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on European Economics |
| By: | Bris, Arturo (IMD and ECGI); Koskinen, Yrjö (Boston University and CEPR); Nilsson, Mattias (University of Colorado at Boulder) |
| Abstract: | In this paper we study how the introduction of the euro has affected corporate financing in Europe. We use firm-level data from eleven euro area countries as well as from a control group of five other European countries spanning the years 1991–2006. We show that firms from euro area countries that previously had weak currencies have increased both their equity and their debt financing compared to the control group. We also show that results are stronger for firms that hail from less financially developed euro area countries, and that large firms from industries that are dependent on external financing have increased their debt financing more. These results support the hypothesis that improved access to capital markets in the euro area has enabled increased external financing, especially debt financing |
| Keywords: | euro; external financing; supply of capital; financial development; financial dependence; financial integration |
| JEL: | F33 F36 G32 |
| Date: | 2011–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofrdp:2011_006&r=eec |
| By: | Sandra Tatierska (National Bank of Slovakia, Research Departmen) |
| Abstract: | The purpose of this study is to analyze the relationship between unit labor costs and inflation. We estimate an optimal price path model based on a New Keynesian Phillips Curve for eleven euro area countries individually, under the assumption that unit labor costs are proportional to marginal costs. We seek such a model which minimizes the distance between fitted and actual price level fluctuations, with parameters that satisfy theoretical restrictions. The econometric methodology used is a two-step approach method. Estimates show that in eight of the eleven euro area countries there is a plausible relationship between unit labor costs and price level dynamics. The average time needed to adjust prices in line with movements in unit labor costs is estimated to be around eight months. In the case of Slovakia the results indicate rather flexible prices. |
| Keywords: | inflation, unit labor costs, NKPC, euro area, VAR |
| JEL: | C22 E12 E3 J3 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:svk:wpaper:1011&r=eec |
| By: | Engelbert Stockhammer |
| Abstract: | The paper argues that the Greek debt crisis, as well as those of other Southern European countries and Ireland, has to be seen in macroeconomic context. The sum of the public sector balance, the (domestic) private sector balance and the current account deficit (or equivalently: the capital inflows) has to add up to zero. By implication in a country that has a current account deficit either the private sector or the public sector has to run a deficit. Therefore the peripheral countries can only solve their public debt problems if there is a change in German current account surpluses. The paper explores the implications of this for wage policy in the euro zone. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:rmf:dpaper:29&r=eec |
| By: | Guglielmo Maria Caporale; Alessandro Girardi; Marco Ventura |
| Abstract: | By estimating a staggered price model over the period 1980q1-2010q2, this paper documents that, after the euro changeover, Italian retailers have increased the number of price adjustments, which has translated into a higher inflation rate, with a detrimental effect on the competitiveness of the Italian economy. |
| Keywords: | Euro changeover, staggered price adjustments, inflation |
| JEL: | C22 E31 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1114&r=eec |
| By: | Leon Podkaminer (The Vienna Institute for International Economic Studies, wiiw); Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Anton Mihailov; Vladimir Gligorov (The Vienna Institute for International Economic Studies, wiiw); Gábor Hunya (The Vienna Institute for International Economic Studies, wiiw); Peter Havlik (The Vienna Institute for International Economic Studies, wiiw); Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Zdenek Lukas (The Vienna Institute for International Economic Studies, wiiw); Josef Pöschl (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw); Waltraut Urban (The Vienna Institute for International Economic Studies, wiiw); Hermine Vidovic (The Vienna Institute for International Economic Studies, wiiw); Sándor Richter (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | The outlook for the world economy has improved in the course of 2010 and the recovery has gained strength in the EU as well. The Central, East and Southeast European countries (CESEE) have also recovered from the crisis; the majority of them recorded positive GDP growth. On average, the recent revival of exports has been even stronger than their growth before the crisis. By way of contrast, the trends in industrial output have so far remained more or less flat. The persistent decline in construction and fixed investments – both related to the still hesitant credit markets – represents one of the key downward internal risks to our moderately optimistic regional economic forecast. The general outlook for the CESEE region in the baseline scenario reckons with a gradual strengthening of economic growth over the period 2011-2013, in most cases rarely exceeding 4% per annum. GDP growth will become more broadly based. The formerly predominant role of external demand will weaken somewhat, while both household consumption and gross fixed investments will ultimately contribute positively to GDP growth. With exports, industrial output levels and eventually also GDP growth having already recovered, the economy is seen as having largely returned ‘back to normal’ – yet with at least two important differences: (1) post-crisis growth will be slower. That slower growth, however, also implies that (2) the labour market situation will be ‘very far from normal’ as unemployment will remain high, with young and low-skilled workers being especially adversely affected, and any improvement only gradual and delayed. Inflation rose throughout 2010 as food and commodity prices soared; in general, however, it will pose no (or little immediate) threat. The moderate economic upturn and a revival of capital inflows have resulted in renewed appreciation pressures. The forecasts point to a gradual deterioration of current account positions in all CESEE countries, yet the return (or persistence) of extreme imbal-ances are only expected for Montenegro, Albania and Serbia. The financing constraint with respect to both domestic and external loans will constitute one of the key brakes on future economic growth. Given the sorry state of public finances and the ensuing budget consolidation efforts, we cannot expect any new additional growth-stimulating measures from the public sector – on the contrary, owing to the limited fiscal space government deficits and public debts will be scaled back. The sharp drop in GDP in most CESEE countries during the crisis resulted in both absolute and relative declines in their per capita GDP. The catching-up process of the previous decade was thus interrupted and income gaps vis-à-vis Western Europe widened. In the baseline GDP growth sce-nario wiiw reckons with a renewed catching-up process starting as early as 2011 (after losing 5 to 7 years in terms of income convergence). |
| Keywords: | Central and East European new EU member states, Southeast Europe, future EU member states, Balkans, former Soviet Union, Turkey, economic forecasts, employment, foreign trade, competitiveness, exchange rates, inflation, monetary policy |
| JEL: | G18 O52 O57 P24 P27 P33 P52 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:wii:fpaper:fc:7&r=eec |
| By: | Alison Johnston |
| Abstract: | Many political scientists and economists have addressed the implications of the public sector’s sheltered status on their unions’ wage strategies vis-à-vis the government. Since the public sector is a monopoly provider of necessary and price inelastic services, conventional wisdom suggests that public sector unions’ push for wage increases which their productivity does not merit, exacerbating inflation and fiscal deficits. The argument in this paper challenges this conventional view, and maintains that the recent, puzzling rise in public sector wage inflation, relative to that in manufacturing, in Euro-zone countries is an unintended result of the institutional shift towards European Economic and Monetary Union (EMU). During the 1980s and 1990s, differences in wage inflation between the manufacturing and public sector within most EMU candidate-countries were low. After 1999, these differences significantly worsened; wage moderation continued in the manufacturing sector while wage inflation arose in the public sector. It is argued here that monetary union’s predecessors, the European Monetary System and Maastricht regimes, imposed two important constraints on public employers, which enhanced their ability to enforce wage moderation: the commitment to a hard currency policy via participation in the Exchange Rate Mechanism, adopted by some earlier than others and, the Maastricht criteria. Monetary union’s removal of these two constraints weakened public employers’ capability to deny inflationary wage settlements to public sector unions. Panel regressions results outline a statistically significant relationship between monetary union and higher levels of wage inflation in the public sector, relative to manufacturing. The paper concludes with a brief discussion of the implications of monetary union for inter-sectoral dynamics. |
| Keywords: | Sectoral Interests, Employers, Trade Unions, European Monetary Union, Institutional Change |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:eiq:eileqs:32&r=eec |
| By: | Götz Zeddies |
| Abstract: | In recent decades, the international division of labor expanded rapidly in course of globalization. In this context, highly developed countries specialized on (human) capital intensively manufactured goods and increasingly sourced parts and components from lowwage countries. Since this should be beneficial for the high-skilled and harmful for the lower qualified workforce, especially the opening up of Eastern Europe and the international integration of newly industrializing Asian economies are considered as main reasons for increasing unemployment of the lower qualified in high-wage countries. The present paper addresses this issue for selected Western European countries by analyzing factor content of trade, which allows inferring on factor demand patterns resulting from international trade. This is not only done for countries’ total external trade, but also for bilateral trade flows, using input-output analyses. Thereby, differences in factor inputs and production technologies are considered, allowing for product differentiation. According to the results, factor content of bilateral trade flows between Western European high-wage countries does hardly differ. However, the results are different for East-West trade, since exports from Western to Eastern Europe are distinctly more human capital intensively manufactured than imports of Western European high-wage countries from Eastern Europe. |
| Keywords: | European integration, international trade, labor markets, input-output analysis |
| JEL: | C67 F11 F15 F16 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:iwh:dispap:6-11&r=eec |
| By: | Roman Horvath; Lubos Komarek; Filip Rozsypal |
| Abstract: | This paper investigates the predictive ability of money for future inflation in the Czech Republic, Hungary, Poland, and Slovakia. We construct monetary indicators similar to those the ECB regularly uses for monetary analysis. We find some in-sample evidence that money matters for future inflation at the policy horizons that central banks typically focus on, but our pseudo out-of-sample forecasting exercise shows that money does not in general improve the inflation forecasts vis-Ã -vis some benchmark models, such as the autoregressive process. Since at least some models containing money improve the inflation forecasts in certain periods, we argue that money still serves as a useful cross-check for monetary policy analysis. |
| Keywords: | Central Europe, forecasting, inflation, money. |
| JEL: | E41 E47 E52 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2010/05&r=eec |
| By: | Sadek Boussena (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II); Catherine Locatelli (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II) |
| Abstract: | The changes on the EU gas market are likely to affect Europe's relations with its natural gas suppliers who are facing increasing competition. Heading this list of producing countries is Russia. Gas relations between Russia and the EU are characterized by strong interdependence. But these relations are currently being hampered by serious lack of understanding, making it difficult for the two parties to reach agreement on a new energy partnership. The aim of this article is to analyse the effects of this new European gas context on Gazprom's strategy and how the issues of energy security and cooperation between Russia and the EU will be affected by this new order. |
| Keywords: | INTERNATIONAL GAS MARKET ; ENERGY SECURITY ; GAS SUPPLY ; RUSSIA ; EUROPEAN UNION |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00578136&r=eec |
| By: | Damiani, Mirella; Pompei, Fabrizio; Ricci, Andrea |
| Abstract: | The present study examines cross-national and sectoral differences in Total Factor Productivity (TFP) in fourteen European countries and ten sectors from 1995 to 2007. The main aim is to ascertain the role of employment protection of temporary contracts on TFP by estimating their effects with a “difference-in-difference” approach. Results show that deregulation of temporary contracts negatively influences the growth rates of TFP in European economies and that, within sectoral analysis, the role of this liberalization is greater in industries where firms are more used to opening short-term positions. By contrast, in our observation period, restrictions on regular jobs do not cause significant effects on TFP, whereas limited regulation of product markets and higher R&D expenses positively affect efficiency growth. |
| Keywords: | productivity; labor regulation |
| JEL: | O47 O43 J58 O40 |
| Date: | 2011–03–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:29698&r=eec |
| By: | Ghosh, Swati; Sugawara, Naotaka; Zalduendo, Juan |
| Abstract: | This paper examines the growth patterns of emerging Europe and the Commonwealth of Independent States (CIS) countries prior to the global financial crisis. The aim is to draw lessons on what policies can best position these countries going forward to enjoy growth without a buildup in macro and financial vulnerability. Cluster analysis is used to classify these countries across the growth and vulnerability dimensions; namely, a classification into low or high growth outcomes, each of which may occur with low or high vulnerability features. The vulnerability indicators used are multifaceted, covering both the domestic and the external dimensions that have been identified in previous studies as being good indicators of likelihood of crisis -- itself understood as multidimensional. Based on multinomial logit regressions, the initial conditions and the economic policies that might affect the probabilities of being in each of the four possible cluster combinations are examined. Many (if not most) of the countries in the sample experienced very large capital inflows relative to their gross domestic product prior to the crisis, which can complicate macroeconomic management and lead to a buildup of vulnerability. These large inflows were partly due to the high liquidity in global markets and, at least for some countries in the country sample, the particular attractiveness of"new Europe and emerging countries in the region"in the eyes of foreign investors. Nonetheless, the analysis finds strong evidence that the macroeconomic and structural policies that over time influence the structure of the economy, can play a significant role in explaining (and, going forward, in influencing) the different growth and vulnerability patternsexperienced by the countries covered in this paper. |
| Keywords: | Currencies and Exchange Rates,Debt Markets,Economic Theory&Research,Achieving Shared Growth,Economic Conditions and Volatility |
| Date: | 2011–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5592&r=eec |