Monetary Policy and the Economy Q4/04

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• Monetary Policy and the Economy Q4/04 (PDF, 591 kB) December 2004.

Studies and Analyses

• Growth Stimulus from Tax Reform in 2005 to Overshadow Weaker Global Economic Momentum (PDF, 181 kB) Fenz, Schneider. Fenz, Schneider – Monetary Policy and the Economy Q4/04 According to the fall 2004 economic outlook of the Oesterreichische Nationalbank (OeNB), Austria's real gross domestic product (GDP) is projected to increase to 1.8% in 2004. Economic growth of 2.3% and 2.1% is expected in 2005 and 2006, respectively. Fuelled by the rise in oil prices, in particular, inflation as measured by the Harmonized Index of Consumer Prices (HICP) will be 1.9% in 2004, 2.0% in 2005 and 1.7% in 2006. The second stage of the tax reform will result in the budget deficit (Maastricht definition) deepening from 1.4% in 2004 to 2.0% in 2005 and to 1.8% in 2006. en Economic Forecast Dec 31, 2004, 12:00:00 AM

• Determinants of the Household Saving Rate in Austria (PDF, 167 kB) Dirschmid, Glatzer. Dirschmid, Glatzer - Monetary Policy and the Economy Q4/04 The last few decades have seen a decline in the household saving rate in Austria and other industrial countries. Using an error correction model, this paper shows that in Austria personal saving decisions are influenced by income growth, real interest rates, inflation, social security expenditure and the general government budget balance. These findings are becoming increasingly important for economic policy, given the aging of society and the concomitant need for pension system reform. In future, households will be required to make greater provision for themselves and step up their saving efforts. As the results show, this can be achieved by productivity-boosting measures that generate income growth and promote personal saving. en Saving, saving ratio Dec 31, 2004, 12:00:00 AM

• The Role of Corporate Bonds for Finance in Austria (PDF, 158 kB) Waschiczek. Waschiczek – Monetary Policy and the Economy Q4/04 With corporate bond issuance having grown at a fast pace in Austria in recent years, bonds have become firmly established as a pillar of the financing structure of the domestic corporate sector. More and more issuers are smaller firms, and they come from a broad range of industries. Bond financing allows companies to diversify their financing sources and to broaden their creditor base beyond the banking industry. Rather than drive up corporate debt, bonds have become an alternative to bank loans as a borrowing instrument. Compared with loans, bonds allow companies to borrow money over longer horizons, but high upfront costs make this instrument more attractive for companies that need to finance large volumes. Moreover, bonds are not equally appropriate for all financing requirements, which is why they will never fully replace loans in the long term. Finally, more stringent requirements implicitly apply to the quality of a company's credit ratings when companies intend to issue bonds than when they apply for a bank loan. So far, there have been very few cases of bond defaults in Austria. en Corporate bonds Dec 31, 2004, 12:00:00 AM

• Economic Growth in Denmark, Sweden and the United Kingdom since the Start of Monetary Union (PDF, 162 kB) Moser, Pointner, Reitschuler. Moser, Pointner, Reitschuler – Monetary Policy and the Economy Q4/04 This study analyzes GDP growth in Denmark, Sweden and the United Kingdom, examining the determinants of potential growth, cyclical fluctuations in GDP and the contribution of the national economic policy of each of the three countries. High spending on research and development, particularly in information and communications technology, is identified as the main force driving growth in Sweden while a robust increase in private consumption resulting from rising asset prices is found to have been the key growth driver in the United Kingdom. In Denmark and Sweden, swings in the business cycle are being successfully offset through fiscal policy and other measures. The United Kingdom has made considerable progress with respect to business cycle convergence with the euro area, a significant factor for joining Economic and Monetary Union. en Economic Growth, Monetary Union Dec 31, 2004, 12:00:00 AM

• The Political Economy of International Financial Governance (PDF, 74 kB) Redak, Schuberth, Weber. Redak, Schuberth, Weber - Monetary Policy and the Economy Q4/04 The OeNB recently organized a workshop on The Political Economy of International Financial Governance to analyze current trends in financial governance from both an economic efficiency and an institutional perspective. Following a discussion of controversial financial governance theories, a number of case studies were presented on current issues, including financial market integration in the EU, changes in private sector associational activity in global finance, the Basel II process, the governance of pension funds, the market for over the counter (OTC) derivates as well as financial literacy programs. The case studies highlighted the role that noneconomic factors play in financial governance mechanisms. With a view to developing more realistic models, further research and more case studies will have to be undertaken to broaden the empirical basis for theorizing financial governance. en Financial Goverance Dec 31, 2004, 12:00:00 AM

• Macroeconomic Models and Forecasts for Austria (PDF, 70 kB) Fenz, Schneider. Fenz, Schneider – Monetary Policy and the Economy Q4/04 On November 11 and 12, 2004, the Oesterreichische Nationalbank (OeNB) held a workshop entitled Macroeconomic Models and Forecasts for Austria. The purpose of the workshop was to provide an overview of the econometric models developed and used in Austria, and to promote exchanges between the main institutions that work on modeling in Austria, namely WIFO (Austrian Institute of Economic Research), IHS (Institute for Advanced Studies), Joanneum Research and the OeNB. This workshop — the first of its kind held in Austria — covered the bulk of the econometric models used regularly in Austria and attracted nearly 100 participants. The papers presented at the workshop are scheduled to appear in an issue of the OeNB Workshop Series in the first quarter of 2005. en Macroeconomic Models, Austria Dec 31, 2004, 12:00:00 AM

• A Constitutional Treaty for an Enlarged Europe: Institutional and Economic Implications for Economic and Monetary Union (PDF, 74 kB) Schmidt. Schmidt – Monetary Policy and the Economy Q4/04 As the negotiations on the Treaty establishing a Constitution for Europe have been concluded and the Constitutional Treaty1 has been signed by the Heads of State or Government of the Member States of the European Union (EU), the Oesterreichische Nationalbank (OeNB) organized an international workshop held on November 5, 2004, in Vienna. The workshop gave an overview of the institutional implications the Constitutional Treaty may have for Economic and Monetary Union (EMU). Furthermore, speakers analyzed the institutional framework for financial stability in Europe and the role fiscal policy and the Stability and Growth Pact play in an enlarged Europe. en Treaty Dec 31, 2004, 12:00:00 AM

• Longer Working Hours? More Flexible Work Schedules? Do Austrian Economic Policymakers Need to Act? (PDF, 115 kB) Stiglbauer. Stiglbauer – Monetary Policy and the Economy Q4/04 On September 23, 2004, the Oesterreichische Nationalbank (OeNB) hosted a workshop to discuss extending working hours and increasing working time flexibility. After Peter Mooslechner (OeNB) outlined the development of the present discussion in the media and presented some facts, the participants delivered their statements. Erhard Fu‹rst (Federation of Austrian Industry and Austria perspektiv) called for more flexibility rather than for an extension of working hours. He supported this view by pointing to the rising competitive pressure on enterprises. Sepp Zuckersta‹tter (Chamber of Labor) opposed lengthening working hours, because this would reduce employment and decrease aggregate demand. In his opinion the current regulations are sufficient. Herbert Walther (Vienna University of Economics and Business Administration) explained that in theoretical models the impact of more flexible working hours on employment is uncertain. Moreover, no connection between the degree of flexibility and key labor market indicators could be established. In the weeks and months preceding the workshop the media reported calls for the extension of standard working hours and more flexible working hours in enterprises. en Working hours, schedules Dec 31, 2004, 12:00:00 AM