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on European Economics |
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Issue of 2009‒08‒30
twenty-six papers chosen by Giuseppe Marotta University of Modena and Reggio Emilia |
| By: | Siedschlag, Iulia (ESRI); Zhang, Xiaoheng (ESRI); Smith, Donal (ESRI) |
| Abstract: | We examine the attractiveness of European Union regions for location of multinationals in the Information and Communication Technologies (ICT) sector. Using data on 8,543 foreign subsidiaries established in 229 regions of the European Union over the period 1998-2008 we find that on average, the location probability increases with regional demand, agglomeration economies, technological development, flexibility of labour markets, and information technology infrastructure. The determinants of the location choice of ICT multinationals are different for regions in Western Europe and Central and Eastern Europe. While in Western Europe, regions with higher GDP per capita are preferred for both ICT multinationals in manufacturing and service sectors, in Central and Eastern Europe, regions with lower GDP per capita attract the bulk of ICT multinationals in the service sector. Unemployment rates appear negatively correlated with the probability of location in the whole European Union and Western Europe, while they increase attractiveness for regions in Central and Eastern Europe. Some determinants are also found to have heterogeneous effects on multinationals from different countries. In particular, US multinationals are not sensitive to labour costs while EU multinationals respond to this factor negatively. |
| Keywords: | Foreign direct investment; Information and Communication Technologies; Location choice; Conditional logit; Nested logit; European Union. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:dynreg45&r=eec |
| By: | Guglielmo Maria Caporale; Luca Onorante; Paolo Paesani |
| Abstract: | This paper estimates a time-varying AR-GARCH model of inflation producing measures of inflation uncertainty for the euro area, and investigates the linkages between them in a VAR framework, also allowing for the possible impact of the policy regime change associated with the start of EMU in 1999. The main findings are as follows. Steady-state inflation and inflation uncertainty have declined steadily since the inception of EMU, whilst short-run uncertainty has increased, mainly owing to exogenous shocks. A sequential dummy procedure provides further evidence of a structural break coinciding with the introduction of the euro and resulting in lower long-run uncertainty. It also appears that the direction of causality has been reversed, and that in the euro period the Friedman-Ball link is empirically supported, implying that the ECB can achieve lower inflation uncertainty by lowering the inflation rate. |
| Keywords: | Inflation, inflation uncertainty, time-varying parameters, GARCH models, ECB, EMU |
| JEL: | E31 E52 C22 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp909&r=eec |
| By: | Blomqvist, Paula (Uppsala University, Department of Government); Larsson, Jakob (Institute for Futures Studies) |
| Abstract: | <p>Health care is an area that remains formally outside the competence of the EU. Despite this, the union’s influence on national health care policies has increased substantially over the past decade. In a series of rulings, the European Court of Justice (ECJ) established a de facto system of patient rights, which, under certain conditions, entitle European citizens to receive health care in other member states at the expense of the social insurance system of their home country. This undermines the autonomy of the member states in the area of health, a key sector in national welfare systems. In 2008, the Commission proposed a new directive on patients’ rights which builds directly on the ECJ rulings, thus consolidating politically the legal precedent set by the Court. The ECJ Court rulings have also spurred the initiation of a so-called OMC process in the area of health care, whereby the member states commit themselves to policy harmonization on a voluntary basis.<p> <p>In this paper, we review the contents of emerging EU policies in the area of health and discuss their implications for the Nordic health care systems. A central question is whether any coherent, common European policy may be discerned and, if so, how it will affect health care systems of the Nordic type, which are tax-based and universalistic in orientation?<p> |
| Keywords: | European Union; Health care; European Court of Justice; Open Method of Coordination |
| JEL: | I11 I18 |
| Date: | 2009–08–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifswps:2009_013&r=eec |
| By: | Martine Druant (National Bank of Belgium, boulevard de Berlaimont 14, B-1000 Brussels, Belgium.); Silvia Fabiani (Bank of Italy, Via Nazionale 91, I-00184 Rome, Italy.); Gabor Kezdi (Central European University and Magyar Nemzeti Bank, Szabadság tér 8-9, H-1850 Budapest, V., Hungary.); Ana Lamo (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Fernando Martins (Universidade Lusíada of Lisbon and Bank of Portugal, 1150 Lisbon, Portugal.); Roberto Sabbatini (Bank of Italy, Via Nazionale 91, I-00184 Rome, Italy.) |
| Abstract: | This paper presents new evidence on the patterns of price and wage adjustment in European firms and on the extent of nominal rigidities. It uses a unique dataset collected through a firm-level survey conducted in a broad range of countries and covering various sectors. Several conclusions are drawn from this evidence. Firms adjust wages less frequently than prices: the former tend to remain unchanged for about 15 months on average, the latter for around 10 months. The degree of price rigidity varies substantially across sectors and depends strongly on economic features, such as the intensity of competition, the exposure to foreign markets and the share of labour costs in total cost. Instead, country specificities, mostly related to the labour market institutional setting, are more relevant in characterising the pattern of wage adjustment. The latter exhibits also a substantial degree of time-dependence, as firms tend to concentrate wage changes in a specific month, mostly January in the majority of countries. Wage and price changes feed into each other at the micro level and there is a relationship between wage and price rigidity. JEL Classification: D21, E30, J31. |
| Keywords: | survey, wage rigidity, price rigidity, indexation, institutions, time dependent. |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091084&r=eec |
| By: | Jan-Egbert Sturm (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Jakob de Haan (Faculty of Economics and Business, University of Groningen, The Netherlands) |
| Abstract: | Nowadays, it is widely believed that greater disclosure and clarity over policy may lead to greater predictability of central bank actions. We examine whether communication by the European Central Bank (ECB) adds information compared to the information provided by a Taylor rule model in which real time expected inflation and output are used. We use five indicators of ECB communication that are all based on the ECB President’s introductory statement at the press conference following an ECB policy meeting. Our results suggest that even though the indicators are sometimes quite different from one another, they add information that helps predict the next policy decision of the ECB. Furthermore, also when the interbank rate is included in our Taylor rule model, the ECB communication indicators remain significant. |
| Keywords: | ECB, central bank, communication, Taylor rule |
| JEL: | E52 E53 E3 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:kof:wpskof:09-236&r=eec |
| By: | Piteli, Eleni E.N. |
| Abstract: | We analyse the determinants of foreign direct investment (FDI) by multinational corporations (MNCs) in developed economies. We compare between EU and non-EU countries, in the context of an estimated equation derived from economic theory, which compares the main demand and supply-side determinants of FDI. We contribute to the literature in three ways. First, by employing different proxies for demand and supply-side factors. Second, by comparing between European and non-European developed countries. Third, by testing for the relative importance of total factor productivity (TFP) as a determinant of FDI. Our results are in line with theoretical predictions, but point to the importance of TFP as the determinant par excellence of FDI in developed countries. They also highlight differences even within developed European and non-European counties. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:dynreg44&r=eec |
| By: | Zsolt Darvas (Bruegel, Institute of Economics of the Hungarian Academy of Sciences and Corvinus University of Budapest) |
| Abstract: | This paper describes the particular impacts of the financial and economic crisis on central and eastern European (CEE) countries, studies pro-cyclicality of fiscal policies, discusses the impact of the crisis on fiscal policy, and the policy response of various governments. After drawing some lessons for fiscal policy from previous emerging market crises, the paper concludes with some thoughts on the appropriate policy response from a more normative perspective. The key message of the paper is that the crisis should be used as an opportunity to introduce reforms to avoid future pro-cyclical fiscal policies, to increase the quality of budgeting and to increase credibility. These reforms should include fiscal responsibility laws comprising medium-term fiscal frameworks, fiscal rules, and independent fiscal councils. When fiscal consolidation is accompanied by fiscal reforms that increase credibility, non-Keynesian effects may offset to some extent the contraction caused by the consolidation. |
| Keywords: | eastern Europe, crisis, fiscal reform, pro-cyclical fiscal policy |
| JEL: | C32 E62 H60 |
| Date: | 2009–08–18 |
| URL: | http://d.repec.org/n?u=RePEc:mkg:wpaper:0904&r=eec |
| By: | Ansgar Belke; Jens Klose |
| Abstract: | We assess the differences that emerge in Taylor rule estimations for the ECB when using ex-post data instead of real time forecasts and vice versa. We argue that previous comparative studies in this field mixed up two separate effects. First, the differences resulting from the use of ex-post and real time data per se and, second, the differences emerging from the use of non-modified real time data instead of real-time data based forecasted values and vice versa. Since both effects can influence the reaction to inflation and the output gap either way, we use a more clear-cut approach to disentangle the partial effects. Our estimation results indicate that using real time instead of ex post data leads to higher estimated inflation coefficients while the opposite is true for the output gap coefficients. If real time data forecasts for the current period are used (since actual data become available with a lag), this empirical pattern is even strengthened in the sense of even increasing the inflation response but lowering the reaction to the output gap while the reverse is true if "true" forecasts of real time data for several periods are employed. |
| Keywords: | European Central Bank, monetary policy, real time data, Taylor rule |
| JEL: | E43 E58 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp917&r=eec |
| By: | Sharon Belenzon; Tomer Berkovitz; Patrick Bolton |
| Abstract: | This paper examines the relation between ownership, corporate form, and innovation for a cross-section of private and publicly traded innovating firms in the US and 15 European countries. A striking novel observation emerges from our analysis: while most innovating firms in the US are publicly traded conglomerates, a substantial fraction of innovation is concentrated in private firms and in business groups in continental European countries. We find virtually no variation across US industries in the corporate form of innovating firms, but a substantial variation across industries in continental European countries, where business groups tend to be concentrated in industries with a slower and more fundamental innovation cycle and where intellectual protection of innovators seems to be of paramount importance. Our findings suggest that innovative companies choose the corporate form most conducive to R&D, as predicted by the Coasian view of how firms form. This is especially true in Europe, where there are fewer regulatory hurdles to the formation of business groups and hybrid corporate forms. It is less the case in the US, where conglomerates are generally favored. |
| JEL: | O16 O31 O32 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15304&r=eec |
| By: | Mayes, David G (Bank of Finland and University of Auckland) |
| Abstract: | The present crisis has revealed that, as expected, much of the safety net for handling failures in the banking system is deficient, particularly for cross-border banks, and the present problems had to be handled by a range of ad hoc measures. The principal new measure that needs to be undertaken in most countries is the implementation of a satisfactory special resolution regime for banks. This paper, however, deals with two further steps that could assist the operation of the safety net. The first is to ensure earlier intervention so there is more time to put a satisfactory rescue or resolution in place. The second is to implement a regime of prompt corrective action (structured early intervention and resolution, SEIR) so that both supervisors and banks know that a regime of increasing intensity will take place according to a strict timetable that will end in the authorities stepping into the bank while it still has positive capital, if the earlier stages are not effective. The paper evaluates the means of doing this in a European environment making use of the experience in the United States. It concludes that, while a lot can be done even within the current framework of national supervision, particularly through pre-positioning, cross-border banks can be better treated either by revising the home-host responsibilities or by moving to a supranational level of responsibility for SEIR for those banks whose continued operation is considered necessary for financial stability in any member state. |
| Keywords: | early intervention; prompt corrective action; cross-border banks; pre-positioning; bank resolution |
| JEL: | E58 F15 F23 G21 G28 G33 |
| Date: | 2009–08–11 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofrdp:2009_017&r=eec |
| By: | Tomáš Havránek (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic) |
| Abstract: | This paper presents an updated meta-analysis of the effect of currency unions on trade, focusing on the Euro area. Using meta-regression methods such as funnel asymmetry test, evidence for strong publication bias is found. The estimated underlying effect for non-Euro studies reaches about 50%. However, the Euro's trade promoting effect corrected for publication bias is insignificant. The Rose effect literature shows signs of the economics research cycle: reported t-statistic is a quadratic function of publication year. Explanatory meta-regression (robust fixed effects and random effects) suggests that some authors produce predictable results. Interestingly, proxies for authors' IT skills were also found significant. |
| Keywords: | Rose effect; Trade; Currency union; Euro; Meta-analysis; Publication bias |
| JEL: | C42 F15 F33 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2009_20&r=eec |
| By: | Joseph Francois (Johannes Kepler University Linz); Hanna Norberg (Lund (School of Economics and Business) and IIDE); Miriam Manchin (University College London) |
| Abstract: | We analyze the effects of potential measures to liberalize trade between the European Union and India using a computable general equilibrium (CGE) model of world trade. Overall, our analysis shows that there are potential gains to be reaped from signing a bilateral FTA between the EU and India. For all scenarios, the FTA is expected to yield positive real income effects for both economies, both in the short- and long-run. The effects are, however, quite small due to the low levels of bilateral trade. In the short run, the real income gains in the EU are expected to range between Û3 and Û4,4 billion (higher for more ambitious liberalization scenarios), which amount to less than 0.1 percent of GDP. In the long run, the effects of an FTA in the EU are much smaller. For the Indian economy, the short-term income effects in absolute measure are similar to those in the EU, but due to differences in the size of economies, the relative effect is bigger in India (ranging from 0.1 to 0.3 percent of GDP). In the long-run, the effects on the Indian economy are expected to be larger. |
| Keywords: | CGE, EU-India Free Trade Area, GTAP |
| JEL: | F13 F15 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:lnz:wpaper:20080601&r=eec |
| By: | Joseph Francois (Johannes Kepler University Linz); Hanna Norberg (Lund (School of Economics and Business) and IIDE); Miriam Manchin (University College London); Annette Pelkmans Balaoing (Erasmus University Rotterdam) |
| Abstract: | We analyze the effects of potential measures to liberalize trade between the European Union and ASEAN using a computable general equilibrium (CGE) model of world trade. The results on the whole point to positive effects for most of ASEAN under all scenarios, and small but positive effects over the long-run for the European Union. Throughout the study, some negative results are observed for other ASEAN countries (Brunei, Cambodia, Laos, and Myanmar). As expected, income and trade gains increase as liberalization deepens and as more dynamic effects are taken into account. The latter is particularly important for ASEAN, whose growth is often constrained by insufficient capital resources. In terms of income effects, the EU and Singapore gain the most, 51 and 78 percent of these gains, respectively, are due to the removal of the barriers to Services trade. It is Vietnam, however, that reaps the largest rise in GDP growth, while the EU, followed by Thailand, gains the most from the removal of non-tariff barriers. For the EU, about 87 percent of the income rise between these two scenarios is due to direct and indirect effects of trade facilitation alone. The productivity effects of an EU-ASEAN FTA are also visible in the form of higher wages both for skilled and unskilled workers. This is particularly important for ASEAN as this would mean that the employment increase in key growth sectors will outstrip the reduction of employment in contracting sectors. In terms of exports, the strong export performance of ASEAN projected here is largely driven by the export growth of ASEANÕs new members, i.e., Vietnam (35%), Cambodia, Laos & Myanmar (13%). There are negative effects for third countries, however. Indeed the net gains for most of ASEAN in the long-run are mirrored by comparable losses in third countries, much of which is carried by India and Pakistan. However, one must note that even in the scenario where the potential of trade diversion is the greatest, the effects are negative but rather trivial. Under the most ambitious trade liberalization scenario between the EU and ASEAN, it is PakistanÕs exports that are largely affected, with its exports falling by 2.4 percent. For the rest of the world, exports fall by just 0.05 percent, so that trade diversion effects can indeed be considered minimal. |
| Keywords: | CGE, EU-ASEAN Free Trade Area, GTAP |
| JEL: | F13 F15 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:lnz:wpaper:20090801&r=eec |
| By: | Marie-Thérèse Letablier (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Angela Luci (INED - Institut National d'Etudes Démographiques - INED); Antoine Math (IRES - Institut de Recherches Economiques et Sociales - IRES); Olivier Thevenon (INED - Institut National d'Etudes Démographiques - INED) |
| Abstract: | The purpose of this report is to produce an overview of available knowledge about the following issues: the costs (to parents) of parenthood and of raising children in European Countries; the effectiveness, in the short and long term, of various policy measures in avoiding or compensating for those costs; 8 the impact of different policy instruments aimed at supporting families according to various policy objectives, e.g. achieving family projects, reconciling family and working life, reducing child poverty, raising the levels of education and well being of children, and increasing equal opportunities. the wider economic and social costs and benefits of policy interventions in support of families. The current state of knowledge on the following issues is presented as follows in this review report: The costs of children and the challenges for public policies supporting parenthood (chapter 1); author: O. Thévenon The policy instruments used in the EU to support families and reduce the costs of parenthood (Chapter 2); authors: A. Math and O. Thévenon The impacts of these policies on families: o On fertility and the decision to have children (chapter 3); authors M-Th. Letablier and O. Thévenon o On parents‘ participation in the labour market, gender equality and work-life balance (chapter 4); authors: M-Th. Letablier, A. Luci, O. Thévenon o On children‘s well-being (chapter 5): M-Th. Letablier and O. Thévenon The wider economic and social costs and benefits of such policies (Chapter 6); author: A. Luci. The review of literature presented in this report attempts to make the tools, goals and impacts of family policies more clear and comparable across countries, in order to facilitate the circulation of knowledge between Member States, notably in the context of the European Alliance for Families and the newly established High Level Experts Group on Demography Issues. The report provides a review of recent literature and available data material on the direct and indirect costs of raising children in the European Union (using international as well as particularly important national studies). Ground breaking studies from countries outside the EU, of particular interest from a methodological point of view, are also included in the review. Focus is on the following kinds of costs of having and raising children over the long and short term: - Direct financial costs, e.g. for housing, health care, education, child care, - Indirect financial costs, e.g. for lost income, lost pension rights, lost career prospects etc. , also taking into account the impact on gender roles and gender equality. The costs of raising children are examined at the different phases of their development, from birth through to the age at which they become autonomous. The overview also summarizes knowledge on the main determinants of costs, including, the effects of the number of children, the socio-economic status of parents, and the family structure. Significant differences in cost levels and structures across Member States are identified. The overview also identifies gaps in the available knowledge, and highlights some issues for future research that have the potential to contribute to a better understanding of the policy impact and to better comparability across the European Union. |
| Keywords: | cost of children; family policies; work and family life reconciliation; fertility; female employment |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00408899_v1&r=eec |
| By: | Martinsson, Gustav (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology) |
| Abstract: | During the mid and late 1990s young, high-tech firms in the U.S. experienced a supply shift in both internal and external equity fueling a finance driven boom in corporate R&D. I estimate dynamic R&D regression models for high-tech firms, separately for the U.K. and Continental Europe, and find significant cash flow effects for newly listed firms in both samples, but only the new, high-tech firms in the U.K. experienced a supply shift in external equity as well. The findings of this paper suggest a channel through which market based financial systems outperform the bank based economies of Continental Europe. |
| Keywords: | Financing constraints; R&D; Stock Issues; Econometrics; Financial markets; international economics |
| JEL: | G32 O32 |
| Date: | 2009–08–26 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cesisp:0192&r=eec |
| By: | Antonio Forte |
| Abstract: | In this paper I analyse the pass-through effect in four big areas using different approaches. On the one hand, I inspect this issue comparing the REER (real effective exchange rate) with the WARP (weighted average relative price) in the US, the UK, Japan and the Euro area. On the other hand, I try to support the findings of the first part with a double econometric analysis: I employ single equation and Var approaches in order to provide wide and robust results. The global conclusion is that in the major economies of the world the pass-through effect has been very light from January 1999 onward and that, especially in the Euro area, this result is linked with the firms behaviour. |
| Keywords: | Real effective exchange rate, weighted average relative price, WARP, REER, double econometric analysis. |
| JEL: | F30 F31 |
| Date: | 2009–08–08 |
| URL: | http://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2009_08&r=eec |
| By: | Michael Ehrmann (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); David Sondermann (University of Münster, Schlossplatz 2, D-48149 Münster, Germany.) |
| Abstract: | How do financial markets price new information? This paper analyzes price setting at the intersection of private and public information, by testing whether and how the reaction of financial markets to public signals depends on the relative importance of private information in agents’ information sets at a given point in time. It studies the reaction of UK short-term interest rates to the Bank of England’s inflation report and to macroeconomic announcements. Due to the quarterly frequency at which the Bank of England releases one of its main publications, it can become stale over time. In the course of this process, financial market participants need to rely more on private information. The paper develops a stylized model which predicts that, the more time has elapsed since the latest release of an inflation report, market volatility should increase, the price response to macroeconomic announcements should be more pronounced, and macroeconomic announcements should play a more important role in aligning agents’ information set, thus leading to a stronger volatility reduction. The empirical evidence is fully supportive of these hypotheses. JEL Classification: E58, E43, G12, G14. |
| Keywords: | public signals, inflation reports, monetary policy, interest rates, announcement effects, co-ordination of beliefs, Bank of England. |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091077&r=eec |
| By: | Joseph Francois (Johannes Kepler University Linz); Miriam Manchin (University College London) |
| Abstract: | We evaluate the effects of potential measures to liberalize trade between the EU and the CIS using a computable general equilibrium (CGE) model. We look at the CIS as an aggregate and we also present results for individual CIS countries. Our CGE model takes different underlying industry specific market structures and elasticities into account. Furthermore, the model incorporates estimated non-tariff trade barriers to trade in services. The results are compared to a baseline that incorporates recent developments in the trade policy environment, i.e. the phase out of ATC, enlargement of the EU and CIS accessions to the WTO. The analysis takes agricultural liberalization, liberalization in industrial tariffs, and liberalization in services trade as well as trade facilitation measures into account. While there is important heterogeneity in the impact of FTAs on individual countries, the results indicate that the CIS as a whole would experience a negative income effect if the FTA would be limited only to trade in goods. This is due to strong trade diversion effects. The CIS states have high tariffs, and these would remain against third countries under an FTA. This implies that the CIS would most likely to benefit from an FTA with the EU if it would incorporate deeper forms of integration not being limited to liberalization of tariffs in goods, or if it is accompanied by a general reduction in CIS tariffs against third countries. |
| Keywords: | CGE, EU-CIS Free Trade Area, Russia, Ukraine, CIS |
| JEL: | F13 F15 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:lnz:wpaper:20090805&r=eec |
| By: | Schulz, Alexander; Wolff, Guntram B. |
| Abstract: | We disentangle different driving factors of sovereign bond market integration by studying yield co-movements of EMU countries, the UK, the US and 16 German states (Länder) since 1992. At a low frequency bond market integration has increased gradually in the course of the last 15 years in EMU countries, as well as the UK, the US and the German Länder. The current financial turmoil has abated low frequency euroarea sovereign bond bond market integration, while it has had little effect on the integration with the US and UK. Bond market integration at a high frequency band remains relatively low until October 2000, when a sharp increase in integration can be observed in all samples. The increase in high frequency integration can be attributed to electronic trading platforms becoming functional. The financial crisis does not effect high frequency integration, as no technology shock occurs. |
| Keywords: | sovereign bond market; bond market integration; EMU; electronic trading |
| JEL: | E42 G15 E44 F33 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16900&r=eec |
| By: | Jonas Dovern (Kiel Economics Research & Forecasting, Fraunhoferstr. 13, D-24118 Kiel, Germany.); Ulrich Fritsche (University of Hamburg, Edmund-Siemers-Allee 1, D-20146 Hamburg, Germany.); Jiri Slacalek (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | Using the Consensus Economics dataset with individual expert forecasts from G7 countries we investigate determinants of disagreement (crosssectional dispersion of forecasts) about six key economic indicators. Disagreement about real variables (GDP, consumption, investment and unemployment) has a distinct dynamic from disagreement about nominal variables (inflation and interest rate). Disagreement about real variables intensifies strongly during recessions, including the current one (by about 40 percent in terms of the interquartile range). Disagreement about nominal variables rises with their level, has fallen after 1998 or so (by 30 percent), and is considerably lower under independent central banks (by 35 percent). Cross-sectional dispersion for both groups increases with uncertainty about the underlying actual indicators, though to a lesser extent for nominal series. Country-by-country regressions for inflation and interest rates reveal that both the level of disagreement and its sensitivity to macroeconomic variables tend to be larger in Italy, Japan and the United Kingdom, where central banks became independent only around the mid-1990s. These findings suggest that more credible monetary policy can substantially contribute to anchoring of expectations about nominal variables; its effects on disagreement about real variables are moderate. JEL Classification: E31, E32, E37, E52, C53. |
| Keywords: | disagreement, survey expectations, monetary policy, forecasting. |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091082&r=eec |
| By: | Federico Cingano (Bank of Italy); Marco Leonardi (University of Milan); Julián Messina (University of Girona); Giovanni Pica (University of Salerno) |
| Abstract: | This paper analyzes the joint effect of EPL and financial market imperfections on investment, capital-labour substitution, labour productivity and job reallocation in a cross-country framework. In the spirit of Rajan and Zingales (1998) and Ciccone and Papaioannou (2006), we exploit variation in the need for reallocation at the sectoral and aggregate level to assess the average effect of EPL on firms’ policies. Then, exploiting firm-level information we study if the effect of EPL is stronger in firms with lower levels of internal resources. We find that, on average, EPL reduces investment per worker, capital per worker and value added per worker in high reallocation sectors relative to low reallocation sectors. The reduction in the capital-labour ratio is less pronounced in firms with higher internal resources, suggesting that financial constraints exacerbate the negative effects of EPL on capital deepening. |
| Keywords: | capital-labor substitution, labor market imperfections, financial market imperfections |
| JEL: | J21 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:0914&r=eec |
| By: | Jacob W. Ejsing (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Jukka Sihvonen (Department of Accounting and Finance, University of Vaasa, P.O. Box 700, FIN-65101 Vaasa, Finland.) |
| Abstract: | There is strong evidence that on-the-run U.S. Treasury securities trade much more liquidly and at significantly higher prices than their off-the-run counterparts. We examine if the same phenomenon is present in the German government bond market whose market structure differ markedly from that of the U.S. Treasury market. In sharp contrast to the U.S. evidence, we find that on-the-run status has only a negligible effect on the liquidity and pricing once other factors have been controlled for. Instead, the highly liquid German bond futures market, whose turnover is many times larger than in the cash market, leads to significant liquidity spillovers. Specifically, we find that bonds which are deliverable into futures contracts are both trading more liquidly and commanding a significant price premium, and that this effect became more pronounced during the recent financial crisis. JEL Classification: E43, G12, H63. |
| Keywords: | Government bond, liquidity, liquidity premium, futures market. |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091081&r=eec |
| By: | Ralf Hepp (Fordham University, Department of Economics); Jürgen von Hagen (University of Bonn, Indiana University, and CEPR) |
| Abstract: | We provide empirical estimates of the risk-sharing and redistributive properties of the German federal fiscal system based on data from 1970 until 2006, with special attention to the effects of German unification. We find that tax revenue sharing between the states and the federal government and the fiscal equalization mechanism (Länderfinanzausgleich) together reduce differences in per-capita state incomes by 36.9 percent during period 1970 to 1994. After the full integration of East German states into the mechanism in 1995, the redistributive effects increase slightly to about 38.6 percent. With respect to the insurance effect of the German fiscal system, our results indicate that the federal fiscal system offsets 47 percent of an asymmetric shock to state per-capita incomes. This effect has significantly decreased after the inclusion of the East German states in 1995. Furthermore, we find that the German fiscal system provides almost perfect insurance for state government budgets against asymmetric revenue shocks; also, its redistributive effect with regard to the tax resources available to state governments is very strong. |
| Keywords: | Regional Risk-sharing, Fiscal Federalism, Monetary Union |
| JEL: | H77 E63 F42 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:frd:wpaper:dp2009-06&r=eec |
| By: | Hess, Wolfgang (Department of Economics, Lund University); Persson, Maria (Department of Economics, Lund University) |
| Abstract: | In the existing literature, the duration of trade has typically been analyzed using either descriptive Kaplan-Meier methods or a Cox regression approach. While the latter has the advantage of allowing for explanatory variables, it is designed for the analysis of continuous duration times, whereas trade flows are observed for discrete time intervals. The purpose of this paper is to point out why it is inappropriate to analyze the duration of trade with continuous- rather than discrete-time models, and to illustrate the implications of the model choice in an empirical application to EU trade. Briefly, there are three major problems with the continuous-time models. First, such models face problems in the presence of many tied duration times, with a risk of biased estimation coefficients and standard errors. Second, it is very difficult to properly control for unobserved heterogeneity, which can cause spurious duration dependencies, as well as parameter biases. Third, the Cox model – which, by far, is the most commonly used model – imposes the restrictive and empirically questionable assumption of proportional hazards. By contrast, discrete-time models, such as probit, logit and complementary log-log models have no difficulty dealing with ties; unobserved heterogeneity can easily be controlled for; and one is not forced to assume proportional hazards. Applying both continuous- and discrete-time models to detailed data on imports to EU15 countries from 139 exporters for the period 1962-2006, we find evidence in support of the arguments against the Cox model, and conclude that researchers that use a Cox model might run a serious risk of getting incorrect results. |
| Keywords: | Duration of Trade; Continuous-Time versus Discrete-Time Hazard Models; Unobserved Heterogeneity; European Union |
| JEL: | C41 F10 F14 |
| Date: | 2009–08–17 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2009_012&r=eec |
| By: | Pavlyuk, Dmitry |
| Abstract: | This study deals with estimation of European airports' efficiency values and their interrelation with a level of competition pressure for passengers among airports. In this paper we present a new adaptive definition of airport's catchment area. Using this definition we develop an indicator of a level of competition pressure, based on overlapping of airport's potential catchment areas. We apply a stochastic frontier model to estimate efficiencies of airports. The method includes the construction of a production frontier for a sample of airports and estimation of individual airports' efficiency values as distances from this frontier. We use a classic production approach to airport activities, where an airport enterprise uses labour resources (a number of employees) and infrastructure (a number of runways, gates, check-ins and parking spaces) for transportation of passengers. Also we use a re-sampling jack-knife technique to test the reliability of airports' efficiencies estimates. We investigate a relationship between a level of competition pressure and airports' operation efficiencies in case of imperfect spatial competition for passengers. |
| Keywords: | stochastic frontier; efficiency; airport; spatial competition |
| JEL: | L93 C51 |
| Date: | 2009–08–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16930&r=eec |
| By: | Charles B. Blankart; Gerrit B. Koester |
| Abstract: | There is little disagreement that the EU budget should be refocused. Redistributive agricultural and structural spending should be reduced in favour of more public good spending as the Boege and Sapir reports demand. But a public choice analysis can show that the current deadlock makes a refocusing of the budget unlikely. Starting with the Treaty of Rome we demonstrate how Member States became net payers and receivers and why the underlying coalitions were fairly stable and will remain so after Lisbon. We propose an additional public good budget within an improved process of enhanced cooperation to overcome the deadlock. |
| JEL: | H31 D78 H87 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:cra:wpaper:2009-16&r=eec |