91 countries around the world have established fiscal rules to limit national debt and/or budget deficits. Using data from previous natural disasters, this report investigates how these fiscal rules affect overall economic development following a crisis. The results show countries with fiscal rules fare better after such shocks than those without. GDP, private consumption, and investments develop markedly ...
The self-employed are among those facing the highest probability of strong income losses during the COVID-19 pandemic. Governments in many countries introduced support programs to support the self-employed, including the German federal government, which approved a €50bn emergency aid program at the end of March 2020 offering one-off lump-sum payments of up to €15,000 to those facing...
Across the world, tax exemptions for jobs with low earnings intend to incite non-participating workers to rejoin the labor market. However, such tax exemptions may also have negative equilibrium effects. The German minijob tax exemption offers a convenient case to identify equilibrium effects as it applies to some but not to other low-wage jobs. We build and estimate a structural job search model with ...
After an economically tough start into the new millennium, Germany experienced an unprecedented employment boom after 2005 only stopped by the COVID-19 pandemic. Persistently high levels of inequality despite a booming labour market and drastically falling unemployment rates constituted a puzzle, suggesting either that the German job miracle mainly benefitted individuals in the mid- or high-income range ...
The European Commission commissioned an international consortium including the DIW Berlin with a background study on State aid in the field of environmental protection and energy. The results of the study are meant to support the Commission in the revision of the EU Guidelines on State aid for environmental protection and energy (EEAG). One key focus of the study was to assess the current rules...
This paper shows how spillovers from sovereign risk to banks׳ access to wholesale funding establish a bank-sovereign nexus. In a dynamic stochastic general equilibrium set-up, heterogeneous banks give rise to an interbank market where government bonds are used as collateral. Government borrowing under limited commitment is costly ex ante as bank funding conditions tighten when the quality of collateral ...
Empirical studies support the hysteresis hypothesis that recessions have a permanent effect on the level of output. We analyze the implications of hysteresis for fiscal policy in a DSGE model. We assume a simple learning-by-doing mechanism where demand-driven changes in employment can affect the level of productivity permanently, leading to hysteresis in output. We show that the fiscal output multiplier ...
This paper sets out a framework for the analysis of public investments, tangible and intangible, at the level of detail needed for the economic analysis of impacts of public policies influencing economic growth. To do this, we broaden the concept of capital in the public sector from that which is mostly tangible (e.g. physical infrastructure) to that which also includes intangibles and long-lasting ...
Statement by DIW president Marcel Fratzscher about the results of the German federal election 2017.