Monetary Policy and the Economy Q4/09

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• Monetary Policy and the Economy Q4/09 (PDF, 1.9 MB) December 2009.

Studies and Analyses

• Sluggish Economic Recovery – Conditions in the Labor Market Remain Strained<br />Economic Outlook for Austria from 2009 to 2011 (December 2009) (PDF, 353 kB) Fenz, Schneider. Fenz, Schneider – Monetary Policy and the Economy Q4/09 Economic Outlook for Austria from 2009 to 2011 (December 2009) en forecast, Austria C5, E17 Dec 31, 2009, 12:00:00 AM

• Fiscal and Structural Policy Challenges Created by the Economic Crisis of 2008–2009 (PDF, 605 kB) Grossmann, Janger, Reiss. Grossmann, Janger, Reiss – Monetary Policy and the Economy Q4/09 The economic crisis of 2008–2009 has greatly compounded the challenge of economic policymaking at the EU level and at the national level. This study focuses on the related real economy aspects, namely on fiscal and structural policies. Judging from current trends, Austria will most probably not be able to reduce its high deficits of 2009 and 2010 via economic growth alone. Furthermore, the repercussions of the crisis on public finances are going to be exacerbated in the medium term by the implications of demographic change. These developments result in a considerable need for consolidation, which will go significantly beyond the need to finance the economic stimulus packages ex post – but by how much cannot be estimated precisely as yet. At any rate, it will be important to coordinate the necessary consolidation measures internationally, not to undertake consolidation before the economic recovery becomes self-sustained, and to avoid conflicts with other economic policy goals. Having analyzed the medium- to long-term structural growth potential which may support fiscal consolidation, we find Austria to have got some catching-up potential in terms of labor supply and productivity compared with typical comparison countries. This catching-up potential is good news, as this means that Austria should find it easier than other countries to revive growth. With a view to offsetting the crisis-related loss in potential growth in the medium term, which would materially support consolidation efforts, policymakers could leverage growth above all by raising employment, improving the education system, enhancing competition policies and reforming innovation funding. Economic policymakers in Austria and elsewhere have indeed got the power to influence the growth path after the crisis. en economic growth, structural reforms, financial crisis, fiscal consolidation H6, O38, O52 Dec 31, 2009, 12:00:00 AM

• Austrian Households’ Equity Capital – Evidence from Microdata (PDF, 595 kB) Andreasch, Fessler. Andreasch, Fessler, Schürz – Monetary Policy and the Economy Q4/09 To date, research on household wealth has seldom focused on households’ business equity holdings. Such equity stakes represent above all ownership in domestic limited liability companies. This study for the first time provides an empirical analysis of the distribution of Austrian households’ equity stakes in limited liability companies. For our analysis, we draw on data from three sources: the Company Register, a commercial database and the OeNB’s 2004 Survey on Financial Household Wealth. In 2005, some 3% of Austrian households possessed equity capital worth around EUR 22.3 billion, which equaled about 6% of total financial wealth. These equity investor households are characterized by above-average incomes and wealth. Compared with the other households, they are also much more frequently invested in risky assets, tend to own their principal residence and have considerably higher education levels. Such equity holdings are highly concentrated even within this group of investor households. en households, business assets, private foundations, wealth distribution, limited liability C80, D14, D31, D43, E21, L11 Dec 31, 2009, 12:00:00 AM

• Wage Staggering and Wage Leadership in Austria – Review and Implications (PDF, 466 kB) Knell, Stiglbauer. Knell, Stiglbauer – Monetary Policy and the Economy Q4/09 This study examines the importance of wage staggering and wage leadership in the Austrian system of collective bargaining. Collective wage agreements in Austria generally remain valid for one year and are staggered; the highest concentrations of new agreements can be found in the months of January, May and November each year. The relevant literature describes Austrian wage bargaining as a system of wage leadership, with the agreement reached by the metal workers, which usually goes into effect in early November of each year, setting a precedent for wage agreements reached by other sectors in the ensuing months. Through an analysis of detailed individual series from the Index of Agreed Minimum Wages, it is actually possible to provide empirical evidence for the existence of wage leadership. The results also show that the wage-leading metal sector is substantially more sensitive to macroeconomic forecasts than the other sectors are. This phenomenon and the rapid transmission to the sectors that follow are probably key reasons why empirical evidence of high real wage flexibility has been found in Austria. en staggered wage contracts, wage leadership, collective wage agreements, Austria E31, E32, E24, J51 Dec 31, 2009, 12:00:00 AM

• Actual Implications of the Current Economic Crisis for Austrian Enterprises – Results of a Company Survey (PDF, 366 kB) Kwapil. Kwapil – Monetary Policy and the Economy Q4/09 This article is based on the results of a survey conducted among 731 Austrian companies and supplements the known macroeconomic facts about the current economic crisis with micro data. While a decline in demand was the main challenge companies faced, they also had to cope with financing problems and customers’ payment difficulties. 16% of Austrian companies reported major or even severe financing difficulties owing to the crisis, with small enterprises feeling a greater impact than large firms. Furthermore, the survey showed that the crisis caused enterprises to increasingly save on wage costs. Here, companies hit hard by the crisis cut costs primarily through layoffs, followed by a reduction in working hours. Although base wages were cut more frequently than in economically calm times, this measure continued to be the exception rather than the rule even during the crisis, which indicates the existence of nominal wage rigidities in Austria. en wage rigidities, demand shock, survey data C25, E24, J30 Dec 31, 2009, 12:00:00 AM

• Determinants of Crude Oil Prices: Supply, Demand, Cartel or Speculation? (PDF, 1 MB) Breitenfellner, Cuaresma, Keppel. Breitenfellner, Cuaresma, Keppel – Monetary Policy and the Economy Q4/09 Understanding the factors driving crude oil price developments is essential for assessing their effects. This paper examines four groups classifying a total of some thirty potential determinants of crude oil prices: fundamental factors, i.e. supply and demand, factors relating to the structure of the crude oil market (OPEC), and factors associated with the behavior of financial market participants (speculation). Bayesian Model Averaging (BMA) allows us to analyze a multitude of potential explanatory variables under model uncertainty and to quantify their robustness in explaining oil price inflation (price changes in percent). The results of our analysis suggest that the significance of individual factors varies over time. While no single factor dominates throughout the entire period under review (1983 to 2008), models explaining short-term movements in oil prices should always include headline inflation indicators and take into account the persistence of oil prices. In the 1990s, also the production quota of Saudi Arabia – a factor relating to the market structure – played a significant role; in the 2000s, both supply and demand (European demand for oil and refining capacities) have been highly important factors. The results of our analysis do not preclude the possibility that determinants other than those discussed here may become significant in the long run. While fundamental shortage conditions play a key role in driving up the price. en oil price, Bayesian model averaging Q30, Q31, C11, C52 Dec 31, 2009, 12:00:00 AM