DIW Roundup

Politik im Fokus

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Central Bank Asset Purchases I: The Theory
7 April 2015, Philipp König, Kerstin Bernoth
Roundup 60

In the face of interest rates having hit their zero lower bound in major economies, large-scale asset purchases have become an important weapon of central banks in recent years. It is, however, not clear whether and under which circumstances such policy measures produce the desired effects. This DIW Roundup provides a selective overview of theoretical research that has been devoted to understand under what conditions central bank asset purchases lead to reductions in longer-term interest rates and produce stimulating effects on the overall economy.

The Market Stability Reserve: Is Europe serious about the Energy Union?
26 March 2015, , Nils May, Karsten Neuhoff
Roundup 59

The European Union Emission Trading Scheme (EU ETS) has been implemented to provide a common climate policy instrument across European Union countries, to contribute to a credible investment perspective for low-carbon investors and support further European integration of energy markets. Thus the EU ETS is a key element of the European Energy Union. However, given the accumulation of a large surplus in the EU ETS, there is now a consensus between the European Commission, the European Council and the European Union Parliament (ENVI vote) that a Market Stability Reserve (MSR) needs to be (...)

What about the OPEC cartel?
11 March 2015, Daniel Huppmann, Franziska Holz
Roundup 58

The recent decision by the Organization of the Petroleum Exporting Countries (OPEC) not to decrease their output quota in spite of a drastic decline of crude oil prices has brought renewed attention to this supplier group dominating the crude oil market. However, the empirical evidence that OPEC truly acts as a textbook cartel is rather limited. This Roundup summarizes the theories proposed over the past decades to explain the fundamental structure of the crude oil market and the role of OPEC and Saudi Arabia, the pivotal supplier. The consensus in the academic literature points towards (...)

Bubbles and Monetary Policy: To Burst or not to Burst?
10 February 2015, David Pothier, Philipp König
Roundup 55

The question of whether monetary policy should target asset prices remains a contentious issue. Prior to the 2007/08 financial crisis, central banks opted for a wait-and-see approach, remaining passive during the build-up of asset price bubbles but actively seeking to stabilize prices and output after they burst. The macroeconomic and financial turbulence that followed the subprime housing bubble has led to a renewed debate concerning monetary policy’s role in maintaining financial stability. This Round-Up provides a brief overview of this topic.

Is there a bubble in the German housing market?
19 January 2015, Konstantin A. Kholodilin, Claus Michelsen, Dirk Ulbricht
Roundup 53

After a period of stagnation that lasted for almost two decades, German house prices began to grow at an accelerated pace since late 2010. Real house prices that even had been declining in 2000-2008 started to climb up steeply from the second half of 2010, followed by a recovery of construction activities. This development raised concerns about the formation of a speculative house price bubble among German policy makers and central bankers. However, empirical evidence of a misalignment of house prices from their fundamentals is mixed.

Individual Insurance and Mutual Support Arrangements in Developing Countries
8 January 2015, Friederike Lenel
Roundup 51

Insurance coverage in the developing world is expanding rapidly. As recently as 2005, only a small number of commercial insurers offered insurance products that specifically targeted low-income people (‘microinsurance’). Seven years later, in 2012, more than half of the world’s 50 largest insurance companies were involved in microinsurance (Churchill and McCord, 2012). International donor organizations, which identified the promotion of social protection systems as a key priority, strongly encourage this development. Yet, while the positive role insurance can play for poverty (...)

The health effects of retirement
20 November 2014,
Roundup 48

Retirement leads to changes in daily life that may affect health positively or negatively. Existing empirical evidence is inconclusive: While a few studies identify negative health effects, the majority of studies find no or positive effects of retirement on health. The mechanisms behind these effects remain unclear, as is the question of which parts of the population benefit most from retirement. Recent studies indicate that retirees use their increased leisure time for healthier behavior.

Daddy leave: does it change the gender division of domestic work?
13 November 2014, Pia S. Schober
Roundup 45

How to best provide incentives for a more gender-equal division of domestic work has entered policy debates in many Western countries. Growing evidence suggests that a gender-traditional division of household labor may result in lower fertility rates and greater risk of relationship breakdown and correlates with gender employment and wage gaps. Partly in response, many European countries have implemented some individual parental leave entitlements for fathers, which are not transferable to mothers. Such non-transferable entitlements for fathers have been consistently shown to increase take-up (...)

Modelling the impact of energy and climate policies
4 November 2014, Daniel Huppmann, Franziska Holz
Roundup 44

Climate change mitigation and the transformation to a global low-carbon economy is a pressing issue in policy discussions and international negotiations. The political debate is supported by the scientific community with a large number of projections, pathway simulations and scenario analyses of the global energy system and its development over the next decades. These studies are often based on numerical economy-energy-environment-climate models. This DIW Roundup provides an overview of the model types used in the academic arena to evaluate and quantify the potential impacts of energy (...)

The Controversy over the Free-Trade Agreement TTIP
22 October 2014, Philipp M. Richter
Roundup 42

A short name is causing a lasting debate: TTIP [tiːtɪp]. Ever since the beginning of the negotiations in the summer of 2013, media coverage of the planned Transatlantic Trade and Investment Partnership between the EU and the US has contributed to a critical debate on the topic. In doing so, difficulties have arisen in differentiating factually substantiated arguments from one-sided statements. TTIP is a planned agreement on free trade and investment between the US and the EU, whose details are currently under negotiation. Advocates expect a stimulus on economic growth, new jobs and a (...)

Skills Training for Entrepreneurs in Developing Countries
18 September 2014,
Roundup 37

For most of the developing world, microenterprises are a key source of income and employment creation. For many countries the informal sector, where most of the small enterprises exist, represents over 80% of employment (ILO 2012). These businesses often have a difficult time growing. There are a number of reasons that have been put forward by policy makers and researchers for this lack of growth, including missing the necessary skills to manage a growing business. International NGOs and governments are interested in training programs. The ILO and World Bank have invested heavily in (...)

The Role of Financial Literacy and of Financial Education Interventions in Developing Countries
9 September 2014, Margherita Calderone
Roundup 34

Financial literacy has received increased attention since the global financial crisis and the literature confirms that it is correlated with higher household well-being. In parallel, financial education programs have grown in popularity and an increasing number of countries are developing national financial education strategies and making more investments in related programs. However, the evidence from field experimental research linking financial education interventions and household financial outcomes in developing countries provides mixed results. New findings from recent experiments (...)

Unconditional basic income: an economic perspective
21 August 2014, Luke Haywood
Roundup 33

A wide range of public figures from the social sciences, politics and business have proposed paying every citizen a fixed amount of income without means testing or work requirement. The idea is fascinating. Most recently, a widely reported crowd-funding initiative from Berlin collected €12,000 to finance one year’s worth of unconditional basic income for a randomly selected individual.  

Internal Migration in Developing Countries
29 July 2014, Valeria Groppo
Roundup 31

For people in rural areas of developing countries, finding a better paying job or better education is often only possible by moving – migrating – somewhere else. Moreover, agricultural production, generally the main economic activity in rural areas of developing countries, is risky, affected by droughts and floods. Due to poverty and the limited availability of crop insurance, rural households often rely on distant family members to provide money for buying food, starting a business or maintaining an existing business. The vast majority of moves happen within countries. Focusing (...)

Are the Economic Sanctions against Russia Effective?
8 July 2014, Konstantin A. Kholodilin, Dirk Ulbricht
Roundup 28

The introduced sanctions against Russia, which at the moment are on a level of travel bans and asset freezes against a limited group of individuals and firms, are unlikely to trigger a profound change in Russian foreign policy. This can primarily be attributed to the fact that the economic impact of the sanctions is rather low. However, the current political tensions have had an impact on financial and non-financial indicators, including a possibly persistent effect on government bond yields.

Soldiers and Trauma
3 July 2014,
Roundup 26

Understanding the risks and consequences of military service in fragile regions is a vital concern facing veterans and policymakers in Germany (and many other nations). Researchers, health professionals, politicians and the news media are actively discussing this contentious topic. A key point in the debate is the psychological well-being of discharged servicemen. The purpose of this column is to offer a perspective on prevalent opinions and evidence regarding the question: What are the risks of deployment in a fragile region for the psychological health of military personnel?

Can the Market Stability Reserve stabilise the EU ETS: commentators hedge their bets
5 June 2014,
Roundup 23

In response to an imbalance between the demand and supply of permits within the European Union Emissions Trading System (EU ETS), the European Commission has proposed the introduction of a Market Stability Reserve (MSR). The MSR represents a quantity based automatic adjustment mechanism, which is designed to tackle the current surplus and introduce a degree of flexibility, allowing the system to respond to future demand side shocks. While some positive features of the MSR have been highlighted, the design, effectiveness and institutional setting have also come under criticism.

The New Growth Debate
13 May 2014, Guido Baldi
Roundup 18

The developed economies of Europe and the United States are slowly recovering from the worldwide financial crisis and the debt crisis in the euro area. How will the economic situation of these countries evolve in the future? Will the developed economies experience high rates of productivity and economic growth or will they have to face stagnation for a long period of time? Various famous economists have started a debate about these issues.

The Bank Capital Debate: Should Fragility Be Reduced?
29 April 2014, David Pothier, Philipp König
Roundup 17

The recent financial crisis has exposed the fragility of the banking sector to sudden withdrawals of wholesale funding, asset price declines and market dry-ups. Governments and central banks had to step in to prevent major banks from defaulting. These events led to renewed interest in the question whether the fragility of banks should be tolerated as a necessary, even desirable feature of an efficient process of financial intermediation, or whether banks should be subject to stricter regulation ex ante. This Round-Up summarizes the key arguments on both sides of the debate.

Structural Reforms in the Eurozone: Timing Matters
15 April 2014, David Pothier
Roundup 15

Several leading policymakers – from ECB President Mario Draghi to EC President José Manual Barroso – have pushed Eurozone countries to adopt far-reaching structural reforms in labour and product markets in order to foster growth and employment. While there is a broad consensus that structural reforms enhance countries’ growth potential in the long-run, recent research shows that they may have harmful effects in the short-run when not accompanied by substantial monetary stimulus. Consequently, a heated debate has started among economists and policymakers about whether (...)


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