Macroeconomics Department Publications

Euro Area Inflation Differentials: The Role of Fiscal Policies Revisited

The Non-linear Impact of Risk Tolerance on Entrepreneurial Profit and Business Survival

Entrepreneurs tend to be risk tolerant but is higher risk tolerance always better? In a sample of about 2100 small businesses, we find an inverted U-shaped relation between risk tolerance and profitability. This relationship holds in a simple bilateral regression, and even after controlling for a large set of individual and business characteristics. Apparently, one major transmission goes from risk ...

Monetary Policy and Mispricing in Stock Markets

We investigate the role of monetary policy in stock price misalignments and explore whether central banks can attenuate excessive mispricing as suggested by the proponents of a “leaning against the wind” monetary policy. Decomposing stock prices into expected excess dividends, an equity risk premium, and a mispricing component, we find that prices fall more strongly in response to an increase in the ...

Foreign Debt, Capital Controls, and Secondary Markets: Theory and Evidence from Nazi Germany

We investigate how internal distribution motives can affect the implementation of an important macroeconomic policy: capital controls. To do this, we study one of history’s largest debt repatriations, which took place under strict capital controls in 1930s Germany, providing a wealth of quantitative and historical evidence. We show that the authorities kept private repatriations under strict control, ...

The Rise and Fall of Social Housing? Housing Decommodification in Long-run Comparison

The comparative study of housing decommodification lags behind classical welfare state research, while housing research itself is rich in homeownership studies but lacks comparative accounts of private and social rentals due to missing comparative data. Building on existing works and various primary sources, this study presents a new collection of up to forty-eight countries’ social housing shares ...

Forward to the Past: Short-Term Effects of the Rent Freeze in Berlin

In 2020, Berlin introduced a rigorous rent-control policy responding to soaring prices by capping rents: the Mietendeckel (rent freeze). The German Constitutional Court revoked the policy only one year later. Although successful in lowering rents during its duration, the consequences for Berlin’s rental market and close-by markets are per se not clear. This article evaluates the short-term causal supply-side ...

A HANK2 Model of Monetary Unions

How does a monetary union alter the impact of business cycle shocks at the household level? We develop a Heterogeneous Agent New Keynesian model of two countries (HANK) and show in closed form that a monetary union shifts the adjustment to a shock horizontally across countries, within the brackets of the union-wide wealth distribution, rather than vertically, that is, across the brackets of the union-wide ...

Navigating the Housing Channel of Monetary Policy across Euro Area Regions

This paper assesses the role of the housing market in the transmission of monetary policy across euro area regions. By exploiting a novel regional dataset on housing-related variables, a structural panel VAR analysis shows that conventional and unconventional monetary policy shocks propagate effectively to the economy, particularly to the housing sector, albeit in a heterogeneous fashion across regions. ...

Active or Passive? Revisiting the Role of Fiscal Policy during High Inflation

We investigate the interplay of the monetary–fiscal policy mix during times of crisis by drawing insights from the Great Inflation of the 1960s and 1970s. We use a Sequential Monte Carlo (SMC) algorithm to estimate a DSGE model with three distinct monetary/fiscal policy regimes. We show that, in such a model, SMC outperforms standard sampling algorithms because it is better suited to deal with multimodal ...

Weather-Related Disasters and Inflation in the Euro Area

This article investigates the impact of weather-related disasters on inflation in the euro area over the period 1996–2021. Using a panel structural vector autoregression approach, we explore whether weather-related disasters have a significant and persistent effect on inflation, as well as the role that demand-side and supply-side channels play as drivers of inflation. We also analyse the heterogeneous ...