Vigorous upswing continues
Wirtschaft im Wandel,
No. 3,
2011
Abstract
The worldwide upswing has gained momentum since last autumn. The main cause for the high growth dynamics is a monetary policy that is very expansive not only in advanced economies, where the utilization rates for production capacities are mostly still low, but also in emerging market economies that in general have already recovered from the Great Recession.
The German economy participates in the worldwide upswing. Here the recovery is ahead of those in most other advanced economies. Both exports and domestic demand are strongly expanding. One reason for the high growth dynamics is that key interest rates are particularly low for Germany, as the ECB has to take into account that many euro area economies are much more fragile. In addition, Germany still benefits from the wage moderation and the labour market reforms in the past decade: employment is expanding strongly, and firms find many profitable investment projects.
Major risks for this forecast are structural problems of some advanced economies that had become visible during the Great Recession and are still unresolved (concerning the US housing market and the crisis of confidence in the fiscal sustainability of some euro area countries in particular). A further risk is the possibility of further oil price hikes due to political instability in North Africa and the Middle East.
Read article
Langfristige Wirkungen des Konjunkturpakets II am Beispiel der sächsischen Kommunen
Peter Haug
List Forum für Wirtschafts- und Finanzpolitik,
2010
Abstract
The article discusses primarily the potential long-term (supply-side) effects of the public investments subsidized by the German „Economic Stimulus Package II“. Considering the allocative aspects, especially the productivity and financing effects of publicly provided capital as well as the factor price effects of investment grants (municipalities are „lured to the concrete“) have to be taken into account. The theoretical problems are supported empirically by the subsidy practice in Saxony and its focus on local consumer goods (sports and leisure facilities) and on not directly economy-related educational facilities (kindergartens, primary schools). From a distributive point of view no interdependence between the financial strength (or weakness) of the municipalities and the amount of their ESPII-grants received could be confirmed empirically. Finally, with respect to the economic short-term stabilization effects of the program a significant increase of the municipal investments – although with a time lag - was found for Saxony.
Read article
Russia: Overcoming the Effects of Economic Crisis Takes Time
Martina Kämpfe
Wirtschaft im Wandel,
No. 6,
2010
Abstract
The last year's decline of Gross Domestic Product in Russia was harder than in most big economies of the world. The financial crisis has revealed specific circumstances of growth in Russia: The situation deteriorated not only by the downfall of crude oil prices, but especially by the Russian banking sector not being able to satisfy financing demand of the private sector enterprises. So foreign liabilities of enterprises had increased and the dependence of the enterprises on the international financial markets had strengthened. In that way impacts of the global financial crisis affected Russia harder. Although external conditions for the Russian economy improved in the last months due to the rise of world oil prices and global demand for commodities, domestic demand still suffers from small revenues and bad financing conditions for enterprises. Because of its structural weakness it will take Russia longer than other transformation countries to overcome the crisis. Economic growth in the near future will expand much smaller than on last years’ average.
Read article
Stages of the 2007/2008 Global Financial Crisis: Is there a Wandering Asset-Price Bubble?
Lucjan T. Orlowski
One-off Publications,
No. 3,
2008
Abstract
This study argues that the severity of the current global financial crisis is strongly influenced by changeable allocations of the global savings. This process is named a “wandering asset bubble”. Since its original outbreak induced by the demise of the subprime mortgage market and the mortgage-backed securities in the U.S., this crisis has reverberated across other credit areas, structured financial products and global financial institutions. Four distinctive stages of the crisis are identified: the meltdown of the subprime mortgage market, spillovers into broader credit market, the liquidity crisis epitomized by the fallout of Bear Sterns with some contagion effects on other financial institutions, and the commodity price bubble. Monetary policy responses aimed at stabilizing financial markets are proposed.
Read article
What are the Long-Term Benefits of the Economic Stimulus Package II for German Local Governments? – The Case of Saxony
Peter Haug
Wirtschaft im Wandel,
No. 4,
2010
Abstract
This article deals with the question whether the investments subsidized by the economic stimulus package II („Konjunkturpaket II“) do not only have short-term effects on demand but also long-term effects e.g. on local economic growth. As far as the short-term effects are concerned, the case of the German state of Saxony shows – with some delay – a rise in local government´s investments. Hence, the time-lag problem inherent in all governmental spending programmes seems to keep within reasonable limits. Up to now there have been no signs of inflationary price tendencies in the construction sector.
According to - for example - the „new“ economic growth theory, one ought to be sceptical about the long-term effects of the projects supported by the programme: Even for genuine public intermediate goods the withdrawal effects of financing have to be weighed against the positive effects on private enterprise sector productivity. Furthermore, the effects on factor prices caused by the investment grants might encourage the excess use of physical capital in public production.
This sceptical attitude of the theory is confirmed for Saxony by the fact that primarily public consumption goods (sports and leisure facilities) or educational facilities (kindergartens, primary schools), which are of no direct relevance to the local enterprises, are supported by the programme. Investments in vocational training, research and development play only a minor role at the local government level or are explicitly excluded from the programme.
Especially because of the incentives to misallocate public resources it is recommended to rely on unconditional grants in future support programmes. Then the local governments could use the grants for either „investments” in human capital (new [fixed-term contract] hires, qualification) or in physical capital, according to their needs.
Read article
Market Concentration and Innovation in Transnational Corporations: Evidence from Foreign Affiliates in Central and Eastern Europe
Liviu Voinea, Johannes Stephan
Research on Knowledge, Innovation and Internationalization (Progress in International Business Research, Volume 4),
2009
Abstract
Purpose – The main research question of this contribution is whether local market concentration influences R&D and innovation activities of foreign affiliates of transnational companies.
Methodology/approach – We focus on transition economies and use discriminant function analysis to investigate differences in the innovation activity of foreign affiliates operating in concentrated markets, compared to firms operating in nonconcentrated markets. The database consists of the results of a questionnaire administered to a representative sample of foreign affiliates in a selection of five transition economies.
Findings – We find that foreign affiliates in more concentrated markets, when compared to foreign affiliates in less concentrated markets, export more to their own foreign investor's network, do more basic and applied research, use more of the existing technology already incorporated in the products of their own foreign investor's network, do less process innovation, and acquire less knowledge from abroad.
Research limitations/implications – The results may be specific to transition economies only.
Practical implications – The main implications of these results are that host country market concentration stimulates intranetwork knowledge diffusion (with a risk of transfer pricing), while more intense competition stimulates knowledge creation (at least as far as process innovation is concerned) and knowledge absorption from outside the affiliates' own network. Policy makers should focus their support policies on companies in more competitive sectors, as they are more likely to transfer new technologies.
Originality/value – It contributes to the literature on the relationship between market concentration and innovation, based on a unique survey database of foreign affiliates of transnational corporations operating in Eastern Europe.
Read article
Germany’s Production of Export Goods: Human Capital Content Slightly Exceeds that of Imports
Hans-Ulrich Brautzsch, Udo Ludwig
Wirtschaft im Wandel,
No. 11,
2009
Abstract
In the decade before the present, world financial crisis exports out of Germany expanded enormously. This was caused by the growing world demand as well as the internationalization of the national production processes and favoured by the improving price competitiveness. At the same time, against the background of the tertiarisation of the economy, the qualification of employees has increased considerably. In our study, we investigate the changes of labour quality in the production of export goods using the standard open input-output model. Hereby, labour input is measured in terms of different formal qualification levels of the employees. The results are compared with the labour input for imported goods. We find out that the input of high qualified labour per unit of produced export goods exceeds only marginally the comparable input value of the imports. It should be mentioned that the comparison is strongly influenced by the assumption of identical production functions for both Germany and its trading partners.
Read article
Yes to Investments by Public Authorities for the Future! But Business Cycle will no Longer be Saved by it!
Hans-Ulrich Brautzsch, Brigitte Loose, Udo Ludwig
Wirtschaft im Wandel,
No. 3,
2009
Abstract
In order to mitigate the effects of the deep economic recession, the German federal government has adopted two economic stimulus packages to be applied in the period from 2009 to 2010. According to our estimations, these programs include investments amounting to 25.3 billion Euros mainly in infrastructure and education. We investigate the total effects of these investments on production and employment using a static input-output model. We find that the gross domestic product will increase by at most one percentage point, namely 0.4 points in 2009 and 0.7 points in 2010. This implies that approximately 400 000 jobs will be safeguarded. About one quarter of the effects will concern construction and business services respectively. For several reasons, our calculations constitute the upper bound to the expected effects. The increasing demand in construction could lead to significantly increasing prices. In light of the expected decline in production, the economic effects of the programs may appear to be low. Obviously, the strong decrease in external demand and its impact on the economy cannot be effectively combated by instruments of national economic policies.
Read article
Stages of the Ongoing Global Financial Crisis: Is There a Wandering Asset Bubble?
Lucjan T. Orlowski
IWH Discussion Papers,
No. 11,
2008
Abstract
This study argues that the severity of the current global financial crisis is strongly influenced by changeable allocations of the global savings. This process is named a “wandering asset bubble”. Since its original outbreak induced by the demise of the subprime mortgage market and the mortgage-backed securities in the U.S., this crisis has reverberated across other credit areas, structured financial products and global financial institutions. Four distinctive stages of the crisis are identified: the meltdown of the subprime mortgage market, spillovers into broader credit market, the liquidity crisis epitomized by the fallout of Bear Sterns with some contagion effects on other financial institutions, and the commodity price bubble. Monetary policy responses aimed at stabilizing financial markets are proposed.
Read article
In Focus: State is Winner of Recent German Upswing
Axel Lindner
Wirtschaft im Wandel,
No. 9,
2008
Abstract
In 2006 and 2007, production expanded briskly in Germany. Real disposable incomes of private households, however, were almost stagnant. This article sheds, with help of national accounts data, some light on the reasons for this discrepancy: By far the most important factor is that the share of the general government in the disposable income of the whole economy increased strongly. The share of corporations in the disposable income increased, too. Finally, the deflator for consumption rose by more than the deflator of GDP mainly because of the price hike for imported commodities and energy.
Read article