The paper analyses the accounting relationships between the financial and the real economy. It will be shown that accounting can clarify the nature of economic phenomena and be an important building block for economic theory. The paper will argue that there is much confusion about key...

This paper investigates the reasons for the exceptionally robust performance of the German labour market during the Great Recession. While GDP dropped by more than five per cent in 2009, employment remained constant and started to increase soon after. We compare this recession to other major...

Much of the literature on the effect of housing wealth on consumption has been embedded in a simple life-cycle model in which housing price changes work as a "wealth effect". In such models, windfall gains in housing always lead to positive changes in consumption. However, this might be a...

The paper presents a critique of loanable funds theory by using simple accounting relationships. It is shown that many economists identify saving and the credit supply by interpreting the macroeconomic saving-investment identity as a budget constraint. According to that interpretation, more...

This paper looks at the relation between mortgage credit and housing values. It has become conventional wisdom in policy circles that credit growth led to the housing bubble in the US. However, this statement has not been empirically tested as of yet. The paper uses the Johansen procedure to...

There is a consensus among the majority of economists that the credit supply is limited by current household saving. If governments or foreigners ran deficits, they would absorb this limited saving so that firms could not borrow any longer and had to reduce their investment. This is the...

Most of the literature on the real exchange rate and the trade balance assumes that the trade balance reacts in the same way irrespective of whether the nominal exchange rate or the price level change. Both are seen as equivalent and the sign of the reaction of the trade balance dependent only...

This paper looks at the relation between mortgage credit and housing values. It has become conventional wisdom in policy circles that credit growth led to the housing bubble in the US. However, this statement has not been empirically tested as of yet. The paper uses the Johansen procedure to...

Much of the literature on the effect of housing wealth on consumption has been embedded in a simple life-cycle model in which housing price changes work as a "wealth effect". In such models, windfall gains in housing always lead to positive changes in consumption. However, this might be a...

The paper presents a critique of loanable funds theory by using simple accounting relationships. It is shown that many economists identify saving and the credit supply by interpreting the macroeconomic saving-investment identity as a budget constraint. According to that interpretation, more...