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Mr. Martin Schindler

Abstract

While the German economy, with a GDP decline of 4.75 percent in 2009, was among the hardest hit during the financial crisis, the impact of the crisis on its potential output is estimated in this chapter to have been comparatively mild and transitory, with virtually no potential output loss in the long term. This outcome reflects both a more flexible economic structure, resulting from past reforms, and, importantly, the nature of the shock—a temporary drop in external demand. The temporary nature of the shock meant that no large-scale structural shifts in employment were necessary, so employers were inclined to retain workers and adjust hours per worker instead. This incentive was buttressed by policy measures during the crisis, but more importantly also by longer-standing labor market improvements regarding hourly flexibility. With employment levels and, especially, hours, returning to pre-crisis levels, the impact on potential GDP was limited, and the evidence suggests that a medium-term convergence of potential output to its pre-crisis trend is likely. However, there is little indication that long-term potential growth will rise above its meager historical rate of about 1.25 percent. Increasing potential growth in the medium and long term will require sustained efforts to reverse the declining secular trend in Germany’s productivity growth and to raise its low total factor productivity (TFP) growth.

Mr. Martin Schindler

Abstract

Germany’s employment fell only marginally during the crisis, despite a sharp drop in output and in contrast to historical employment patterns over the business cycle. This paper offers new perspectives on the apparent “puzzle” of the German labor market response. Labor market developments during the crisis are consistent with a view that Germany experienced mainly a temporary demand shock, necessitating relatively little sectoral reallocation and with employers therefore adjusting hours of work while retaining workers. The labor market dynamics also provide evidence that past reforms, including especially the Hartz reforms during the early 2000s, enabled the labor market to react in a way that previously had not been possible to the same extent. These reforms facilitated a shift from adjustment in the number of individuals employed to adjustments in hours. Thus, while the employment decline was smaller than expected based on past dynamics, the reduction in hours worked was more in line with the drop in output. And lastly, the moderate employment decline during the crisis reflected the longer-term structural changes in the labor market. The upward momentum in employment stemming from the earlier reforms held back the adverse crisis impact.

Mr. Martin Schindler

This paper describes a newly constructed panel data set containing measures of de jure restrictions on cross-border financial transactions for 91 countries from 1995 to 2005. The new data set adds value to existing capital control indices by providing information at a more disaggregated level. This structure allows for the construction of various subindices, including those for individual asset categories, for inflows vs. outflows, and for residents vs. nonresidents. Disaggregations of this kind open up new ways to address questions of interest in the field of international finance. Some potential research avenues are outlined.

Mr. Martin Schindler

Abstract

Five years after the onset of the global financial crisis, Europe’s economy is still fragile. Notwithstanding recent positive signs amid calmer financial markets, medium-term growth is likely to remain frail owing to continuing weaknesses and vulnerabilities at the country level and in the fabric of European institutions and banks, especially in the euro area. In addition, unemployment in many countries has reached very high levels. The IMF research collected in this volume provides a number of guideposts that offer an opportunity for stronger and better-balanced growth and employment in Europe after what has been a long and dismal period of crisis.

Mr. Martin Schindler

Abstract

The magnitude of cross-border financial assets holdings has grown in recent years at rising speed, from under 50 percent of world GDP in 1970 to over 300 percent in 2006, and doubling over just the last 10 years (see Figure 7.1). A more financially integrated global economy brings many opportunities, such as improved access to capital and more potential for risk diversification, but the increasing ease at which capital can flow into and out of countries may also carry risks: reversals of capital flows, for example, have contributed to financial crises, and more recently, large net capital flows into the United States may have contributed to the U.S. housing bubble. The ensuing recent subprime mortgage crisis underscored the fact that financial integration binds different parts of the world in good times and bad—in a financially integrated world, market participants in one part of the global economy are no longer sheltered from events emanating in another.

Mr. Martin Schindler

Abstract

The magnitude of cross-border financial assets holdings has grown in recent years at rising speed, from under 50 percent of world GDP in 1970 to over 300 percent in 2006, and doubling over just the last 10 years (see Figure 7.1). A more financially integrated global economy brings many opportunities, such as improved access to capital and more potential for risk diversification, but the increasing ease at which capital can flow into and out of countries may also carry risks: reversals of capital flows, for example, have contributed to financial crises, and more recently, large net capital flows into the United States may have contributed to the U.S. housing bubble. The ensuing recent subprime mortgage crisis underscored the fact that financial integration binds different parts of the world in good times and bad—in a financially integrated world, market participants in one part of the global economy are no longer sheltered from events emanating in another.

Mr. Martin Schindler
Mr. Martin Schindler

Despite improvements in labor market performance over the past decade, owing in part to past reforms, Italy's employment and productivity outcomes continue to lag behind those of its European peers. This paper reviews Italy's institutional landscape and labor market trends from a cross-country perspective, and discusses possible avenues for further reform. The policy discussion draws on international reform experience and on simulations based on a calibrated labor market matching model. A key lesson is that the details of reform design, and the sequencing of reforms, matter greatly for labor market outcomes and for the fiscal costs associated with these reforms.

Mr. Martin Schindler
Despite improvements in labor market performance over the past decade, owing in part to past reforms, Italy's employment and productivity outcomes continue to lag behind those of its European peers. This paper reviews Italy's institutional landscape and labor market trends from a cross-country perspective, and discusses possible avenues for further reform. The policy discussion draws on international reform experience and on simulations based on a calibrated labor market matching model. A key lesson is that the details of reform design, and the sequencing of reforms, matter greatly for labor market outcomes and for the fiscal costs associated with these reforms.