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This paper develops Area-wide Leading Inflation CyclE (ALICE) indicators with the aim to provide early signals for turning points in the euro area headline and core inflation cycles. The headline (core) ALICE leads the reference cycle by three (four) months and the lead times extend to five (nine) months based on longer-leading series. Both ALICE indicators signalled turning points in the inflation cycles ex post and also performed well in a simulated real-time exercise. Moreover, in particular the headline ALICE also appeared to be useful for quantitative forecasting of the direction and level of inflation.

This paper explores the transmission mechanism between wages and prices in the euro area. While labour costs account for notable parts of companies’ costs and should, hence, be of relevance for the...

This paper introduces a new monthly euro Area-wide Leading Indicator (ALI) for the euro area growth cycle which is composed of nine leading series and derived from a one-sided bandpass filter. The main findings are that (i) the GDP growth cycle in the euro area can be well tracked, in a timely manner and at monthly frequency, by a reference growth cycle indicator (GCI) derived from industrial production excluding construction, (ii) the ALI reliably leads turning points in the GCI by 5 months and (iii) longer leading components of the ALI are good predictors of the GCI up to 9 months ahead. A real-time case study on the ALI's capabilities for signalling turning points in the euro area growth cycle from 2007 to 2011 confirms these findings. Copyright © 2013 John Wiley & Sons, Ltd.

Neither money supply trends nor other relevant indicators suggest that the target of price stability is under threat in the foreseeable future. On the other hand, it is questionable whether output and employment will soon experience a strong and self-sustaining upturn. In such a situation cuts in central bank rates are called for as a support measure to underpin economic growth.

Given the serious crisis in Asia and evidence of its spreading to other developing and transition countries, the attempt by German economic policymakers to achieve faster economic growth and higher employment almost exclusively by means of successes on export markets appears likely to fail sooner than had been expected by the DIW5. The significance of domestic demand has been systematically underestimated in recent years. With the help of extremely low pay settlements, the D-Mark was devalued in real terms; this promoted exports, but at the same time led to growth losses in private consumption and investment that more than offset the gains in exports. On top of this German fiscal policy—as documented in the following report in this issue—has weakened domestic demand and investment activity. This strategy might have worked if a symmetrically oriented monetary policy had reacted to the deflationary trend inherent in pay settlements and the fiscal-policy stance by swiftly and significantly reducing interest rates. This did not happen. It was therefore inevitable that the crisis in sales markets made its full effects felt on economic growth. More seriously still, if cost deflation in Germany is not brought to an end in the coming year by a return to productivity-oriented wage settlements, it will pose a major threat to the European Monetary Union.6 If Germany pursues a beggar-thyneighbour policy in a Europe without exchange rates, this can only result in deflation and a downward economic spiral.7

This paper derives forecasts for euro area real GDP growth based on a bottom up approach from the production side. That is, GDP is forecast via the forecasts of value added across the different branches of activity, which is quite new in the literature. Linear regression models in the form of bridge equations are applied. In these models earlier available monthly indicators are used to bridge the gap of missing GDP data. The process of selecting the best performing equations is accomplished as a pseudo real time forecasting exercise, i.e. due account is taken of the pattern of available monthly variables over the forecast cycle. Moreover, by applying a very systematic procedure the best performing equations are selected from a pool of thousands of test bridge equations. Our modelling approach, finally, includes a further novelty which should be of particular interest to practitioners. In practice, forecasts for a particular quarter of GDP generally spread over a prolonged period of several months. We explore whether over this forecast cycle, where GDP is repeatedly forecast, the same set of equations or different ones should be used. Changing the set of bridge equations over the forecast cycle could be superior to keeping the same set of equations, as the relative merit of the included monthly indictors may shift over time owing to differences in their data characteristics. Overall, the models derived in this forecast exercise clearly outperform the benchmark models. The variables selected in the best equations for different situations over the forecast cycle vary substantially and the achieved results confirm the conjecture that allowing the variables in the bridge equations to differ over the forecast cycle can lead to substantial improvements in the forecast accuracy. JEL Classification: C22, C52, C53, E27

This paper investigates the pass-through of external shocks, i.e. oil price shocks, exchange rate shocks, and non-oil import price shocks to euro area inflation at different stages of distribution (import prices, producer prices and consumer prices). The analysis is based on a VAR model that includes the distribution chain of pricing. According to our results the pass-through is largest and fastest for non-oil import price shocks, followed by exchange rate shocks and oil price shocks. The size and the speed of the pass-through of these shocks decline along the distribution chain. External shocks explain a large fraction of the variance in all price indices. They seem to have contributed largely to inflation in the euro area since the start of the European Monetary Union. The results on the size and the speed of the pass-through in the euro area appeared to be robust over time and different identification schemes. JEL Classification: C32, E31

Die Weltkonjunktur zeigt sich im Frühsommer 2003 leicht aufwärtsgerichtet. Zu einer durchgreifenden Erholung ist es bisher noch nicht gekommen. Belastend wirkten insbesondere die Irak-Krise, der zwischenzeitliche Höhenflug des Erdölpreises, der Ausbruch der Lungenkrankheit SARS sowie die immer noch nicht überwundene Flaute im IT-Sektor. Im weiteren Verlauf dieses Jahres ist jedoch eine Wende zum Besseren und im Jahr 2004 eine Erholung zu erwarten. Denn die retardierenden Momente fallen nach und nach weg; die überall deutlich expansive Geldpolitik kann damit ihre stimulierende Wirkung stärker entfalten. Auch in Deutschland lassen die allmähliche Besserung des internationalen konjunkturellen Umfelds und auch die Meldungen der am ifo Konjunkturtest teilnehmenden Firmen über die Geschäftserwartungen einen leichten Anstieg der gesamtwirtschaftlichen Produktion im zweiten Halbjahr 2003 erwarten; dennoch dürfte die gesamte Wirtschaftsleistung sowohl im Jahresverlauf als auch im Jahresergebnis nur stagnieren. Im Durchschnitt des kommenden Jahres wird das Bruttoinlandsprodukt um 1,5% expandieren, hiervon entfällt allerdings reichlich 1/2 Prozentpunkt auf die ungewöhnlich große Zahl von Arbeitstagen. Die Zahl der Arbeitslosen dürfte im Jahresdurchschnitt 2003 um 390 000 auf 4,45 Millionen steigen und im kommenden Jahr weiter auf 4,6 Millionen. Die Arbeitslosenquote - bezogen auf alle inländischen Erwerbspersonen - beläuft sich dann auf 10,8%, das ist der höchste Stand seit der Wiedervereinigung. Ein Wendepunkt der negativen Entwicklung bei der Arbeitslosigkeit wird bis zum Ende des Prognosezeitraums nicht erwartet. Der Anstieg der Lebenshaltungskosten wird moderat bleiben; die Inflationsrate dürfte in diesem Jahr 0,9% betragen und im nächsten Jahr 0,8%. Das gesamtstaatliche Budgetdefizit wird in diesem Jahr auf rund 80 Mrd. q (3,7% des BIP) steigen; im nächsten Jahr ist das Minus auf 70 Mrd. q (3,2% des BIP) zu veranschlagen. Deutschland verfehlt damit in beiden Jahren das De

Against the difficult background of analyzing aggregated data in this paper core inflation in the euro area is estimated by means of the structural vector autoregressive approach. We demonstrate that the HICP sometimes seems to be a misleading indicator for monetary policy in the euro area. We furthermore compare our core inflation measure to the wide-spread "ex food and energy" measure, often referred to by the ECB. In addition we provide evidence that our measure is a coincident indicator of HICP inflation. Assessing the robustness of our core inflation measure we carefully conclude that it seems to be quite reliable.

In the following essay, I want to show that there is a connection between Naturphilosophie and the absolute standpoint of identity, the construction of which Schelling began after 1801. Mind and nature are not in opposition but “Mind” is “Nature.” The first principle of all being is motion. It is intelligence in nature. Nature, absolute identity, and intellectual intuition as methods of advancing clarify the path to the “Identitatsphilosophie”