Comment
Federal Reserve Bank | Interest Rate | Interest rate policy | United States | Monetary Policy | Monetary policy decisions

In Janet Yellen’s last meeting as chairwoman, the US Federal Reserve decided to leave the federal funds rate unchanged. After a rate hike in December 2017, the Federal Open Market Committee has decided to keep its benchmark rate in a range between 1.25 and 1.5 per cent. Professor Friedrich Heinemann, head of the ZEW Research Department “Corporate Taxation and Public Finance” at the Centre for European Economic Research (ZEW) in Mannheim, comments on the Fed’s decision:

Research
Science council | ZEW | Market design

Following an in-depth review, the German Council of Science and Humanities has given its approval to a funding application submitted by the Centre for European Economic Research (ZEW) in Mannheim. ZEW’s goal of establishing itself as a centre of competence for the study of market and institutional design has thus surmounted an important hurdle. In recommending to the Joint Science Conference (GWK) that ZEW receive long-term financing for this research endeavour, the German Council of Science and Humanities paid heed to the opinion of the Leibniz Association, to which ZEW belongs.

Comment
Public bond | ECB | Interest Rate | Monetary Policy | Eurozone | Monetary policy decisions
The ECB Governing Council expects the ECB’s interest rates to remain low for an extended period of time.

The European Central Bank’s (ECB) latest monetary policy decision still does not give a clear indication of what will happen to its bond-purchase programme from October 2018 onwards. The ECB stands by its resolution to continue making monthly bond purchases to the sum of 30 billion euros as part of the programme until at least September 2018, “or longer if necessary”. Once again, the decision made by the ECB Governing Council even includes a statement that the programme could be expanded if the economic outlook worsens. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at the Centre for European Economic Research (ZEW), Mannheim, comments on the ECB’s decision.

ZEW Lunch Debate in Brussels
European Union | Reform actions | Economic reform | reform process | ZEW Lunch Debates
In early 2018, the European Commission is set to open EU budget negotiations with its own proposal for how the budget should look after 2020.

In early 2018, the European Commission is set to open EU budget negotiations with its own proposal for how the budget should look after 2020. During coalition negotiations in Germany, the CDU, CSU and SPD agreed on plans to increase Germany’s payments to the EU. EU Commissioner for Budget and Human Resources, Günther Oettinger, has already announced that the EU’s budget proposal will also include ideas for new sources of revenue. The EU budget and potential savings will be the focus of today’s Lunch Debate, which is part of a regular discussion series hosted in Brussels by the Centre for European Economic Research (ZEW), Mannheim. On the subject of EU budget reforms, Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at ZEW, offers his view.

ZEW Indicator of Economic Sentiment
ZEW Financial Market Survey | Europe | Business Cycle | Germany | Short-term forecast | Business survey | Business cycle research | ZEW Indicator of Economic Sentiment
ZEW Indicator of Economic Sentiment for Germany, January 2018

The ZEW Indicator of Economic Sentiment for Germany climbed 3.0 points in January 2018, currently standing at 20.4 points. The indicator thus still remains slightly below the long-term average of 23.7 points. The assessment of the current economic situation in Germany increased by 5.9 points, with the corresponding indicator currently standing at 95.2 points.

Research
ECB | Europe | Monetary Policy | Budget deficit | Eurozone | Public bond
The ECB has increasingly been purchasing bonds from countries with high levels of public debt.

The European Central Bank (ECB) has increasingly been purchasing bonds from countries with high levels of public debt. This is confirmed by a comparison between the purchases made in 2015, the first year the Public Sector Purchasing Programme (PSPP) was introduced, and the purchases in 2017. This comparison was conducted as part of a recent analysis by the Centre for European Economic Research (ZEW), Mannheim.

Research
reform process | Reform actions | Household income | Family taxation | Change of government | Coalition government | Tax Policy | Federal Government
If the Grand Coalition consisting of the CDU/CSU and the SPD implements its planned reform, this would ease the burden on the middle class in particular.

If the CDU/CSU and SPD agree to form a governing coalition and implement their reform plans in the areas of tax and family policy, this would primarily ease the financial burden on households with children. At the same time, it is above all the middle class who would benefit from the planned reforms. Low-income households, however, also stand to benefit from these plans, which would cost the state around 13.6 billion euros per year. With regard to the households’ voting preferences, the tax reductions would yield the highest savings among supporters of the green and the liberal party (FDP). SPD and CDU/CSU voters would benefit to a more or less equal extent from the tax relief.

Comment
Wissenschaftsgemeinschaft Gottfried Wilhelm Leibniz | Enterprise | Labour Market | Middle class | Labour market research | Leibniz Association | Digitisation

As part of the Leibniz Economic Summit in Berlin, the president of the Centre for European Economic Research (ZEW), Professor Achim Wambach, engaged in a discussion on “Digitalisation and the Labour Market” with the heads of other economic research institutions also belonging to the Leibniz Association. Professor Achim Wambach comments on the matter:

China Economic Panel
Business cycle research | Business survey | Greater China | Short-term forecast | Cyclical indicator | China | China Economic Panel
In January, the CEP Indicator improves and stands currently at minus 1.1 points.

In the most recent survey conducted in January (2–11 January 2018), expectations for the Chinese economy have improved again, rising to 1.1 points. In December, the indicator was still as low as minus 10.7 points. Nevertheless, the CEP Indicator, which reflects the expectations of international financial market experts regarding China’s macroeconomic development over the coming twelve months, is still below the long-term average of 5.0 points. The survey does, however, not reveal a downward trend in expectations. Instead, since around 2014, expectations have been seen to fluctuate around a relatively constant average value.

Comment
Digitisation | Federal Government | Coalition | European policy | Coalition government | ZEW President | Energy transition
Germany is still waiting for a new government to be formed following federal elections in September 2017. The CDU/CSU and SPD have just entered into discussion of forming a “Grand Coalition”.

In their recent coalition paper released following exploratory talks about forming a “Grand Coalition”, the CDU/CSU and SPD reached key compromises on EU policy, digitalisation and Germany’s planned energy transition. Professor Achim Wambach, president of the Centre for European Economic Research (ZEW), Mannheim, offers his view on the paper.

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