nep-eec New Economics Papers
on European Economics
Issue of 2006‒11‒18
thirty-six papers chosen by
Giuseppe Marotta
Universita di Modena e Reggio Emilia

  1. The Effect of the Euro on Foreign Direct Investment By Pavlos Petroulas
  2. Forecasting Euro-Area Variables with German Pre-EMU Data By Ralf Brueggemann; Helmut Luetkepohl; Massimiliano Marcellino
  3. The Euro and Inflation Uncertainty in the European Monetary Union By Guglielmo Maria Caporale; Alexandros Kontonikas
  4. Europe's Hard Fix: The Euro Area By Otmar Issing
  5. Current accounts in the euro area: An intertemporal approach By Campa, Jose M.; Gavilán, Angel
  6. A Basic Income for Europe's Children? By Horacio Levy; Christine Lietz; Holly Sutherland
  7. Domestic Politics and Referendums on the Constitutional Treaty By Gemma Mateo González
  8. The scale of internal market and the growth effects of regional economic integration. The case of the EU By Tomasz Brodzicki
  9. Euros and Zeros: The Common Currency Effect on Trade in New Goods By Richard E. Baldwin; Virginia Di Nino
  10. The effect of financial development on the investment-cash flow relationship - cross-country evidence from Europe By Bo Becker; Jagadeesh Sivadasan
  11. Trade Spillovers of Fiscal Policy in the European Union: A Panel Analysis By Roel Beetsma; Massimo Giuliodori; Franc Klaassen
  12. Does Leaving Home Make You Poor? Evidence from 13 European Countries By Arnstein Aassve; Maria A. Davia; Maria Iacovou; Stefano Mazzuco
  13. Regional Currency Arrangements: Insights from Europe By Josef Christl
  14. Technical and Allocative Efficiency in European Banking By Sophocles N. Brissimis; Matthaios D. Delis; Efthymios G. Tsionas
  15. Fiscal institutions, fiscal policy and sovereign risk premia By Hallerberg, Mark; Wolff, Guntram B.
  16. Financial integration of new EU Member States By Lorenzo Cappiello; Bruno Gérard; Arjan Kadareja; Simone Manganelli
  17. Enlargement and Eurozone: Convergence or Divergence By Minoas Koukouritakis; Leo Michelis
  18. Term Structure Linkages Among the New EU Countries and the EMU By Minoas Koukouritakis; Leo Michelis
  19. Catching-up and Credit Booms in Central and Eastern European EU Member States and Acceding Countries: An Interpretation within the New Neoclassical Synthesis Framework By Peter Backé; Cezary Wójcik
  20. The Term Structures of Interest Rates in the New and Prospective EU Countries By Minoas Koukouritakis; Leo Michelis
  21. Measuring the Correlation of Shocks betweem the EU15 and the New Member Countries By Stephen G. Hall; George Hondroyiannis
  22. Monetary policy before and after the euro: Evidence from Greece By Arghyrou, Michael G
  23. Europeanisation without Europe? The Mediterranean and the Neighbourhood Policy By Gonzalo Escribano
  24. Macroeconomic fluctuations and bank lending: evidence for Germany and the euro area By Eickmeier, Sandra; Hofmann, Boris; Worms, Andreas
  25. The Greek Model of the European System of Central Banks Multi-Country Model By Dimitrios Sideris; Nicholas G. Zonzilos
  26. Regional Integration Challenges in South East Europe: Banking Sector Trends By George Stubos; Ioannis Tsikripis
  27. Making Work Pay for the Elderly Unemployed : Evaluating Alternative Policy Reforms for Germany By Peter Haan; Viktor Steiner
  28. IFRS Adoption in Europe: the Case of Germany By Soledad Moya; Jordi Perramon; Anselm Constans
  29. The structure of R&D collaboration networks in the European Framework Programmes By Roediger-Schluga, Thomas; Barber, Michael J.
  30. Alcohol Taxation and Regulation in the European Union By Sijbren Cnossen
  31. The Regulation of Food Advertising and Obesity Prevention in Europe: What Role for the European Union By Armandine Garde
  32. European Pharmaceutical Price Regulation, Firm Profitability, and R&D Spending By Joseph H. Golec; John A. Vernon
  33. Impacts of the European Emission Trade System on Finnish Wholesale Electricity Prices By Juha Honkatukia; Ville Mälkönen; Adriaan Perrels
  34. Effectiveness of bailouts in the EU By Ela Glowicka
  35. Academic entrepreneurship, patents, and spin-offs: critical issues and lessons for Europe By Chiara Franzoni; Francesco Lissoni
  36. The Employment and Pensions Module in SHARE Wave 1 By Enrica Croda; Lisa Callegaro

  1. By: Pavlos Petroulas (Bank of Greece, Economic Research Department)
    Abstract: In this paper the recent effect of the European Monetary Union on inward FDI-flows is examined. We use a difference-in-differences approach for both a gravity based- as well as a general equilibrium approach. The estimated results show that the introduction of the euro raises inward FDI by 14 to 16 percent within the euro area by 11 to 13 percent from non-member and weakly by 8 percent to non-member countries. Moreover the geographical effects of the euro are explored. The results show partial agglomeration tendencies for the euro area. There are also some indications of increased importance of vertical specialization in the sample.
    Keywords: Foreign Direct Investment, EMU, Panel Data
    JEL: F21 F0 C23
    Date: 2006–10
  2. By: Ralf Brueggemann; Helmut Luetkepohl; Massimiliano Marcellino
    Abstract: It is investigated whether Euro-area variables can be forecast better based on synthetic time series for the pre-Euro period or by using just data from Germany for the pre-Euro period. Our forecast comparison is based on quarterly data for the period 1970Q1 - 2003Q4 for ten macroeconomic variables. The years 2000 - 2003 are used as forecasting period. A range of different univariate forecasting methods is applied. Some of them are based on linear autoregressive models and we also use some nonlinear or time-varying coefficient models. It turns out that most variables which have a similar level for Germany and the Euro-area such as prices can be better predicted based on German data while aggregated European data are preferable for forecasting variables which need considerable adjustments in their levels when joining German and EMU data. These results suggest that for variables which have a similar level for Germany and the Euro-area it may be reasonable to consider the German pre-EMU data for studying economic problems in the Euro-area.
    Keywords: Aggregation, forecasting, European monetary union, constructing EMU data
    JEL: C22 C53
    Date: 2006
  3. By: Guglielmo Maria Caporale; Alexandros Kontonikas
    Abstract: This paper investigates the relationship between inflation and inflation uncertainty in twelve EMU countries. A time-varying GARCH model is estimated to distinguish between short-run and steady-state inflation uncertainty. The effects of the introduction of the Euro in 1999 are then examined introducing a dummy variable. Overall, it appears that post-1999 steady-state inflation has generally remained stable, steady-state inflation uncertainty and inflation persistence have both increased, and the relationship between inflation and inflation uncertainty has broken down in many countries. When the break dates are determined endogenously, the adjustment is found to have taken place before the introduction of the Euro.
    Keywords: inflation, inflation uncertainty, inflation persistence, time-varying parameters, GARCH models, ECB, EMU
    JEL: C22 E31 E52
    Date: 2006
  4. By: Otmar Issing ((European Central Bank))
    Keywords: Regional and International Currency Arrangements
    JEL: F41 F15 F33
    Date: 2006–05
  5. By: Campa, Jose M. (IESE Business School); Gavilán, Angel (Banco de España)
    Abstract: This paper uses an intertemporal model of the current account to evaluate the fluctuations in current account balances experienced by Euro area countries over the last three decades. In the model current account balances are used to smooth consumption and they are driven by expectations about future income and relative prices. This simple model is not rejected for six (Belgium, France, Italy, Netherlands, Portugal, and Spain) of the ten Euro area countries examined, although the model tends to underestimate their current account volatility. The analysis also shows that the relative contributions to current account balances of future output and relative prices differ across countries. Expectations of future growth increased in all Southern European countries at the creation of the Euro but they had considerably diverged by 2005. While in Portugal these expectations are now below its historical mean, in Spain they are at a historical high.
    Keywords: Current account; euro; external deficits; economic integration;
    Date: 2006–09–06
  6. By: Horacio Levy (Institute for Social and Economic Research); Christine Lietz (Institute for Advanced Studies, Vienna); Holly Sutherland (Institute for Social and Economic Research)
    Abstract: This paper explores the prospects for a guaranteed income for every child in the European Union and its potential effects on child poverty, taking as one starting point the ideas set out in Atkinson (2005). It examines the extent to which existing levels of financial support for children through national taxes and benefits fall short of a series of illustrative minimum levels of income corresponding to proportions of median income. It estimates the cost of bringing the amount of support up to these levels for all children as well as the corresponding impacts on income poverty among EU children. From this the cost in each country of providing basic incomes for children is estimated such that potential EU child poverty reduction targets are met. This cost could be met at national level or, alternatively, at EU level and we investigate the effect of financing the guaranteed child income using a European flat tax (Atkinson, 1995). The analysis uses EUROMOD, the European tax-benefit microsimulation model and illustrates the implications of the choices that must be made when designing such a scheme for the extent of redistribution between countries and towards children.
    Keywords: children, european union, microsimulation
    Date: 2006–09
  7. By: Gemma Mateo González
    Abstract: How can the decision of ten member states to subject the Constitutional Treaty of the European Union (EU) to a referendum be explained? Recently, some scholars have considered the need to give legitimacy to the decisions of the EU as one of the principal motivations for holding referendums. An empirical analysis of the motivations behind the decisions in favour of referendums uncovers a completely different reality, however. Political actors used the possibility to hold referendums about European matters in a strategic way to strengthen their positions in the domestic context rather than to correct the democratic deficit of the EU. The analysis of a database with the positions of all the political parties represented in the national parliaments of the twenty-five member states confirms this point.
    Keywords: referendum; legitimacy; political parties; Constitution for Europe
    Date: 2006–10–05
  8. By: Tomasz Brodzicki (Department of Economics, University of Gdansk)
    Abstract: The recent enlargement of the European Union has led to a relatively significant increase in the size of the internal market. This has once again shifted attention to the issue whether the anticipated positive growth effects of economic integration are related to the scale of the integrated market. In the present study we utilize several empirical approaches to assess whether increases in the scale of the internal market mainly due two a series of enlargements had a positive, distinguishable and statistically significant impact on the real GDP per capita growth rates of the EU Member States. The study is undertaken for a panel of 27 states (EU15 and twelve countries of the reference group) within a considerable period of 40 years (1960-1999). In contrast to the previous research the current study utilizes indices of relative scale of the integrating block in comparison to traditionally utilized absolute scale indices. The empirical evidence seems to confirm the initial hypothesis. Increases of relative scale of the regional economic block in comparison to the size of domestic economies mainly due to consecutive enlargements seem to provide significant incentives and are beneficial to the growth-performance of the Member States. The incentives are obviously higher for smaller-scale economies. On the policy arena the deepening of the integration process seems to enhance the benefits associated with integration widening.
    Keywords: economic growth, European economic integration, scale effects, cross-sectional analysis, dynamic panel data models, system GMM estimator
    JEL: F15 F43 C23
    Date: 2006–08
  9. By: Richard E. Baldwin; Virginia Di Nino
    Abstract: This paper tests whether trade in new goods is partially responsible for the pro-trade effects of the euro and provides a measure of the size of the effect. It works with a very large data set (about 16 million observations) covering twenty countries at the most disaggregated level of trade data that is publicly available. Using predictions from a heterogeneous-firms trade model in a multi-country environment to structure our empirical model, we find that the euro had a positive impact on trade overall. Our findings provide supportive but not conclusive evidence for the new-goods hypothesis. We also determined the pro-trade effect of euro-usage on non-Euroland nations trading with euro-users. We confirmed the absence of trade diversion for non-Eurozone EU members with sizeable overall increase comparable to that of members.
    JEL: F12 F31 F4 F41
    Date: 2006–11
  10. By: Bo Becker (University of Illinois at Urbana-Champaign, Urbana, IL 61801, USA.); Jagadeesh Sivadasan (Ross School of Business, University of Michigan, 701 Tappan Street, Ann Arbor, MI 48109, USA.)
    Abstract: We investigate financing constraints in a large cross-country data set covering most of the European economy. Firm level investment sensitivity to cash flow is used to identify financing constraints. We find that the sensitivities are significantly positive on average, controlling for country and industry fixed effects, as well as firm level controls. Most importantly, the cash flow sensitivity of investment is lower in countries with better-developed financial markets. This suggests that financial development may mitigate financial constraints. This effect is weaker in conglomerate subsidiaries, which are likely to have access to internal capital markets and depend less on the outside financial environment, and possibly for firms in industries with highly liquid assets as well. This result sheds light on the link between financial and economic development. JEL Classification: E22, E44, G31, L10.
    Keywords: Financial Constraints, Investment, Europe, Financial Development.
    Date: 2006–10
  11. By: Roel Beetsma; Massimo Giuliodori; Franc Klaassen
    Abstract: We explore the international spillovers from fiscal policy shocks via trade in Europe. A fiscal expansion stimulates domestic activity, which leads to more foreign exports and, hence, higher foreign output. To quantify this, we combine a panel VAR model in government spending, net taxes and GDP with a panel trade model. On average, a public spending increase equal to 1% of GDP implies 2.3% more foreign exports over the first two years. The corresponding figure for an equal-size net tax reduction is 0.6%. Both estimates are statistically significant. As far as the effect on foreign activity is concerned, a 1% of GDP spending increase (net tax reduction) in Germany on average raises GDP of trading partners by 0.23% (0.06%) over the first two years. These figures are likely to form lower bounds for the actual effects and suggest that it may be worthwhile to further investigate the benefits from coordinated fiscal expansions (contractions) in response to European-wide cyclical downturns (upswings).
    Keywords: trade policy
    Date: 2005–10–26
  12. By: Arnstein Aassve (Institute for Social and Economic Research); Maria A. Davia (Universidad de Castilla-La Mancha); Maria Iacovou (Institute for Social and Economic Research); Stefano Mazzuco (University of Padua)
    Abstract: A particular feature of poverty in Europe is the close connection between young people’s living arrangement and economic disadvantage. Leaving home is generally associated with a higher degree of poverty and compared to other events, such as experiencing unemployment and having children, it is by far the most important driver behind youth poverty. There is however huge variations across countries. It is natural to assume that young people would delay leaving home if they consider this to jeopardise their level of wellbeing (i.e. entering poverty). In this paper we implement a statistical approach to analyse the causal effect of leaving home on entering poverty. We use data from the European Community Household Panel and propensity score estimation techniques, and find that the event of leaving home does have a particularly strong effect in entering poverty in Scandinavian countries, but rather weak effect among Mediterranean countries.
    Keywords: poverty dynamics, young people, youth transitions
    Date: 2006–09
  13. By: Josef Christl (Oesterreichische Nationalbank)
    Abstract: This paper focuses on the requirements and features of a successful monetary union on the basis of the optimum currency area theory, the “logical roadmap” for integration as proposed by Balassa as well as the economic and institutional framework of the European Economic and Monetary Union (EMU). The analysis suggests that monetary union is contingent upon high economic integration and strong political commitment. However, political union is not an ex-ante requirement. Outside factors such as systemic shocks and globalization seem to speed up the pooling of sovereignty in the economic domain. A firm commitment to stability-oriented monetary and fiscal policies is a precondition for gaining credibility and trust within and outside a monetary union. Last, but not least, convergence criteria, fiscal rules and strong institutions are necessary to help ensure and monitor the participants’ compliance. However, the European experience is not a blueprint for regional integration that can be directly and entirely applied to other regions.
    Keywords: Economic and Monetary Integration; International Monetary Arrangements and Institutions; Monetary Policy and Central Banking; Macroeconomic Policy Formation
    JEL: E50 E61 F02 F33
    Date: 2006–06
  14. By: Sophocles N. Brissimis (Bank of Greece, Economic Research Department and University of Piraeus); Matthaios D. Delis (Athens University of Economics and Business); Efthymios G. Tsionas (Athens University of Economics and Business)
    Abstract: This paper specifies an empirical framework for estimating both technical and allocative efficiency, which is applied to a large panel of European banks over the years 1996 to 2003. Our methodology allows for self-consistent measurement of technical and allocative inefficiency, in an effort to address the issue known in the literature as the Greene problem. The results suggest that, on average, European banks exhibit constant returns to scale, that technical and allocative efficiency are close to 80% and 75% respectively, and that overall economic efficiency shows a clearly improving trend. We also show through the comparison of various estimators that models incorporating only technical efficiency tend to overestimate it.
    Keywords: Technical and allocative efficiency; Translog cost function; Maximum likelihood; European banking
    JEL: C13 G21 L2
    Date: 2006–09
  15. By: Hallerberg, Mark; Wolff, Guntram B.
    Abstract: We investigate the effect of fiscal institutions such as the strength of the finance minister in the budget process and deficits on interest spreads contained in bond yields of the countries now belonging to the Eurozone. Deficits significantly increase risk premia measured by relative swap spreads. The effect of deficits is significantly lower under EMU. This effect partly results from neglecting the role of fiscal institutions. After controlling for institutional changes, fiscal policy remains a significant determinant of risk premia. We find that better institutions are connected with lower risk premia. Furthermore deficits and surpluses matter less for risk premia in countries with better institutions. This reflects the market perception, that better institutions will reduce fiscal dificulties and make the monitoring of annual developments less important. The results are robust to controlling for country fixed effects and different estimation methodologies.
    Keywords: Budget institutions, fiscal rules, sovereign risk premia, EMU, fiscal policy, government bond yields
    JEL: E43 E62 G12 G15 H61 H62
    Date: 2006
  16. By: Lorenzo Cappiello (DG Research, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany); Bruno Gérard (Mellon Capital Management, 595 Market Street Suite 3000, San Francisco, CA 94105.); Arjan Kadareja; Simone Manganelli (DG Research, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany)
    Abstract: This study assesses the degree of financial integration for a selected number of new EU member states between themselves and with the euro zone. Within the framework of a factor model for market returns, we measure integration as the amount of variance explained by the common factor relative to the local components. We show that this measure of integration coincides with return correlation. Correlations are proxied by comovements, estimated via a regression quantile-based methodology. We find that the largest new member states, the Czech Republic, Hungary and Poland, exhibit strong comovements both between themselves and with the euro area. As for smaller countries, only Estonia and to a less extent Cyprus show increased integration both with the euro zone and the block of large economies. In the bond markets, we document an increase in integration only for the Czech Republic versus Germany and Poland. JEL Classification: C32, F30, G12.
    Keywords: Integration, new EU member states, regression quantile.
    Date: 2006–10
  17. By: Minoas Koukouritakis (Department of Economics, University of Crete, Greece); Leo Michelis (Department of Economics, Ryerson University, Toronto, Canada)
    Abstract: This paper investigates empirically the extent to which the ten new countries of the recent EU enlargement are ready to join the European Monetary Union (EMU). We assess the prospects of successful accession into the EMU using cointegration and common trends analysis on the nominal convergence criteria specified by the Maastricht Treaty as well as on real exchange rates and real per capita GDPs. The empirical results indicate that the enlargement countries are partially ready to join the Eurozone, and need further adjustments in their government policies to be fully prepared for joining the EMU.
    Keywords: Economic Integration, EU Enlargement, Cointegration, Common Trends.
    JEL: F15 F33 F42
    Date: 2005
  18. By: Minoas Koukouritakis (Department of Economics, University of Crete, Greece); Leo Michelis (Department of Economics, Ryerson University, Toronto, Canada)
    Abstract: This paper uses cointegration and common trends techniques to investigate empirically the expectations hypothesis of the term structure of interest rates in the 10 new EU countries, and the 2 core EMU countries, France and Germany. By decomposing each term structure into its transitory and permanent components, we also analyze the possible short run and long run linkages among the term structures of these countries. The empirical results support the expectations theory of the term structure for all countries except Malta. Further, they point to both weak short run linkages and several strong long run linkages among the monetary policies of the 10 new EU and the core of the EMU. The group of the Central European countries and Latvia are prominent in the latter case.
    Keywords: Term Structure, EU Enlargement, Cointegration, Common Trends, Granger
    JEL: E43 F15 F42
    Date: 2005
  19. By: Peter Backé; Cezary Wójcik
    Abstract: Credit to the private sector has risen rapidly in many Central and Eastern European EU Member States (MS) and acceding countries (AC) in recent years. The lending boom has recently been particularly strong in the segment of loans to households, primarily mortgage-based housing loans, and in those countries that operate currency boards or other forms of hard pegs. The main aim of this paper is to propose a conceptual framework to analyze the observed developments with a view to exploring some policy implications at a stage in which these countries are preparing for their prospective integration with the euro area. To achieve this, we first use a stylized New Neoclassical Synthesis (NNS) framework, which has recently been advanced by Goodfriend (2002) and Goodfriend and King (2000). We then discuss the implications of the NNS model for credit dynamics and ensuing monetary policy challenges. Specifically, we emphasize consumption smoothing as an important channel of the observed credit expansion and we show how it is related to and how it affects the monetary policy making in MS and AC. In doing so, we place our discussion in the context of the monetary integration process in general and the nominal convergence process in particular.
    Keywords: credit booms, new neoclassical synthesis, currency boards, euro area, convergence process
    JEL: E50 F30
    Date: 2006
  20. By: Minoas Koukouritakis (Department of Economics, University of Crete, Greece); Leo Michelis (Department of Economics, Ryerson University, Toronto, Canada)
    Abstract: This paper uses cointegration and common trends techniques to investigate empirically the expectations hypothesis of the term structure of interest rates for the 10 new EU countries, along with Bulgaria and Romania. The empirical results support the expectations theory of the term structure for all countries except Malta. By decomposing each term structure into its transitory and permanent components, we also analyze short run and long run interdependence among the term structures of interest rates in these countries. Our results indicate weak linkages among the term structures of the 10 new EU countries, and strong linkages between Bulgaria and Romania that hope to join the EU in 2007.
    Keywords: Term Structure, EU Enlargement, Cointegration, Common Trends, Granger Causality
    JEL: E43 F15 F42
    Date: 2005
  21. By: Stephen G. Hall (Leicester University and NIESR); George Hondroyiannis (Bank of Greece, Economic Research Department)
    Abstract: This paper considers the question of the symmetry of inflation, exchange rate changes and GDP shocks between the EU15 and the new member countries. It applies a relatively new technique, the orthogonal GARCH model, which allows us to calculate a complete time varying correlation matrix for these countries. We can then examine the way the conditional correlation of shocks between the EU15 and the new member countries has been evolving over time. Our results suggest that the shocks which hit the EU are not symmetrical with those affecting the majority of new member countries. In addition, most of the new member countries seem to exhibit relatively low correlation with EU15.
    Keywords: Business cycle, GARCH
    JEL: E32 C22
    Date: 2006–01
  22. By: Arghyrou, Michael G (Cardiff Business School)
    Abstract: We model Greek monetary policy in the 1990s and use our findings to address two interrelated questions. First, how was monetary policy conducted in the 1990s so that the hitherto highest-inflation EU country managed to join the euro by 2001? Second, how compatible is the current ECB monetary policy with Greek economic conditions? We find that Greek monetary policy in the 1990s was: (i) primarily determined by foreign (German/ECB) interest rates though still influenced, to some degree, by domestic fundamentals; (ii) involving non- linear output gap effects; (iii) subject to a deficit of credibility culminating in the 1998 devaluation. On the question of compatibility our findings depend on the value assumed for the equilibrium post-euro real interest rate and overall indicate both a reduction in the pre-euro risk premium and some degree of monetary policy incompatibility. Our analysis has policy implications for the new EU members and motivates further research on fast-growing EMU economies.
    Keywords: monetary policy; reaction function; non- linear; compatibility; Greece; EMU
    JEL: C51 C52 E43 E58 F37
    Date: 2006–11
  23. By: Gonzalo Escribano
    Abstract: The Neighbourhood Policy wants to be a new approach by the EU towards the Mediterranean region. The focus is now on conditionality and offering a premium for countries implementing a comprehensive pack of economic and political reforms. In the economic domain, the offer to participate in the European Single Market is seen as an strong incentive for reform to Mediterranean Partner Countries. To some extent it can be called the 'europeanisation' of MPC's without becoming members of the EU. Under this approach, MPC's should upgrade their institutions and policies to put them in line with the 'acquis communautaire', a process that in the European integration literature is called 'europeanisation'. The paper will deal with this 'europeanisation without Europe' approach, trying to foresee its the sustainability in the Mediterranean. It analyse the economic dimensions of ENP, present some economic implications of including Mediterranean Partner Countries in the European Single Market discipline, and we explore the usefulness of conceptualising MPC's modernization as europeanisation and its feasibility.
    Keywords: Mediterranean; economic integration; liberalization; economic policy; trade policy; provision of services; institutions
    Date: 2006–06–23
  24. By: Eickmeier, Sandra; Hofmann, Boris; Worms, Andreas
    Abstract: This paper analyzes how bank lending to the private nonbank sector responds dynamically to aggregate supply, demand and monetary policy shocks in Germany and the euro area. The results suggest that the dynamic responses in the two areas are broadly similar, although there are some differences in the relative contribution of the three shocks to the development of output, prices, interest rates and bank loans over time. In order to assess the role of bank lending in the transmission of macroeconomic shocks, we perform counterfactual simulations and analyze the dynamic responses of German loan sub-aggregates in order to test the distributional implications of potential credit market frictions. The results suggest that there is no evidence that loans amplify the transmission of macroeconomic fluctuations or that a “financial accelerator” via bank lending exists.
    Keywords: Business cycle fluctuations, bank lending, SVAR model, sign restrictions
    JEL: E32 E44 G21
    Date: 2006
  25. By: Dimitrios Sideris (Bank of Greece, Economic Research Department and University Ioannina, Department of Economics); Nicholas G. Zonzilos (Bank of Greece, Economic Research Department)
    Abstract: The present paper presents a quarterly econometric model for the Greek economy, the GR-MCM model. The model has been developed as part of a larger project within the European System of Central Banks (ESCB), the Multi-Country Model (MCM). The model combines short-run Keynesian dynamics determined by demand with a neoclassical steady state driven by supply factors. A well-specified long-run supply side is fully and simultaneously estimated. As far as the econometric methodology is concerned, the equilibrium relationships are estimated using cointegration analysis, whereas the dynamic equations are specified as error correction models. Standard simulations result in plausible short to long-run responses to exogenous shocks, thus indicating that the model can be useful for policy analysis experiments.
    Keywords: Econometric Modelling; Cointegration Techniques; Simulation Results
    JEL: C50 E17
    Date: 2005–02
  26. By: George Stubos (Bank of Greece); Ioannis Tsikripis (Bank of Greece)
    Abstract: This study reviews and evaluates a particular aspect of the institution building process in the transition countries of Southeast Europe. The focus is the development of the banking sector. It is argued that banking sector development plays an integral and pivotal role in the successful completion of the transition process. It functions as a very strong integrating force contributing to the broader institution building process and as a pillar of future growth and development in the new market environment of the Balkan economies. This study concentrates on three main issues. First, it undertakes a brief literature review of regional integration approaches in the Balkans. Second, it provides an overview of the most significant changes that have taken place in the banking sector. Third, it reviews some structural characteristics and performance indicators, all of which point to considerable advancements made in this sector in recent years. Empirical evidence is provided showing that a substantial harmonisation of ownership structures and performance indicators has been achieved in the banking sectors of these countries initiating a convergence process toward EU banking structures and functions. In this regard, this study complements the findings of other studies focusing on various sectors of economic activity, which clearly show that a de facto regional and, even more so, continental integration of the Southeast European countries is under way.
    Keywords: Balkan banking; foreign banks; regional integration; transition policies
    JEL: R10 P30 G21
    Date: 2005–06
  27. By: Peter Haan; Viktor Steiner
    Abstract: We evaluate three policy reforms targeted at older unemployed people: (i) an hourly wage subsidy, (ii) an in-work credit, and (iii) a subsidy of social security contributions on low wages. The work incentive, labour supply and welfare effects of these hypothetical reforms are analysed on the basis a detailed micro-simulation model for Germany which includes a structural household labour supply model. We find that the simulated labour supply effects of the three policy reforms would be rather similar and of moderate size, ranging between 20,000 and 30,000 older women and between 10,000 and 20,000 older men. Our results also suggest that the hourly wage subsidy yields the highest welfare gains.
    Keywords: in-work support, wage subsidies, unemployment, elderly workers
    JEL: J21 J48 H21
    Date: 2006
  28. By: Soledad Moya (Department of Business Economics, Universitat Autonoma de Barcelona); Jordi Perramon (Departament d'Economia i Empresa, Universitat Pompeu Fabra); Anselm Constans (Departament d'Economia i Empresa, Universitat Pompeu Fabra)
    Abstract: From 2005 onwards, consolidated financial statements of listed European companies will have to comply with IFRS (IAS). Many German companies began adopting those standards in the 1990s, on a voluntary basis, because of their need to access international capital funding. Spanish companies, by contrast, are not permitted to adopt IFRS before 2005. This paper has two purposes: first, it analyses the financial impact of initial IFRS adoption on the statement of changes in equity and the income statement of individual German companies. Second, and taking into account the German experience, it focuses on the expected impacts on a sample of listed Spanish companies in two industrial sectors: chemical-pharmaceutical and fashion. Our analysis of German companies comprised all non-financial DAX groups applying IFRS plus additional listed companies in the two selected industrial sectors identified above. The impact of initial adoption of IFRS on German companies was, both individually and overall, very significant. The analysis suggests that the expected impact on Spanish companies is likely to be significant but to a lesser degree than in respect of the German companies in the study.
    Keywords: IFRS adoption, Germany, Spain, IFRS adjustments, chemical-pharmaceutical sector, fashion sector
    Date: 2005–02
  29. By: Roediger-Schluga, Thomas (Department of Technology Policy, ARC Systems Research); Barber, Michael J. (Centro de Ciências Matemáticas, Universidade da Madeira)
    Abstract: Using a large and novel data source, we study the structure of R&D collaboration net-works in the first five EU Framework Programmes (FPs). The networks display proper-ties typical for complex networks, including scale-free degree distributions and the small-world property. Structural features are common across FPs, indicating similar network formation mechanisms despite changes in governance rules. Several findings point towards the existence of a stable core of interlinked actors since the early FPs with integration increasing over time. This core consists mainly of universities and research organisations. We observe assortative mixing by degree of projects, but not by degree of organisations. Unexpectedly, we find only weak association between central projects and project size, suggesting that different types of projects attract different groups of actors. In particular, large projects appear to have included few of the pivotal actors in the networks studied. Central projects only partially mirror funding priorities, indicating field-specific differences in network structures. The paper concludes with an agenda for future research.
    Keywords: R&D collaboration, EU Framework Programmes, Complex Networks, Small World Effect, Centrality Measures, European Research Area
    JEL: L14 O38 Z13
    Date: 2006
  30. By: Sijbren Cnossen
    Abstract: This paper estimates the external costs of harmful alcohol use in the European Union (EU) and confronts them with the alcohol excise duty collections per adult and per litre of pure alcohol in the various Member States. In all but one Member State, drinkers do not appear to pay their way. This reflects the EU’s acquiescence in a formidable alcohol problem. Fifteen per cent of adults ‘drink too much’, while the extent of youth drinking has reached alarming proportions. The external costs should be internalised in price through an appropriate optimal alcohol excise duty, supplemented by regulatory measures aimed at specific problem groups. Further, a coordinated alcohol tax policy seems called for, which would, among others, raise the minimum duties on wine, beer and spirits, preferably in line with their relative alcohol content. A drawback of these measures is that they would reduce the welfare of moderate drinkers.
    Keywords: alcohol taxation, European Union, external costs, social costs
    JEL: H20 H80
    Date: 2006
  31. By: Armandine Garde
    Abstract: Since 1998, the World Health Organisation has recognised obesity as a problem of epidemic proportions. As none of the EU Member States is spared, the European Commission has recently published a Green Paper aimed at gathering evidence on how it could develop an obesity prevention strategy at European level. It is therefore the right moment to reflect on the principles which should guide EU policy in this field. This paper concentrates on one particular aspect of obesity prevention, namely the role that the European Union can play to curb the epidemic by regulating how food is marketed to consumers. That is not to say that the regulation of food advertising will, on its own, solve this public health issue. Obesity being by definition a multifactorial disease, the concerted action of all stakeholders is crucial to the successful outcome of the strategy which the Commission will choose to adopt
    Keywords: law; European law; competences; harmonisation
    Date: 2006–05–01
  32. By: Joseph H. Golec; John A. Vernon
    Abstract: EU countries closely regulate pharmaceutical prices whereas the U.S. does not. This paper shows how price constraints affect the profitability, stock returns, and R&D spending of EU and U.S. firms. Compared to EU firms, U.S. firms are more profitable, earn higher stock returns, and spend more on research and development (R&D). Some differences have increased over time. In 1986, EU pharmaceutical R&D exceeded U.S. R&D by about 24 percent, but by 2004, EU R&D trailed U.S. R&D by about 15 percent. During these 19 years, U.S. R&D spending grew at a real annual compound rate of 8.8 percent, while EU R&D spending grew at a real 5.4 percent rate. Results show that EU consumers enjoyed much lower pharmaceutical price inflation, however, at a cost of 46 fewer new medicines introduced by EU firms and 1680 fewer EU research jobs.
    JEL: I11 I18 K2 O34
    Date: 2006–11
  33. By: Juha Honkatukia; Ville Mälkönen; Adriaan Perrels
    Abstract: This study deals with the matter to what extent the costs of the EU Emission Trade System (EU ETS) end up in the electricity prices. The study encompasses both a theoretical and an empirical review of electricity price formation. It includes an econometric analysis of electricity price formation and the impact of EU ETS on power prices. On the basis of the econometric analysis is concluded that cost compensation due to EU ETS is indeed occurring. On average, about 75% to 95% of a price change in EU ETS is passed on to the Finnish NordPool spot price. The analysis also shows that the degree of utilisation of generation capacity (and hence the network loads) have an effect on electricity prices. This hints at possible market imperfections and can aggravate the price effects of EU ETS.
    Keywords: electricity markets, emission trading, competitiveness
    Date: 2006–11–08
  34. By: Ela Glowicka (Wissenschaftszentrum Berlin, Reichpietschufer 50, 10785 Berlin, Germany.
    Abstract: Governments in the EU frequently bail out firms in distress by granting state aid. I use data from 86 cases during the years 1995-2003 to examine two issues: the effectiveness of bailouts in preventing bankruptcy and the determinants of bailout policy. The results are threefold. First, the estimated discrete-time hazard rate increases during the first four years after the subsidy and drops after that, suggesting that some bailouts only delayed exit instead of preventing it. The number of failing bailouts could be reduced if European control was tougher. Second, governments’ bailout decisions favored state-owned firms, even though state-owned firms did not outperform private ones in the survival chances. Third, subsidy choice is an endogenous variable in the analysis of the hazard rate. Treating it as exogenous underestimates its impact on the bankruptcy probability. Several policy implications of the results are discussed in the paper.
    Keywords: State aid, European Union, Discrete-time hazard, Bivariate probit
    JEL: K2 G3 L5
    Date: 2006–10
  35. By: Chiara Franzoni (A. Young School of Policy Studies, Georgia State University, USA); Francesco Lissoni (Università di Brescia and CESPRI-Università Commerciale Bocconi, Milano, Italy)
    Abstract: The paper proposes a definition of “academic entrepreneur” which draws from draws from the economics, history, and sociology of science. Academic entrepreneurs are scientists with a brilliant scientific record, who build their careers through discipline-building, the creation and of new labs and teams, and an appetite for the economic resources necessary to pursue those goals. Long-standing institutional features of national university systems explain to what extent commercial activities may or may not help academic entrepreneurs to progress in their careers. European policies for technology transfer should address these features, rather than aiming straight at university patenting and firm creation.
    Keywords: Academic entrepreneurship, Technology transfer
    JEL: I23 M13 O31
    Date: 2006–09
  36. By: Enrica Croda (Department of Economics, Cà Foscari University Of Venice); Lisa Callegaro (Department of Economics, Cà Foscari University Of Venice)
    Abstract: This paper documents the Employment and Pensions module in the first wave of the Survey of Health, Ageing and Retirement in Europe (SHARE). This is the first survey in Europe that collects extensive cross-national interdisciplinary data on different aspects of the life of the elderly, ranging from health conditions to economic status. The Employment and Pensions module is constructed to elicit information on labor force participation, earnings and other incomes such as pensions and benefits. We show both the structure of the module and selected preliminary results.
    Keywords: Aging, employment, pensions, household survey, cross-national research, Europe, SHARE
    JEL: J14 J26 C81
    Date: 2006

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