The Appropriateness of the Macroeconomic Imbalance Procedure for Central and Eastern European Countries
Geraldine Dany-Knedlik, Martina Kämpfe, Tobias Knedlik
Empirica,
forthcoming
Abstract
The European Commission’s Scoreboard of Macroeconomic Imbalances is a rare case of a publicly released early warning system. It was published first time in 2012 by the European Commission as a reaction to public debt crises in Europe. So far, the Macroeconomic Imbalance Procedure takes a one-size-fits-all approach with regard to the identification of thresholds. The experience of Central and Eastern European Countries during the global financial crisis and in the resulting public debt crises has been largely different from that of other European countries. This paper looks at the appropriateness of scoreboard of the Macroeconomic Imbalances Procedure of the European Commission for this group of catching-up countries. It is shown that while some of the indicators of the scoreboard are helpful to predict crises in the region, thresholds are in most cases set too narrow since it largely disregarded the specifics of catching-up economies, in particular higher and more volatile growth rates of various macroeconomic variables.
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Ten Facts on Declining Business Dynamism and Lessons from Endogenous Growth Theory
Ufuk Akcigit, Sina T. Ates
American Economic Journal: Macroeconomics,
forthcoming
Abstract
In this paper, we review the literature on declining business dynamism and its implications in the United States and propose a unifying theory to analyze the symptoms and the potential causes of this decline. We first highlight 10 pronounced stylized facts related to declining business dynamism documented in the literature and discuss some of the existing attempts to explain them. We then describe a theoretical framework of endogenous markups, innovation, and competition that can potentially speak to all of these facts jointly. We next explore some theoretical predictions of this framework, which are shaped by two interacting forces: a composition effect that determines the market concentration and an incentive effect that determines how firms respond to a given concentration in the economy. The results highlight that a decline in knowledge diffusion between frontier and laggard firms could be a significant driver of empirical trends observed in the data. This study emphasizes the potential of growth theory for the analysis of factors behind declining business dynamism and the need for further investigation in this direction.
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Public Bank Guarantees and Allocative Efficiency
Reint E. Gropp, Andre Guettler, Vahid Saadi
Journal of Monetary Economics,
forthcoming
Abstract
A natural experiment and matched bank/firm data are used to identify the effects of bank guarantees on allocative efficiency. We find that with guarantees in place unproductive firms receive larger loans, invest more, and maintain higher rates of sales and wage growth. Moreover, firms produce less productively. Firms also survive longer in banks’ portfolios and those that enter guaranteed banks’ portfolios are less profitable and productive. Finally, we observe fewer economy-wide firm exits and bankruptcy filings in the presence of guarantees. Overall, the results are consistent with the idea that guaranteed banks keep unproductive firms in business for too long.
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Switching to Good Policy? The Case of Central and Eastern European Inflation Targeters
Andrej Drygalla
Macroeconomic Dynamics,
forthcoming
Abstract
The paper analyzes how actual monetary policy changed following the official adoption of inflation targeting in the Czech Republic, Hungary, and Poland and how it affected the volatilities of important macroeconomic variables in the years thereafter. To disentangle the effects of the policy shift from exogenous changes in the volatilities of these variables, a Markov-switching dynamic stochastic general equilibrium model is estimated that allows for regime switches in the policy parameters and the volatilities of shocks hitting the economies. Whereas estimation results reveal periods of high and low volatility for all three economies, the presence of different policy regimes is supported by the underlying data for the Czech Republic and Poland, only. In both economies, monetary policy switched from weak and unsystematic to strong and systematic responses to inflation dynamics. Simulation results suggest that the policy shifts of both central banks successfully reduced inflation volatility in the following years. The observed reduction in output volatility, on the other hand, is attributed more to a reduction in the size of external shocks.
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Coal Phase-out in Germany – Implications and Policies for Affected Regions
Pao-Yu Oei, Hauke Hermann, Philipp Herpich, Oliver Holtemöller, Benjamin Lünenburger, Christoph Schult
Energy,
2020
Abstract
The present study examines the consequences of the planned coal phase-out in Germany according to various phase-out pathways that differ in the ordering of power plant closures. Soft-linking an energy system model with an input-output model and a regional macroeconomic model simulates the socio-economic effects of the phase-out in the lignite regions, as well as in the rest of Germany. The combination of two economic models offers the advantage of considering the phase-out from different perspectives and thus assessing the robustness of the results. The model results show that the lignite coal regions will exhibit losses in output, income and population, but a faster phase-out would lead to a quicker recovery. Migration to other areas in Germany and demographic changes will partially compensate for increasing unemployment, but support from federal policy is also necessary to support structural change in these regions.
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12.03.2020 • 4/2020
Global economy under the spell of the coronavirus epidemic
The epidemic is obstructing the economic recovery in Germany. Foreign demand is falling, private households forgo domestic consumption if it comes with infection risk, and investments are postponed. Assuming that the spread of the disease can be contained in short time, GDP growth in 2020 is expected to be 0.6% according to IWH spring economic forecast. Growth in East Germany is expected to be 0.9% and thus higher than in West Germany. If the number of new infections cannot be decreased in short time, we expect a recession in Germany.
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Konjunktur aktuell: Wirtschaft im Bann der Corona-Epidemie
Konjunktur aktuell,
No. 1,
2020
Abstract
Seit Ende Januar 2020 steht die Weltwirtschaft unter dem Eindruck der Corona-Epidemie. Nach ihrem Ausbruch in China sind dort im ersten Quartal Produktion und Nachfrage eingebrochen. Mit dem deutlichen Rückgang der Neuerkrankungen kommt das Wirtschaftsleben in China gegenwärtig nach und nach wieder in Gang. Zugleich steigt aber andernorts die Zahl der Krankheitsfälle, und für viele fortgeschrittene Volkswirtschaften ist mit ähnlichen wirtschaftlichen Folgen wie in China zu rechnen. Die vorliegende Prognose unterstellt, dass sich die Ausbreitung der Epidemie insgesamt wie in China eindämmen lässt. Unter dieser Annahme dürfte die Weltkonjunktur im ersten Halbjahr 2020 sehr schwach bleiben, sich aber ab dem Sommer langsam erholen.
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Bank Accounting Regulations, Enforcement Mechanisms, and Financial Statement Informativeness: Cross-country Evidence
Augustine Duru, Iftekhar Hasan, Liang Song, Yijiang Zhao
Accounting and Business Research,
forthcoming
Abstract
We construct measures of accounting regulations and enforcement mechanisms that are specific to a country's banking industry. Using a sample of major banks in 37 economies, we find that the informativeness of banks’ financial statements, measured by the value relevance of earnings and common equity, is higher in countries with stricter bank accounting regulations and countries with stronger enforcement. These findings suggest that superior bank accounting and enforcement mechanisms enhance the informativeness of banks’ financial statements. In addition, we find that the effects of bank accounting regulations are more pronounced in countries with stronger enforcement in the banking industry, suggesting that enforcement is complementary to bank accounting regulations in achieving higher value relevance of financial statements. Our study has important policy implications for bank regulators.
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Konjunktur aktuell: Weltwirtschaft wieder etwas kräftiger – aber Deutschland zunächst weiter im Abschwung
Konjunktur aktuell,
No. 4,
2019
Abstract
Im Jahr 2020 zieht die Weltwirtschaft wieder etwas an, weil der Gegenwind von den Handelskonflikten nachlässt. Die jüngsten Produktionsdaten deuten allerdings noch nicht auf eine durchgreifende Besserung der internationalen Konjunktur hin. Auch wegen der niedrigen Preisdynamik ist die Geldpolitik im Lauf des Jahres vielerorts noch einmal expansiver geworden. Wenn weitere Zollerhebungen im Wesentlichen ausbleiben, dürfte der Abschwung im Verarbeitenden Gewerbe um die Jahreswende 2019/2020 zu Ende gehen. Allerdings bleibt die Zukunft der politischen Rahmenbedingungen für den internationalen Handel unsicher. Das ist ein wichtiger Grund, warum mit einem kräftigen weltwirtschaftlichen Aufschwung für den Prognosezeitraum nicht zu rechnen ist. Zudem dürfte die Expansion der Nachfrage aus China weiter nachlassen.
Die deutsche Wirtschaft befindet sich weiter im Abschwung. Ursache ist im Wesentlichen die schwache Auslandsnachfrage nach Produkten des Verarbeitenden Gewerbes, bedingt durch die von den USA ausgehenden protektionistischen Tendenzen und den bevorstehenden Brexit. Als weiterer Faktor kommen die Probleme im Automobilbau hinzu, denn die Branche steht mit am Beginn eines drastischen Strukturwandels. Im Jahr 2020 dürfte eine leichte Belebung der internationalen Konjunktur den deutschen Export wieder anziehen lassen. Der Anstieg wird aber nicht allzu hoch ausfallen, nicht zuletzt, weil die Lohnstückkosten seit einiger Zeit deutlich zugenommen haben. Auf der anderen Seite stabilisieren die recht deutlichen Lohnzuwächse die binnenwirtschaftliche Nachfrage. Zudem wirkt die Finanzpolitik expansiv, und die günstigen Finanzierungsbedingungen werden zusammen mit der Wohnungsknappheit in Ballungsräumen den Bauboom am Leben halten. Das Bruttoinlandsprodukt wird im Jahr 2020 wohl um 1,1% zunehmen, auch dank einer hohen Zahl an Arbeitstagen. Der Produktionszuwachs in Ostdeutschland dürfte mit 1,3% höher ausfallen als in Gesamtdeutschland. Die Verbraucherpreisinflation bleibt moderat, die Beschäftigung nimmt nur noch wenig zu.
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12.12.2019 • 24/2019
Global economy slowly gains momentum – but Germany still stuck in a downturn
In 2020, the global economy is likely to benefit from the recent thaw in trade disputes. Germany’s manufacturing sector, however, will recover only slowly. “In 2020, the German economy will probably grow at a rate of 1.1%, and adjusted for the unusually high number of working days the growth rate will only be 0.7%”, says Oliver Holtemöller, head of the Department Macroeconomics and vice president at Halle Institute for Economic Research (IWH). With an estimated growth rate of 1.3%, production in East Germany will outpace total German production growth.
Oliver Holtemöller
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