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12. German Economy Summer 2022: Slowly progressing recovery
- Author:
- Jens Boysen-Hogrefe, Nils Jannsen, Saskia Meuchelbock, Dominik Groll, Stefan Kooths, and Nils Sonnenberg
- Publication Date:
- 06-2022
- Content Type:
- Working Paper
- Institution:
- Kiel Institute for the World Economy (IfW)
- Abstract:
- The German economy navigates troubled waters. The catch-up process in the contact-intensive service industries is continuing at a fast pace and companies in the manufacturing sector are sitting on well-filled order books. However, high inflation is reducing the purchasing power of disposable incomes and thus dampening the recovery in consumption. In addition, supply bottlenecks have recently worsened again due to the war in Ukraine. As a result, the recovery will regain strength only in the second half of the year, when prices will no longer rise as rapidly and supply bottlenecks will begin to ease. Overall, we expect GDP to increase by 2.1 percent this year, as in our spring forecast. In 2023, GDP will grow by 3.3 percent (spring forecast: 3.5 percent). At 7.4 percent, inflation in the current year will be higher than ever before in reunified Germany. Next year, inflation will probably remain high with 4.2 percent. The recovery in employment continues. Effective earnings will rise strongly, also because labor shortages have reached an all-time high. In the current year, however, the increase of about 5 percent will lag behind the rate of inflation. Public budget deficits will decline as revenues increase strongly and pandemic-related expenditures are reduced. In 2023, public debt in relation to GDP is expected to be slightly above 60 percent.
- Topic:
- Economics, GDP, Inflation, and Russia-Ukraine War
- Political Geography:
- Europe and Germany
13. German Economy Spring 2022: Recovery at risk – Soaring Inflation
- Author:
- Jens Boysen-Hogrefe, Nils Jannsen, Saskia Meuchelbock, Jan Reents, Dominik Groll, Stefan Kooths, Martin Ademmer, and Nils Sonnenberg
- Publication Date:
- 03-2022
- Content Type:
- Working Paper
- Institution:
- Kiel Institute for the World Economy (IfW)
- Abstract:
- The German economy is once again facing strong headwinds. The war in Ukraine is leading to rising commodity prices, new supply bottlenecks and dwindling sales opportunities. These factors will affect the German economy in different ways. Higher commodity prices reduce the purchasing power of disposable incomes and thus dampen private consumption. Moreover, new supply bottlenecks will dampen industrial production in the coming months. Finally, sales opportunities will deteriorate at least temporarily due to the sanctions and the increased uncertainty caused by the war. All this is hitting the economy in a phase in which the dampening effects of the pandemic are fading out and a strong recovery has begun to emerge. The dampening factors are cushioned because private households have accumulated large amounts of extra savings since the beginning of the pandemic, so that high inflation does not fully impact private consumption. In addition, industrial firms have an unusually high stock of orders, which will cushion the temporarily lower sales opportunities. As a result, the recovery is likely to continue this year, albeit at a noticeably slower pace than expected in winter. Overall, we now expect GDP to rise by 2.1 percent in this year (winter forecast: 4 percent) and by 3.5 percent in 2023 (winter forecast: 3.3 percent). With 5.8 percent inflation is likely to be higher this year than ever before in reunified Germany. Even if commodity prices stop rising and supply bottlenecks gradually ease, inflation is still likely to be unusually high at 3.4 percent next year, also because recent producer price increases are only gradually being passed through to consumers. The labor market is expected to remain robust. Public spending will rise in response to the war and its economic consequences, so that budget deficits will remain at elevated levels for a longer period.
- Topic:
- Economics, GDP, Inflation, and Purchasing Power
- Political Geography:
- Europe and Germany
14. Exchanging Money for Love? A Regional Analysis of EU Cohesion Policy on Euroscepticism
- Author:
- Michael Bayerlein and Matthias Diermeier
- Publication Date:
- 04-2022
- Content Type:
- Working Paper
- Institution:
- Kiel Institute for the World Economy (IfW)
- Abstract:
- In the past, the European Union seems to have been able to tame Euroscepticism through regional 'convergence' funding. After the Eastern enlargement of the Union, however, this relationship needs to be put to the test. Not only have the new member states become the main recipients of EU funding, Eastern Europe has also changed from once being the most integration-friendly region to displaying the most integration-hostile attitudes in the EU. Motivated by this empirical puzzle, we revisit the relationship between structural 'convergence' funding and Euroscepticism and ask where - if at all - is the EU's convergence spending still able to tame Euroscepticism. Most surprisingly, correlation analyses reveal that between 2006 and 2018 larger regional subsidies go along with increasing opposition to EU integration. We can rebut this counterintuitive finding by a Diff-in-Diff approach that reveals an increasing Euroscepticism in Eastern European regions between 2006 and 2014. Nevertheless, also these more advanced models fail to establish a positive relationship between regional funding eligibility and pro-integrationist attitudes. Finally, fuzzy RDD models exploit the funding assignment rule and corroborate that the EU is no longer able to pacify integration-critical regions by their simply increasing 'convergence' funding. Nevertheless, the EU has won support in Eastern Europe where EU investments are perceived (positively). In designing a strategy to win back support for EU integration, Brussels does not need more fiscal capacity but rather has to design 'convergence' funding that is visible as well as clearly attributable to its donor.
- Topic:
- Economics, Regional Cooperation, Foreign Aid, European Union, and Eurocentrism
- Political Geography:
- Europe
15. Eighth sanctions package: Which side will be the economic loser?
- Author:
- Nigar Islamli
- Publication Date:
- 09-2022
- Content Type:
- Working Paper
- Institution:
- Center for Economic and Social Development (CESD)
- Abstract:
- Since February 24, 2022, Russia's invasion policy towards Ukraine has been tried to be prevented by several series of sanctions by the European Union. These sanctions include trade, travel, asset freezes, oil, transport, and SWIFT bans. Since the start of the war, 7 sanctions packages have been presented and many of them are being implemented. In response to Russia's invasion policy against Ukraine, the European Commission presented the eighth package of sanctions covering visa issues and asset freezes.
- Topic:
- Economics, Sanctions, European Union, and Russia-Ukraine War
- Political Geography:
- Russia, Europe, and Ukraine
16. Will economic statecraft threaten western currency dominance? Sanctions, geopolitics, and the global monetary order
- Author:
- Carla Norrlof
- Publication Date:
- 09-2022
- Content Type:
- Working Paper
- Institution:
- Atlantic Council
- Abstract:
- The return of great power rivalry is stoking renewed fears of weakening Western currency dominance. Financial sanctions are becoming the preferred economic tool for accomplishing geopolitical goals. These instruments are especially popular with the United States and Europe. In response, rival great powers, notably China and Russia, are diversifying away from Western currencies and developing counterstrategies to maintain economic and foreign policy autonomy. As other countries are hit by increasingly punishing Western sanctions, the incentive to join Russia and China’s alternative international monetary order increases. New analysis, published in this report, shows early signs that some countries may be trying to diversify away from the dollar. A growing circle of countries attempting to evade the Western-centric financial and currency order may over time erode the dollar and the euro’s sizeable lead, though will likely fall well short of ending their global dominance. This report analyzes these trends and quantifies the extent of reserve diversification following Russia’s 2022 war on Ukraine. It also assesses the polarity of the international currency order since the onset of the euro in 2002. Reserve diversification out of the dollar, and into the euro, has been modest, though Chinese renminbi reserves grew after Russia’s February offensive in Ukraine. Dollar unipolarity declined acutely in 2017 as the number of countries sanctioned by the United States increased and the US President Donald J. Trump threatened to revoke alliance commitments. Using economic statecraft while retaining global economic influence will require the United States to keep its economic house in order and allies close, if the current unipolar currency order is to survive.
- Topic:
- Economics, Monetary Policy, Sanctions, and Geopolitics
- Political Geography:
- China, Europe, and Asia
17. The Business Case for the Sustainable Development Goals: An Empirical Analysis of 21 Danish Companies' Engagement with the SDGs
- Author:
- Michael W. Hansen, Henrik Gundelach, and Erik Johnson
- Publication Date:
- 09-2022
- Content Type:
- Working Paper
- Institution:
- Centre for Business and Development Studies (CBDS), Copenhagen Business School
- Abstract:
- This paper explores why business engage with the SDG agenda, with a view to understanding the business case for the SDGs. Building on and extending the responsibility literature’s discussion of the business case for responsibility, the paper develops a conceptual framework for analyzing why business engage with the SDGs. This framework is employed to analyze why a sample of 21 Danish companies decided to engage with the SDG agenda. The analysis finds that most companies view the SDGs as a platform for achieving rather conventional business goals such as mitigating risk, saving costs, and differentiating products and services. However, in a few cases, companies use the SDGs as a lever for carving out uncontested positions in future markets. The paper concludes that companies overwhelmingly view the SDGs as a business opportunity rather than as a business responsibility, something that fundamentally may distinguish the SDG agenda from previous responsibility agendas. The paper fills a gap in the extant literature on business responsibility by developing and validating a classification of the business case for the SDGs based on economic value drivers, and by deepening the empirical understanding of, what precisely this business case may be.
- Topic:
- Development, Economics, Sustainable Development Goals, Business, and Social Responsibility
- Political Geography:
- Europe and Denmark
18. EU-Azerbaijan Economic Relations: New Perspectives and Targets
- Author:
- CESD Research Team
- Publication Date:
- 12-2022
- Content Type:
- Working Paper
- Institution:
- Center for Economic and Social Development (CESD)
- Abstract:
- The study is an example of the series on issues analyzing the EU-Azerbaijan economic relations which can be considered a step forward to empower economic approach in the policy-making process aiming to provide an alternative view in addressing current challenges and developments in Azerbaijan. The European Union’s relations with Azerbaijan have been formulated based on the EU-Azerbaijan Partnership and Cooperation Agreement which entered into force since 1999. In February 2017, the EU and Azerbaijan began negotiations on a new framework agreement designed to enhance the political dialogue, trade and mutually beneficial cooperation covering a wide range of economic aspects. One of the most important strategies of EU in the energy policy is to ensure energy security through diversification of energy routes. Azerbaijan is a strategically important energy partner for the EU and plays a significant role in bringing Caspian energy resources to the EU market. In 2018, the EU and Azerbaijan endorsed joint Partnership Priorities, along the four Eastern Partnership priorities that accompany the political dialogue and economic cooperation….
- Topic:
- International Relations, Economics, European Union, and Partnerships
- Political Geography:
- Europe, Caucasus, and Azerbaijan
19. German Economy Winter 2022: Inching through the energy crisis
- Author:
- Jens Boysen-Hogrefe, Dominik Groll, Nils Sonnenberg, Nils Jannsen, Stefan Kooths, Vincent Stamer, and Timo Hoffmann
- Publication Date:
- 12-2022
- Content Type:
- Working Paper
- Institution:
- Kiel Institute for the World Economy (IfW)
- Abstract:
- Wholesale prices for gas and electricity have fallen significantly in recent months - even though they are still at a high level. In addition, the burdens on private households and companies caused by high energy costs are to be cushioned by so-called price brakes. Overall, inflation in 2023 will be much lower at 5.4 percent than we had expected in our autumn forecast (8.7 percent). Although real disposable income and, as a result, private consumption are likely to decrease next year, the decline will be much smaller than had been expected a few months ago. As a result, we now expect a slight increase in GDP of 0.3 percent for 2023 (autumn: -0.7 percent). In 2024, GDP is expected to grow somewhat more strongly again at 1.3 percent (autumn: 1.7 percent). The labour market is robust despite the economic slowdown, partly because companies are still desperately seeking skilled workers. The public fiscal balance is likely to deteriorate significantly in 2023 due to the aid packages in response to the energy crisis and displays a deficit of around 4 percent relative to GDP. With the expiry of the aid packages, the deficit will decrease again in 2024.
- Topic:
- Economics, Monetary Policy, Budget, Business, Labor Market, Energy Crisis, Emerging Economies, and Advanced Economies
- Political Geography:
- Europe and Germany
20. Nudging for Recovery: Behavioral Economics and the implementation of the National Recovery and Resilience Plan
- Author:
- Demosthenes Kollias
- Publication Date:
- 10-2021
- Content Type:
- Working Paper
- Institution:
- Hellenic Foundation for European and Foreign Policy (ELIAMEP)
- Abstract:
- With the National Recovery and Resilience Plan, Greece is presented with yet another opportunity to catch up with global trends. At the same time, behavioral economics are being established worldwide as a valuable asset in the policy maker’s toolkit. The paper -mainly focusing on taxation, labor market policy, and climate change- aims to examine the behavioral conundrum that creates frictions and inefficiency in the domains outlined above and to offer concrete and quantifiable policy proposals, in accordance with the goals of Greece 2.0. Regarding tax evasion, for example, one can estimate at least €1 billion in additional tax revenue if the proposals are implemented.
- Topic:
- Climate Change, Economics, Tax Systems, Labor Market, and Economic Recovery
- Political Geography:
- Europe and Greece