Monetary Policy and the Economy Q2/12

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• Monetary Policy and the Economy Q2/12 (PDF, 2.9 MB) June 2012.

Studies and Analyses

• Austrian Economy Prevails in Bleak International Environment (PDF, 2.6 MB) Ragacs, Vondra. Ragacs, Vondra – Monetary Policy and the Economy Q2/12 en Jun 30, 2012, 12:00:00 AM

• European Monetary Union: Lessons from the Debt Crisis (PDF, 2.4 MB) Gnan, Segalla. Gnan, Segalla – Monetary Policy and the Economy Q2/12 Sovereign debt crises have far-reaching consequences and usually go hand in hand with (or can be traced to) banking and – in many cases – currency crises. Therefore, managing and resolving sovereign debt crises pose extraordinary challenges to economic policymakers. Decisive action and reforms have been taken over the past two years to tackle the current European debt crisis. However, given their numerous transmission channels, these measures have been the subject of intense debate among decision-makers, experts, the media and the general public. There are differences in the analysis of the underlying problems, the recommendations of appropriate economic policy responses and in the lessons that should be learned. The 40th Economics Conference of the Oesterreichische Nationalbank (OeNB) from May 10 to 11, 2012, in Vienna brought together renowned national and international experts and practitioners from politics and the economy as well as finance and academia to address these issues from various angles, discussing and identifying possible short- and longer-term solutions with all their advantages and disadvantages. en Jun 30, 2012, 12:00:00 AM

• Business Cycle Synchronization in the Euro Area and the Impact of the Financial Crisis (PDF, 3.2 MB) Gächter, Riedl, Ritzberger-Grünwald. Gächter, Riedl, Ritzberger-Grünwald – Monetary Policy and the Economy Q2/12 The extent of synchronization of national business cycles is a widespread indicator for gauging whether individual countries are indeed ready to adopt a common currency. The occurrence of asymmetric shocks and their consequences in Economic and Monetary Union (EMU) may hamper implementation of monetary policy, as such shocks may significantly raise the cost of the single monetary policy for individual countries. This study analyzes whether the synchronization pattern of business cycles in the euro area has systematically changed since the outbreak of the global financial crisis in 2008. Country-specific differences in the terms of trade and fiscal imbalances may have caused the global shock to affect euro area countries asymmetrically. Conversely, the business cycles of individual countries may have become more closely synchronized, as all countries slipped into recession at the same time. For the purpose of this study we use empirical data to establish which of the two effects dominates. The results of the analysis show a pronounced desynchronization of business cycles during the crisis period, both with respect to dispersion and to the correlation of business cycles. Moreover, interesting differences and parallels may be observed between the developments since the beginning of the most recent financial crisis and an earlier period, around 2004, when the output gap in the euro area was negative as well. en Keywords: business cycles, European Monetary Union, convergence, financial crisis E32, E61, F02, F44 Jun 30, 2012, 12:00:00 AM

• Analyzing Corporate Loan Growth in Austria Using Bank Lending Survey Data (PDF, 3 MB) Beer, Waschiczek. Beer, Waschiczek – Monetary Policy and the Economy Q2/12 This paper contributes to the emerging literature that makes use of Bank Lending Survey (BLS) data to shed light on the determinants of the growth of loans to enterprises. We examine the relationship between loan growth and information from the BLS using Bayesian model averaging. Our results suggest that in Austria volumes of corporate loans mainly react to changes in demand whereas supply effects play only a minor role. Moreover, the current crisis did not impair bank lending to enterprises beyond its influence on credit standards and loan demand. We find no indication for a credit crunch as defined by Bernanke and Lown (1991) in Austria. The evidence is less clear with regard to the broader definition of credit crunch by Owens and Schreft (1993) that also takes into account non-price conditions. In addition, this paper discusses the concept of credit standards and some methodical issues that have to be taken into account when using BLS data to analyze loan developments. en credit, lending standards, loan demand, bank lending survey C23, E51, G21 Jun 30, 2012, 12:00:00 AM

• Savings Deposits in Austria – A Safety Net in Times of Crisis (PDF, 2.2 MB) Andreasch, Fessler, Schürz. Andreasch, Fessler, Schürz – Monetary Policy and the Economy Q2/12 Households, financial intermediaries and ultimately even businesses all rely on savings deposits. On the one hand, savings deposits constitute a central pillar of precautionary saving; they play an important role in individual saving for old age and provide a financial buffer against unexpected events. On the other hand, they provide the bedrock of funding for the banking system and thus help maintain the flow of credit from banks to businesses. This paper draws on a unique data set compiled by the Oesterreichische Nationalbank (OeNB), which covers all savings accounts that domestic nonbanks held with banks reporting to the OeNB in the review period. We are thus able to analyze the changes in the total volume of deposits and their distribution across different categories of size in the period from 2002 to 2011. Against this backdrop we highlight how the relative significance of smaller and larger accounts changed before and during the financial crisis, and we discuss what role the deposit insurance system as well as savings plans with building and loan associations played in this context. On balance, we find the share of savings deposits in households’ total financial wealth to have remained broadly stable; the allocation of funds to the individual categories was subject to visible changes, however. en deposits, safe assets, deposit insurance, Austria, financial stability G00, G11, G21, G28, H31, H81 Jun 30, 2012, 12:00:00 AM