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The findings have important implications for the empirical work on the money demand schedule, i.e. it seems that the conventional equation leaves much too much in the disturbance term. Moreover, expectations of future monetary injections are highly important for the current demand for money.
The above points are discussed in the following order. Section II provides an evaluation of the current shock-absorption view of money on which the present work is based. In Section III, a microeconomic approach is provided to rationalize the shock-absorption view of money under exogenous money supply injections. Implications for empirical work will be discussed. The testable form of the model is derived in Section IV. The empirical results are reported in Section V for five economies: West Germany, Australia, the USA, Finland and Sweden. The final section summarizes the results. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to examine whether price expectations satisfy the rationality hypothesis in Muth's sense, using direct observations on price expectations included in the IFO business survey data. The IFO Institute of Munich has been conducting monthly panel surveys for over 5000 manufacturing establishments. They are asked, for one thing, whether their selling prices will increase, remain the same or decrease over the next three months. The question about the actual price changes is also included in the survey. If the problems arising due to the qualitative nature of the data are solved, this unique set of data should provide valuable information for the study of price expectations.
First, the data construction is explained in Section II. Then, Section III contains the development of several statistical measures of forecasting performance for the qualitative data. In Section IV the accuracy and consistency of prediction, are examined. Section V investigates the validity of the rational expectation hypothesis by testing the unbiasedness and efficiency of price expectations. The main empirical findings and their implications are discussed in Section VI. [ABSTRACT FROM AUTHOR]

The relation of output to workers and hours is a frequently investigated topic. The points addressed are the development of wages over the business cycle or the adjustment of the workweek and employment if output is fluctuating. Some papers concerned with wages take supply factors into account,[1] whereas other authors only consider the demand for labour.[2] This paper is of the second kind, disregarding labour supply or wage effects it is only looking at the effects of current or expected production and orders regarding the adjustment of labour.
In this paper the question of how expected output determines the demand for hours of work and employment is investigated more closely. An adjustment model for employment and hours per worker is discussed. This model leads to conclusions which modify the hypotheses of Topel (1982) and Rossana (1985). One feature of this model is the consideration of adjustment costs of recruitment and overtime premiums. The costs associated with the worker are not constant over time. Usually in the beginning of an employment relationship fixed costs arise. These fixed costs are caused by training expenditures and foregone output in the period when workers are settling into their new jobs. Other fixed costs are expenditures for search and screening by the employer. [ABSTRACT FROM AUTHOR]

One of the dominant economic themes of the 1980s was the USA's persistent current account deficit. This deficit had, of course, its counterpart in a capital account surplus -borrowing from the rest of the world. Observers, whether academic economists, market operators or press commentators, repeatedly questioned whether the situation could continue. Would world investors (in the financial sense) grow weary, or at least wary, of putting their funds into US securities, with the result that the dollar would collapse in the foreign exchange markets and/or US interest rates would have to rise to exorbitant levels to persuade the world to keep buying US paper?
The current account deficits have continued but by the time of writing, at least, the catastrophe has not happened. The dollar has moved down at times but also up at times, so that exchange rates against other currencies cannot be said to have collapsed. Interest rates, meanwhile, do not show a risk premium which is visible, as it were, to the naked eye.
However, that is not necessarily to say that no risk premium exists. This paper reports an attempt to determine whether there is such a risk premium on US hands and also for the sake of comparison, on those of the UK, France and Germany (Federal Republic). For reasons which will be made clear below, we concentrate on long-term bonds.
The results suggest that, a risk premium related to current account deficits exists for the USA, but there appears to be no evidence of a risk premium for the other countries. A suggestion is offered as to why this may be so.
The results can be seen in terms of the ultra-familiar, textbook IS-LM-BP model. The implication of a risk premium on current account deficits is that the BP curve is upward-sloping. In the absence of such a premium, it is flat.
The paper is organized as follows: Section II summarizes the development of the relevant theory; Section III explains the method of investigation and... [ABSTRACT FROM AUTHOR]

This paper investigates the effects of government spending on real and nominal exchange rates within the context of an open economy equilibrium rational expectations model. The model predicts that both real and nominal exchange rates appreciate in response to anticipated and unanticipated increases in government spending. Empirical evidence from Germany for the period 1975:2-1989:4 provides some weak support for the predictions of the model.
The purpose of this paper is to shed more light on the role of fiscal policy in the determination of exchange rates by investigating the effects of government spending on real and nominal exchange rates. For this purpose, McCallum and Whitaker (1979) is extended to an open economy setting where the home country is assumed to produce and consume a single traded commodity and considered to be a price taker in the world commodity and capital markets. Within this framework it is shown that both anticipated and unanticipated increases in government spending lead to an appreciation of real and nominal exchange rates. Empirical evidence from Germany for the period 1975:2-1989:4 provides some support for the predictions of the model. [ABSTRACT FROM AUTHOR]

The extent of international capital mobility is assessed in a time series context. The possibility that the current account balance of different OECD countries contains a unit root is explored. It is shown that if the ratio of the current account balance to GDP is found to be integrated of the order of one, the country is likely to be part of the world capital market. The results for the whole period 1950-1988 indicate that the current account balance of at least Germany, Japan and the United States contains a unit root. Considering the subperiods before and after 1972 it is shown that international capital mobility increased after the breakdown of the Bretton Woods System. This paper develops a new approach to testing whether a country is linked to the international capital market. We show that if a country's current account balance expressed as a ratio to GDP contains a unit root, then there is no long-run stable relationship between its saving and investment rates and the country is linked to the international capital market. [ABSTRACT FROM AUTHOR]

This paper proposes a theoretical model to assess the effect of 'news' on the spot-forward-exchange-rate relationship and thereby predicts the direction of the impact of 'news' on the exchange rate. Two types of 'news' are analysed: rational expectations type innovations and announcement effects from newspapers. By using historical data from a time period which includes the German hyperinflation of the early 1920s, an estimable form of the model is derived which is substantially simpler than the version required using contemporary data. Preliminary empirical results support the main theoretical predictions but also cast some doubt on a literal interpretation of the exchange rate model plus rational expectations. [ABSTRACT FROM AUTHOR]

This paper investigates the integration of EU money supplies for the ERM period 1979Q1--93Q4. An estimating equation is derived from a simple equilibrium model of the EU money markets. Estimation is undertaken using the Johansen maximum likelihood cointegration procedure. The results show that those EU members with relatively low exchange rate premia against the DM are those whose variations in the money supply have been most sensitive to those of Germany. [ABSTRACT FROM AUTHOR]

This paper studies the determinants of disability retirement and unemployment of older workers, two labor market phenomena which the German public discussion combines under the label of early retirement. A social policy issue attracting much attention in German public debate is the reform of the retirement system. This reform is required because the current utilization of early retirement will not be affordable in future years. Both disability retirement and early retirement after unemployment are very common among older workers in Germany. During the 1980s more than half of all new retirees were disability retirees. The article shows the fractions of male cohorts that were either employed, unemployed or already in disability retirement by 1991. Out of all men aged 58 in 1991 about 18.3% had already retired due to disability and about 7% were unemployed. The public discussion indiscriminately combines disability retirement and `early retirement after long-term unemployment under the label of early retirement. Additionally, the high correlation between the two forms of labor force exit is confirmed by social scientists. This study tests the hypothesis that disability retirement and retirement after unemployment are substitute mechanisms for older workers to exit the labor force before reaching retirement age and compares the determinants of transitions into the two states.

In this paper, a dynamic decision model of the firm with a delayed adjustment of employment and investment is developed. Special attention is devoted to dynamic inefficiencies, i.e. underutilizations of the capital stock and labour hoarding. Market disequilibrium is introduced by allowing for a sluggish adjustment of wages and prices. The model of the firm is complemented by explicit aggregation, and the aggregate model is estimated for the FRG for the period 1960 to 1989. The empirical results reveal that dynamic adjustment constraints for employment and capital contributed to the persistence of unemployment in Germany in the 1980s. [ABSTRACT FROM AUTHOR]

This paper examines the effects of German foreign aid to, and net trade with, Namibia on Namibia's recent (1985-95) economic performance. The analysis suggests significant benefits for Namibia from trade with and assistance from Germany. However, domestic capital is found to determine Namibian economic growth more than net trade with Germany and German foreign aid to Namibia, while the effect of German capital tends be larger than that of German aid. A need for direct foreign investment from Germany to Namibia is inferred. Two types of further investigations are required: a joint determination of economic growth, aid, trade and capital formation, and a disaggregation of German aid to Namibia with an analysis of its individual impacts compared with similar effects of aid from other donors. [ABSTRACT FROM AUTHOR]

This paper reports results of an empirical study on the effectiveness of labour market policy. Data from Austria, France, Germany, Great Britain, Sweden and the United States are used to apply a simultaneous equation model with wages and employment being the endogenous variables. In order to explain employment, the amount of unemployment benefits per unemployed (passive labour market policy) and payment for wage subsidies and training per employed and unemployed person (active labour market policy) are used in addition to real wages and output. Wages and output have their expected impact on total employment. It turns out that passive labour market policy has a negative, and active labour market measures a positive, effect on the number of persons employed. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to develop and test a cash-in-advance model of an open economy. Following the contribution of Bohn (1991) and using intertemporal balance of payments theory we set up a currency demand function with real consumption expenditure, the foreign interest rate and exchange rate expectations as the core explaining variables. We test the model with the aid of the econometric techniques proposed by Hylleberg, Engle, Granger and Yoo (1990) and Engle, Granger, Hylleberg and Lee (1993) relying on quarterly seasonally unadjusted data for Germany in the period 1960: 1 to 1993: 4. The findings reported in the paper support the suggestions made by the theoretical model. [ABSTRACT FROM AUTHOR]

The macro evidence of increased adjustment pressure since the early 1970s suggests that job mobility should have increased. Hence, retrospective and spell data from the German Socio-Economic Panel are combined in order to test the hypothesis that job stability for German workers declined between 1974 and 1994. Using count data regression models in which we control for labour market experience, various demographic factors, and occupation, we find that job stability did not decrease, but if anything increased, between 1974 and 1994. Our finding suggests that labour market inflexibility is an important factor in explaining the European unemployment problem. [ABSTRACT FROM AUTHOR]

The introduction of an European common market for electricity and the opening of the power markets to eastern Europe and Scandinavia will have a drastic and lasting effect on the structure of the German electricity industry. This paper presents an evaluation of the possible effects of a single market especially on the power trade within Europe and the German power plant system. One special aspect is the investigation, whether a flooding of the German electricity market with French nuclear power could happen. Scenario simulations reject the argumentation that a European common market for electricity would lead to a dramatic increase in international electricity trade. [ABSTRACT FROM AUTHOR]

On several occasions, the 1980s witnessed non-Keynesian effects of fiscal contractions. Most notably, cuts in government spending in Ireland, Denmark and Germany are known to have coincided with increases in private consumption spending. Self-fulfilling expectations about the effects of stabilization policies may explain these and a diversity of opposing experiences. This paper formulates a dynamic stochastic equilibrium model with equilibrium indeterminacy, which allows for sunspot fluctuations as well as for systematic consumption effects of government policy in either direction. Cointegration tests and Euler equation estimates suggest that the model is approximately in accord with German data. Parameter estimates imply that the non-Keynesian experiences are not due to self-fulfilling expectations but to the productivity effects of government-provided infrastructure services. [ABSTRACT FROM AUTHOR]

Many theoretical analyses of the sources of economic growth focus on knowledge spillovers and scale economies to explain growth endogenously. The contribution of this paper is to shed some light on these arguments by an empirical investigation based on a production function framework. Sectoral production functions are estimated with annual German data of 51 sectors from 1960-90. The estimates reveal that both a pure Solow growth model and a Solow model augmented with human capital cannot account for the observed productivity increases. The model should be extended by allowing for inter-industry spillovers and scale economies at the aggregate level, as well as for scale economies associated with human capital at the sectoral level. The business cycle affects observed productivity changes in the short run and in the long run. [ABSTRACT FROM AUTHOR]

The paper appraises the in-sample and out-of-sample adequacy of linear AR and nonlinear SETAR models of unemployment rates for Germany, Japan, the UK and the US. Tests are reported for the presence and specification of threshold nonlinearities, SETAR model estimates, limiting dynamic properties and residual diagnostics, and out-of-sample forecasting performance. In-sample, threshold non-linearities are confirmed to be strongly present for the UK, US and Germany, and more marginally so for Japan. Out-of-sample, excepting Japan, SETAR models provide superior onestep-ahead forecast on RMSE grounds, most notably for the US. Final tests indicate that these models exhibit predictive accuracy in the sense of parameter and residual variance stability, implying the potential for exploitation of such nonlinearity in official forecasting. [ABSTRACT FROM AUTHOR]

This paper investigates the relationship between size and growth for a sample of banks from France, Germany, Italy and the UK over the period 1990 to 1996. Using several measures of bank size (total assets, equity and value of off balance sheet business), we test for size effects on growth, using models which incorporate the influences of previous growth, bank type and country of origin. The results of the analysis suggest that for Italy, small banks tend to grow faster than larger banks. No relationship is found between bank size and growth for France, Germany and the UK. This suggests a process of increasing concentration in these banking systems, even in the absence of bank specific strategic advantages. Small banks tend to have more variable growth rates than their larger counterparts. This suggests that large banks may enjoy advantages associated with diversified operations, which make them less susceptible to periods of extremely high or low growth. [ABSTRACT FROM AUTHOR]

This study presents an application of the Generalized Error Correction Model (GECM) for heterogeneous factor demands based on the quadratic cost function. Using data for 26 West German manufacturing industries over the period 1976-1995, it turns out that less general specifications such as the partial adjustment and the static AR(1) model are rejected. Furthermore, both short-run and long-run labour demands of different skill classes are inelastic. Unskilled labour is found to have a somewhat higher wage elasticity in absolute terms than medium-skilled labour. A small part of the shift in demand away from unskilled labour can be explained by the substitutability relationship between intermediate materials and unskilled labour. Between 6 and 13 percent of the observed shift towards high-skilled labour can be explained by capital accumulation. [ABSTRACT FROM AUTHOR]