OeNB Bulletin Q3/24

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• OeNB Bulletin Q3/24 (PDF, 10.1 MB) September 2024

Studies and Analyses

• The role of inflation subcomponents: applying maximally forward-looking core inflation to euro area countries (PDF, 6.7 MB) Greso, Klieber. For well-informed monetary policy decisions, central banks gather a wide range of data on the state of the economy, including several inflation measures. When pursuing a forward-looking monetary policy, policymakers ideally rely on measures that indicate where inflation is heading in the medium term, e.g. when shocks to the economy will have disappeared. To complement the set of inflation measures commonly used in the decisionmaking process, we construct maximally forward-looking core inflation, as proposed by Goulet Coulombe et al. (2024), for the euro area and its seven largest economies. Since the euro area aggregate summarizes diverse economic conditions and responses to shocks within the region, constructing maximally forward-looking core inflation for individual member states provides additional insights into the heterogeneity and commonalities across countries. Overall, our results confirm our measure’s strong performance in predicting medium-term inflation developments, which holds for all economies in the set. We identify key economic sectors that provide useful signals for future headline inflation and find a broad consistency across the seven largest euro area economies. en underlying inflation, inflation forecasting, inflation subcomponents, euro area C53, E31, E37, E52 Aug 30, 2024, 12:00:00 AM

• Macroeconomic effects of carbon prices – a cross-country perspective (PDF, 6 MB) Džubur, Pointner. In the fight against climate change, the EU has set ambitious targets for its member states to decarbonize their economies by 2050. While carbon prices are among the proposed policy instruments to reduce greenhouse gas emissions, the carbon taxes currently in place are nowhere near the levels that would reduce emissions sufficiently. We use a globally integrated forecast model to simulate the introduction of carbon prices that reduce emissions to the EU’s targets, assuming that carbon prices are the only effective climate policy, while in reality, a bundle of policy measures will be necessary to reach these targets. Then we assess the effects of these prices on GDP and inflation as well as the potential tax revenues generated by these prices. The results highlight the multifaceted impact of high carbon prices within the euro area: We find that we would need a sharply increasing average carbon price – from the actual price of EUR 43/t CO2 in 2024 to EUR 668/t by 2030 – to achieve the planned reduction for the euro area aggregate, although the required price changes vary across member states. The macroeconomic effects seem manageable at the euro area level, with a cumulative GDP loss of –2.2% and a cumulative increase in the consumer price index (CPI) of 6.4 percentage points from 2024 to 2030. However, for countries with a low share of renewable energy capacities and a strong reliance on fossil fuels in production, combined with low incomes, the impact on GDP and inflation may be double the size of the euro area average. For countries that have already undertaken ambitious investments in the green transition the effect on GDP is only half of the euro area average and significantly lower for consumer prices. We show that carbon pricing may be a very powerful tool to reduce emissions. However, the heterogeneity of economic impacts across member states highlights the need for coordinated support and targeted investment in renewable energy capacities, which could be partially funded by the tax revenues obtained from carbon pricing. en carbon taxes, energy prices, inflation, GDP E31, H23, Q54 Sep 12, 2024, 12:00:00 AM

• The (de)globalization of migration: has the polycrisis period changed the patterns of global migration? (PDF, 7.4 MB) Fitter, Raggl, Ramskogler. Migration is a hotly discussed issue, and while the magnitude of migration is a frequent topic of debate, there is less discussion about its patterns (i.e. the diversity of migration). Yet, there is accumulating evidence that higher cultural heterogeneity among immigrants – a result of more globalized migrants – has positive impacts on productivity growth and innovation in destination countries and thus, ultimately, affects monetary policy. But is migration really becoming more globalized (i.e. more heterogenous), or is there evidence for recent (de)globalization trends, often attributed to flows of goods and capital? We address this question by composing an index of the globalization of migration that comprises three dimensions of global migration, following Czaika and de Haas (2015): the intensity – or relative magnitude – of migration, its diversity with respect to origin and destination countries, and the average distance of migration routes. These dimensions are combined to obtain an index of migration globalization that allows us to assess not only the degree of migration globalization, but also each country’s integration in global migration processes. Using migration flow estimates for 1990–2020, we find that migration continued to become more globalized in the past three decades, but this upward trend started to flatten out after the period 2005–10. The intensity of global migration flows did not increase between 1990 and 2020. The spread of global emigrants across destination countries widened in these three decades, while the diversity of global immigrants with respect to their home countries changed little and remained at a high level. This constitutes a change in the trend seen in earlier decades, when migrants from increasingly different origin countries moved to a narrowing set of destination countries. en international migration, bilateral migration, (de)globalization, diversification of migrants F22, F60, J11 Sep 24, 2024, 12:00:00 AM