This analysis attempts to offer a counter strategy to the idea of anti-globalization and de-growth that had flared up again
since the COVID-19 crisis. All international forecasts expect for the year 2020 the deepest recession since the Great Depression.
Countries which can afford it, run a super-Keynesian fiscal policy to fight the crisis, accompanied by an extremely expansionary
monetary policy in the USA (Fed) and in the euro area (ECB). As a third policy instrument besides fiscal and monetary policy,
an aggressive pro-globalization trade policy could relieve and strengthen the crisis macro policy. To demonstrate which options
are available we analyze nine mega free trade agreements, some of them are already in effect, others will be enacted soon.
Overall, not the big players in world trade, the EU and the USA win by a simultaneous implementation of the nine FTAs. Japan
would be the winner because it participates in four combinations (overlaps) of FTAs: EU–Japan, USA–Japan, CPTPP and RCEP.
The USA hardly gain from further globalization. Similarly, the EU 27 cannot profit much from further globalization.
Austria's EU accession 25 years ago, alongside Finland and Sweden, was preceded by an extended period of convergence toward
the EU: via the free trade agreement concluded with the EC in 1973, and the participation in the European Economic Area (EEA)
in 1994. Although the COVID-19 crisis in 2020 seems to overshadow the overall positive balance of 25 years of EU membership,
on average the real GDP growth dividend amounted to 0.8 percentage points per year since 1995. To check the robustness of
this result, obtained with an integration macro model, a DSGE model for Austria is used here. Usually other methods are applied
to estimate integration effects: trade gravity models, CGE models, macro models. Following in't Veld's (2019) approach with
a DSGE model for the EU, we adapt an earlier version of the two-country DSGE model for Austria and the Euro area (Breuss and
Rabitsch, 2009) to evaluate the benefits of Austria's EU membership. It turns out that grosso modo the macro results can be
confirmed with the DSGE model.
Trump's trade wars hit a new dimension expanding from mini to global trade wars. They target sectors (e.g., aluminium and
steel) for the protection of "national security" (according to Section 232 of the Trade Expansion Act of 1962) and countries
(e.g., China) for unfair trade practices (according to Section 301 of the Trade Act of 1974). Both legal instruments give
the US President the power to impose sanctions and protective measures. Since Trump came in office, he has cancelled most
multilateral agreements or projects the USA were previously involved (TTIP, TPP, NAFTA, Paris Climate Agreement, JCPoA). Whereas
the US trade conflict with China escalated dramatically and could ultimately – beginning with 1 September 2019 as President
Trump has threatened – affect all bilateral trade flows, the tensions with the EU are currently limited to aluminium and steel.
However, a trade war with respect to cars could follow if no agreement on an US-EU FTA-light is reached, besides the agreement
on increasing the share of duty-free imports of hormone-free beef from the USA, signed on 2 August 2019. We analyse the trade
wars already underway (aluminium and steel; USA–China) and possible new conflicts (cars) and agreements (FTA-light) with two
methods: 1. a static CGE model and 2. a global dynamic economic macro model. The comprehensive US trade war with China results
in the biggest impact for the involved countries, followed by a possible car conflict and an FTA-light agreement.
In this laudation of Wilhelm Kohler's 65th birthday I firstly will do a retrospective on the fight for Europe by Willi and
me at the same time with different methods. We both did research around Austria's accession to the EU. We made several ex-ante
studies about the possible economic impact of EU membership. The expected effects on GDP and trade were positive. This was
then verified in ex-post studies. At that time the EU only was in the stage of the Single Market. Later it continued its process
of deepening (EMU with the introduction of the Euro) and enlarging. Lastly the EU increased to 28 members. These integration
steps gave enough impetus for Willi and me to do respective research. Research has also been done on the reform of the SGP
and the several tries to reform the EMU after the Euro crisis. The Brexit is a new challenge not only politically, but economically.
After discussing the present multiplicity of problems of the EU (Brexit, Euro crisis, migration problem) and a reflexion of
the already existing reform proposals I try to develop a vision for a new (institutional) future for Europe: a dissolution
of the present EU and a new foundation as the United States of Europe.
The EU Single Market and the Maastricht Treaty are now aged 25. In this short history many events marked the way: the creation
of EMU in 1999, the introduction of the euro in 2002, and the great EU enlargement starting in 2004. And lastly – for the
first time – with the Brexit a reverse of the process of European integration takes place. The recession of 2009 and the Euro
crisis in 2010 led to a setback in the economic development in the EU. A quarter of a century invites to look back about the
achievements. How much trade and economic growth could be created by the Single Market plus euro plus EU enlargement? These
questions are treated here with the help of a consistent integration model. Embedded into an endogenous growth model approach
growth and trade effects for EU and EFTA countries are estimated. It turns out that (taking also into account GATT liberalisation)
the European integration added to per-capita GDP 0.5 percentage point to EU 28 countries but only 0.2 percentage point to
EFTA countries. Trade openness increased by 0.9 percentage point of GDP in EU 28 and by 0.3 percentage point in EFTA countries.
Aus ökonomischer Sicht werden hier 100 Jahre Österreich beleuchtet und Schlussfolgerungen für die Zukunft gezogen. Die Republik
Österreich besteht nicht durchgehend seit 100 Jahren; sie ging zwischen 1938 und 1945 unter. Im Gegensatz zur Sicht eines
Historikers, der chronologisch und sehr detailliert die Ereignisse von 100 Jahren Österreich in der Ersten und Zweiten Republik
beschreibt, möchte ich als Ökonom nur gewisse Muster herausarbeiten. Zum einen werde ich die Charakteristika der Wirtschaftsentwicklung
nach den beiden Weltkriegen (Inflation, Arbeitslosigkeit, Staatshaushalt, Geldpolitik und die Auswirkungen auf das Wirtschaftswachstum)
aufzeigen. Zum anderen werden die Auswirkungen der verschiedenen Regimewechsel auf die wirtschaftliche Souveränität und damit
auf die Wirtschaftsentwicklung des Staates Österreich behandelt. In der Ersten Republik und am Beginn der Zweiten Republik
gab es eher eine zwangsweise Abgabe an Souveränität (Völkerbunddiktat, Anschluss, Besatzung). Dann folgte mit dem Staatsvertrag
und der Neutralität die volle Souveränität. Später kam es im Zuge der stufenweisen Teilnahme an der europäischen Integration
(EFTA, EWR, EU, WWU) zu einer freiwilligen Abgabe an Souveränität in der Hoffnung, als Gegenleistung einen barrierefreien
Zugang zu einem größeren Markt zu erhalten. Zum Abschluss werden die Vorzüge der EU-Mitgliedschaft beleuchtet und abschließend
die Frage diskutiert, ob Österreich besser mit oder ohne EU in die Zukunft schreiten sollte.
Ten years ago, the global financial crisis started to unwind in the USA and triggered the greatest recession since World War
II. Although the crisis of 2007-08 was caused in the USA, their economy was not hit so hard in the Great Recession of 2009
as in Europe, and in particular in the Euro area. The USA also recovered more rapidly and sustained from the crisis than the
Euro area. Additionally, the specific Euro (debt) crisis of 2010 led to a double-dip recession in the Euro area, not joined
by the USA. This divergent post-crisis development since then accumulated to a considerable growth gap between the USA and
the Euro area. What are the factors behind this different performance? Would a more aggressive fiscal and/or monetary policy
in the Euro area have closed the growth gap? As our simulation exercises show: the answer is no. However, the unconventional
monetary policy by the ECB since 2014-15 contributed to the most recent recovery in the Euro area. We identify the pivotal
reason of Euro areas growth lagging behind the USA in the different experiences in the crises management. The USA has a long-lasting
experience in handling financial crises. In historical comparison, the Euro area – the Economic and Monetary Union (EMU) of
the EU – is still a "teenager". The crises revealed, that the legal basis of the institutional set-up of EMU and hence of
the Euro area was not enough crises-proven. Rescue instruments had newly to be implemented. The global financial crisis was
the first great shock which was badly absorbed by the still quite heterogeneous Euro countries. The Euro area, shattered by
a succession of external (global financial crisis, Great Recession) and internal (Euro crisis) shocks, could therefore not
unfold its growth potential in the last decade. If – hypothetically – the Euro area would have profited from the faster-growing
production inputs (capital and labour) as in the USA, the growth gap could have been closed.
The Comprehensive Economic and Trade Agreement (CETA) between the European Union and Canada is the most ambitious (new generation)
free trade agreement the EU has ever negotiated. It is a "mixed" agreement with EU and member countries competences. Most
elements of the agreement for which the EU has "exclusive competence", including the chapter on tariffs and non-tariff barriers
(the dismantling of all barriers to trade in goods and services and market access to foreign direct investment) can – after
the European Parliament gave its consent on 15 February 2017 – be applied provisionally in spring 2017. With a specifically
constructed macroeconomic trade and growth model for Austria, we simulate the impact of CETA on Austria. CETA will add 0.3
percent to Austria's real GDP in the medium run and will stimulate bilateral trade and FDI. Our model is a small prototype
model and can easily be applied to other foreign trade agreements the EU is planning. A comparison shows that TTIP – which
is "politically" dead now – would have the biggest impact (real GDP +1.7 percent).The almost finished negotiated EU-Japan
foreign trade agreement would result in an increase of Austria's real GDP by 0.4 percent in the medium run.
DSGE (Dynamic stochastic general equilibrium) models are the common workhorse of modern macroeconomic theory. Whereas story-telling
and policy analysis were in the forefront of applications since its inception, the forecasting perspective of DSGE models
is only recently topical. In this study, we perform a post-mortem analysis of the predictive power of DSGE models in the case
of Austria's recession in 2009. For this purpose, 8 DSGE models with different characteristics (small and large models, closed
and open economy models, one and two-country models) were used. The initial hypothesis was that DSGE models are inferior in
ex-ante forecasting a crisis. Surprisingly however, it turned out that not all but those models which implemented features
of the causes of the global financial crisis (like financial frictions or interbank credit flows) could not only detect the
turning point of the Austrian business cycle early in 2008 but they also succeeded in forecasting the following severe recession
in 2009. In comparison, non-DSGE methods like the ex-ante forecast with the Global Economic (Macro) Model of Oxford Economics
and WIFO's expert forecasts performed not better than DSGE models in the crisis.