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David Sondermann

Economics

Division

Supply Side, Labour and Surveillance

Current Position

Deputy Head of Division

Fields of interest

Macroeconomics and Monetary Economics,International Economics,Economic Growth

Email

david.sondermann@ecb.europa.eu

Education
2006-2009

PhD in Monetary Economics, University of Muenster (Germany)

2002-2006

Master in Economics, Universities of Muenster, Hamburg (Germany) and Cambridge (UK)

Professional experience
2021-

Deputy Head of Division (ECB, DG Economics - Supply Side, Labour and Surveillance Division)

2020-2021

Adviser (ECB, DG Economics - Supply Side, Labour and Surveillance Division)

2017-2020

Principal and Senior Team-Lead Economist (ECB, DG Economics - Supply Side, Labour and Surveillance Division)

2014-2017

Principal Economist (ECB, DG Economics - Country Surveillance Division)

2011-2014

Economists (ECB, DG Economics - EU Countries Division)

2009-2011

Graduate Programme (ECB)

Teaching experience
2008-2009

University of Muenster - seminars in monetary and international economics

21 September 2021
OCCASIONAL PAPER SERIES - No. 275
Details
Abstract
This report discusses the role of the European Union’s full employment objective in the conduct of the ECB’s monetary policy. It first reviews a range of indicators of full employment, highlights the heterogeneity of labour market outcomes within different groups in the population and across countries, and documents the flatness of the Phillips curve in the euro area. In this context, it is stressed that labour market structures and trend labour market outcomes are primarily determined by national economic policies. The report then recalls that, in many circumstances, inflation and employment move together and pursuing price stability is conducive to supporting employment. However, in response to economic shocks that give rise to a temporary trade-off between employment and inflation stabilisation, the ECB’s medium-term orientation in pursuing price stability is shown to provide flexibility to contribute to the achievement of the EU’s full employment objective. Regarding the conduct of monetary policy in a low interest rate environment, model-based simulations suggest that history-dependent policy approaches − which have been proposed to overcome lasting shortfalls of inflation due to the effective lower bound on nominal interest rates by a more persistent policy response to disinflationary shocks − can help to bring employment closer to full employment, even though their effectiveness depends on the strength of the postulated expectations channels. Finally, the importance of employment income and wealth inequality in the transmission of monetary policy strengthens the case for more persistent or forceful easing policies (in pursuit of price stability) when interest rates are constrained by their lower bound.
JEL Code
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
16 April 2020
WORKING PAPER SERIES - No. 2392
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Abstract
The European Single Market created a common market for millions of Europeans. However, thirty years after its introduction, it appears that the benefits of the common European project are occasionally being questioned at least by some parts of the population. Others, by contrast, strive for deeper integration. Against this background, we empirically gauge the growth effect that arose from the Single Market. Using the Synthetic Control Method, we establish the growth premium for the Single Market overall and for its founding members. Broadly in line with the predictions made by Baldwin (1989) at the onset of the Single Market project, we find significantly higher real GDP per capita for the overall Single Market area of around 12-22%. In comparison, smaller EU Member States seem to have benefited somewhat more compared to larger countries. The estimated growth effects underline the case for further deepening and broadening the Single Market where possible.
JEL Code
F13 : International Economics→Trade→Trade Policy, International Trade Organizations
F14 : International Economics→Trade→Empirical Studies of Trade
F15 : International Economics→Trade→Economic Integration
N14 : Economic History→Macroeconomics and Monetary Economics, Industrial Structure, Growth, Fluctuations→Europe: 1913?
12 August 2019
WORKING PAPER SERIES - No. 2306
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Abstract
Macroeconomic imbalances increase the vulnerability of an economy to adverse shocks, which in turn can lead to crises with severe economic and social costs. We propose an early warning model that predicts such crises. We identify a set of macroeconomic indicators capturing domestic and external imbalances that jointly predict severe recessions (i.e. growth crises) in a multivariate discrete choice framework. The approach allows us to quantify an economy's macroeconomic vulnerabilities at any point in time. In particular, the model would have pointed early on to emerging vulnerabilities in all the euro area countries that registered severe recessions in the years after 2007. We also show that the model can be applied beyond the euro area crisis in that its main results remain robust to changes in assumptions and sample composition.
JEL Code
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
F47 : International Economics→Macroeconomic Aspects of International Trade and Finance→Forecasting and Simulation: Models and Applications
O52 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Europe
13 June 2019
OCCASIONAL PAPER SERIES - No. 224
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Abstract
Well-functioning economic structures are key for resilient and prospering euro area economies. The global financial and sovereign debt crises exposed the limited resilience of the euro area’s economic structures. Economic growth was masking underlying weaknesses in several euro area countries. With the inception of the crises, significant efforts have been undertaken by Member States individually and collectively to strengthen resilience of economic structures and the smooth functioning of the euro area. National fiscal policies were consolidated to keep the increase in government debt contained and structural reform momentum increased notably in the second decade, particularly in those countries most hit by the crisis. The strengthened national economic structures were supported by a reformed EU crisis and economic governance framework. However, overall economic structures in euro area countries are still not fully commensurate with the requirements of a monetary union. Moreover, remaining challenges, such as population ageing, low productivity and the implications of digitalisation, will need to be addressed to increase economic resilience and long-term growth.
JEL Code
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E60 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→General
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
F10 : International Economics→Trade→General
J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
O43 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Institutions and Growth
30 April 2019
WORKING PAPER SERIES - No. 2275
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Abstract
In this paper we investigate the impact of the euro integration process on the drivers of FDI inflows. We show theoretically and empirically that the single currency alters the drivers of FDI inflows across its Member States. Estimating bilateral gravity models of FDI inflows into euro area countries, we show that the euro facilitates intra-euro area vertical FDI flows but reduces incentives for horizontal or market seeking FDI. Instead, horizontal FDI flows stemming from investor countries located outside the monetary union increase. Such flows are however not more likely be directed towards euro area countries with larger domestic markets but rather to countries that are close to large euro area markets and that have higher quality institutions. Overall, these results suggest that while the euro has been beneficial to FDI inflows into the monetary union, the impact differs significantly across countries. The global financial crisis does not change our main findings. Our results are robust to various economic specifications.
JEL Code
F21 : International Economics→International Factor Movements and International Business→International Investment, Long-Term Capital Movements
F23 : International Economics→International Factor Movements and International Business→Multinational Firms, International Business
F45 : International Economics→Macroeconomic Aspects of International Trade and Finance
O43 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Institutions and Growth
31 October 2018
OCCASIONAL PAPER SERIES - No. 216
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Abstract
A macroeconomic stabilisation function for the euro area - as envisaged in the Five Presidents’ Report - plays a central role in the debate on deepening Economic and Monetary Union (EMU). We evaluate a broad range of options, their impact on economic growth, macroeconomic stabilisation and synchronisation of the euro area business cycle, and review how they could be designed so they do not undermine incentives for welfare-enhancing national economic policies. A common macroeconomic stabilisation function, e.g. in the form of a European Unemployment Insurance (EUI), could in theory help stabilise the business cycle in the euro area, especially in some participating Member States. Yet, simulating the effects of such a function for 2002-2014 suggests that its stabilisation properties would have been relatively limited. At the same time, design options with meaningful safeguards and relatively low financing requirements would have been most efficient when comparing the degree of stabilisation with the size of the funds distributed among countries. Finally, we discuss some design elements of a scheme whose aim is to support the transition process towards more resilient economic structures in the euro area as envisaged in the Five Presidents’ Report.
JEL Code
J65 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers→Unemployment Insurance, Severance Pay, Plant Closings
H53 : Public Economics→National Government Expenditures and Related Policies→Government Expenditures and Welfare Programs
F55 : International Economics→International Relations, National Security, and International Political Economy→International Institutional Arrangements
25 June 2018
OCCASIONAL PAPER SERIES - No. 211
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Abstract
This occasional paper reviews the macroeconomic developments in the euro area countries over the past 20 years. It analyses the accumulation of macroeconomic imbalances in the first decade of the EMU and their unwinding during the second decade. It shows that while flow imbalances have been corrected to a large extent, stock imbalances persist. The presence of large stock imbalances implies that the adjustment process needs to continue in the years to come. Accordingly, this paper reviews the national responses so far and the importance of well-functioning national economic structures for facilitating the adjustment process within the EMU. It shows that national structural policies are able to stimulate the supply side of the economy, increase adjustment capacity and mitigate the adverse growth effects of high debt and deleveraging. Finally, it gives an overview of the European response to address macroeconomic imbalances, i.e. the establishment of the Macroeconomic Imbalance Procedure (MIP). The MIP has contributed to increasing the general attention given to macroeconomic imbalances in the euro area and to the critical role that structural reforms play in facilitating their adjustment. Looking forward, further steps would appear to be warranted in order to move from greater awareness towards stronger ownership and implementation of reforms.
JEL Code
E02 : Macroeconomics and Monetary Economics→General→Institutions and the Macroeconomy
F45 : International Economics→Macroeconomic Aspects of International Trade and Finance
O52 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Europe
20 June 2017
WORKING PAPER SERIES - No. 2078
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Abstract
The objective of this paper is to investigate which factors macroeconomic, policy‐related or institutional ‐ foster the implementation of structural reforms. To this objective, we look at episodes of structural reforms over three decades across 40 OECD and EU countries and link them to such factors. Our results suggest that structural reforms implementation is more likely during deep recessions and when unemployment rates are high. Moreover, the further distant from best practices, the more likely a country implements reforms. External pressures, such as being subject to a financial assistance programme, or being part of the EU Single Market facilitated pro‐competitive reforms. If at all, low interest rates tend to promote rather than discourage structural reforms, while there seems no clear link between fiscal policy and reforms. Moreover, reforms in product markets tend to increase the likelihood of labour market reforms following suit. Many robustness checks have been carried out which confirm our main results.
JEL Code
C23 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Panel Data Models, Spatio-temporal Models
D70 : Microeconomics→Analysis of Collective Decision-Making→General
D72 : Microeconomics→Analysis of Collective Decision-Making→Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior
P11 : Economic Systems→Capitalist Systems→Planning, Coordination, and Reform
P16 : Economic Systems→Capitalist Systems→Political Economy
9 June 2017
WORKING PAPER SERIES - No. 2071
Details
Abstract
Lobbying can provide policy makers with important sector-specific information and thereby facilitating informed decisions. If going far beyond this, in particular if successfully influencing policy makers to unnecessarily tighten regulation or not opening already excessively regulated markets, it could potentially reduce overall economic welfare. We create a unique firm-level database on EU lobby activity and firm characteristics. We tend to find that firms in more protected sector, e.g. firms from non-tradable or higher regulated sectors tend to spend more for lobby activities. Also such firms tend to have higher profit margins and lower productivity, as often the case in sheltered sectors.
JEL Code
D72 : Microeconomics→Analysis of Collective Decision-Making→Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior
D78 : Microeconomics→Analysis of Collective Decision-Making→Positive Analysis of Policy Formulation and Implementation
O38 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→Government Policy
19 May 2017
WORKING PAPER SERIES - No. 2066
Details
Abstract
This paper investigates the role of economic structures as determinants of FDI inows. We expand on the existing literature by focusing on advanced economies, using a newly available measure of FDI which cleans the data from statistical artefacts, such as financial round tripping, and by relying on a wide variety of measures that proxy the quality of a country’s economic structures. Our results show that there is an empirical relation from the quality of a host country’s economic structures to FDI inflows. These results are robust to various economic specifications and are confirmed when restricting our sample to euro area countries only.
JEL Code
F21 : International Economics→International Factor Movements and International Business→International Investment, Long-Term Capital Movements
F23 : International Economics→International Factor Movements and International Business→Multinational Firms, International Business
L51 : Industrial Organization→Regulation and Industrial Policy→Economics of Regulation
O43 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Institutions and Growth
22 November 2016
WORKING PAPER SERIES - No. 1984
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Abstract
Economic resilience is essential to better withstand adverse shocks and reduce the economic costs associated with them. We propose different measures of resilience and empirically gauge how countries differ in their shock absorption capacity conditioning on the quality of their economic structures. The paper finds robust evidence that sound labour and product markets, framework conditions and political institutions increase the resilience towards adverse shocks and reduce the incidence of crisis more generally. In the presence of a common shock, a country with weaker economic structures can on average suffer up to twice the output loss in a given year compared to the country at frontier of institutional parameters. In a similar fashion, the likelihood of a severe economic crisis is reduced significantly if a country exhibits most flexible and adaptable institutions. The above exercises can be used to establish a governance process towards more resilient economic structures (as e.g. suggested for the euro area in the so?called Five Presidents
JEL Code
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
L50 : Industrial Organization→Regulation and Industrial Policy→General
J21 : Labor and Demographic Economics→Demand and Supply of Labor→Labor Force and Employment, Size, and Structure
19 November 2014
OCCASIONAL PAPER SERIES - No. 157
Details
Abstract
In the light of the lessons learned from the euro area sovereign debt crisis, the EU fiscal and macroeconomic governance framework was overhauled in 2011. Against this background, this paper analyses whether the broadened surveillance of fiscal and macroeconomic indicators under the strengthened governance framework would have facilitated the identification of emerging imbalances, had it been in place before the crisis. The findings suggest that the strengthened governance framework would have given earlier signals about emerging excessive fiscal and macroeconomic imbalances. Euro area countries thus would have been obliged to take preventive and corrective action at an earlier stage, provided that the stricter rules had been effectively implemented. At the same time, the paper concludes that the increased reliance of the EU fiscal governance framework on unobservable magnitudes such as the structural budget balance, which are difficult to measure in real time, will continue to impede the timely identification of underlying fiscal imbalances. It is suggested that the new macroeconomic imbalance procedure could have given earlier indications about the emergence of excessive macroeconomic imbalances, which in turn posed risks for fiscal sustainability. Looking forward, these preliminary findings suggest possible synergies between the, until now largely unrelated, fiscal and macroeconomic governance frameworks.
JEL Code
H3 : Public Economics→Fiscal Policies and Behavior of Economic Agents
H6 : Public Economics→National Budget, Deficit, and Debt
E02 : Macroeconomics and Monetary Economics→General→Institutions and the Macroeconomy
E61 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Policy Objectives, Policy Designs and Consistency, Policy Coordination
27 April 2012
WORKING PAPER SERIES - No. 1431
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Abstract
Sizable prevailing real economic disparities among countries in a currency union potentially involve costs for those countries for which the aggregate policy stance is not appropriate. This paper contributes to the literature by testing for productivity convergence among euro area countries. While no convergence can be found on the aggregate level, selected service sectors and manufacturing sub-industries indicate evidence of convergence. In a search for factors influencing productivity, investments in research and development as well as a high skill level of employees are shown to be beneficial whereas regulations constitute a burden. Consequently, euro area countries should engage in structural reforms where necessary to provide a more competitive environment, eventually facilitating economic convergence.
JEL Code
C33 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Panel Data Models, Spatio-temporal Models
O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence
J24 : Labor and Demographic Economics→Demand and Supply of Labor→Human Capital, Skills, Occupational Choice, Labor Productivity
L60 : Industrial Organization→Industry Studies: Manufacturing→General
L80 : Industrial Organization→Industry Studies: Services→General
30 September 2011
OCCASIONAL PAPER SERIES - No. 128
Details
Abstract
The distributive trades sector, which is primarily accounted for by wholesale and retail trade, is not only economically important in its own right, but also relevant to monetary policy. Ultimately, it is retailers who set the actual prices of most consumer goods. They are the main interface between producers of consumer goods and consumers, with around half of private consumption accounted for by retail trade. The
JEL Code
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
18 August 2009
WORKING PAPER SERIES - No. 1077
Details
Abstract
How do financial markets price new information? This paper analyzes price setting at the intersection of private and public information, by testing whether and how the reaction of financial markets to public signals depends on the relative importance of private information in agents’ information sets at a given point in time. It studies the reaction of UK short-term interest rates to the Bank of England’s inflation report and to macroeconomic announcements. Due to the quarterly frequency at which the Bank of England releases one of its main publications, it can become stale over time. In the course of this process, financial market participants need to rely more on private information. The paper develops a stylized model which predicts that, the more time has elapsed since the latest release of an inflation report, market volatility should increase, the price response to macroeconomic announcements should be more pronounced, and macroeconomic announcements should play a more important role in aligning agents’ information set, thus leading to a stronger volatility reduction. The empirical evidence is fully supportive of these hypotheses.
JEL Code
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
2020
Quarterly Journal of Economics and Finance
Drivers of Genuine FDI Inflows in Advanced Economies
  • K. Dellis, D. Sondermann, I. Vansteenkiste
2019
Applied Economics Letters, Vol 26(7), 561-575
  • A. Consolo, M. Langiulli, D. Sondermann
2018
Journal of Policy Modeling, 2018, Vol. 40(1), 97-117
  • D. Sondermann
2014
Empirical Economics, 2014, Vol. 47(3), 999-1027
  • D. Sondermann
2013
Applied Economics Letters, 2013, Vol. 20(1), 48-61
  • P. Mohl, D. Sondermann
2012
International Journal of Central Banking, 2012, Vol. 8(3), 1-53
  • M. Ehrmann, D. Sondermann
2011
Applied Economics, Vol. 42(2), 2011, 208-21
  • D. Sondermann, M. Trede, B. Wilfling
2009
Finance Research Letters, 2009, Vol. 6(4), 230-235
  • D. Sondermann, M. T. Bohl, P. L. Siklos
2008
International Finance, 2008, Vol. 11(2), 117-130
  • M. T. Bohl, P. L. Siklos, D. Sondermann
2018
in Campos/De Grauwe/Ji, “The political economy of structural reforms in Europe”, Oxford University Press
  • A. Dias da Silva, A. Givone, D. Sondermann