Gerrit Koester
Economics
- Current Position
-
Adviser
- Fields of interest
-
Macroeconomics and Monetary Economics,Public Economics,International Economics
- Education
- 2007
PhD in economics (summa cum laude) - Humboldt University Berlin
- 2000
M.A. in economics - Humboldt University Berlin
- 2000
M.A. in political science and philosophy - Free University Berlin
- 1999
Master of International Affairs - Columbia University New York
- 23 May 2024
- THE ECB BLOGDetails
- JEL Code
- E20 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→General
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
- 25 April 2024
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 3, 2024Details
- Abstract
- Changes in energy prices and wage costs can, to the extent these are passed through to consumer prices, have important effects on HICP inflation excluding energy and food (HICPX). Data from different sources can be matched to obtain the cost shares of energy and wages in various sectors. Since the importance of changes in input costs is likely to increase with the share of such costs in the overall input costs or in the production of a service or a good, this information allows HICPX inflation to be broken down into indicators for energy-sensitive and not energy-sensitive items, as well as into contributions from wage-sensitive and not wage-sensitive items. The energy-sensitive HICPX inflation indicator derived in this way illustrates the important role of the energy shock in HICPX inflation developments over the last few years. Similarly, the indicator for wage-sensitive HICPX inflation signals an important role for wages as a driver of underlying inflation in the euro area, especially more recently. The two indicators have little overlap – which helps in interpreting their signals.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
P44 : Economic Systems→Other Economic Systems→National Income, Product, and Expenditure, Money, Inflation
J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
Q4 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Energy
- 8 February 2024
- OCCASIONAL PAPER SERIES - No. 338Details
- Abstract
- This paper introduces innovative, newly developed forward-looking indicators of negotiated wage growth in the euro area using data on collective bargaining agreements from seven countries: Germany, France, Italy, Spain, the Netherlands, Austria and Greece. The paper demonstrates how agreement-level data can be used to study drivers of aggregate negotiated wage growth, as well as monitor the breadth of wage increases and account for time-varying factors such as one-off payments, when assessing wage pressures. Lastly, the paper shows that the new indicators can provide reliable signals about current and future developments of wage pressures in the euro area while also serving as important cross-checking tools for negotiated wage growth forecasts.
- JEL Code
- E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
J31 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Wage Level and Structure, Wage Differentials
J50 : Labor and Demographic Economics→Labor?Management Relations, Trade Unions, and Collective Bargaining→General
- 30 March 2023
- THE ECB BLOGDetails
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
- 24 February 2023
- THE ECB BLOGDetails
- JEL Code
- E30 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→General
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
Related- 1 March 2023
- THE ECB BLOG
- 10 January 2023
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2022Details
- Abstract
- Headline inflation has increased sharply in the euro area and in the United States since the start of 2021. But there are major differences between inflation developments in these two economies. In particular, energy inflation has been much higher in the euro area – leading to higher headline inflation than in the United States in recent months. As the euro area is significantly more dependent on energy imports than the United States, the rise in energy prices constitutes a strong adverse terms-of-trade shock to euro area income. Amid the resulting relatively slower recovery from the pandemic in the euro area, the contribution of demand to core inflation has increased more gradually and later in the euro area than in the United States. In addition, the short-term outlook for economic growth is weaker in the euro area than in the United States and the US labour market is tighter, implying a relatively smaller impetus from economic activity and the labour market to inflation in the euro area. Looking ahead, professional forecasters expect inflation to be somewhat more persistent in the United States than in the euro area.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
F4 : International Economics→Macroeconomic Aspects of International Trade and Finance
N10 : Economic History→Macroeconomics and Monetary Economics, Industrial Structure, Growth, Fluctuations→General, International, or Comparative
J3 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs
- 9 January 2023
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 8, 2022Details
- Abstract
- This article discusses wage developments and the main factors that have influenced them since the start of the pandemic. First, it reviews developments in a broad range of wage measures for the euro area and discusses their current usefulness as signals of wage pressures. In this context, it illustrates how the growth of compensation per employee was adjusted for the impact of job retention schemes. Second, the article looks at how wage developments have differed across sectors, reflecting the heterogeneous impact of the pandemic shock. Finally, it discusses the impact of inflation on purchasing power of wage incomes and real wage costs in the euro area by examining developments in real consumer and producer wages for the economy as a whole and in its main sectors.
- JEL Code
- E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
J31 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Wage Level and Structure, Wage Differentials
J38 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Public Policy
- 7 October 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 7, 2022Details
- Abstract
- In this box we decompose components of HICP excluding energy and food inflation into those driven predominantly by demand and those driven predominantly by supply shocks. This approach to monitoring inflation was originally developed for the United States. When adapted to the euro area it reveals that both supply and demand factors have contributed strongly to the increase in HICPX inflation since the second half of 2021. Supply factors were dominant at the beginning of the upturn in inflation in the second half of 2021, but demand factors have gradually increased in importance and contributed to a similar extent as supply factors to HICPX inflation over recent months. In recent months, the main contribution to non-energy industrial goods (NEIG) inflation has come from components predominantly driven by supply shocks, whereas services inflation has stemmed more from components predominantly driven by demand.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
- 28 April 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 3, 2022Details
- Abstract
- Minimum wages are prevalent in many euro area countries. Since 2008 minimum wages in the euro area have tended, on average, to grow at a similar pace to wages and salaries per employee. However, minimum wage growth can also significantly deviate from growth in wages and salaries in some years. Minimum wages are expected to grow at a substantially stronger pace than wages and salaries in many euro area countries in 2022 and 2023 – leading to a stronger than usual upward impact of minimum wages on euro area wage growth while the absolute direct mechanical impact on wage growth in the euro area is likely to remain contained.
- JEL Code
- E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
J3 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
- 16 February 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 1, 2022Details
- Abstract
- A recurring theme in the “ECB Listens” event conducted in the context of the monetary policy strategy review was the affordability of housing and the case for including related costs more adequately in the HICP. Housing costs can be analysed on the basis of different sources of data. This box reviews perceptions of housing costs among tenants and homeowners based on survey microdata, compares them with developments in housing costs based on macro price statistics, and highlights conceptual differences between the various measures that are important in the interpretation of the data.
- JEL Code
- R21 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Household Analysis→Housing Demand
R31 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Real Estate Markets, Spatial Production Analysis, and Firm Location→Housing Supply and Markets
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
- 14 February 2022
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 1, 2022Details
- Abstract
- After headline inflation had already reached very high levels in the United States in the first half of 2021 and increased further to 7% in December, euro area inflation also recorded a very rapid increase in the second half of 2021 but remained much lower than in the United States at 5% in December and – according to Eurostat’s flash release – at 5.1% in January. Most of the difference in overall inflation developments has been due to the far stronger increase in inflation less energy and food (and from a higher starting point) in the United States than in the euro area. Large contributions from some special items – including used car prices – continue to play a key role for explaining differences in inflation excluding food and energy. Turning to underlying drivers of inflation developments, the United States is more advanced in the business cycle than the euro area and the US labour market has tightened, which has started to be reflected in some upward pressure on wages. However it should be kept in mind that the pandemic is a unique situation with considerable differences in inflation developments when compared with “normal” times, which require close monitoring and add to the uncertainty surrounding the inflation outlook in the United States as well as in the euro area. Upside surprises in inflation data releases have continued to be larger for the United States than for the euro area over recent quarters. Looking ahead, Consensus Economics forecasts expected inflation to remain below 2% in 2023 in the euro area but not in the United States and uncertainty around the outlook for inflation seemed to be much greater for the United States.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
J3 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs
E2 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
N10 : Economic History→Macroeconomics and Monetary Economics, Industrial Structure, Growth, Fluctuations→General, International, or Comparative
- 2 December 2021
- WORKING PAPER SERIES - No. 2619Details
- Abstract
- Endogeneity of the labour market slack in reduced-form Phillips Curves (PCs) is usually addressed either by including proxies for omitted supply shocks, or by using instrumental variables. Using the Kiviet (2020) Kinky Least Squares estimator, we find evidence that supply-shock proxies should not be omitted from PCs, and that many popular instrumental variables seem to be invalid. We estimate a standard backward-looking wage Phillips Curve by Kinky Least Squares and find that unless a large negative correlation between the slack variable and the error term is assumed, the coefficient of the slack variable is significantly negative.
- JEL Code
- C1 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General
E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
- 11 November 2021
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 7, 2021Details
- Abstract
- Shocks to inflation can have longer-lasting effects in the presence of second-round effects. Wage-setting systems are more likely to trigger second-round effects if wage indexation is widespread in labour agreements. To derive a euro area indicator for the prevalence of wage indexation, characteristics of national wage indexation schemes are weighted by country shares in euro area private sector employment. Based on this indicator, around 3% of private sector employees in the euro area have wages and minimum wages automatically indexed to inflation. For most of the employees covered by automatic wage indexation, the inflation measure is backward-looking and includes energy. Indexation regimes where inflation has a formal, but not automatic role in wage negotiations, apply to currently around 18% of employees in the euro area and mostly consider forward-looking inflation measures excluding energy. Additionally, around 18% of euro area employees work in countries where only the minimum wages are automatically indexed to inflation. These indexation mechanisms are usually backward-looking with inflation measures that include energy. For more than half of the employees in the euro area, inflation does not play a formal role in wage setting but can be an important factor in wage negotiations. Where there is no formal role for inflation, inflation developments can be more easily disregarded in times of high uncertainty, with the focus being on job security instead, for example. Since the Great Financial Crisis, indexation regimes with a formal role for inflation in wage setting have become somewhat less prevalent in the euro area. Overall, the likelihood of euro area wage-setting schemes triggering second-round effects based on inflation indexation is relatively limited, particularly with regard to energy inflation. Recent hikes in energy inflation can be expected to lead to some automatic wage increases, mainly in minimum wages in some countries, affecting only a small share of private sector employees. However, a broadly based and automatic pass-through to wage growth through wage indexation mechanisms seems rather unlikely.
- JEL Code
- J3 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs
J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
J38 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Public Policy
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
- 21 September 2021
- OCCASIONAL PAPER SERIES - No. 280Details
- Abstract
- From 2013 up to the launch of the ECB’s strategy review in January 2020, inflation in the euro area was low and over-predicted. This low inflation during the years 2013-19 can be attributed to a combination of interconnected factors. Cyclical developments account for a substantial share of the fall in underlying inflation, mainly in the first part of the low inflation period. Additionally, there is evidence that an underestimation of the amount of economic slack and less well-anchored longer-term inflation expectations, in combination with monetary policy in the euro area being constrained by the effective lower bound, have played an important role in the long period of subdued inflation. Ongoing disinflationary structural trends (such as globalisation, digitalisation and demographic factors) are likely to have had a dampening effect on inflation over the last few decades, but were in themselves not the main drivers of low inflation in the euro area from 2013 to 2019. However, as they could not have been easily offset by interest rate policy in an effective lower bound environment, they might also have contributed to the more subdued inflation dynamics in the euro area from 2013 to 2019.
- JEL Code
- C51 : Mathematical and Quantitative Methods→Econometric Modeling→Model Construction and Estimation
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
F62 : International Economics→Economic Impacts of Globalization→Macroeconomic Impacts
J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
- 21 September 2021
- OCCASIONAL PAPER SERIES - No. 279Details
- Abstract
- The existence of nominal rigidities and inflation differentials between countries offers two of the main rationales for an inflation buffer in a monetary union where monetary policy is oriented towards an area-wide inflation objective. Evidence accumulated since 2003 suggests that nominal rigidities remain a prevalent feature of the euro area, with some differences as regards prices and wages. Price setting may have become more flexible and there is no evidence for any especially strong downward rigidities in price setting. At the same time, persistent downward nominal wage rigidity (DWR) provides a strong argument for a positive inflation buffer to “grease the wheels” of the euro area economy – also in order to avoid the risk of macroeconomic adjustments being managed in terms of quantities (unemployment) rather than prices when DWR is binding and particularly when productivity growth is low. Inflation differentials across euro area countries have tended to be small but persistent. For inflation dispersion in the euro area, the across countries has been more important than across regions, confirming that an inflation buffer might be especially important in a monetary union of different countries. Overall, inflation differentials were due to the rise of economic and financial imbalances in the first decade of the euro and the subsequent need for adjustment. Balassa-Samuelson effects which were highlighted in the 2003 strategy review were only a minor factor. By and large, the ECB’s inflation objective seems to have provided a sufficient margin to prevent countries from having to live with prolonged periods of excessively low inflation rates in the period 1999-2019. There were some exceptions in the second decade of the euro (from 2009-2019), when inflation in the euro area was, overall, substantially lower than during the first decade.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
- 21 September 2021
- OCCASIONAL PAPER SERIES - No. 265Details
- Abstract
- This paper – which takes into consideration overall experience with the Harmonised Index of Consumer Prices (HICP) as well as the improvements made to this measure of inflation since 2003 – finds that the HICP continues to fulfil the prerequisites for the index underlying the ECB’s definition of price stability. Nonetheless, there is scope for enhancing the HICP, especially by including owner-occupied housing (OOH) using the net acquisitions approach. Filling this long-standing gap is of utmost importance to increase the coverage and cross-country comparability of the HICP. In addition to integrating OOH into the HICP, further improvements would be welcome in harmonisation, especially regarding the treatment of product replacement and quality adjustment. Such measures may also help reduce the measurement bias that still exists in the HICP. Overall, a knowledge gap concerning the exact size of the measurement bias of the HICP remains, which calls for further research. More generally, the paper also finds that auxiliary inflation measures can play an important role in the ECB’s economic and monetary analyses. This applies not only to analytical series including OOH, but also to measures of underlying inflation or a cost of living index.
- JEL Code
- C43 : Mathematical and Quantitative Methods→Econometric and Statistical Methods: Special Topics→Index Numbers and Aggregation
C52 : Mathematical and Quantitative Methods→Econometric Modeling→Model Evaluation, Validation, and Selection
C82 : Mathematical and Quantitative Methods→Data Collection and Data Estimation Methodology, Computer Programs→Methodology for Collecting, Estimating, and Organizing Macroeconomic Data, Data Access
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
- 21 September 2021
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 6, 2021Details
- Abstract
- Before the start of the coronavirus (COVID-19) pandemic, HICP inflation was relatively subdued in the euro area, standing at 1.2% in February 2020. In the United States, CPI inflation was substantially stronger, at 2.3% in the same month. After having declined over 2020, headline inflation has increased strongly in the United States and the euro area over recent months. Most of the increase, especially in the United States, has been driven by only a few items in the consumption baskets – including energy prices. Looking at developments in underlying inflation, US CPI inflation less food and energy has increased strongly, significantly surpassing its pre-pandemic levels, while HICP inflation excluding energy and food (HICPX) in the euro area has remained below its pre-pandemic levels – reflecting in part a still larger amount of slack in the euro area economy. Recent increases in inflation have pushed up the short-term inflation expectations of professional forecasters for the United States and, to a much lesser extent, also for the euro area, but inflation rates are expected to decrease substantially again over the first half of 2022. A substantial part of the strong increases in inflation over recent months in the United States and the euro area can be attributed to special factors that are likely to be of a temporary nature. For a more permanent increase in inflation, price pressures would usually need to become more broad-based (especially in the euro area) and also reflect increasing labour cost pressures. However, there is so far no firm indication of the latter once the effects of changes in the composition of employment and of job retention schemes are taken into account.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
J3 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs
D84 : Microeconomics→Information, Knowledge, and Uncertainty→Expectations, Speculations
- 5 August 2021
- ECONOMIC BULLETIN - BOXRecent developments in pipeline pressures for non-energy industrial goods inflation in the euro areaEconomic Bulletin Issue 5, 2021Details
- Abstract
- The recent marked increases in the cost of commodities, raw materials and intermediate products have so far led to only limited upward pressures on consumer goods inflation. Looking ahead, upward pressures on non-energy industrial goods (NEIG) inflation from recent global developments in these input costs are expected to strengthen, as the pass-through generally takes more than one year. How visible and strong the impact on NEIG inflation might be will depend on how persistent the global input cost shocks ultimately are.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
Q02 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→General→Global Commodity Markets
D12 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Empirical Analysis
- 3 August 2021
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 5, 2021Details
- Abstract
- The recovery of growth in compensation per employee (CPE) has been V-shaped and driven mainly by adjustments in compensation and less by changes in employment. This can be explained by the decisive role played by job retention schemes during the pandemic, which helped to preserve the employment status of employees. The dispersion of CPE growth has remained higher than during pre-pandemic times – underlining the importance of taking sectoral developments into account when analysing aggregate wage growth in the euro area. The differences in sectoral developments in CPE growth reflect the different degrees to which sectors were affected by the pandemic and the measures taken to contain it. While wage growth has been strong in non-market services and construction in recent quarters, CPE growth was hardest hit and remains negative in high-contact services. The effects of the pandemic on growth in compensation are expected to shape wage developments in 2021 in all main sectors. As for the outlook, a key question is whether sectoral wage negotiations will aim to make up for the temporary cuts in compensation at least partly and in some sectors – which could add to wage growth over the next years, especially in those parts of the services sector that were hit hardest during the pandemic.
- JEL Code
- H24 : Public Economics→Taxation, Subsidies, and Revenue→Personal Income and Other Nonbusiness Taxes and Subsidies
J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
J31 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Wage Level and Structure, Wage Differentials
- 24 June 2021
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 4, 2021Details
- Abstract
- This box documents the misalignment between the surge in global demand for semiconductors and their limited global supply. The semiconductor chip shortage poses constraints on euro area manufacturers, particularly in industries relying on semiconductors, such as the computer, electronic, electrical equipment and automotive industries. So far, there is only limited evidence regarding the effects of the shortage of semiconductors on euro area price pressures.
- JEL Code
- F10 : International Economics→Trade→General
D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
E23 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Production
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
- 6 May 2021
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 3, 2021Details
- Abstract
- This box reviews the factors behind the 11-percentage point swing in energy inflation between December 2020 and March 2021, with a particular focus on oil prices, base effects and the impact of indirect taxation. Base effects linked to the collapse of oil prices at the beginning of 2020 pushed up energy inflation by around 5 percentage points between December 2020 and March 2021, and this contribution can be expected to increase substantially further in April. The impact of the marked increase in oil prices since November 2020 has come on top of this. However, the strengthening of energy inflation in early 2021 has reflected not only oil price developments but also changes in taxes and other surcharges – including environmentally motivated measures such as the introduction of carbon emission certificates. Overall, energy inflation plays a prominent role in the temporary rise in overall HICP inflation projected for 2021 and its reduction in early 2022.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
Q4 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Energy
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
H2 : Public Economics→Taxation, Subsidies, and Revenue
H23 : Public Economics→Taxation, Subsidies, and Revenue→Externalities, Redistributive Effects, Environmental Taxes and Subsidies
- 6 January 2021
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2020Details
- Abstract
- Can the indicator of negotiated wage rates play an especially important role in assessing and forecasting wage dynamics at the current juncture? While the data on negotiated wages are available on a more timely basis, negotiated wage growth tends to only react with some lag to changes in labour market conditions, owing to the nature of the negotiation process, and the indicator is currently still dominated by wage agreements agreed prior to the pandemic. The main effects of the pandemic on negotiated wage growth are likely to become visible only from 2021 – when a substantial share of wage contracts in euro area countries is due to be renegotiated. Wage drift developments, in conjunction with information on hours worked and unemployment, can provide some indications regarding the environment in which these negotiations will take place. The availability of more granular data, for example on negotiated wage growth in different sectors, would be very helpful in analysing euro area wage developments in more detail.
- JEL Code
- H24 : Public Economics→Taxation, Subsidies, and Revenue→Personal Income and Other Nonbusiness Taxes and Subsidies
J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
J31 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Wage Level and Structure, Wage Differentials
- 24 September 2020
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 6, 2020Details
- Abstract
- This box reviews the impact of changes in indirect taxes on inflation developments in the euro area. In the past, increases in indirect taxes have tended to contribute positively to inflation in the euro area. However, the recent reductions in indirect taxes in response to the coronavirus (COVID-19) pandemic in several euro area countries, in particular in Germany, have not been seen before in the euro area on this scale. The impact they will have on inflation is surrounded by considerable uncertainty, but overall the pass-through is likely to be incomplete and to vary across sectors. In this respect, the September 2020 staff projections expect only a quite limited pass-through. The effects are nevertheless large enough to imply a slight V-shape profile for underlying inflation excluding the effects of changes in indirect taxes concealed in the annual numbers for HICPX, as well as a gradual increase between 2020 and 2022.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
H22 : Public Economics→Taxation, Subsidies, and Revenue→Incidence
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
- 17 June 2020
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 4, 2020Details
- Abstract
- This box reviews recent developments in short-time work and temporary lay-off schemes in the five largest euro area countries. It then calculates wage replacement rates and estimates take-up rates. Combining wage replacement rates with the estimated number of participants makes it possible to calculate the impact of short-time work on household disposable income. The box concludes that short-time work and temporary lay-off measures are significantly buffering the impact of COVID-19 on households’ disposable income.
- JEL Code
- E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
E65 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Studies of Particular Policy Episodes
- 27 December 2019
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 8, 2019Details
- Abstract
- Although recent wage growth has increasingly been in line with predictions, there has been a period of low and under-predicted wage growth in the euro area. This period of weak wage growth can be explained to a large extent by the drivers traditionally captured in a Phillips curve analysis, such as economic slack (including broader measures of labour market slack) and inflation expectations. However, these factors do not paint the full picture, as wages were consistently under-predicted during the period 2013-17. As wages differ across sectors and according to employees’ individual characteristics, significant changes in the composition of employment that have taken place in the euro area since the beginning of the crisis could have been an important factor in aggregate wage growth developments. These changes can result from slow-moving trends, cyclical changes or a combination of the two. This article discusses the role of such changes, known as “compositional effects”, in wage growth. It analyses the role of changes in the composition of employment with respect to the individual characteristics of employees (e.g. age, education or gender), employment types (e.g. permanent or temporary contracts) and sectoral shifts. The analysis is mainly based on microdata from the EU survey of income and living conditions, but the article also includes cross-checks and analyses based on the EU Labour Force Survey (EU-LFS) and national accounts data. The analyses indicate that compositional effects pushed up wage growth early in the crisis, but that the effect later decreased and turned negative. This has contributed to a relatively muted response from aggregate wage growth, both to the strong downturn of the labour market early in the crisis and later, from 2014 onwards, to cyclical improvements. Hence compositional effects have been one factor contributing to low wage growth in the euro area. The most important contributions to compositional effects seem to be related to changes in the age and educational structure of the workforce, which can have both a long-term and a cyclical impact. Looking at country-specific evidence, the euro area aggregate results have been influenced by Spain and Italy in particular.
- JEL Code
- J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
- 27 December 2019
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2019Details
- Abstract
- The box assesses recent developments in social security contributions and minimum wages. It finds that social security contributions have led to a moderation of growth in composition of employee growth, while growth in wages and salaries per employee – excluding employers’ social security contributions – has remained quite robust. Over the last decade minimum wages have affected wage growth substantially in some countries, but only marginally in the euro area.
- JEL Code
- J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
J38 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Public Policy
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
- 3 September 2019
- OCCASIONAL PAPER SERIES - No. 232Details
- Abstract
- Despite notable improvements in the labour market since 2013, wage growth in the euro area was subdued and substantially overpredicted in 2013-17. This paper summarises the findings of an ESCB expert group on the reasons for low wage growth and provides comparable analyses on wage developments in the euro area as a whole and in individual EU countries. The paper finds that cyclical drivers, as captured by a standard Phillips curve, seem to explain much of the weakness in wage growth during this period, but not all of it. Going beyond the drivers included in standard Phillips curves, other factors are also found to have played a role, such as compositional effects, the possible non-linear reaction of wage growth to cyclical improvements, and structural and institutional factors. In order to increase the robustness of wage forecasts, the paper also proposes ready-to-use tools for cross-checking euro area wage growth forecasts based on wage Phillips curves. These are derived based on a comprehensive real-time forecast evaluation exercise
- JEL Code
- J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
- 13 June 2019
- OCCASIONAL PAPER SERIES - No. 224Details
- Abstract
- Well-functioning economic structures are key for resilient and prospering euro area economies. The global financial and sovereign debt crises exposed the limited resilience of the euro area’s economic structures. Economic growth was masking underlying weaknesses in several euro area countries. With the inception of the crises, significant efforts have been undertaken by Member States individually and collectively to strengthen resilience of economic structures and the smooth functioning of the euro area. National fiscal policies were consolidated to keep the increase in government debt contained and structural reform momentum increased notably in the second decade, particularly in those countries most hit by the crisis. The strengthened national economic structures were supported by a reformed EU crisis and economic governance framework. However, overall economic structures in euro area countries are still not fully commensurate with the requirements of a monetary union. Moreover, remaining challenges, such as population ageing, low productivity and the implications of digitalisation, will need to be addressed to increase economic resilience and long-term growth.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E60 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→General
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
F10 : International Economics→Trade→General
J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
O43 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Institutions and Growth
- 30 April 2019
- OCCASIONAL PAPER SERIES - No. 221Details
- Abstract
- The studies summarised in this paper focus on the economic implications of euro area firms’ participation in global value chains (GVCs). They show how, and to what extent, a large set of economic variables and inter-linkages have been affected by international production sharing. The core conclusion is that GVC participation has major implications for the euro area economy. Consequently, there is a case for making adjustments to standard macroeconomic analysis and forecasting for the euro area, taking due account of data availability and constraints.
- JEL Code
- F6 : International Economics→Economic Impacts of Globalization
F10 : International Economics→Trade→General
F14 : International Economics→Trade→Empirical Studies of Trade
F16 : International Economics→Trade→Trade and Labor Market Interactions
E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
- 20 December 2018
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 8, 2018Details
- Abstract
- The wage drift measures deviations in developments in actual wages from developments in negotiated wages. It is an important element in the macroeconomic analysis of employee compensation because it should be closely linked to cyclical developments in the labour market. In a tightening labour market, employers might be compelled to offer pay scales that are higher than those under collective agreements, to promote employees to higher bands within collectively agreed pay scales, or simply to pay bonuses on top of agreed wages as a way to reward and retain employees. Given recent protracted declines in unemployment and increasing signs of labour shortages, this box reviews the role of the wage drift in recent developments in employee compensation.
- JEL Code
- E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
- 31 October 2018
- OCCASIONAL PAPER SERIES - No. 216Details
- Abstract
- A macroeconomic stabilisation function for the euro area - as envisaged in the Five Presidents’ Report - plays a central role in the debate on deepening Economic and Monetary Union (EMU). We evaluate a broad range of options, their impact on economic growth, macroeconomic stabilisation and synchronisation of the euro area business cycle, and review how they could be designed so they do not undermine incentives for welfare-enhancing national economic policies. A common macroeconomic stabilisation function, e.g. in the form of a European Unemployment Insurance (EUI), could in theory help stabilise the business cycle in the euro area, especially in some participating Member States. Yet, simulating the effects of such a function for 2002-2014 suggests that its stabilisation properties would have been relatively limited. At the same time, design options with meaningful safeguards and relatively low financing requirements would have been most efficient when comparing the degree of stabilisation with the size of the funds distributed among countries. Finally, we discuss some design elements of a scheme whose aim is to support the transition process towards more resilient economic structures in the euro area as envisaged in the Five Presidents’ Report.
- JEL Code
- J65 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers→Unemployment Insurance, Severance Pay, Plant Closings
H53 : Public Economics→National Government Expenditures and Related Policies→Government Expenditures and Welfare Programs
F55 : International Economics→International Relations, National Security, and International Political Economy→International Institutional Arrangements
- 5 September 2018
- RESEARCH BULLETIN - No. 49Details
- Abstract
- Economists often try to forecast whether the economy as a whole will grow or contract. When measuring the effects of fiscal policy measures on economic activity, such forecasts are based on so-called multipliers. Using a new dataset compiled from economic forecasts and recommendations by the European Commission under the excessive deficit procedure of the Stability and Growth Pact, we derive the multipliers that were assumed by forecasters during the European sovereign debt crisis to project the effects of fiscal consolidation on economic growth. Our results confirm that forecasters adapted their assumptions on multipliers as the crisis progressed and accounted for larger effects of consolidation on growth later on in the crisis. Another finding is that the actual fiscal multipliers were not exceptionally large during the crisis.
- JEL Code
- E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H20 : Public Economics→Taxation, Subsidies, and Revenue→General
H5 : Public Economics→National Government Expenditures and Related Policies
- 30 May 2018
- WORKING PAPER SERIES - No. 2154Details
- Abstract
- Identifying fiscal multipliers is usually constrained by the absence of a counterfactual scenario. Our new data set allows overcoming this problem by making use of the fact that recommendations under the EU’s excessive deficit procedure (EDP) provide both a baseline no-policy-change scenario and a fiscal-adjustment EDP scenario that entails a forecast of the macroeconomic impact of fiscal consolidation over the EDP horizon. For a sample of 24 EU countries to which 48 EDP recommendations were applied between 2009 and 2015, we derive country-specific fiscal multipliers as actually applied by forecasters during the crisis. Our results confirm Blanchard and Leigh’s (2013, 2014) presumption that forecasters learned during the crisis. According to our findings, fiscal multipliers as applied by the European Commission increased over time – from about 1/4 in the early years of the crisis to about 2/3 in the later years. However, different from Blanchard and Leigh (2013, 2014), we do not find evidence for the hypothesis that ex-post fiscal multipliers have been substantially above 1 during the crisis.
- JEL Code
- E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H20 : Public Economics→Taxation, Subsidies, and Revenue→General
H5 : Public Economics→National Government Expenditures and Related Policies
- 20 January 2017
- WORKING PAPER SERIES - No. 1989Details
- Abstract
- Revenue elasticities play a key role in forecasting, monitoring and analysing public finances under the European fiscal framework, which largely builds on cyclically adjusted indicators. This paper investigates whether there is evidence for dynamic – instead of the currently used static – elasticities in euro area countries. Applying country-specific error correction models we reveal important differences across countries. For a majority of euro area Member States we find evidence for dynamic revenue elasticities. We show that the application of such dynamic elasticities could substantially reduce forecast errors in several countries – with the evidence being stronger based on ex-post than based on real-time data.
- JEL Code
- E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H68 : Public Economics→National Budget, Deficit, and Debt→Forecasts of Budgets, Deficits, and Debt
- 13 November 2014
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 11, 2014
- 12 August 2014
- WORKING PAPER SERIES - No. 1712Details
- Abstract
- The sovereign debt crisis in the euro area has increased the interest in early warning indicators, with the aim to indicate the build?up of fiscal stress early on and to facilitate crisis prevention by a timely counteraction of fiscal and macroeconomic policies. This paper presents possible improvements to enhance existing early warning indicators for fiscal stress, especially for the euro area. We show that a country?specific approach could strongly increase the signalling power of early warning systems. Finally we draw policy conclusions for the setting?up and application of a system of early warning indicators for fiscal stress.
- JEL Code
- E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
E65 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Studies of Particular Policy Episodes
E66 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→General Outlook and Conditions
H62 : Public Economics→National Budget, Deficit, and Debt→Deficit, Surplus
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
F34 : International Economics→International Finance→International Lending and Debt Problems
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- FinanzArchiv: Public Finance Analysis
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- Economic Studies - Deutsche Bundesbank
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- European Union Budget ReformThe Lisbon Treaty, the Financial Crisis and Exit from Budget Gridlock
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- ECBIMF conference on Reforming EU fiscal governance, Frankfurt am Main, 13-14
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- Kyklos - International Review for Social Sciences
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