Can R&D Subsidies Counteract the Economic Crisis? – Macroeconomic Effects in Germany
Hans-Ulrich Brautzsch, Jutta Günther, Brigitte Loose, Udo Ludwig, Nicole Nulsch
Research Policy,
Nr. 3,
2015
Abstract
During the economic crisis of 2008 and 2009, governments in Europe stabilized their economies by means of fiscal policy. After decades of absence, deficit spending was used to counteract the heavy decline in demand. In Germany, public spending went partially into R&D subsidies in favor of small and medium sized enterprises. Applying the standard open input–output model, the paper analyzes the macroeconomic effects of R&D subsidies on employment and production in the business cycle. Findings in the form of backward multipliers suggest that R&D subsidies have stimulated a substantial leverage effect. Almost two thirds of the costs of R&D projects are covered by the enterprises themselves. Overall, a subsidized R&D program results in a production, value added and employment effect that amounts to at least twice the initial financing. Overall, the R&D program counteracts the decline of GDP by 0.5% in the year 2009. In the year 2010 the effects are already procyclical since the German economy recovered quickly. Compared to the strongly discussed alternative uses of subsidies for private consumption, R&D spending is more effective.
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Do We Need New Modelling Approaches in Macroeconomics?
Claudia M. Buch, Oliver Holtemöller
Financial Cycles and the Real Economy: Lessons for CESEE Countries,
2014
Abstract
The economic and financial crisis that emerged in 2008 also initiated an intense discussion on macroeconomic research and the role of economists in society. The debate focuses on three main issues. Firstly, it is argued that economists failed to predict the crisis and to design early warning systems. Secondly, it is claimed that economists use models of the macroeconomy which fail to integrate financial markets and which are inadequate to model large economic crises. Thirdly, the issue has been raised that economists invoke unrealistic assumptions concerning human behaviour by assuming that all agents are self-centred, rationally optimizing individuals. In this paper, we focus on the first two issues. Overall, our thrust is that the above statements are a caricature of modern economic theory and empirics. A rich field of research developed already before the crisis and picked up shortcomings of previous models.
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Linking Distress of Financial Institutions to Macrofinancial Shocks
Alexander Al-Haschimi, Stéphane Dées, Filippo di Mauro, Martina Jančoková
ECB Working Paper,
Nr. 1749,
2014
Abstract
This paper links granular data of financial institutions to global macroeconomic variables using an infinite-dimensional vector autoregressive (IVAR) model framework. The approach taken allows for an assessment of the two-way links between the financial system and the macroeconomy, while accounting for heterogeneity among financial institutions and the role of international linkages in the transmission of shocks. The model is estimated using macroeconomic data for 21 countries and default probability estimates for 35 euro area financial institutions. This framework is used to assess the impact of foreign macroeconomic shocks on default risks of euro area financial firms. In addition, spillover effects of firm-specific shocks are investigated. The model captures the important role of international linkages, showing that economic shocks in the US can generate a rise in the default probabilities of euro area firms that are of a significant magnitude compared to recent historical episodes such as the financial crisis. Moreover, the potential heterogeneity across financial firms.
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Do We Need New Modelling Approaches in Macroeconomics?
Claudia M. Buch, Oliver Holtemöller
IWH Discussion Papers,
Nr. 8,
2014
Abstract
The economic and financial crisis that emerged in 2008 also initiated an intense discussion on macroeconomic research and the role of economists in society. The debate focuses on three main issues. Firstly, it is argued that economists failed to predict the crisis and to design early warning systems. Secondly, it is claimed that economists use models of the macroeconomy which fail to integrate financial markets and which are inadequate to model large economic crises. Thirdly, the issue has been raised that economists invoke unrealistic assumptions concerning human behaviour by assuming that all agents are self-centred, rationally optimizing individuals. In this paper, we focus on the first two issues. Overall, our thrust is that the above statements are a caricature of modern economic theory and empirics. A rich field of research developed already before the crisis and picked up shortcomings of previous models.
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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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The Skills Balance in Germany’s Import Intensity of Exports: An Input-Output Analysis
Udo Ludwig, Hans-Ulrich Brautzsch
Intereconomics,
Nr. 2,
2014
Abstract
In the decade prior to the economic and financial crisis, Germany’s net exports increased in absolute terms as well as relative to the growing level of import intensity of domestically produced export goods and services. This article analyses the direct and indirect employment effects induced both by exports as well as by of the import intensity of the production process of export goods and services on the skills used. It shows that Germany’s export surpluses led to positive net employment effects. Although the volume of imports of intermediate goods increased and was augmented by the rise in exports, it could not undermine the overall positive employment effect.
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Macroeconomic Policy Formation in Africa - General Issues
Karl Wohlmuth, Achim Gutowski, M. Kandil, Tobias Knedlik, O. O. Uzor
African Development Perspectives Yearbook, Vol. 16,
2014
Abstract
In Volume 16 with the title “Macroeconomic Policy Formation in Africa - General Issues“ new macroeconomic policy frameworks for Africa are discussed. Emphasis is on macroeconomic policies focusing on sustainable and inclusive growth, especially by considering the employment targeting of macroeconomic policy frameworks in Africa. The responses of the macroeconomic policymakers in Africa to the Euro crisis and to the recent globalization trends are reviewed and analyzed. The role of macroeconomic policies for generating sustainable and inclusive growth is also discussed. In Volume 16 also the economics of the “Arab Spring“ countries is analyzed, by focusing on the socioeconomic conditions and the economic policy factors that have led to the “Arab Spring“ events. Highlighted are the cases of Egypt and Tunisia, and the new strategic and policy frameworks in these countries after the democratic changes. An agenda for comprehensive policy reforms for the Arab countries in Africa is presented. In forthcoming Volume 17 with the title “Macroeconomic Policy Formation in Africa - Country Cases“ macroeconomic policies in African post-conflict countries and in the ECOWAS region are considered. Volume 17 contains also a section with Book Reviews and Book Notes.
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Sovereign Credit Risk Co-movements in the Eurozone: Simple Interdependence or Contagion?
Manuel Buchholz, Lena Tonzer
UniCredit & Universities Foundation, Working Paper Series No. 47,
Nr. 47,
2013
publiziert in: International Finance
Abstract
We investigate credit risk co-movements and contagion in sovereign debt markets of 17 industrialized countries for the period 2008-2012. We use dynamic conditional correlations of sovereign CDS spreads to detect contagion. This approach allows separating the channels through which contagion occurs from the determinants of simple interdependence. The results show that, first, sovereign credit risk comoves considerably, in particular among eurozone countries and during the sovereign debt crisis. Second, contagion cannot be attributed to one moment in time but varies across time and countries. Third, similarities in economic fundamentals, cross-country linkages in banking, and common market sentiment constitute the main channels of contagion.
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