Archive: Publikationen

Raphael Fischer; Gunther Schnabl

Abstract

Both Japan and parts of the European Monetary Union have experienced boom and bust in stock and real estate markets, which have been followed by a lasting crisis. The paper analyses the role of a high degree of regional heterogeneity for public debt and monetary policy in the context of crisis. It is shown for Japan that the attempts to maintain regional cohesion via a regional transfer mechanism has contributed to the unprecedented rise in public debt and persistent monetary expansion. Econometric estimations show that in Japan regional redistribution of funds has ensured homogeneous living conditions across Japanese regions pre- and post-crisis. The side condition is monetary expansion. A similar effect could emerge in Europe, if the crisis persists.

Keywords: EMU Crisis, Japan, Monetary policy, Public debt, Regional redistribution.

JEL Codes: H20, H50, H70.

Erschienen in

International Economics and Economic Policy (April 2018), Volume 15, Issue 2, pp 405–428.

Download

via SpringerLink

Sophia Latsos; Gunther Schnabl

Abstract

The paper shows that currencies of countries with persistent current account surpluses and high foreign-currency denominated assets, such as the Swiss franc and the Japanese yen, are under persistent appreciation pressure, particularly when the centres of the world monetary system follow expansionary monetary policies. This limits the choice of exchange rate regime. Given flexible exchange rates, a negative risk premium on the domestic interest rate can emerge. Empirical estimations provide mixed evidence for a negative impact of net foreign asset positions and exchange rate uncertainty on interest rates of international creditor countries at the periphery of the world monetary system.

Keywords: appreciation pressure, exchange rate risk, Japanese yen, negative risk premium, self-fulfilling expectations, Swiss franc.

JEL Codes: F15, F31, F33.

Erschienen in

Int Econ Econ Policy 15, 261–280 (2018).

Download

via SpringerLink

Gunther Schnabl

Abstract

The world has moved into a low-interest rate trap. Since the mid1980s, asymmetric monetary policy patterns—that is, sharp interest rate cuts during crises and hesitant interest rate increases during the post-crisis recoveries—have pushed interest rates toward zero (Hoffmann and Schnabl 2011) (see Figure 1).1 With short-term interest rates having reached the zero bound, unconventional monetary policies (i.e., extensive government and corporate bond purchases) have nudged long-term interest rates further downward.

Erschienen in

Cato Journal 38 (2018), 2, 447-466..

Download

via Cato

Gunther Schnabl

Abstract

The paper analyzes the role of monetary policy for cyclical movements of investment and asset markets in East Asia and Europe based on a Mises-Hayek overinvestment framework. It is shown how the gradual global decline of interest rates has triggered wandering overinvestment cycles in Japan, Southeast Asia, and China. Similarly, it is shown how a one-size monetary policy within the European Monetary Union has not preserved the European Monetary Union from idiosyncratic economic development and crisis because of uncoordinated fiscal policies. With monetary policy crisis management being argued to impede financial and economic restructuring, a timely exit from ultra-expansionary monetary policies is recommended for both East Asia and Europe to reconstitute economic stability and growth.

JEL Codes: E52, E58, E63, F42.

Erschienen in

Asia Europe Journal (December 2017), Volume 15, Issue 4, pp 445–462.

Download

via SpringerLink

Katharina Knoll; Moritz Schularick; Thomas Michael Steger

Abstract

How have house prices evolved over the long-run? This paper presents annual house prices for 14 advanced economies since 1870. Based on extensive data collection, we show that real house prices stayed constant from the 19th to the mid-20th century, but rose strongly during the second half of the 20th century. Land prices, not replacement costs, are the key to understanding the trajectory of house prices. Rising land prices explain about 80 percent of the global house price boom that has taken place since World War II. Higher land values have pushed up wealth-to-income ratios in recent decades.

Keywords: house prices, land prices, neoclassical theory, transportation costs.

JEL Codes: N10, O10, R30, R40.

Erschienen in

American Economic Review, Volume 107, Issue 2, pp 331-353.

Download

Via SSRN

Sophia Latsos; Gunther Schnabl

Abstract

The paper shows that currencies of countries with persistent current account surpluses and high foreign-currency denominated assets, such as the Swiss franc and the Japanese yen, are under persistent appreciation pressure, particularly when the centres of the world monetary system follow expansionary monetary policies. This limits the choice of exchange rate regime. Given flexible exchange rates, a negative risk premium on the domestic interest rate can emerge. Empirical estimations provide mixed evidence for a negative impact of net foreign asset positions and exchange rate uncertainty on interest rates of international creditor countries at the periphery of the world monetary system.

Keywords: appreciation pressure, exchange rate risk, Japanese yen, negative risk premium, self-fulfilling expectations, Swiss franc.

JEL Codes: F15, F31, F33.

Erschienen in

CESifo Working Paper No. 5490 (August 2015).

Download

Via IDEAS

Pablo Duarte; Gunther Schnabl

Abstract

Since a series of crisis events after 2007, the discussion about the adjustment channels of current account imbalances has been revived. We discuss the effectiveness of exchange rates versus macroeconomic policies to rebalance current accounts for a set of 86 mainly emerging market economies. We find that nominal exchange rates are not a sufficient adjustment channel for (unsustainable) current account positions. Instead, depending on the region, monetary and/or fiscal policies are the main determinants of current accounts. For East Asia and the oil exporting countries sterilization policies, i.e. relatively tight monetary policies, are the main determinants. In contrast the main driving forces for emerging and southern Europe are fiscal policy stances. Only for the Latin American countries the exchange rate seems to play a significant role.

Keywords: exchange rate adjustment, fiscal policy, global imbalances, intra-european imbalances, Monetary policy.

JEL Codes: E42, F31, F43.

Erschienen in

Review of Development Economics, Volume 19, Issue 3, pp 531-544.

Download

Via Wiley Online Library

Andreas Hoffmann; Björn Urbansky

Abstract

We explain periods of financial instability following drastic policy shifts within a Hayekian framework. Hayek emphasized that prices, established via the market process, help market participants to form coherent expectations about the future and coordinate plans with one another. In this paper, we elaborate on how policy shifts may undermine planning based on price signals and exacerbate uncertainty about the future, which can contribute to financial instability. Based on our postulated framework, we clarify how financial liberalization in the 1980s/1990s and the recent discretionary monetary policies in the advanced economies may have contributed to recurring episodes of financial instability in emerging markets. In particular, this paper provides an explanation for (1) why we observe financial instability mainly shortly following financial liberalization, and (2) why financial developments in the emerging markets are sensitive to unexpected monetary policy changes in the advanced countries in the current zero-interest rate environment.

Erschienen in

Review of Development Economics, Volume 19, Issue 3, pp 455-469.

Download

Via IDEAS

Ansgar Belke; Ulrich Haskamp; Gunther Schnabl; Holger Zemanek

Abstract

We scrutinize the role of capital flows for competitiveness in seven euro-area countries in the context of real convergence and crisis with a specific focus on Greece. The paper extends the seminal Balassa-Samuelson model to include international capital markets. Capital flows are assumed to be able to invert the traditional direction of transmission of real wage increases from the tradable to the non-tradable sector and to cause real wages to increase beyond productivity increases. Panel estimations for the period from 1995 to 2013 show evidence in favour of capital inflow-driven real wage increases in excess of productivity increases in Greece.

Keywords: Balassa-Samuelson Effect, capital inflows, Estonia, exchange rate regime, Greece, inflation, Latvia, Lithuania, panel model, Portugal, productivity differential, Slovak Republic, Slovenia, wages.

JEL Codes: E24, F16, F31, F32.

Erschienen in

CESifo Working Paper No. 5557 (October 2015).

Download

Via IDEAS

Gunther Schnabl

Abstract

Japan experienced a boom-and-bust cycle in the real estate and stock markets almost 20 years earlier than Europe. Since the bursting of the Japanese bubble economy, the country has fallen into a deep recession and has experimented with crisis therapies in the form of unconventional monetary expansion, Keynesian fiscal stimulus, and recapitalization of financial institutions. Japan reached a low interest rate environment in the mid 1990s and has accumulated an exceptionally high level of public debt during more than two decades of economic stagnation. This paper compares the boom-and-bust cycles in Japan and Europe with respect to the reasons for excessive booms, the characteristics of the crises, and the (potential) effects of the crisis therapies. It is argued that in both Japan and Europe the consequences of expansionary monetary and fiscal policies include the hysteresis of a low-interest rate and high government debt environment, the erosion of the allocation and signaling functions of the interest rate, the gradual quasi-nationalization of financial institutions, as well as gradual real income losses. The economic policy implication for Europe and Japan is the timely exit from crisis therapies in the form of excessively expansionary monetary and fiscal policies.

Keywords: boom-and-bust, crisis, crisis therapies, economic stagnation, Europe, fiscal policies, interest rate, Japan, Keynesian fiscal stimulus, monetary expansion, Public debt, recapitalization of financial institutions, recession.

JEL Codes: E00, E60, E62, E66, F00, N00, O10.

Erschienen in

Asian Economic Papers, Volume 14, Issue 1, pp 124-150.

Download

Via EconPapers