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The German Economy: A Comprehensive Analysis of Data, Models, and Institutions

This paper provides a thorough examination of the German economy, including data, models, and institutions. It explores the factors contributing to its resilience and analyzes the role of expectations, wage moderation, and other factors. The paper also discusses the impact of private sector working time accounts, public sector short time work, and raises important questions about the narrow focus on stylized facts, expectations, sectoral shocks, longer-term trends, and the inclusion of relevant institutions. The analysis compares the German and US economies as well as boom/bust countries with others.

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The German Economy: A Comprehensive Analysis of Data, Models, and Institutions

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  1. Discussion: Burda/Hunt Helge Berger

  2. In a nutshell • A very good and comprehensive paper that takes a look at data, model, and institutions • Miracle decomposition 40 percent = expectations 20 percent = wage moderation 40 percent = other • private sector working time accounts • public sector short time work • ?

  3. Questions • Too narrow look at stylized facts? • Asking a lot of expectations? • Stress sectoral nature of shock enough? • Missing a longer term trend? • Coherent story including all relevant institutions?

  4. Only DEU vs. US?

  5. Boom/bust countries vs. others!

  6. (Some qualifications…) Source: Schindler (2011).

  7. Expectations over-stressed? • Firms first underestimate the resilience of the German economy (explaining ‘underhiring’ prior to the crisis)… • …but then are firmly convinced that the “great recession” will be quite short (explaining ‘underfiring’ during the crisis) • Too strong assumptions?

  8. Sectoral shock under-stressed? • For DEU, shock was very specific • Would expectations have mattered as much in services sector? • Manufacturing • Longer planning horizon • Larger skilled worker constraint • Higher capacity for time accounts

  9. Missing an improving trend… Simulations* Source: Schindler (2011), Lam (2011) *Search model: u_t+1 = u_t (1-a) + (1-u_t) d (w/ d=1/2; u_ss; a)

  10. …missing employment impact? • Counterfactual would be “better” than actual employment figures, leading to a larger notional loss during ‘grand recession’ • Estimates: • Pre-crisis unemployment = 7.2 percent • Crisis peak (so far): 7.6 percent • Simulated: about 8.2 percent

  11. Missing institutions? • Fiscal policy, unions,… • Labor courts (B/Danninger 2006; B/Neugart 2011a/b)

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