Monetary Policy and the Economy Q1/13

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• Monetary Policy and the Economy Q1/13 (PDF, 1.1 MB) March 2013.

Studies and Analyses

• Austria Withstands Recession: Return to Positive Growth in Early 2013 (PDF, 1.1 MB) Vondra. Vondra – Monetary Policy and the Economy Q1/13 en Mar 31, 2013, 12:00:00 AM

• Structural Budget Balances: Calculation, Problems and Benefits (PDF, 2 MB) Reiss. Reiss – Monetary Policy and the Economy Q1/13 The reform of the Stability and Growth Pact and the incorporation of “debt brake” rules into national legislation have heavily increased the importance of structural balances in economic policymaking in Europe. As defined by the European Commission, structural balances are calculated by subtracting the estimated cyclical component of government revenue and spending as well as certain temporary factors from the headline balance. Structural balance estimates can be subject to significant measurement errors, which are mainly related to uncertainties about potential output and nonlinear reactions of tax revenue to sharp changes in GDP growth. The definition of temporary factors can also cause substantial problems. While these problems do not render structural balances useless for the implementation of fiscal policy, they imply that policymakers should not aim to reach the target values for the structural balance exactly a specified each year, but rather on average over much longer time periods (unless exceptionality clauses apply). Achieving the targets on average can be ensured by using appropriately specified control accounts. en structural balance, cyclically adjusted balance, fiscal rules, fiscal policy E62, H6 Mar 31, 2013, 12:00:00 AM

• Effective Retirement Age in Austria – A Review of Changes since 2000 (PDF, 1.7 MB) Stiglbauer. Stiglbauer – Monetary Policy and the Economy Q1/13 Increases in life expectancy, lower birthrates and the aging of the baby-boom generation call for measures to increase the effective retirement age. In Austria, the employment rate of older workers rose from 28.8% to 41.4% between 2000 and 2011, which would imply substantial progress in keeping older workers in employment. Yet social security statistics indicate that the average pension entry age has barely risen in the past decade and that it remains stuck considerably below the statutory age. How can these differing developments be reconciled? By discussing various concepts of the effective retirement age, this article finds that the discrepancy can be largely explained by adjusting the conventional statistical measures in several ways. After accounting for such effects it becomes clear that the average retirement age has indeed risen. en retirement, effective retirement age, public pensions J11, J26 Mar 31, 2013, 12:00:00 AM

• The Future of Sovereign Borrowing (PDF, 1.4 MB) Gnan, Holler. Gnan, Holler – Monetary Policy and the Economy Q1/13 In March 2013 around 130 participants from academia, banking and finance, governments and central banking gathered at the premises of the OeNB in Vienna for a conference jointly organized by the European Money and Finance Forum SUERF, the OeNB and the Österreichische Bankwissenschaftliche Gesellschaft to discuss “The Future of Sovereign Borrowing in Europe.” The financial, economic and sovereign debt crisis has fundamentally changed the rules of the game in sovereign debt markets, particularly in the euro area, but also beyond its borders. Sovereign bonds are no longer widely perceived as “risk-free” assets. Even the sovereign bonds of safe-haven countries have come under close scrutiny or lost some of their prime ratings. Yet crisis countries have seen dramatic downgrades of their sovereign debt ratings so that they face soaring risk spreads and unsustainably high financing costs (or even a loss of access to bond market financing), pushing them towards shorter financing or forcing them to rely on financial support from other countries and the international community, or massive intervention by central banks. Against this backdrop, the conference focused on three aspects: first, how issuers and lenders have reacted to the changed environment (session 1); second, implications of the current and likely future state of public finances and debt markets for financial stability, monetary policy and central banks (session 2); and third, ways to improve risk management and foster prudence in future sovereign borrowing (session 3). en structural balance, cyclically adjusted balance, fiscal rules, fiscal policy E62, H6 Mar 31, 2013, 12:00:00 AM