The research project "International Macroeconomics" deals with the global aspects of business cycles and macroeconomic policy. Globalization is proceeding quickly, implying that economies are becoming more and more interconnected. Shocks within one country can easily be transmitted to other countries. Excess savings in one country can lead to bubbles in other countries. The bursting of a bubble in one country can lead to a recession in a number of other countries.
In our analysis we put special emphasis on the interconnectedness of financial markets and potential feedback effects to the economy. The aim of this research project is to contribute to a deeper understanding of the magnitude as well as the structure of risk in the financial sector. Our research topics include the structure of interactions among market participants, the emergence of speculative bubbles and the econometric analysis of asset price dynamics, including foreign exchange markets. A strong focus is also on developing and enhancing the methodological tools to assess these issues.
The global interconnectedness of economies is not restricted to the private sector but also includes the effects of macroeconomic policies. Loose monetary policy in a developed country can lead to a surge of capital into emerging economies, and fiscal stimulus (or austerity) in one country is likely to affect its trading partners. A topic especially relevant for Europe is the economics of currency unions in which its members forsake the possibility to enact independent monetary policy. Under which conditions can such an arrangement be beneficial for the involved economies? These are the questions that are dealt with in this research project.