nep-eec New Economics Papers
on European Economics
Issue of 2007‒04‒09
35 papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Is European Monetary Policy Appropriate for the EMU Member Countries? A Counterfactual Analysis By Bernd Hayo
  2. Old Europe Goes to Work: Rising Employment Rates in the European Union By John Schmitt; Dean Baker
  3. A New Look at Economic Convergence in Europe: A Common Factor Approach By Bettina Becker; Stephen G. Hall
  4. The Impact Of The European Union Fiscal Rules On Economic Growth By Castro, Vítor
  5. Cross-Border Bank Contagion in Europe By Reint Gropp; Marco Lo Duca; Jukka Vesala
  6. Price setting in the euro area : some stylised facts from individual producer price data By Philip Vermeulen; Daniel Dias; Maarten Dossche; Erwan Gautier; Ignacio Hernando; Roberto Sabbatini; Harald Stahl
  7. Real exchange rates and current account imbalances in the Euro-area By Michael G Arghyrou; Georgios Chortareas
  8. Bank Lending and Asset Prices in the Euro Area By Michael Frömmel; Torsten Schmidt
  9. Will corporate tax consolidation improve efficiency in the EU? By Albert van der Horst; Leon Bettendorf; Hugo Rojas-Romagosa
  10. Are Shorter Work Hours Good for the Environment? A Comparison of U.S. and European Energy Consumption By David Rosnick; Mark Weisbrot
  11. Expansionary fiscal consolidations in Europe: part of conventional wisdom? By António Afonso
  12. Are Euro Interest Rates led by FED Announcements? By Andrea Monticini; Giacomo Vaciago
  13. Constructing Historical Euro Area Data By Heather Anderson; Mardi Dungey; Denise Osborn; Farshid Vahid
  14. Sectoral money demand models for the euro area based on a common set of determinants By Julian von Landesberger
  15. Merger Remedies at the European Commission: A Multinomial Logit Analysis By Bougette, Patrice; Turolla, Stéphane
  16. The predictive content of the real interest rate gap for macroeconomic variables in the euro area By Jean-Stéphane MESONNIER
  17. Financial Stability in European Banking: The Role of Common Factors By Clemens J.M. Kool
  18. Are Protective Labor Market Institutions Really at the Root of Unemployment? A Critical Perspective on the Statistical Evidence By David R. Howell; Dean Baker; Andrew Glyn; John Schmitt
  19. Real-Time Effects of Central Bank Interventions in the Euro Market By Rasmus Fatum; Jesper Pedersen
  20. Using the Dynamic Bi-Factor Model with Markov Switching to Predict the Cyclical Turns in the Large European Economies By Konstantin A. Kholodilin
  21. Optimal Monetary Policy Rules for the Euro Area in a DSGE Framework By Pelin Ilbas
  22. Forecasting Exchange Rate Volatility with High Frequency Data: Is the Euro Different? By Georgios Chortareas; John Nankervis; Ying Jiang
  23. An Early Warning Model for EU banks with Detection of the Adverse Selection Effect By Olivier BROSSARD (LEREPS-GRES ); Frédéric DUCROZET (PSE - Crédit Agricole); Adrian ROCHE (EconomiX - Crédit Agricole)
  24. The Eurosystem, the US Federal Reserve and the Bank of Japan - similarities and differences By Dieter Gerdesmeier; Francesco Paolo Mongelli; Barbara Roffia
  25. The Effects of the EU ETS on Companies: Research by Conducting Interviews in European Companies By Seiji Ikkatai; Daisuke Ishikawa; Shuichi Ohori
  26. The Impact of the European Union Emissions Trading Scheme on Competitiveness in Europe By Oberndorfer, Ulrich; Rennings, Klaus
  27. Labor productivity in Europe: Evidence from a sample of regions By Lionel Artige; Rosella Nicolini
  28. Emission trading beyond Europe : linking schemes in a post-Kyoto world By Anger, Niels
  29. Funding Systems and their Effects on Higher Education Systems By Franz Strehl; Sabine Reisinger; Michael Kalatschan
  31. Opening Services Markets within Europe: Modelling Foreign Establishments in a CGE Framework By Arjan Lejour; Hugo Rojas-Romagosa; Gerard Verweij
  32. Stringency and Distribution in the EU Emissions Trading Scheme –The 2005 Evidence By Stefan P. Schleicher; Claudia Kettner; Angela Köppl; Gregor Thenius
  33. Copayments in the German Health System – Do They Work? By Boris Augurzky; Thomas Bauer; Sandra Schaffner
  34. Home-ownership and Economic Performance of Immigrants in Germany By Mathias Sinning
  35. Evidence on the Determinants of Foreign Direct Investment. The Case of Three European Regions By Lionel Artige; Rosella Nicolini

  1. By: Bernd Hayo (University of Marburg)
    Abstract: This paper analyses whether interest rate paths in the EMU member countries would have been different if the previous national central banks had not handed over monetary policy to the ECB. Using estimates of monetary policy reaction functions over the last 20 years before the formation of EMU, we derive long-run rules the relate interest rate setting to the expected one-year ahead inflation rate and the current output gap. These Taylor rules allow to derive long-run target rates which are employed in the simulation of counterfactual interest rate paths over the time period January 1999 to December 2004 and then compared to actual short-term interest rates in the euro area. It is found that for almost all EMU member countries euro area interest rates tend to be below the national target interest rates, even after explicitly accounting for a lower real interest rate in the EMU period, with Germany being the only exception.
    Keywords: Taylor rule, monetary policy, ECB, European Monetary Union
    JEL: E5
    Date: 2007–02–02
  2. By: John Schmitt; Dean Baker
    Abstract: This report shows that Europe's welfare states have nearly closed the employment gap with respect to the United States for workers aged 25 to 54 years old.
    Date: 2006–09
  3. By: Bettina Becker (Department of Economics, Loughborough University); Stephen G. Hall (Department of Economics, University of Leicester)
    Abstract: We propose a common factor approach to analyse convergence, which we implement using principal components analysis. We show that this method provides a useful new way of approaching the convergence debate. We apply this technique to a dataset of nominal and real monthly exchange rates of the twelve member countries of the European Monetary Union over the period 1970-2001. Our empirical results neatly capture the convergence patterns related to the various regimes from Bretton Woods toward EMU. The UK's Pound Sterling has been on a gradual convergence path to the Euro, although convergence is less progressed than it was for the EMU countries by 1999.
    Keywords: Convergence, exchange rates, European Monetary Union, nominal convergence, real convergence, principal components analysis.
    JEL: C22 F31
    Date: 2007–02
  4. By: Castro, Vítor (University of Warwick, University of Coimbra and NIPE)
    Abstract: This study intends to provide an empirical answer to the question of whether Maastricht and SGP fiscal rules have affected growth of European Union countries. A growth equation augmented with fiscal variables and controlling for the period in which fiscal rules were implemented in Europe is estimated over a panel of 15 EU countries (and 8 OECD countries) for the period 1970-2005 with the purpose of answering this question. The equation is estimated using both a dynamic fixed effects estimator and a recently developed pooled mean group estimator. GMM estimators are also used in a robustness analysis. Empirical results show that growth of real GDP per capita in the EU was not negatively affected in the period after Maastricht. This is the case when the recent performance of EU countries is compared both with their past performance and with the performance of other developed countries. Results even show that growth is slightly higher in the period in which the fulfilment of the 3% criteria for the deficit started to be officially assessed. Therefore, this study concludes that the institutional changes that occurred in Europe after 1992, especially the implementation of Maastricht and Stability and Growth Pact fiscal rules, should not be blamed for being harmful to growth in Europe.
    Keywords: European Union ; Economic Growth ; Fiscal rules ; Pooled mean group estimator
    JEL: E62 H6 O47
    Date: 2007
  5. By: Reint Gropp; Marco Lo Duca; Jukka Vesala
    Abstract: This paper analyses cross-border contagion in a sample of European banks from January 1994 to January 2003. We use a multinomial logit model to estimate the number of banks in a given country that experience a large shock on the same day (“coexceedances”) as a function of variables measuring common shocks and coexceedances in other countries. Large shocks are measured by the bottom 95th percentile of the distribution of the first difference in the daily distance to default of the bank. We find evidence in favour of significant cross-border contagion. We also find some evidence that since the introduction of the euro cross-border contagion may have increased. The results seem to be very robust to changes in the specification.
    JEL: G21 F36 G15
    Date: 2007–02
  6. By: Philip Vermeulen (European Central Bank); Daniel Dias (Banco de Portugal); Maarten Dossche (National Bank of Belgium); Erwan Gautier (Banque de France); Ignacio Hernando (Banco de España); Roberto Sabbatini (Banca d’Italia); Harald Stahl (Deutsche Bundesbank)
    Abstract: This paper documents producer price setting in 6 countries of the euro area: Germany, France, Italy, Spain, Belgium and Portugal. It collects evidence from available studies on each of those countries and also provides new evidence. These studies use monthly producer price data. The following five stylised facts emerge consistently across countries. First, producer prices change infrequently: each month around 21% of prices change. Second, there is substantial cross-sector heterogeneity in the frequency of price changes: prices change very often in the energy sector, less often in food and intermediate goods and least often in non-durable non- food and durable goods. Third, countries have a similar ranking of industries in terms of frequency of price changes. Fourth, there is no evidence of downward nominal rigidity: price changes are for about 45% decreases and 55% increases. Fifth, price changes are sizeable compared to the inflation rate. The paper also examines the factors driving producer price changes. It finds that costs structure, competition, seasonality, inflation and attractive pricing all play a role in driving producer price changes. In addition producer prices tend to be more flexible than consumer prices.
    Keywords: Price-setting, producer prices
    JEL: E31 D40 C25
    Date: 2007–03
  7. By: Michael G Arghyrou (Cardiff Business School); Georgios Chortareas (University of Essex)
    Abstract: Global current account imbalances have been one of the focal points of interest for policymakers during the last few years. Less attention has been paid, however, to the growing imbalances within the Euro-area. In the short period since the commencement of the EMU two distinct groups of member state have emerged: those with consistently improving current accounts and those with consistently worsening current accounts. In this paper we consider the dynamics of current account adjustment and the role of real exchange rates in current account determination in the EMU member countries. Monetary union participation, which entails giving up the nominal exchange rate, can make the correction of current account imbalances more cumbersome. While most theoretical models of open economies rely on a causal relationship between real exchange rates and the current account limited, if any, contemporary evidence exist on the empirical validity of this relationship. We find that the above relationship is substantial in size and subject to pronounced non-linear effects. We identify two groups of countries since the abandonment of European national currencies: those with persistent real exchange rate depreciation leading to current account improvement; and those with systematic real appreciation and deteriorating current accounts. These groups largely correspond to those previous research has identified as respectively belonging and not belonging to a European Optimum Currency Area. Our findings validate the theoretical arguments concerning the potential costs of EMU participation and suggest that meeting the nominal convergence criteria has come, in some countries, at the cost of growing current account imbalances. The latter pose policy-response questions for national authorities and the ECB, suggesting that it may be optimal to add to the EMU-accession criteria one referring to the balance of the current account; and highlighting the importance of increasing the flexibility of relative prices to facilitate real exchange rate and current account adjustment
    Keywords: current account, real exchange rate, EMU, nonlinearities
    JEL: C51 F32 F41
    Date: 2007–02–02
  8. By: Michael Frömmel; Torsten Schmidt
    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 co-movement 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: Credit demand, credit rationing, asset prices, credit channel
    JEL: C32 G21
    Date: 2006–05
  9. By: Albert van der Horst; Leon Bettendorf; Hugo Rojas-Romagosa
    Abstract: Consolidation of the tax base in the European Union is expected to curve compliance costs and reduce profit shifting. A number of proposals for consolidation from the European Commission are simulated with the applied general equilibrium model CORTAX. We show that the benefits from consolidation are offset by two weaknesses in the proposals for a common consolidated tax base. Formula apportionment, which is needed to allocate the consolidated taxable profits across jurisdictions, creates new tax planning possibilities for MNEs and allows them to benefit from existing tax rate differentials in the European Union. In addition, it triggers tax competition as member states may attract foreign investment by reducing their tax rates. The second distortion is an unlevel playing field, which is introduced if only part of the firms participate in the consolidation. The gains from consolidation can be fully grasped if it is obliged for all firms and if it is accompanied by a harmonisation of the tax rate.
    Keywords: corporate tax; consolidation; formula apportionment; European Union; general equilibrium model
    JEL: H87 H21 H25 F21
    Date: 2007–03
  10. By: David Rosnick; Mark Weisbrot
    Abstract: European employees work fewer hours per year -- and use less energy per person -- than their American counterparts. This report compares the European and U.S. models of labor productivity and energy consumption. It finds that if all countries worked as many hours per week as U.S. workers do, the world would consume 15 to 30 percent more energy by 2050 than it would by following Europe's model.
    Date: 2006–12
  11. By: António Afonso (ECB and ISEG/UTL-Technical University of Lisbon)
    Abstract: In order to assess whether expansionary fiscal consolidations can be part of conventional wisdom, panel data models for private consumption are estimated for the EU15 countries, using annual data over the period 1970–2005. Three alternative approaches to determine fiscal episodes are used, and the level of government indebtedness is also taken into account. The results show some evidence in favour of the existence of expansionary fiscal consolidations, for a few budgetary spending items (general government final consumption, social transfers, and taxes), depending on the specification and on the time span used. On the other hand, the possibility of asymmetric effects of fiscal episodes does not seem to be corroborated by the results
    Keywords: fiscal policy, expansionary fiscal consolidations, non-Keynesian effects, panel data models, European Union
    JEL: C23 E21 E62
    Date: 2007–02–02
  12. By: Andrea Monticini (University of Exeter); Giacomo Vaciago (Universita' Cattolica Milano)
    Abstract: This paper investigates, for the first time, the reactions of markets to the monetary policy decisions of their own Central Bank and to the decisions of the Central Banks of other countries. In particular, using daily interest rates to estimate the impact of the monetary policy announcements of a Central Bank, we analyse the effect of the FED, ECB, and BoE monetary policy announcements on their own markets, and on the others. Surprisingly, we find that while the US rates respond only to FED announcements, and the British rates respond mainly to BoE announcements and marginally to FED announcements, the response of Euro bond rates to the FED announcements is stronger than their response to ECB announcements
    Keywords: Monetary Policy, Term structure of interest rates, Interdependence
    JEL: E4 E43 E52 F42
    Date: 2007–02–02
  13. By: Heather Anderson (Australian National University); Mardi Dungey (University of Cambridge); Denise Osborn (University of Manchester); Farshid Vahid (Australian National University)
    Abstract: The conduct of time series analysis on the Euro Area currently presents problems in terms of availability of sufficiently long data sets. The ECB has provided a dataset of quarterly data from 1970 covering many data series in its Area Wide Model (AWM), but not for a number of important financial market series. This paper discusses methods for producing such backdata and in the resulting difficulties in selecting aggregation methods. Simple applicaiton of the AWM weights results in orders of magnitude difference in financial series. The use of different aggregation methods across series induces relationships. The effects of different possible methods of constructing data are shown through estimation of simple Taylor rules, which result in different weights on output gaps and inflation deviation for what are purportedly the same data
    Keywords: Euro area, data aggregation, Taylor rule
    JEL: C82 C43 E58
    Date: 2007–02–02
  14. By: Julian von Landesberger (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: Empirical money demand analysis undertaken at the aggregate level may obscure behavioural differences between the financial, non-financial corporation and household sectors. Looking at the individual and more homogenous sectors may allow more clearly interpretable empirical relationships between money holding, scale variables and opportunity costs to be estimated. Two possible approaches can be taken to address this issue: aggregate and sectoral money holdings are explained either by a common set of determinant variables or by specific determinants, which may differ across sectors. In this analysis, the first approach has been chosen in order to highlight the different elasticities of the long-run money demand with respect to a common set of macroeconomic determinants and thereby to allow comparison of the model for the aggregate M3 with corresponding models for households, non-financial corporations and non-monetary financial intermediaries. This paper presents results for cointegrated VAR systems estimated over a sample of quarterly data from 1991 to 2005. A SUR system is estimated to cross-check the robustness of the findings and to analyse the importance of common shocks across sectors. JEL Classification: E41, C32, E59.
    Keywords: Sectoral money holdings, money demand, cointegrated VAR systems.
    Date: 2007–03
  15. By: Bougette, Patrice; Turolla, Stéphane
    Abstract: This paper aims to build and empirically evaluate a discrete choice model of merger remedies as a basis for policy analysis. The database consists of 229 merger cases accepted in Phase I or Phase II of the European merger process between 1990 and 2005. We focus on the following question: Which merging firms' characteristics lead the European Commission to decide whether to require conditional acceptance? Although a lot of empirical studies have been carried out these last years, ours is distinguished by at least two original features. First, we explore determinant factors of the Commission's decisions with a neural network model differentiating cases accepted with or without remedies (either structural or behavioral). Secondly, we implement three multinomial logit models. We find that variables related to high market power lead more frequently to a remedy outcome, whatever the phase. Innovative industries such as energy, transportation and communications positively affect the probability of a behavioral remedy. Lastly, former Competition Commissioner Mario Monti's policy appears to be pro-remedy, i.e. seeking concessions from merging parties.
    Keywords: Merger Remedies ; Antitrust ; European Commission ; Discrete Choice Models ; Self-Organizing Maps
    JEL: L40 K21 D78
    Date: 2006–09
  16. By: Jean-Stéphane MESONNIER (Banque de France)
    Abstract: The real interest rate gap -IRG-, i.e. the gap between the short term real interest rate and its “natural†level, is a theoretical concept of potential policy relevance for central banks, at least to evaluate the monetary policy stance, at best as a guideline for policy moves. This paper aims at clarifying the practical relevance of IRG indicators for monetary policy. To this end, it provides an empirical assessment of the usefulness of various univariate and multivariate estimates of the real IRG for predicting inflation, real activity and real credit growth in the euro area. On the basis of out-of-sample evidence using real-time data, I find that IRG measures are globally of little help to improve our knowledge of future inflation in the euro area. By contrast, some of the estimated IRG measures exhibit a significant predictive power for future real activity, in line with the intuition from a traditional IS curve, as well as for credit growth. Nevertheless, in most cases, the forecasting models that include estimated IRG do not outperform a simpler AR model augmented with the first difference of the nominal interest rate
    Keywords: natural rate of interest, monetary policy, forecasting
    JEL: C53 E37 E52
    Date: 2007–02–02
  17. By: Clemens J.M. Kool (Utrecht University)
    Abstract: In this paper, I investigate the development and determinants of CDS spreads for 18 major European banks between December 2001 and January 2004 using daily data. I demonstrate that two nonstationary common factors can be extracted from the data that together explain most CDS spread variation across time and across banks. The group of German banks plus a few Southern-European banks appear to systematically have high CDS spreads and to be relatively sensitive to changes in the underlying factors. The dominating first common factor impacts on all banks in a similar direction, suggesting strong market integration. However, the quantitatively less important second factor has opposite effects on credit spreads of Southern European versus Northern European banks, suggesting some remaining country-specific or region-specific credit risk. Finally, I show that the first common factor may indeed be interpreted as a measure of market conditions as it is cointegrated with the European P/E ratio and the 2-year nominal interest rate
    Keywords: credit default swap spreads, contagion, cointegration, factor analysis
    JEL: G15 G21 G28
    Date: 2007–02–02
  18. By: David R. Howell; Dean Baker; Andrew Glyn; John Schmitt
    Abstract: This report debunks the myth that labor market protections, such as unions and unemployment benefits, are responsible for high European unemployment rates.
    Date: 2006–07
  19. By: Rasmus Fatum (University of Alberta); Jesper Pedersen (Department of Economics, University of Copenhagen)
    Abstract: This paper investigates the real-time effects of foreign exchange intervention using official intraday intervention data provided by the Danish central bank. Denmark is currently pursuing an active intervention policy under the provisions of the Exchange Rate Mechanism (ERM II) and intervenes on a discretionary basis when considered necessary. Prior participation in ERM II is a requirement for adoption of the Euro. Therefore, our study is of particular relevance for the new European Union member states that are either currently participating in ERM II or expected to do so at a later date as well as for Denmark. Our analysis employs the two-step weighted least squares estimation procedure of Andersen, Bollerslev, Diebold and Vega (2003) and an array of robustness tests. We find that intervention exerts a statistically and economically significant influence on exchange rate returns when the direction of intervention is consistent with fundamentals and intervention is carried out during a period of high exchange rate volatility. We also show that the exchange rate does not adjust instantaneously to the unannounced and discretionary interventions under study. We conclude that intervention can be an important short-term policy instrument for exchange rate management.
    Keywords: foreign exchange intervention; intraday data; ERM II
    JEL: D53 E58 F31 G15
    Date: 2007–03
  20. By: Konstantin A. Kholodilin (DIW Berlin)
    Abstract: The appropriately selected leading indicators can substantially improve the forecasting of the peaks and troughs of the business cycle. Using the novel methodology of the dynamic bi-factor model with Markov switching and the data for three largest European economies (France, Germany, and UK) we construct composite leading indicator (CLI) and composite coincident indicator (CCI) as well as corresponding recession probabilities. We estimate also a rival model of the Markov-switching VAR in order to see, which of the two models brings better outcomes. The recession dates derived from these models are compared to three reference chronologies: those of OECD and ECRI (growth cycles) and those obtained with quarterly Bry-Boschan procedure (classical cycles). Dynamic bi-factor model and MSVAR appear to predict the cyclical turning points equally well without systematic superiority of one model over another
    Keywords: Forecasting turning points, composite
    JEL: E32 C10
    Date: 2007–02–02
  21. By: Pelin Ilbas (Catholic University of Leuven)
    Abstract: This paper evaluates optimal monetary policy rules within the context of a dynamic stochastic general equilibrium model estimated for the Euro Area. Under assumption of an ad hoc loss function for the central bank, we compute the unconditional losses both under discretion and commitment. We compare the performance of unrestricted optimal rules to the performance of optimal simple rules. The results indicate that there are considerable gains from commitment over discretion, probably due to the stabilization bias present under discretion. The lagged variant of the Taylor type of rule that allows for interest rate inertia does relatively well in approaching the performance of the unrestricted optimal rule derived under commitment. On the other hand, simple rules expressed in terms of forecasts to next period's inflation rate seem to perform relatively worse.
    Keywords: monetary policy, discretion, commitment
    JEL: E52 E58
    Date: 2007–02–02
  22. By: Georgios Chortareas (University of Essex); John Nankervis (University of Essex); Ying Jiang (University of Essex)
    Abstract: This paper focuses on forecasting volatility of high frequency Euro exchange rates. Four 15 minute frequency Euro exchange rate series, including Euro/CHF, Euro/GBP, Euro/JPY and Euro/USD, are used to test the forecast performance of six models, including both traditional time series volatility models and the realized volatility model. Besides the normally used regression test and accuracy test, an equal accuracy test, the HLN-DM test, and a superior predictive ability test are also employed in the out-of-sample forecast evaluation. The FIGARCH model is found to be superior in almost all exchange rate series. Although the widely preferred ARFIMA model shows better performance than the traditional daily volatility models, generally speaking, it cannot surpass the FIGARCH model and the intraday GARCH model. Furthermore, the SVX model does not significantly outperform the SV model in the accuracy test, which contradicts the results of some earlier research. The paper confirms the advantage of using high frequency data and modelling the long memory factor. It also analyses the characteristics of Euro exchange rates and compares the test results with the conclusions drawn by previous studies
    Keywords: exchange rates, volatility, euro, high frequency
    JEL: F31 C22
    Date: 2007–02–02
  23. By: Olivier BROSSARD (LEREPS-GRES ); Frédéric DUCROZET (PSE - Crédit Agricole); Adrian ROCHE (EconomiX - Crédit Agricole)
    Abstract: We estimate an early warning model of banks’ failure using a panel of 82 EU banks observed between 1991 and 2005. We make two contributions to the literature. Firstly, we construct a distance-to-default indicator and test its predictive power. The tests implemented here are very similar to those realized by Gropp, Vesala and Vulpes (2005), but our time dimension is four years longer and we use a more restrictive definition of banks’ “failure”. This first part of the paper establishes the accuracy of our data and confirms the robustness of distance-to-default as an early indicator of EU banks’ fragility. Our second advance consists in introducing a variable detecting the adverse selection problem that can be caused by rapid growth strategies. A measure of past average growth of assets is shown to be a very significant and powerful predictor of future banks’ difficulties. We discuss the origins and implications of such an effect.
    Keywords: failures; early warning systems; CAMEL ratings; distance to default
    JEL: G21 G33 G14 E58
    Date: 2007
  24. By: Dieter Gerdesmeier (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Francesco Paolo Mongelli (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Barbara Roffia (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: The paper provides a systematic comparison of the Eurosystem, the US Federal Reserve and the Bank of Japan. These monetary authorities exhibit somewhat different status and tasks, which reflect different historical conditions and national characteristics. However, widespread changes in central banking practices in the direction of greater independence and increased transparency, as well as changes in the economic and financial environment over the past 15-20 years, have contributed to reduce the differences among these three world’s principal monetary authorities. A comparison based on simple “over-the-counter” policy reaction functions shows no striking differences in terms of monetary policy implementation. JEL Classification: E40, E52, E58.
    Keywords: Monetary policy, central banks and their policies, monetary policy committees.
    Date: 2007–03
  25. By: Seiji Ikkatai (Institute of Economic Research, Kyoto University); Daisuke Ishikawa (Institute of Economic Research, Kyoto University); Shuichi Ohori (Institute of Economic Research, Kyoto University)
    Abstract: We study the effects of the European Union Emission Trading Scheme (EU ETS)?which was introduced in January 2005?on companies by conducting interviews in some German and UK firms. In this paper, we demonstrate that although the introduction of the EU ETS has increased awareness of the importance of efforts to reduce global warming and emission costs, it has had little influence on the companies CO2 abatement efforts during the first period.
    Date: 2007–01
  26. By: Oberndorfer, Ulrich; Rennings, Klaus
    Abstract: This literature review analyses the impacts of the EU ETS on competitiveness focussing on existing simulation studies. We have identified the choice of the reference scenario as the most critical issue for an appropriate analysis of the relevant literature. We find, however, that effects of the scheme on competitiveness are modest, even given the business as usual case that does not take the legally binding framework of the Kyoto Protocol into account. Furthermore, the impacts of the EU ETS are smaller than the impacts of alternative Kyoto-based regulation scenarios. Compared to these other regulation methods ETSs can have positive competitiveness effects. However, the EU ETS is not designed to boost Europe’s economy. Its prime purpose and justification is to ensure that Europe’s CO2 emissions are brought down and Kyoto targets are reached at minimal costs. To our opinion, it is therefore important that the system as well as modifications to it do not undermine the environmental goals associated with this policy instrument.
    Keywords: emissions trading, competitiveness, environmental regulation
    JEL: Q21 Q28 Q43
    Date: 2006
  27. By: Lionel Artige; Rosella Nicolini
    Abstract: The present paper aims at analyzing the sources of labor productivity in Europe at regional level. We study the productivity performance in a sample of twenty European regions belonging to four countries (France, Germany, Italy and Spain). Exploiting the increasing availability of disaggregated data at regional level, we propose both a descriptive statistics and an econometric analysis of productivity sources since 1995. Our main finding is that the levels and sources of labor productivity are rather heterogeneous across the sample. This heterogeneity is found to be associated with disparities both across sectors and regions.
    Keywords: Labor productivity, productivity determinants, European regions.
    JEL: J24 O11 O18 O52
    Date: 2006
  28. By: Anger, Niels
    Abstract: This paper assesses the economic impacts of linking the EU Emission Trading Scheme (ETS) to emerging schemes beyond Europe, in the presence of a post-Kyoto agreement in 2020. Simulations with a numerical multi-country model of the world carbon market show that linking the European ETS induces only marginal economic benefits: As trading is restricted to energy-intensive industries that are assigned generous initial emissions, the major compliance burden is carried by non-trading industries excluded from the linked ETS. In the presence of parallel government trading under a post-Kyoto Protocol, excluded sectors can however be substantially compensated by international trading at the country level, thus increasing the political attractiveness of the linking process. From an efficiency perspective, a desirable future climate policy regime represents a joint trading system that enables international emission trading between ETS companies and governments. While the Clean Development Mechanism (CDM) cannot alleviate the inefficiencies of linked ETS, in a parallel or joint trading regime the access to abatement options of developing countries induces large additional cost savings. Restricting CDM access via a supplementarity criterion does not significantly decrease the economic benefits from project-based emission crediting.
    Keywords: EU ETS, Emission Trading, Kyoto Protocol, Clean Development Mechanism
    JEL: D61 H21 H22 Q58
    Date: 2006
  29. By: Franz Strehl; Sabine Reisinger; Michael Kalatschan
    Abstract: This international study focuses on the funding systems in the area of higher education in the following countries: Austria, Czech Republic, Denmark, Germany, Ireland, Latvia, Norway, Portugal and Slovak Republic. Each individual country study was designed and conducted within an overall common framework by a project partner from the respective country. By using the stakeholder approach, this study addresses and analyses the effects of funding systems on the higher education system and its institutions. In order to present a comprehensive overview, the study explicitly takes into account the stakeholders' diversity and explores the effects of how funding systems are perceived and assessed differently... <BR>Cette étude internationale cible les systèmes de financement de l'enseignement supérieur dans les pays suivants : Allemagne, Autriche, Danemark, Irlande, Lettonie, Norvège, Portugal, République slovaque et République tchèque. Chaque étude par pays a été conçue et menée selon un cadre général commun par un partenaire du projet du pays concerné. À travers le recours à l'approche des parties prenantes, cette étude aborde les effets des dispositifs de financement sur les systèmes et établissements de l'enseignement supérieur, avant d'en faire l'analyse. Dans le but de présenter une vue d'ensemble exhaustive, l'étude prend clairement en considération la diversité des parties prenantes et explore les effets consécutifs aux différentes perceptions et évaluations des systèmes de financement...
    Date: 2007–03–20
  30. By: Anneli Kaasa
    Abstract: This paper investigates how different dimensions of social capital influence innovation output. The novelty of the paper lies in the fact that for measuring social capital, instead of one overall index, six factors are constructed of 20 indicators using principal components analysis. Then, human capital and R&D are also included in the analysis as factors of innovation. Unlike many previous studies, this one uses the structural equation modelling approach instead of regression analysis in order to take into account the relationships between the factors of innovation. Regional-level data from Eurostat Regio and the European Social Survey are analysed. Compared to preceding studies, a larger number of observations is used. The findings provide strong support for the argument that social capital indeed influences innovative activity and furthermore, that different dimensions of social capital have dissimilar effects on innovation.
    Keywords: innovation, social capital, human capital, R&D
    Date: 2007
  31. By: Arjan Lejour; Hugo Rojas-Romagosa; Gerard Verweij
    Abstract: In services, the activities of foreign affiliates often exceed the value of cross-border trade. A complete analysis of services liberalisation therefore requires the modelling of FDI. This paper presents the treatment of FDI in our CGE model WorldScan based on the ideas of Petri (1997) and Markusen (2002). They assume that firms establishing affiliates abroad also transfer firmspecific knowledge. Consequently, capital and products differ from existing capital and products in the host country. As an illustration, we apply this model to assess the proposals of the European Commission to open up services markets. FDI in services could increase by 20% to 35%. However, the overall economic impact is limited. Our assessment suggests that GDP in the EU25 could increase up to 0.4%. These effects could be up to 0.8% higher if foreign capital also increases the overall productivity of the services sector.
    Keywords: FDI; CGE models; trade in services; economic integration
    JEL: F23 C68 F15
    Date: 2007–03
  32. By: Stefan P. Schleicher (Austrian Institute of Economic Research); Claudia Kettner (Austrian Institute of Economic Research); Angela Köppl (Austrian Institute of Economic Research); Gregor Thenius (Austrian Institute of Economic Research)
    Abstract: With the release of the verified emissions for installations covered by the EU Emissions Trading Scheme for the first trading year 2005 we are able to compare actual emissions and allowances for each installation. Based on data available for 24 Member States as of January 2007, this paper uses a thorough data analysis for about 9,900 installations to investigate evidence on three issues: first, the stringency of the total allocation cap and allocation differences both among the Member States and a selection of emission intensive sectors; second, the distribution of the size of installations; and third, the spread of allocation discrepancies and possible allocation biases regarding the size of installations.
    Keywords: Emission Trading, EU Emissions Trading Scheme, Climate Policy
    JEL: D61 O1 Q51 Q54
    Date: 2007–02
  33. By: Boris Augurzky; Thomas Bauer; Sandra Schaffner
    Abstract: This paper examines the effect of copayments on doctor visits using the German health care reform of 2004 as a natural experiment. In January 2004, copayments of 10 euros for the first doctor visit in each quarter have been introduced for all adults in the statutory health insurance. Individuals covered by private health insurance as well as youths have been exempted from these copayments. We use them as control groups in a difference-in-differences approach to identify the causal impact of these copayments on doctor visits. In contrast to expectations and public opinion our results indicate that there are no statistically significant effects of the copayments on the decision of visiting a doctor.
    Keywords: Copayment, doctor visits, difference-in-differences, fixed-effect logit
    JEL: I11 I18
    Date: 2006–08
  34. By: Mathias Sinning
    Abstract: This paper analyzes the home-ownership gap between native and immigrant households in Germany, paying particular attention to the assimilation process of immigrant households.A double cohort approach is applied to investigate the effect of the duration of residence in Germany on the homeownership probability of immigrant households.Moreover, focusing on homeowners, differences in the housing quality between native and immigrant households are being examined.The estimates indicate that immigrant households are less likely to own their primary residence than comparable native households. Since the effect of the duration of residence in Germany on the home-ownership probability turns out to be insignificant, the empirical findings suggest that an assimilation process in home-ownership between native and immigrant households does not take place. Finally, differences in housing quality measures become insignificant after controlling for socioeconomic characteristics and contextual factors of native and immigrant households in an interacted model.
    Keywords: Home-ownership, International Migration, Assimilation
    JEL: F22 I31 R21
    Date: 2006–08
  35. By: Lionel Artige; Rosella Nicolini
    Abstract: This study aims at analyzing the determinants of foreign direct investment inflows for a group of European regions. The originality of this approach lies in the use of disaggregated regional data. First, we develop a qualitative description of our database and discuss the importance of the macroeconomic determinants in attracting FDI. Then, we provide an econometric exercise to identify the potential determinants of FDI inflows. In spite of choosing regions presenting economic similarities, we show that regional FDI inflows rely on a combination of factors that differs from one region to another.
    Keywords: Foreign Direct Investment, Productivity, Regions.
    JEL: F20 O18 R10
    Date: 2006

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