|
on European Economics |
| By: | Zsolt Darvas; Jean Pisani-Ferry; André Sapir |
| Abstract: | The euro area’s sovereign debt crisis continues though significant steps have been taken to resolve it. This paper proposes a comprehensive solution to the crisis based on three pillars: a plan to restore banking sector soundness in the whole euro area, a resolution of sovereign debt crisis - including a revision of EU assistance facilities and a reduction of the Greek public debt - and a strategy to foster growth and competitiveness. The paper provides novel estimates and analysis focusing on the current situation of Greece, Ireland, Portugal and Spain. |
| Keywords: | fiscal sustainability, euro-area crisis, financial interdependence |
| JEL: | F34 E60 H63 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:mkg:wpaper:1101&r=eec |
| By: | Zsolt Darvas (Institute of Economics Hungarian Academy of Sciences); Jean Pisani-Ferry (Bruegel, Brussels) |
| Abstract: | The 'currency war', as it has become known, has three aspects: 1) the inflexible pegs of undervalued currencies; 2) recent attempts by floating exchange-rate countries to resist currency appreciation; 3) quantitative easing. Europe should primarily be concerned about the first issue, which relates to the renewed debate about the international monetary system. The attempts of floating exchange-rate countries to resist currency appreciation are generally justified while China retains a peg. Quantitative easing cannot be deemed a 'beggar-thy-neighbour' policy as long as the Fed's policy is geared towards price stability. Current US inflationary expectations are at historically low levels. Central banks should come to an agreement about the definition of price stability at a time of deflationary pressures. The euro's exchange rate has not been greatly impacted by the recent currency war; the euro continues to be overvalued, but less than before. |
| Keywords: | currency war; quantitative easing; currency intervention; international monetary system |
| JEL: | E52 E58 F31 F33 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:1102&r=eec |
| By: | Calmfors, Lars (Institute for International Economic Studies, Stockholm University) |
| Abstract: | A fundamental overhaul of EU economic governance is needed. The most important reform is a strengthening of national fiscal frameworks, including the establishment of independent fiscal watchdogs in Member States that do not yet have such institutions. At the European level, a permanent crisis resolution mechanism should be integrated with both broader macroeconomic surveillance and the sanction system. An independent European fiscal council could, based on macroeconomic risk considerations, decide in advance appropriate haircuts in the event of future sovereign debt restructuring. |
| Keywords: | EU; economic governance; fiscal policy; macroeconomics |
| JEL: | A00 E62 |
| Date: | 2010–08–18 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iiessp:0765&r=eec |
| By: | Fédéric Holm-Hadulla (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Nadine Leiner-Killinger (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Michal Slavík (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper investigates the relationship between government debt and labour taxation for a panel of 18 EU countries over the period 1979-2008. The econometric estimates point to a statistically significant and economically relevant positive response of labour taxation to changes in the general government debt and interest expenditure-to-GDP ratios. The results are robust across a range of econometric specifications and labour tax indicators. JEL Classification: H2, H24, H63, J22. |
| Keywords: | Debt, labour taxes, fiscal adjustment. |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20111307&r=eec |
| By: | Zsolt Darvas (Institute of Economics Hungarian Academy of Sciences) |
| Abstract: | This paper assesses the impact of the 2008-09 global financial and economic crisis on the medium-term growth prospects of the countries of central and eastern Europe, the Caucasus and Central Asia, which began an economic transition about two decades ago. We use cross-country growth regressions, putting special emphasis on a proper consideration of the crisis and robustness. We find that the crisis has had a major impact on the within-sample fit of the models used and that the positive impact of EU enlargement on growth is smaller than previous research has shown. The crisis has also altered the future growth prospects of the countries studied, even in the optimistic but unrealistic case of a return to pre-crisis capital inflows and credit booms. |
| Keywords: | crisis; economic growth; growth regressions; transition countries |
| JEL: | C31 C33 O47 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:1103&r=eec |
| By: | Cristina Conflitti |
| Abstract: | Survey data on expectations and economic forecasts play an important role in providing better insights into how economic agents make their own forecasts, what factors do affect the accuracy of these forecasts and why agents disagree in making them. Uncertainty is also important for better understanding many areas of economic behavior. Several approaches to measure uncertainty and disagreement have been proposed but a lack of direct observations and information on uncertainty and disagreement lead to ambiguous definitions of these two concepts. Using data from the European Survey of Professional Forecasters (SPF), which provide forecast point estimates and probability density forecasts, we consider several measures of uncertainty and disagreement at both aggregate and individual level. We overcome the problem associated with distributional assumptions of probability density forecasts by using an approach that does not assume any functional form for the individual probability densities but just approximating the histogram by a piecewise linear function. We extend earlier works to the European context for the three macroeconomic variables: GDP, inflation and unemployment. Moreover, we analyze how these measures perform with respect to different forecasting horizons. Looking at point estimates and disregarding the individual probability information provides misestimates of disagreement and uncertainty. Comparing the three macroeconomic variables of interest, uncertainty and disagreement are higher for GDP and inflation than unemployment, at short and long horizons. Besides this, it is difficult to find a common behavior between uncertainty and disagreement among the variables: results do not support evidence that, if uncertainty or disagreement are relatively high for one of the variable than it is the same for the others |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/64795&r=eec |
| By: | Jan Babecky; Philip Du Caju; Theodora Kosma; Martina Lawless; Julian Messina; Tairi Room |
| Abstract: | Firms have multiple options at the time of adjusting their wage bills. However, previous literature has mainly focused on base wages. We broaden the analysis beyond downward rigidity in base wages by investigating the use of other margins of labour cost adjustment at the firm level. Using data from a unique survey, we find that European firms make frequent use of other, more flexible, components of compensation to adjust the cost of labour. Changes in bonuses and non-pay benefits are some of the potential margins firms use to reduce costs. We also show how the margins of adjustment chosen are affected by firm and worker characteristics. |
| Keywords: | European Union, firm survey, labour costs, wage rigidity. |
| JEL: | J30 C81 P5 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2010/07&r=eec |
| By: | Hansson, Åsa (Department of Economics, Lund University); Olofsdotter, Karin (Department of Economics, Lund University) |
| Abstract: | This paper uses panel data on bilateral FDI flows in the European Union to empirically analyze the impact of labor and corporate taxations on FDI decisions. While the effect of corporate taxes on FDI is well documented, the impact of labor taxes on FDI has been neglected. This is surprising since labor taxation may influence FDI as well. The reason for this is that taxation of labor affects the production cost and the ability to attract and retain productive labor and ultimately the investment return. By employing a Heckman two-step estimation model, which controls for possible sample selection bias due to many zero bilateral observations, it is found that labor taxes do influence FDI decisions. The effect is significant both statistically and economically, although the magnitude is smaller than for corporate tax. |
| Keywords: | labor taxation; foreign direct investment |
| JEL: | F12 F15 F21 H71 H73 |
| Date: | 2011–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2011_011&r=eec |
| By: | Lars Calmfors; Simon Wren-Lewis |
| Abstract: | Fiscal councils now exist in a number of countries. This paper first considers the extent of deficit bias, potential explanations for it, and how independent institutions could help reduce it. Are fiscal councils complements to or substitutes for fiscal rules, and why do none at present have any formal control over fiscal decisions? The paper then outlines the specific tasks that a fiscal council might undertake, and examines how these are combined in eleven fiscal councils. A more detailed examination is undertaken of the fiscal councils in Sweden and the UK. The paper draws some conclusions on the role of fiscal forecasting, ensuring independence, and the provision of policy advice. |
| Keywords: | Fiscal policy, debt, deficit bias, fiscal council |
| JEL: | E62 E65 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:537&r=eec |