Monetary Policy and the Economy Q4/20 – Q1/21

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• Monetary Policy and the Economy Q4/20 – Q1/21 (PDF, 5.7 MB) March 2021

Studies and Analyses

• Call for applications: Klaus Liebscher Economic Research Scholarship (PDF, 44 kB) en Mar 11, 2021, 12:00:00 AM

• Nontechnical summaries (in Englisch and German) (PDF, 116 kB) de en Mar 11, 2021, 12:00:00 AM

• Monitoring the economy in real time with the weekly OeNB GDP indicator: background, experience and outlook (PDF, 745 kB) Fenz, Stix. This study presents the OeNB’s new weekly indicator of economic activity, which is based on a demand-side approach to measuring GDP and which relies on real-time data. The weekly OeNB GDP indicator (1) tracks economic development in Austria on a weekly basis; (2) provides estimates of the contributions of the main demand components of GDP; (3) focuses on seasonally adjusted year-on-year changes; and (4) considers shifts from cash to noncash consumer spending, thus taking into account behavioral changes in the use of payment instruments.
  The OeNB has published weekly GDP estimates since early May 2020 and has thus provided policymakers and the public with important and timely information on the state of the Austrian economy. First benchmarking results indicate that the weekly OeNB GDP indicator generated rather accurate results for aggregate economic activity in the first two quarters after the outbreak of the COVID-19 pandemic in Austria.
  We describe the construction and the main features of the weekly OeNB GDP indicator, present its results for the period from March to December 2020, discuss the strengths and shortcomings of our approach and draw some lessons from more than eight months of weekly nowcasting with real-time data.
  Indicator updates will continue to be released during the COVID-19 pandemic at https:// www.oenb.at/Publikationen/corona/bip-indikator-der-oenb.html. en GDP, nowcasting, COVID 19, real-time data, payments data C53; E01; E27 Mar 11, 2021, 12:00:00 AM

• Austrian tourism sector badly hit by COVID-19 pandemic (PDF, 1.1 MB) Fenz, Stix, Vondra. Contributing 7.3% to Austrian value added, tourism is an important pillar of the Austrian economy. It has been hit particularly hard by the COVID-19 crisis. We analyze the impact of the crisis using high-frequency real-time data on payment card spending and monthly data on overnight stays. During the lockdown in spring 2020, overnight stays in Austria dropped by almost 100%. Over the summer, tourism activity recovered strongly, backed by domestic and German tourists. Nevertheless, it remained clearly below 2019 levels. In October 2020, the renewed increase in the number of COVID-19 infections led to another severe downturn in Austrian tourism, as several neighboring countries posted travel warnings. On November 2, 2020, a second lockdown started in Austria – accommodation establishments and restaurants were closed. Hence, we expect overnight stays to drop again by around 95% in November. As the Austrian government announced on December 2, 2020, Austrian accommodation establishments will not open before January 2021; on top of that, travel warnings by major countries of origin (especially Germany) will remain in place. Based on these assumptions, we estimate total overnight stays to decrease by 36% in 2020. This will be mainly attributable to a strong decline in overnight stays by foreign tourists (–41%), while overnight stays by domestic tourists will go down by only 23%. The overall decline in overnight stays could have been far stronger if the lockdown in spring 2020 and the recent shutdown had not fallen into the off-season but into the high season in winter or summer. en tourism, COVID-19 pandemic, Austria E23, L83 Mar 11, 2021, 12:00:00 AM

• Prices and inflation in Austria during the COVID-19 crisis – an analysis based on online price data (PDF, 313 kB) Beer, Rumler, Tölgyes. To shed light on price developments during the early stage of the COVID-19 pandemic in Austria, we analyze online price data collected from April to August 2020 by means of webscraping. Our analysis focuses on product categories that received special attention during the COVID-19 crisis, such as food and medical products. In contrast to what has been reported in the media, we find only small price changes for most product categories over the observation period. For food, nonalcoholic beverages, personal care products and IT equipment, we find small price decreases. Prices for alcoholic beverages remained broadly stable. Medical products and delivered meals saw very small price increases. When comparing price changes derived from our online price dataset with monthly price changes as reported in official inflation statistics, we find similarities for some product categories but also considerable differences for others. These differences are most likely attributable to methodological differences in data collection. For the analysis of price developments, we find that webscraped data are a useful data source complementary to data from official inflation statistics. en inflation, price developments, COVID-19, webscraping, online shops E31, C82 Mar 11, 2021, 12:00:00 AM

• Have mitigating measures helped prevent insolvencies in Austria amid the COVID-19 pandemic? (PDF, 1.8 MB) Puhr, Schneider. We employ a novel modeling approach to capture the impact of the COVID-19 pandemic on sectoral insolvency rates in Austria. Turnover shocks derived from a macroeconomic scenario generate stress to firms’ profits and cash flows. Over time, both the equity and the liquidity (cash and bank) positions deteriorate, which causes insolvencies if firms fall under certain thresholds. Our model builds on data for nonfinancial incorporated Austrian enterprises available from the BACH and SABINA databases. Since only two firm-level variables (equity ratio, cash and bank) are available at sufficient coverage, we generate a hypothetical firmlevel dataset for 17 NACE 1 sectors by using a Monte Carlo simulation.
  The granularity of our model allows us to assess the impact of mitigating measures implemented in light of the COVID-19 shock. Such measures serve to cushion the loss of companies’ revenue and households’ income triggered by the COVID-19 containment measures. Put differently, they are meant to minimize the damage resulting from the deliberate temporary reduction in economic activity. In our analysis, we only investigate measures aimed at firms. These measures include equity injections via grants and subsidies (e.g. short-time work), longterm payment deferrals (e.g. credit guarantees) and short-term payment deferrals (e.g. social security contributions). We used all available data sources to calibrate the mitigating measures, with August 31, 2020, as cutoff date.
  The model indicates a marked increase of COVID-19-induced insolvency rates, but mitigating measures reduce such insolvencies substantially. Without mitigating measures, the insolvency rate would rise to 5.8% by the end of 2020, more than quintupling its pre-crisis average (2017–2019: 1.0%). By end-2022, 9.9% of all Austrian firms would fail, which corresponds to an annual insolvency rate of 3.3%. With mitigating measures in place, the insolvency rate is significantly lower, reaching 2.1% by end-2020, and 6.9% by end-2022.
  Projected insolvency rates should be interpreted with caution. The merit of this novel approach, however, lies less in the calculated sectoral insolvency rates themselves, but in the model’s capacity to compare and rank the efficiency and efficacy of various mitigating measures. As to the current measures, we, for instance, find that credit guarantees appear most effective, followed by fixed cost support and short-time work. In the short term, delayed filing for insolvency is most efficient, but is set to mostly reverse itself in 2021, once public institutions recommence their usual practice.
  At the OeNB, the model has also been used to assess implementation delays and the extension of mitigating measures. We intend to continuously extend the model, both in terms of its core functionality and the calibration of mitigating measures to address questions from (1) a macroeconomic perspective, in particular the loss of productive capacities (potential output), (2) a fiscal policy perspective, to estimate the costs of mitigating measures, and (3) a macro- and microprudential banking supervisory perspective, to provide a basis for estimating credit default probabilities for the banking system. de insolvencies, bankruptcy, COVID-19 pandemic, forecasting, firm-level data C15, E47, G33 Mar 11, 2021, 12:00:00 AM

• How has COVID-19 affected the financial situation of households in Austria? (PDF, 845 kB) Albacete, Fessler, Kalleitner, Lindner. This study discusses the potential effects of the COVID-19 crisis on the finances of households in Austria. Different individuals and households have been exposed to the crisis in very different ways and to varying degrees. In the first part of this study, we discuss different types of households and different channels through which the COVID-19 crisis may affect households’ financial situation. The second part of the study uses data from the Austrian Corona Panel Project (ACPP) carried out by the University of Vienna as well as data from the Eurosystem Household Finance and Consumption Survey (HFCS) for Austria to analyze (potential) impacts of the crisis. We find that those households who had already found themselves in a difficult social, economic and financial situation before the COVID-19 crisis were the ones suffering the largest income losses (e.g. low-income households or households with an unemployed reference person). en COVID-19 crisis, coronavirus, Austrian Corona Panel Project (ACPP), Household Finance and Consumption Survey (HFCS) I18, H12, D14, G5 Mar 11, 2021, 12:00:00 AM

• The effects of the monetary policy response to the COVID-19 pandemic: preliminary evidence from a pilot study using Austrian bank-level data (PDF, 597 kB) Kwapil, Rieder. The Eurosystem’s monetary policy response to the COVID-19 crisis has been swift and powerful. Its policy package contained both extensions and enlargements of existing unconventional monetary policy measures, including the further loosening of their respective conditions. The Eurosystem also introduced new measures to meet the extraordinary challenge posed by the economic fallout of the COVID-19 pandemic. In this paper, we provide a pilot study to analyze the credit supply effects of one important building block of the monetary policy rescue package: the Eurosystem’s targeted longer-term refinancing operations (TLTROs). The modalities and conditions of the current vintage of TLTRO, TLTRO III, were significantly relaxed in spring 2020 in response to the COVID-19 pandemic. We draw on Austrian bank-level data and exploit an instrumental variable strategy to approximate the effects of the June 2020 TLTRO uptake on banks’ supply of new loans. We find evidence for an unambiguously positive effect of TLTRO participation on the supply of new loans in Austria. The estimated credit supply elasticity, however, differs substantially (ranging between 0.26 and 1.00), depending on the specification and caveats considered. en COVID-19, monetary policy, targeted longer-term refinancing operations, credit supply E44, E51, E52, E58 Mar 11, 2021, 12:00:00 AM

• Unprecedented fiscal (re)actions to ease the impact of the COVID-19 pandemic in Austria (PDF, 284 kB) Prammer. Austria’s public finances – both, automatic stabilizers and discretionary measures – have played a major role in easing the impact of the COVID-19 pandemic on the Austrian economy. During the two lockdowns in spring and November/December 2020, discretionary fiscal measures were mainly aimed at supporting the health care system and mitigating the effects of the lockdowns. Measures adopted after the first lockdown provided classic stimuli to boost economic activity. Initiatives to promote private and public investments followed, which, ideally, support the transition to new technologies and ways of working and thus increase the Austrian economy’s long-term growth potential. Given the high uncertainty surrounding the economic outlook, the measures taken to contain COVID-19 might, however, be less effective than during normal times. Moreover, policy measures must be unwound with caution to avoid that crisis legacy issues, such as tax deferrals or accumulated debt once the moratoria are lifted, hamper the economic recovery. At the same time, the measures should be carefully designed and targeted to avoid overcompensation of private companies at the cost of society. While the unprecedented fiscal measures and automatic stabilizers built into the budget have left their mark on Austria’s public finances, their sustainability is currently not at risk. Nevertheless, as low interest rates might not stay around forever, the high debt ratio should be reduced in the medium-term in a socially and environmentally sustainable way. en fiscal policy, automatic stabilizers, discretionary fiscal measures, COVID-19 pandemic H12, H60, H84 Mar 11, 2021, 12:00:00 AM

• Second wave of COVID-19 pandemic delays economic recovery. Economic outlook for Austria from 2020 to 2023 (December 2020) (PDF, 782 kB) Fenz, Schneider. Over the summer months, the Austrian economy recovered faster than expected from the deep slump observed in the first half of 2020. However, the current second wave of coronavirus infections in Austria caused a renewed downturn in the fourth quarter of 2020. Still, this downturn is likely to be only half as severe as the spring 2020 contraction. The further course of the COVID-19 pandemic will have a substantial impact on the future growth path of the Austrian economy. The Oesterreichische Nationalbank (OeNB) expects a strong economic recovery that rests on the following assumptions: a third wave of coronavirus infections in spring 2021 can be prevented; the related health policy measures will be phased out gradually over the first half of 2021; and a medical solution will be successfully implemented by end-2021. After real GDP growth decreased by 7.1% in Austria in 2020, the OeNB expects growth rates of 3.6% in 2021, 4.0% in 2022 and 2.2% in 2023. In the second half of 2022, Austrian real GDP growth is expected to be back at pre-crisis levels. After having surged in 2020, the saving ratio in Austria is expected to decline again quickly, thus fostering the recovery of private consumption. As a result, Austria’s growth outlook for 2020 appears virtually unchanged against the OeNB’s economic outlook of June 2020. Growth figures for 2021, in contrast, must be revised downward by 1.3 percentage points in view of the strong second wave of the COVID-19 pandemic and the related second lockdown. On the other hand, growth rates for 2022 are revised upward by 1.3 percentage points as the economic upturn is now projected to begin later in 2021 than forecast in the June 2020 outlook. The unemployment rate (national definition) will climb to 10.2% in 2020 and go down only marginally to 8.9% by 2023. A stronger rise in unemployment will be prevented by short-time work schemes. Despite the massive economic slump, HICP inflation in 2020 will decrease only moderately to 1.3%. Over the remaining forecast horizon, it will increase to 1.7%. The general government deficit (Maastricht definition) is forecast to rise to 9.2% of GDP in 2020, reflecting comprehensive fiscal stimulus packages and the effect of automatic stabilizers, before shrinking markedly to 1.4% of GDP by 2023. en Mar 11, 2021, 12:00:00 AM