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The debate on the cyclical adjustment procedure of the debt brake has focused on problems with regards to potential output. The second key determinant of the cyclical budget component, however, has been neglected: the semi-elasticity of the budget balance, which measures the response of federal revenues and expenditures to the business cycle. We analyse the sensitivity of estimates of the semi-elasticity with respect to data inputs and model specifications. Our results highlight estimation uncertainties that affect how much the federal government is allowed to borrow under the debt brake.

Im Koalitionsvertrag der Bundesregierung ist festgehalten, dass die Details der Schuldenbremse und vor allem die Regeln zur Bestimmung des Produktionspotenzials überprüft werden sollen. Insbesondere die Methodik zur Berechnung der konjunkturellen Defi zite wird diskutiert, da diese entscheidend für das mögliche Maß an Neuverschuldung ist. Welche Eigenschaften eine solche Methodik haben sollte, ist umstritten. Ein grundsätzlicher Kritikpunkt des aktuellen Verfahrens ist die Revisionssensitivität und Prozyklizität, was tendenziell dazu führt, die konjunkturellen Defi zite zu unterschätzen. The cyclical adjustment procedure of the debt brake is one of the most important elements of the German deficit rule. The cyclical adjustment enables governments that are borrowing to take account of current business cycle developments: In economic upturns, the scope for net borrowing shrinks, and in downturns, it grows. Recently, various aspects of this procedure have been criticised. We argue that methodical reforms to the estimation procedure can reduce revisions and are better suited to quantify estimation uncertainty. However, revisions cannot be completely avoided. In our view, improving the estimation method with a lagged consideration of revisions seems appropriate for fiscal policy. In contrast, the technical component of the cyclical adjustment procedure should not be the starting point for a political reorientation of the German debt brake.

We augment an otherwise standard business cycle model with a richer government sector and add modified cash in advance (CIA) and deposit considerations. In particular, both the cash in advanceand deposit constraints of in earlier work are extended to include private investment and government consumption. Also, part of the purchases are made using credit. This specification is then calibrated to Bulgarian data after the introduction of the currency board (1999- 2020), gives a role to money and costly credit in accentuating economic fluctuations. In particular, the modified CIA constraint combines monetary with banking theory, and thus produces a novel mechanism that allows the framework to reproduce better observed variability and correlations among model variables, and those characterising the labour market in particular.

There is a consensus among academics and policymakers that the excess savings built up by households during the past couple of years are specific to the pandemic. Based on data from the past half century for the US, this article shows that savings generally increase during recessions; the pandemic is different only by the magnitude of these savings, but not by their sign. Moreover, it suggests that these excess savings are rather compensatory than precautionary, as households save more to rebuild their lost wealth.

Motivación El impacto desigual por ramas de actividad de las recientes perturbaciones que han afectado a la economía española, vinculadas tanto al COVID-19 o como al repunte de los precios energéticos, ha puesto de manifiesto la importancia del seguimiento de la actividad por el lado de la oferta. Ideas principales •Este artículo presenta un procedimiento de previsión del PIB trimestral a partir de la combinación de indicadores de frecuencia mensual que permite estimar el crecimiento del valor añadido bruto de cada rama de actividad. •Los resultados obtenidos en términos de capacidad predictiva muestran la utilidad de un enfoque desagregado por ramas de actividad como una herramienta complementaria para el seguimiento coyuntural de la actividad.

Der Krieg in der Ukraine bringt erhebliche Belastungen für die deutsche Wirtschaft mit sich. Auf Basis der Konjunkturumfrage des Instituts der deutschen Wirtschaft können die verschiedenen Übertragungswege und Auswirkungen eingeschätzt werden. Fast 80% der Unternehmen sehen sich derzeit durch hohe Energiepreise belastet. Über 40% erwarten, dass sie kurzfristig in ihren Geschäftsabläufen durch ausfallende Lieferungen von Vorleistungen beeinträchtigt werden; ebenso hoch ist die erwartete Belastung durch drohende Engpässe in der Energieversorgung. Seit der ersten Befragung in der ersten Märzhälfte 2022 haben sich die Sorgen tendenziell erhöht. Für die mittlere Frist werden weiter ansteigende Belastungen durch den Krieg für die Unternehmen erwartet. The war in Ukraine is placing considerable burdens on the German economy. Based on the economic survey conducted by the German Economic Institute, the different various transmission paths and effects can be assessed. Almost 80% of companies currently see themselves burdened by high energy prices. More than 40% of businesses expect their operations to be impacted in the short term by failed input deliveries; the expected burden due to impending bottlenecks in the energy supply is just as high. Concerns have increased since the first survey in the first half of March. In the medium term, companies expect to face increasing burdens from the war.

Derzeit wird in der EU und Deutschland diskutiert, wie die Fiskalregeln zukünftig ausgestaltet sein sollen. Ein Punkt ist dabei die Berechnung des strukturellen Finanzierungssaldos. Fünf Kriterien sind wichtig, die strukturelle Salden erfüllen sollten. Die Revisionen, die sich aus dem bestehenden Produktionsfunktionsansatz ex post ergeben, zeigen die Revisionsproblematik auf. Ein umfragegestützter Ansatz kann diese Problematik deutlich entschärfen. The design of future fiscal rules is currently being debated in Germany and the EU. A recurring point is the calculation of the structural budget balance. In the following, we present five criteria that should be fulfilled by structural budget balances. Moreover, we analyse the expost revisions of the existing production function approach and present a surveybased method that mitigates revision problems.

This paper empirically analyses the effects of globalisation on labour market regulations. We also interact globalisation measures with economic uncertainty, and they serve as potential determinants of de jure labour market conditions. For this purpose, we consider new innovative globalisation and economic uncertainty indices (the Revisited KOF Globalisation and the World Uncertainty) in a panel dataset of 136 countries from 2000 to 2017. The findings indicate that globalisation promotes labour market flexibility, while economic uncertainty decreases it. We also find that the interaction of globalisation with economic uncertainty positively affects labour market flexibility. The findings are robust to various sensitivity analyses, that is, different estimation procedures and globalisation indicators, including various controls and excluding outliers.

Within a New Zealand business cycle context, we assess whether Hamilton’s (H84) OLS regression methodology produces stylised business cycle facts which are materially different from the Hodrick–Prescott (HP) and Baxter–King (BK) measures, and whether using the H84 predictor for forecast-extension improves the HP filter’s properties at the ends of series. Stylised business cycle facts were computed for a set of key New Zealand macroeconomic variables. In general, H84 produces greater volatilities and less credible trend movements during key economic periods than either HP or BK, and so for this purpose there is no material advantage in using H84 over HP or BK. At the ends of series, we evaluate the performance of the forecast-extended HP filter for three representative business cycle environments. The forecast-extension methods compared include the H84 predictor, the informed forecasts of three leading New Zealand economic agencies, two methods based on models of past data, and the HP filter with no extension. As expected, the better the forecast-extension the more accurate the HP filter at the ends of series and, as reported elsewhere in the literature, the HP filter with no extension performed poorly. However, in all cases considered the H84 predictor performed worst.

Leading indicators are important variables in business cycle forecasting. We use wavelet analysis to investigate the lead-lag stability of German leading indicators in time-frequency space. This method permits a time-varying relation of the leading indicators to the reference cycle allowing simultaneously to focus on lead-lag stability at the specific business cycle frequencies. In this way we analyze an index of new orders, a survey-based index of business expectations, an index of stock market returns and the interest rate term spread. We confirm that most of these indicators are indeed leading the reference cycle most of the time, but the number of months leading varies considerably over time and is associated with a great deal of estimation uncertainty.

This study uses American Community Survey data to examine the impact of the Great Recession on college graduates majoring in the arts. Arts graduates play important roles in an economy, through both artistic creation and in careers outside of the arts. While the Great Recession took a significant toll on the US economy generally, arts majors faced additional vulnerabilities as industries that rely on discretionary spending, like the arts and entertainment, are especially hard hit in times of economic downturn. This paper assesses the impact of graduating during or shortly after the recession relative to graduating shortly before this period on educational choices, including choice of major, double majoring, and completing an advanced degree, and career outcomes, including employment status, type of employment, hours worked, and earnings, for college graduates majoring in the arts. Graduating before or after the recession is found to have a negative impact on the share of graduates majoring in traditional arts fields, but a positive impact on the share majoring in related creative fields. Using a difference-in-difference estimation strategy, relative to non-art college graduates, traditional arts majors graduating during or after the Great Recession are more likely to complete a double major, be self-employed, be unemployed, work longer hours, and earn less income than those graduating prior to the recession. These impacts are likely to have a negative effect on the pipeline of college-educated artists working in the arts into the future.

Despite the wealth of literature on the oil price growth examinations, there is a shortage of research on the causality between oil prices and various macroeconomic fundamentals with regard to the group of net oil-exporting countries in Africa. This study examines the causality between oil price volatility and macroeconomic fundamentals in net oil-exporting countries in Africa using the Toda–Yamamoto and homogeneous causality techniques to gauge the nexus in the selected countries from 1995 to 2019. Our findings from the panel causality test suggest that oil price volatility significantly Granger causes the economic growth of the selected net oil-exporting countries in Africa. However, a mixed outcome was observed for the cross-sectional analyses using the Toda–Yamamoto causality test. Hence, the study offers the need for a policy framework that would drive the output growth as oil price changes continue to threaten macroeconomic variables.

The literature has not yet resolved whether the effect of macroeconomic fluctuations on training decisions is positive or negative. On the one hand, the opportunity cost to train is lower during downturns, and thus training should be counter-cyclical. On the other hand, a positive shock may be related to the adoption of new technologies and increased returns to skill, making training incidence pro-cyclical. Using the Canadian panel of Workplace and Employee Survey (WES), we document another important channel at work: the relative position of a sector also matters. We find not only that training moves counter-cyclically with the aggregate business cycle (more training during downturns), but also that the idiosyncratic sectoral shocks have a positive impact on training incidence (more training in sectors doing relatively better). These findings help us better understand training decisions by firms.

Based on a large historical panel dataset, this paper provides evidence that the government spending multiplier can be significantly higher when interest rates are at or near the zero lower bound (ZLB). We estimate multipliers that are as high as 1.5 during ZLB episodes but small and statistically indistinguishable from zero during normal times. Our results are robust to different definitions of ZLB episodes, alternative ways of identifying government spending shocks, controlling for the exchange rate regime, and other potentially important state variables. In particular, we show that the difference in multipliers is not driven by multipliers being higher during periods of economic slack.

This paper develops a dynamic general equilibrium model with heterogeneous firms that face search complementarities in the formation of vendor contracts. Search complementarities amplify small differences in productivity among firms. Market concentration fosters monopsony power in the labor market, magnifying profits and further enhancing high-productivity firms' output share. Firms want to get bigger and hire more workers, in stark contrast with the classic monopsony model, where a firm aims to reduce the amount of labor it hires. The combination of search complementarities and monopsony power induces a strong ``Matthew effect'' that endogenously generates superstar firms out of uniform idiosyncratic productivity distributions. Reductions in search costs increase market concentration, lower the labor income share, and increase wage inequality

This paper develops a macroeconomic uncertainty index based on the multistage procedure that combines maximum likelihood and Bayesian estimation methods proposed by Jurado et al. (Am Econ Rev 105(3):1177–1216, 2015). Our approach streamlines the computation of the macroeconomic uncertainty index by specifying a state-space model estimated by maximum likelihood that allows us to obtain in one step the parameters of the model, the dynamic factors, and the forecast errors of the macroeconomic variables used to construct the index. Moreover, we estimate stochastic volatility models on the forecast errors also by maximum likelihood using a density filter that proves to be faster than a Bayesian estimation. After showing that our methodology produces reasonable results for the USA, we apply it to compute a macroeconomic uncertainty index for Ecuador, becoming the first index of this kind for a small developing or middle-income country. The results show that the Ecuadorian economy is more volatile and less predictable during recessions. We also provide evidence that macroeconomic uncertainty is detrimental to economic activity, finding that the responses of non-oil output, employment in the formal sector, and consumer prices to macroeconomic uncertainty shocks are sizable and persistent. Supplementary Information The online version contains supplementary material available at 10.1007/s00181-021-02069-5.

In diesen Tagen jährt sich der Tod von John Maynard Keynes zum 75. Mal. Er war einer der bedeutendsten Ökonomen des 20. Jahrhunderts, wenn nicht gar der bedeutendste überhaupt. Dabei waren seine Lehren und seine Ratschläge schon zu seinen Lebzeiten teilweise heftigst umstritten. Das galt erst recht für die Zeit nach seinem Tod. Zwar dominierte keynesianisches Gedankengut die Wirtschaftspolitik der Nachkriegszeit. Doch spätestens seit den 1970er Jahren begann deren intellektuelle Anziehungskraft angesichts gleichzeitig steigender Arbeitslosigkeit, Staatsverschuldung und Inflation merklich zu schwinden. In jüngster Zeit ist allerdings eine Trendwende erkennbar, die mit Fehlern der Wirtschaftspolitik, aber auch mit neuen Herausforderungen im Zusammenhang steht. This month marks the 75th anniversary of the death of John Maynard Keynes. He was one of the most important economists of the 20th century, if not of any century. Yet his teachings and advice were already highly controversial during his lifetime. This applied even more after his death. Keynesian ideas dominated economic policy in the postwar period. But since the 1970s at the latest, their intellectual appeal began to wane noticeably in the face of concurrently rising unemployment, national debt and inflation. Recently, however, a trend reversal has become apparent, which is related to mistakes in economic policy as well as to new challenges.

The COVID‐19 pandemic is significantly disrupting human capital in labour markets. Workforce reductions cause firm outputs to fall and prices to rise, leading to unprecedented economic costs. To quantify the economic costs, we develop a dynamic general equilibrium macroeconomic model that incorporates susceptible–infectious–recovered epidemiology dynamics, where individuals can be healthy, infected or recovered so that evolution of human capital can be well tracked. We characterise optimal public policy responses to the decline in human capital by either isolating susceptible residents from infected residents to reduce the spread of disease or increases in government spending to improve the recovery and death rates.

This study presents a dynamic general equilibrium model with an explicit employment period and investigates economic fluctuations to a temporary productivity shock. Numerical experiments indicate oscillatory responses of new hiring and employment to the shock which are not observed in a standard flexible price model. The explicit employment period constructs an overlapping structure of employment which results in the oscillatory response. This study also examines the effects of change in employment period to economic fluctuations and shows that the variations in new hiring are higher when the employment period is long.

We propose to add ranking restrictions on impulse‐responses to sign restrictions to narrow the identified set in vector autoregressions (VARs). Ranking restrictions come from micro data on heterogeneous industries in VARs, bounds on elasticities, or restrictions on dynamics. Using both a fully Bayesian conditional uniform prior and prior‐robust inference, we show that these restrictions help to identify productivity news shocks in the data. In the prior‐robust paradigm, ranking restrictions, but not sign restrictions alone, imply that news shocks raise output temporarily, but significantly. This holds both in an application with rankings in the form of heterogeneity restrictions and in another applications with slope restrictions as rankings. Ranking restrictions also narrow bounds on variance decompositions. For example, the bound of the contribution of news shocks to the forecast error variance of output narrows by about 30 pp at the one‐year horizon. While misspecification can be a concern with added restrictions, they are consistent with the data in our applications. Structural VAR set‐identification sign restrictions ranking restrictions heterogeneity posterior bounds Bayesian inference sampling methods productivity news C32 C53 E32

PurposeThe author augments an otherwise standard business cycle model with a richer government sector and adds money-in-utility (MIU) considerations to study economic fluctuations.Design/methodology/approachMore specifically, real money balances enter in a non-separable way with consumption and leisure. This specification is then calibrated to Bulgarian data after the introduction of the currency board (1999–2020) gives a role to money in accentuating economic fluctuations.FindingsThis novel mechanism allows the framework to reproduce – better than the real business cycle (RBC) model – the observed variability and correlations among model variables, and those characterizing the labor market in particular. In addition, money is non-neutral and affects aggregate economic activity.Originality/valueThis is the first micro-founded monetary-DSGE (dynamic stochastic general equilibrium) model on Bulgaria trying to explain the role of money for economic fluctuations.

This article using the principal components analysis identifies key industries and groups them into particular clusters. The data come from the US benchmark input-output tables of the years 2002, 2007, 2012 and the most recently published input-output table of the year 2019. We observe some intertemporal switches of industries both between and within the top clusters. The findings further suggest that structural change is a slow moving process and it takes time for some industries to move from one cluster to the other. This information may be proved important in the designation of effective economic policies by targeting particular industries and also for the stability properties of the economic system.JEL classifications: B24, B51, C67, D46, D57, E11, E32

Infolge der Maßnahmen zur Eindämmung der Corona-Pandemie ist die deutsche Wirtschaftsleistung in der ersten Jahreshälfte drastisch gesunken, vor allem in den Monaten März und April. Schon im Mai setzte eine kräftige Gegenbewegung ein, die sich in nahezu allen Branchen bis zum aktuellen Rand fortsetzte. Dieser Erholungsprozess dürfte an Fahrt verlieren. Die Institute erwarten daher nach einem Rückgang des Bruttoinlandsprodukts um 5,4 % (2020) einen Zuwachs um 4,7 % (2021) und um 2,7 % im Jahr 2022. Sie revidieren damit ihre Prognose aufgrund des nunmehr etwas schwächeren Erholungsprozesses gegenüber dem Frühjahr nach unten. Die Wirtschaftspolitik hat frühzeitig mit massiven finanzpolitischen Maßnahmen auf die Corona-Krise reagiert. Die Konjunkturprogramme haben im Zusammenspiel mit den automatischen Stabilisatoren dazu beigetragen, dass die verfügbaren Einkommen der privaten Haushalte selbst in der akuten Krisenphase insgesamt stabil blieben. The corona pandemic has left substantial marks on the German economy and its impact is more persistent than presumed in the spring. In their autumn reports, leading German economic research institutes have revised their economic outlook downwards by roughly one percentage point for both this and next year. They now expect gross domestic product to fall by 5.4% in 2020 (previously 4.2%) and to grow by 4.7% (5.8%) in 2021 and 2.7% in 2022. The downgrade of the forecast follows a more pessimistic assessment of the recovery, which is being held back by those sectors that are particularly dependent on social contacts. The precrisis level of output will not be reached until the end of 2021 with GDP remaining at 2.5% below the level that would have prevailed without the pandemic. Despite massively falling back on shorttime working schemes, an estimated 820,000 jobs were lost due to the crisis. The government will run a record high budget deficit of 183 billion euros in 2020. In 2021 and 2022, deficits will remain substantial at 118 billion euros and 92 billion euros, respectively.

The paper presents a medium-run growth model driven by autonomous demand, where aggregate demand and supply interact and unemployment is present and plays different roles. In particular, it generates a feedback from supply to aggregate demand rooted in the presence of heterogeneous consumers and an uncertain environment. Two are the main consequences of this approach. The first is that multiple equilibria can be generated. The second is that equilibria may have different stability properties. In this perspective, growth becomes a dynamic process where initial conditions matter and history plays an important role.

PurposeThe authors introduce non-Ricardian (“hand-to-mouth”) myopic agents into an otherwise standard real-business-cycle (RBC) setup augmented with a detailed government sector. The authors investigate the quantitative importance of the presence of nonoptimizing households for cyclical fluctuations in Bulgaria.Design/methodology/approachThe authors calibrate the RBC model to Bulgarian data for the period following the introduction of the currency board arrangement (1999–2018).FindingsThe authors find that the inclusion of such non-Ricardian households improves model performance along several dimensions and generally provides a better match vis-a-vis data, as compared to the standard model populated with Ricardian agents only.Originality/valueThis is a novel finding in the macroeconomic studies on Bulgaria using modern quantitative methods.

The invisible hand of a perfectly competitive financial market refers to the self-regulating behavior of the market where if each consumer and producer of funds is allowed to freely make their own choices, the market settles at an efficient outcome which is beneficial to all the individual members of the society and hence to the society as a whole. Two well-known facets of the invisible hand are generally mentioned in the economics and finance literature - the first one is a static picture of a perfectly competitive market, i.e., a competitive market is efficient in an equilibrium; and the second one is that if the competitive market is disturbed from its equilibrium position, in the absence of a market failure and frictions, the market automatically settles at a new efficient equilibrium. This paper takes into account a third facet, i.e., how efficient is a perfectly competitive financial market on the dynamic adjustment path after an economic shock in the absence of all kinds of frictions and interest rate rigidities. We conclude that coordinated actions of economic agents can result in a level of economic efficiency on the dynamic adjustment path which is not achievable by a free market mechanism. Electronic supplementary material The online version of this article (10.1007/s12197-020-09523-7) contains supplementary material, which is available to authorized users.

This paper aims to investigate the co-movement between the credit growth and gross domestic product (GDP) growth in Turkey over the period January 2004–October 2019. By taking into account alternative credit decomposition and the variations over time and across frequencies using the wavelet analysis, the results show that: i) GDP growth highly synchronizes with credit growth compared to other financial variables such as stock exchange, bonds, and exchange rate. ii) There is a high correlation between commercial loan growth and capital formation and a relatively weak one with consumer loans and consumption. iii) Co-movement stemming from Turkish Lira (TL) credits to GDP growth is stronger than foreign exchange (FX) credits where the latter is significant until 2015. iv) Public and domestic private banks are the main drivers of economic activity while the foreign banks are following them. By showing the differential effects of different types of credit on GDP growth, we specify that shocks to different credit types are crucial to analyze business cycles. For policymakers, this result implies that the dynamics of different credit types are crucial to analyze the impacts of credit cycles on economic activity.

We introduce government investment into a real-business-cycle setup. We calibrate the model to Bulgarian data for the period 1999-2018. We then proceed to quantitatively evaluate the effect of the public capital accumulation channel as a tool for business cycle propagation, as well the importance of public investment spending on output growth. Government investment shocks, in the absence of other technological disturbances, turn out to be unable to account for observed business cycles in Bulgaria. On the other hand, government investment may be able to increase subsequent output growth, but that effect is estimated to be quite small.

Unemployment has been routinely used as a measure of the economic cycle. In addition, regional unemployment rates are characterized by, among other factors, their relation to the national unemployment rate. In this regard, the literature on regional sensitivity to the economic cycle has analyzed how fluctuations in the national unemployment rate affect the regions. In recent years, due to the great impact of past crises, the development of new econometric techniques and the possible arrival of new crises, the debate on how sensitive regions are to the economic cycle has reopened. In Spain, this debate is necessary since unemployment rates are very high and display a great deal of heterogeneity. We analyzed regional unemployment rates in Spain between 1978 and 2018 through a recently developed dynamic spatial econometric model with common factors and found that some regions are more sensitive than others to the economic cycle. The results seem to show that in Spain, the sensitivity to the economic cycle displays a geographical pattern where the most sensitive regions are those located on the Mediterranean coast. Specifically, we find that the sensitivity to the economic cycle of unemployment is not determined by the fact that regions have high or low unemployment; it seems that geographical location plays an important role. These results can be useful for the national and regional governments when they implement countercyclical policies.

Research background: Output volatility has potentially adverse consequences on the economy and the stabilizing role of fiscal policy is linked to the share of government size in an economy. Hence, given the relative large share of government in developing countries, government size is expected to play an important role in stabilizing output volatility. Purpose: This study examines the relationship between output volatility and government size in Nigeria. The study seeks to establish if government size mitigates output volatility in Nigeria. Research methodology: The study employs the Autoregressive Distributed Lag (ARDL) technique after conducting stationarity and co-integration tests. Results: The results of the ARDL estimate showed that government size lessens output volatility but the magnitude was insignificant. Further, the study found that volatility in aggregate government spending; international oil price and public debt were significant determinants of output volatility in Nigeria. Novelty: This showed that the automatic stabilization role of government size on output volatility could not be established. The automatic stabilization role of fiscal policy can be improved by increasing social security transfers (pension payment), payments of unemployment benefits and increasing civil servants minimum wage.

International audience; Instability of the warranted growth path, an important property for business cycle theory, is central to Harrod’s Essay. It is persuasively presented as the consequence of moving from statics (where stability is viewed as the normal case) to dynamics. How exactly? The paper suggests two reasons. The first lies in attributing to demanders (firms as investors) rather than to suppliers (firms as producers) the main response to market imbalances. The second results from the insidious introduction of an extrapolative component of expectations in Harrod’s dynamic approach, replacing levels by trends and confining them to a single point in time.

In the present paper, we study how the dynamics of Foley’s model may be affected by the introduction of a money wage Phillips curve with a perfect spill-over of price inflation on wage inflation. The upshot is a model with endogenous price and wage dynamics with unstable equilibrium, meaning that the integration of the Foley liquidity/profit rate cycle with the Goodwin cycle requires state intervention to stabilize the economy. With this approach, we show that Foley’s initial insight is consistent with flexible prices and wages only in the presence of a rule for money supply. The stable equilibrium, in this case, may degenerate into a limit cycle if the growth rate of liquidity increases to a sufficient degree. To illustrate this result, we carry out the analysis both regarding general functions as well as in terms of a particular example.

Artículo de revista En el segundo trimestre de 2022, las empresas españolas perciben una evolución más dinámica de su facturación, tras el descenso de los tres primeros meses del año, aunque esta recuperación se queda por debajo de las expectativas formuladas hace tres meses. La reactivación está concentrada en ramas de servicios, como la hostelería y el transporte, beneficiadas por el fin de las restricciones asociadas a la pandemia. En cuanto a los precios y costes, las sociedades encuestadas siguen observando encarecimientos adicionales de sus consumos intermedios, aunque algo inferiores a los del trimestre anterior. Esta incipiente moderación se está registrando también en los precios de venta. Finalmente, un gran número de empresas indican que el aumento del coste de sus productos intermedios, fundamentalmente energéticos, es el principal canal por el que su actividad se está viendo afectada por la invasión rusa de Ucrania.

Die Umsätze der Bauwirtschaft werden in diesem und im kommenden Jahr weiter kräftig wachsen. Insgesamt rechnet das DIW Berlin mit einem nominalen Anstieg des Bauvolumens um fast 13 Prozent im Jahr 2022 und weiteren gut sechs Prozent im Jahr 2023 auf dann 585 Milliarden Euro. Im abgelaufenen Jahr wurde ein Plus von gut zehn Prozent auf 488 Milliarden Euro erreicht, was einem Anteil von etwa 15 Prozent am Bruttoinlandsprodukt (BIP) entspricht. Das zeigt, dass die Baunachfrage trotz Corona-Pandemie ungebrochen ist. Andererseits dürften aber vor allem die Preise für Bauleistungen nach dem deutlichen Plus im Jahr 2021 auch im laufenden Jahr stark zulegen. Dies ist zum einen auf die Entwicklung der Produzentenpreise zurückzuführen: Diese steigen derzeit so schnell wie seit Jahrzehnten nicht mehr. Zum anderen ist der Bauüberhang – die Zahl der noch nicht fertiggestellten genehmigten Bauvorhaben – weiterhin hoch und auch die öffentliche Hand weitet ihre Investitionsbudgets aus. Dies eröffnet den Unternehmen der Baubranche weitere Spielräume für Preiserhöhungen. Gleichwohl dürften die steigenden Preise auch in geringerer realer Bautätigkeit münden. Insbesondere der öffentlichen Hand dürfte es damit deutlich schwerer fallen, die ambitionierten Ziele im Bereich des Infrastrukturausbaus und der Wohnungsversorgung zu erreichen., DIW Wochenbericht

Im Verlauf des 20. Jahrhunderts haben Regierungen die Regulierung von Mietpreisen häufig eingesetzt, um insbesondere in Krisenzeiten auch bei knappem Wohnraum Mieten bezahlbar zu halten. Bisherige Forschung hat gezeigt, dass diese Regulierung allerdings mit gesamtgesellschaftlichen Wohlstandsverlusten, Misallokation am Markt und anderen unerwünschten Nebeneffekten wie sinkendem Wohnungsangebot und niedrigerer Mobilität verbunden ist. Dabei wurde allerdings nur selten untersucht, welchen Effekt die Regulierung von Mietpreisen auf ökonomische Ungleichheit hat. Weltweit lässt sich seit den 1980er Jahren ein Wiederanstieg der Einkommensungleichheit beobachten. Während sich bisherige Erklärungen für diese Entwicklung auf das Verhältnis von Kapital- und Lohnwachstum und sozialpolitische Maßnahmen fokussierten, argumentiert dieser Beitrag, dass die bestehenden Erklärungen um eine Wohnungsdimension ergänzt werden sollten. Anhand einer Zeitreihenanalyse wird untersucht, welchen Einfluss Mietpreisregulierung auf Einkommensungleichheit ausübt. Dabei zeigt sich: Die Regulierung der Mieten reduziert die in dem Gini-Koeffizienten ausgedrückte soziale Ungleichheit signifikant und verringert das Vermögens-Nationaleinkommens- Verhältnis. Diese Effekte sind stärker, je strenger die ergriffenen Maßnahmen sind. Mikro-Daten aus verschiedenen Ländern legen nahe, dass die unteren Einkommensgruppen einen größeren Teil ihres Einkommens für die Miete ausgeben, während höhere Einkommensgruppen einen größeren Teil ihrer Einnahmen durch Vermietung erzielen. Werden die Mieten durch staatliche Maßnahmen gesenkt, steigen kurzfristig die verfügbaren Einkommen der unteren Einkommensgruppen, während der Einkommensanteil der bestverdienenden zehn Prozent kurzfristig sinkt. Es ist eine Frage der politischen Bewertung, wie diese Effekte und die bereits bekannten Einflüsse von Mietpreisregulierung auf gesamtgesellschaftlichen Wohlstand und den Mietmarkt abgewägt werden., DIW Wochenbericht

Sales in the construction industry will continue to increase strongly in 2022 and 2023. Overall, DIW Berlin estimates a nominal increase in construction volume of almost 13 percent in 2022 and six percent in 2023 to 585 billion euros. In 2021, construction volume increased by ten percent to 488 billion euros, which is around 15 percent of GDP. This shows that construction demand remains at a high level despite the coronavirus pandemic. It is also likely that costs for construction work in particular will rise sharply over the course of 2022 following the significant increase in 2021. On the one hand, this is due to the fact that producer prices are currently rising more rapidly than they have in decades. On the other hand, the construction backlog—the number of approved construction projects not yet completed—is still high and the public sector is expanding its investment budgets, which offers companies in the construction sector further leeway for price increases. Nevertheless, the rising prices are likely to result in lower real construction activity. This is likely to make it more difficult for the public sector to achieve its ambitious goals in the areas of infrastructure expansion and housing provision., DIW Weekly Report

Over the course of the 20th century, governments have frequently used rent control to keep rents affordable, especially in times of crisis when housing is scarce. Existing research shows that rent control has undesirable side effects, such as overall societal welfare losses, market misallocation, a declining housing supply, and lower mobility. However, there has been little research examining the effect of rent control on economic inequality. Income inequality has been rising worldwide since the 1980s. While previous explanations of this development focused on the relationship between the growth of capital and wages and social policy measures, this paper argues a housing dimension should be considered as well. Using a time series analysis, we investigate what impact rent control has on income inequality. The analysis shows that rent control significantly reduces the social inequality as measured by the Gini index and reduces the wealth-to-income ratio. The stricter the measures taken, the stronger the effects. Existing data suggest that lower income groups spend a larger share of their income on rent, while rental income makes up a large share of the income of higher income groups. When rent-reducing measures are taken, the disposable income of the lower-income groups will rise and the income share of the top ten percent will decrease in the short run. Policymakers must decide how to weigh the effects and the impact of rent control on overall social welfare and the rental housing market., DIW Weekly Report

We study how firm heterogeneity and market power affect macroeconomic fragility, defined as the probability of long slumps. We propose a theory in which the positive interaction between firm entry, competition and factor supply can give rise to multiple steady-states. We show that when firm heterogeneity is large, even small temporary shocks can trigger firm exit and make the economy spiral in a competition-driven poverty trap. We calibrate our model to incorporate the well-documented trends on rising firm heterogeneity in the US economy, we show that they significantly increase the likelihood and length of slow recoveries. We use our framework to study the 2008-09 recession and show that the model can rationalize the persistent deviation of output and most macroeconomic aggregates from trend, including the behavior of net entry, markups and the labor share. Post-crisis cross-industry data corroborates our proposed mechanism. We conclude by showing that firm subsidies can be powerful in preventing long slumps and can lead to up to a 21% increase in welfare.

Spatial differences in unemployment rates are large and persistent. Our objective is to develop a quantitative theory of these differences. Considering the local unemployment rate as an (equilibrium) outcome between workers and firms, we document facts on both sides of the labor market. First, we confirm recent findings that differences in separation rates (unemployment inflows) are more important than differences in job-finding rates (unemployment outflows) in accounting for local unemployment differences. Second, we present novel facts on the differences in job-creation and job-filling rates. We document that local labor markets with lower unemployment rates are tighter, have lower vacancy filling rates, and higher average vacancy duration. These facts constitute empirical regularities in the United States, Germany, and the United Kingdom. On the theory side, we demonstrate that a Diamond-Mortensen-Pissarides model with endogenous separations quantitatively accounts for all the documented facts on the geography of job creation and job destruction. Furthermore, we demonstrate that this model not only matches labor market differences across space but also over the business cycle.

Artículo de revista The COVID-19 crisis has had a very uneven impact on the different productive sectors of the economy, with those requiring less personal contact or that are less labour-intensive, such as industry, being the least affected. This appears to have been a determining factor behind the buoyancy observed in investment in capital goods during the current crisis, as the sectors representing a higher relative share of investment are those that, broadly speaking, have been more resilient. The drive towards digitalisation and e-commerce has also helped cushion the fall in this aggregate in the current crisis, as they require investing in the relevant equipment. Furthermore, unlike in previous recessions, the relatively favourable financing conditions have helped prevent this factor from being an additional constraint in tackling planned investment projects. Lastly, general government has also played a key role in sustaining investment in capital goods during this crisis, given the effort required in terms of digitalisation in order to continue providing services in a setting marked by mobility restrictions and the need to acquire equipment to deal with the health emergency.

We jointly estimate the U.S. business and financial cycle through a unified empirical approach while simultaneously accounting for the role of financial factors. Our approach uses the Beveridge-Nelson decomposition within a medium-scale Bayesian Vector Autoregression. First, we show, both in reduced form and when we identify a structural financial shock, that variation in financial factors had a larger role post-2000 and a more modest role pre-2000. Our results suggest that the financial sector did play a role in overheating the business cycle pre-Great Recession. Second, while we document a positive unconditional correlation between the credit cycle and the output gap, the correlation of the lagged credit cycle and the contemporaneous output gap turns negative when we condition on a financial shock. The sign-switch suggests that the nature of the underlying shocks may be important for understanding the relationship between the business and financial cycles.

The international Financial Crisis shock of 2008/09 is used as case study with a worldwide data set of 210 states to examine potential resilience factors with special focus on country size, along with other pre-crisis determinants. The cross-country analysis suggests an increasing partial effect of smaller country size on vulnerability with a larger impact magnitude of the Financial Crisis shock. States below a population of around 10 million featured a higher exposure compared to larger states and very small states suffered the most from being more vulnerable. With respect to impact persistence, significant evidence can be found that the shock persistence was prolonged by smaller state size. Also, small states were impacted earlier on average, but the faster shock transmission was mainly linked to their higher GDP per capita and lower pre-crisis GDP growth. Anhand eines weltweiten Datensets mit 210 Ländern wird der internationale Finanzkrisenschock 2008/09 als Fallstudie angewendet, um potenzielle Resilienzfaktoren zu untersuchen, mit einem speziellen Fokus auf Ländergrösse. Die Länderquerschnittsanalyse legt einen verstärkenden partiellen Einfluss von kleinerer Bevölkerungsgrösse auf die Vulnerabilität mit einer grösseren Schockwirkung der Finanzkrise nahe. Länder mit einer Bevölkerung von unter 10 Millionen wiesen eine höhere Exposition auf und sehr kleine Länder litten am meisten unter der höheren Verwundbarkeit. Bezüglich der Persistenz der Schockwirkung kann signifikante Evidenz gefunden werden, dass die Dauer von Länder-Kleinheit verlängert wurde. Zudem waren kleine Länder im Durchschnitt früher betroffen, die schnellere Schockübertrag war jedoch hauptsächlich mit ihrem höheren BIP pro Kopf und dem tieferen Vorkrisenwachstum verknüpft.

Artículo de revista La crisis del COVID-19 ha tenido un impacto muy heterogéneo entre las distintas ramas productivas de la economía. Las menos afectadas han sido las que requieren menor contacto interpersonal y son menos intensivas en empleo, como la industria. Este hecho habría sido determinante para explicar el dinamismo observado en la inversión en bienes de equipo durante la actual crisis, ya que las ramas con mayor peso relativo en la inversión son las que, en general, han mostrado una mayor resiliencia. Además, el impulso hacia la digitalización y el comercio electrónico, dados los requerimientos de inversión en equipo asociados a su implementación, habrían ayudado a amortiguar la caída de este agregado en la actual crisis. Por otro lado, a diferencia de recesiones anteriores, las condiciones de financiación relativamente favorables habrían contribuido a que este factor no haya supuesto una limitación adicional para afrontar los proyectos de inversión planeados. Por último, también las Administraciones Públicas habrían desempeñado un papel relevante en el sostenimiento de la inversión en bienes de equipo en esta crisis. Por un lado, por el esfuerzo en digitalización que han realizado para continuar prestando servicios en un contexto de restricciones a la movilidad y, por otro, por la adquisición de equipo para hacer frente a la emergencia sanitaria.

I study the role of industries' position in supply chains in shaping the transmission of final demand shocks. First, I use a shift-share design based on destination-specific final demand shocks and destination shares to show that shocks amplify upstream. Quantitatively, upstream industries respond to final demand shocks up to three times as much as final goods producers. To organize the reduced form results, I develop a tractable production network model with inventories and study how the properties of the network and the cyclicality of inventories interact to determine whether final demand shocks amplify or dissipate upstream. I test the mechanism by directly estimating the model-implied relationship between output growth and demand shocks, mediated by network position and inventories. I find evidence of the role of inventories in explaining heterogeneous output elasticities. Finally, I use the model to quantitatively study how inventories and network properties shape the volatility of the economy.

The Business Leaders’ Pulse is a new online survey conducted each month. It is designed to provide timely and flexible input into the Bank of Canada’s monetary policy decision making while also creating a platform to analyze business conditions and uncertainty. Since May 2021, the Bank has been reaching out to leaders of almost all types of businesses across the country with this short questionnaire inquiring about their sales and employment growth expectations, the risks to their business outlook, and topical questions that address specific information needs of the Bank. This survey is designed to complement the Bank’s quarterly Business Outlook Survey conducted in person. The Business Leaders’ Pulse has already proven valuable in getting timely feedback from firms about the effects of a rapidly changing economic environment, including the impact of COVID-19 and the Russian invasion of Ukraine. It has also helped Bank staff assess the extent of and reaction to ongoing economic challenges, such as supply chain bottlenecks and labour shortages., Le Pouls des entrepreneurs est une nouvelle enquête en ligne qui est menée chaque mois pour fournir, avec efficience et souplesse, des renseignements servant à étayer les décisions de la Banque du Canada concernant la politique monétaire. L’enquête représente également une plateforme qui permet d’analyser la situation et l’incertitude des entreprises. Depuis mai 2021, la Banque communique avec les dirigeants de presque tous les types d’entreprises au pays et leur transmet ce court questionnaire afin de se renseigner sur leurs attentes quant à la croissance des ventes et de l’emploi, les risques pour leurs perspectives d’affaires et des sujets précis. Cette enquête sert de complément à l’enquête de la Banque sur les perspectives des entreprises, qui est menée chaque trimestre en personne. Le Pouls des entrepreneurs s’est déjà avéré un précieux atout pour connaître en temps opportun l’opinion des entreprises sur les effets d’une conjoncture économique évoluant rapidement, y compris les répercussions de la COVID-19 et l’invasion de l’Ukraine par la Russie. L’enquête a aussi aidé le personnel de la Banque à évaluer la portée des défis économiques qui se posent et la réaction des entreprises à ces défis, tels que les goulots d’étranglement dans les chaînes d’approvisionnement et les pénuries de main-d’œuvre.

Times of elevated aggregate uncertainty are associated with lower investment, but surprisingly, future capital growth does not drop and even increases in the data. To reconcile this novel evidence, we show that high uncertainty predicts lower utilization and depreciation of existing capital, which dominates the reduction in new investment. We construct and estimate a general-equilibrium model to explain the relation between uncertainty and capital accumulation. In the model, precautionary saving is achieved by lowering utilization, instead of increasing investment. Lower utilization persistently decreases depreciation, conserving capital for the future, and simultaneously, discourages new investment. This channel amplifies stock price exposure to uncertainty risks, especially for firms with more flexible utilization, which we confirm in the data. We further show the importance of our mechanism to generate a negative impact of uncertainty shocks in an extended New-Keynesian framework.

We propose a new empirical framework that jointly decomposes the conditional variance of economic time series into a common and a sector-specific uncertainty component. We apply our framework to a large dataset of disaggregated industrial production series for the US economy. Our results indicate that common uncertainty and uncertainty linked to nondurable goods both recorded their pre-pandemic global peaks during the 1973-75 recession. In contrast, durable goods uncertainty recorded its pre-pandemic peak during the global financial crisis of 2008-09. Vector autoregression exercises identify unexpected changes in durable goods uncertainty as drivers of downturns that are both economically and statistically significant, while unexpected hikes in non-durable goods uncertainty are expansionary. Our findings suggest that: (i) uncertainty is heterogeneous at a sectoral level; and (ii) durable goods uncertainty may drive some business cycle effects typically attributed to aggregate uncertainty., Nous proposons un nouveau cadre empirique qui permet de décomposer simultanément la variance conditionnelle des séries chronologiques de données économiques en deux facteurs : l’incertitude agrégée et l’incertitude sectorielle. Nous appliquons notre cadre à un vaste ensemble de données désagrégées relatives à la production industrielle aux États-Unis. Nos résultats indiquent qu’avant la pandémie, l’incertitude agrégée et l’incertitude liée aux biens non durables ont toutes deux atteint leur sommet durant la récession de 1973-1975. L’incertitude liée aux biens durables a quant à elle culminé pendant la crise financière mondiale de 2008-2009. Des exercices d’autorégression vectorielle permettent d’établir que les variations imprévues de l’incertitude liée aux biens durables sont des facteurs de ralentissement économiquement et statistiquement significatifs, tandis que les hausses inattendues de l’incertitude liée aux biens non durables ont une action expansionniste. Nos résultats donnent à penser que 1) l’incertitude est hétérogène au niveau sectoriel, et 2) l’incertitude liée aux biens durables peut être à l’origine de certains effets du cycle économique qui sont habituellement attribués à l’incertitude agrégée.

We provide empirical evidence of the causal effects of changes in financial intermediaries' net worth on the aggregate economy. Our strategy identifies financial shocks as high-frequency changes in the market value of intermediaries' net worth in a narrow window around their earnings announcements, based on US tick-by-tick data. Using these shocks, we estimate that news of a 1% decline in intermediaries' net worth leads to a 0.2% to 0.4% decrease in the market value of nonfinancial firms. These effects are more pronounced for firms with high default risk and low liquidity and when the aggregate net worth of intermediaries is low.

Die deutsche Wirtschaft befindet sich im Sog handelspolitischer Verunsicherungen. Der Begriff der ökonomischen Unsicherheit ist facettenreich, aber zahlreiche theoretische und empirische Studien mit unterschiedlichen Messkonzepten und Methoden zeigen: Es besteht ein klarer Zusammenhang zwischen einem Anstieg der Unsicherheit und negativen Auswirkungen auf Wirtschaftsaktivität, Handel und vor allem Investitionen. Tatsächlich weisen wichtige Indikatoren aktuell ein hohes Maß an Unsicherheit aus. Dazu zählt auch das hier vorgestellte Dispersionsmaß für die Produktionserwartungen in Deutschland auf Basis der IW-Konjunkturumfrage. Damit dürfte die gestiegene Unsicherheit zum Erlahmen der Konjunktur in Deutschland beigetragen haben.

Germany and the United States pursued different economic strategies to minimise the impact of the Coronavirus Crisis on the labour market. Germany focused on safeguarding existing jobs through the use of internal flexibility measures, especially short-time work (STW). The United States relied on a mix of external flexibility and income protection. On this basis, we use macroeconomic time series to examine the German strategy of securing employment through internal flexibility by contrasting it with the chosen strategy in the United States. In Germany, temporary cyclical reductions in working hours are mainly driven via STW. US unemployment rose at an unprecedented rate, but unlike in previous recessions, it was mostly driven by temporary layoffs. However, a closer look at the blind spots of the chosen strategies in both countries showed that despite the different approaches, people in weaker labour market positions were less well protected by the chosen strategies.