Leading indicators still point to favourable cyclical conditions in Austria until the end of 2018. GDP growth for the year
as a whole is set to reach 3 percent. Currency crises in some emerging market countries, lack of clarity about the further
course of US trade policy, and uncertainty surrounding the terms of Brexit increasingly strain international trade and with
it business activity in highly export-oriented economies. These factors will dampen GDP growth also in Austria, which is expected
to receed to 2 percent in 2019.
The Austrian economy continued to grow at a strong pace in the late summer of 2018, although the trend toward declining unemployment
slowed. In the euro area, growth remains stable, albeit modest. The US economy has benefitted from expansive fiscal policy,
posting particularly strong growth rates. Recent trade-policy signals have been stoking uncertainty. This, in combination
with a sharp depreciation in emerging market currencies, has had a dampening effect on global trade, with potential knock-on
effects for export-oriented industrialised economies.
After a rather sluggish growth at the beginning of the year, economic activity in the USA gained considerably momentum in
the second quarter. In the EU, following a weak start, economic growth stabilised in the second quarter, although it slowed
again in the euro area. The economy in Austria continues to expand strongly. Despite growth slowing down in comparison to
previous quarters, GDP continues to expand faster than in the average of euro area countries. Unemployment dropped again in
Using a sample of 19 advanced countries from 1990 to 2014 and an Arellano – Bover-Blundell – Bond linear dynamic GMM estimator
along with a bootstrap-based bias correction fixed effects estimator for dynamic panels, the paper examines the macroeconomic
impact of collective bargaining structures in a context of varying intersectoral heterogeneity in productivity growth among
the exposed and sheltered sectors of the economy. Results show a dampening impact of pattern and centralised bargaining structures
on unemployment. However, strong domestic demand is a key precondition for such a favourable effect to materialise. Uncoordinated
and centralised bargaining structures are the most efficient in terms of labour cost restraint while industry bargaining moderates
labour cost growth as intersectoral productivity differentials widen.
The advent of global financial crisis in 2008 unleashed volatile short-term capital flows to the emerging markets. This has
forced many central banks in the developing world to adopt innovative policy measures to address concerns related to financial
instability caused by the volatile nature of capital flows. In 2010 the Turkish Central Bank included financial stability
in addition to price stability as one of the primary goals of its monetary policy. Several macro-prudential measures had been
taken and "corridor system" of setting the short-term policy rates had been introduced. In this paper, we have estimated an
extended Taylor rule, using error correction model, to examine the impact of global financial factors in impacting the setting
up of the policy rate in the pre and post 2010 periods in Turkey. It has been found that in the post-2010 period, global financial
factors and monetary policy stance of the core economy, USA, have become major factors in shaping up the monetary policy.
Particularly our results of variance decomposition show that global financial indicators such as VIX and EMBI have taken prominence
in the setting of the short-term policy rate. This has not only made the domestic monetary policy more dependent on external
factors but has also made it pro-cyclical in nature.
José Carlos Vides, Antonio A. Golpe, Jesús Iglesias
This paper examines financial integration among stock markets in the Eurozone using the prices from each stock index. Monthly
time series are constructed for four major stock indices for the period between 1998 and 2016. A fractional cointegrated vector
autoregressive model is estimated at an international level. Our results show that there is a perfect and complete Euro financial
integration. Considering the possible existence of structural breaks, this paper also examines the fractional cointegration
within each regime, showing that Euro financial integration is very robust. However, in the financial and sovereign debt crisis
regime, IBEX 35 appears to be the weak link in Euro financial integration, unless Euro financial integration recovers when
this period ends.
This paper investigates the empirical relationship between military spending and economic growth in a large panel of advanced
and developing countries over the period 1984–2014, with a particular focus on whether the growth impact of military expenditures
varies with the type and level of security threats. Although there is extensive literature on the military-growth nexus, there
is still no consensus on the nature and magnitude of this relationship. Using an expansive dataset and controlling for country-specific
effects and potential endogeneity, we revisit this issue and reach two firm conclusions: First, military spending has no statistically
significant direct (positive) effect on growth. Second, the nature and level of security threats do not alter the relationship
between military spending and growth. Overall, the empirical results documented in the study suggest that military spending
is simply not important or large enough in most countries to have a meaningful impact on growth.