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on European Economics |
| By: | Christian Friedrich; Václav Zdárek |
| Abstract: | This paper examines how international investors evaluate the change in the risk-return profile of ten Central and Eastern European countries that recently entered the European Union (EU). By supplement- ing international investment position data provided by IMF’s International Financial Statistics with data obtained from Lane and Milesi-Ferretti’s External Wealth of Nations Mark II Database, we create a unified data set of external assets and liabilities for new EU member states (NMS) ranging from 1993 to 2007. Drawing from the so called ‘push-pull’ factor approach and the achievements of Modern Portfolio Theory, we then collect an extensive set of international controls and a number of local risk-return variables that served as transmission channels for the benefits of EU integration and hence, potentially attracted foreign capital. These variables finally enter a panel data model with the Feasible Generalized Least Squares, (FGLS) and linear regression method with panel-corrected standard errors (PCSE) as proposed by Beck and Katz (1995). Our results indicate that convergence towards the EU has had a significant impact on the liability side of international investment positions in NMS. Especially for debt and portfolio equity liabilities, the region’s affiliation with the EU has mitigated the negative evaluation of local macroeconomic risk factors by international investors. Nevertheless, also global forces turned out to be important drivers of the recent build-up in external liabilities and show that the region’s capital supply still depends on actions taken in other parts of the world. |
| Keywords: | capital flows, push-pull factor approach, EU enlargement, new EU member states |
| JEL: | E31 F15 F21 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieasw:454&r=eec |
| By: | Martinoia, Michela |
| Abstract: | TThis paper has a double goal. On one side we want to evaluate the effect of economic integration on migration flows moving from the enlargement countries towards the EU-15; on the other, we want to analyse whether the migration flows had any impact over employment, real wages and labour force in the receiving countries of the European labour market. Due to the fact that economic integration can be observed in different real, monetary and financial phenomena, we refer to three of these to measure integration: trade openness, trade integration and financial market integration. These indicators have been inserted in a theoretical model that tries to explain labour market dynamics. The theoretical context that seemed the most suitable one to summarise European labour market characteristics is a modified version of the insider/outsider model proposed by Layard, Nickell and Jackman (LNJ, 1991). Another innovative contribution is the introduction of an equation modelling migration flows, whose creation is inspired to the neo-classic approach to the migration theory (Harris-Todaro, 1970). The model based on rational expectations is solved to find the equilibrium solution and the impact multipliers. Subsequently we estimated a structural VAR with the aim of both evaluating the impact that different shocks on integration measures have on migration flows, and measuring the type of effects that an increase in migration flows causes on the labour market. The estimates show that economic integration generate relevant effects on migration flows from the enlargement countries towards the EU-15 countries. Moreover, from the results emerge that migration flows generate an effect on the labour market. |
| Keywords: | European economic integration, labour market effects, migration |
| JEL: | E24 F15 F22 J61 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:uca:ucapdv:136&r=eec |
| By: | Fève, P.; Matheron, J.; Sahuc, J-G. |
| Abstract: | Euro area countries as a whole have experienced a marked downward trend over the 1980s. Over this period, the unemployment rate has increased and economic activity has been sluggish. Changes in the implicit inflation target, viewed as low frequency movements of inflation, might possibly explain these developments. To highlight this issue, the present study estimates the dynamics of the implicit inflation target in the euro zone over the period 1970Q1-2004Q4. Based on a small macroeconometric model, the implicit target, not known by the econometrician, is identified through a minimal set of theoretical restrictions: (i) the inflation target is a non stationary process, (ii) inflation is a monetary phenomenon in the long-run, and (iii) changes in the implicit target have no long-run effects whatsoever on real variables. The model is estimated so as to match output growth, changes in inflation and the ex post real interest rate. Our main results are: (i) inflation target shocks account for the bulk of nominal fluctuations; (ii) due to monetary policy inertia and nominal stickiness, changes in the target generate large swings in the real interest rate translating into substantial short-run effects on real variables; (ii) in spite of this inflation target shocks moderately impact on output dynamics. |
| Keywords: | Implicit inflation target, Macroeconometric modelling, Euro area. |
| JEL: | E31 E32 E52 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:246&r=eec |
| By: | Fève, P.; Matheron, J.; Sahuc, J-G. |
| Abstract: | The present paper investigates the dynamic effects of disinflation shocks for a number of real macroeconomic variables in the euro area. Using structural VARs, we identify disinflation shocks as the only shocks that can exert a long--run effect on inflation as well as other nominal variables cointegrating with inflation. These shocks are found to generate large recessionary effects, notably when it comes to investment, and triggers a persistent rise in unemployment and in the real interest rate. The analysis is complemented by computing inefficiency measures on goods and labor markets. We show that, after a disinflation shock, inefficiencies in the labor market seem to prevail. These conclusions are robust to modifications of our baseline identification scheme. |
| Keywords: | SVAR, long-run restrictions, disinflation. |
| JEL: | C32 E31 E52 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:247&r=eec |
| By: | Jean Imbs; Haroon Mumtaz; Morten O. Ravn; Hélène Rey |
| Abstract: | We use a unique dataset on television prices across European countries and regions to investigate the sources of differences in price levels. Our findings are as follows: (i) Quality is a crucial determinant of price differences. Even in an integrated economic zone as Europe, rich economies tend to consume higher quality goods. This effect accounts for the lion’s share of international price dispersion. (ii) Sizable international price differentials subsist even for the same television sets. The average bilateral price difference is as high as 80 euros, or 8% of the average TV price in our sample. (iii) EMU countries display lower price dispersion than non-EMU countries. (iv) absolute price differentials and relative price volatility are positively correlated with exchange rate volatility, but not with conventional measures of transport costs. (v) Importantly we show brand premia are sizable. They differ markedly across borders, in a way that does not correlate with transport costs, nor exchange rate movements. Taken together, the evidence is consistent firms exploiting market power through brand values to price discriminate across borders. |
| JEL: | F0 F1 F15 F23 F41 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15418&r=eec |
| By: | Jorge Rodrigues (Autoridade da Concorrência) |
| Abstract: | Gasoline prices are said to take longer to decrease and at a slower rate when crude oil prices fall than they do to increase when crude oil prices rise. In this paper I analyze to what extent this asymmetry phenomenon can be identified across all EU15 Member States, plus the EU15 average, and I allow for a comparative analysis between IO95 gasoline and motor diesel. I follow previous approaches by disentangling between the two major channels of pump price formation in Europe, namely the international channel from Brent to Platts (ex-refinery) prices and the domestic channels from Platts to average pump prices before tax. I consider weekly data over the period 2004-2008 and follow a previously proposed co-integration based econometric approach. Results strongly suggest the existence of asymmetries in the international channel for diesel, where there is also evidence of overshooting, but not for gasoline. On the domestic channels, the evidence in favour of asymmetries depends on the considered Member State and type of fuel. |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:pca:wpaper:37&r=eec |
| By: | Cette, G.; Lopez, J. |
| Abstract: | This study aims to provide some empirical explanations for the gaps in ICT diffusion between industrialized countries, especially European countries vis-à-vis the United States. The panel data cover eleven OECD countries: Austria, Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, Spain, the United Kingdom and the United States. These annual macroeconomic data span the 1981-2005 period.The analysis provides some original results: (i) the impact on ICT diffusion of the level of education and market rigidities has changed over time. The correlation of ICT diffusion, positive with the level of education and negative with market rigidities, increased over time (in absolute terms) until the middle of the 1990s; (ii) In each country, the estimates show a decrease over time of the price-elasticity of demand for ICT (in absolute terms). More precisely, the elasticity of substitution of ICT vis-à-vis all production factors are close to or greater than 2 at the beginning of the 1980s and close to 1 in the middle of the 2000s; (iii) The estimates confirm the positive impact of the share of the population with a higher education and the negative impact of market rigidities on ICT diffusion. These effects are heightened when ICT diffusion is already substantial |
| Keywords: | ICT, investment, factor demand, productivity. |
| JEL: | E22 O47 O57 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:252&r=eec |
| By: | Monica Billio (University Ca' Foscari of Venice); Laurent Ferrara (Banque de France); Dominique Guegan (Paris School of Economics - Centre d'Economie de la Sorbonne); Gian Luigi Mazzi (Eurostat) |
| Abstract: | In this paper, we aim at assessing Markov-switching and threshold models in their ability to identify turning points of economic cycles. By using vintage data that are updated on a monthly basis, we compare their ability to detect ex-post the occurrence of turning points of the classical business cycle, we evaluate the stability over time of the signal emitted by the models and assess their ability to detect in real-time recession signals. In this respect, we have built an historical vintage database for the Euro area going back to 1970 for two monthly macroeconomic variables of major importance for short-term economic outlook, namely the Industrial Production Index and the Unemployment Rate. |
| Keywords: | Business cycle, Euro zone, Markov switching model, SETAR mpdel, unemployment, industrial production. |
| JEL: | C22 C52 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:09053&r=eec |
| By: | Beat Hintermann (Center for Energy Policy and Economics CEPE, Department of Managment, Technology and Economics, ETH Zurich, Switzerland) |
| Abstract: | In the first phase of the EU Emissions Trading Scheme (EU ETS), the price per ton of CO2 rose to over €30 before decreasing to zero by mid 2007. I examine to what extent this variation can be explained by marginal abatement costs by deriving a structural model of the allowance price under the assumption of efficient markets. I then gradually relax the model by allowing for delayed adjustment of price to fundamentals, as well as by introducing lagged LHS variables. The pattern of the results suggests that prices were not initially driven by marginal abatement costs, but that this inefficiency was largely corrected by the first round of emission verifications. |
| Keywords: | Emissions permit markets, air pollution, climate change, bubble, speculation, CO2, asset pricing, EU ETS |
| JEL: | D84 G12 G14 Q52 Q53 Q54 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:cee:wpcepe:09-63&r=eec |
| By: | Beatriz Armendariz (CERMi, Centre Emile Bernheim, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels and Harvard University, University College London.) |
| Abstract: | Poverty is multidimensional. In its starkest form, the United Nations Development Annual Reports proxy poverty as combined low levels of income, health, and education. Microfinance, on the other hand, addresses directly the income dimension of poverty, and indirectly health and education. Specifically, microfinance is generally perceived as a tool for poverty reduction via self-employment for income-generating activities. Because the vast majority of poor households live in developing countries, poverty in industrialized countries is often neglected. This report focuses on microfinance as a tool for pulling disadvantaged individuals out of poverty in industrialized countries. In particular, this report contrasts the experience of two microfinance institutions, namely, that of Crédit Alternatif (Crédal) in Belgium with that of the Association pour le droit à l’initiative économique (Adie) in France. While both institutions started over twenty years ago, microfinance is far more active and outreach in per capita terms is much higher in the latter than in the former. First, we find similarities between the two institutions: Both target the socially excluded and unbanked, their presence in the capitals of Belgium and France is strong, both offer “guided” microloans, benefit from government support, and socially responsible investors. Second, we encounter very important differences: The distinct historical roots of Crédal and Adie, their different trajectories in terms of scale and scope, governance, loan size and maturity structures, average interest rates, geographic coverage, and their very different strategies for outreach growth. Third, we draw some lessons from Adie, which can potentially be replicated for microfinance outreach growth by Crédal, and by other microfinance institutions operating in Brussels and Belgium. Finally, this report concludes by extending the analysis to other urban areas of Europe, where strategic alliances with other financial institutions and the government, and marketing for guided loans and other financial products might prove key to microfinance expansion in industrialized countries. |
| Keywords: | poverty, microfinance, industrialized countries, Europe, social exclusion. |
| JEL: | F35 G21 G28 O54 O57 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:09-041&r=eec |
| By: | Marcus Neureiter; Peter Nunnenkamp |
| Abstract: | We draw on a recent survey of European companies to differentiate between alternative modes of international outsourcing as possible determinants of market, cost and knowledge-related aspects of the competitiveness of firms. We find that internalized modes are often superior to outside options, and using existing subsidiaries tends to be more (cost) effective than undertaking new greenfield FDI |
| Keywords: | international sourcing, FDI, competitiveness of firms, market access, cost reduction, core and support functions |
| JEL: | F23 L24 L25 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1558&r=eec |
| By: | Chiara Forlati (Chair of International Finance, Ecole Polytechnique Federale de Lausanne (EPFL), Switzerland) |
| Abstract: | I develop and analyze a DSGE model of a currency union to revise the question of how to conduct monetary and fiscal policy in countries that share the same currency. In contrast with the previous literature which assumes coordination, this paper analyzes the case where coordination lacks among fiscal authorities as well as between fiscal and monetary authorities. I show that the normative prescriptions emphasized by former analyses are not valid any more once policymakers are not coordinated. Indeed, in that case the common central bank does not stabilize the average union in ation as if it were in a closed economy because it has to take into account the distortions caused by the lack of coordination among fiscal policymakers. At the same time, if there is not a common agreement to coordinate fiscal policies, autonomous governments should use government expenditure as a stabilization tool even if shocks are symmetric. |
| Keywords: | Monetary and Fiscal Policy, Policy Coordination |
| JEL: | E52 E58 E62 F42 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:cif:wpaper:200904&r=eec |