Topic Business Cycles

Joint Economic Forecast Spring 2025: Geopolitical turn intensifies crisis – structural reforms even more urgent

The German economy will continue to tread water in 2025. In their spring report, the leading economic research institutes forecast an increase in gross domestic product of just 0.1 per cent for the current year. For 2026, the institutes expect gross domestic product to increase by 1.3 per cent. In the short term, the new US trade policy and economic policy uncertainty are weighing on the German economy. ...

German economy will not grow again until 2026

The next federal government needs courage and honesty

Following yesterday's Bundestag elections, DIW President Marcel Fratzscher commented on the results and the challenges facing the new German government:

Euro Area Inflation Differentials: The Role of Fiscal Policies Revisited

Policy Changes Leaving Marks on the Economy

The German economy is stuck in a period of stagnation: Following two years of consecutive slight declines in GDP, growth is not expected for 2025 either. Weak exports, rising unemployment worries, and the resulting reserved private consumption and economic policy uncertainty are slowing the economy. Structural adjustment processes and the erratic trade policy of the Trump administration are weighing ...

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 ...

Where Do They Care? The ECB in the Media and Inflation Expectations

This paper examines how news coverage of the European Central Bank (ECB) affects consumer inflation expectations in the four largest euro area countries. Utilizing a unique dataset of multilingual European news articles, we measure the impact of ECB-related inflation news on inflation expectations. Our results indicate that German and Italian consumers are more attentive to this news, whereas in Spain ...

ECB Communication and Policy Responses: Being Effective in an Era of Disinflation and Economic Policy Uncertainty: In-Depth Analysis

This briefing report evaluates the ECB's monetary policy in a context of declining inflation and stagnant growth. Inflation risks have been averted and, after a period of relatively tight policy in 2024, benchmark comparisons indicate that the current interest rate is consistent with the ECB's mandate. The prevailing economic and inflation outlook supports further rate cuts. However, the high level ...

Turnaround in Sight for the Construction Industry; Political Pressure for Action Is Nonetheless Increasing

Real construction volume is expected to decline for the fifth year in a row: A decline of nearly four percent is expected for 2024 and it should fall by almost one percent in 2025. However, the construction industry may manage to reverse the trend in 2026, when real construction volume is projected to grow by two percent. However, this should not obscure the fact that the declines over the past years ...

Testing Marx: Capital Accumulation, Income Inequality, and Socialism in Late Nineteenth-Century Germany

We study the dynamics of capital accumulation, income inequality, capital concentration, and voting up to 1914. Based on new panel data for Prussian regions, we re-evaluate the famous Revisionism Debate between orthodox Marxists and their critics. We show that changes in capital accumulation led to a rise in the capital share and income inequality, as predicted by orthodox Marxists. But against their ...