Current research projects

Money in macroeconomics

In frictionless economic models of business cycles and growth, monetary shocks have effects on goods, labor and capital markets that contradict empirical experience. Can market frictions, such as market power, costs of price adjustment and wage contracts, change this picture? What contribution can endogenous growth theory make towards explaining the relationship between the level of inflation, the growth rate of per capita income and the unemployment rate, as well as persistent non-neutral effects of money? Which implications for the age profile of money balances arise from different motives of the demand for money, such as the cash-in-advance constraint, the consideration of transaction costs as well as money as an argument of the utility function?



Asset prices and returns and the business cycle

The cyclical properties of asset prices and asset returns are difficult to reconcile with theory. For instance, the observed equity premia require an implausibly high risk aversion. Which market frictions, technological restrictions and preference structures of individuals can explain these anomalies? What role does the threat of a very large crisis play? Are these explanatory approaches consistent with characteristics of goods, labor and money markets? What are the implications for ecnomic policy?



Solving dynamic, stochastic general equilibrium models

Dynamic, stochastic general equilibrium models have become a workhorse in macroeconomics. There are a number of methods from the field of numerical mathematics that can be used to solve these models. We investigate the accuracy of different solution methods and investigate which of the methods are transferable to models with large state space.



Evaluation and assessment of stochastic, dynamic general equilibrium models

One reason for the success of stochastic, dynamic, general equilibrium models are their quantitative predictions for, e.g., the costs of business cycles, the effects of structural shocks, the autocovariances and correlations of economics times, as well as the likelihood function of economic state space models. Estimation of the models’ parameters from observed data can be time-consuming because it involves the repeated solution of the model, which is a computationally intensive task in particular for large or medium scaled models solved with global techniques. We investigate and develop methods that increase efficiency and accuracy and present suitable applications.



Residential construction in the economic cycle

Approximately 25% of investments in developed economies are accounted for by residential construction. These investments exhibit strong differences over the business cycle compared to other investment activities: their prices and quantities are highly volatile and they lead the cycle. We examine whether real characteristics such as low depreciation rates or high shares of the production factors land and labor explain this behavior.  A second object of analysis is the close link between housing and mortgages.





Completed research projects

Spatial and temporal determinants of knowledge diffusion and knowledge spillovers

(Prof. Torben Klarl) 


Knowledge, just like human capital, is an essential growth driver of economies. However, to date there is as yet no clear evidence of the forces that favor or hinder the diffusion of knowledge both in terms of time and space. The heterogeneity of regions as well as network effects can be identified as significant explanatory variables for the diffusion of knowledge.




  • Klarl, Torben, What tells us spatial filtered labour productivity? - Evidence for German regions, mimeo, ZEW and University of Augsburg
  • Klarl, Torben, Comment on Acs and Varga: Entrepreneurship, agglomeration and technological change, erscheint in: Small Business Economics, (DOI 10.1007/s11187-012-9418-z)
  • Klarl, Torben, Modelling the folk theorem of spatial economics: a heterogeneous regional growth model, Universität Augsburg, Volkswirtschaftliche Diskussionsreihe, Beitrag 305, Mai 2009
  • Klarl, Torben, Knowledge diffusion and knowledge transfer: two sides of the medal, ZEW Discussion Paper No. 09-080, Dezember 2009
  • Klarl, Torben,  Spatial model selection and spatial knowledge spillovers: a regional view of Germany, ZEW Discussion Paper No. 10-005, Januar 2010
  • Klarl, Torben: Absorptive Capacity, formation of enterprises and space, mimeo, ZEW and University of Augsburg
  • Klarl, Torben: A Bayesian approach for estimating higher order spatial error component models dealing with spatial heterogeneity, mimeo, ZEW and University of Augsburg

Natural resources and (endogenous) growth

(Prof. Dr. Torben Klarl) 


This project deals with current problem areas in the conflicting fields of resource economics and growth. This involves, among other things, questions of optimal resource management under changing market conditions or the optimal design of fiscal policy within the context of extreme weather events and climate change. 




  • Klarl, Torben, Market dynamics, dynamic resource management and environmental policy in the context of (strong) sustainability, erscheint im Journal of Evolutionary Economics
  • Klarl, Torben and Martin Scheffel, Climate Change, the Likelihood of Extreme Events and Optimal Fiscal Policy, mimeo, ZEW and University of Augsburg 

Ecological sustainability and population ageing

(Prof. Dr. Torben Klarl)


The demographic change currently taking place in large parts of the industrialized countries poses a number of new challenges for the design of a sustainable environmental policy. For example, an answer must be given to the question of whether, and if so to what extent, altruistic motives may be the key to sustainable environmental policy. This project was conducted in cooperation with Prof. Sebastian Kranz from the University of Ulm.


Asset prices and monetary policy


German Research Foundation (DFG), Priority Program 1578 "Financial Market Imperfections and Macroeconomic Performance“


(Prof. Dr. Alfred Maußner, Halvor Ruf, Michael Flor)


Should central banks also monitor asset price developments? The recent financial and economic crisis illustrates the relevance of this question for monetary policy strategy. Although there have already been a number of studies investigating this question, a definitive answer has yet to be found. Research in this area is to be promoted within two subprojects:

In the first subproject, existing models with a representative budget are to be further developed. Within the framework created in this manner, simulation studies will shed light on the effects of a monetary policy which is also oriented towards asset prices on the extent of economic fluctuations and the welfare of the representative household. The resulting framework is intended to yield two improvements: 1) It should map several transmission channels of monetary policy (the interest rate channel, the financial accelerator, and the bank balance sheet channel), 2) It should replicate known facts about asset prices and the business cycle.
Furthermore, monetary policy should not be evaluated solely in terms of the stabilization target, but also in terms of the distributional effects of financial crises that lead to adjustments in asset structure and prices. Consequently, an already developed model framework (see project "Market Frictions, Money and the Business Cycle") on the distributional effects of inflation is to be extended by additional channels during a second subproject. Within the framework of a model with overlapping generations, the role of public indebtedness of real estate assets and unemployment leading to fluctuations in earned income will be studied.



  • Heer, Burkhard, Alfred Maußner and Halvor Ruf, Q-Targeting in New Keynesian Models, forthc. in Journal of Business Cycle Research (DOI 10.1007/s41549-017-0019-4, online first 2017-11-07).
  • Heer, Burkhard und Alfred Maußner, Asset Returns, the Business Cycle, and the Labor Market, CESifo working paper no. 3391, März 2011.


Integration of financial markets into DSGE models


(Dr. Sabine Gunst)


This project aims to link models, such as the model of Carlstrom and Fuerst (1997), with the search and matching literature to develop a DSGE model that includes both frictions in the financial markets (in the form of credit contracts) and frictions in the labor markets. The addition of frictions in the labor market to the financial market models has only been considered in a few articles so far. One such example is the work of Wasmer and Weil (2004), who, in describing their model, however, neither use suitable programs nor estimate the model parameters.



  • Gunst, Sabine:Konjunkturdynamik mit Finanz- und Arbeitsmarktfriktionen. Business Cycle Dynamics with Financial and Labor Market Frictions, Inauguraldissertation, Universität Augsburg, 2013


Technical progress and development of the wage structure

(Prof. Dr. Jürgen Antony)


The increasing wage inequality between highly and low-skilled employees and workers, especially in the Anglo-Saxon countries, is a phenomenon that is not only widely observed among economists. This was accompanied by an increase in the relative supply of highly qualified workers; at the same time, higher growth rates in the number of highly qualified workers were observed in economic sectors with a high proportion of highly qualified workers in the total workforce. This research project aims at mapping a possible correlation of these parallel developments by means of theoretical models and thereby revealing potential causal structures. Special emphasis is placed on the hypothesis of distorted technical progress in favor of certain qualification groups and its possible endogeneity.



  • Antony, Jürgen: Scale Effects and Labor Productivity, Inauguraldissertation, Universität Augsburg, 2006
  • Antony, Jürgen: Directed Sector and Skill-Specific Technological Change: The Development of Wages for the High and Low Skilled. Universität Augsburg, Volkswirtschaftliche Diskussionsreihe, Beitrag 236, Februar 2003


Wage rigidity and unemployment

(Prof. Dr. Alfred Maußner)


Assessment of the labor market consequences of rigid real wages within the framework of static and dynamic general equilibrium models.



  • Maußner, Alfred: Sticky Wages and German Unemployment: What Simple Models Tell. Volkswirtschaftliche Diskussionsbeiträge der Otto-Friedrich-Universität Bamberg, Nr. 82, Oktober 1997
  • Maußner, Alfred: Wage Gaps in Textbook Models: Do they Account for the German Unemployment Experience?, in: Jahrbuch der Wirtschaftswissenschaften, heft 2/99, S. 156-177


Social security and job search

(Michael Holsteuer)


The search theory of unemployment implies that generous wage replacement benefits extend the duration of unemployment. However, the empirical evidence for this analytically clear effect is conflicting. For this reason, computable intertemporal search models are implemented on the computer and tested for their explanatory content. These are then used to analyze the incentive effects of various possible reform measures of the current unemployment insurance system. To the extent that this is possible, a reform recommendation for Germany will be developed.



  • Holsteuer, Michael: Einkommensteuer und Sozialversicherungsbeiträge in einem minimalen suchtheoretischen Modell, Volkswirtschaftliche Diskussionsbeiträge, Nr. 85, Otto-Friedrich Universität Bamberg 1999


Tax policy and employment


(Dr. Jana Kremer)


Proposals to solve the employment problem in Germany include a general reduction and flattening of the progression of income tax. Despite the fact that the positive effects of such measures can easily be demonstrated in static partial models, the relationship between tax levels and unemployment is extremely weak in these models. Moreover, they seem to overstate the benefits of higher tax progression. On the other hand, empirical studies indicate that a comprehensive assessment can only be obtained in models that take into account long-term influences of tax policy in the economy as a whole. This presents an opportunity to investigate the role of tax levels and tax progression in a dynamic general equilibrium model of overlapping generations with heterogeneous agents and imperfect labor markets.



  • Kremer, Jana: Arbeitslosigkeit und Steuerpolitik, BERG Working Paper Series No. 32, Otto-Friedrich Universität Bamberg 1999
  • Kremer, Jana: Arbeitslosigkeit, Lohndifferenzierung und wirtschaftliche Entwicklung: Qualifikationsunterschiede und Gewerkschaften in einem OLG-Modell mit heterogenen Agenten - Lohmar, Köln: Eul-Verlag 2001


Business cycle and time allocation


(Dr. André de Beisac)


From the known labor supply models it is clear that the labor supply or, in a broader sense, the overall time allocation, is dependent on a series of factors that are internal to the budget, but can also be external to the budget. One of these factors external to the budget is the cyclical state of an economy. Not only does this directly influence employment opportunities, but it also influences the individual optimization of time allocation by means of real wages. Using data from GSOEP, this project will examine the extent to which a simple business cycle indicator is capable of explaining changes in time allocation. In this context, it is apparent that the data situation rather contradicts the models of a pure intertemporal allocation. One potential explanation would be a weak correlation between the economic activity and real wages.



  • De Beisac, André, Die Einflüsse von Haushaltsstruktur und Konjunktur auf die Zeitallokation: eine empirische Analyse, Dissertation, Universität Augsburg, 2010


Prices, exchange rates and optimal central bank policy in customer market models


(Dr. Nikolay Hristov)


Customer loyalty and the expansion of market share are central to any marketing policy and are among the most vital components of any corporate strategy. However, the battle for market share is hardly considered in macroeconomic theory. This project develops macroeconomic models of closed and open economies based on microeconomic studies that explicitly consider the interaction between consumers and companies fighting for market share. The possibilities of explaining the rigidity of nominal prices and the imperfect transmission of exchange rate fluctuations to import prices through this interaction will be investigated, as well as contributing to the explanation of the cyclical development of prices, exchange rates, production and employment. These models are also used to formulate recommendations regarding the design of the central bank's interest rate and monetary policy.



  • Hristov, Nikolay, Customer Markets and the Real Effects of Monetary Policy Shocks, Dissertation, University of Augsburg, 2011
  • Hristov, Nikolay, Inflation Aversion and the Real Effects of Monetary Policy Shocks, Working Paper, University of Augsburg. Presented at the 23rd Annual Congress of the European Economic Association, Milan, August 2008
  • Hristov, Nikolay, Inflation Aversion and the Real Effects of Monetary Policy Shocks. GMM Estimation and Business Cycles Moments, Working Paper, University of Augsburg. Presentaed at the "Jahrestagung 2008 des Vereins für Socialpolitik", Graz, September 2008
  • Hristov, Nikolay, Market Share Competition, Non-Separable Utility and the Propagation of Monetary Policy Shocks, Working Paper, University of Augsburg, 2009
  • Hristov, Nikolay, Price Dispersion and Monetary Policy, Working Paper, University of Augsburg, 2008