During the event, HaralD Uhlig from the University of Chicago presented recent research findings on the impact of fiscal policy measures on the economy as a whole. On the basis of theoretic and econometric findings, Uhlig argued that government interventions that increase public spending or lower tax rates can in fact have a positive effect on economic growth in the short term. In the long term, however, the effect of these interventions on growth is most likely weaker than if there had been no intervention. Given the significant number of comprehensive government measures in the form of recovery packages in both the United States and Europe, the conference participants showed particular interest in Uhlig’s findings.
Volatility of the unemployment rate
The presentation given by Michael Burda from the Humboldt University of Berlin focused on the so-called Shimer puzzle, according to which the volatility of unemployment rates and job vacancies cannot be sufficiently explained by the standard theoretical models used to describe labour markets. According to Burda, this problem can be solved by including income tax-financed social security contributions in the model. If models take into account the fact that gross wages are dependent on income taxes, then they can explain the majority of the observed fluctuations in the unemployment rate and in the number of job vacancies.
From a methodical point of view, Helmut Lütkepohl from the University Institute in Florence provided insights on the identification of shocks by means of structural vector autoregressive models. In their paper, Lütkepohl and his co-authors applied the Markov switching approach in order to answer the question of whether national monetary policies change over a given period of time, or whether it is the macroeconomic aggregates that react to changes in the volatility of shocks.
In addition to these keynote speeches, the conference also featured high-quality presentations covering the various fields of macroeconomics, such as labour economics, business cycle analysis, fiscal policy and monetary policy.