Kiel Institute for the World Economy

About: Kiel Institute for the World Economy is a facility organization based out in Kiel, Germany. It is known for research contribution in the topics: Foreign direct investment & Productivity. The organization has 318 authors who have published 1909 publications receiving 42832 citations. The organization is also known as: Institut für Weltwirtschaft an der Universität Kiel.

Regional Integration and FDI in Emerging Markets

Abstract: Regional integration is often considered a means to improve member countries’ attractiveness to foreign direct investment (FDI) But regional integration agreements (RIAs) as well as FDI are too diverse to allow for generalized verdicts Our case studies on Mercosur in Latin America, ASEAN and SAARC in Asia, and SADC in sub-Saharan Africa caution against high expectations in several respects First, country-specific factors were often more important as a stimulus to FDI than regional integration per se Second, member countries are unlikely to equally share RIA-induced FDI inflows, even though the larger and richer members are not necessarily the winners taking all Third, the regional heavyweights Brazil, China, India, and the Rep of South Africa have played a minor role so far in fostering effective regional integration through outward FDI

A theory of price adjustment under loss aversion

Abstract: We present a new partial equilibrium theory of price adjustment, based on consumer loss aversion. In line with prospect theory, the consumers’ perceived utility losses from price increases are weighted more heavily than the perceived utility gains from price decreases of equal magnitude. Price changes are evaluated relative to an endogenous reference price, which depends on the consumers’ rational price expectations from the recent past. By implication, demand responses are more elastic for price increases than for price decreases and thus firms face a downward-sloping demand curve that is kinked at the consumers’ reference price. Firms adjust their prices flexibly in response to variations in this demand curve, in the context of an otherwise standard dynamic neoclassical model of monopolistic competition. The resulting theory of price adjustment is starkly at variance with past theories. We find that – in line with the empirical evidence – prices are more sluggish upwards than downwards in response to temporary demand shocks, while they are more sluggish downwards than upwards in response to permanent demand shocks. The degree of these asymmetries, in turn, depends on the size of the shock.

Economic Implications of the Corona Crisis and Economic Policy Measures

Abstract: The corona crisis started in China and had great consequences for public health and the economy. In the meantime, high and rapidly growing numbers of cases of infections with SARS-CoV-2 have also been recorded in Japan, Korea, Italy, Germany, Great Britain, France, Spain and above all in the USA. Forecasts of economic growth have been massively revised downwards and governments around the world are struggling to find the right economic policy response. This article describes basic short-term options for the German government to react to the corona shock and briefl y assesses the package of measures "Schutzschirm fur Beschaftigte und Unternehmen" presented on 13 March 2020 by the German Finance Minister Olaf Scholz and the German Economics Minister Peter Altmaier.