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Begin New Search Author Moritz Schularick Publication Year within 3 Years

1. What if? The Effects of a Hard Decoupling from China on the German Economy

Author:
Julian Baqaee, Julian Hinz, Benjamin Moll, Moritz Schularick, Feodora A. Teti, Joschka Wanner, and Sihwan Yang
Publication Date:
01-2024
Content Type:
Policy Brief
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
How would the German economy cope with a hard economic decoupling from China? The authors study a scenario where the global economy fragments into three distinct blocs: the G7 economies and their allies, China and her allies, as well as neutral countries. German trade with China would have to be entirely rerouted to countries within the "Western" block and neutral countries. The authors quantify the costs of such a worst-case hard decoupling using the (Baqaee and Farhi 2021) multi-sector model of the world economy. The key finding is that a total cut-off of trade relations with China would have severe but not devastating effects on the German economy. The welfare loss for Germany (relative to a no-cut-off baseline) would be around 5 percent of Gross National Expenditure (GNE) over the first few months and around 4 percent over the first year, plus additional short run costs due to business-cycle amplification effects. In the medium and long run, the costs would fall to a permanent loss in the 1–2 percent range. Less extreme decoupling or gradual de-risking scenarios (“small yard, high fence") would incur smaller costs. The single most influential assumption relates to the “trade elasticity,", i.e., the ease and speed with which trade can be reorganized away from China to neutral countries and within the “Western” block. The authors´ findings, in particular the critical dependence of economic costs on the time horizon over which adjustments take place, provide some rationale for embarking on a gradual de-risking trajectory to avoid a costly and politically contentious hard decoupling dictated by geopolitical events.
Topic:
Globalization, International Trade and Finance, Sanctions, Geoeconomics, Decoupling, and De-Risking
Political Geography:
China, Asia, and Germany

2. The Price of War

Author:
Jonathan Federle, André Meier, Steffen Müller, Willi Mutschler, and Moritz Schularick
Publication Date:
02-2024
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
In an integrated global economy, the economic fallout of war is not confined to the country where the conflict is fought but spills over to other countries. We study the economic effects of large interstate wars using a new data set spanning 150 years of data for more than 60 countries. War on a country’s territory typically leads to an output decline of 30 percent and a 15 percentage point increase in inflation. We find large negative effects also for countries that are geographically close to the war site, irrespective of their participation in the war. Output in neighboring countries falls by more than 10 percent over 5 years, and inflation rises by 5 percentage points on average. Negative spillovers decline with geographic distance and increase in the degree of trade integration with the war site. For very distant countries, output spillovers can turn positive so that wars create winners and losers in the international economy. We rationalize these findings in an international business cycle model, calibrated to capture key features of the data. As the war destroys capital in the war site and productivity falls, trade with nearby economies decreases, generating an endogenous supply-side contraction abroad.
Topic:
International Trade and Finance, War, Business, Geoeconomics, Russia-Ukraine War, Spillovers, and Supply Shocks
Political Geography:
Russia, Ukraine, and Global Focus

3. Monetary Policy and Racial Inequality

Author:
Alina Bartscher, Moritz Kuhn, Moritz Schularick, and Paul Wachtel
Publication Date:
01-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The racial tensions that spread across the United States in 2020 have caught the attention of monetary policymakers and focused concern on the size and persistence of the gap between both the income and wealth of black and white households. There is widespread recognition that despite some decline in overt labor market discrimination, gains in educational opportunities, and income growth of black households since the onset of the civil rights movement, the gaps persist and have even grown larger by some measures. According to the 2019 Survey of Consumer Finances (SCF), the median wealth of a white household was $184,390, compared with only $20,730 for the median black household. The typical black household owns only about 11 percent of the wealth of the typical white household. The income gap is smaller but still large; the median income of black households ($38,688) is 58 percent of the median income of white households ($67,196).
Topic:
Race, Monetary Policy, Inequality, and Economic Policy
Political Geography:
North America and United States of America