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72. 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
73. 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
74. Social Capital And Its Changes In Armenia: Challenges and Expectations
- Author:
- Albert Hayrapetyan and Liana Isayan
- Publication Date:
- 02-2022
- Content Type:
- Journal Article
- Journal:
- Journal of Liberty and International Affairs
- Institution:
- Institute for Research and European Studies (IRES)
- Abstract:
- Social capital was the Achilles’ heel of the economic competitiveness of Armenia. In the meantime, the country made significant progress in solidifying it since the Velvet Revolution. In this article, we tried to present and analyze those elements of social capital which demonstrated significant progress in post-revolutionary Armenia, as well as the changes thereof. For that purpose, we have formulated the following research questions: What factors led to this growth, and what factors still lag? What hidden challenges can be observed through factual indicators which probably resulted from the slight decrease in the updated scores? What changes can be expected from the turbulent world and in the post-war society? The applied methodology is quantitative. In particular, to answer the research questions we used index analysis, graphic analysis, and comparison, correlation analysis techniques, pared t-test of the mathematical-statistical significance of changes, and Principal Component Analysis. The results of the analysis showed that a significant increase in the level of social capital was recorded in post-revolutionary Armenia, which was mainly due to the progress in institutional trust. Nevertheless, some revealed anomalies and encountered challenges undermined the archived progress in the growth of trust. Therefore, we put forward several recommendations.
- Topic:
- Economics, Pandemic, Social Capital, and COVID-19
- Political Geography:
- Europe and Armenia
75. The Impact of Demographic Factors in Consumer Purchasing Preferences in Developing Countries: Empirical Evidence From Kosovo
- Author:
- Faruk Ahmeti
- Publication Date:
- 02-2022
- Content Type:
- Journal Article
- Journal:
- Journal of Liberty and International Affairs
- Institution:
- Institute for Research and European Studies (IRES)
- Abstract:
- This paper analyses the role and the level of impact that different demographic factors have on buying preferences during the selection process between local and imported goods in developing and emerging economies, with a specific focus on the Kosovo region. A total of 630 questionnaires were distributed, from which 536 valid responses and an empirical study is applied to test the hypothesis. A probability sample (randomly selected), which was stratified by seven regions throughout the country was applied, by covering all levels of the society, cultural background, different locations (urban and rural), different levels of education, and income. Some of the respondents have shown a preference for imported goods and were willing to pay a price premium for it based on the quality offered by top producers (around 41.79%). Whereas, 58.21% of respondents prefer local products. It is proven that there is a correlation between demographic factors and buying preferences process when deciding between local and imported products. Whereas, price is considered as the main factor in the buying process in developing countries, due to the low income, whereas the level of imported products depends on the country’s ability to fulfill the local needs with local products.
- Topic:
- Demographics, Economics, Local, and Consumerism
- Political Geography:
- Europe and Serbia
76. Evaluating Macroeconomic Factors And Their Influence on Economic Growth: Empirical Evidence From Western Balkan Economies
- Author:
- Ereza A. Arifi
- Publication Date:
- 06-2022
- Content Type:
- Journal Article
- Journal:
- Journal of Liberty and International Affairs
- Institution:
- Institute for Research and European Studies (IRES)
- Abstract:
- This research aimed to identify and evaluate the impact of some macroeconomic components on economic growth performance. The data applied in the analysis were secondary data, including six countries from 2005 to 2020. The econometric approach applied was the fixed effect regression approach to economic growth as a dependent variable. The study also applied several diagnostic tests and the Hausman test to select between fixed and random effects. The data provided after the analysis show that inflation and foreign direct investment have a significant positive impact, while public debt has a significant negative impact. Moreover, unemployment and population growth have shown statistically insignificant results. The study from the aspect of the original contribution provides arguments and applies two variables that are very little addressed in the context of economic growth. The study results provide critical information for policymakers, economists, and researchers and provide arguments for a sound and proactive debate on these variables.
- Topic:
- Economics, Economic Growth, Banks, and Macroeconomics
- Political Geography:
- Europe and Balkans
77. Assessing the Effects of Trade Liberalization With Third Countries: The Case of the Eurasian Economic Union
- Author:
- Simon Sngryan
- Publication Date:
- 06-2022
- Content Type:
- Journal Article
- Journal:
- Journal of Liberty and International Affairs
- Institution:
- Institute for Research and European Studies (IRES)
- Abstract:
- The processes of objectively conditioned integration in the economic, political, legal, and institutional spheres of the Eurasian Economic Union (EEU) Member States took place step by step, starting from preferential trade agreements, passing to the customs union, the common market and other stages of integration. This process is accompanied by the gradual deepening of trade liberalization with potential partners. The selection of potential partners should be carried out through a comprehensive and detailed analysis of the structure and volumes of foreign trade of the EEU Member States (Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia) with third parties, their markets structure, existing customs regulation, trade barriers, and possible export potential. The research evaluated the EEU's possible enlargement effects on the Member States' economic indicators. The research aimed to assess the possible consequences of EEU expansion and signing free trade agreements, considering Pakistan, Korea, and Malaysia as potential trade partners. Modeling the effect of an FTA assumes horizontal zeroing of tariffs between partners. Then, using the GTAP model, a new state of general equilibrium was calculated corresponding to the changed parameters of customs and tariff regulation. In this case, most variables, such as change in GDP, production output, and export-import volumes, were estimated, manifesting the economic effect of trade liberalization.
- Topic:
- Economics, International Trade and Finance, Regional Cooperation, and Trade Liberalization
- Political Geography:
- Europe, Eurasia, and Asia
78. The Factors Influence Gross Domestic Product
- Author:
- Muhamet J. Spahiu and Betim J. Spahiu
- Publication Date:
- 06-2022
- Content Type:
- Journal Article
- Journal:
- Journal of Liberty and International Affairs
- Institution:
- Institute for Research and European Studies (IRES)
- Abstract:
- This paper examined the factors that influenced the Gross Domestic Product growth (GDP) in the post-Covid-19 period in Kosovo. This paper explored the impact of consumption, remittances, exports, imports, and inflation on Kosovo's GDP growth using fixed effects regression analysis with data from various secondary sources to analyze their impact from Kosovo's perspective. The results demonstrated that consumption, remittances, and exports had a statistically significant influence on GDP growth during the post-pandemic economic lockdown stage, whereby imports and inflation had a little inverse relation. Further, the Hausman test statistics on the adequacy of the fixed-effect model selection represent a superior performance compared to the random effect model. The paper is the first that extensively explores the impact of these factors that drove GDP growth in the post-pandemic period in Kosovo's economy. The novelty of this paper is that it recognizes the response of governments to the pandemic and accurately identifies the macroeconomic factors that influenced GDP growth.
- Topic:
- Economics, GDP, Pandemic, and COVID-19
- Political Geography:
- Europe and Kosovo
79. 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
80. 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