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Nowcasting East German GDP Growth: a MIDAS Approach

João Carlos Claudio, Katja Heinisch, Oliver Holtemöller
Empirical Economics, im Erscheinen
Abstract
Economic forecasts are an important element of rational economic policy both on the federal and on the local or regional level. Solid budgetary plans for government expenditures and revenues rely on efficient macroeconomic projections. However, official data on quarterly regional GDP in Germany are not available, and hence, regional GDP forecasts do not play an important role in public budget planning. We provide a new quarterly time series for East German GDP and develop a forecasting approach for East German GDP that takes data availability in real time and regional economic indicators into account. Overall, we find that mixed-data sampling model forecasts for East German GDP in combination with model averaging outperform regional forecast models that only rely on aggregate national information.
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Employment Effects of Introducing a Minimum Wage: The Case of Germany

Oliver Holtemöller, Felix Pohle
Economic Modelling, im Erscheinen
Abstract
Income inequality has been a major concern of economic policy makers for several years. Can minimum wages help to mitigate inequality? In 2015, the German government introduced a nationwide statutory minimum wage to reduce income inequality by improving the labour income of low-wage employees. However, the employment effects of wage increases depend on time and region specific conditions and, hence, they cannot be known in advance. Because negative employment effects may offset the income gains for low-wage employees, it is important to evaluate minimum-wage policies empirically. We estimate the employment effects of the German minimum-wage introduction using panel regressions on the state-industry-level. We find a robust negative effect of the minimum wage on marginal and a robust positive effect on regular employment. In terms of the number of jobs, our results imply a negative overall effect. Hence, low-wage employees who are still employed are better off at the expense of those who have lost their jobs due to the minimum wage.
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The Effects of Fiscal Policy in an Estimated DSGE Model – The Case of the German Stimulus Packages During the Great Recession

Andrej Drygalla, Oliver Holtemöller, Konstantin Kiesel
Macroeconomic Dynamics, im Erscheinen
Abstract
In this paper, we analyze the effects of the stimulus packages adopted by the German government during the Great Recession. We employ a standard medium-scale dynamic stochastic general equilibrium (DSGE) model extended by non-optimizing households and a detailed fiscal sector. In particular, the dynamics of spending and revenue variables are modeled as feedback rules with respect to the cyclical components of output, hours worked and private investment. Based on the estimated rules, fiscal shocks are identified. According to the results, fiscal policy, in particular public consumption, investment, and transfers prevented a sharper and prolonged decline of German output at the beginning of the Great Recession, suggesting a timely response of fiscal policy. The overall effects, however, are small when compared to other domestic and international shocks that contributed to the economic downturn. Our overall findings are not sensitive to considering fiscal foresight.
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Expectation Formation, Financial Frictions, and Forecasting Performance of Dynamic Stochastic General Equilibrium Models

Oliver Holtemöller, Christoph Schult
Historical Social Research, Special Issue: Governing by Numbers 2019
Abstract
In this paper, we document the forecasting performance of estimated basic dynamic stochastic general equilibrium (DSGE) models and compare this to extended versions which consider alternative expectation formation assumptions and financial frictions. We also show how standard model features, such as price and wage rigidities, contribute to forecasting performance. It turns out that neither alternative expectation formation behaviour nor financial frictions can systematically increase the forecasting performance of basic DSGE models. Financial frictions improve forecasts only during periods of financial crises. However, traditional price and wage rigidities systematically help to increase the forecasting performance.
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On the Risk of a Sovereign Debt Crisis in Italy

Oliver Holtemöller, Tobias Knedlik, Axel Lindner
Intereconomics, im Erscheinen
Abstract
The intention for the Italian government to stimulate business activity via large increases in government spending is not in line with the stabilisation of the public debt ratio. Instead, if such policy were implemented, the risk of a sovereign debt crisis would be high. In this article, we analyse the capacity of the Italian economy to shoulder sovereign debt under different scenarios. We conclude that focusing on growth enhancing structural reforms, would allow for moderate increases in public expenditure.
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Zu den rentenpolitischen Plänen im Koalitionsvertrag 2018 von CDU, CSU und SPD: Konsequenzen, Finanzierungsoptionen und Reformbedarf

Oliver Holtemöller, Christoph Schult, Götz Zeddies
Zeitschrift für Wirtschaftspolitik, Nr. 3, 2018
Abstract
In the coalition agreement from February 7, 2018, the new German federal government drafts its public pension policy, which has to be evaluated against the background of demographic dynamics in Germany. In this paper, the consequences of public pensions related policy measures for the German public pension insurance are illustrated using a simulation model. In the long run, the intended extensions of benefits would lead to an increase in the contribution rate to the German public pension insurance of about two and a half percentage points. Referring to pension systems of other countries, we discuss measures in order to limit this increase in the contribution rate.
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Global Food Prices and Monetary Policy in an Emerging Market Economy: The Case of India

Oliver Holtemöller, Sushanta Mallick
Journal of Asian Economics, 2016
Abstract
This paper investigates a perception in the political debates as to what extent poor countries are affected by price movements in the global commodity markets. To test this perception, we use the case of India to establish in a standard SVAR model that global food prices influence aggregate prices and food prices in India. To further analyze these empirical results, we specify a small open economy New-Keynesian model including oil and food prices and estimate it using observed data over the period 1996Q2 to 2013Q2 by applying Bayesian estimation techniques. The results suggest that a big part of the variation in inflation in India is due to cost-push shocks and, mainly during the years 2008 and 2010, also to global food price shocks, after having controlled for exogenous rainfall shocks. We conclude that the inflationary supply shocks (cost-push, oil price, domestic food price and global food price shocks) are important contributors to inflation in India. Since the monetary authority responds to these supply shocks with a higher interest rate which tends to slow growth, this raises concerns about how such output losses can be prevented by reducing exposure to commodity price shocks. 
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On the Distribution of Refugees in the EU

Martin Altemeyer-Bartscher, Oliver Holtemöller, Axel Lindner, Andreas Schmalzbauer, Götz Zeddies
Intereconomics, Nr. 4, 2016
Abstract
The current situation regarding the migration of refugees can only be handled efficiently through closer international cooperation in the field of asylum policy. From an economic point of view, it would be reasonable to distribute incoming refugees among all EU countries according to a distribution key that reflects differences in the costs of integration in the individual countries. An efficient distribution would even out the marginal costs of integrating refugees. In order to reach a political agreement, the key for distributing refugees should be complemented by compensation payments that distribute the costs of integration among countries. The key for distributing refugees presented by the EU Commission takes account of appropriate factors in principle, but it is unclear in terms of detail. The compensation payments for countries that should take relatively high numbers of refugees for cost efficiency reasons should be financed by reallocating resources within the EU budget. 
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Impact of Personal Economic Environment and Personality Factors on Individual Financial Decision Making

S. Prinz, G. Gründer, R. D. Hilgers, Oliver Holtemöller, I. Vernaleken
Frontiers in Decision Neuroscience, Nr. 158, 2014
Abstract
This study on healthy young male students aimed to enlighten the associations between an individual’s financial decision making and surrogate makers for environmental factors covering long-term financial socialization, the current financial security/responsibility, and the personal affinity to financial affairs as represented by parental income, funding situation, and field of study. A group of 150 male young healthy students underwent two versions of the Holt and Laury (2002) lottery paradigm (matrix and random sequential version). Their financial decision was mainly driven by the factor “source of funding”: students with strict performance control (grants, scholarships) had much higher rates of relative risk aversion (RRA) than subjects with support from family (ΔRRA = 0.22; p = 0.018). Personality scores only modestly affected the outcome. In an ANOVA, however, also the intelligence quotient significantly and relevantly contributed to the explanation of variance; the effects of parental income and the personality factors “agreeableness” and “openness” showed moderate to modest – but significant – effects. These findings suggest that environmental factors more than personality factors affect risk aversion.
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Explosive Preisentwicklung und spekulative Blasen auf Rohstoffmärkten

Oliver Holtemöller
ORDO, Nr. 64, 2013
Abstract
In dieser Studie wird untersucht, ob die Preisentwicklung auf Rohstoffmärkten statistische Anhaltspunkte für spekulative Preisblasen liefert. Diese Frage ist von zentraler Bedeutung in der wirtschaftspolitischen Debatte um die Regulierung des Handels von Rohstoffen. Es kann statistisch gezeigt werden, dass sich Rohstoffpreise gelegentlich explosiv verhalten. Die stärkste Evidenz für explosives Verhalten gibt es bei den Industrierohstoffen. Auch bei Nahrungsmittelpreisen können Phasen explosiven Verhaltens statistisch nachgewiesen werden. Eine wichtige Schlussfolgerung ist, dass die Ursachen explosiven Verhaltens auf Rohstoffmärkten und die Effekte von Preisblasen auf die Entscheidungen von Konsumenten und Investoren sowie Verteilungseffekte systematisch untersucht werden müssen.
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