This Selected Issues paper attempts to analyze the end-point problem and improve the quality of potential GDP estimates for Germany. It projects that Germany’s potential GDP growth will slow over the coming decade, mainly because of declining labor input. The paper focuses on a long-term fiscal scenario for Germany based on current policies. The paper also attempts to construct a preliminary public sector balance sheet for Germany, and analyzes the performance of its nonfinancial corporate sector.
This paper investigates the microeconomic origins of aggregate economic fluctuations in
Europe. It examines the relevance of idiosyncratic shocks at the top 100 large firms (the
granular shocks) in explaining aggregate macroeconomic fluctuations. The paper also
assesses the strength of spillovers from large firms onto SMEs. Using firm-level data
covering over 14 million firms and eight european countries (Austria, Belgium, Finland,
France, Germany, Italy, Portugal and Spain), we find that: (i) 40 percent of the variance in
GDP in the sample can be explained by idiosyncratic shocks at large firms; (ii) positive
granular shocks at large firms spill over to domestic SMEs’ output, especially if SMEs’
balance sheets are healthy and if SMEs belong to the services and manufacturing sectors.
This Selected Issues paper analyzes the housing prices, consumption, and the household debt overhang in the Netherlands. Deflated housing prices that were fueled by robust borrowing often leave in their wake households with heavy debt burden. This �debt overhang� forces households into deleveraging�reducing their level of debt to sustainable levels. When deleveraging is brought about through reduced household consumption, it can contribute to a protracted �balance sheet recession� as appears to be the case in the Netherlands. This paper estimates a simultaneous equations model of the Dutch economy using a three-stage least squares approach. Empirical results are supportive of the hypothesis that housing prices strongly affect private consumption.
This paper analyzes the implications of global rebalancing in the post-crisis period for Korea and how high leverage in the household and SMEs sectors could affect this process. The first section of the paper discusses implications of global rebalancing for Korea using simulations from the Global Integrated Monetary and Fiscal Model (GIMF). The second section focuses on how rebalancing growth in Korea is different from the rest of the region, and discusses the challenges of highly leveraged households and SMEs for the rebalancing process. The last section concludes with policy recommendations.