Economic research

Definition of the European Center for Economic Research

What is the Center for European Economic Research?

The Center for European Economic Research is a non-profit economic research institution based in Mannheim, Germany.

The organization provides advice on economic issues and policies to its clients, with its work focusing primarily on European economies.

Key points to remember

  • The Center for European Economic Research, or ZEW (Zentrum für Europäische Wirtschaftsforschung), is an economic think tank based in Mannheim, Germany.
  • The Center for European Economic Research was founded in 1990 and is a limited liability company (LLC).
  • ZEW economists study a wide range of applied economic topics, including the production of the ZEW Indicator of Economic Sentiment.
  • ZEW’s research and indicators are well known in Germany and beyond as tools to help businesses, investors and policy makers navigate the economy.

Understanding the Center for European Economic Research

The Center for European Economic Research was founded in 1990 and its name in German is Zentrum für Europäische Wirtschaftsforschung (ZEW). It is a limited liability company (LLC).

ZEW is funded by the Land of Baden-Württemberg and the German government as well as through research projects. It receives approximately 40% of its funding from federal and state government institutions, with the rest of its funding coming from research projects funded by outside institutions, including the European Commission, private companies and local authorities.

The Leibniz Center for European Economic Research employs 190 people, two thirds of whom are scientists. ZEW’s interdisciplinary approach translates into the collaboration of economists and business management graduates, economic engineers and computer scientists, as well as specialists from other fields, such as law and the natural sciences.

According to its website, ZEW’s main objective is to study the “optimal performance of markets and institutions in Europe”, and in addition to research, the organization also produces a series of books and a few magazines.

ZEW researchers and analysts study economic topics ranging from labor markets to economic development to the political economy of the EU, with an emphasis on applied research. Although most of his research focuses on microeconomics and microeconometric studies, ZEW is well known for his ZEW Macroeconomic Indicator of Economic Sentiment, an economic indicator created as a result of the ZEW Financial Markets Survey, which is a monthly survey of economists and specialists in the financial market and macroeconomic trends.

The ZEW Economic Sentiment Indicator

ZEW has conducted the ZEW survey of financial markets since 1991. This survey contains analyzes from hundreds of economists and analysts, and the ZEW Economic Sentiment, which is released following the results of this survey, is a leading indicator of the German economy.

Investors can use sentiment indicators, such as the ZEW Economic Sentiment Indicator, to help them understand the mood of the stock market. A positive index value indicates optimism, while a negative index value indicates pessimism. In general, an optimistic sentiment is supposed to signal solid economic conditions for Germany going forward. As such, the Economic Sentiment Indicator is often used by forex traders and others to ground expectations for exchange rates, DAX performance, and other variables.

To conduct the survey, each month ZEW collects the insights and sentiments of approximately 300 economists and analysts from banks, insurance companies and financial services from selected companies. They are asked to provide their six-month expectations for the economy, particularly on inflation rates, oil prices, interest rates, stock markets and exchange rates.

The survey looks at the markets and economic future of a group of countries including Germany, the United States, Britain, Japan, France and Italy. According to the ZEW website, the survey also collected information on Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovenia and Croatia since 1999.