Macroeconomic changes such as economic depression and stock market crashes can have an impact on private life, mood and attitudes toward individuals and, by this, on the macroeconomy. This paper ...deals with the mental health indicators depression and grief as a result of economic and financial crises. For this purpose, it refers to the seminal five phases of crisis response well known from psychology and applies them to the setting of Greece since the start of the most recent crisis. In this context, we differentiate between investors and the “normal” population and deal with important feedback effects from lower mental health to the macroeconomy. Finally, as these feedback effects tend to lead even deeper into macroeconomic trouble, a vicious cycle cannot be excluded given these findings. The paper also generalizes its considerations to the case of mental health effects of economic crises beyond the Greek case.
This study assesses the impact of the Brexit probability on both the UK and on international financial markets, for the first and the second statistical moments. As financial markets are by nature ...highly interlinked, one might expect that the uncertainty engendered by Brexit also has an impact on financial markets in several other countries. We first estimate the time-varying interactions between UK policy uncertainty, which to a large extent is attributed to uncertainty about Brexit and UK financial market volatilities. Second, we use two other measures of the perceived probability of Brexit before the referendum, namely daily data released by Betfair and results of polls published by Bloomberg. Based on these data sets, and using both panel and single-country SUR estimation methods, we analyse the Brexit effect on levels of stock returns, sovereign CDS, 10-year interest rates in 19 predominantly European countries, and those of the British pound and the euro. We show that Brexit-induced policy uncertainty will continue to cause instability in key financial markets and has the potential to damage the real economy in both the UK and other European countries. The main losers outside the UK are the 'GIIPS' economies: Greece, Ireland, Italy, Portugal and Spain.
Since the demise of the Bretton Woods system, the yen has seen several episodes of strong appreciation, including in the late 1970s, after the 1985 Plaza Agreement, the early and late 1990s and after ...2008. These appreciations have not only been associated with “expensive yen recessions” resulting from negative effects on exports; since the late 1980s, the strong yen has also raised concerns about a de-industrialisation of the Japanese economy. Against this backdrop, the article investigates the effects of changes to the yen exchange rate on the hollowing out of the Japanese industrial sector. To this end, the article uses both aggregate and industry-specific data to gauge the effects of yen fluctuations on the output and exports of different Japanese industries, exploiting new data for industry-specific real effective exchange rates. Our findings support the view that the periods of yen appreciation had more than just transitory effects on Japanese manufacturing. The results also provide indication of hysteresis effects on manufacturing. While there are certainly also other factors that have contributed to a hollowing out of Japanese industry, a strong yen played a role, too.
This paper aims at establishing empirical facts on the fundamental determinants of real estate prices. It contributes to the literature by analysing a unique panel dataset covering a wide range of ...real estate market data and other economic variables for nearly 100 German cities. Several robust fundamental determinants are identified, among them the supply-side factors of construction activity and housing stock as well as the demand-side factors of apartment rents, market size, age structure, local infrastructure and rental prices. Results suggest that these factors are robustly linked to fundamental real estate prices and thus can be used to detect misalignments of market prices.
This paper identifies and measures fiscal spillovers in the EU countries empirically using a global vector autoregression (GVAR) model. Our aim was to look at the sign and the absolute values of ...fiscal spillovers in a countrywise perspective and at the time profile (impulse response) of the impacts of fiscal shocks. We find moderate spillover effects of fiscal policy shocks originating in Germany and France. However, there is significant variation regarding the magnitude of the spillovers on individual destination countries and country clusters. Furthermore, we find some evidence that German or French fiscal spillovers are stronger on EMU than on non‐EMU countries.
This article explores the extent to which changes to long‐term interest rates in major advanced economies have influenced long‐term government bond yields in emerging Asia. To gauge long‐term ...interest spillover effects, the article uses vector autoregressive (VAR) variance decompositions with high frequency data. Our results reveal that sovereign bond yields in emerging Asia responded significantly to changes to US and eurozone bond yields, although the magnitudes were heterogeneous across countries. The size of spillovers varied over time. The pattern of these variations can partially be explained by the implementation of different unconventional monetary policy measures in advanced countries.
Brexit, the withdrawal of the United Kingdom (UK) from the European Union (EU), has led to significant exchange rate fluctuations and to uncertainty in financial markets and in UK–EU trade relations. ...In this article, we use a non-linear model to study how this uncertainty affects export companies. Exports tend to react in spurts when exchange rate fluctuations go beyond a band of inaction, referred to here as a “play area”. We apply an algorithm to study this hysteretic relationship with ordinary least squares (OLS) regressions. We examine the export relationship between Europe (Belgium, Germany, France, Italy, and The Netherlands) and the UK. To guarantee the robustness of the results, we estimate a variety of specifications for modeling economic uncertainty: (a) constant uncertainty, (b) exchange rate volatility, (c) volatility in European equity markets, (d) the Treasury Bill EuroDollar Difference (TED-spread), (e) the Economic Policy Uncertainty Index (EPUI), and (f) a combination of exchange rate volatility and the EPUI. Since the results show little evidence of hysteretic effects on British exports, we focus on the European side. The specifications including exchange rate and equity market volatility show a significant effect of hysteresis.
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