Macroeconomics Department Publications

Germany's Big Weakness is a Lack of Investment: Seven Questions to Marcel Fratzscher

More Growth through Higher Investment

While many countries in the euro area are deep in recession due to a debt and structural crisis, the German economy appears to have excelled compared to many other euro area countries. Unemployment has fallen to the lowest level since German reunification, economic output has grown by over eight percent since 2009, and public budgets have been consolidated, generating a surplus in 2012. But this is ...

Germany Must Invest More in Its Future

Shortly before the parliamentary election in 2013, Germany is riding on a wave of euphoria: hardly any other euro country has weathered the financial and debt crisis so well. Since 2009, GDP has grown by over eight percent and 1.2 million new jobs have been created. Public finances were consolidated and, in 2012, there was a fiscal surplus of 0.2 percent of GDP. An impressive financial position indeed ...

Real Estate Booms and Price Bubbles: What Can Germany Learn from Other Countries?

When speculative price bubbles on real estate markets burst, the effects for the real economy are often devastating taking the form of substantial losses in production and employment. This paper discusses the degree to which institutional frameworks can prevent speculative bubbles from emerging and expanding. Comparing experiences in different countries indicates that, in Germany, institutional regulations ...

Separated Banking System Not Enough: Seven Questions to Dorothea Schäfer

Implicit State Guarantees Exacerbate Problem: Separated Banking System Alone Not a Solution

Many banks are now too big, complex, and closely interconnected to be liquidated. When they run into difficulties, they threaten the entire financial system of their economic area. Five years of financial crisis have not alleviated but exacerbated this problem. The cost of stabilizing banks is enormous, posing serious challenges to the states affected. In addition, such state guarantees create dangerously ...

A Financial System Should Be Able to Restore Stability Autonomously: Seven Questions to Dorothea Schäfer

Sustainable Financial Markets: Financial Transaction Tax and High Capital Buffers Indispensable

The sustainability of the financial markets is a requirement that has only appeared on the economic policy agenda very recently, whereas a stable financial system has been a declared goal for decades. The relationship between sustainability and stability is, however, still unclear. The two terms are often used synonymously but stability is only one part of sustainability. The following outlines the ...

A Transfer Mechanism as a Stabilization Tool in the EMU

With the crisis in the euro area, the issue of the institutional structure of the monetary union has gained in significance. One problem with regard to the longer-term stability of the euro area is the absence of mechanisms to adequately absorb asymmetric cyclical shocks in the individual member states. Such an instrument is essential in order to be able to implement a single monetary policy suitable ...

German Cities to See Further Rises in Housing Prices and Rents in 2013

Over the past few years, prices and rents for flats went up in most German cities. This trend is expected to continue in 2013. Berlin, Hamburg, Munich, and Frankfurt am Main will still see the highest increases in property prices and rents. In these cities, housing prices are rising much faster than rents. By contrast, stagnating or even falling prices are forecast for the cities in the Ruhr area. ...