EconPol Policy Briefs

Wage smoothing is beneficial for firms and workers, but wage rigidities can lead to bilaterally inefficient separations. By comparing the impact of four policy measures regarding their impact on welfare, output and government expenditures, Martin Kerndler (TU Wien) and Michael Reiter (IHS Vienna, NYU Abu Dhabi, EconPol Europe) have identified a reasonable policy mix to counter the negative employment effects of wage rigidities. 
 

This EconPol policy brief, using figures from the ifo Institute, calculates potential costs of coronavirus to the German economy of up to 729 billion, with up to 1.8 million jobs cut and six million workers affected by lower hours - however it stresses that the aim of any action must be to shorten the partial shutdown of the economy without compromising the fight against the epidemic, with strategies that combine a resumption of production with further containment of the epidemic.

The rise of China in the world economy and its growing importance as investor in industrialised and developing countries has raised concerns of policy makers in some countries. Contrary to the trade situation between China and the US, trade between the euro area aggregate and China is almost balanced. On an individual country level, Germany, Ireland and Finland record trade surpluses with China. As trade between the euro area and China is balanced, there is no need for policy action to address any imbalance, however, European markets should only be opened for Chinese companies and investment if this is reciprocated.

Video: Current Account Development Between the Euro Area and China, Klaus Weyerstrass

Bank loans continue to be the main source of external financing for small and medium-sized enterprises (SMEs), in both the Netherlands and other European countries. Businesses are using those loans for expansion, innovation or as working capital.  But Dutch SMEs are applying for fewer bank loans, and those applications are often rejected by the banks. How does SME bank financing in the Netherlands relate to other European countries, and what are the reasons for the differences?

Industrial production in the German car industry dropped by 9.4% in the third quarter of 2018, creating an immediate impact on its main trading partners and causing global and sectoral losses. The decline is mainly due to problems with the implementation of the new Worldwide Harmonized Light-Duty Vehicles Test Procedure (WLTP). As the car producing industry is the most important sector for the German economy and is deeply integrated into international value-added chains, this policy report presents estimated sectoral and
global impacts due to this sharp drop.