Cross-country evidence on the relation between equity prices and the current account

This paper explores the relationship between equity prices and the current account for 17 industrialized countries in the period 1980-2007. Based on a panel vector autoregression, I compare the effects of equity price shocks to those originating from monetary policy and exchange rates. While monetary policy shocks have a limited impact, shocks to equity prices have sizeable effects. The results suggest that equity prices impact on the current account through their effects on real activity and exchange rates. Furthermore, shocks to exchange rates play a key role as well. Keywords: current account fluctuations, equity prices, panel vector autoregressio

Cross-country evidence on the relation between stock prices and the current account

This paper explores the relation between stock prices and the current account for 17 OECD countries in 1980-2007. I use a panel vector autoregression (VAR) to compare the effects of stock price shocks to those originating from monetary policy and exchange rates. While monetary policy shocks have little effects, shocks to stock prices and exchange rates have sizeable effects. A 10% contraction in stock prices improves the current account by 0.3% after two years. Hence I find a channel, in addition to the traditional exchange rate channel, through which external balance for an OECD country with a current account imbalance can be restored

Cross-country evidence on the relation between stock prices and the current account

This paper explores the relation between stock prices and the current account for 17 OECD countries in 1980-2007. I use a panel vector autoregression (VAR) to compare the effects of stock price shocks to those originating from monetary policy and exchange rates. While monetary policy shocks have little effects, shocks to stock prices and exchange rates have sizeable effects. A 10% contraction in stock prices improves the current account by 0.3% after two years. Hence I find a channel, in addition to the traditional exchange rate channel, through which external balance for an OECD country with a current account imbalance can be restored.current account fluctuations, stock prices, panel VAR

Do monetary and technology shocks move euro area stock prices?

I use a Bayesian vector autoregressive (VAR) model to investigate the impact of monetary and technology shocks on the euro area stock market in 1987-2005. I find an important role for technology shocks, but not monetary shocks, in explaining variations in real stock prices. The identification method is flexible enough to study the effects of technology news shocks. The responses are consistent with the idea that news on technology improvements have an immediate impact on stock prices. These findings are robust to several modelling choices, including the productivity measure, omitted variables, and the identifying restrictions.monetary policy, technology shocks, news, stock prices, Bayesian VAR

Technology news and the U.S. economy: Time variation and structural changes

This paper examines the time varying impact of technology news shocks on the U.S. economy during the Post-World War II era using a structural time varying parameter vector autoregressive (TVP-VAR) model. The identification restrictions are derived froma standard new Keynesian dynamic stochastic general equilibrium (DSGE) model and hold for a wide range of parameter constellations. In addition, the set of restrictions is sufficient to discriminate technology news shocks from other supply and demand side disturbances - technology surprise shocks among them. Overall, there is little evidence that the variance of technology news shocks or their transmission to real activity and inflation has changed over time. However, I detect significant time variation in the endogenous monetary policy reaction to technology news shocks; responding strongly to inflation most of the time, but less during the Great Inflation period. The evidence of this paper thus supports the hypothesis that the high inflation rates of the mid and late 1970s were the result of bad policy rather than bad luck.technology news shocks, business cycles, monetary policy, DSGE models, structural time varying parameter VARs

VAR-Modelle und der Zusammenhang zwischen Aktienpreisen und der Makroökonomie

This dissertation consists of three essays, which study the relation between stock prices and the macroeconomy using vector autoregressions (VARs). The first essay focuses on the link between stock prices and the current account. I find that stock markets provide a channel, in addition to the traditional exchange rate channel, through which external balance for a country with a current account imbalance can be restored. The second essay explores the transmission of U.S. stock price shocks to real activity and prices in G-7 countries. I achieve identification by imposing a small number of sign restrictions on impulse responses, while controlling for monetary policy, business cycle and government spending shocks. The results suggest that stock price movements are important for fluctuations in G-7 real activity and prices, but do not qualify as demand side business cycle shocks. The third essay investigates the impact of monetary and technology shocks on the stock market. I find an important role for technology shocks, but not monetary shocks, in explaining variations in real stock prices. The identification method is flexible enough to study the effects of technology news shocks. The responses are consistent with the idea that news on technology improvements have an immediate impact on stock prices.Die vorliegende Dissertation besteht aus drei thematisch verwandten Aufsätzen, die den Zusammenhang zwischen Aktienpreisen und makroökonomischen Variablen mit Vektor Autoregressiven (VAR) Modellen untersuchen. Ich analysiere den Zusammenhang von Aktienpreisen und Leistungsbilanz (Kapitel 1), die Transmission amerikanischer Aktienpreisbewegungen zur Realwirtschaft und zu gesamtwirtschaftlichen Preisen in den G7 Ländern (Kapitel 2) und die Effekte geldpolitischer und technologischer Schocks auf den europäischen Aktienmarkt (Kapitel 3). Ich finde in Kapitel 1 keinen nennenswerten Einfluss geldpolitischer Schocks auf die Leistungsbilanz. Im Gegensatz dazu haben Aktienpreis- und Wechselkursbewegungen einen beachtlichen Einfluss auf die Leistungsbilanz. Ein Anstieg der Aktienpreise von 10% hat eine Verschlechterung der Leistungsbilanz um 0,3 Prozentpunkte zur Folge, während eine Aufwertung der heimischen Währung in gleicher Größenordnung einen negativen Effekt von 0,4 Prozentpunkten hat. Die Ergebnisse von Kapitel 2 deuten darauf hin, dass amerikanische Aktienpreis-Schocks eine nicht zu vernachlässigende Größe sind wenn es um die Analyse von Schwankungen in der realwirtschaftlichen Aktivität und den gesamtwirtschaftlichen Preisen in G7 Ländern geht. So erklären sie zwischen 9% und 40% der Schwankungen in der realwirtschaftlichen Aktivität der Vereinigten Staaten und zwischen 12% und 16% für die restlichen G7 Länder. Des Weiteren sind für alle G7 Länder zwischen 10% und 21% der Schwankungen des BIP Deflators die Folge von Aktienpreis-Schocks. Die Ergebnisse in Kapitel 3 deuten an, dass Technologie-Schocks aber nicht geldpolitische Schocks eine wichtige Rolle bei der Erklärung von Aktienmarktbewegungen spielen. Technologie-Schocks eklären etwa 22% der Schwankungen im Aktienmarkt während der Erklärungsgehalt von geldpolitischen Schocks bei unter 5% liegt. Insbesondere während des Auf- und Abschwungs der Jahre 1995-2003 sind Technologie-Schocks für nahezu alle Schwankungen verantwortlich. Ich finde auch einen signifikanten Effekt von Neuigkeiten über technologische Innovationen auf den Aktienmarkt

Time Varying Fiscal Multipliers in Germany

This paper provides novel evidence on the time varying impact of government spending shocks on output in Germany over the years 1970 to 2013. In a first step, I use an expectations-augmented vector autoregressive model with time varying parameters (TVP-VAR) to show that fiscal multipliers are not stable over time but exhibit a u-shaped pattern. While multipliers fluctuate around 2 at the beginning and end of the sample, they are much smaller in between. In a second step, I discuss which factors determine the magnitude of German multipliers and hence explain the observed variation. It turns out that fiscal policy is more effective when business uncertainty is high but less in periods of financial market stress, while the state of the business cycle is minor important. Moreover, I find that fiscal sustainability is a crucial determinant of the multipliers and that these are about 1 euro higher since the loss of monetary policy autonomy due to the adoption of the euro. And finally, I conclude that policy recommendations based on average multipliers are misleading

Business Uncertainty and the Effectiveness of Fiscal Policy in Germany

This paper explores how business uncertainty affects the effectiveness of fiscal policy in Germany in the years 1970 to 2014. I use measures of business uncertainty that are derived from the firm-level data of the Ifo Business Climate Survey and interact them with the parameters of a structural vector autoregression to produce state-dependent spending multipliers. I observe that fiscal policy is most effective when uncertainty is high and that the difference in multipliers across uncertainty levels is largest for longer-term horizons. The results also point to a prominent role for business confidence in the state-dependent transmission of spending shocks to output. The findings have an important implication for stabilization policies. Since monetary policy is less effective during volatile episodes, fiscal policy is the better tool to stimulate the economy in uncertain times

Business Uncertainty and the Effectiveness of Fiscal Policy in Germany

This paper explores how business uncertainty affects the effectiveness of fiscal policy in Germany in the years 1970 to 2014. I use measures of business uncertainty that are derived from the firm-level data of the Ifo Business Climate Survey and interact them with the parameters of a structural vector autoregression to produce state-dependent spending multipliers. I observe that fiscal policy is most effective when uncertainty is high and that the difference in multipliers across uncertainty levels is largest for longer-term horizons. The results also point to a prominent role for business confidence in the state-dependent transmission of spending shocks to output. The findings have an important implication for stabilization policies. Since monetary policy is less effective during volatile episodes, fiscal policy is the better tool to stimulate the economy in uncertain times

Multivariate Forecasting with BVARs and DSGE Models

In this paper I assess the ability of Bayesian vector autoregressions (BVARs) and dynamic stochastic general equilibrium (DSGE) models of different size to forecast comovements of major macroeconomic series in the euro area. Both approaches are compared to unrestricted VARs in terms of multivariate point and density forecast accuracy measures as well as event probabilities. The evidence suggests that BVARs and DSGE models produce accurate multivariate forecasts even for larger datasets. I also detect that BVARs are well calibrated for most events, while DSGE models are poorly calibrated for some. In sum, I conclude that both are useful tools to achieve parameter dimension reduction