The New EU Countries and Euro Adoption
Hubert Gabrisch, Martina Kämpfe
Intereconomics,
No. 3,
2013
Abstract
In the new member states of the EU which have not yet adopted the euro, previous adoption strategies have come under scrutiny. The spillovers and contagion from the global financial crisis revealed a new threat to the countries’ real convergence goal, namely considerable vulnerability to the transmission of financial instability to the real economy. This paper demonstrates the existence of extreme risks for real convergence and argues in favour of a new adoption strategy which does not announce a target date for the currency changeover and which allows for more flexible and countercyclical monetary, fiscal and wage policies.
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Financial Factors in Macroeconometric Models
Sebastian Giesen
Volkswirtschaft, Ökonomie, Shaker Verlag GmbH, Aachen,
2013
Abstract
The important role of credit has long been identified as a key factor for economic development (see e.g. Wicksell (1898), Keynes (1931), Fisher (1933) and Minsky (1957, 1964)). Even before the financial crisis most researchers and policy makers agreed that financial frictions play an important role for business cycles and that financial turmoils can result in severe economic downturns (see e.g. Mishkin (1978), Bernanke (1981, 1983), Diamond (1984), Calomiris (1993) and Bernanke and Gertler (1995)). However, in practice researchers and policy makers mostly used simplified models for forecasting and simulation purposes. They often neglected the impact of financial frictions and emphasized other non financial market frictions when analyzing business cycle fluctuations (prominent exceptions include Kiyotaki and Moore (1997), Bernanke, Gertler, and Gilchrist (1999) and Christiano, Motto, and Rostagno (2010)). This has been due to the fact that most economic downturns did not seem to be closely related to financial market failures (see Eichenbaum (2011)). The outbreak of the subprime crises ― which caused panic in financial markets and led to the default of Lehman Brothers in September 2008 ― then led to a reconsideration of such macroeconomic frameworks (see Caballero (2010) and Trichet (2011)). To address the economic debate from a new perspective, it is therefore necessary to integrate the relevant frictions which help to explain what we have experienced during recent years.
In this thesis, I analyze different ways to incorporate relevant frictions and financial variables in macroeconometric models. I discuss the potential consequences for standard statistical inference and macroeconomic policy. I cover three different aspects in this work. Each aspect presents an idea in a self-contained unit. The following paragraphs present more detail on the main topics covered.
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How to Create a New Holiday Destination? An Evaluation of Local Public Investment for Supporting Tourism Industry
Albrecht Kauffmann, Martin T. W. Rosenfeld
Quantitative Methods in Tourism Economics,
2013
Abstract
Since the 1990s tourism has been one major area in Saxony where new local public infrastructure has been created. The question is whether this newly-built tourism infrastructure has been able to change the path of economic development in those municipalities where the investment has occurred. Is it possible to activate the tourism industry with the help of public investment at locations that are completely new to the tourism industry? The econometric estimations and a survey of businesses in the field of tourism make it clear that the new tourist infrastructure really did have a positive effect on local employment – but not everywhere and not in every case. Tourist infrastructure will only have a major positive impact on economic development if a municipality already has a “track record” of being a tourist destination and is well-equipped with the relevant complementary factors for tourist activities and the “primary features” of tourist destinations – History matters!
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The Investment Strategies of Sovereign Wealth Funds
Shai B. Bernstein, Josh Lerner, Antoinette Schoar
Journal of Economic Perspectives,
No. 2,
2013
Abstract
Sovereign wealth funds have emerged as major investors in corporate and real resources worldwide. After an overview of their magnitude, we consider the institutional arrangements under which many of the sovereign wealth funds operate. We focus on a specific set of agency problems that is of first-order importance for these funds: that is, the direct involvement of political leaders in the management process. We show that sovereign wealth funds with greater involvement of political leaders in fund management are associated with investment strategies that seem to favor short-term economic policy goals in their respective countries at the expense of longer-term maximization of returns. Sovereign wealth funds face several other issues, like how best to cope with demands for transparency, which can allow others to copy their investment strategies, and how to address the problems that arise with sheer size, like the difficulties of scaling up investment strategies that only work with a smaller value of assets under investment. In the conclusion, we discuss how various approaches cultivated by effective institutional investors worldwide -- from investing in the best people to pioneering new asset classes to compartmentalizing investment activities -- may provide clues as to how sovereign wealth funds might address these issues.
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Gauging the Effects of Fiscal Stimulus Packages in the Euro Area
Mathias Trabandt, Roland Straub, Günter Coenen
Journal of Economic Dynamics and Control,
No. 2,
2013
Abstract
We seek to quantify the impact on euro area GDP of the European Economic Recovery Plan (EERP) enacted in response to the financial crisis of 2008–2009. To do so, we estimate an extended version of the ECB's New Area-Wide Model with a richly specified fiscal sector. The estimation results point to the existence of important complementarities between private and government consumption and, to a lesser extent, between private and public capital. We first examine the implied present-value multipliers for seven distinct fiscal instruments and show that the estimated complementarities result in fiscal multipliers larger than one for government consumption and investment. We highlight the importance of monetary accommodation for these findings. We then show that the EERP, if implemented as initially enacted, had a sizeable, although short-lived impact on euro area GDP. Since the EERP comprised both revenue and expenditure-based fiscal stimulus measures, the total multiplier is below unity.
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How does Institutional Setting Affect the Impact of EU Structural Funds on Economic Cohesion? New Evidence from Central and Eastern Europe
Marina Grusevaja, Toralf Pusch
Journal of Common Market Studies,
2012
Abstract
Structural Funds are the main instrument of the EU Cohesion Policy. Their effective use is subject to an ongoing debate in political and scientific circles. European fiscal assistance under this heading should promote economic and social cohesion in the member states of the European Union. Recently the domestic institutional capacity to absorb, to distribute and to invest Structural Funds effectively has become a crucial determinant of the cohesion process and has attracted attention of the scientific community. The aim of this study is to shed light on the effectiveness of Structural Funds in the countries of the first Central and Eastern European enlargement round in 2004. Using regional data for these countries we have a look on the impact of several institutional governance variables on the effectiveness of Structural Funds. In the interpretation of results reference is made to regional economics. Results of the empirical analysis indicate an influence of certain institutional variables on the effectiveness of Structural Funds in the new member states.
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Vernetzung, Kooperationen, Metropolregionen – Effekte für die wirtschaftliche Zukunft der Städte. Dokumentationen des „3rd Halle Forum on Urban Economic Growth“
IWH-Sonderhefte,
No. 4,
2012
Abstract
Das dritte „Halle Forum on Urban Economic Growth“ widmete sich der Frage nach den Formen von Kooperationen und Vernetzung zwischen Unternehmen, Kommunen und anderen korporativen Akteuren sowie nach den Vorteilen einer solchen Zusammenarbeit für die wirtschaftliche Entwicklung von Städten speziell innerhalb von Metropolregionen. Wie stark sind die konstituierenden Merkmale von Metropolen in den Städten Mitteldeutschlands ausgeprägt, und wie sind deren Verflechtungen untereinander im Hinblick auf ihre Einbindung in das europäische Städtesystem zu beurteilen? Welche Faktoren tragen zum Erfolg interkommunaler Kooperationen bei? Sind bei der Herausbildung Europäischer Metropolregionen in Deutschland Muster ihrer Institutionalisierung erkennbar? Wie stark sind Unternehmen in verschiedenen Wirtschaftsräumen in Deutschland vernetzt, und welchen Typen lassen sich diese Verflechtungen zuordnen? Diesen Fragen wird im vorliegenden Band aus Sicht der Wirtschafts- und Verwaltungswissenschaft sowie der Geographie nachgegangen.
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Monetary Policy in a World Where Money (Also) Matters
Makram El-Shagi, Sebastian Giesen
IWH Discussion Papers,
No. 6,
2012
Abstract
While the long-run relation between money and inflation as predicted by the quantity theory is well established, empirical studies of the short-run adjustment process have been inconclusive at best. The literature regarding the validity of the quantity theory within a given economy is mixed. Previous research has found support for quantity theory within a given economy by combining the P-Star, the structural VAR and the monetary aggregation literature. However, these models lack precise modelling of the short-run dynamics by ignoring interest rates as the main policy instrument. Contrarily, most New Keynesian approaches, while excellently modeling the short-run dynamics transmitted through interest rates, ignore the role of money and thus the potential mid-and long-run effects of monetary policy. We propose a parsimonious and fairly unrestrictive econometric model that allows a detailed look into the dynamics of a monetary policy shock by accounting for changes in economic equilibria, such as potential output and money demand, in a framework that allows for both monetarist and New Keynesian transmission mechanisms, while also considering the Barnett critique. While we confirm most New Keynesian findings concerning the short-run dynamics, we also find strong evidence for a substantial role of the quantity of money for price movements.
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The Halle Economic Projection Model
Sebastian Giesen, Oliver Holtemöller, Juliane Scharff, Rolf Scheufele
Economic Modelling,
No. 4,
2012
Abstract
In this paper we develop an open economy model explaining the joint determination of output, inflation, interest rates, unemployment and the exchange rate in a multi-country framework. Our model -- the Halle Economic Projection Model (HEPM) -- is closely related to studies published by Carabenciov et al. Our main contribution is that we model the Euro area countries separately. In doing so, we consider Germany, France, and Italy which represent together about 70 percent of Euro area GDP. The model combines core equations of the New-Keynesian standard DSGE model with empirically useful ad-hoc equations. We estimate this model using Bayesian techniques and evaluate the forecasting properties. Additionally, we provide an impulse response analysis and a historical shock decomposition.
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Central Bank, Trade Unions, and Reputation – Is there Room for an Expansionist Manoeuvre in the European Union?
Toralf Pusch, A. Heise
A. Heise (ed.), Market Constellation Research: A Modern Governance Approach to Macroeconomic Policy. Institutionelle und Sozial-Ökonomie, Bd. 19,
2011
Abstract
The objective of this reader is manifold: On the one hand, it intends to establish a new perspective at the policy level named 'market constellations': institutionally embedded systems of macroeconomic governance which are able to explain differences in growth and employment developments. At the polity level, the question raised is whether or not market constellations can be governed and, thus, whether institutions can be created which will provide the incentives necessary for favourable market constellations.
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