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Recent Publications & Events

Presentation: 'Transformation of the fiscal framework of the euro area'.
85th International Atlantic Conference, London 14-17 March 2018.

Comments on Alisa Giarette and Giusy Chesini (University of Verona, Italy): Digital innovation and profitability:  Evidence from European financial institutions'.

85th International Atlantic Conference, London 14-17 March 2018.

Presentation: '
A fire department for the Euro area: reflections on a fiscal risk-sharing capacity'.
14th Annual meeting of the German Keynes Society, Frankfurt/Main, 19th/20th January 2018; abstract see below in my working paper.

Presentation: 'The controversy on competitiveness and capital flows as factors of current account imbalances in the Euro area'.
Research Seminar, Faculty of Economics, Technical University of Chemnitz, 30. January 2018.


I argued that financial expansion and integration in the euro area is responsible for trade imbalances and changes in cost competitiveness positions. The theoretical background is Keynes’ liquidity preference theory, which is applied to the relationship between the financial sector and business investment. In such a setting, relative unit labor costs are endogenous to financial movements. Empirical tests indicate a statistical causality running from capital flows to unit labor costs. Separate regressions show that capital in- and outflows determine potential capital gains and bank lending rates, and that capital gains and shrinking lending rates have a positive effect on business investment.

The lecture was based upon a paper you may download free of charge:

Working Paper:‘A fire department for the Euro area: reflections on a fiscal risk-sharing capacity’. MPRA Working paper No. 83965, January 2018. Free download https://mpra.ub.uni-muenchen.de/83965/


This study investigates the necessity of and options for a central fiscal risk-sharing capacity in the Euro area. How can these aims be reconciled with the member countries’ responsibility for sound fiscal policy that also considers constitutional sovereignty, institutional efficiency and economic effectiveness? As a result, such a capacity can be created as an overlay over the existing fiscal framework without treaty changes and can complement it according to the distinct features of the monetary union. A stabilization fund dedicated to investment appears to be the best solution in light of the applied criteria.

Conference presentation: Conference on European Economic Integration 2017, Austrian National Bank November 20-21, Vienna

Title of presentation: Reforming EU frameworks or EU countries? Reflections on a public risk-sharing capacity for the Euro area. 


When one advocates reforms of the framework of the EU, one has to think about solutions that respect the unique political character of the EU. Proposals of a super-state, similar to other federations, would produce much resistance. On the other hand, the recent crises challenge the existing architecture of the union, and something must be done. I think, what Europe needs is a new project, a vision, based on a new understanding of sovereignty as also President Macron recently recognized. My response to his call is simple. Instead of replacing or transferring national sovereignties, let us create new sovereignties on the EU level.

Let me exemplify this idea using the example of the controversial debate on a central fiscal risk-sharing capacity in the monetary union. Compared to other monetary unions, fiscal risk sharing is almost nonexistent, both in the EU and the euro area. The Maastricht-Treaty establishes a fiscal discipline regime in the monetary union, but contains no common provision to deal with spillover effects of fiscal adjustment programs. Everything is left in the hands of individual countries. Many commentators argue that this lack has contributed to aggravate the severity of the economic downturn in the euro periphery and may have delayed the recovery in the entire area. I would add that this crisis strengthened the mistrust into the EU as a whole and the Western values.

In particular, the Maastricht-Treaty does not reflect that

  •       asymmetric shocks are transformed into common shocks due to more trade and financial integration, and amplitudes across countries show increasing divergence,
  •  country traditions and reforms of the social and tax systems caused the cyclical sensitivity of public budgets to differ between member countries (this includes strongly unequal income multipliers of automatic adjustments and, hence negative spillover effects across countries),        
  • monetary and fiscal policies are not complete substitutes, at least not at the zero lower bound and ‘diminishing returns to unconventional monetary policies’. Centralized monetary policy becomes ineffective in the case of a common shock.

With all this at hand, the community might want to protect against negative spillovers from reform actions undertaken unilaterally by one or more countries. The analogy I propose to imagine is a  fire department. Its task is not only to extinguish a broken out fire, but also to prevent its spreading to the neighborhood.  

But, is  a central fire department, speak: fiscal risk-sharing capacity, possible without a change of the treaties and the transfer of national sovereignty to a centre? I believe, yes, it is. A new institution, created by an intergovernmental contract, may represent a new sovereignty. Instead of taking national sovereignties and transferring them to a central level, the creation of new sovereignties at the EU level is possible. Expressions of his concept are a European Unemployment Insurance system or a Stabilization Funds dedicated to compensate for discretionary cuts of national budgets’ investment expenditure, which is the first victim when governments are requested to consolidate according to the present framework.

 The central fiscal capacity would be an overlay over the existing system, completing it according to the distinct features of the monetary union as being a federation of single nation-states. The capacity would balance the common risks from different country systems. It would also make the existing fiscal framework more reliable. The principle of ‘sound fiscal policy’ at the national level can be reconciled with the principle of functional finance at the central level.

See the long version of my contribution at:


'Monetary policy independence reconsidered: evidence from six non-euro members of the European Union'

Empirica August 2017, Volume 44, Issue 3, pp 567–584

This study measures the degree of de-facto monetary policy independence of a national central bank. This measurement might allow a central bank to assess the gains and losses in sovereign affecting the national money market when the country’s own currency is given up and a common one is adopted. The study applies a multivariate GARCH-model to the money market rates of six members of the European Union (EU) that have not adopted the common currency. It finds that the central banks of Sweden, Romania, and Poland would not lose considerable de-facto independence by adopting the euro. Their daily money market rates co-move strongly with the euro money market rates, which is a sign of already low monetary policy dependence despite floating exchange rates. This result confirms other research with co-integration techniques, although the coefficients of co-movement with the euro money market are lower in the present study. Lower coefficients can be explained by the impact of non-mean reverting money market rates after heavy shocks in turbulent market periods, which slacken the co-movement ties. The opposite results were obtained for the central banks of the UK, the Czech Republic and Hungary. Hungary is a problematic case: notwithstanding a low co-movement of money market rates with the euro market rates, the almost explosive volatility of money market rates after a shock signals a very poor effectiveness of monetary policy.

Download info: https://link.springer.com/article/10.1007/s10663-016-9337-3?wt_mc=Internal.Event.1.SEM.ArticleAuthorAssignedToIssue

Artikel: '‘Explaining trade imbalances, in the euro area: Liquidity preference and the role of finances’

PSL Quarterly Review, vol. 70, n. 280 (June 2017), 155-184. 

The contribution of the study to the already abundant literature on EA trade imbalances is twofold: (i) it intends to demonstrate a causal relationship between finance and the real economy; and (ii) it tests this claim empirically, mainly through causality tests and regression analyses of capital gains and of an expectation-augmented investment model. I claim that the effective demand of an EA member, its trade balance and cost competitiveness may be endogenous to movements in EA capital markets.

Free download: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/

Presentation: 'Kapitalmarktunion und Risikoteilung: Zur Problematik eines  Plans der EU-Kommission'

Der Vorschlag der EU-Kommission für eine Kapitalmarktunion basiert auf der Idee der Risikoteilung durch Finanzmarktintegration, so dass dadurch in einem nicht-optimalen Währungsraum Schocks ohne fiskalische Transfers abgefedert werden können. Ich argumentiere, dass Risikoteilung zwar das individuelle Risiko eines Investors zu verringern vermag, aber das systemische Risiko für eine Finanzkrise erhöhen kann, wenn finanzielle Schocks zu einer Kaskade von Zusammenbrüchen im finanziellen und nicht-finanziellen Sektor führen.

 Vortrag vor der deutschen Keynes-Gesellschaft anlässlich ihrer Wiener Tagung am 20. und 21. Februar 2017 zu dem Themenschwerpunkt "Keynes, Geld und Finanzen".

Download: https://www.researchgate.net/publication/313891507_Kapitalmarktunion_und_Risikoteilung_Zur_Problematik_eines_Plans_der_EU-Kommission

Artikel: 'Zur Kritik der Kapitalmarktunion'.  Wirtschaftsdienst 12/2016, S. 1-9.

Ich argumentiere, dass die Liberalisierung der Kapitalmärkte weltweit und in der Europäischen Union zur Aufhebung der traditionellen Trennung zwischen bankbasierter und marktbasierter Finanzierung geführt hat. Dadurch sind hybride Kapitalmärkte entstanden, bei denen die Verflechtung zwischen den einzelnen Marktsegmenten und Instituten zu mehr Risikoteilung führen. Diesen Trend zu verstärken ist das Ziel des Kommissionsvorschlags für eine Kapitalmarktunion. Indes ist die These von einem vollständigen mikroökonomischen Risikotransfer durch möglichst viele Derivate eine Illusion; eher werden die gesamtwirtschaftlichen Risiken durch eine Verschlechterung der Fristentransformation, einen unvollständigen Risikotransfer, eine Ausdehnung der Kredithebelung und neue Formen der Regulierungsarbitrage erhöht. Das Konzept zertifizierter Verbriefungen stellt  keine ausreichende Systemstabilität her, weil es wesentliche Märkte – synthetische Verbriefungen und nachgelagerte Märkte auslässt.--- Der Vorschlag für eine Kapitalmarktunion steht in Konkurrenz zu dem von der EU seit 2009 beschrittenen Weg der Regulierung und Kontrolle des Bankenmarktes sowie des Verbriefungsgeschäfts. Dieser zielt eher auf eine Verstärkung regulatorischer Restriktionen als auf ihren Abbau ab. Solange der Schattenbanksektor nicht reguliert und kontrolliert werden kann, sollte das wirtschaftspolitische Ziel in Europa die volumenmäßige Beschränkung des Verbriefungshandels und nicht seine Wiederbelebung und weitere Förderung sein. Es bleibt zumindest riskant, wesentliche Komponenten des Kommissionsentwurfs bis Ende 2017 zu implementieren, wenn wichtige Finanzmarktsegmente weder statistisch erfasst, noch kontrolliert und reguliert sein werden Die Instrumente, über die nationale Regierungen noch heute verfügen, um die Attraktivität ihrer Länder für destabilisierende Finanzströme  zu verringern, sollte daher besser nicht abgeschafft werden.  

Download- und Bezugsinfo (15 EUR):http://archiv.wirtschaftsdienst.eu/jahr/2016/12/zur-kritik-der-kapitalmarktunion/

Presentation: 'Real economy effects of cross border finance in the euro area'

The nearly exclusive explanation for current account imbalances in the euro area blames real economy differences between countries, prominently the competitiveness of the participating states. This essay questions the common opinion that wage policy is crucial for rebalancing the European economies. This essay attempts to unfurl the real economy processes from the perspective of money and finance. This essay identifies an interregional asset-price-interest mechanism at work in the monetary union: A general change in the state of confidence provokes asset prices and the effective long-run interest rate to change and to affect aggregate demand and trade flows. A change in competitive positions of countries follows as the second-round effect. The policy implications prefer a downscaling of the financial sector against government interventions into wage formation.

Annual meeting of the Austrian Economic Society and the Slovak Economic Society, Bratislava, 27th-28th May 2016.

Workshop: 'Modern Finance and Effective Demand'

This workshop was devoted to the latest research of Prof. Amit Bhaduri to include the modern financial sector into Keynes/Kalecki-real economy models. It is related to my own research (see presentations).

Vienna, 9th April 2016.

Presentation: 'Die Effekte grenzüberschreitender Kapitalströme für die Realwirtschaft in den Ländern der Eurozone'

Dieser Vortrag stellt einen theoretischen Rahmen für die Analyse von Leistungsbilanzungleichgewichten bereit, der auf der Liquiditätspräferenztheorie von Keynes aufbaut, und wendet ihn auf die Eurozone an. Ich argumentiere, dass man realwirtschaftliche Probleme in der Währungsunion aus der Perspektive von Geld und Finanzen analysieren sollte und daher unter Berücksichtigung grenzüberschreitender Kapitalströme und der Finanzmarktintegration. Sie identifiziert einen Intra-EZ (Eurozone) Vermögenspreis-Zins-Mechanismus in der Währungsunion: Eine stärkere Änderung der Vermögenspreise in einer Region gegenüber anderen Regionen steuert über relative Änderungen im langfristigen Zinssatz Änderungen in der aggregierten Investitionsnachfrage der Teilnehmerstaaten und als Folgeprodukt ihrer Wettbewerbsposition. Daraus ergeben sich zwangsläufig wirtschaftspolitische Konsequenzen, die sich auf eine Reduzierung von Kapitalströmen durch selektive Steuerung und Kontrollen richten statt auf politische Lohnkontrollen.

Annual meeting of the German Keynes Society, Berlin, 15th - 16th February 2016.

Steigerung der Wettbewerbsfähigkeit in der Balkanregion (mit Hanzl-Weiss, Holzner, Landesmann, Pöschl und Vidovic)

Hierbei handelt es sich um ein Gutachten im Auftrage des deutschen Bundesministeriums für Finanzen, welches gemeinsam mit dem Wiener Institut für Internationale Wirtschaftsvergleiche (WIIW) durchgeführt wurde.  Das Gutachten behandelt auf 217 Seiten, 27 Tabellen und 110 Abbildungen verschiedene Ursachen der mangelnden Wettbewerbsfähigkeit in der Region und zeichnet Wege zu ihrer Überwindung auf. Ein besonderer Schwerpunkt liegt auf Finanzierungsfragen. Ihr Zusammenhang mit Fragen der Wettbewerbsfähigkeit und der Innovationen steht gegenwärtig im Zentrum der Literatur.

wiiw Research Report in German language, No. 3. Dezember 2015. Download: http:/wiiw.ac.at/steigerung-der-wettbewerbsfähigkeit-in-der-balkanregion--moeglichkeiten-und-grenzen-p-3755.html


Article: 'Financial constraints on growth: comparing the Balkans to other transition economies'

This article applies an adjusted growth diagnostic approach to identify the currently most binding constraint on financing growth in the West Balkan countries. Since this group of economies faces both structural and systemic transformation problems, the original supply-side approach might not be sufficient to detect the most binding constraint. The results of the analysis indicate that the binding constraint on credit and investment growth in the region is the high and increasing share of nonperforming loans, primarily in the household sector, due to policy failures. This article compares the Balkan countries to a group of advanced transition economies. Single-country and panel regressions indicate that demand-side factors do not play a constraining role on growth in the West Balkan countries, but they do in the advanced transition economies.

Eastern European Economics. Vo. 53, Issue 4, 2015, 309-327. Look inside: http://www.tandfonline.com/doi/full/10.1080/00128775.2015.1072023.


Article: 'The Euro Plus Pact: cost competitiveness and external capital flows in the EU countries' (with Karsten Staehr).

The Euro Plus Pact was approved by 23 EU countries in March 2011 and came into force shortly afterwards. The Pact stipulates a range of quantitative targets meant to strengthen cost competitiveness with the aim of preventing the accumulation of external financial imbalances. This paper uses Granger causality tests and vector autoregressive models to assess the short-term linkages between changes in the relative unit labour cost and changes in the current account balance. The sample consists of annual data for 27 EU countries for the period 1995-2012. The main finding is that changes in the current account balance precedes changes in relative unit labour costs, while there is no discernible effect in the opposite direction. The divergence in unit labour costs between the countries in Northern Europe and the countries in Southern and Eastern Europe may thus partly be the result of capital flows from the core of Europe to the periphery prior to the global financial crisis. The results also suggest that the measures in the Euro Plus Pact to restrain the growth of unit labour costs may not affect the current account balance in the short term.


Chapter:  'Monetäre Transformation'
in: Kollmorgen, Merkel, Wagener " Handbuch Transformationsforschung"

Ein Kernelement der monetären Transformation einer sozialistischen Planwirtschaft ist die Herstellung jener Funktionen, die Geld in einer Marktwirtschaft ausübt. Diese Monetarisierung bestimmt die Effektivität und Effizienz aller anderen Reformbereiche, beispielsweise die Privatisierung, also den Verkauf von realem Kapital auf Vermögensmärkten. Die sozialistische Planwirtschaft ist eine Quasi-Tauschwirtschaft, in der Geld nur begrenzt in Güter, Vermögensbeständen oder fremde Währungen frei konvertierbar ist.

Stichworte: Bedeutung und Entwicklung von Vermögensmärkten, Entwicklung und Probleme des Bankensektors, Rolle der Zentralbank, neue Herausforderungen.