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on European Economics |
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Issue of 2010‒05‒29
fifteen papers chosen by Giuseppe Marotta University of Modena and Reggio Emilia |
| By: | Sandra Gomes (Bank of Portugal, Economic Research Department, Av. Almirante Reis 71, 1150-012 Lisbon, Portugal.); Pascal Jacquinot (European Central Bank, Directorate General of Research, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Massimiliano Pisani (Bank of Italy, Research Department, Via Nazionale 91, 00184 Rome, Italy.) |
| Abstract: | Building on the New Area Wide Model, we develop a 4-region macroeconomic model of the euro area and the world economy. The model (EAGLE, Euro Area and Global Economy model) is microfounded and designed for conducting quantitative policy analysis of macroeconomic interdependence across regions belonging to the euro area and between euro area regions and the world economy. Simulation analysis shows the transmission mechanism of region-specific or common shocks, originating in the euro area and abroad. JEL Classification: C53, E32, E52, F47. |
| Keywords: | Open-economy macroeconomics, DSGE models, econometric models, policy analysis. |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20101195&r=eec |
| By: | Matthias Hartmann; Helmut Herwartz |
| Abstract: | We study the impact of the introduction of the European Monetary Union on inflation uncertainty. Two groups of economies, one consisting of three European Union members which are not part of the EMU and one of six OECD member economies, are used as control groups to contrast the effects of monetary unification against the counterfactual of keeping the status quo. We find that the monetary unification provides a significant payoff in terms of lower inflation uncertainty in comparison with the OECD. Regarding the difficulty of quantifying the latent inflation uncertainty, results are found to be robust over a set of four alternative estimates of inflation risk processes. |
| Keywords: | Monetary policy regimes,euro introduction,inflation uncertainty,uncertainty measures,Did the introduction of the euro impact on infla,Hartmann,Herwartz,European Economy. Economic Papers |
| JEL: | C53 E31 E42 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0396&r=eec |
| By: | Lawrence Christiano (Northwestern University, 633 Clark Street Evanston, IL 60208 Evanston, USA.); Roberto Motto (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Massimo Rostagno (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | We augment a standard monetary DSGE model to include a banking sector and financial markets. We fit the model to Euro Area and US data. We find that agency problems in financial contracts, liquidity constraints facing banks and shocks that alter the perception of market risk and hit financial intermediation — ‘financial factors’ in short — are prime determinants of economic fluctuations. They have been critical triggers and propagators in the recent financial crisis. Financial intermediation turns an otherwise diversifiable source of idiosyncratic economic uncertainty, the ‘risk shock’, into a systemic force. JEL Classification: E3, E22, E44, E51, E52, E58, C11, G1, G21, G3. |
| Keywords: | DSGE model, Financial frictions, Financial shocks, Bayesian estimation, Lending channel, Funding channel. |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20101192&r=eec |
| By: | Alexander Mihailov (School of Economics, University of Reading); Fabio Rumler (Economic Analysis Division, Oesterreichische Nationalbank); Johann Scharler (Department of Economics, University of Linz) |
| Abstract: | In this paper we evaluate the relative influence of external versus domestic inflation drivers in the 12 new European Union (EU) member countries. Our empirical analysis is based on the New Keynesian Phillips Curve (NKPC) derived in Gali and Monacelli (2005) for small open economies (SOE). Employing the Generalized Method of Moments (GMM), we find that the SOE NKPC is well supported in the new EU member states. We also find that the inflation process is dominated by domestic variables in the larger countries of our sample, whereas external variables are mostly relevant in the smaller countries. |
| Keywords: | New Keynesian Phillips Curve, small open economies, inflation dynamics, new EU member countries, GMM estimation |
| JEL: | C32 C52 E31 F41 P22 |
| Date: | 2010–05–09 |
| URL: | http://d.repec.org/n?u=RePEc:rdg:emxxdp:em-dp2010-04&r=eec |
| By: | Uwe Böwer; Alessandro Turrini |
| Abstract: | This paper investigates the accession-related economic boom in the countries which recently entered the European Union. The analysis tests whether, on top of the standard growth determinants, the period of EU accession made a significant difference to the growth performance of the New Member States (NMS). The paper finds that the period of EU accession is characterised by significantly larger growth rates of per-capita GDP, even after controlling for a wide range of economic and institutional factors. This effect is robust and particularly strong for countries with relatively low initial income levels, weak institutional quality and less advanced financial development, suggesting that EU accession has been speeding up the catching-up process and improved the institutions of the laggards among the NMS. The prospect of EU membership which has triggered large capital inflows seems to have fostered economic growth of those NMS with lower degrees of financial depth. |
| Keywords: | Economic growth,EU accession,new member states,convergence,Böwer,Turrini,European Economy. Economic Papers |
| JEL: | O47 F15 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0393&r=eec |
| By: | Carlos Fonseca Marinheiro (GEMF/Faculdade de Economia, Universidade de Coimbra, Portugal) |
| Abstract: | Credible fiscal plans that aim at restoring fiscal sustainability will be essential to counter the present increase in debt levels all across Europe. The macroeconomic scenario of such plans will be crucial. This paper assesses whether there is any advantage in delegating (part of) such power to supra-national forecasts. The evidence on the relative performance of the European Commission’s (EC) growth forecast is rather mixed, with considerable variation at the country level. Some national government forecasts (France, Italy, and Portugal) perform worse in terms of descriptive statistics than the EC forecast for all forecast horizons. For the year ahead the EC growth forecast is better than the official forecasts for almost ¾ of the EU-15 countries. All in all, since the EC forecast appears to be a good benchmark, in order to reduce the (optimistic) forecast bias, national governments could be forced to justify any large (optimistic) deviation from this benchmark when presenting their respective national stability and growth programmes. |
| Keywords: | Sustainability of public debt; Fiscal policy; Stability and Growth Pact; Fiscal forecasting; forecast evaluation; real-time data. |
| JEL: | H68 E17 E61 E62 H6 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:gmf:wpaper:2010-07&r=eec |
| By: | Halls, C.; Dustmann, C.; Frattini, T. |
| Abstract: | This paper assesses the fiscal consequences of migration to the UK from the Central and Eastern European countries that joined the EU in May 2004 (A8 countries). We show that A8 immigrants who arrived after EU enlargement in 2004, and who have at least one year of residence – and are therefore legally eligible to claim benefits - are 60% less likely than natives to receive state benefits or tax credits, and 58% less likely to live in social housing. Even if A8 immigrants had the same demographic characteristics of natives, they would still be 13% less likely to receive benefits and 28% less likely to live in social housing. We then compare the net fiscal contribution of A8 immigrants with that of individuals born in the UK, and find that in each fiscal year since enlargement in 2004, A8 immigrants made a positive contribution to public finance despite the fact that the UK has been running a budget deficit over the last years. This is because they have a higher labour force participation rate, pay proportionately more in indirect taxes, and make much lower use of benefits and public services. |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:ner:ucllon:http://eprints.ucl.ac.uk/18263/&r=eec |
| By: | André Sapir; Mathias Dewatripont |
| Abstract: | The financial crisis exposed Europe's inadequacy in developing an effective banking resolution framework that could bring together national authorities and set guidelines for their coordination. The European Commission, through its assessment of state aid cases, managed to avoid single market distortions and mitigate moral hazard. This Policy Contribution explains why in the long-term Europe needs a single resolution authority. The authors Bruegel Senior Research Fellow André Sapir, Mathias Dewatripont, ULB and CEPR; Gregory Nguyen, National Bank of Belgium, and Peter Praet, National Bank of Belgium, show how in the short-term, the European Commission, through its state aid control discipline, can set the foundation for a new crisis resolution architecture. It can act as a substitute to improve coordination among member states and complement a European resolution authority once it is set up. |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:bre:polcon:421&r=eec |
| By: | Davide Furceri; Annabelle Mourougane |
| Abstract: | This paper examines the effects of fiscal policy on output in the euro area. For this purpose we develop a DSGE Fiscal Model with endogenous government bond yields to assess the impact of different fiscal policy shocks on output, its components and on government debt. The simulations suggest that fiscal policy is effective in supporting activity, especially in the short term. In particular, the largest fiscal multipliers are found for an increase in public investment, public consumption and a cut in the wage tax. The results are robust to different parameter calibrations and are economically significant. Amongst the different structural parameters, the share of liquidity constrained households and price persistence are found to be the ones which affect the most fiscal multipliers.<P>Les effets de la politique budgétaire sur la production : une analyse à partir d’un modèle DSGE<BR>Ce papier examine les effets de la politique budgétaire sur l?activité dans la zone euro. À cette fin, nous avons développé un modèle budgétaire DSGE dans lequel les rendements des obligations d?État sont endogènes et nous examinons l?effet de différents chocs budgétaires sur le PIB et ses composantes et sur la dette publique. Les simulations indiquent que la politique budgétaire permet de soutenir l?activité, en particulier sur le court terme. Plus précisément, les multiplicateurs budgétaires les plus larges sont associés à une augmentation de l?investissement public, de la consommation publique ainsi qu?à une baisse du taux d?imposition sur les salaires. Les résultats sont robustes à différentes valeurs des paramètres structuraux du modèle et sont économiquement significatifs. Parmi les différents paramètres structurels, la part des ménages qui rencontrent des contraintes de liquidité et les inerties au niveau des prix sont les paramètres qui affectent le plus les multiplicateurs fiscaux. |
| Keywords: | fiscal policy, debt sustainability, output, DSGE, politique budgétaire, soutenabilité de dette, activité, DSGE |
| JEL: | E62 H10 |
| Date: | 2010–05–18 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:770-en&r=eec |
| By: | Amalia Morales-Zumaquero (Universidad de Málaga); Simón Sosvilla-Rivero (Universidad Complutense de Madrid) |
| Abstract: | This paper attempts to determine whether or not the introduction of the euro affected the volatility of bilateral exchange rates all over the world. To that end, we examine the exchange rate behaviour for a set of OECD and non-OECD countries during the 1993-2007 period. Two econometric methods are implemented for this purpose: the OLS-based tests to detect multiple structural breaks, as proposed by Bai and Perron (1998, 2003), and several procedures based on Information Criterion together with the so-called sequential procedure suggested by Bai and Perron (2003). Although results suggest evidence of structural breaks in volatility across investigated variables, there is high heterogeneity regarding the located dates. Moreover, the realignments in the Exchange Rate Mechanism seem to play a significant role in the reduction of volatility in some European countries and transition economies. |
| Keywords: | Exchange rates, volatility |
| JEL: | F3 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:aee:wpaper:1001&r=eec |
| By: | CASE |
| Abstract: | Based on the conceptual framework developed by the European Commission for linking the quality of public finances and economic growth, this study examines empirically the key channels through which fiscal policy impacts economic growth in the Mediterranean partner countries of the EU. The results confirm that the function of specific disaggregated fiscal parameters like debt financing, governance, efficiency of spending, mixture of taxes can have a significant impact on growth. |
| Keywords: | Quality of public finances,fiscal policy,growth,public sector governance,Mediterranean partner countries. Study on Qualit |
| JEL: | H1 H2 H3 H5 H6 H7 E6 O1 O2 O4 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0394&r=eec |
| By: | Elke Holst; Andrea Schäfer; Mechthild Schrooten |
| Abstract: | Remittances from Germany are substantial. Cross-border transfers to family and friendship networks outside Germany are not only made by foreigners. Many naturalized migrants send money home as well. Here, we focus on international networks and gender-specific determinants of remittances from the senders' perspective, based on data from the German Socio-Economic Panel Study (SOEP) for the years 2001-2006. Our findings show, above all, that foreign women remit less money than foreign men. Using information on the social network in the home country we find, first, that the social network abroad explains part of gender differences in remittance behavior. Second, employing gender interaction terms for the social network effects suggests that remittance behavior is affected by traditional gender roles. Third, the migrant's social integration in the destination country matters. Remittance decisions of naturalized migrants do not show the aforementioned gender effect. |
| Keywords: | Remittances, Gender, Foreigners, Naturalized Migrants |
| JEL: | F24 J16 D13 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1005&r=eec |
| By: | Angelo Baglioni (DISCE, Università Cattolica); Andrea Boitani (DISCE, Università Cattolica); Massimo Liberatore (DISCE, Università Cattolica); Andrea Monticini (DISCE, Università Cattolica) |
| Abstract: | Detecting whether banks?leverage is indeed procyclical is relevant to support the view that booms and crises may be reinforced by some sort of supply side ?nancial accelerator, whilst ?nding a plausible ex- planation of banks?behaviour is crucial to trace the road for a sensible reform of ?nancial regulation and managers? incentives. The paper shows that procyclical leverage appears to be well entrenched in the behaviour of a sample of major European banks, which are commonly labelled as mainly "commercial banks". |
| Keywords: | Banks, Pro-cyclicality, Financial Regulation. |
| JEL: | G21 E3 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:ctc:serie3:ief0093&r=eec |
| By: | Kerrigan, Arthur |
| Abstract: | Under the VAT system of the European Union, domestic supplies of financial services are exempt. That exemption has significant drawbacks, not least of which is that it compromises the neutrality of the tax. In this article, the author indicates how, depending on government policy views, margin-based financial services could be taxed. He also indicates how financial institutions could give new impetus to the discussion on the VAT treatment of the services in that sector. |
| Keywords: | VAT; Financial Services; neutrality; EU |
| JEL: | K3 |
| Date: | 2010–03–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:22618&r=eec |
| By: | McQuinn, Kieran (Central Bank and Financial Services Authority of Ireland); O’Donnell, Nuala (Central Bank and Financial Services Authority of Ireland) |
| Abstract: | In this paper we avail of new data in studies of financial capability conducted separately in the United Kingdom and Ireland to model the determinants of individuals’ attitudes to risk. These risk attitudes are explored explicitly in the context of savings and investments and are modelled on the basis of socio-economic characteristics such as age, gender, region of residence and educational attainment. Furthermore, we explore the relatively complex relationship between risk attitudes and proxies of individual’s wealth levels in the context of potential reverse causation. |
| JEL: | D81 C81 D14 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:wpaper:6/rt/10&r=eec |