MAXIMILIAN KONRADT

PUBLICATIONS

Exportweltmeister: Germany’s foreign investment returns in international comparison Forthcoming at Journal of International Economics 

with Franziska Hünnekes, Moritz Schularick, Christoph Trebesch and Julian Wingenbach. [UN/BALANCED]

In the past decade, Germany has been the world champion in exporting capital ("Exportweltmeister"). No other country invested larger amounts of savings outside its borders. However, we find that Germany plays in the third division when it comes to investment performance. To show this, we construct a comprehensive new database on the returns on foreign investment for 13 advanced economies back to the 1970s. The data reveal that Germany's annual returns on foreign assets were 2 to 5 percentage points lower than those of comparable countries. Germany ranks last among the G7 countries and earns signicantly lower foreign returns within asset classes, especially for equity and foreign direct investments. These aggregate results are confirmed with micro data on equity returns by 50,000 mutual funds worldwide. German funds perform worse across all sectors and destination countries of investment. They also seem to do a worse job in timing the market.

Carbon taxation and greenflation: Evidence from Europe and Canada Journal of the European Economic Association, 21(6), 2023, 2518-2546

with Beatrice Weder di Mauro. [VoxEU column][NY Times][Nature Climate Change][Speech by ECB board member Isabel Schnabel]

This paper studies the effects of carbon pricing on inflation dynamics. We construct a sample of carbon taxes implemented in Europe and Canada over three decades and estimate for the first time the response of inflation and price components to carbon pricing. We find that past carbon taxes changed relative prices but did not significantly increase inflation. This is consistent with previous findings of carbon taxes impacting emissions but not aggregate output. Based on the cross-section of taxes in Europe, we provide suggestive evidence that the response of inflation was especially muted in countries with revenue recycling schemes and monetary policy regimes that can accommodate the carbon tax. 

Climate policies and monetary policies in the Euro area ECB Forum on Central Banking Conference Proceedings, 2021, 200-238  

with Warwick McKibbin and Beatrice Weder di Mauro. [Speech by ECB president Christine Lagarde]

This paper presents two types of analysis on the interaction between climate policy and monetary policy in the euro area. We empirically estimate the past effects of carbon pricing on inflation and explore two alternative monetary policy rules under a range of simulations in a multisector model. We find that under the existing monetary policy framework, the inflationary effects of carbon taxes in Euro area countries have been contained. The results from the simulation model show that the nature of the monetary rule within Europe has a significant effect on the impact of carbon taxation. Overall, the model simulations suggest that transitions risks from carbon pricing have long run output costs but only a transitory impact on inflation. 

Corona politics: The cost of mismanaging pandemics Covid Economics, Vol. 50, 2020, 3-23

with Helios Herrera, Guillermo Ordoñez and Christoph Trebesch. [VoxEU column][Forbes]

The Covid-19 pandemic is a major test for governments around the world. We study the political consequences of (mis-)managing the Covid crisis by constructing a high-frequency dataset of government approval for 35 countries. In the first weeks after the outbreak, approval rates for incumbents increase strongly, consistent with a global “rally around the flag” effect. Approval, however, drops again in countries where Covid cases continue to grow. This is especially true for governments that do not implement stringent policies to control the number of infections. Overall, the evidence suggests that loose pandemic policies are politically costly. Governments that placed more weight on health rather than short-term economic outcomes obtained higher approval. 

WORKING PAPERS

Carbon Policy and the Economy: Evidence from Europe's Carbon Pricing Initiatives Revisions requested at IMF Economic Review

with Diego Känzig. [VoxEU column][The Economist][Hutchins Roundup][GFPN][Speech by BOE committee member Catherine L Mann]

We study the impact of carbon pricing on the economy, with a focus on European carbon taxes and the carbon market. While both policies have successfully reduced emissions, the economic costs of the European carbon market are larger than for national carbon taxes. We explore four factors that explain this difference: fiscal policy and revenue recycling, pass-through and sectoral coverage, spillovers and leakage, and monetary policy. We document substantial regional heterogeneity in the impacts of the carbon market, which crucially depend on the share of freely allocated emission permits and the degree of market concentration in the power sector.

Do pension funds reach for yield? Evidence from a new database.  

This paper investigates the financial risk-taking behavior of pension funds since 2000. I assemble a new database containing portfolio holdings of more than 100 pension funds from 14 advanced economies. The study reveals three key findings. First, I show that pension fund portfolios have become riskier over that period, with an average increase in risky asset weights of 4 percentage points since 2008. European pension funds tend to invest more in public equities, while North American and Asian funds focus on alternative assets. Second, I find evidence that declining domestic risk-free rates play a significant role in driving the trend, with pension funds increasing their risky asset exposure in response to falling short-term interest rates. Third, I demonstrate that less underfunded pension funds with fewer risky assets tend to reach for yield more aggressively, which is exacerbated during periods of low risk-free rates. This is most pronounced for European pension funds, particularly after the global financial crisis.

(SELECTED) WORK IN PROGRESS

Institutional Investors and Carbon Pricing: Evidence from Equity Portfolios

Carbon pricing and green innovation with Diego Känzig.

Political consequences of inequality with Manuel Funke.