Economic Crisis Unleashes Deep Recession in Austria – Stabilization Expected at Year-End
According to the June 2009 economic outlook of the Oesterreichische Nationalbank (OeNB), the Austrian economy is projected to enter a deep recession in 2009 owing to the global slump in growth, with real GDP set to shrink by 4.2%. After further declining by a modest 0.4% in 2010, positive real annual GDP growth of 1.2% will reemerge only in 2011. Compared with the OeNB December 2008 economic outlook, growth expectations for 2009 and 2010 were downgraded by 3.9 and 1.2 percentage points respectively. This major revision reflects the steep slump in the demand for exports and investment – unparalleled in the post-war period. The current downturn is so pronounced that GDP levels seen in 2007 will not return until 2011. HICP inflation will ease from 3.2% in 2008 to a mere 0.4% in 2009 and rise modestly to 1.1% and 1.2% in 2010 and 2011 respectively.
Monetary Factors in Recurring Economic Recessions
This paper used parametric shared-frailty models to observe the recession periods of 22 countries. The constant increases in the values of change in consumer prices, foreign exchange reserves (FERs), ratio of foreign direct investment to gross domestic product (GDP), ratio of domestic credits to GDP, and ratio of monetary base to FERs were found to shorten the recession periods of economies. On the other hand, a steady increase in real effective exchange rates, economic openness, and lending-to-deposit ratio can lead to longer recessions. Moreover, economies were found to diverge after currency crises, whereas no apparent differences in economies were observed before crises; and this is attributed to some economies access to financing opportunities, whereas others have lesser and even faced enforceability problems. Jel code: C33, F30, F40 Copyright © 2014 JAEBR
Financial Structure and the Interest Rate Channel of ECB Monetary Policy
This paper analyses persistence differences in financial structure across countries of the euro area and whether they can lead to asymmetries in the transmission of the ECB policy. First, the paper examines the pass-through of money market rates to various bank retail rates and measures how this has evolved over the past two interest rate cycles. An analysis of panel data suggests that current 'country asymmetries' in the response of bank rates to monetary policy should decrease over time by virtue of the implementation of the single monetary policy, money market integration and the growth of debt securities markets and competition among banks. Second, analysis of the balance sheet structure of households and firms shows that the income effects of monetary policy are fairly homogenous in the four largest countries of the euro area, while wealth effects could be stronger in Italy. JEL Classification: E43, E52, G21