27.09.2018 • 19/2018
Upswing in East Germany has slowed, but continues – implications of the joint forecast of the German economic research institutes in autumn 2018 and of official data for the Eastern German economy in the first half of 2018
The German institutes forecast a slowdown in the cyclical upswing in Germany. Foreign demand, in particular from other euro area countries, has eased, and capacity constraints make it increasingly difficult for companies to expand production. Both arguments apply to East Germany as well: high vacancy rates indicate that labour may be even scarcer than in the West despite higher unemployment. Moreover, a particularly high proportion of East German exports go to other European countries. Important drivers of growth in the East, however, are still intact: unlike the manufacturing sector, services have been rising a bit faster in recent years in East Germany than in the West. Providers of services benefit from significantly rising disposable incomes of private households, as employment is currently expanding healthily and at only a slightly slower pace than in West Germany, despite poorer demographic conditions. Retirement pensions in East Germany have also been increased considerably.
Oliver Holtemöller
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Does it Payoff to Research Economics? A Tale of Citation, Knowledge and Economic Growth in Transition Countries
Dejan Kovač, Boris Podobnik, Nikol Scrbec
Physica A: Statistical Mechanics and its Applications,
September
2018
Abstract
There are many economic theories that promote human capital as a key driver of a country’s economic growth, but it is challenging to test this theory empirically on a country level and causally interpret the coefficients due to several identification problems. We tried to answer this particular question by using a quasi-natural experiment that happened quarter century ago – the fall of communist block in Eastern Europe. We use a shock to a particular scientific field – economics, to test whether the future investment into that particular field resulted in increased welfare and economic growth. The economics paradigm that was governing all of the communist block ceased to exist. Human capital depreciated over night and all communist countries had to transit from planned economy to a market economy. In the following years countries had to adapt to market economy through additional investment in human capital and research. We find that countries which lack both of the two fourth mentioned components had 25 years later a relatively lower economic growth and wealth. Unlike economics, other fields such as physics and medicine did not go through the same process so we use them as a placebo effect for our study. We find that the relative ratio of citations between economics and physics in post-communist countries is increasing only 15 years after the “paradigm” shock which gives a suggestive evidence that timing of investment into particular scientific field matters the most.
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Growth through Heterogeneous Innovations
Ufuk Akcigit, William R. Kerr
Journal of Political Economy,
No. 4,
2018
Abstract
We build a tractable growth model in which multiproduct incumbents invest in internal innovations to improve their existing products, while new entrants and incumbents invest in external innovations to acquire new product lines. External and internal innovations generate heterogeneous innovation qualities, and firm size affects innovation incentives. We analyze how different types of innovation contribute to economic growth and the role of the firm size distribution. Our model aligns with many observed empirical regularities, and we quantify our framework with Census Bureau and patent data for US firms. Internal innovation scales moderately faster with firm size than external innovation.
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14.06.2018 • 14/2018
Current economic outlook: German upswing is slowing down
In summer 2018, the world economy is still rather strong. Dynamics in the euro area, however, have declined markedly, and the cyclical upswing in Germany has almost stalled, due to weaker exports. “Gross domestic product will, according to this forecast, expand by 1.7% in 2018 and by 1.6% in 2019. Growth in East Germany will be about as strong as in Germany as a whole”, says Oliver Holtemöller, head of the Department Macroeconomics and vice president at IWH.
Oliver Holtemöller
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What Type of Finance Matters for Growth? Bayesian Model Averaging Evidence
Iftekhar Hasan, Roman Horvath, Jan Mares
World Bank Economic Review,
No. 2,
2018
Abstract
We examine the effect of finance on long-term economic growth using Bayesian model averaging to address model uncertainty in cross-country growth regressions. The literature largely focuses on financial indicators that assess the financial depth of banks and stock markets. We examine these indicators jointly with newly developed indicators that assess the stability and efficiency of financial markets. Once we subject the finance-growth regressions to model uncertainty, our results suggest that commonly used indicators of financial development are not robustly related to long-term growth. However, the findings from our global sample indicate that one newly developed indicator—the efficiency of financial intermediaries—is robustly related to long-term growth.
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On the Empirics of Reserve Requirements and Economic Growth
Jesús Crespo Cuaresma, Gregor von Schweinitz, Katharina Wendt
Abstract
Reserve requirements, as a tool of macroprudential policy, have been increasingly employed since the outbreak of the great financial crisis. We conduct an analysis of the effect of reserve requirements in tranquil and crisis times on credit and GDP growth making use of Bayesian model averaging methods. In terms of credit growth, we can show that initial negative effects of higher reserve requirements (which are often reported in the literature) tend to be short-lived and turn positive in the longer run. In terms of GDP per capita growth, we find on average a negative but not robust effect of regulation in tranquil times, which is only partly offset by a positive but also not robust effect in crisis times.
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The Economic Development of Saxony-Anhalt since 1990
Oliver Holtemöller, Axel Lindner
Abstract
In diesem Beitrag wird die wirtschaftliche Entwicklung Sachsen-Anhalts seit 1990 im Kontext des ostdeutschen Transformationsprozesses von einer Zentralverwaltungswirtschaft zu einer Marktwirtschaft beschrieben. Die wirtschaftliche Leistungsfähigkeit Sachsen-Anhalts hat in den frühen 1990er Jahren zunächst schnell gegenüber Westdeutschland aufgeholt, vor allem weil der Kapitalstock modernisiert und erweitert worden ist. Seit einiger Zeit stagniert der Aufholprozess jedoch, und das Bruttoinlandsprodukt je Erwerbstätigen liegt etwa 20% unter dem westdeutschen Niveau. Die wirtschaftspolitische Herausforderung besteht darin, den Aufholprozess durch die Förderung von Forschung und Innovation und durch bessere Qualifizierung der Erwerbstätigen weiter voranzubringen.
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19.04.2018 • 7/2018
Joint Economic Forecast Spring 2018: Germany’s Economic Experts Raise Forecast Slightly
Berlin, 19 April – Germany’s leading economic experts raised their forecasts for 2018 and 2019 slightly in their Spring Joint Economic Forecast released on Thursday in Berlin. They now expect economic growth of 2.2 percent for this year and 2.0 percent for 2019, versus 2.0 percent and 1.8 percent respectively in their autumn forecast. “The German economy is still booming, but the air is getting thinner as unused capacities are shrinking“, notes Timo Wollmershaeuser, ifo Head of Economic Forecasting. Commenting on the new German government’s economic policy, he adds: “It is precisely when the government’s coffers are full that fiscal policy should reflect the implications of its actions for overall economic stability and the sustainability of public finances. The extension of statutory pension benefits outlined in the coalition agreement runs counter to the idea of sustainability.”
Oliver Holtemöller
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