Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Non-technical summaryThe credibility crisis regarding the sustainability of public debt has transformed the markets for government bonds in the Euro area. A new sensitivity of creditors for the risk of sovereign default has pushed up financing costs of several euro member countries or has even cut them off from market access. Currently, policy makers try to enhance their fiscal reputation through the establishment of better European and national fiscal rules, particular in form of the debt brakes prescribed by the European Fiscal Compact. The hope is that, independent from the current budgetary performance, new fiscal rules send out credible signals to the markets and cut short the way towards lowering the risk spread.In our paper we study the determinants of sovereign risk premia in the EU countries between 1992 and 2008. Our contribution addresses two interrelated questions: First, do fiscal rules impact on sovereign risk premia in Europe? And second, is any such observable link really causal or rather the consequence of different national "stability cultures", which arise from differing historical institutions or fiscal preferences?In our empirical analysis, we try to shed light on this issue by employing several types of stability preference related proxies. These proxies are related to a country's past stability performance, government characteristics and survey results related to general trust. We find evidence that these indicators have an influence on risk premia. Moreover, they dampen the measurable impact of fiscal rules on risk premia. The estimated positive effect of fiscal rules on market confidence in the early years of EMU can thus mainly be explained by the fact that mainly high-stability countries introduced such constraints. Our results indicate that these stability-oriented countries would not have had a significantly lower financial market reputation if they had not established fiscal rules. Thus, for these countries strict fiscal rules may be rather interpreted as a confirmation of the underlying fiscal preferences of the voters and their political representatives. Still, even if this is true, it does not preclude the possibility that the new establishment of strict rules -such as intended by the Fiscal Compact -is relevant for fiscal reputation in countries with a lack of historical stability orientation. Our results rather point to the fact that fiscal rules have the largest potential for countries with particularly poor stability culture ...

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp07058.pdf Non-technical summaryThe last decade has seen marked economic fluctuations in the major industrial countries, which regularly present business cycle forecasters with a challenge. In this paper we are interested in how professional forecasters managed to predict GDP and price developments during the last decade. To this end, we explore the accuracy and evolution of the Consensus Forecast for twelve industrial countries for the years 1996 to 2006. This pooled forecast has the main advantage that it offers monthly publications of revised forecasts for the current and the next year, so that an explicit revision process of 24 forecasts for every target year can be observed.The theoretical and econometric analysis is based on the framework of Davies and Lahiri (1995) and Clements et al. (2006). The latter employ a pooling procedure which permits the evaluation of all forecasts for each target variable over 24 horizons simultaneously. Adopting this methodology allows us to draw conclusions on evaluating systematic forecast bias and, by applying a test on the predictability of forecast revisions, on the efficient use of new information for all forecast horizons jointly. It is shown how the pooled approach needs to be adjusted in order to accommodate the forecasting scheme of the Consensus Forecasts.Furthermore, the pooled approach is extended by a sequential test with the purpose of detecting the critical horizon beyond which the forecast should be regarded as biased.Moreover, we show how the pooled tests for the predictability of forecast revisions can be improved by taking heteroscedasticity in the form of target year-specific variances of macroeconomic shocks into account.In the empirical part we first present results in the form of analytical confidence intervals surrounding the horizon-specific bias estimates which allow intuitive and meaningful interpretations. The test for common bias reveals that several countries show biased forecasts, especially with forecasts covering more than 12 months. These results partially confirm the presumption that the macroeconomic forecasts for the past 10 years were severely affected by the pronounced shocks in that period. The fact that for individual countries systematic biases can be observed by applying the Consensus Forecasts reveals that in these countries the forecasting industry on the whole was not able to cope with the shoc...

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp11011.pdf Non-technical summaryThe theoretical literature suggests that upper-tier governments have an incentive to strategically allocate regional transfers in order to affect the electorate's opinion. This implies that citizens in targeted regions are aware of this intended benefit, and that they reward the benefactor for it. In this paper, the reaction of the citizens is studied, which has not found much consideration in the empirical literature until now. In particular, it focuses on the regional policy of the European Union (EU) as a special case of regional transfer policies with an immense scope and regionally targeted benefits. In this policy area the European institutions, in particular the Commission, act as benefactor and apparently also intend to increase the public support for European integration. The effects of these targeted transfers on the public support for the EU are studied by combining a rich data set on the regional allocation of structural funds payments with opinion survey data.In the empirical section, it is shown that the regional transfers show a positive impact on the public opinion that turns out to be sizeable. An increase of per capita transfers by 100 Euro increases the probability of being supportive of the EU to the extent of approximately 5 to 15%. Moreover, this is the first paper which is able to analyse the chain of causation which leads from regional transfers to public opinion in a more detailed way. In particular, the relevance of the individual's awareness of being a beneficiary is scrutinized.First, it is found that the awareness of being a beneficiary of transfers is conditional on a number of further socio-economic characteristics. Education plays an important role, since higher educated peoples' awareness reacts stronger to regional transfers than lower educated people. Second, the awareness of being supported is generally reflected in higher public support for the EU. Informed people have a 4% higher probability of having a positive opinion of the EU. However, this effect is also heterogeneous and depends on the channel of information. A sizeable effect is mainly detected for those citizens who are direct recipients of EU funds. Other information sources (TV, information signs) also have a positive but much smaller effect, whereas a negative effect is found in those cases where the respondent is acquainted with other people who...

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp10092.pdf Non-technical summaryIn this paper, we present a new approach to disclose the impact of policy preferences of parties on economic growth. We derive policy preferences of parties, such as political ideology and preferences restricted to single policy dimensions, from the content analysis of party manifestos. This data is obtained from the Comparative Manifesto Project (CMP), an international large scale project in political science that has collected the wording of thousands of election manifestos. These are coded according to the frequency of sentences devoted to 56 different policy issues, which comprise economic and non-economic issues and are regarded as proxies for the party preferences in the related political science literature. Based on this data, it is possible to calculate indices for the general left-right position as well as concerning specific policy areas that represent the political preferences of the parties or legislatures.In the empirical section, we analyse per capita GDP growth in a panel of 23 OECD countries for the period 1971-2004. We estimate several models containing a set of typical control variables; fixed effects control for time-invariant country-specific influences. First, we follow an approach which is typical for the empirical political economics literature and employ dummy variables for the differentiation of left-wing and right-wing governments.However, we are not able to detect a significant impact of partisanship on growth rates.This implies that partisanship defined according to the broad distinction between leftwing and right-wing governments cannot be proven to affect economic growth.Then we proceed with analyses based on 7 indices that account for the political preferences concerning different policy areas. These indicators are first tested individually in our empirical model, and then jointly in a model averaging procedure, the weighted averaged least squares (WALS) method. A strong and robust negative impact on economic growth can be detected for parties that support market interventions, whereas a positive impact can be found for parties that aim at setting incentives for business as well as those which promote technology and infrastructure. Welfare state policies are also found to have a significant negative effect in our classical estimations, but show a much weaker impact in our WALS analysis. These results are robust to...

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