|
on European Economics |
|
Issue of 2008‒12‒14
sixteen papers chosen by Giuseppe Marotta University of Modena and Reggio Emilia |
| By: | Domenico Giannone; Michele Lenza; Lucrezia Reichlin |
| Abstract: | This paper shows that the EMU has not affected historical characteristics of member countries’ business cycles and their cross-correlations. Member countries which had similar levels of GDP percapita in the seventies have also experienced similar business cycles since then and no significant change associated with the EMU can be detected. For the other countries, volatility has been historically higher and this has not changed in the last ten years. We also find that the aggregate euro area per-capita GDP growth since 1999 has been lower than what could have been predicted on the basis of historical experience and US observed developments. The gap between US and euro area GDP per capita level has been 30% on average since 1970 and there is no sign of catching up or of further widening. |
| Keywords: | Euro area, International Business Cycle, European monetary union, European integration |
| JEL: | E32 C5 F2 F43 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2008_040&r=eec |
| By: | Marek Jarociński (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper compares impulse responses to monetary policy shocks in the euro area countries before the EMU and in the New Member States (NMS) from central-eastern Europe. We mitigate the small sample problem, which is especially acute for the NMS, by using a Bayesian estimation that combines information across countries. The impulse responses in the NMS are broadly similar to those in the euro area countries. There is some evidence that in the NMS, which have had higher and more volatile inflation, the Phillips curve is steeper than in the euro area countries. This finding is consistent with economic theory. JEL Classification: C11, C32, C33, E40, E52. |
| Keywords: | monetary policy transmission, Structural VAR, Bayesian estimation, exchangeable prior. |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080970&r=eec |
| By: | Ulf Söderström |
| Abstract: | I revisit the potential costs and benefits for Sweden of joining the Economic and Monetary Union (EMU) of the European Union. I first show that the Swedish business cycle since the mid-1990s has been closely correlated with the Euro area economies, suggesting that common shocks have been an important driving force of business cycles in Europe. However, evidence from an estimated model of the Swedish economy instead suggests that country-specific shocks have been important for fluctuations in the Swedish economy since 1993, implying that EMU membership could be costly. The model also indicates that the exchange rate has to a large extent acted to destabilize, rather than stabilize, the Swedish economy, pointing to the costs of independent monetary policy with a flexible exchange rate. Finally, counterfactual simulations of the model suggest that Swedish inflation and GDP growth might have been slightly higher if Sweden had been a member of EMU since the launch in 1999, but also that GDP growth might have been more volatile. The evidence is therefore not conclusive about whether or not participation in the monetary union would be advantageous for Sweden. |
| JEL: | E42 E58 F41 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14519&r=eec |
| By: | Mevlud Islami (University of Wuppertal/European Institute for International Economic Relations (EIIW)) |
| Abstract: | In this analysis the interdependence between foreign exchange markets and stock markets for selected accession and cohesion countries is discussed. This includes basic theoretical approaches. Monthly data for the nominal stock market indices and nominal exchange rates are used, where Ireland, Portugal, Spain, Greece, Poland, Czech Republic, Slovenia, and Hungary are included in the analysis. From the cointegration analysis and VAR analysis both long-term links and short-term links for Poland are identified. Conversely, for Slovenia, Hungary, Ireland, and Spain merely short-term links resulted. Surprisingly, the direction of causation is unambiguously from the stock market index to the exchange rate for all five countries considered. |
| Keywords: | Exchange Rate; Stock Markets; Cointegration; VAR; European Integration |
| JEL: | G15 F31 E44 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:bwu:schdps:sdp08007&r=eec |
| By: | Jeffrey A. Frankel |
| Abstract: | Andy Rose (2000), followed by many others, has used the gravity model of bilateral trade on a large data set to estimate the trade effects of monetary unions among small countries. The finding has been large estimates: Trade among members seems to double or triple, that is, to increase by 100-200%. After the advent of EMU in 1999, Micco, Ordoñez and Stein and others used the gravity model on a much smaller data set to estimate the effects of the euro on trade among its members. The estimates tend to be statistically significant, but far smaller in magnitude: on the order of 10-20% during the first four years. What explains the discrepancy? This paper seeks to address two questions. First, do the effects on intra-euroland trade that were estimated in the euro's first four years hold up in the second four years? The answer is yes. Second, and more complicated, what is the reason for the big discrepancy vis-à -vis other currency unions? We investigate three prominent possible explanations for the gap between 15% and 200%. First, lags. The euro is still very young. Second, size. The European countries are much bigger on average than most of those who had formed currency unions in the past. Third, endogeneity of the decision to adopt an institutional currency link. Perhaps the high correlations estimated in earlier studies were spurious, an artifact of reverse causality. Contrary to expectations, we find no evidence that any of these factors explains a substantial share of the gap, let alone all of it. |
| JEL: | F01 F33 F4 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14542&r=eec |
| By: | Matthieu Lemoine (Observatoire Français des Conjonctures Économiques); Gian Luigi Mazzi (Eurostat); Paola Monperrus-Veroni (Observatoire Français des Conjonctures Économiques); Frédéric Reynes (Observatoire Français des Conjonctures Économiques) |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:0834&r=eec |
| By: | Philip Du Caju (Banque Nationale de Belgique, Boulevard de Berlaimont 14, B-1000 Brussels, Belgium.); Erwan Gautier (Banque de France, 39, rue Croix-des-Petits-Champs, F-75049 Paris Cedex 01, France.); Daphne Momferatou (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Melanie Ward-Warmedinger (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper presents information on wage bargaining institutions, collected using a standardised questionnaire. Our data provide information from 1995 and 2006, for four sectors of activity and the aggregate economy, considering 23 European countries, plus the US and Japan. Main findings include a high degree of regulation in wage setting in most countries. Although union membership is low in many countries, union coverage is high and almost all countries also have some form of national minimum wage. Most countries negotiate wages on several levels, the sectoral level still being the most dominant, with an increasingly important role for bargaining at the firm level. The average length of collective bargaining agreements is found to lie between one and three years. Most agreements are strongly driven by developments in prices and eleven countries have some form of indexation mechanism which affects wages. Cluster analysis identifies three country groupings of wage-setting institutions. JEL Classification: J31, J38, J51, J58. |
| Keywords: | wage bargaining, institutions, indexation, trade union membership, cluster analysis. |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080974&r=eec |
| By: | Guillaume Allègre (Observatoire Français des Conjonctures Économiques) |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:0835&r=eec |
| By: | Jean-François Goux (GATE, University of Lyon, CNRS, ENS-LSH, Centre Léon Bérard, France) |
| Abstract: | The taking into account of a period of break (thick break) makes it possible to correctly analyze the time series of the euro-dollar exchange rate. By retaining the posterior period with the Louvre agreements, but by eliminating the first years from existence of the euro, and until today, one can affirm that this rate is stationary and after trend stationary and thus that there is a mechanism of return towards a level (a trend) of equilibrium. This point is shown using a new procedure of test based on the elimination of thick breaks. That makes it possible to propose a forecast based on this deterministic trend |
| Keywords: | euro-dollar exchange rate, stationarity, breaks, outliers |
| JEL: | C F F32 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:0826&r=eec |
| By: | Cecilia Frale; Massimiliano Marcellino; Gian Luigi Mazzi; Tommaso Proietti |
| Abstract: | A continuous monitoring of the evolution of the economy is fundamental for the decisions of public and private decision makers. This paper proposes a new monthly indicator of the euro area real Gross Domestic Product (GDP), with several original features. First, it considers both the output side (six branches of the NACE classification) and the expenditure side (the main GDP components) and combines the two estimates with optimal weights reflecting their relative precision. Second, the indicator is based on information at both the monthly and quarterly level, modelled with a dynamic factor specification cast in state-space form. Third, since estimation of the multivariate dynamic factor model can be numerically complex, computational efficiency is achieved by implementing univariate filtering and smoothing procedures. Finally, special attention is paid to chain-linking and its implications, via a multistep procedure that exploits the additivity of the volume measures expressed at the prices of the previous year. |
| Keywords: | Temporal Disaggregation, Multivariate State Space Models, Dynamic factor Models, Kalman filter and smoother, Chain-linking |
| JEL: | E32 E37 C53 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2008/32&r=eec |
| By: | Laurent Ferrara (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Banque de France - Business Conditions and Macroeconomic Forecasting Directorate); Dominique Guegan (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Patrick Rakotomarolahy (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I) |
| Abstract: | This papier formalizes the process of forecasting unbalanced monthly data sets in order to obtain robust nowcasts and forecasts of quarterly GDP growth rate through a semi-parametric modelling. This innovative approach lies on the use on non-parametric methods, based on nearest neighbors and on radial basis function approaches, ti forecast the monthly variables involved in the parametric modelling of GDP using bridge equations. A real-time experience is carried out on Euro area vintage data in order to anticipate, with an advance ranging from six to one months, the GDP flash estimate for the whole zone. |
| Keywords: | Euro area GDP, real-time nowcasting, forecasting, non-parametric models. |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00344839_v1&r=eec |
| By: | Christian Milelli; Françoise Hay |
| Abstract: | This contribution deals with the rise of direct investment flows from ‘third-world’ to ‘first-world’ countries. To analyze this trend, we chose to focus on China and India due to their high economic growth regime and their rapid pace to embrace the world economy, which place them at the forefront of the surging wave of FDI and multinational companies from emerging economies. The European Union which is the largest host region worldwide for FDI flows is the target of the paper, and the central point is to better assess the possible effects of the arrival of Chinese and Indian firms on its economy. The paper is based on firm-level data. After providing understanding on Chinese and Indian FDI on a global scale, we draw from the existing academic literature hypotheses that are tested on findings derived from a proprietary dataset. On the basis of these insights, we identify and discuss the plausible economic impacts of those investments on European economies. |
| Keywords: | foreign direct investment, European economies, policy implications |
| JEL: | F14 F23 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2008-35&r=eec |
| By: | Esen Erdogan-Ciftci (Erasmus University Rotterdam); Eddy Van Doorslaer (Erasmus University Rotterdam); Angel Lopez-Nicolas (Universidad Politecnica de Cartagena, Cartagena, Spain) |
| Abstract: | We estimate the impact of health and financial incentives on the retirement transitions of older workers in Spain. Individual measures of pension wealth, peak and accrual values are constructed using labor market histories and health shocks are derived as changes in a composite health stock measure over time. We examine labour market exits into both old age retirement and a broader definition of retirement including inactivity, while controlling for unobserved heterogeneity. We find that pension wealth, accrual and peak value are significant determinants of retirement decisions, although their effect is weaker in the case of the broad definition of retirement. Initial health stock shows a significant impact on both definitions of retirement. Only large negative health shocks have a significant effect on the probability of entering the broader definition of retirement. Unlike previous literature, we find that (i) financial incentives, when measured adequately, exert a greater impact on retirement behaviour than health shocks, and (ii) initial health stock plays a more important role than health shocks in determining retirement decisions. We also perform simulations of a recently enacted reform of pension incentives and show how its expected effects compare to those of health improvements. |
| Keywords: | Health; Retirement; Social security and public pensions |
| JEL: | H55 I10 J26 |
| Date: | 2008–10–02 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20080093&r=eec |
| By: | Luigi Guiso; Tullio Jappelli |
| Abstract: | In this paper we focus on poor financial literacy as one potential factor explaining lack of portfolio diversification. We use the 2007 Unicredit Customers' Survey, which has indicators of portfolio choice, financial literacy and many demographic characteristics of investors. We first propose test-based indicators of financial literacy and document the extent of portfolio under-diversification. We find that measures of financial literacy are strongly correlated with the degree of portfolio diversification. We also compare the test-based degree of financial literacy with investors' self-assessment of their financial knowledge, and find only a weak relation between the two measures, an issue that has gained importance after the EU Markets in Financial Instruments Directive (MIFID) has required financial institutions to rate investors' financial sophistication through questionnaires. |
| Keywords: | Financial literacy, Portfolio diversification |
| JEL: | E2 D8 G1 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2008/31&r=eec |
| By: | Karsten van den Berg |
| Abstract: | The subject of this report is spin-outs in the Netherlands compared to those in the Cambridge area. The differences between the two areas have been found to be fewer than expected. The same type of initiatives are to be found in both areas, and the same type of problems are also encountered in both areas In general it seems that it would be advisable for universities to have spin-out stimulation added to the performance criteria to help the better facilitation of spin-outs. |
| Date: | 2008–12–04 |
| URL: | http://d.repec.org/n?u=RePEc:eim:papers:h200821&r=eec |
| By: | Harald Uhlig |
| Abstract: | Fifteen years after German reunification, the facts about slow regional convergence have born out the prediction of Barro (1991), except that migration out of East Germany has not slowed down. I document that in particular the 18-29 year old are leaving East Germany, and that the emigration has accelerated in recent years. I document that low wages, high unemployment and increasing reliance on social security persist across wide regions of East Germany together with these migration patterns. To understand these patterns, I use an extension of the standard labor search model introduced in Uhlig (2006, 2008) by allowing for migration and network externalities. In that theory, two equilibria can result: one with a high networking rate, high average labor productivity, low unemployment and no emigration ("West Germany'') and one with a low networking rate, low average labor productivity, high unemployment and a constant rate of emigration ("East Germany''). The model does not imply any obviously sound policies to move from the weakly networked equilibrium to the highly networked equilibrium. |
| JEL: | E20 J61 J64 O11 O18 O33 P20 P25 R12 R23 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14553&r=eec |