Macroeconomics Department Publications

A Sustainable Development of Inflation in Euro Area Requires Continuously Improving Labor Market

In the past five years, the inflation in the euro area has been well below the European Central Bank’s (ECB) aimed inflation rate of close to but below two percent for achieving its objective of price stabilization in the medium term. The present analysis shows that expectations of low inflation, rising cyclical unemployment, and external factors such as low crude oil prices were responsible. In the ...

Policy Responses to Turkey’s Crisis: Independent Central Bank and International Credit

The presently tenuous situation in Turkey will worsen if the government does not take appropriate policy action. In view of foreign investors’ loss of confidence, the cost of external financing is likely to rise while consumption and investment will fall, and the Turkish lira would depreciate further. The influx of foreign capital would dry up as well. Conservative estimates show that the country’s ...

German Economy Remaining Robust in Uncertain Times: DIW Economic Outlook

The German economy will keep on growing amid risks although growth will slow down somewhat. GDP will continue to grow noticeably at 1.8 percent this year, 1.7 percent next year, and 1.8 percent in 2020. Private household incomes in particular—and thus consumption as well—are boosting growth, as the labor markets are improving: the unemployment rate will fall from 5.2 percent this year to well below ...

The Global Economy and the Euro Area: So Far Trade Disputes Have Had Only Limited Effects on Global Growth: DIW Economic Outlook

After a strong second quarter, the global upturn appears to remain intact, economic and political turmoils notwithstanding, especially in the United States and the euro area. Therefore, DIW Berlin is slightly raising its forecast for the global economy this year to 4.2 percent. Over the course of the rest of the year, however, non-recurring effects are likely to disappear in the United States, causing ...

German Economy Continues to Grow Moderately but Risks Remain: Editorial

Signs of New Housing Bubble in Many OECD Countries – Lower Risk in Germany

Ten years after the worldwide financial and economic crisis was triggered by the American real estate market, real estate prices are rising around the globe. Concerns about a new housing bubble are growing. The present report based on OECD data for 20 countries demonstrates that this concern is not unwarranted. In eight countries, including the United Kingdom and the USA, the evolution of real estate ...

The Global Economy and the Euro Area: Increased Uncertainty Is Dampening Growth

The political conditions for growth are currently dominated by increased uncertainty; this is particularly weighing on investment activity and slowing down the global economy. DIW Berlin is lowering its forecast slightly for this year and the next to 4.1 percent and 3.9 percent, respectively. However, global expansion appears to remain intact. In developed economies, primarily the good labor market ...

The German Economy Is Slowing down Somewhat: Editorial

A Stabilization Fund Can Make the Euro Area More Crisis-Proof

Reorganizing European fiscal policy is a main topic in current reform considerations. In particular, the creation of a European stabilization mechanism is being discussed. This study examines the macroeconomic effects of a stabilization fund, the economic consequences of which are analyzed in an equilibrium model. The model shows that a stabilization fund reduces economic fluctuations and is thus a ...

German and Euro Area Economies Will Benefit from a U.S. Interest Rate Hike in the Short Term

To accompany the economic upturn in the U.S., the Federal Reserve Bank has been raising its benchmark interest rate incrementally. In an increasingly globalized world in which the American economy plays a key role, an action like this has spillover effects on the international level. Based on a dynamic factor model, the present study shows that the member states of the euro area—Germany in particular—can ...