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on European Economics |
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Issue of 2010‒12‒18
fourteen papers chosen by Giuseppe Marotta University of Modena and Reggio Emilia |
| By: | Avadanei, Andreea |
| Abstract: | Abstract: The scope of this article is to point out the features of European corporate bond market, in particular its development since the euro introduction. We structured our paper on chapters that present its economic importance, the implications of the common currency in respect to its growth and the level of integration in the present context. This market, including the debt securities issued by non-financial corporations, non-monetary financial corporations and monetary financial institutions, is economically important, as it contributes to the allocation of funds to their most profitable uses. Its rapid growth since the introduction of the euro can be explained by developments in economic activity, the costs of issuance and mergers &acquisitions-related activity. The adoption of the common currency had a direct and permanent effect on debt securities issued by non-monetary financial corporations. However, the use of corporate bonds at the euro area level is not uniform across countries. Country-specific factors continue to matter, despite the fact that financial markets are gradually becoming more integrated. |
| Keywords: | corporate bond market; euro; financial integration; economic importance; market segmentation. |
| JEL: | F15 G14 G29 G15 E50 |
| Date: | 2010–12–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27309&r=eec |
| By: | Carfì, David; Schilirò, Daniele |
| Abstract: | The crisis within the Euro area have become frequent during 2010. First was the Greek economy to face a default problem of its sovreign debt, in November it was Ireland who has been in a serious financial situation at the verge of collapse causing difficulties to the euro. In this contribution we focus on the Greek crisis and we suggest, through a model of coopetition based on game theory and conceived at a macro level, feasible solutions in a cooperative perspective for the divergent interests which drive the economic policies in Germany and Greece, with the aim of improving the position of Greece, Germany and the whole Euro area and also giving a contribution to expand the set of macroeconomic policy tools. By means of our general analytical framework of coopetition, we show the strategies that could bring to feasible solutions in a cooperative perspective for Germany and Greece, where these feasible solutions aim at offering a win-win outcome for both countries, letting them to share the pie fairly within a growth path represented by a non-zero sum game. A remarkable analytical result of our work consists in the determination of the win-win solution by a new selection method on the transferable utility Pareto boundary of the coopetitive game. |
| Keywords: | European monetary Union; Coopetitive Games; Macroeconomic Policy |
| JEL: | F40 C71 E6 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27138&r=eec |
| By: | Kamila Fialová (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic) |
| Abstract: | This paper analyzes the role of labor market institutions in explaining developments of shadow economies in European countries. We use several alternative measures of the shadow sector, and we examine effects of labor institutions on shadow sector in two specific regions: new and old European Union member countries, as their respective shadow sectors exhibited a different development in the last decade. While the share of shadow economy in GDP averaged 27.7% in the new member countries in 1999-2007, the respective share in the old member states stood at 18.0% only. In our paper, we estimate effects of labor market institutions on two sets of shadow economy indicators―shadow production and shadow employment. Comparing alternative measures of the shadow sector allows more granulated analysis of the labor market institutions effects. Our results indicate that the one institution that unambiguously increases shadow economy production and employment is the strictness of employment protection legislation. Other labor market institutions―active and passive labor market policies, labor taxation, trade union density and the minimum wage setting―have less straightforward and statistically robust effects and their impact often diverge in new and old EU member countries. The differences are not robust enough, however, to allow us to reject the hypothesis of similar effect of labor market institutions in new and old EU member states. |
| Keywords: | labor market institutions, shadow economy, shadow employment, European Union |
| JEL: | J08 O17 O52 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2010_29&r=eec |
| By: | Marta Bańbura (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Domenico Giannone (Université libre de Bruxelles, ECARES, Avenue Roosevelt CP 114 Brussels, Belgium and CEPR.); Lucrezia Reichlin (London Business School and CEPR.) |
| Abstract: | We define nowcasting as the prediction of the present, the very near future and the very recent past. Crucial in this process is to use timely monthly information in order to nowcast key economic variables, such as e.g. GDP, that are typically collected at low frequency and published with long delays. Until recently, nowcasting had received very little attention by the academic literature, although it was routinely conducted in policy institutions either through a judgemental process or on the basis of simple models. We argue that the nowcasting process goes beyond the simple production of an early estimate as it essentially requires the assessment of the impact of new data on the subsequent forecast revisions for the target variable. We design a statistical model which produces a sequence of nowcasts in relation to the real time releases of various economic data. The methodology allows to process a large amount of information, as it is traditionally done by practitioners using judgement, but it does it in a fully automatic way. In particular, it provides an explicit link between the news in consecutive data releases and the resulting forecast revisions. To illustrate our ideas, we study the nowcast of euro area GDP in the fourth quarter of 2008. JEL Classification: E52, C53, C33. |
| Keywords: | Nowcasting, News, Factor Model, Forecasting. |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20101275&r=eec |
| By: | Pinto, Hugo |
| Abstract: | The knowledge production function framework is used to understand how territories transform specific inputs into knowledge outputs. This article focuses knowledge production function estimation at European Union with twenty five member-states using a data panel analysis between 1999 and 2003. The importance of different variables in knowledge production is tested. The econometric results give relevant insights for EU decision-makers and the creation of a more integrated European Research Area and innovation cooperation within Europe. |
| Keywords: | Knowledge Production Function; Panel Data; European Union |
| JEL: | C3 O3 |
| Date: | 2010–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27283&r=eec |
| By: | Véronique Genre (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Geoff Kenny (European Central Bank, DG Research, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Aidan Meyler (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Allan Timmermann (Rady School of Management and Department of Economics, University of California, San Diego, USA.) |
| Abstract: | In this paper, we explore the potential gains from alternative combinations of the surveyed forecasts in the ECB Survey of Professional Forecasters. Our analysis encompasses a variety of methods including statistical combinations based on principal components analysis and trimmed means, performance-based weighting, least squares estimates of optimal weights as well as Bayesian shrinkage. We provide a pseudo real–time out-of-sample performance evaluation of these alternative combinations and check the sensitivity of the results to possible data-snooping bias. The latter robustness check is also informed using a novel real time meta selection procedure which is not subject to the data-snooping critique. For GDP growth and the unemployment rate, only few of the forecast combination schemes are able to outperform the simple equal-weighted average forecast. Conversely, for the inflation rate there is stronger evidence that more refined combinations can lead to improvement over this benchmark. In particular, for this variable, the relative improvement appears significant even controlling for data snooping bias. JEL Classification: C22, C53. |
| Keywords: | forecast combination, forecast evaluation, data snooping, real-time data, Survey of Professional Forecasters. |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20101277&r=eec |
| By: | Filippetti, Andrea; Payrache, Antonio |
| Abstract: | This paper investigates the relative contribution of capital deepening and total factor productivity (TFP) as drivers of labour productivity growth and catch up in Europe. Proxies for technological capabilities (technology gap) are introduced which allow to explain differences in TFP. Using a conditional Malmquist nonparametric approach, we find that capital deepening and TFP respectively account for around 53% and 47% of labour productivity growth respectively. Further, change in technological capabilities explains 71% of change in TFP, making a substantial contribution to catch up. Different patterns arise between industrialized and catching-up countries. Our results support the scope for innovation policy, technology diffusion and education policy to explain growth and convergence in labour productivity across Europe. |
| Keywords: | labour productivity growth; technological capabilities; EU policies; Malmquist TFP |
| JEL: | O47 E23 O33 |
| Date: | 2010–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27212&r=eec |
| By: | António Afonso (European Central Bank, Directorate General Economics, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Manuel M.F. Martins (University of Porto, Faculty of Economics, Cef.up – Centre for Economics and Finance at the University of Porto, Rua Dr Roberto Frias, s/n 4200 464 Porto Portugal.) |
| Abstract: | We study fiscal behaviour and the sovereign yield curve in the U.S. and Germany in the period 1981:I-2009:IV. The latent factors, level, slope and curvature, obtained with the Kalman filter, are used in a VAR with macro and fiscal variables, controlling for financial stress conditions. In the U.S., fiscal shocks have generated (i) an immediate response of the short-end of the yield curve, associated with the monetary policy reaction, lasting between 6 and 8 quarters, and (ii) an immediate response of the longend of the yield curve, lasting 3 years, with an implied elasticity of about 80% for the government debt ratio shock and about 48% for the budget balance shock. In Germany, fiscal shocks entail no significant reactions of the latent factors and no response of the monetary policy interest rate. In particular, while (i) budget balance shocks created no response from the yield curve shape, (ii) surprise increases in the debt ratio caused some increase in the short-end and the long-end of the yield curve in the following 2nd and 3rd quarters. JEL Classification: E43, E44, E62, G15, H60. |
| Keywords: | yield curve, fiscal policy, financial markets. |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20101276&r=eec |
| By: | Plummer, Michael G. (Asian Development Bank Institute) |
| Abstract: | This paper analyzes key aspects of the changing economic relationship between the European Union (EU) and Asia, and explores the potential economic ramifications of deeper EU-Asian economic cooperation. The author investigates the possible costs to the EU of remaining “disengaged” from the Asian integration process and the likely impact of multi-nested EU-Asian trade agreements. His empirical review of CGE models revealed trivial effects of several possible EU-Asian accords (e.g., EU-India, EU-ASEAN, EU-Republic of Korea). In part, this is a result of relatively small trade shares, open markets, and restrictions in the models, particularly in that they excluded behind-the-border effects. He also presents two CGE models that estimate the potential negative effects of Asian/Asia-Pacific regional accords on the EU, and likewise found small effects. Nevertheless, using a highly-disaggregated (partial-equilibrium) approach, he argues that high-quality FTAs in Asia could be quite detrimental to the EU, particularly in key sectors. The push toward a Free Trade Area of the Asia Pacific could be particularly worrisome to the EU. It is therefore concluded that it makes sense for the EU to be more aggressive in pursuing prospective trade agreements with Asia. |
| Keywords: | asia eu economic cooperation; asia eu trade; free trade areas |
| JEL: | F13 F15 |
| Date: | 2010–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0255&r=eec |
| By: | Emanuele Breda (Bank of Italy, Economic and Financial Statistics); Rita Cappariello (Bank of Italy, Economic and Financial Statistics) |
| Abstract: | This paper evaluates the extent of internationalisation of production between 1995 and 2006 for Italy and Germany. The analysis is based on a large set of indicators of international outsourcing including a new one, the direct and indirect import content of production, which also takes into account the import content of domestic inputs. In 2006 the intensity of international off-shoring was quite similar in the two countries, although slightly higher for Italian firms when only manufacturing was considered. From a dynamic point of view, between 1995 and 2000 the growth in off-shoring was substantial in both economies but stronger in Germany, which at least in manufacturing had started from a lower level. During the first years of the past decade the off-shoring intensity of the two economies stagnated, but in the last period under study (2004-06) their growth resumed at a fast pace, especially in Italy. This seems to suggest a change in strategies and a reorganisation of production in Italian firms. The new challenges posed by globalisation, by the diffusion of information and communication technologies, and by the adoption of the euro have induced the most dynamic Italian firms to rethink their organisation, including their degree of vertical specialisation. |
| Keywords: | International outsourcing, input-output tables |
| JEL: | F14 C67 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_79_10&r=eec |
| By: | Cuzman, Ioan; Dima, Bogdan; Dima (Cristea), Stefana Maria |
| Abstract: | This study examines the Eurozone stock markets’ reaction to a number of events associated with the post-implementation amendments of the IFRSs regarding financial instruments (IFRS 7, IFRS 9, IAS 32 and IAS 39). The adoption of these IFRSs is probably one of the most important recent changes in financial information environment. However, in order to contribute to an increase in financial stability, it is necessary to ensure an ex post stability of the regulatory framework. Based on this meta-argument, we have analyzed the inter-linkages between the episodes of higher market volatility and the amendments to the mentioned IFRSs, inside a binary dependent variable model. Overall, our findings suggest that the adoption of the IFRS can lead to a stabilization of European financial markets but this result is not necessary a robust one since investors prefer a higher stability on standards’ contents and application conditions. |
| Keywords: | IFRS 9; IFRS 7; IAS 32; IAS 39; volatility; event study |
| JEL: | M41 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27167&r=eec |
| By: | Matheron, J. |
| Abstract: | This paper characterizes the short- and long-run effects of overtime de-taxation. A dynamic general equilibrium with overtime hours is first developed and calibrated to French data. A fiscal shock consisting of a complete de-taxation of overtime hours is then implemented in the model. Several fiscal scenarios are considered, depending on the pace of public debt and depending on whether consumption taxes or lump-sum taxes are adjusted. In each case, the welfare gains of the fiscal reform are computed. Overtime de-taxation is found to have very limited aggregate effects on output and the labor supply. It also generates a small welfare gain or even a welfare loss, depending on the on the fiscal scenario. |
| Keywords: | Overtime de-taxation, general equilibrium |
| JEL: | E13 E62 E65 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:304&r=eec |
| By: | Agnes Benassy-Quere; Lionel Fontagne; Jean Foure |
| Abstract: | We present growth scenarios for 128 countries to 2050, based on a three-factor production function that includes capital, labour and energy. We improve on the literature by accounting for the energy constraint through dynamic modelling of energy productivity, and departing from the assumptions of either a closed economy or full capital mobility by applying a Feldstein-Horioka-type relationship between savings and investment rates. Our results suggest that, accounting for relative price variations, China could account for 28% of the world economy in 2050, which would be much more than the United States (14%), India (12%), the European Union (11%) and Japan (3%). They suggest also that China would overtake the United States around 2025 (2035 at constant relative prices). However, in terms of standards of living, measured through GDP per capita in purchasing power parity, only China would be close to achieving convergence to the US level, and only at the end of the simulation period. |
| Keywords: | GDP projections; long run; global economy |
| JEL: | E23 E27 F02 F47 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2010-27&r=eec |
| By: | Eric Dor (IÉSEG School of Management, LEM-CNRS (UMR 8179),) |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:ies:wpaper:e201006&r=eec |