Georg Winckler

The advantages of tying Austria's hands: The success of the hard currency strategy

Abstract The paper offers support for the following thesis: Austria opted for an exchange rate peg at a time (1974) when the economic (optimum currency area — OCA) prerequisites were not yet met. It needed an appreciation of the schilling relative to the D-Mark between 1979 and 1981 to signal a hard rule and to earn credibility. This hard-currency-option triggered off adjustment processes (i.e., real wage flexibility) which ultimately made Austria part of an OCA with Germany. Using the theory of time consistency, a model demonstrates that for a small economy such as Austria an exchange rate rule constitutes a good focal point. Employing criteria derived from the OCA-theory it is shown that for Austria asymmetric real shocks dominated the observation period (1973–1989), at least until the mid 1980s. Then, through domestic policies induced by the hard-currency-option, one can argue that Austria became part of an OCA with Germany. A successful fixed exchange rate rule in the face of asymmetric shocks and restricted factor mobility requires a (relatively) high degree of real wage flexibility, as can be shown for Austria. Only a credible long-term policyenables a country to fulfil the OCA-criteria. Austria may therefore be viewed as an example for a fixed exchange rate system, at least between smaller countries and an anchor country, even if OCA criteria (initially) are not being met.

Monetary Union: European Lessons, Latin American Prospects

In this paper selective issues of long-run sustainability of monetary unions are analyzed. Using theoretical insights and the experience of EMU up to now we argue that empirical evidence on OCA criteria for EMU suggests that benefits for the countries participating in EMU outweigh costs by a relatively large margin although by varying degrees from country to country. Fiscal policy rules are necessary for EMU to succeed. We also conclude that EMU has been driven by political considerations. A sound financial sector is a precondition. With regard to lessons to be drawn for Latin America and the Caribbean we first find that there has been a strong push towards the floating cum inflation-targeting corner and to regional trade integration. Moreover, it seems that, in contrast to EMU, the benefit-cost balance of a move to monetary union is much less favorable in Latin America and the Caribbean and, most important, the political dimension missing.

Too much noise in the Times Higher Education rankings.

Several individual indicators from the Times Higher Education Survey (THES) data base—the overall score, the reported staff-to-student ratio, and the peer ratings—demonstrate unacceptably high fluctuation from year to year. The inappropriateness of the summary tabulations for assessing the majority of the “top 200” universities would be apparent purely for reason of this obvious statistical instability regardless of other grounds of criticism. There are far too many anomalies in the change scores of the various indices for them to be of use in the course of university management.

Central banks and seigniorage: A study of three economies in transition

Abstract The paper examines the relations between central banks and other macro sectors in the Czech Republic, Hungary, Romania, with respect to the creation and distribution of seigniorage, taking Austria and Germany as a reference. In economies in transition, transfers of seigniorage from the central bank to the government and to the banking sector may appear as a natural way to soften the financial constraints of both sectors. We propose a simple framework for the analysis of central bank seigniorage, based on the opportunity cost approach, and measure both the amount and allocation of seigniorage for the five countries in 1993. We find central bank seigniorage to be approximately four times our benchmark value in Hungary, and thirty times in Romania (the latter due to the high level of the inflation tax). In Hungary and Romania most seigniorage is appropriated (as an interest rate subsidy) by the government; in Romania a large part also goes as a subsidy to the financial sector. In none of the five countries we find that central banks retain an excessive amount of seigniorage for reserve accumulation or for current expenditures. In the last part of the paper we discuss the implications of our findings on seigniorage for the evaluation of central bank independence vis-a-vis the government.

International trade and restructuring in Eastern Europe

It has been widely recognized that international economic relations play a crucial role in the transition of countries of Eastern and Central Europe. The scope, speed, and success of the efforts to transform the formerly centrally planned economies to market economies have increasingly become dependent on the pattern these countries have in their relation to the rest of the world. Many of the new governments in these countries have found that the most appropriate fixed point (the so-called nominal anchor), to which stabilization measures should be attached, is the nominal exchange rate of their currency. A more reasonable exchange rate than that in the former system of central planning has required a full system of reorganization of trade and exchange relations including the establishment of some kind of currency convertibility and deregulation of international trade transactions. Part I of the book deals with exchange rate regimes that have played and may play a role in supporting political and macroeconomic stabilization, on the one hand, and competitiveness of domestic production, on the other. For foreign trade the structural changes had two implications: (1) shift in the sectoral and geographical composition of trade and (2) the modification of the behavior of enterprises. Part II of the book covers the first dimension and Part III is devoted to the changes in trade-related enterprise behavior.

Exchange Rate Appreciation as a Signal of a New Policy Stance

It is shown in a game theoretic framework that it may pay off to signal a “conservative” policy stance--giving a high priority to price stability--by appreciating the exchange rate. Such an appreciation demonstrates to domestic producers and more precisely to the trade union that the new policy stance is meant to be serious. An example explores the welfare implication for the policy maker and the trade union. The empirical background of the paper refers to the monetary policy in Europe. It explains the occurrence of exchange rate commitments to the deutsche mark, with appreciated rates.

Deficits, Debt and European Monetary Union: Some Unpleasant Fiscal Arithmetic

There is now a rapidly growing literature dealing with the relationship between fiscal and monetary policies in complete or incomplete monetary unions.2 Much of this literature is a reaction to the Delors Report and to the Maastricht Treaty. The Report suggested and the Treaty institutionalized binding fiscal rules for monetary convergence. Since then these rules have been intensively debated. Many authors regard them as superfluous or as arbitrarily fixed.

The Influence of Wage Rate Variations on the Level of Employment with and without an Exogenous Interest Rate

Since Clower’s statement of the dual decision hypotheses there has been an intensive search for a “true” Keynesian model: This model should be a correct interpretation of Keynes’ General Theory, it should be well based in microeconomics and should generate a role for economic policy which Keynes envisaged. Some authors claim that only the quantity rationing models meet all these conditions (Malinvaud 1977, Muellbauer-Portes 1978). However, many critics of the quantity rationing models regard its key assumption, that prices are fixed respectively determined exogenously, as unfounded in Keynes’ own writings, as empirically implausible or as theoretically misleading. “There is no explanation of how and when prices change and hence there is no way of saying in what sense a fix-price ‘equilibrium’ is an equilibrium” (Gale, 1983, p.195). In addition, the introduction of price dynamics in these models suggests (except from odd cases) that there are no non-Walrasian equilibria when prices react to excess demand (Gale, 1983, ch.4).

Excellence in Strategic Planning

Strategic planning is a means for a university to tackle the big issues with which it is confronted and to improve its competitive position. In order to gain the status of excellence, it is worthwhile that the university studies past models of success. Interesting examples are the so-called research-intensive university, the entrepreneurial university, or the university as knowledge enterprise. Ultimately, excellence depends on transforming the existing profile to one that successfully copes with future challenges.

National Reform Processes: Examples of Six European Countries

This chapter describes the national reform processes of six European countries: Austria, Denmark, Finland, France, the Netherlands and Portugal. The approach opted for here has been to give the voice to the individual university rectors and officials that played an important role during the reform processes. By hearing their stories, we obtain a vivid narrative of the government drivers of reform and of the rationales of the institutions as main partners in the reform processes. These narratives are complemented by and contrasted with a review of the literature on the subject.