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.
AQM-06: The Macro economic Model of the OeNB
This paper gives an overview of the current version of the quarterly macroeconomic model of the Oesterreichische Nationalbank for Austria. The model is a small to medium size macroeconomic model. It is in the tradition of the neoclassical synthesis and is therefore in line with most models used by euro system central banks. The model has been extended in several ways compared with the previous version. The most important changes concern the use of oil and import competitor’s prices in the supply block, a more detailed treatment of government receipts, the use of tax rates as policy instruments as well as a dynamic import demand indicator. In the empirical part, the paper presents some simulation results to show the impact of tax increases on the Austrian economy and the reaction of the model to five standard macroeconomic shocks: Increases of the value added tax, the personal income tax and the corporate income tax by the same amount have different effects on the Austrian economy. The reaction of the model to macroeconomic shocks is characterized by a high demand multiplier and a low negative impact of price competitiveness on exports.
Testing for an unstable root in conditional and structural error correction models
Abstract This paper proposes a class of Wald tests for the hypothesis of an unstable root in conditional error correction models. Both single-equation models and simultaneous equations models in structural form are considered. The asymptotic distribution of the test statistics under the null hypothesis is derived in terms of a vector Brownian motion process, and critical values are obtained via Monte Carlo simulation. In an empirical model of the demand for money and the rate of inflation in the UK, the tests reject the instability hypothesis.