Macroeconomics Department Publications

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 ...

New Government’s Policies Give the Thriving German Economy an Additional Boost

The German economy will grow by 2.4 percent this year, especially due to strong foreign demand. Brisk investment activity continues in this economic climate; stimulus from foreign trade, however, is weakening somewhat. Despite strong consumer demand in the coming quarters, employment and economic output growth are losing momentum. However, stimulus measures from the new federal government will increase ...

The Global Economy and the Euro Area: Expansion Continues but Is Losing Momentum

The global economy is likely to grow by over four percent this year and somewhat less next year. DIW Berlin has slightly raised its forecast for both years. Developed economies as well as emerging markets are experiencing an upturn; however, growth rates are likely to be slightly lower in the future. One reason for the sound global economy is the fact that the labor market situation is steadily improving, ...

New Government Prolongs German Economic Upswing: Editorial

German Right-Wing Party AfD Finds More Support in Rural Areas with Aging Populations

This study examines in which setting the German political party Alternative for Germany (Alternative für Deutschland, AfD) performed well in the 2017 parliamentary elections. The AfD’s popularity was relatively high in electoral districts with an above-average amount of craft businesses, a disproportionately high amount of older residents and workers in the manufacturing sector, and—applicable mainly ...

German Economy: Upswing Has Gained Breadth but Will Not Hold Pace: DIW Economic Outlook

The upswing of the German economy continues and since the beginning of 2017, even at a somewhat faster pace. Sharp gains in employment are still driving consumption. And companies are investing significantly more in machines and facilities. Many global risks that previously limited the propensity to invest—in Germany and many other countries—have vanished. And the euro area is also finally feeling ...

The World Economy and the Euro Area: Global Upswing Remains Intact for the Time Being: DIW Economic Outlook

The global economy is expected to grow by four percent annually over the next two years. This is a slight increase in the German Institute for Economic Research forecast in comparison to that of the fall. The upswing will gain momentum in both developed and emerging economies. Private consumption will play a pivotal supporting role as investment continues to grow rapidly around the globe. Despite the ...

German Economy Booming but Not to the Point of Overheating: Editorial

Early Exit from ECB Bond Purchase Program Could Reduce GDP Growth and Inflation

The European Central Bank is planning a gradual reduction of government bond purchases under the asset purchase program it initiated in 2015. The present study by the German Institute for Economic Research analyzes the potential macroeconomic implications of different exit strategies. The authors examined the potential effects of a reduction in net purchase volume, an early exit, and a faster exit ...