Hohenheimer Diskussionsbeiträge

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How the ECB and the US fed set interest rates
(2006) Polleit, Thorsten; Belke, Ansgar
Monetary policies of the ECB and US Fed can be characterised by ?Taylor rules?, that is both central banks seem to be setting rates by taking into account the ?output gap? and inflation. We also set up and tested Taylor rules which incorporate money growth and the euro-dollar exchange rate, thereby improving the ?fit? between actual and Taylor rule based rates. In general, Taylor rules appear to be a much better way of describing Fed policy than ECB policy. Simulations suggest that the ECB?s short-term interest rates have been at a much lower level in the last two years compared with what a Taylor rule would suggest.
Money and Swedish inflation reconsidered
(2006) Belke, Ansgar; Polleit, Thorsten
Analysing the role of money for Swedish inflation, we apply a single equation ?PStar? model and a structural VECM for the period of the late 1980 to the beginning of 2005. Against the background of theoretical and empirical considerations, we find that money ? when measured by the ?price gap? or, alternatively, the ?money overhang? ? has a statistically significant impact on future price movements. The results suggest that money should play a systematic role in monetary policy making in Sweden compared with the status quo.
Trade effects of the Europe agreements
(2006) Spies, Julia; Marques, Helena
The eastern enlargement of the European Union (EU) brought and will bring full membership to countries whose trade barriers with the EU had to a large extent already been removed under Free Trade Agreements (FTAs) during the 1990s. We employ a theory-based new version of a gravity equation, whose specification allows for an assessment of the impact of the arrangements on extra- and intra-group imports. We find robust evidence that the agreements have substantially increased intra-group trade, in the case of the Czech and Slovak Republic at the expense of the Rest of the World (ROW).
Downward nominal wage rigidity in Europe : an analysis of European micro data from the ECHP 1994-2001
(2006) Knoppik, Christoph; Beißinger, Thomas
This paper substantially extends the limited available evidence on existence and extent of downward nominal wage rigidity in the European Union and the Euro Area. For this purpose we develop an econometric multi-country model based on Kahn?s (1997) histogram-location approach and apply it to employee micro data from the European Community Household Panel (ECHP) for twelve of the EU?s current member states. Our estimates for the degree of downward nominal wage rigidity on the national as well as the EU-wide level point to marked downward nominal wage rigidity within the European Union.
Competition between airports with an application to the state of Baden-Württemberg
(2006) Strobach, Daniel
Classical theories of competition in two-dimensional space mainly deal with the questions of where firms locate in the plane and what shape their market areas willconsequently adopt. Out of that develops the construct of catchment areas. As part of long-term infrastructure equipment, an airport can not change location. Once it is chosen and operational, an airport has to compete for passengers and market share on basis of its prevailing catchment areas. Passenger choice determines the shape of an airport?s market and these markets, other than in the presented theories, commonly overlap. On the basis of passengers? selection criterions, the valuation of an airport?s attraction takes place. The developed procedure is applied to the state of Baden-Württemberg. It paints a picture of airport competition in the German Southwest. In order to get a sharper image, the formed catchment areas are subdivided into zones of different competition intensity.
Nobelpreis für Wirtschaftswissenschaften 2006 an Edmund S. Phelps
(2006) Polleit, Thorsten; Geisslreither, Kai; Belke, Ansgar
Am 9. Oktober dieses Jahres gab die Königlich Schwedische Akademie der Wissenschaften (KVA) bekannt, dass der Ökonom Edmund S. Phelps mit dem Wirtschaftsnobelpreis ausgezeichnet wird. Der vorliegende Beitrag stellt die wissenschaftlichen Leistungen von Phelps vor und ordnet sie in den makroökonomischen Gesamtkontext ein. Phelps? Arbeiten haben signifikant zur Verbesserung der Theorie des makroökonomischen Politik-Designs beigetragen. Von ihm ging die Idee einer um Erwartungen modifizierten Phillips-Kurve aus; diese trug dazu bei, den Konflikt zwischen Inflation und Beschäftigung als ?Scheinkonflikt? zu entlarven. Phelps lieferte somit einen bedeutenden Beitrag für die Mikrofundierung der Makroökonomik. Phelps? zweite bedeutende makroökonomische Innovation war die Entdeckung der goldenen Regel der Kapitalakkumulation. Auch sie birgt wichtige Politikimplikationen. Die Auszeichnung von Edmund S. Phelps ist ein folgerichtiger Schritt zur Würdigung eines Ökonomen, der die moderne Makroökonomik in umfassender Weise geprägt hat.
Neue Anforderungen an eine gesamtwirtschaftliche Stabilisierung
(2006) Beißinger, Thomas
In dieser Arbeit soll der Frage nachgegangen werden, wie sich das erneute Interesse an der Stabilisierung der Ökonomie durch Nachfragesteuerung erklären lässt und welche neuen Anforderungen an die Stabilisierungspolitik sich unter Umständen aus der aktuellen Forschung ableiten lassen. Dabei muss bereits vorab betont werden, dass es im Rahmen eines Aufsatzes unmöglich ist, diese Thematik in all ihren Facetten zu diskutieren und vielmehr nur einzelne Aspekte herausgegriffen werden können. In Abschnitt 2 werden zunächst mögliche Ursachen für die erneute Hinwendung zu Fragen der gesamtwirtschaftlichen Stabilisierung angeführt. Abschnitt 3 widmet sich der Frage, welche Wohlfahrtsgewinne durch eine verbesserte Stabilisierungspolitik zu erwarten sind. Da neuere Forschungsergebnisse auf beträchtliche Wohlfahrtsgewinne hindeuten, erscheint es lohnend, über neue Anforderungen an eine gesamtwirtschaftliche Stabilisierung nachzudenken. Abschnitt 4 widmet sich der Frage möglicher Verbesserungen einer auf Inflationssteuerung ausgerichteten Geldpolitik, während Abschnitt 5 Möglichkeiten und Grenzen fiskalpolitischer Maßnahmen zur Konjunkturstabilisierung anspricht. Abschnitt 6 schließt mit einer Zusammenfassung und einigen Schlussfolgerungen.
Bargained wages in decentralized wage-setting regimes
(2006) Heinbach, Wolf Dieter
Collective wage agreements still play an important role in the German wage bargaining system. However, there is a critical debate in Germany whether collective agreements deliver the flexibility needed by firms to adjust to the needs of international competition and technological change. In recent years, the social partners in some industries have responded to this possible lack of flexibility by introducing so called opening clauses into their collective bargaining agreements. These allow firms to deviate from their collective agreement under certain conditions. The aim of this paper is to empirically analyze the prevalence of opening clauses in the German manufacturing sector and their impact on the wage structure. To provide a basis for the empirical analyses, a survey on the existence and intensity of opening clauses in central collective agreements has been conducted. Thereby, these sectoral data about opening clauses are exactly combined with those from the German Structure of Earnings Survey 1995 and 2001, a linked employer-employee dataset from German official statistics. The results show the number of collective bargaining agreements containing opening clauses increasing remarkably since 1991. Furthermore, the implementation of opening clauses into collective contracts creates significant effects on wages.
Instability of the Eurozone? : on monetary policy, house prices and structural reforms
(2006) Belke, Ansgar; Gros, Daniel
This paper deals with potential instabilities of the eurozone stemming from an insufficien interplay between monetary policy and reform effort on the one hand and the emergence of intra-euro area divergences on the other. As a first step, we assess the effect of EMU on structural reform and investigate this question by an examination of the relationship between fixed exchange rates and reform in two wider samples of countries. We also stress that loose monetary conditions which prevailed until some months ago can also manifest themselves in asset price inflation, notably in the housing market. When these bubbles burst, for example, when housing prices stop rising, this often leads to a prolonged period of economic instability and weakness rather than consumer price inflation. As a second step, we point out that risks for EMU are not only increasing because longer-term disequilibria become evident in fiscal and monetary policy, but also because serious divergences are now appearing within the euro area which threaten its long-term cohesiveness. The most manifest example of this threat comes from what promises to be a long-term divergence between Germany and Italy which for the time being was offset by asynchronous developments of house prices in both countries. There are still large differences within the euro area, with the small countries performing much better than the large ones on almost every indicator. This suggests that better policies can make a large difference even if monetary policy is the same for everybody. Finally, we construct a simple formal model in order to investigate whether EMU is in danger from internal tensions which could lead to severe instabilities. The experience so far has shown that some countries are continuously losing competitiveness. Is this a structural problem in the sense that these countries just have problems in keeping inflation at level that does not imply a continuing loss of competitiveness? Or is the persistence of higher inflation one can observe in some countries due to the internal dynamics of a monetary union in which any country that starts with higher inflation rate also has a lower real interest rate, which stimulates demand, and thus leads potentially to even more inflation. The purpose of our theoretical section is to discuss what the main factors are which could lead to such diverging cycles.
Auswirkungen von Steueränderungen im Bereich Entfernungspauschale und Werbungskosten : ein Mikrosimulationsmodell
(2006) Wagenhals, Gerhard; Buck, Jürgen
To overcome a lack of information in official income tax statistcs, we developed a statistical matching approach for adding additional data from the German Socio-Economic Panel (GSOEP) to the most recent official income tax statistics data as of 2002. Based on a representative dataset of more than 35000 original tax report extracts, we implemented a microsimulation model that calculates the fiscal impact of changes in the area of tax deductible income related expenses, in particular tax deductible expenses for traveling from home to work and the lump sum deductible for all income related expenses. The new model allows a more detailed simulation of the fiscal impact of changes in the German income tax law than previously possible.
Money matters for inflation in the euro area
(2006) Polleit, Thorsten; Belke, Ansgar; Kösters, Wim; Leschke, Martin
PART 1 ECB independence and price stability The success of the stability oriented monetary policy of the ECB depends on the acceptance of the bank?s institutional set-up. In this context, the ECB?s political independence seems to be of the utmost importance. However, important pillars for safeguarding the bank?s political independence ? such as, for instance, governments? adherence to the European Stability and Growth Pact and the acceptance of the division of labor between fiscal and monetary policy ? induced) financial crisis which, in turn, could have a highly negative impact on output and employment. PART 2 Monetary policy and structural reforms What role does monetary policy play for structural reform in open economies? Empirical estimations were performed with panel data for 23 OECD countries from 1970 to 2000. Structural reform was measured by the Economic Freedom of the World index, whereas the monetary policy constraints were measured by a monetary commitment index and the prevailing exchange rate regime. ? Our results provide little evidence for the hypothesis that a discretionary monetary policy promotes structural reform and economic freedom. The results strongly argue against those views maintaining that a business cycle oriented and lax monetary policy has never and nowhere been detrimental for employment. In fact, our results show that discretionary monetary policies tend to lead to a lower degree of structural labor market reform and, hence, to lower employment. That said, the ECB should pursue a medium- to long-term oriented monetary policy if it wants to strengthen growth and employment in the euro area via supporting reforms. PART 3 A critical view of the real interest rate concept The concept of the neutral (real) interest rate (NRIR) ? as implied by the Taylor rule ? recommends monetary policy to set real interest rates at a level that closes, or at least smoothes, the output gap. We argue that such a policy, if put into practice, would entail substantial pitfalls. First, monetary policy is an inadequate tool for influencing real GDP: the central bank?s impact on long-term interest rates and GDP is actually small (or not existing); to make things worse, a cyclically oriented policy would provoke the well-known time-lag problem. Second, and perhaps most importantly, the NRIR concept is not necessarily compatible with price stability, as it ignores the impact of credit and money growth on inflation. ? As a result, we are in favour of a long-term oriented monetary policy that has a strong focus on money and credit growth and asset prices. Such a monetary policy would not only be compatible with the objective of price stability. It would also reduce the risk of the economy falling into (a monetary induced) financial crisis which, in turn, could have a highly negative impact on output and employment. PART 4 ECB monetary policy and euro inflation outlook Even at a main refinancing rate of 3.25%, ECB monetary policy remains very expansionary. We forecast annual HICP inflation in 2007 to be 2.3% on average (including the German VAT hike). Due to strong excess liquidity, annual consumer price inflation is likely to remain at 2.3% in 2008. We recommend raising ECB rates further to around 4.0%, for reducing credit and money supply growth, thereby dampening inflationary pressure. ? Our money demand analyses for the euro area suggest that, in recent years, excess liquidity might have been translating in great part into asset price inflation rather than consumer price inflation. The results indicate that headline M3 growth is actually much more closely related to the ongoing loss of purchasing of money power of the euro ? that is consumer and asset price inflation ? than may be widely believed. That said, for keeping inflation in check it seems advisable for the ECB to set interest rates in line with the signals provided by (trend) money supply (excess liquidity).
The bazaar economy hypothesis revisited : a new measure for Germany's international openness
(2007) Wang, Lars; Belke, Ansgar; Mattes, Anselm
In this paper we argue that traditional measures of openness of an economy usually overstate the actual degree. This is due to the fact that traditional export or import shares are measured as a share of the gross domestic product. The former are expressed in gross terms, the latter in value added terms. In this way the actual interdependences between economies are overstated. We develop a new value based openness indicator that includes interregional and interindustrial dependencies. Based on a Leontief production system and input-output-tables we argue that export-induced imports of intermediate parts must be subtracted of the value of exports in order to obtain the real value added in the export sector. The same reasoning applies to the import side. We use these measures of actual openness to calculate openness indicators for Germany using GTAP data. We show that traditional measures of openness exaggerate the actual openness and argue that these new indicators are an important contribution to the debate about the German ?bazaar economy?.
Fairness, efficiency, risk, and time
(2007) Seidel, Gerald
We present a model of a 2-person-2-period-economy with specific (human) capital. Although the individuals are purely selfish, the outcome is seemingly guided by pro-social behavior. We find in our model economy that fairness and efficiency are positively related whereas risk aversion seems to have no major impact on the seemingly fair behavior. A rise in the time preference increases the disadvantaged subject?s aspiration for equal outcomes but reduces the advantaged subject?s willingness to accept them.
Realzins, intertemporale Preise und makroökonomische Stabilisierung : ein Streifzug durch die Theoriegeschichte
(2007) Spahn, Heinz-Peter
The notion of a "real rate of interest" has been a centre of confusion in the history of economic thought. In neoclassical economics, real interest rates were designed as relative prices of contemporary and future goods and Böhm-Bawerk believed that misalignments were corrected by market forces, restoring the allocation of saving and investment as well as macroeconomic equilibrium. The intertemporal perspective in goods market analysis was modified in Wicksell and Keynes; the focus shifted to financial markets. According to the new Keynesian theory, monetary policy should be used to support intertemporal consumption smoothing. Because investment is neglected, this approach is unable to grasp the intertemporal coordination problem and delivers poor microfoundations for macroeconomic stabilization.
What a difference trade makes : export activity and the flexibility of collective bargaining agreements
(2007) Heinbach, Wolf Dieter; Schröpfer, Stefanie
The prevalence of opening clauses in collective bargaining agreements may indicate a tendency to a higher decentralised wage settlement. Increasing competition on international product markets is assumed to be one reason for wage-setting decentralisation, whereas theoretical explanations focus currently on the change of production structure and the impact of exogenous shocks. Incorporating stylised facts about exporting firms, new trade models suggest a different way of adjustment to increasing competition depending on a firm?s nature. While the most productive exporters expand into new markets, small, less productive non-exporters are threatened by import competition. Based on the model from Bernard et al. (2003), we apply the theoretical implications to explain why decentralisation in bargaining may arise. We examine in a second step whether small, less productive, non-exporting firms paying low average wages, possess a higher propensity to use opening clauses than more productive, large exporters with a high wage level. Based on IAB Establishment Data covering the German Manufacturing, our results indicate that firms exporting to EMU countries ? but not exporters in general ? have a lower propensity of using opening clauses than non-exporters. However, inconsistent with theory, slight evidence suggests a rising propensity with increasing firm size and increasing wage level.
To bind or not to bind collectively? : decomposition of bargained wage differences using counterfactual distributions
(2007) Spindler, Markus; Heinbach, Wolf Dieter
Collective bargaining agreements still play an important role in the German wage setting system. Both existing theoretical and empirical studies find that collective bargaining leads to higher wages compared to individually agreed ones. However, the impact of collective bargaining on the wage level may be very different along the wage distribution. As unions aim at compressing the wage distribution, one might expect that for covered workers? wages in the lower part of the distribution workers? individual characteristics may be less important than the coverage by a collective contract. In contrast, the relative importance of workers? individual characteristics may rise in the upper part of the wage distribution, whereas the overall wage difference might decline. Using the newly available German Structure of Earnings Survey (GSES) 1995 and 2001, a cross-sectional linked employer-employee-dataset from German official statistics, this study analyses the difference between collectively and individually agreed wages using a Machado/Mata (2005) decomposition type technique.
Exchange rate regimes and the transitionprocess in the Western Balkans : a comparative analysis
(2007) Belke, Ansgar; Zenkic, Albina
In the academic literature some criteria have been identified which could have an impact on the success of the transition process, such as macroeconomic stability, microeconomic restructuring and implementation of legal and institutional reforms. The role of the exchange rate system in general is to foster the stability of the monetary environment characterized by low inflation rates and a stable domestic currency. Although the importance of a sustainable price-level oriented monetary policy for the transition-success has been stressed in the academic literature, there are still further questions to be answered related to the choice of the exchange rate system throughout the different phases of the transition process. This paper intends to contribute to close this gap in the literature. The guiding research question is how the choice of an exchange rate system influences the economic success of a country in transition and its gradual integration within the European Union (EU) and the European Monetary Union (EMU). For this purpose, the study focuses on the transition process of South-eastern Europe (SEE). In particular and for the first time in a joint study, we will take a look at the following South-eastern European Countries (SEECs), often referred to as the �West Balkans�: Bosnia and Herzegovina (BiH), Croatia, Former Yugoslav Republic of Macedonia (FYRM), Serbia and Montenegro, as these five countries share certain common characteristics: they were part of the Former Yugoslav Republic (FYR); they are countries in transition; they are members of the Stability Pact for South-eastern Europe and they are all potential EU-accession candidates.
Two-Pillar monetary policy and bootstrap expectations
(2007) Spahn, Heinz-Peter
The paper integrates the two-pillar Phillips curve, which explains expected inflation by the money growth trend, within a simple macro model. A Taylor-like interest rule contains also a money growth target. The model takes into account serially correlated supply and money demand shocks; the latter induce goods demand shocks, thereby establishing a feedback mechanism from money to markets which is missing in the modern New Keynesian approach. Two groups of market agents are distinguished from which one derives inflation expectations from money growth trend figures whereas the other builds rational expectations by way of learning. The inspection of output and inflation variances show that a policy of reacting to excess money growth requires precise information on shock characteristics whereas inflationgap and output-gap oriented interest policies provide more robust stabilization services.
Money and inflation : lessons from the US for ECB monetary policy
(2007) Polleit, Thorsten; Belke, Ansgar
We turn our attention to the role of money for determining nominal magnitudes. Using US data, we find that the aggregate ?nominal output plus and stock market capitalisation? is closely related to the money stock, lending support to one of Milton Friedman?s key monetarist propositions. This finding should be particularly important for ECB monetary policy: an inflation-free euro plays a crucial role for European economic and political integration. We conclude that monetary policy must keep a very close eye on money supply if it wants to prevent consumer and asset price inflation.
Perspectives of workers with low qualifications in Germany under the pressures of globalization and technical progress
(2007) Rukwid, Ralf; Hagemann, Harald
This paper gives a detailed analysis of the perspectives of workers with low qualifications in Germany under the twofold pressures of globalization and technological change. First, alternative explanations for the skill-bias in the development of labour demand are discussed, with particular emphasis on the ?trade versus technology? debate. The consequences of the demand shift away from low-skilled labour in Germany are examined in a detailed empirical analysis of the development of (un)employment problems differentiated for qualification groups. Compared to other advanced economies, Germany shows a higher unemployment rate among less-qualified workers which is generally associated with a lack of flexibility in the German wage structure. However, an analysis of German, U.S. and British wage data based on the Cross National Equivalent File (CNEF) does not confirm the assumption of a simple monocausal relationship between wage disparity and the intensity of group-specific unemployment. Finally, some political approaches for an improvement of the job prospects of less-qualified persons in Germany are outlined briefly and evaluated against the background of the empirical results.

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