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on European Economics |
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Issue of 2008‒05‒05
seventeen papers chosen by Giuseppe Marotta University of Modena and Reggio Emilia |
| By: | Arturo Bris; Augusto Rupérez-Micola |
| Abstract: | We study the price convergence of goods and services in the euro area in 2001-2002. To measure the degree of convergence, we compare the prices of around 220 items in 32 European cities. The width of the border is the price di¤erence attributed to the fact that the two cities are in different countries. We find that the 2001 European borders are negative, which suggests that the markets were very integrated before the euro changeover. Moreover, we do not identify an integration effect attributable to the introduction of the euro. We then explore the determinants of the European borders. We find that different languages, wealth and population differences tend to split the markets. Historical inflation, though, tends to lead to price convergence. |
| Keywords: | Euro, economic integration |
| JEL: | F15 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1086&r=eec |
| By: | Markus Baltzer (Deutsche Bundesbank, Wilhelm-Epstein-Strasse 14, 60431 Frankfurt am Main, Germany.); Lorenzo Cappiello (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Roberto A. De Santis (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Simone Manganelli (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | The study considers three broad categories of financial integration measures: (i) price-based, which capture discrepancies in asset prices across different national mar kets; (ii) news-based, which analyse the impact that common factors have on the return process of an asset; (iii) quantity-based, which aim at quantifying the effects of frictions on the demand for and supply of securities. This paper finds that financial markets in the new EU Member States (plus Cyprus, Malta and Slovenia) are significantly less integrated than those of the euro area. Nevertheless, there is strong evidence that the process of integration is well under way and has accelerated since accession to the EU. JEL Classification: None |
| Keywords: | None |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:20080081&r=eec |
| By: | Marco Pagano (Università di Napoli, CSEF and CEPR); Marco Pagano (Università di Napoli, CSEF and CEPR) |
| Abstract: | The single most important policy-induced innovation in the international financial system since the collapse of the Bretton-Woods regime is the institution of the European Monetary Union. This paper provides an account of how the process of financial integration has promoted financial development in the euro area. It starts by defining financial integration and how to measure it, analyzes the barriers that can prevent it and the effects of their removal on financial markets, and assesses whether the euro area has actually become more integrated. It then explores to which extent these changes in financial markets have influenced the performance of the euro-area economy, that is, its growth and investment, as well as its ability to adjust to shocks and to allow risk-sharing. The paper concludes analyzing further steps that are required to consolidate financial integration and enhance the future stability of financial markets. |
| Date: | 2008–04–28 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:197&r=eec |
| By: | Dekker, Ronald; kleinknecht, A.H. |
| Abstract: | Using CIS data from the Netherlands, Germany and France we test whether EU Framework programs do have effects on their participants' R&D input and innovative output. From our Heckman selection equations, we conclude that the FPs attract the "elite" of European innovators. The question is whether, after correction for self-selection, the programs have positive effects on innovative behaviour. This is hard to test meaningfully among large firms as EU funding is likely to cover only a minor share of their innovative activities. Analysing changes in R&D input we find that smaller firms increase their R&D input quite substantially after entering an EU FP program. Estimating equations that explain sales of innovative products, we find that firms that collaborate on R&D with clients, suppliers, competitors or public research institutes do not have increased sales of innovative products. We try to provide explanations for this counter-intuitive finding. Moreover, participation in an EU FP neither increases sales of innovative products. This result holds after numerous robustness checks. We argue that our insignificant outcomes do not necessarily imply that the FP programs are worthless. There is independent evidence that innovative projects funded by the EU FPs do, on average, involve more technical and scientific risks, they are more complex, and involve longer time horizons. Obviously, they are farer from market introduction which is not surprising, given the regulatory demand that EU FPs should be "pre-competitive". Against this background, we cannot exclude the possibility that an insignificant coefficient of FP participation in our equation on innovative output may still have a positive meaning. |
| Keywords: | innovation; R&D subsidies; collaborative R&D; CIS data; Netherlands; Germany; France |
| JEL: | O38 O57 O32 O31 |
| Date: | 2008–05–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8503&r=eec |
| By: | Michiel van Leuvensteijn (CPB Netherlands Bureau for Economic Policy Analysis, P.O. Box 80510, 2508 GM The Hague, The Netherlands.); Christoffer Kok Sørensen (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Jacob A. Bikker (De Nederlandsche Bank (DNB), Supervisory Policy Division, Strategy Department, P.O. Box 98, 1000 AB Amsterdam, The Netherlands.); Adrian A.R.J.M. van Rixtel (Banco de España, International Economics and International Relations Department, Alcalá 48, 28014 Madrid, Spain.) |
| Abstract: | This paper analyses the impact of loan market competition on the interest rates applied by euro area banks to loans and deposits during the 1994-2004 period, using a novel measure of competition called the Boone indicator. We find evidence that stronger competition implies significantly lower spreads between bank and market interest rates for most loan market products. Using an error correction model(ECM) approach to measure the effect of competition on the pass-through of market rates to bank interest rates, we likewise find that banks tend to price their loans more in accordance with the market in countries where competitive pressures are stronger. Further, where loan market competition is stronger, we observe larger bank spreads (implying lower bank interest rates) on current account and time deposits. This would suggest that the competitive pressure is heavier in the loan market than in the deposit markets, so that banks compensate for their reduction in loan market income by lowering their deposit rates. We observe also that bank interest rates in more competitive markets respond more strongly to changes in market interest rates. These findings have important monetary policy implications, as they suggest that measures to enhance competition in the European banking sector will tend to render the monetary policy transmission mechanism more effective. JEL Classification: D4, E50, G21, L10. |
| Keywords: | Monetary transmission, banks, retail rates, competition, panel data. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080885&r=eec |
| By: | Frank Smets (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Matthieu Darracq Pariès (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Stéphane Adjemian (Université du Maine, Avenue Olivier Messiaen, 72085 Le Mans Cedex 9, France.) |
| Abstract: | The objective of this paper is to examine the main features of optimal monetary policy cooperation within a micro-founded macroeconometric framework. First, using Bayesian techniques, we estimate a two-country dynamic stochastic general equilibrium (DSGE) model for the United States (US) and the euro area (EA). The main features of the new open economy macroeconomics (NOEM) are embodied in our framework: in particular, imperfect exchange rate pass-through and incomplete financial markets internationally. Each country model incorporates the wide range of nominal and real frictions found in the closed-economy literature: staggered price and wage settings, variable capital utilization and fixed costs in production. Then, using the estimated parameters and disturbances, we study the properties of the optimal monetary policy cooperation through welfare analysis, impulse responses and variance decompositions. JEL Classification: E4, E5, F4. |
| Keywords: | DSGE models, Optimal monetary policy, New open economy macroeconomics, Bayesian estimation. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080884&r=eec |
| By: | Tobias Blattner (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Marco Catenaro (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Michael Ehrmann (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Rolf Strauch (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Jarkko Turunen (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | Current best practice in central banking views a high level of monetary policy predictability as desirable. A clear distinction, however, has to be made between short-term and longer-term predictability. While short-term predictability can be narrowly defined as the ability of the public to anticipate monetary policy decisions correctly over short horizons, the broader, ultimately more meaningful concept of longerterm predictability also encompasses the ability of the private sector to understand the monetary policy framework of a central bank, i.e. its objectives and systematic behaviour in reacting to different circumstances and contingencies. In this broader sense, longer-term predictability is also closely related to the credibility of the central bank. This paper reviews the main conceptual issues relating to predictability, both in its short and longer-term dimensions, and discusses how a transparent monetary policy strategy can be – and indeed has been – instrumental in achieving this purpose. This latter aspect is investigated in an overview of the empirical literature, highlighting how financial markets have been increasingly able to correctly anticipate monetary policy decisions for a number of large central banks, including the ECB. The paper also reviews several possible empirical proxies for the less-explored concept of longer-term predictability, which is inherently more diffi cult to measure. JEL Classification: E52, E58, E61. |
| Keywords: | Predictability, central bank transparency, central bank communication. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:20080083&r=eec |
| By: | Maximo Camacho (Universidad de Murcia); Gabriel Perez-Quiros (Banco de España) |
| Abstract: | We propose a model to compute short-term forecasts of the Euro area GDP growth in real-time. To allow for forecast evaluation, we construct a real-time data set that changes for each vintage date and includes the exact information that was available at the time of each forecast. In this context, we provide examples that show how data revisions and data availability affect point forecasts and forecast uncertainty. |
| Keywords: | business cycles, output growth, time series |
| JEL: | E32 C22 E27 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:0807&r=eec |
| By: | Paola Giuri; Myriam Mariani |
| Abstract: | This paper studies the geographical breadth of knowledge spillovers. Previous research suggests that knowledge spillovers benefit from geographical proximity in technologically active and rich regions more than elsewhere. An alternative view explains the geographical breadth of knowledge spillovers as a function of the characteristics and personal networks of the individuals. We test these two competing theories by using information provided directly by the inventors of 6,750 European patents (PatVal-EU survey). Our results confirm the importance of inventors’ personal background. However, compared to previous research, we find that the level of education of the inventors is key in shaping the geographical breadth of knowledge spillovers. Highly educated inventors rely more on geographically wide research networks than their less educated peers. This holds after controlling for the mobility of the inventors and for the scientific nature of the research performed. Differently, location matters only in the very rare regions in Europe that perform the bulk of the research in the specific discipline of the inventors. |
| JEL: | O31 O33 R19 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:aal:abbswp:08-01&r=eec |
| By: | Ugo Colombino; Marilena Locatelli; Edlira Narazani; Cathal O’Donoghue; Isilda Shima |
| Abstract: | In this paper we develop and estimate a microeconometric model of household labour supply for four European countries representative of different economies and welfare policy regimes: Denmark, Italy, Portugal and United Kingdom. We then simulate, under the constraint of constant net tax revenue, the effects of 10 hypothetical tax-transfer reforms which include various alternative versions of a Basic Income policy. We produce various indexes and criteria according to which the reforms can be ranked. It turns out that in every country there are many reforms that can improve upon the current status according to many criteria and that might be “politically” feasible. Overall, the non meanstested policies have a better performance and progressive tax rules are somehow more efficient than the flat tax rules. |
| Keywords: | Welfare, Basic Income, Simulation |
| JEL: | D10 D33 E64 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:wpc:wplist:wp03_08&r=eec |
| By: | Heuchemer Sylvia; Kleimeier Stefanie; Sander Harald (METEOR) |
| Abstract: | We investigate the determinants of European banking market integration with a focus on the potentially limiting role of cultural and political factors. Employing a unique data set of European cross-border loans and deposits, the study uses various gravity models that are augmented by societal proxies. While trade-theoretic reasoning can explain part of the surge in cross-border banking, we demonstrate that distance and borders still matter in the geography of European cross-border banking. Moreover, we can identify cultural differences and different legal family origin as important barriers to integration. |
| Keywords: | Economics (Jel: A) |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2008008&r=eec |
| By: | Jukka Jalava; Ilja Kristian Kavonius |
| Abstract: | ABSTRACT : The purpose of this paper is to estimate the effect of durable goods and ICT on Euro Area economic growth and productivity change; when expenditure on consumer durables is recorded as capital investment. The capitalization of consumer durables impacts both the levels and growth rates of the capital stock, productivity and GDP. Our growth accounting computations demonstrated that the capital services of durables contributed one-tenth of economic growth and one-eight of labour productivity growth in 1995-2004. ICT´s impacts were larger, i.e., one-fifth of GVA growth and one-sixth of labour productivity growth. |
| Keywords: | durable good, asset, productivity, ICT, growth accounting, capital services, household production |
| JEL: | E13 E21 E22 O11 O47 O52 |
| Date: | 2008–04–23 |
| URL: | http://d.repec.org/n?u=RePEc:rif:dpaper:1132&r=eec |
| By: | Christopher T. Whelan (Economic and Social Research Institute (ESRI)); Maitre, Bertrand (Economic and Social Research Institute (ESRI)) |
| Abstract: | In this paper we take advantage of the recent availability of EU-SILC data to contribute to the recent debate relating to the Europeanisation of reference groups. Our analysis addresses both weak and strong versions of the thesis. The former proposes that common standards of what is an acceptable level of participation in one’s own society emerge as a consequence of knowledge of conditions in other societies. The latter argues that people increasingly perceive themselves as part of a larger European stratification. Our analysis leads us to reject both versions of the thesis. Material deprivation rather than having a uniform effect is highly dependent on national context. In circumstances where the Europeanisation of inequality is raising issues relating to both national and transnational forms of legitimacy, it is important to understand that there is no necessary relationship between such Europeanisation and the Europeanisation of reference groups. |
| Keywords: | housing, Europeanisation of inequality, reference groups, deprivation, economic stress, legitimacy |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp235&r=eec |
| By: | Alan Barrett (Economic and Social Research Institute (ESRI)); Seamus McGuinness (Economic and Social Research Institute (ESRI)); Martin O'Brien (Economic and Social Research Institute (ESRI)) |
| Abstract: | As the movement of population from the New Member States (NMS) of the EU to the older members is a relatively new flow, it is important to build up our knowledge of who is moving within Europe and how they are performing in their destinations. In this paper, we analyse the earnings of immigrants in Ireland from the NMS using a new large-scale dataset on employees in Ireland. In so doing, we add to the emerging strand in the literature on immigrant earnings that looks beyond average earnings differentials and considers variations in such differentials across the earnings and skills distributions. We do this partly by using quantile regressions and also by analyzing earnings differentials within educational categories. We find that the average earnings difference between immigrants from the NMS and natives is between 10 percent and 18 percent, depending on the controls used. However, the difference is found to be either non-existent or low for people with low skill levels and for people at the lower end of the earnings distribution. The difference is higher for those at the upper ends of the skills and earnings distributions. This suggests that the transferability of human capital is a crucial determinant of the immigrant-native earnings gap for NMS immigrants in Ireland. |
| Keywords: | Immigrant earnings; Ireland; New Member States; Quantile regression |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp236&r=eec |
| By: | Gropp, Reint Eberhard; Heider, Florian |
| Abstract: | This paper documents that standard cross-sectional determinants of firm leverage also apply to the capital structure of large banks in the United States and Europe. We find a remarkable consistency in sign, significance and economic magnitude. Like non-financial firms, banks appear to have stable capital structures at levels that are specific to each individual bank. The results suggest that capital requirements may only be of second-order importance for banks’ capital structures and confirm the robustness of current corporate finance findings in a holdout sample of banks. |
| Keywords: | capital structure, corporate finance, leverage, bank capital, banking regulation |
| JEL: | G21 G32 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:7224&r=eec |
| By: | Jurgen Von Hagen (University of Bonn); Iulia Siedschlag (Economic and Social Research Institute (ESRI)) |
| Abstract: | The countries of Central and Eastern Europe went from being largely closed to being largely open to international capital flows. This paper discusses their experience with capital account liberalization and coping with large capital inflows. We start with a discussion of basic economic characteristics and the real convergence achieved so far, and then discuss the pace and sequencing of capital account liberalization and the degree of international financial integration over the past decade. We then analyze trends and patterns of capital inflows in these countries in recent years. These stylized facts are useful for understanding the macroeconomic implications and policy challenges of coping with large capital inflows, which we discuss next. Finally we conclude with policy implications for emerging Asian economies. |
| Keywords: | International financial integration, Macroeconomic policy, Central and Eastern Europe, Emerging Asian economies |
| JEL: | E44 F36 F41 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp234&r=eec |
| By: | Lars P. Feld; Benno Torgler; Bin Dong |
| Abstract: | The paper explores whether a social learning model helps explain the observed conformity and compliance with social norms after the unification of Germany. We compare tax morale, (the willingness to pay taxes), between inhabitants of East and West Germany during the post-unification period, using three World Values Survey/European Values Survey waves between 1990 and 1999. German unification is of particular interest in analyzing tax morale since it is close to a quasi-natural experiment. Factors such as a common language, similar education systems and a shared cultural and political history prior to the separation after the Second World War can be controlled because they are similar. Our findings indicate that the social learning model employed in this study helps to predict the development of tax morale over time. It is clear that tax morale values converged within a mere nine years after unification, due largely to a strong change in the level of tax morale in the East. Thus, the paper contributes to the literature that attempts to explain how norms arise, how they are maintained and how they are changed. |
| Keywords: | Tax Morale; Social Learning; Conformity; Convergence Process; Deterrence; Quasi-Natural Experiment |
| JEL: | H26 H73 D78 C93 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:cra:wpaper:2008-09&r=eec |