nep-eec New Economics Papers
on European Economics
Issue of 2006‒07‒21
seven papers chosen by
Giuseppe Marotta
Universita di Modena e Reggio Emilia

  1. Bank Lending and Asset Prices in the Euro Area By Frömmel, Michael; Schmidt, Torsten
  2. Euro or “Teuro”?: The Euro-induced Perceived Inflation in Germany By Hans Wolfgang Brachinger
  3. The Impact of Population on CO2 Emissions: Evidence From European Countries By Inmaculada Martínez-Zarzoso; Aurelia Bengochea-Morancho; Rafael Morales-Lage
  4. Applying a Comprehensive Neo-Schumpeterian Approach to Europe and its Lisbon Agenda By Horst Hanusch; Andreas Pyka
  5. Monetary Policy Rules in Central and Eastern Europe By Frömmel, Michael; Schobert, Franziska
  6. Insurance Sector Risk By Jan Frederik Slijkerman
  7. European Integration and Regional Specialization Patterns in Turkey's Manufacturing Industry By Sedef Akgüngör; Pinar Falcioglu

  1. By: Frömmel, Michael; Schmidt, Torsten
    Abstract: We examine the dynamics of bank lending to the private sector for countries of the Euro area by applying a Markov switching error correction model. We identify for Belgium, Germany, Ireland and Portugal stable, mean reverting regimes and unstable regimes with no tendency to return to the long term credit demand equation, whereas for some other countries there is only weak evidence. Furthermore, for these as well as for other countries we detect in the less stable regimes a strong comovement with the development of the stock market. We interpret this as evidence for constraints in bank lending. In contrast, the banks' capital seems to have only marginal impact on the lending behaviour.
    Keywords: bank lending, credit demand, Euro area, Markov switching error correction, credit channel, asset prices, credit rationing
    JEL: C32 G21
    Date: 2006–07
  2. By: Hans Wolfgang Brachinger (Department of Quantitative Economics)
    Abstract: After the introduction of the euro notes and coins in January 2002, throughout the Economic and Monetary Union member countries there was a widespread feeling that the euro had brought about a significant hike in consumer prices. A substantial discrepancy was evident between inflation as measured by the official consumer price indices (CPI) and the one perceived by the general public. In this paper the German case is treated. First, a short overview is given on the public discussions and the many studies published by the German Federal Statistical Office. Then a newly developed theory of inflation perception is outlined and a corresponding index of perceived inflation (IPI) is developed. This index has been calculated for Germany. In the main part of the paper, the results are presented. The IPI time series for Germany from 1996 through 2006 clearly show a special inflation around the introduction of the Euro notes and coins. During that period, the average perceived inflation was approximately 4 times higher than the official inflation rate.
    Keywords: perceived inflation; price index; prospect theory; euro cash changeover
    JEL: C43 E31 D81
    Date: 2006–07–17
  3. By: Inmaculada Martínez-Zarzoso (Universitat Jaume I); Aurelia Bengochea-Morancho (Universitat Jaume I); Rafael Morales-Lage (Universitat Jaume I)
    Abstract: This paper analyses the impact of population growth on CO2 emissions in European Union countries. Traditionally, researchers have assumed a unitary elasticity of emissions with respect to population growth. In this study population is treated as a predictor in the model, instead of being included as part of the dependent variable (per capita emissions), thus relaxing the above-mentioned assumption of unitary elasticity. We also contribute to the existing literature by taking into account the presence of heterogeneity in the sample and considering a dynamic specification. The sample covers the period 1975- 1999 for the current European Union members. Our results show that the impact of population growth on emissions is more than proportional for recent accession countries whereas for old EU members, the elasticity is lower than unity and non significant when the properties of the time series and the dynamics are correctly specified. The different impact of population change on CO2 emissions for the current EU members should therefore be taken into account in future discussions of climate change policies within the EU.
    Keywords: CO2 Emissions, European Union, Panel Data, Population Growth
    JEL: Q25 Q4 Q54
    Date: 2006–06
  4. By: Horst Hanusch (University of Augsburg, Department of Economics); Andreas Pyka (University of Augsburg, Department of Economics)
    Abstract: The paper shows that Comprehensive Neo-Schumpeterian Economics (CNSE) is an adequate theoretical approach accompanying the enforcement of the aims of the Lisbon Agenda. The CNSE approach is based on the principle of innovation and the idea of future orientation penetrating all spheres of economics which can be summarized in three domains of economic life: industry, finance and public sector, the 3-pillars of CNSE. The CNSE approach is applied to an empirical study of 18 OECD countries using a three step procedure: In a first step country patterns of pillars are identified in a cluster analysis. This gives a fine grained picture of institutional and structural set-ups for the countries under study. In a second step within the pillar clusters a performance analysis is exercised in order to rank the countries. Because of the similarities of countries within a cluster this comparative analysis can be done whereas for countries belonging to different clusters this comparison would lead to wrong conclusions. In a final step as a crude representation of macro-economic performance the cluster composition is sorted by the average growth rates of the economies. This allows a first correlation of pillar composition and growth performance.
    Keywords: Lisbon Agenda, Comprehensive Neo-Schumpeterian Economics, European Country Patterns, future-oriented indicator-based model
    JEL: O30 O40 L2 P0 G10 B52
    Date: 2006–07
  5. By: Frömmel, Michael; Schobert, Franziska
    Abstract: We estimate monetary policy rules for six central and eastern European countries (CEEC) by taking changes in the policy settings explicitly into account. Distinguishing rather fixed and more flexible exchange rate arrangements we find that for most countries exchange rates played an important role in monetary policy during the fixed exchange rate regime, whereas their influence disappears after the introduction of floating exchange rate regimes. This indicates that most countries followed their officially announced policy settings. For Slovenia and to some extent for Romania, however, we find evidence for exchange rate targeting, although they officially announced a managed float.
    Keywords: monetary policy, Taylor rule, transition economies, CEEC, inflation targeting, interest rate policy
    JEL: E52 E58 P20
    Date: 2006–07
  6. By: Jan Frederik Slijkerman (Faculty of Economics, Erasmus Universiteit Rotterdam)
    Abstract: We model and measure simultaneous large losses of the market value of insurers to understand the impact of shocks on the insurance sector. The downside risk of insurers is explicitly modelled by common and idiosyncratic risk factors. Since reinsurance is important for the capacity of insurers, we measure risk dependence among European insurers and reinsurers. The results point to a relatively low insurance sector wide risk. Dependence among insurers is higher than among reinsurers.
    Keywords: Systemic risk; asymptotic dependence
    JEL: G15 G22 G38
    Date: 2006–06–12
  7. By: Sedef Akgüngör (Department of Economics, Faculty of Business, Dokuz Eylül University); Pinar Falcioglu (Department of Management, Isik University)
    Abstract: The dynamics of industrial agglomeration across the regions and the reasons for such agglomeration have been the focus of interest particularly in exploring the effects of economic integration of regions on the spatial distribution of economic activity. In this context, following the predictions of the literature on economic geography, Turkey’s integration with the European Union as a candidate member is a likely cause of changes in economic dispersion of the economic activity over the years. The major objective of the study is to complement the findings of the studies on industrial agglomeration in Turkey’s manufacturing industry by exploring whether specialization and concentration patterns have changed over time and to expose the driving forces of geographic concentration in Turkey’s manufacturing industry, particularly during Turkey’s economic integration process with the European Union under the customs union established in 1996. Industrial concentration and regional specialization are measured by GINI index for NUTS 2 regions at the 2-digit level for the years between 1992 and 2001. To investigate which variables determine industry concentration, the systematic relation between the characteristics of the industry and geographical concentration is tested. A regression equation is estimated, where the dependent variable is GINI concentration index and the independent variables are the variables that represent the characteristics of the sectors. The major finding of the study is that Turkey’s manufacturing industry has a tendency for regional specialization. Increase in the average value for regional specialization supports the prediction developed by Krugman that regions become more specialized with regional integration. But there is no evidence for increased industrial concentration in Turkish manufacturing industry, contrary to the expectations. As for the answer to which variables determine industry concentration, the analysis supports the hypothesis that the firms tend to cluster in regions where there are economies of scale and there are significant linkages between firms, supporting the predictions of new trade theory and economic geography.
    Keywords: Regional specialization, geographical concentration, economic integration, geographical economics
    JEL: L60 R10 R11 R12 R15
    Date: 2005–11–23

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