Monetary Policy and the Economy Q2/06

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• Monetary Policy and the Economy Q2/06 (PDF, 2.2 MB) June 2006.

Studies and Analyses

• Domestic Demand and Strong Exports Stimulate the Economy (PDF, 189 kB) Ragacs, Scharler. Ragacs, Scharler – Monetary Policy and the Economy Q2/06 According to the June 2006 economic outlook of the Oesterreichische Nationalbank (OeNB), Austria’s real gross domestic product (GDP) is expected to grow 2.5% in 2006 and 2.2% in both 2007 and 2008. The OeNB’s growth forecast for 2006 has been revised upward by 0.2 percentage point since the December outlook. Inflation will drop to 1.7% in 2006 (2005: 2.1%) and will fall further to 1.6% in 2007 and 2008. Employment will continue to increase substantially, but so will the labor supply. As a result, the unemployment rate will dip only slightly, to 5.1%. en Economic Forecast, Austria. Jun 30, 2006, 12:00:00 AM

• Is Germany’s Influence on Austria Waning? (PDF, 245 kB) Fenz, Schneider. Fenz, Schneider – Monetary Policy and the Economy Q2/06 This study analyzes the connection between business cycle fluctuations in Germany and Austria as well as the transmission of German shocks to Austria. Compared to Austria’s links with other countries, the ties between Austria and Germany have loosened in relative terms in recent years; in terms of gross domestic product (GDP), however, a strong and steady increase has been recorded. Static and dynamic correlation measures point to a consistently high level of co-movement between Austria and Germany. While the Austrian economy lagged behind the German economy by one quarter in the 1970s, it now leads the German economy by one quarter. The Austrian economy’s reaction to German shocks equals 0.4 times the German reaction. Monetary policy shocks are transmitted with the greatest impact, while supply and demand shocks trigger a far less pronounced reaction in Austria. Over time, monetary policy shocks have gained slightly in importance, while German demand shocks have become less important. On average across shocks, the transmission effect shows a marginal weakening. The relative importance of Germany and the international environment in explaining the forecast error for Austrian GDP has increased somewhat over time, whereas the domestic contribution to the forecast error has declined. On the whole, it is not possible to identify a decline in Germany’s importance for the Austrian economy. en business-cycle, synchronization, vector autoregression, shock-identification, transmission. C32, E32, F41 Jun 30, 2006, 12:00:00 AM

• The Lisbon National Reform Programs: New Ideas for Austria’s Economic Policy (PDF, 243 kB) Janger. Janger – Monetary Policy and the Economy Q2/06 Following the relaunch of the Lisbon Process, the EU Member States drew up their national reform programs (NRPs) in the second half of 2005. This paper starts by pinpointing potential new ideas for Austria’s economic policies and policymaking from a selection of other NRPs, with the aim of suggesting means how to further improve the quality of the Austrian NRP. The author then examines the question of whether the reform program in itself can increase the likelihood of actually transforming the measures announced in the NRP into tangible policies. The topics discussed include competition policy, education and further training, employment promotion measures, public sector reform, and support programs for small and medium-sized enterprises (SMEs). Austria’s economic policymaking may find stimulus in the forward-looking, cross-sectoral and goal-oriented political strategies and action plans of other countries, which also contain elements of monitoring and evaluation. The NRP’s prospects for success in improving the implementation of economic policies depend on whether or not it can become an effective commitment device for growth- and employment-oriented economic policy. Arguably, this will only be possible if a number of conditions are met: The NRP must achieve a higher profile in public consciousness and its signaling effect must be clarified through precise analyses of the influence on growth and employment engendered by the measures set out in the program. Furthermore, the appointment of an official body (such as the European Commission or an independent research institute) to evaluate and report on the progress of each country would be of value. en economic policy, political economy of reform. O10, O57 Jun 30, 2006, 12:00:00 AM

• The Austrian Pension System – How Recent Reforms Have Changed Fiscal Sustainability and Pension Benefits (PDF, 269 kB) Knell, Köhler-Töglhofer, Prammer. Knell, Köhler-Töglhofer, Prammer – Monetary Policy and the Economy Q2/06 This article discusses the most recent pension reforms in Austria, which were mainly triggered by the need to alleviate the budgetary pressure stemming from the age structure of the Austrian population. Using synthetic indicators, derived from the government’s budget constraint, the paper assesses fiscal sustainability before and after the major pension reforms. Austria’s fiscal sustainability was clearly improved by the reforms. The two main factors behind this improvement are a projected increase in the average effective retirement age and a projected reduction in the generosity of the mandatory state pension system. Based on available data, the paper assesses the current and prospective level of Austrian public pension benefits and puts them into an international perspective. en public pensions, social security, fiscal sustainability. H55, H60, E62 Jun 30, 2006, 12:00:00 AM

• Austrian Households’ Financial Wealth: An Analysis Based on Microeconomic Data (PDF, 224 kB) Beer, Mooslechner, Schürz, Wagner. Beer, Mooslechner, Schürz, Wagner – Monetary Policy and the Economy Q2/06 Microeconomic data on households are providing increasingly important information for many economic policy issues. This study presents the results of a survey conducted by the Oesterreichische Nationalbank on Austrian households’ financial wealth. The descriptive presentation of household financial wealth also covers data on household debt and investment. Household income is shown to have a significant influence on the level of financial assets. The results of logit estimates and a cluster analysis demonstrate the prominent role of net household income on investment decisions. By far the greatest volume of household financial assets is invested in savings deposits and in deposits made under building loan contracts, but 16% of all households also stated that they owned stocks. en households’ wealth, portfolio choice, financial assets. D14, D31, G11 Jun 30, 2006, 12:00:00 AM

• How Are Payments Made in Austria? (PDF, 244 kB) Mooslechner, Stix, Wagner. Mooslechner, Stix, Wagner – Monetary Policy and the Economy Q2/06 This study presents the results of a survey conducted in fall 2005 on the payment habits of Austrian households, comparing its findings with those of similar surveys carried out in 1996 and 2000. The focus is to analyze changes in the use of payment means over time and, on this basis, to assess future trends. As the analysis in the 2005 survey shows, cash continues to dominate the structure of payment transactions, remaining by far the most important means of payment. Cash payments account for 86% of all direct payment transactions by Austrian households and for 70% of the total payment value. Compared with the previous surveys, however, the share of cash has contracted noticeably whereas the share of payments at point-of-sale (POS) terminals (via debit card payments) has more than doubled in the last five years to 11.5%. Although credit card payments have posted a slight increase, their share in the total volume still remains very low (1.3%). Overall, the results indicate the continuation of cash-card substitution. From a central banking perspective, assessing future trends in cash demand is a key monetary policy issue. The findings of this study suggest that Austrian households’ payment habits will not change abruptly, therefore, any impact on monetary policy can be expected to remain very limited. en usage of payment means, demand for money, monetary policy. E41, E58, D12 Jun 30, 2006, 12:00:00 AM

• Globalization: Opportunities and Challenges for the World, Europe and Austria – Summary of the 34th Economics Conference (PDF, 137 kB) Janger, Knell, Pointner. Janger, Knell, Pointner – Monetary Policy and the Economy Q2/06 The 34th Economics Conference of the Oesterreichische Nationalbank (OeNB), which was held on May 22 and 23, 2006, dealt with globalization and the opportunities and challenges involved for the world, Europe and Austria. The objective of the conference was to examine the short- and long- term economic and social effects of globalization from different angles and to provide a constructive, empirically oriented contribution to the globalization debate, which at times tends to be controversial and emotional. Among the speakers and discussants were high-ranking representatives from central banks and international organizations, academics, economists, and politicians. en globalization, economic integration, economic policy. F15, F42, F43 Jun 30, 2006, 12:00:00 AM

• Strategies for Growth and Employment in Austria (PDF, 121 kB) Beer, Janger, Stiglbauer. Beer, Janger, Stiglbauer – Monetary Policy and the Economy Q2/06 On March 3, 2006, the Oesterreichische Nationalbank (OeNB) hosted a one-day workshop on “Strategies for Growth and Employment in Austria.” The workshop’s objective was to propose concrete measures for the promotion of growth and employment in Austria. In the introductory session, Andreas Wörgötter (OECD) spoke about growth-promoting reforms in Austria, while Jürgen Janger (OeNB) addressed the National Reform Programs under the Lisbon Strategy. Karl Aiginger (Austrian Institute of Economic Research – WIFO) commented on both presentations and outlined his views on growth policy. Michael Böheim (WIFO) suggested implementing a growth-oriented competition policy, particularly in the field of public utilities, in the service sector and in the liberal professions. Iain Paterson (Institute for Advanced Studies – IHS) pointed out that the liberal professions are highly regulated in Austria. Ludger Wößmann (ifo Institute for Economic Research) and David Audretsch (Max Planck Institute of Economics) emphasized the significance of the secondary and tertiary education systems for growth and employment. The final workshop session on maximizing employment potential included an overview of labor market developments in Austria by Helmut Hofer (IHS), a talk on how to increase female employment by Gudrun Biffl (WIFO) as well as a presentation on the employment of older workers by Alfred Stiglbauer (OeNB). en growth policies, employment policies, competition policies, education, economic reforms E24, H50, O40 Jun 30, 2006, 12:00:00 AM