Quantifying and Correcting Eurozone Imbalances - Fighting the Debt Snowball

Claus Vistesen (2010) - Quantifying and Correcting Eurozone Imbalances - Fighting the Debt Snowball, Working Paper 01-10

This paper quantifies and discusses the concept of current account imbalances in the Eurozone. Using panel data estimations, the analysis shows how the external positions of the Eurozone economies can be modelled as a function of divergences in unit labour costs. Specifically, the results indicate that the formation of EMU has exacerbated the extent to which even relatively small divergences in unit labour costs may materialize in large current account imbalances. These results are framed in the context of the idea of a debt snowball effect and why the idea of an internal devaluation as a tool to correct external imbalances is inconsistent with the current setup of the Eurozone.

Demographics and the Anatomy of International Capital Flows

Vistesen, Claus (2010) - Demographics and the Anatomy of International Capital Flows, Master's thesis Copenhagen Business School (MSc Applied Economics and Finance)

This thesis is built upon two core arguments. The first is the notion that the demographic transition should be narrated through the perspective of ageing rather than population growth and the second is that ageing on a macroeconomic level represents a strong driver of international capital flows. These two arguments are used to discuss the standard prediction in a life cycle framework that ageing leads to dissaving in the aggregate and thus how old economies should tend towards running current account deficits. Using Japan and Germany as the subjects of analysis, this thesis develops the idea that rapidly ageing societies are not, in the main, characterized by dissaving but rather by the fight against it. Finally, a small empirical exercise acts as a perspectivation on the results to suggest why ageing might lead to a reliance on exports and foreign asset income to achieve growth and what this means in a global context.

Working Paper 03-09: Audi vs. BMW – On the Physical Heterogeneity of German Luxury Cars

Vistesen, Claus (2009) - Audi vs. BMW – On the Physical Heterogeneity of German Luxury Cars, Working Paper 03-09, exam paper Methods in Empirical Business Economics (Copenhagen Business School, fall/winter 09).

This paper uses Logit and Probit regressions to test for and quantify the physical heterogeneity between German luxury cars. Using a matched sample database, the binary response variable consisting of Audis and BMWs is fitted to a matrix of physical characteristics such as power, torque, fuel consumption, engine displacement etc. The results indicate that having a forced induction engine (e.g. turbo) is associated with a 51% lower probability of observing a BMW and that increasing fuel consumption by 1 liter per 100km lowers the probability of observing a BMW with 61%. The results are discussed in relation to the idea that consumers may not differentiate across luxury products on the basis of physical characteristics and how this may introduce a bias with respect to predicting demand in the context of available market data.