Conference Agenda

Overview and details of the sessions of this online conference.

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Session Overview
H05: Macro Public Finance, Budgets, and Banks
Friday, 20/Aug/2021:
9:00am - 10:30am

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9:00am - 9:22am

Gauging the Effects of the German COVID-19 Fiscal Stimulus Package

Natascha Hinterlang, Stéphane Moyen, Oke Röhe, Nikolai Stähler

Deutsche Bundesbank, Germany

To alleviate the economic costs of the COVID-19 pandemic, the German government set up a huge fiscal stimulus package. Simulations in a dynamic New Keynesian multi-sector general equilibrium model indicate that it notably stabilizes output and consumption. Cumulated over 2020-2022, output can be stabilized by over 4 PP. On average, the welfare costs of the pandemic are reduced by around 5% and by 20% for liquidity-constrained households. The long-run present value output multiplier amounts to around 0.2. The reduction of consumption taxation and direct transfers to households notably back consumption by liquidity-constrained consumers and stabilize output. Subsidies for firms prevent defaults and stabilize the economy, but are quite costly, while public investment is the most cost-effective measure.The paper sheds light on the question as to which fiscal measures have so far helped to mitigate the impact of the crisis and may provide guidance for possible future fiscal stimulus packages.

Hinterlang-Gauging the Effects of the German COVID-19 Fiscal Stimulus Package-136.pdf

9:22am - 9:45am

Freeze! Financial Sanctions and Bank Responses

Matthias Efing1, Stefan Goldbach2, Volker Nitsch3

1HEC Paris; 2Deutsche Bundesbank; 3Technische Universität Darmstadt, Germany

When the UN or another political body impose financial sanctions on a country, banks are typically required to end business relations with targeted counterparties. Based on German regulatory data for years 2002-15, we show that parent institutions of multinational banking groups reduce their positions in sanctioned countries by -38%. However, their branches and subsidiaries in countries with weak policies against financial crime increase lending by +68% after sanctions are imposed. These branches and subsidiaries receive additional intra-group credit from their parent banks. The evidence suggests that credit is rerouted to sanctioned countries through bank branches and subsidiaries in offshore locations.

Efing-Freeze! Financial Sanctions and Bank Responses-323.pdf

9:45am - 10:07am

Regional and Sectoral Varieties of VAT Pass Through in Japan

Kazuki Hiraga

Tokai University, Japan

This paper investigates the contemporaneous (short-run) and dynamic (long-run) responses of regional and sectoral price level change in consumption tax rate (VAT) hike (i.e. pass through of VAT) in Japanese monthly, 10 regional and 10 sectoral (commodity category) data. We show the effects not only contemporaneous but also pre-reform (from 12 month ago to one month) and post-reform (from one month ahead to 12 month) similar to Benedek et al.(2019). We obtain some remarkable results. First, aggregate pass through is incomplete, but case in 5% in 1997 and 8% in 2014 increase are complete (or overshifting) pass-through. Second, sectoral difference is large (e.g. the long-run pass through range from -0.25 to 1.42), while regional difference is small.

Hiraga-Regional and Sectoral Varieties of VAT Pass Through-153.pdf

10:07am - 10:30am

Avoiding Unpleasant Surprises: An Analysis of German States' Budget Forecasts

Thiess Buettner1,2, Tobias Goerbert1

1FAU Erlangen-Nuremberg, Germany; 2CESifo

This paper explores budget forecasts over different forecast horizons. We argue that these forecasts tend to be pessimistic at a given forecast horizon if negative fiscal shocks are perceived to be more costly than positive fiscal shocks. We provide an empirical analysis of the German states' forecasts of the budget-balance over a period of fourty years. The results confirm the existence of a robust downward bias, supporting a strong negative perception of negative fiscal shocks over the short-term horizon. The bias increases in states with relatively large levels of public debt but is not associated with transfers, government ideology or election dates.

Buettner-Avoiding Unpleasant Surprises-431.pdf

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