EPU and the VSTOXX usually co-move Insights on whether EPU and the VSTOXX usually co-move – despite some divergence in the short run – can be gained from an econometric framework that tests if there is a long-run relation between the two. To do so, we perform an Engle-Granger testRead More →
Consistent support of industry German government policy: consistent support of industry Although the companies themselves deserve most of the credit for the strength of German manufacturing, the German government also plays a role in strengthening the country’s position. The government’s official policy is to keep intervention to a minimum andRead More →
VAT is levied in Germany under the harmonised EU system Value added tax (VAT) VAT is levied in Germany under the harmonised EU system. The standard rate is 19%, and there is a reduced rate of 7% for certain basic foodstuffs, books, newspapers, antiques, live animals, hotel accommodation and forRead More →
div valuation now Another sign that investors have increasingly valued stocks based on their dividend can be found in the dividend yield of S&P 500 stocks which has been relatively constant since the financial crisis. More importantly, the difference between the dividend yields of stocks, the dispersion, has been fallingRead More →
Buoyant mittelstand and blue-chip corporations The first is its mittelstand, the small and medium-sized companies that dominate the economy. In particular, the prominence of larger family-owned companies in Germany contrasts to other developed economies. In 2013 the 4,500 largest family-owned companies in Germany employed 7.2 m people (around 1,600 employeesRead More →
Rock-bottom benchmark rates Benign global economic conditions and rock-bottom benchmark rates may partly explain low financial markets volatility in recent years. Indeed, the largest economies in the world are all growing relatively strongly. At the same time, both factors do not necessarily lead to a low EPU. It is alsoRead More →
Upstream sectors, The plastics and metal industries In the wake of the uptrend in capital goods sectors, output in the upstream sectors, i.e. The plastics and metal industries, has also risen considerably. We forecast output growth of c. 4% for both sectors in 2017. As industrial output growth looks setRead More →
Pharmaceuticals industry is particularly dependent on US exports Apart from capital goods producers, the pharmaceuticals industry is particularly dependent on US exports. More than 18% of the sector’s total exports went to the US in 2017, and the export ratio is very high, at 66.9%. While demand for numerous medicinesRead More →
Financial market uncertainty and economic policy uncertainty decouple As already discussed, market participants may take a wait-and-see approach during episodes of elevated EPU, which may affect asset prices, market liquidity, etc. It is therefore reasonable to look at the transmission from all-time high policy uncertainty to financial markets. Insights canRead More →
Investor debt capacity More recently, though, the aristocrats’ performance has turned. Over the last 18 months, they have underperformed by about one-quarter. One reason for this is that investors have begun to realise they have reached capacity in the amount of debt they can take on to finance both outsizedRead More →
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