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Bernd Schnatz

International & European Relations

Division

External Developments

Current Position

Deputy Head of Division

Email

bernd.schnatz@ecb.europa.eu

Other current responsibilities

Deputy Head of Division, DG-International and European Relations, External Developments Division

Education

University of Hamburg, PhD in Economics (Dr. rer. pol), 1993 – 1996

J. W. Goethe University Frankfurt, M. Sc. in Economics (Dipl. Volkswirt), 1987– 1993

Professional experience

European Central Bank, 2000 – present

Deutsche Bundesbank, 1996 – 2000

Hamburg Institute for International Economics, 1993 – 1996

1 November 2001
WORKING PAPER SERIES - No. 85
Details
Abstract
This paper presents an empirical analysis of the medium-term determinants of the euro effective exchange rate. The empirical analysis builds on synthetic quarterly data from 1975 to 1998, and derives a Behavioural Equilibrium Exchange Rate (BEER) and a Permanent Equilibrium Exchange Rate (PEER). Four different model specifications are retained, due to the difficulties encountered in specifying an encompassing model. Results indicate that differentials in real interest rates and productivity, and (in some specifications) the relative fiscal stance and the real price of oil, have a significant influence on the euro effective exchange rate. Assessing the existence and the extent of the over- or undervaluation of the exchange rate is not straightforward, since these different specifications often lead to contrasting findings. However, all four models point unambiguously to the undervaluation of the euro in 2000, although the extent of this undervaluation largely depends on the specification chosen
JEL Code
F31 : International Economics→International Finance→Foreign Exchange
F32 : International Economics→International Finance→Current Account Adjustment, Short-Term Capital Movements
1 April 2003
WORKING PAPER SERIES - No. 225
Details
Abstract
This paper analyses the impact of productivity developments in the United States and the euro area on the euro-dollar exchange rate. The paper presents a new measure of relative average labour productivity (ALP), which does not suffer from the biases implicit in readily available relative ALP data. Importantly, the patterns of these series differ widely. Employing the Johansen cointegration framework, four Behavioural Equilibrium Exchange Rate models are estimated using four different productivity proxies. Our results indicate that the extent to which productivity can explain the euro depreciation varies with the productivity proxy used: readily available measures explain most, our new, preferred measure least. If foreign exchange traders used the former to assess productivity developments, this might thus have contributed to the weakness of the euro in 2000/2001. In all models, however, productivity can explain only a fraction of the actual euro depreciation experienced in 1999/2000.
JEL Code
F31 : International Economics→International Finance→Foreign Exchange
C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence
1 April 2003
WORKING PAPER SERIES - No. 224
Details
Abstract
This paper examines the long-run determinants of the euro-yen exchange rate. Using cointegration analysis, we find a consistent and significant relationship between the real exchange rate and relative productivity, the net foreign asset position, relative government spending and terms of trade shocks, as well as a fairly rapid mean reversion of the exchange rate to its equilibrium. The "equilibrium" rate tracks the trends in the actual exchange rate quite well, accounting for a large part of the yen appreciation from the mid-1970s to 2001. Our findings suggest that the euro appreciation against the yen in 2001 represented an equilibrium correction of its previous depreciation. Moreover, the width of the error bands highlights the difficulties arising when attempting to determine the precise equilibrium value of a currency.
JEL Code
F31 : International Economics→International Finance→Foreign Exchange
C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
28 April 2004
WORKING PAPER SERIES - No. 353
Details
Abstract
This paper provides a discussion of methodological issues relating to the estimation of the long-run relationship between exchange rates and fundamentals for Central and Eastern European acceding countries, focusing on the so-called behavioural equilibrium exchange rate (BEER) approach. Given the limited availability and reliability of data as well as the rapid structural change acceding countries have been undergoing in the transition phase, this paper identifies several pitfalls in following the most straightforward and standard econometric procedures. As an alternative, it looks at the merits of a two-step strategy that consists of estimating the relationship between exchange rates and economic fundamentals in a panel cointegration setting - using a sample which excludes acceding countries - and then "extrapolating" the estimated relationships to the latter. While focusing on the first step of such a strategy, the paper also delves into discussing technical aspects underlying the "extrapolation" stage. As a result, the paper endows the reader with the methodological and empirical ingredients for computing equilibrium exchange rates for acceding countries, providing estimates for the long-run coefficients between real exchange rates and economic fundamentals and a discussion of how to apply these results to acceding countries data.
JEL Code
C23 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Panel Data Models, Spatio-temporal Models
F31 : International Economics→International Finance→Foreign Exchange
11 November 2005
WORKING PAPER SERIES - No. 545
Details
Abstract
The aim of the paper is to analyse the factors behind the rapid trade integration of the Central and Eastern European countries with the euro area in the past ten years and to gauge the potential for further integration. We use as benchmark an enhanced gravity model estimated with a large sample of bilateral trade flows across 61 countries since 1980. We show that a careful examination of the fixed effects of the model is crucial for the proper interpretation of the results: simply extracting the predicted values of the regression (“in-sample”) – as commonly done in the literature – leads to distorted results as it fails to take the transition process properly into account. As an alternative, we propose a two-stage “out-of-sample” approach. The results suggest that trade integration between most of the largest Central and Eastern European countries and the euro area is already relatively advanced, while the Baltic countries as well as the South Eastern European countries still have significant scope for integration.
JEL Code
C23 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Panel Data Models, Spatio-temporal Models
F15 : International Economics→Trade→Economic Integration
F14 : International Economics→Trade→Empirical Studies of Trade
13 October 2006
WORKING PAPER SERIES - No. 682
Details
Abstract
The paper tests for nonlinearities in the adjustment of the euro exchange rate towards purchasing power parity (PPP). It presents new survey based evidence consistent with non-linear patterns in euro exchange rate dynamics. Moreover, based on an exponential smooth transition autoregressive (ESTAR-) model, it finds strong evidence that the speed of mean reversion in euro exchange rates increases non-linearly with the magnitude of the PPP deviation. Accordingly, while the euro real exchange rate can be well approximated by a random walk if PPP deviations are small, in periods of significant deviations, gravitational forces are set to take root and bring the exchange rate back towards its long-term trend. Consistent with higher euro-dollar volatility, deviations from the PPP equilibrium for this pair need to be stronger in order to reach the same adjustment intensity as for other currencies.
JEL Code
F31 : International Economics→International Finance→Foreign Exchange
17 November 2006
WORKING PAPER SERIES - No. 693
Details
Abstract
The rapid transition of China from a closed agricultural society to an industrial powerhouse has been associated with a rapid increase in the share of China in world trade. As the world is taking the full measure of this phenomenon, tensions have been arising ranging from holding China partly responsible for global imbalances to complaints about the “excessive” competitiveness of Chinese products. Without a quantifiable benchmark, however, such claims are difficult to judge. This paper therefore provides an assessment of China’s “natural” place in the world economy based on a new set of trade integration indicators. These indicators are used as a benchmark in order to examine whether China’s share in international trade is consistent with fundamentals such as economic size, location and other relevant factors. They constitute a better measure of trade integration that incorporates many more factors than traditional openness ratios. Results show that the model tracks international trade well and confirm that China is already well integrated in world markets, particularly with North America, several Latin American and East Asian emerging markets and most euro area countries.
JEL Code
C23 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Panel Data Models, Spatio-temporal Models
F15 : International Economics→Trade→Economic Integration
F14 : International Economics→Trade→Empirical Studies of Trade
30 November 2007
WORKING PAPER SERIES - No. 833
Details
Abstract
From a conceptual point of view there is little consensus of what should be the “ideal indicator” of international cost and price competitiveness as each of the standard measures typically employed has its own merits and drawbacks. This calls for addressing the question from an empirical angle, searching for the indicator that best explains and helps forecast export developments. This paper constitutes a first attempt to systematically compare the properties of the alternative cost and price competitiveness measures of the euro area. Although they diverge sometimes, we find little evidence that there is one indicator consistently outperforming the other in terms of explaining and forecasting euro area exports. This suggests that the measures based on consumer and producer prices, which offer some advantages in terms of quality and timeliness, are good approximations of euro area price and cost competitiveness.
JEL Code
F17 : International Economics→Trade→Trade Forecasting and Simulation
F31 : International Economics→International Finance→Foreign Exchange
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
9 December 2009
WORKING PAPER SERIES - No. 1125
Details
Abstract
Using OECD composite leading indicators (CLI), we assess empirically whether the ability of the country- specific CLIs to predict economic activity has diminished in recent years, e.g. due to rapid advances in globalisation. Overall, we find evidence that the CLI encompasses useful information for forecasting industrial production, particularly over horizons of four to eight months ahead. The evidence is particularly strong when taking cointegration relationships into account. At the same time, we find indications that the forecast accuracy has declined over time for several countries. Augmenting the country-specific CLI with a leading indicator of the external environment and employing forecast combination techniques improves the forecast performance for several economies. Over time, the increasing importance of international dependencies is documented by relative performance gains of the extended model for selected countries.
JEL Code
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
F47 : International Economics→Macroeconomic Aspects of International Trade and Finance→Forecasting and Simulation: Models and Applications
14 April 2010
WORKING PAPER SERIES - No. 1170
Details
Abstract
In this paper we examine linkages across non-energy commodity price developments by means of a factor-augmented VAR model (FAVAR). From a set of non-energy commodity price series, we extract two factors, which we identify as common trends in metals and a food prices. These factors are included in a FAVAR model together with selected macroeconomic variables, which have been associated with developments in commodity prices. Impulse response functions confirm that exchange rates and of economic activity affect individual nonenergy commodity prices, but we fail to find strong spillovers from oil to non-oil commodity prices or an impact of the interest rate. In addition, we find that individual commodity prices are affected by common trends captured by the food and metals factors.
JEL Code
E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
F3 : International Economics→International Finance
10 August 2012
WORKING PAPER SERIES - No. 1455
Details
Abstract
Reliable and timely information about current economic conditions is crucial for policy makers and expectations formation. This paper demonstrates the efficacy of the Survey of Professional Forecasters (SPF) and the Purchasing Manager Indices (PMI) in anticipating US real economic activity. We conduct a fully-fledged real-time out-ofsample forecasting exercise linking these surveys to US GDP and industrial production growth over a long sample period. We find that both indicators convey valuable information for assessing current economic conditions. The SPF clearly outperforms the PMI in forecasting GDP growth, while it performs quite poorly in anticipating industrial production growth. Combining the information included in both surveys further improves the accuracy of both, the PMI and the SPF-based forecast.
JEL Code
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
E47 : Macroeconomics and Monetary Economics→Money and Interest Rates→Forecasting and Simulation: Models and Applications
C22 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models &bull Diffusion Processes
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
P. De Grauwe (ed.), "The Many Dimensions of Competitiveness", MIT Press, Cambridge.
Explaining and forecasting euro area exports: Which competitiveness indicator performs best?
  • M. Ca’Zorzi and B. Schnatz
Open Economies Review, 2009, 20, 1, 85-111.
Evaluating China’s Integration in World Trade: A Benchmark Based on a Gravity Model
  • M. Bussière and B. Schnatz
F. di Mauro, S. Dees, W. McKibbin (ed.), "Globalisation, Regionalism and Economic Interdependence", Cambridge Univ. Pr.
Trade integration of central and eastern European countries and China: Has it reached potential?
  • M. Bussière and B. Schnatz
Review of Development Economics, 2008, 12, 3, 562-576.
EU Enlargement and Trade Integration: Lessons from a Gravity Model
  • M. Bussière, J. Fidrmuc and B. Schnatz
International Economics and Economic Policy, 2007, 4, 3, 281-295.
Is reversion to PPP in euro exchange rates non-linear?
  • B. Schnatz
Journal of Comparative Economics, 2006, 34, 3, 499-517.
Towards the estimation of equilibrium exchange rates for transition economies: Methodological issues and a panel cointegration perspective
  • F. Maeso-Fernandez, C. Osbat and B. Schnatz
Economic Systems, 2005, 29, 130-143.
Pitfalls in estimating equilibrium exchange rates for transition economies
  • F. Maeso-Fernandez and C. Osbat
K. Liebscher et al. (ed.), "European Economic Integration and South East Europe – Challenges and Prospects".
Trade integration of the new EU member states and selected South-East European countries: lessons from a gravity model
  • M. Bussière, J. Fidrmuc and B. Schnatz
Review of World Economics/ Weltwirtschaftliches Archiv, 2004, 140, 1, 1-30.
Productivity and the euro-dollar exchange rate
  • B. Schnatz, F. Vijselaar and C. Osbat
Australian Economic Papers, 2002, 41, 4, 437-461.
Determinants of the euro real effective exchange rate: A BEER/PEER approach
  • F. Maeso-Fernandez, C. Osbat and B. Schnatz
Applied Economics Quarterly, 2000, 46, 3, 274-302; and Deutsche Bundesbank Discussion Paper 2/00
The determinants of the euro-dollar exchange rate: synthetic fundamentals and a non-existing currency
  • J. Clostermann and B. Schnatz
Intereconomics, 2000, 35, 2, 81-79; and Deutsche Bundesbank Discussion Paper 3/98
Speculative attacks in emerging markets: the role of macroeconomic fundamentals
  • B. Schnatz
Asia Pacific Journal of Finance
The sudden freeze of the Asian miracle: The role of macroeconomic fundamentals
  • B. Schnatz
Intereconomics
Rating agencies and financial market volatility – a commentary
  • B. Schnatz
L. Menkhoff and B. Reszat (eds), "Asian financial markets – structures, policy issues and prospects", Baden-Baden
Financial markets and speculative attacks in Asia: a historical perspective
  • B. Schnatz
Intereconomics
South Africa's economic prospects after the elections
  • B. Schnatz