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Turkey: A typical emerging market crisis? (Martin Ertl)

21 Aug

Martin Ertl

Political tensions with the US, lack of central bank independence and structural macro-economic vulnerabilities have contributed to a sell-off of the Turkish Lira.Low levels of reserve adequacy in combination with a structural current account deficit has made Turkey vulnerable to financial shocks.This combination is also present in South Africa and Ukraine, while the latter is already recovering from an emerging market crisis.During the last two weeks, the Turkish Lira has depreciated by 17 % (Friday-to-Friday) against the USD. Since the beginning of the year the Turkish currency has even lost more than 40 % of its value (Figure 1). The recent sell-off is based on a combination of macroeconomic vulnerabilities, financial markets’ questioning the central bank’s independence and political tension...     » Weiterlesen


CEE monetary policy developments (Martin Ertl)

14 Aug

Martin Ertl

Romania: The National Bank of Romania has, surprisingly, signaled a near end to its rate hiking cycle in spite of inflation above target.Serbia: With economic growth accelerating and inflation contained, the National Bank of Serbia has no need to change its monetary policy stance.Romania In no other European Union member state, inflation is as high as in Romania. While for the whole European Union, Eurostat’s harmonized consumer price index (HICP) increased by 2.0 % in June, inflation was at 4.7 % in Romania. Using the domestic consumer price index, inflation was even higher at 5.4 %, although it decreased to 4.6 % in July. In spite of high inflation, the National Bank of Romania (NBR), has decided to keep monetary policy interest rates unchanged during the Board’s meeting on August 6. The mone...     » Weiterlesen


Macroeconomics a decade after the Great Recession (Martin Ertl)

06 Aug

Martin Ertl

What has changed during the last ten yearsModern macroeconomics under fireExtensions of the baseline New Keynesian macro model“Economist have learned nothing from the crisis, stick to their wrong models, operate within a very constrained model world and stubbornly believe in the homo oeconomicus” are regularly formulated accusations vis-à-vis the profession (Martin Halla).Famously, right at the onset of the Great Recession in 2008, Olivier Blanchard wrote an article which concluded that “the state of macro is good” what kind of went terribly wrong. Although Blanchard discussed mainly how a convergence in methodology had emerged (sometimes called the “new neoclassical synthesis”), after the “field looked like a battlefield” before the 1970s. [1]The summ...     » Weiterlesen


Eurozone business cycle monitoring (Martin Ertl)

31 Jul

Martin Ertl

Uncertainty increased recently amid conflicting signals.Survey data softened further in July, while financing conditions remain favorable.On Tuesday, the Q2 GDP release will add an important information.Business cycle uncertainty has recently been increasing in the Euro Area. We observe downward signals from a number of cyclical indicators which conflict with a broad strength in macroeconomic trends. The first Eurostat Q2 GDP release on Tuesday 31st July will add another indication about the state of the business cycle. The most visible downward trend in time series comes from prominent survey data. The purchase managers surveys (PMI) – both contemporaneously correlated with GDP and forward-looking – have been losing momentum since January (Figure 1). In July, the surveys for the manufacturing ...     » Weiterlesen


International trade in Central and Eastern European EU member states and non-EU ac...

23 Jul

Martin Ertl

Trade openness is high whereby the EU is the most important trading partner.The structure of trade differs substantially.Negative EU trade balances are substantial except for the CE-4.International trade drives economic growth. That trade should not only be seen as an important by-product of economic growth, but as a crucial determinant of higher income levels, is a widely held, well supported, though heavily debated view, in economics. Frankel and Romer (1999, p. 394), for instance, find a causal positive effect of trade on income arguing that “a rise of one percentage point in the ratio of trade to GDP increase income per person by at least one-half percent” [1]. A higher degree of trade openness is associated with more pronounced capital accumulation as well as higher productivity. For trans...     » Weiterlesen

Martin Ertl

Chief Economist, UNIQA Capital Markets GmbH

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