WIFO-JMX—An annual econometric macro model of the Austrian economy

Zusammenfassung Das Jahresmodell WIFO-JMX, das in der vorliegenden Arbeit vorgestellt wird, ist primär ein mittelfristiges Modell. Bei seiner Spezifikation wurde daher der Angebotsseite große Aufmerksamkeit gewidmet. Wir verwenden eineCobb-Douglas Produktionsfunktion als langfristige Planungsbeziehung. Von dieser Produktionsfunktion werden dann Faktor-nachfragegleichungen für Arbeit und Kapital abgeleitet. Die Identität der Produktionsfunktionsparameter in beiden Faktornachfragefunktionen garantiert die Konsistenz der langfristigen Eigenschaften dieser Beziehungen. Weiters erlaubt diese Spezifikation Faktorsubstitution als Reaktion auf änderungen in den relativen Preisen. In einem mittelfristigen Modell sollte dieser Aspekt nicht vernachlässigt werden. Die so geschätzten Faktornachfragefunktionen wurden dann ihrerseits verwendet, um verschiedene Auslastungsmaße herzuleiten. Wir unterscheiden hier zwischen Kapazitäts-, Vollbeschäftigungs- und Potentialproduktion.Es verwundert nun nicht weiter, daß ein mittelfristiges Modell kurzfristige Konjunkturschwankungen eher ungenau abbildet. Da aber gerade kurzfristige Prognoseprobleme im Institut für Wirtschaftsforschung breiten Raum einnehmen, haben wir eine spezielle Prognoseversion von WIFO-JMX entwickelt. Diese Version ist in ihrer theoretischen Struktur wesentlich einfacher. Wir ließen hier das Produktionsfunktionskonzept fallen, was den Simultanitätsgrad des Modells beträchtlich reduzierte. Erste Tests der Treffsicherheit der mit dieser Modellversion erstellten Prognosen verliefen zurfriedenstellend.Es soll jedoch nicht verschwiegen werden, daß beide Modellversionen noch recht unvollständig sing. Der monetäre und der öffentliche Sektor fehlen zur Zeit völlig, die Zahlungsbilanz wird gegenwärtig äußerst rudimentär behandelt. Wir beabsichtigen, dieses Basismodell nun nach und nach zu einem vollständigen Gleichungssystem der österreichischen Wirtschaft auszubauen. Dabei ist uns völlig bewußt, daß der vielleicht schwierigere Teil der Arbeit noch vor uns liegt. Denn für den monetären und den öffentlichen Sektor müssen wir Ansätze entwickeln, die den von ausländischen Erfahrungen hier teilweise stark abweichenden österreichischen Gegebenheiten Rechnung tragen.     

Has Austria’s Accession to the EU Triggered an Increase in Competition? A Sectoral Markup Study

We estimate the pro-competitive effects of Austrias participation in the Single Market after its European Union (EU) accession in 1995 in terms of firms market power as measured by the Lerner index, using a sample of 46 industries and 7 industry groups, covering the period 1978–2001. In the framework of the markup estimation method suggested by Roeger (1995), we test for both an instantaneous structural break between 1993 and 1998 and also estimate logistic smooth transition models to take up the proposition that the regime shift is likely to have occurred gradually rather than as a big bang. In sum, the results provide no reason for being euphoric: Pronounced markup reductions were only found in three industry groups (mining and quarrying, wholesale and retail trade; financial services and real estate). At the more disaggregate level, the picture is mixed: Both increases and reductions in market power have been found.     

The political business cycle: An extension of Nordhaus's model

Summary Nordhaus's (1975) model of the political business cycle is extended in this paper by explicitly formulating the link between the economic sphere (represented by the Phillips curve) and fiscal policy. This extended model yields the hypothesis that during an electoral period the budgetary policy is contractionary in the first half and expansionary in the second half with the consequences of a reduction in unemployment (increase in inflation) before elections and a rise in unemployment (decrease in inflation) after elections. This hypothesis is tested against the data of the Austrian economy by a non-parametric test (which leads to a rejection of our hypothesis for Austria). The extent of the political business cycle bias is demonstrated by policy simulations within a macroeconomic model.

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Zusammenfassung Das Modell vonNordhaus (1975) über den Politischen Konjunkturzyklus wird in diesem Artikel erweitert, indem explizit die Beziehung zwischen dem ökonomischen Bereich (repräsentiert durch die Phillips-Kurve) und der Fiskalpolitik hergestellt wird. Dieses erweiterte Modell führt zu der Hypothese, daß während einer Legislaturperiode die Budgetpolitik in der ersten Hälfte restriktiv und in der zweiten Hälfte expansiv ist. Als Konsequenz dieser Politik kommt es zu einer Verringerung der Arbeitslosigkeit (einem Anstieg der Inflation) vor Wahlen und einem Anstieg der Arbeitslosigkeit (einer Verringerung der Inflation) nach den Wahlen. Diese Hypothese wird an Hand österreichischer Daten mit Hilfe eines nichtparametrischen Tests geprüft (was zu einer Ablehnung unserer Hypothese für Österreich führt). Das quantitative Ausmaß des durch den Politischen Konjunkturzyklus entstehenden bias wird dann mit Hilfe von politischen Simulationen im Rahmen eines makroökonomischen Modells demonstriert.

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Definitions AK Public purchases of goods and services + public investment (A.S.) - AT Unemployed persons, in total (in 1.000) - AZA Worked hours per worker (in hours) - BAU Central government's expenditures (outlays) in total (A.S.) - BEI Central government's revenues (receipts) in total (A.S.) - BS Budget deficit of the Central government (A.S.) - CB Labour supply (in 1.000) - CH Unemployment rate (%) - CON Public consumption (A.S.) - COR Public consumption (A.S. 1964) - CPN Private consumption (A.S.) - CPR Private consumption (A.S. 1964) - CUB Current balance (A.S.) - DS Direct taxes + public income from property-transfers to households + transfers from households (A.S.) - DX DS-public income from property (A.S.) - D7273 Dummy for monetary policy and Dummy for change from gross turnover tax to VAT (1972+1; 1973–1; other 0) - D7278 Dummy for investment tax (1972+1; 1973–1; 1977+1; 1978–1; other 0) - D73US Dummy for shift of employers to employees (1973+1; other 0) - D7375 Dummy for incomes tax reform (1973–1; 1975–1; other 0) - D7778 Dummy for extra VAT (1977+1; 1978–1; other 0) - EBE Population in total (in 1.000) - EET Employment in total + unemployed (total labour supply; in 1.000) - ESE Employers (in 1.000) - EUS Employees (in 1.000) - FBN Monetary base (A.S.) - FGN Money M1 (A.S.) - FG Money M1 (A.S. 1964) - GDN Gross domestic product (A.S.) - GDR Gross domestic product (A.S. 1964) - GER Energy (1.000 t/TCE) - GIR Industry output (A.S. 1964) - GE Profits in total (A.S.) - GV Profits in total (A.S. 1964) - IS Indirect taxes—transfers to firms (A.S.) - ITN Gross fixed investment (A.S.) - ITR Gross fixed investment (A.S. 1964) - JR Final domestic demand (A.S. 1964) - LA Stocks and statistical discrepancies; National account basis (A.S.) - LEAD Difference of one major party over the other in parliament in percentage points - LB Foreign balance (A.S.) - LKV Long term capital transactions (A.S.) - MA Money M1 + profits (A.S. 1964) - MMN Imports of goods and services (A.S.) - MMR Imports of goods and services (A.S. 1964) - OIN Public investment (A.S.) - OKG Public purchases of goods and services (A.S.) - PC Private consumption deflator (1964=100) - PEN Energy prices (1964=100) - PI Gross fixed investment deflator (1964=100) - PK Imports of goods and services deflator (1964=100) - PL Exports of goods and services deflator (1964=100) - PT Gross domestic product deflator (1964=100) - RES Value change in balance of payments reserves (A.S.) - RIR Interest rate for long term bonds (%) - SD Stocks and statistical discrepancies; National account basis (A.S. 1964) - ST Overall indirect taxes—subsidies; National account basis (A.S.) - STD Direct taxes (A.S.) - STI Indirect taxes (A.S.) - TAH Transfers to households (A.S.) - TBB Trade balance (A.S.) - TTT Time (1960, 1961,..., 1979) - TUN Transfers to firms (A.S.) - TVH Transfers from households (A.S.) - VW Gross fixed investment plus exports of goods and services (A.S. 1964) - WON Changes in foreign currency reserves of the National Bank (A.S.) - WKU Changes in foreign currency reserves of all commercial banks (A.S.) - WW Changes in balance of payments' official reserves (A.S.) - XB Relative energy prices (1964=100) - XXN Exports of goods and services (A.S.) - XXR Exports of goods and services (A.S. 1964) - YLN Wages and salaries (compensation of employees; A.S.) - YOB Public income from property (A.S.) - YVN Net disposable income (A.S.) - YY Net disposable income (A.S.) - YYN National income (A.S.) - ZST Statistical discrepancies in balance of payments (A.S.) - A.S billion Austrian Schilling at current prices - A.S. 1964 billion Austrian Schilling at constant prices (basis 1964)     

Congestion effects in a public-good economy

This paper considers a public-good economy with congestion, where participants jointly produce a public good from input of a private good. This economic model gives rise to a transferable-utility game, the profit game, that depends on consumer preferences and a congestion parameter. The simplicity of the game allows the maximum level of congestion that guarantees the nonemptiness of the core of the economy to be determined. It is known that the sustainability of the Lindahl equilibrium in the core of the economy depends on the distribution of profits. In this paper two distributions of profits are compared: the Lindahl solution and the marginal-contribution solution. The latter is more often in the core than the Lindahl solution which in turn Lorenz-dominates the marginal-contribution solution.     

How Media Coverage of Corporate Social Irresponsibility Increases Financial Risk

Research summary: This article explores the relationship between corporate social irresponsibility (CSI) and financial risk. We posit that media coverage of CSI generates risk by providing conditions that increase the potential for stakeholder sanctions. Through analyzing an international panel of 539 firms during 2008–2013, we find that firms receiving higher CSI coverage face higher financial risk. We show that the reach of the reporting media outlet is a critical condition for this relationship. Once the outlet has a high reach, the severity of CSI coverage is a boundary condition that further reinforces the effect. Our findings complement existing theory about the risk‐mitigating effect of corporate social responsibility by illuminating the risk‐generating effect of CSI coverage. For executives, these insights suggest complementary strategies for corporate risk management. Managerial summary: This article examines the effect of negative news on financial risk. It shows that negative media articles regarding environmental, social, and governance (ESG) issues increase a firm's credit risk. It also provides a detailed analysis of the impact of an article's reach and severity, i.e., how many readers are exposed to the article and how harshly it criticizes the firm. The results allow to quantitatively assess the risk that emanates from negative ESG news. For executives, three strategies are derived for limiting a firm's exposure to this risk: balancing corporate social responsibility programs with operational safety programs, reporting suboptimal environmental and social performance transparently and proactively, and avoiding acquisition targets and markets with a legacy of negative news. Copyright © 2017 John Wiley & Sons, Ltd.     

Global financial crisis as a phenomenon of stock market overshooting

Inspired by Dornbusch’s model of exchange rate overshooting we develop a theory of stock market behaviour and its impact on the real economy. The idea is that stock market prices overshoot and undershoot their long-run equilibrium values which are determined by the development in the real economy. The overshooting is triggered primarily by a loose monetary policy. With our model we explain the genesis of the global financial crisis (GFC) 2008/2009 primarily as the result of a loose monetary policy in the USA. Following the overshooting and crash in the stock market the real economy dropped into a recession. After modelling the interaction of three markets with different speed of adjustment—money, stocks and goods—for a closed economy we expand it to an open economy and lastly study the spillovers of a financial market crisis between countries (from a large to a small country) by introducing the transmission channels of external trade or cross-border financial transactions. A long-lasting monetary easing as exhibiting by the Fed and the ECB since 2007 and 2008, respectively could—according to our model—generate another boom-bust cycle.     

Current account deficits in Greece,Portugal and Spain — origins and consequences

In light of the shortcomings of the Stability and Growth Pact, there has been a recognition that a surveillance framework is needed which goes beyond fiscal issues to cover wider macroeconomic factors. The question arises whether the surveillance and connected reform criteria should be applied symmetrically, to all members of the eurozone, or whether they should specifically target countries with current account deficits.     

Empirical Evaluation of Fair Use Flat Rate Strategies for Mobile Internet

The fair use flat rate is a promising tariff concept for the mobile telecommunication industry. Similar to classical flat rates it allows unlimited usage at a fixed monthly fee. Contrary to classical flat rates it limits the access speed once a certain usage threshold is exceeded. Due to the current global roll-out of the LTE (Long Term Evolution) technology and the related economic changes for telecommunication providers, the application of fair use flat rates needs a reassessment. We therefore propose a simulation model to evaluate different pricing strategies and their contribution margin impact. The key input element of the model is provided by so-called discrete choice experiments that allow the estimation of customer preferences.