Central bank behavior: A positive empirical analysis

The central bank is analyzed as a utility-maximizing unit acting in the framework of a politico- economic model. It derives utility from keeping the price level stable and is constrained by government, the structure of the economy, and the political commitment to stable exchange rates. It uses a satisficing strategy, concentrating on keeping conflicts with government below a certain level. In the case of serious conflict, the central bank follows the policy directions undertaken by government but with a time lag. The complete model comprising endogenous consumer/voters, government and central bank is econometrically tested for Germany, with good results.     

Economic and political determinants of foreign direct investment

Four models explaining the flow of foreign direct investment in 80 less developed countries are econometrically estimated and compared by ex post forecasts. A politico-economic model which simultaneously includes economic and political determinants performs best. The higher the real per capita GNP and the lower the balance of payments deficit are, the more foreign direct investment is attracted. Among the political determinants the amount of bilateral aid coming from Western countries and multilateral aid has a stimulating effect, while help from communist countries has a negative effect. Political instability significantly reduces the inflow of foreign direct investment.     

Competing models of international lending activity

Four competing models of the World Bank's lending to developing countries are constructed and econometrically estimated by pooled time series and cross-section data. The analysis suggests that a model combining economic and political determinants performs best. Besides per capita income, inflation, balance of payment and budget deficit, external debt and past growth, political determinants such as the ‘capitalist’ climate or political instability are also important, as well as a recipient country's former status as a colony or dominion. This politico-economic-model is successfully used to forecast the distribution of IBRD loans and IDA credits among the developing countries.     

Employment and Environment in a Sustainable Europe

major challenges in Europe. The EuropeanTreaties require an integration of environmental, economic and social policies in orderto allow for a Sustainable Development. This is of special importance for the linkbetween environmental and employment policy. This paper starts with a definition of thethree pillars of sustainable development, the viability (resilience) of environmental, economicand social systems. With regard to economic development and the social field,these objectives are relatively easy to operationalise: GDP and employment are generallyused headline indicators of sustainable development. The total material input into aneconomy can be seen as an indicator showing the environmental impact.This view brings about major challenges for economic theory:We include the total material input along with resource productivities to describe, explainand evaluate possible developments of economic and environmental variables.With the help of the results from a German research project weshow the relationships between the indicators, the productivities and how they can beinfluenced by policy measures. The simulation results indicate the possibility ofwin-win situations concerning the environment and employment. Additionally, we investigatewhether the developed minimum conditions of sustainable development are valid for Austria.     

Zukunft der Versicherung – Versicherung der Zukunft

The insurance industry is currently characterized by a long-lasting low-interest period and various legislative proposals. Especially the bundling of the requirements of Solvency II, the so called “interest back-up reserve” and the achievement of promised guarantees in the current interest rate environment represent a major challenge for the life insurance industry. In a joint study by Deloitte, E?+?S Rück and the University of Hannover, within the sense of qualitative research by collecting broad expert knowledge the economic effects of the regulatory provisions were discussed. Another focus of research refers to the expectations of the industry representatives regarding the advancing digitization. This paper presents selected reactions and consequences of life insurance companies and derives recommendations for that industry.     

An Exploration of the Greek Shadow Economy: Can Its Transfer into the Official Economy Provide Economic Relief Amid the Crisis?

We explore the determinants of the Greek shadow economy, its interaction with the official economy, and its relationship with corruption. In doing so, we undertake — for the first time — an interdisciplinary review of economic and political studies on the size and determinants of the shadow economy, tax evasion, undeclared work and, moreover, of their relation with corruption in Greece in order to reveal the extent and complexity of these phenomena. We estimate the size and determinants of the shadow economy via a multiple-indicators-multiple-causes (MIMIC) approach. Our findings indicate that the important determinants are factors related to macroeconomic conditions, such as unemployment and GDP growth, and institutional factors, such as tax morale and the rule of law. We also indicate that the shadow economy and corruption are complementary and that the official and the shadow economy substitute each other over the business cycle. An adoption of policy based on these findings would lead to a successful transfer of part of the shadow economy to the official economy, would boost government revenue, and would eventually lead the Greek economy out of the depression that emerged as a result of the sovereign debt crisis.     

Asset management in an inflationary environment—Are commodities a useful hedge?

The 2008 German investment act now allows insurers to buy commodities. Taking the perspective of a German investor and using techniques of cointegration analysis this paper aims to investigate whether commodity investments can be a useful hedge against inflation. A financial asset can only be considered to be a hedge against inflation if its price is cointegrated with the general price level. The results of the study seem to imply that commodity investments may be considered as a hedge against inflation for German insurers, but only to a limited extend.