JBNST - Vol. 242/2 - 2022

We investigate the impact of errors in medium run tax revenue forecasts on the final budget balance. Our analysis is based on fiscal data for the entirety of German states and takes advantage of revenue forecasts and respective errors that can be considered as exogenously given in the budgeting process. We find that forecast errors at various forecast horizons translate considerably into the final budget balance, indicating that expenditure plans get only marginally adjusted when revenue forecasts get revised. Consequently, errors in tax revenue forecasts may considerably affect the accumulation of public debt. Our calculations suggest that a significant share of total debt of German states results from forecasts that were too optimistic.

I analyze the narratives that accompany business cycle forecasting reports of three German institutes using topic models. To this end, I gather multiple similar topics into different economic subject categories, allowing me to map shifting prioritizations within and between these subjects. Subsequently, I examine whether forecasting narratives contain additional information not captured by traditional indicators and include them in a random forest-based investment-forecast efficiency analysis. I find multiple correlations between narratives and forecast errors and conclude that forecasters inefficiently incorporate qualitative information in these cases. I raise the idea that further investigations with more precise identification of forecasting narratives could improve qualitative information processing or lead to scientific guidelines for forecast adjustments.

Based on bank level data from the euro area, I investigate the role of non-performing loans (NPLs) for lending rates on newly granted loans. The focus is on an effect caused by the stock of NPLs that extends beyond losses that banks have already incorporated into their reported capital positions. The paper assesses the channels through which such an effect occurs. The results indicate that a higher stock of NPLs is associated with higher lending rates. This relation is driven by net NPLs, which constitute the part of NPLs that is not covered by loan loss reserves. Although the stock of NPLs affects banks’ idiosyncratic funding costs as well, the latter do not seem to constitute an important link between the stock of net NPLs and lending behaviour. This is because the relation between idiosyncratic funding costs and lending rates turns out to be rather weak. Furthermore, NPLs do not strongly affect the banks’ interest rate pass-through.

Zusammenfassung Albert O. Hirschmans Unterscheidung von „Abwanderung und Widerspruch“ als Antwort auf den Leistungsabfall von Staaten hat grosse Aufmerksamkeit gefunden. Es gibt jedoch eine dritte Antwort, nämlich Camouflage, Stillhalten als Tarnung, bis sich die Bedingungen verbessern. Diese Strategie wird häufig praktiziert, weil ihr Nutzen oft in einem günstigen Verhältnis zu den entstehenden Kosten steht. Die Kosten sind im Fall des Ausstiegs oder des Widerspruches oft hoch. Deshalb tarnt sich eine große Mehrheit der Bürgerinnen und Bürger, wenn sie mit den Ansichten und der Politik eines Regimes nicht einverstanden ist. Sie wartet, bis das unterdrückerische Regime zerbröckelt ist, um im richtigen Moment umso stärker aktiv werden zu können. Camouflage findet auch in privaten Unternehmungen, öffentlichen Einrichtungen und in der Wissenschaft statt. Nutzen und Kosten der drei Reaktionen – Abwanderung, Widerspruch und Camouflage – unterscheiden sich stark voneinander.

The aim of the project SOEP-RV is to link data from participants in the German Socio-Economic Panel (SOEP) survey to their individual Deutsche Rentenversicherung (German Pension Insurance) records. For all SOEP respondents who give explicit consent to record linkage, SOEP-RV creates a linked dataset that combines the comprehensive multi-topic SOEP data with detailed cross-sectional and longitudinal data on social security pension records covering the individual’s entire insurance history. This article provides an overview of the record linkage project, highlights potentials for analysis of the linked data, compares key SOEP and pension insurance variables, and suggests a re-weighting procedure that corrects for selectivity. It concludes with details on the process of obtaining the data for scientific use.