QE is no debt relief

There was a little Twitter exchange on the nature of the ECB’s QE programme between Paul de Grauwe and Marcel Fratzscher. Paul sees QE as a sort of debt relief and asks why the ECB grants such relief to Germany, France and Italy but not to debt-burdened Greece. If you think of QE as a sort of debt relief, Paul’s question is legitimate, after all Greece would benefit most from a debt relief. But that is not what QE is or should be. Continue reading QE is no debt relief

Enforcing Rules Is Important

A while ago on a German train station, I saw a conductor telling a group of people that smoking is prohibited in this station. He was laughed at and ignored. Later on a passenger next to me on the train told the conductor, how glad he was that he stood up to the smoking people and reminded them of the rules. The conductor replied that it is sadly not in his power to enforce the smoking ban in German stations – and not his job for that matter. This would be the job of DB Security, a subsidiary of Deutsche Bahn, who (together with the German Federal Police) is responsible for the security of German train stations and have the means to enforce the rules. The passenger complained that all the security personnel  making their rounds do rarely remind  people of the smoking ban and even more rarely enforce it. An observation I can confirm. The conductor shrugged “A lot is changing” to which the passenger replied “Unfortunately”.

We could now dismiss this little story as an unimportant chat of people unhappy about change, but I think there is more to it. It is not a story about change but about rules and how unenforced rules makes people unhappy.

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One in arguably a few thousand

Currently in Germany’s Top 40 Radio Charts is a song by Max Giesinger called “80 Millionen”, where the singer muses about the incredibly small chance of meeting his lover, a chance of one in eighty million, the rough-and-ready number of the German population. Though 81.8 million would be the more accurate number, for reasons of song-writing eighty million is fine. The singer also admits that he “was never good at probabilities” but he remembered that the chance of meeting her (or him for that matter) approaches zero.  Now the probability of meeting, falling in love and actually being together with one particular person is indeed close to zero – in the literal frequentist view it is one over eighty million, which is zero for all practical purposes, even for matters of the heart in which the brain has little say. The thing is, a purely frequentist approach is plain wrong. Luckily for Mr Giesinger, the chances are much better than he thinks. Continue reading One in arguably a few thousand

Germany’s and France’ potential GDP since EMU

I am currently working on an estimation of a monetary union model I set up for my PhD thesis. For this, I need quarterly data of the output gap of Germany and France, which is surprisingly hard to come by. So I estimated it myself using real GDP data from Eurostat (unadjusted, chain-linked). For a very first glance, I de-seasonalised the data via moving-averages. After that, I employed the modified Hodrick-Prescott filter (mHP) as suggested by Bruchez (2003). Yes I know, the HP and mHP filters have their drawbacks and weaknesses, but they are nevertheless useful for a first look on the data.

Continue reading Germany’s and France’ potential GDP since EMU