16.12.2015 • 45/2015
German Economy: Strong domestic demand compensates for weak exports
The upturn of the German economy is expected to gain further momentum as a consequence of strong domestic demand. Real gross domestic product is expected to increase by 1.6% in 2016. Consumer prices are expected to rise by 0.9%. Unemployment is expected to rise slightly because it will take time to integrate refugees into the labour market.
Oliver Holtemöller
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Exit Expectations and Debt Crises in Currency Unions
Alexander Kriwoluzky, G. J. Müller, M. Wolf
IWH Discussion Papers,
No. 18,
2015
Abstract
Membership in a currency union is not irreversible. Exit expectations may emerge during sovereign debt crises, because exit allows countries to reduce their liabilities through a currency redenomination. As market participants anticipate this possibility, sovereign debt crises intensify. We establish this formally within a small open economy model of changing policy regimes. The model permits explosive dynamics of debt and sovereign yields inside currency unions and allows us to distinguish between exit expectations and those of an outright default. By estimating the model on Greek data, we quantify the contribution of exit expectations to the crisis dynamics during 2009 to 2012.
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Monetary-fiscal Policy Interaction and Fiscal Inflation: A Tale of Three Countries
Martin Kliem, Alexander Kriwoluzky, Samad Sarferaz
Abstract
We study the impact of the interaction between fiscal and monetary policy on the low-frequency relationship between the fiscal stance and inflation using cross-country data from 1965 to 1999. In a first step, we contrast the monetary-fiscal narrative for Germany, the U.S. and Italy with evidence obtained from simple regression models and a time-varying VAR. We find that the low-frequency relationship between the fiscal stance and inflation is low during periods of an independent central bank and responsible fiscal policy and more pronounced in times of high fiscal budget deficits and accommodative monetary authorities. In a second step, we use an estimated DSGE model to interpret the low-frequency measure structurally and to illustrate the mechanisms through which fiscal actions affect inflation in the long run. The findings from the DSGE model suggest that switches in the monetary-fiscal policy interaction and accompanying variations in the propagation of structural shocks can well account for changes in the low-frequency relationship between the fiscal stance and inflation.
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09.09.2015 • 34/2015
Interest Benefits from the Debt Crisis to the German Budget: Updated Calculations
In an updated calculation, IWH researchers could provide further evidence that interest benefits to the German budget arise indeed also from the “flight-to-safety-effect” and are not just effects from the low interest environment more generally. With a refined methodology they obtain interest savings to the German budget of just under 90 billion Euro.
Reint E. Gropp
Oliver Holtemöller
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Monetary Policy and the Transaction Role of Money in the US
Alexander Kriwoluzky, Christian A. Stoltenberg
Economic Journal,
No. 587,
2015
Abstract
The declining importance of money in transactions can explain the well-known fact that US interest rate policy was passive in the pre-Volcker period and active after 1982. We generalise a standard cashless new Keynesian model (Woodford, 2003) by incorporating an explicit transaction role for money. In the pre-Volcker period, we estimate that money did play an important role and determinacy required a passive interest rate policy. However, after 1982, money no longer played an important role in facilitating transactions. Correspondingly, the conventional view prevails and an active policy ensured equilibrium determinacy.
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10.08.2015 • 30/2015
Germany Benefited Substantially from the Greek Crisis
The balanced budget in Germany is largely the result of lower interest payments due to the European debt crisis. Research from the Halle Institute for Economic Research (IWH) – Member of the Leibniz Association shows that the debt crisis resulted in a reduction in German bund rates of about 300 basis points (BP), yielding interest savings of more than EUR 100 billion (or more than 3% of gross domestic product, GDP) during the period 2010 to 2015. A significant part of this reduction is directly attributable to the Greek crisis. When discussing the costs to the German tax payer of saving Greece, these benefits should not be overlooked, as they tend to be larger than the expenses, even in a scenario where Greece does not repay any of its debts.
Reint E. Gropp
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Monetary Policy under the Microscope: Intra-bank Transmission of Asset Purchase Programs of the ECB
L. Cycon, Michael Koetter
IWH Discussion Papers,
No. 9,
2015
Abstract
With a unique loan portfolio maintained by a top-20 universal bank in Germany, this study tests whether unconventional monetary policy by the European Central Bank (ECB) reduced corporate borrowing costs. We decompose corporate lending rates into refinancing costs, as determined by money markets, and markups that the bank is able to charge its customers in regional markets. This decomposition reveals how banks transmit monetary policy within their organizations. To identify policy effects on loan rate components, we exploit the co-existence of eurozone-wide security purchase programs and regional fiscal policies at the district level. ECB purchase programs reduced refinancing costs significantly, even in an economy not specifically targeted for sovereign debt stress relief, but not loan rates themselves. However, asset purchases mitigated those loan price hikes due to additional credit demand stimulated by regional tax policy and enabled the bank to realize larger economic margins.
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Gemeinschaftsdiagnose: Kräftiger Aufschwung dank günstigem Öl und schwachem Euro
Oliver Holtemöller, Ferdinand Fichtner, Roland Döhrn, Timo Wollmershäuser
Wirtschaftsdienst,
No. 5,
2015
Abstract
In ihrem Frühjahrsgutachten prognostizieren die an der Gemeinschaftsdiagnose teilnehmenden Wirtschaftsforschungsinstitute einen Anstieg des Bruttoinlandsprodukts (BIP) um 2,1% im Jahr 2015 und um 1,8% im Jahr 2016. Die Institute korrigieren damit ihre Prognose vom Herbst 2014 erheblich nach oben; vor einem halben Jahr war für 2015 noch eine Veränderungsrate von 1,2% erwartet worden. Ein großer Teil der Revision geht auf eine seit dem Herbst unerwartet deutliche Verbesserung der Rahmenbedingungen für die deutsche Konjunktur zurück. Vor allem der massive Rückgang des Ölpreises stimuliert die deutsche Wirtschaft, aber auch die deutliche Abwertung des Euro, die mit der Ausweitung der Anleiheankaufprogramme der Europäischen Zentralbank einherging.
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Zur Wirtschaftspolitik: Investitionen fördern – aber nicht allein mit mehr öffentlichen Mitteln!
Oliver Holtemöller, Konstantin Kiesel, Axel Lindner, Andreas Schmalzbauer, Götz Zeddies
Konjunktur aktuell,
No. 1,
2015
Abstract
Seit Ausbruch der europäischen Schulden- und Vertrauenskrise stellten sich der Wirtschaftspolitik in Deutschland vermeintlich ganz andere Aufgaben als auf europäischer Ebene. Es herrschte der Eindruck vor, dass Deutschland im Vergleich zu den Krisenländern strukturell gut aufgestellt sei. Der Rückgang der konjunkturellen Dynamik in Deutschland lenkt nunmehr die Aufmerksamkeit auch wieder verstärkt auf wirtschaftspolitische Herausforderungen im Inland.
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