15.03.2017 • 13/2017
The German Economy: Employment Boom in Germany, but no Overheating of the Economy
Employment in Germany continues to increase healthily, and private consumption expands due to rising real incomes. Investment in equipment, however, remains modest. Overall, economic demand is expanding at roughly the growth rate of potential Gross Domestic Product (GDP), and the output gap is nearly closed. “In 2017, GDP will increase by 1.3% and thus at a lower rate than in the previous year, but this is only due to fewer working days and not to sliding demand,” says Oliver Holtemoeller, Head of the Department Macroeconomics and IWH vice president.
Oliver Holtemöller
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International Banking and Cross-border Effects of Regulation: Lessons from Germany
Jana Ohls, Markus Pramor, Lena Tonzer
International Journal of Central Banking,
Supplement 1, March
2017
Abstract
We analyze the inward and outward transmission of regulatory changes through German banks’ (international) loan portfolio. Overall, our results provide evidence for international spillovers of prudential instruments. These spillovers are, however, quite heterogeneous between types of banks and can only be observed for some instruments. For instance, domestic affiliates of foreign-owned global banks reduce their loan growth to the German economy in response to a tightening of sector-specific capital buffers, local reserve requirements, and loan-to-value ratios in their home country. Furthermore, from the point of view of foreign countries, tightening reserve requirements is effective in reducing lending inflows from German banks. Finally, we find that business and financial cycles matter for lending decisions.
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Suppliers as Liquidity Insurers
Reint E. Gropp, Daniel Corsten, Panos Markou
IWH Discussion Papers,
No. 8,
2017
Abstract
We examine how financial constraints in portfolios of suppliers affect cash holdings at the level of the customer. Utilizing a data set of private and public French companies and their suppliers, we show that customers rely on their financially unconstrained suppliers to provide them with backup liquidity, and that they stockpile approximately 10% less cash than customers with constrained suppliers. This effect persisted during the global financial crisis, highlighting that suppliers may be viable insurers of liquidity even when financing from banks and other external channels is unavailable. We further show that customers with unconstrained suppliers also simultaneously receive more trade credit; that the reduction in cash holdings is greater for firms with stronger ties to their unconstrained suppliers; and that customers reduce their cash holdings following a significant relaxation in their suppliers’ financial constraints through an IPO. Taken together, the results provide important nuance regarding the implications of supplier portfolios and financial constraints on firm liquidity management.
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Effects of Sanctions between the EU and Russia on the German Economy
Jutta Günther, Maria Kristalova, Udo Ludwig
Wirtschaftsdienst,
No. 7,
2016
Abstract
The mutual imposition of economic sanctions strengthened the slow down of German exports to Russia and exposed output as well as jobs inside the value chains to danger. The amount of potential losses is estimated by the the use of input-output-analysis.
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The Age of Global Value Chains: Maps and Policy Issues
Joao Amador, Filippo di Mauro
CEPR Press,
2015
Abstract
Global value chains (GVCs) - referring to the cross-border flows of goods, investment, services, know-how and people associated with international production networks - have transformed the world. Their emergence has resulted in a complete reconfiguration of world trade, bearing a strong impact on the assessment of competitiveness and economic policy. The contributions to this eBook are based on research carried out within the scope of the Eurosystem Competitiveness Research Network (CompNet), bringing together participants from EU national central banks, universities and international organisations interested in competitiveness issues. The mapping of GVCs and full awareness about their implications are essential to informed public debate and improved economic policy.
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Assessing European Competitiveness: the Contribution of CompNet Research
Filippo di Mauro, Maddalena Ronchi
CompNet Report,
June
2015
Abstract
Restoring competitiveness is broadly acknowledged as the critical building block for achieving sustainable growth, but defining competitiveness, both in terms of tools as well as objectives, is a matter of debate. The Competitiveness Research Network (CompNet) adopts a pragmatic approach, defining “a competitive economy [as] one in which institutional and macroeconomic conditions allow productive firms to thrive… [thus supporting] the expansion of employment, investment and trade” (Draghi, 2012). This approach requires handling (i) firm-level features, most notably productivity, (ii) macroeconomic factors, and (iii) cross-border aspects related to the operation of global value chains (GVCs). While at first concentrating solely on the original mandate of explaining export competitiveness, the Network has extended the scope of its research to broader aspects related to productivity drivers.
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Do Manufacturing Firms Benefit from Services FDI? – Evidence from Six New EU Member States
J. Damijan, Crt Kostevc, Philipp Marek, Matija Rojec
IWH Discussion Papers,
No. 5,
2015
Abstract
This paper focuses on the effect of foreign presence in the services sector on the productivity growth of downstream customers in the manufacturing sector in six EU new member countries in the course of their accession to the European Union. For this purpose, the analysis combines firm-level information, data on economic structures and annual national input-output tables. The findings suggest that services FDI may enhance productivity of manufacturing firms in Central and Eastern European (CEE) countries through vertical forward spillovers, and thereby contribute to their competitiveness. The consideration of firm characteristics shows that the magnitude of spillover effects depends on size, ownership structure, and initial productivity level of downstream firms as well as on the diverging technological intensity across sector on the supply and demand side. The results suggest that services FDI foster productivity of domestic rather than foreign controlled firms in the host economy. For the period between 2003 and 2008, the findings suggest that the increasing share of services provided by foreign affiliates enhanced the productivity growth of domestic firms in manufacturing by 0.16%. Furthermore, the firms’ absorptive capability and the size reduce the spillover effect of services FDI on the productivity of manufacturing firms. A sectoral distinction shows that firms at the end of the value chain experience a larger productivity growth through services FDI, whereas the aggregate positive effect seems to be driven by FDI in energy supply. This does not hold for science-based industries, which are spurred by foreign presence in knowledge-intensive business services.
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Real Effective Exchange Rate Misalignment in the Euro Area: A Counterfactual Analysis
Makram El-Shagi, Axel Lindner, Gregor von Schweinitz
Abstract
Were real effective exchange rates (REER) of Euro area member countries drastically misaligned at the outbreak of the global financial crisis? The answer is difficult to determine because economic theory gives no simple guideline for determining the equilibrium values of real exchange rates, and the determinants of those values might have been distorted as well. To overcome these limitations, we use synthetic matching to construct a counterfactual economy for each member as a linear combination of a large set of non-Euro area countries. We find that Euro area crisis countries are best described by a mixture of advanced and emerging economies. Comparing the actual REER with those of the counterfactuals gives sensible estimates of the misalignments at the start of the crisis: All peripheral countries were strongly overvalued, while high undervaluation is only observed for Finland.
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Actors and Interactions – Identifying the Role of Industrial Clusters for Regional Production and Knowledge Generation Activities
Mirko Titze, Matthias Brachert, Alexander Kubis
Growth and Change,
No. 2,
2014
Abstract
This paper contributes to the empirical literature on systematic methodologies for the identification of industrial clusters. It combines a measure of spatial concentration, qualitative input–output analysis, and a knowledge interaction matrix to identify the production and knowledge generation activities of industrial clusters in the Federal State of Saxony in Germany. It describes the spatial allocation of the industrial clusters, identifies potentials for value chain industry clusters, and relates the production activities to the activities of knowledge generation in Saxony. It finds only a small overlap in the production activities of industrial clusters and general knowledge generation activities in the region, mainly driven by the high-tech industrial cluster in the semiconductor industry. Furthermore, the approach makes clear that a sole focus on production activities for industrial cluster analysis limits the identification of innovative actors.
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International Climate Policy after Kyoto – Economic Challenges Ahead
Wilfried Ehrenfeld
Wirtschaft im Wandel,
No. 12,
2009
Abstract
The signs are increasing that the gain in greenhouse gas emissions since the beginning of the 20th century causes the average global temperature to rise. Limiting the temperature rise to 2°C should at least avoid the worst consequences of global warming. This would require the greenhouse gas emissions to reach their maximum value by no later than 2015 and to be dramatically reduced worldwide from that time until 2050. From the economic perspective, there are a number of important questions: In the first place, how can the initial situation be described in economic categories? Therefore, the emissions should first of all be identified by region and sector and thereupon, the adjustment possibilities are to be outlined. Which costs and which revenues are associated with climate policy? The bandwidth of the estimated damage is between 5% and 20% of global gross domestic product (GDP) annually in the case of unmitigated climate change. These estimates are compared to around 1% of global GDP, which would be spent to stabilize the concentration of greenhouse gases in the atmosphere. How are the global targets to be distributed regionally and sectorally, and which economic instruments are recommended for this purpose? Obviously, tradable permits are preferred. Here, the initial assignment and the nature of the allocation on the one hand and the tradability on the other play a prominent role. What politico-economic conflicts arise and what recommendations can economists give to solve these conflicts goal-oriented? Finally, what is to recommend in terms of political economy in order to remain credible in particular in the sense of an international climate agreement?
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