We propose a modelling approach based on a set of small-scale factor models linked together in a cluster with linkages derived from Granger causality tests. GDP forecasts are produced using a disaggregated approach across production, expenditure and income accounts. The method combines the advantages of large structural macroeconomic models and small factor models, making our cluster of dynamic factor models (CDFM) useful for large-scale model-consistent forecasting. The CDFM has a simple structure, and its forecasts outperform those of a variety of competing models and professional forecasters. In addition, the CDFM allows forecasters to use their own judgment to produce conditional forecasts.

We present an uncertainty measure that is based on a business survey in which uncertainty is captured directly by a qualitative question on subjective uncertainty regarding expectations. Uncertainty perceptions display persistence at the firm level and changes are associated with past business assessments and expectations. While our uncertainty measure correlates with commonly used alternatives, it is superior in forecasting and suggests a larger role of uncertainty shocks for aggregate fluctuations. Its informational content is highest when considering smaller firms or firms with a low growth rate. Our results confirm the feasibility of constructing uncertainty measures from business survey questions that elicit information on uncertainty of respondents directly.

This paper examines broad patterns of structural change for a large number of countries on a global scale and for a smaller set of advanced industrialised countries over time. The findings show that structural change over the past decades followed the three-sector hypothesis. The past decades were characterised by the rise of the service sector, driven especially by business services and non-market service. At the same time as manufacturing sectors are declining in terms of shares, they remain the sectors with the highest contributions to aggregate productivity growth. An analysis of determinants of structural change confirms that country competencies related to institutional quality, knowledge generation and industrial application of the new knowledge are an important driving force of structural changes towards services, but that they have a heterogeneous impact on manufacturing subsectors. High technology manufacturing share seems not to be characterised by a tendency to decline with the development of country competencies. Broad policy implications are discussed.

This paper examines the association between participation in global value chains and financial globalisation measured by international net and capital flows. The results show that financial globalisation and the rise of global value chains are related but not two sides of the same coin. In fact, we find that GVC participation is positively associated with equity capital flows but negatively associated with debt capital flows. We also study the association of GVC participation and capital flows with aggregate economic outcomes. The findings show that both GVC participation and equity flows affect the share of mortgage and business credit. But we uncover also important differences in the impact of capital flows between advanced and emerging countries. Regarding changes in the economic structure our results suggest a positive association of both GVC participation and equity inflows on the manufacturing share, while debt inflows are primarily associated with a growth of the service sector in advanced economies, but not in emerging and developing countries. The finding that there is no strong association between the globalisation indicators and innovation suggests that the fragmentation of value chains leads to functional specialisation in tasks and tends to weaken the link between innovation and production at country level. We find in addition that a higher GVC participation is weakly associated with a higher growth of government revenue, as are debt flows but only in advances countries. This finding suggests also that debt flows were redirected primarily into safe countries in advanced countries.

This paper examines structural change in global trade and its impact in the development of manufacturing shares across countries over time. It focuses on the dynamics of variety creation and destruction in exports and links the observed outcomes to the development of manufacturing shares across countries. The results show that while there is an inverse-U-shaped relationship with income per capita levels across countries of manufacturing shares, a specialisation in product lines with a high likelihood of displacing other exports and a high propensity to induce a clustering in the uptake of exports in related product lines is positively associated with manufacturing shares. Controlling for income levels more complex export portfolios are weakly associated with smaller manufacturing shares. These effects are mitigated when these parameters combine at the extreme ends of their values range.

Unsere Studie entwickelt einen neuen Ansatz, um die lokalen Wachstumseffekte der EU-Regionalpolitik seit 2007 zu untersuchen. Für eine ausgewählte Pilotregion im Grenzgebiet zwischen Deutschland, Polen und Tschechien kombinieren wir erstmals einen Mikrodatensatz zum Erhalt von EU-Förderung auf Projektebene mit Fernerkundungsdaten verschiedener Satelliten. Dabei wird das Wachstum der regionalen Wirtschaft über Änderungen in der Intensität der jährlichen Nachtlichtemissionen erfasst. Auf Gemeindeebene lässt sich zeigen, dass der Erhalt höherer Förderbeträge mit höherem Wachstum einhergeht. Die Ergebnisse dieses Projekts verdeutlichen, wie Fernerkundungsdaten effektiv genutzt werden können, um die kleinräumigen Auswirkungen regionaler Wirtschaftsförderung auch im gesamteuropäischen Kontext zu quantifizieren.

This paper uses the supply tables underlying WIOT data to explore the provision of services by manufacturing. The service shares differ substantially across countries and sectors, while they remain largely stable over time. Findings from a latent class analysis reveal that servitization in-crease with labour productivity. The service intensities in the sectoral production mix of broadly defined manufacturing sectors are lower in countries with higher manufacturing shares. This holds for both catching-up and developed economies. Yet, servitization is largely unrelated to productivity and employment growth. We therefore argue that the degree of servitization is contingent on and an attribute of the respective economic model in which a sector operates.

This paper is the first to study the effects of hosting Olympic Games on regional economic output beyond population dynamics. For identification, runners-up in the Olympic bidding process are used to construct the counterfactual for Olympic host regions. In the short run, hosting Summer Olympics boosts regional GDP per capita by about 3 to 4 percentage points relative to the national level in the year of the event and the year before. There is also evidence for positive long-run effects, but results on the latter are not statistically robust. In contrast, Winter Olympics do not have a positive impact on host regions. If anything, they lead to a temporal decline in regional GDP per capita in the years around the event.

Over the course of the 2014-2020 period, the European Union has invested more than 125 billion € into support to research and innovation through two main channels: the excellence-based Horizon 2020 programme and its cohesion policy implemented through the European Structural and Investment Funds (ESIF) and in particular the European Regional Development Fund (ERDF). While projects funded by ESIF are selected in the context of place-based operational programmes and smart specialisation strategies (S3), Horizon 2020 grants are assigned based on the quality of the project proposals and consortia without any geographical criteria. A concentration of R&I funding from both funding schemes in the same technological or policy area could point to the creation of a synergy between EU funding as suggested by the concept of smart specialisation and encouraged by the European Commission. This report uses project data to analyse the regional distribution of Horizon 2020 and ESIF funding among key enabling technologies and societal grand challenges and to map potential synergies between different EU funding policies.