployment will continue to shrink, albeit at a smaller rate than during 2007. Fiscal policy will no longer be restrictive. Economic policy has improved the conditions for growth in Germany; there is, however, still much to do. Public finances have to be consolidated further, but at the same time, public investment has to be strengthened. This can be achieved if public consumptive expenditure growth is limited. The institutes suggest to increase public expenditure by 2% per annum over the cycle in nominal terms; this is, by less than by the trend growth rate of nominal GDP.
The institutes advise against a reversal of the recent labour market reforms. Instead, incentives for taking up jobs should be increased further.
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The IWH signals approach: the present potential for a financial crisis in selected Central and East European countries and Turkey
Hubert Gabrisch, Simone Lösel
Wirtschaft im Wandel,
No. 8,
2006
Abstract
The steep increase of oil prices, general threats rooting from Iran’s nuclear program, and doubts about the future policy of important central banks recently caused more uncertainties of investors on international financial markets. This explains the higher volatility and the fall of indices on stock markets including those of some Central and East European countries. International investors could respond with adjustments of their portfolio and trigger off a financial crisis. On this background, the article studies the potential for a financial crises in the region mentioned. The analytical tool is the IWH signals approach. The study concludes that the risk of the outbreak of a financial crisis within the next 18 months is rather unrealistic in most countries. A stable economic policy, high real growth rates, a financial system already robust compared to earlier times of transition, and appropriate exchange rate arrangements protect the countries against speculative attacks and portfolio adjustments. When the composite indicator shows deterioration like in the Baltic countries, it turned out to be negligible. For the Slovak Republic and Slovenia, the composite indicator even improved. A closer look to individual indicators reveals still some problems in the banking sectors of the Czech Republic, Poland, and Hungary, however, without out major impact on the composite indicator.
This general assessment does not apply to Romania, and, in particular, to Turkey. The composite indicator signals a significant increase of the risk potential for the next 18 months in both countries. There is a considerable need for sound policy action.
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IWH early warning indicators for financial crises in Central and Eastern Europe: Risk potential remains low
Ibolya Mile
Wirtschaft im Wandel,
No. 8,
2003
Abstract
Die aktuelle Analyse der Frühwarnindikatoren des IWH signalisiert ein weiterhin geringes Risiko für den Ausbruch von Finanzkrisen in den mittel- und osteuropäischen Beitrittsländern. Die Berechnungen bestätigen die positiven Erwartungen über die Stabilität der Finanzmärkte in dieser Region, die sich bereits in der vorangegangenen Untersuchung angedeutet hatten. Doch in einigen Bereichen, wie auf dem fiskalischen Gebiet, besteht für die Mehrzahl der Länder weiterhin wirtschaftspolitischer Handlungsbedarf. Im März 2003 hat auch Kroatien einen Beitrittsantrag an die Europäische Kommission gestellt. Deshalb wurde Kroatien erstmalig mit in die Untersuchungen des IWH zur Bestimmung von Risikopotenzialen für Finanzkrisen einbezogen. Die Frühwarnindikatoren zeigen hier ein ähnliches Muster wie das der anderen mittel- und osteuropäischen Staaten.
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Empirical methods for analysising the risks of financial crises
Axel Brüggemann, Thomas Linne
IWH-Sonderhefte,
No. 3,
2003
Abstract
he vulnerability against financial crises of EU candidate countries and other Central and East European countries is on the agenda of the Institute for Economic Research Halle. Research concentrates on the developing of effective early warning indicators and includes a strong orientation on quantitative methods. This volume presents selected methods for the analyse of financial fragility. The finding complete the signals approach, which is used by the IWH for routine checks of the risk potential of EU candidate an other countries of the region. The four studies presented here were written by the scientific staff of the IWH and by guest researchers. Their objective is to deepen insights into selected problems of financial fragility by using alternative methods.
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Fallen risk potential for financial crises and improved perspectives for 2003/2004 in Central and Eastern Europe
Martina Kämpfe, Ibolya Mile
Wirtschaft im Wandel,
No. 4,
2003
Abstract
Die aktuellen Berechnungen der Frühwarnindikatorenanalyse ergaben eine Verringerung des Risikopotenzials für Finanzkrisen für alle Volkswirtschaften Mittel- und Osteuropas mit Ausname von Ungarn. Hier hat sich der Konflikt zwischen einer expansiven Fiskalpolitik und einer restriktiven Geldpolitik zuletzt zugespitzt. Die Zunahme des Bruttoinlandsprodukts schwächte sich 2002 ab, lag aber mit Ausnahme von Polen und Tschechien bei über 3%. Dieser Anstieg wurde vorrangig von der Binnennachfrage und weniger vom Export getragen. Im Rahmen der Binnennachfrage nahm der private Konsum durchgängig zu, während der öffentliche Konsum und die Investitionstätigkeit eher uneinheitlich in der Region ausfielen. Für das Jahr 2003 ist insgesamt mit einer leichten Verstärkung des BIP-Zuwachses auf 3,4% in Mitteleuropa und dem Baltikum und 3,7% in Russland zu rechnen. Die Inflation wird sich im laufenden Jahr wegen des Ölpreisanstiegs in den meisten Ländern wieder etwas beschleunigen, im Jahr 2004 dagegen sinken. Im Jahr 2004 wird das Wirtschaftswachstum weiter zunehmen.
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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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Higher risk potential for financial crises in Central and Eastern Europe: Countermeasures restrain revival of economic activity
Martina Kämpfe, Thomas Linne
Wirtschaft im Wandel,
No. 12,
2002
Abstract
Das Risikopotenzial für eine Finanzkrise stieg zuletzt in einigen wichtigen mittel- und osteuropäischen Ländern (Polen, Ungarn, Tschechien, Slowakei) deutlich an. Wirtschaftspolitischer Handlungsbedarf besteht vordringlich in einer Korrektur der derzeit noch expansiv angelegten Fiskalpolitik. Davon sind für das Jahr 2003 dämpfende Impulse für den konjunkturellen Aufschwung zu erwarten. Positive Impulse werden dagegen von einem Anziehen der westeuropäischen Konjunktur gegen Ende des Jahres 2002 für die Exporte der Unternehmen in Mittel- und Osteuropa ausgehen. Die gesamtwirtschaftliche Wachstumsrate wird im Jahr 2003 mit rund 4% etwas höher ausfallen als im laufenden Jahr. Dafür ist im Wesentlichen die russische Wirtschaft verantwortlich, die ebenfalls von der westeuropäischen Konjunkturbelebung profitieren wird. Im Jahr 2002 wird das Wachstum in der Region mit 3% deutlich geringer ausfallen als noch im Jahr zuvor.
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International economic development still impedes growth in Central and Eastern Europe
Axel Brüggemann
Wirtschaft im Wandel,
No. 3,
2002
Abstract
The world wide economic slow down has increasingly affected the transition economies. Lower demand in Western Europe for exports from Central and Eastern Europe has depressed industrial production and growth in the region. Strong domestic demand has managed to offset some of the negative external influences. In total the countries in Central and eastern Europe will grow with 3,1 % in 2002 and with 4,1% in 2003. The higher growth in 2003 results from the combination of a continuing strong domestic demand and amore favourabel external environment, as the world economy starts to recover in the second half of 2002. Inflation will continue to slow, while unemployment decreases only marginally. Higher growth will also lead to higher current account deficits.
The slowdown in 2001 has increased the risk potential for financial crises in Central and Eastern Europe. The forecast is build upon the assumption that no such crisis will occur, if a crisis does errupt the forecast will have to be revised downwards. The regular anlysis carried out by the IWH regarding the development of the risk potential, indicate particular high risks for Poland and to a somewhat lesser extent also for Hungary. As the unfavourable external economic conditions will persist for the coming months, a further increase in the risk potential can be expected.
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Risk Potential for Financial Crises for the Central and East European Transition Countries still high
Axel Brüggemann, Thomas Linne
Wirtschaft im Wandel,
No. 1,
2002
Abstract
Since the mid-nineties there have been several financial crises in Central and Eastern Europe. Among the countries affected are Bulgaria, the Czech Republic and Romania - all countries with which the European Union is in the midst of accession negotiations. The prevention of financial crises is also important due to the output losses which occurr in the affected countries. Additionally, contagion effects can influence the economic situation in third countries such as those of the EU. For this reason, the IWH analyses on a regular basis the risk potential of the EU-accession countries as well as for Turkey and Russia.
Since the beginning of 1999 at least two different phases in the development of the risk potential can be distinguished for the majority of the Central and Eastern European countries. The first phase is marked by an increase in the risk potential across all countries in the region because of the contagion and spill-over effects following the Russian financial crisis in August 1998. The risk potential was considerably reduced with the phasing out of these effects and a worldwide economic recovery. However, since mid-2000 a second phase has set in. The weaker international environment has again led to a sizable increase in the crisis vulnerability of several countries, where a host of signals indicate an urgent need for economic policy actions.
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Economic Slowdown reaches Central and Eastern Europe: Problematic Poland
Axel Brüggemann, Thomas Linne
Wirtschaft im Wandel,
No. 12,
2001
Abstract
Forecast for central and Eastern Europe for 2001 and 2002. Discussion of the high risk potential for financial crises in Poland as measured by the IWH early warning system and an analysis of the underlying reasons for this development.
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