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on European Economics |
| By: | Demosthenes Ioannou (European Central Bank, DG International and European Relations, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Livio Stracca (European Central Bank, DG International and European Relations, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper examines the out-of-sample forecast performance of sectoral stock market indicators for real GDP, private consumption and investment growth up to 4 quarters ahead in the US and the euro area. Our findings are that the predictive content of sectoral stock market indicators: i) is potentially strong, particularly for the financial sector, and is stronger than that of financial spreads; ii) varies over time, with a substantial improvement after 1999 for the euro area; iii) is stronger for investment than for private consumption; and iv) is stronger in the euro area than in the United States. JEL Classification: E62, E63, H63, O43. |
| Keywords: | Stability and Growth Pact, Lisbon Strategy, euro area, European Union, governance, institutions. |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20111344&r=eec |
| By: | Magnus Andersson (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Antonello D’Agostino (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Gabe J. de Bondt (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Moreno Roma (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper examines the out-of-sample forecast performance of sectoral stock market indicators for real GDP, private consumption and investment growth up to 4 quarters ahead in the US and the euro area. Our findings are that the predictive content of sectoral stock market indicators: i) is potentially strong, particularly for the financial sector, and is stronger than that of financial spreads; ii) varies over time, with a substantial improvement after 1999 for the euro area; iii) is stronger for investment than for private consumption; and iv) is stronger in the euro area than in the United States. JEL Classification: C53, E37, G12. |
| Keywords: | forecasting real GDP, consumption and investment, sectoral stock prices, stock market valuation metrics, US, Euro Area. |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20111343&r=eec |
| By: | Zsolt Darvas; Valentina Kostyleva (OECD Public Governance and Territorial Development Directorate) |
| Abstract: | This paper studies the role of fiscal and monetary institutions in macroeconomic stability and budgetary control in central, eastern and south-eastern European countries (CESEE) in comparison with other OECD countries. CESEE countries tend to grow faster and have more volatile output than non-CESEE OECD countries, which has implications for macroeconomic management: better fiscal and monetary institutions are needed to avoid pro-cyclical policies. The paper develops a Budgetary Discipline Index to assess whether good fiscal institutions underpin good fiscal outcomes. Even though most CESEE countries have low scores, the debt/GDP ratios declined before the crisis. This was largely the consequence of a very favourable relationship between the economic growth rate and the interest rate, but such a favourable relationship is not expected in the future. Econometric estimations confirm that better monetary institutions reduce macroeconomic volatility and that countries with better budgetary procedures have better fiscal outcomes. All these factors call for improved monetary institutions, stronger fiscal rules and better budgetary procedures in CESEE countries. |
| Keywords: | CESEE countries, Budgetary Discipline Index, budget process, fiscal institutions, budgetary institutions, monetary institutions, macroeconomic stability, econometric analysis, budgetary procedures, fiscal outcomes, fiscal rules |
| JEL: | E32 E50 H11 H60 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:mkg:wpaper:1102&r=eec |
| By: | Nikolai Stähler (Deutsche Bundesbank); Carlos Thomas (Banco de España) |
| Abstract: | This paper develops a medium-scale dynamic, stochastic, general equilibrium (DSGE) model for fiscal policy simulations. Relative to existing models of this type, our model incorporates two important features. First, we consider a two-country monetary union structure, which makes it well suited to simulate fiscal measures by relatively large countries in a currency area. Second, we provide a notable degree of disaggregation on the government expenditures side, by explicitly distinguishing between (productivity-enhancing) public investment, public purchases and the public sector wage bill. In addition, we consider a labor market characterized by search and matching frictions, which allows to analyze the response of equilibrium unemployment to fiscal measures. In order to illustrate some of its applications, and motivated by recent policy debate in the Euro Area, we calibrate the model to Spain and the rest of the area and simulate a number of fiscal consolidation scenarios. We find that, in terms of output and employment losses, fiscal consolidation is the least damaging when achieved by reducing the public sector wage bill, whereas it is most damaging when carried out by cutting public investment. |
| Keywords: | DSGE model, fiscal policy, two-country monetary union, disaggregation of fiscal expenditures, labor market frictions |
| JEL: | E62 H30 |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1110&r=eec |
| By: | Francisco de Castro (Banco de España, Madrid, Spain.); Javier J. Pérez (Banco de España, Madrid, Spain.); Marta Rodríguez-Vives (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | Public deficit figures are subject to revisions, as most macroeconomic aggregates are. Nevertheless, in the case of Europe, the latter could be particularly worrisome given the role of fiscal data in the functioning of EU’s multilateral surveillance rules. Adherence to such rules is judged upon initial releases of data, in the framework of the so-called Excessive Deficit Procedure (EDP) Notifications. In addition, the lack of reliability of fiscal data may hinder the credibility of fiscal consolidation plans. In this paper we document the empirical properties of revisions to annual government deficit figures in Europe by exploiting the information contained in a pool of real-time vintages of data pertaining to fifteen EU countries over the period 1995-2008. We build up such real-time dataset from official publications. Our main findings are as follows: (i) preliminary deficit data releases are biased and non-efficient predictors of subsequent releases, with later vintages of data tending to show larger deficits on average; (ii) such systematic bias in deficit revisions is a general feature of the sample, and cannot solely be attributed to the behaviour of a small number of countries, even though the Greek case is clearly an outlier; (iii) Methodological improvements and clarifications stemming from Eurostat’s decisions that may lead to data revisions explain a significant share of the bias, providing some evidence of window dressing on the side of individual countries; (iv) expected real GDP growth, political cycles and the strength of fiscal rules also contribute to explain revision patterns; (v) nevertheless, if the systematic bias is excluded, revisions can be considered rational after two years. JEL Classification: E01, E21, E24, E31, E5, H600. |
| Keywords: | data revisions, real-time data, news and noise, fiscal statistics, rationality. |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20111342&r=eec |
| By: | Karl Whelan (University College Dublin) |
| Date: | 2011–05–23 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:201109&r=eec |
| By: | Michele Raitano; Francesco Vona (Sapienza University of Rome.) |
| Abstract: | Recent literature agrees that the degree of intergenerational mobility substantially differs across European countries, ranked between the “mobile” Nordic countries and the “immobile” Anglo-Saxon and Southern ones. In this paper we will compare the intergenerational transmission of advantages in 8 European countries using EU-SILC dataset. Considering parental occupations as background variable, our main aims are to assess whether residual returns to background on offspring’s labour incomes persist after controlling for intermediated background-related outcomes (education and occupation) and to disentangle the role played by upward and downward occupational mobility on earnings. Our empirical analyses show that cross-country differences occur in the labour markets rather than in the educational stream. Consistently with previous findings, residual background effects on earnings are not significant in Nordic and Continental countries whereas they appear large in Anglo-Saxon and Southern ones. When the impact of backward and upward mobility is assessed, in all countries but Nordic ones penalties for upgrading emerge mostly in top occupations and are higher in less-mobile countries. These patterns are smoothened but preserved in bottom occupations and robust to different labour income measures. |
| Keywords: | Residual Returns to Background, Earning Impact of Occupational Mobility, International comparison, Intergenerational Inequality |
| JEL: | D31 I21 J24 J31 J62 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:dsc:wpaper:13&r=eec |
| By: | Bruno Contini |
| Abstract: | Why did employment growth - high in the last decade– take place at the expense of young workers in the countries of Central and Southern Europe ? This is the question addressed in this paper. Youth unemployment has approached or exceeded 20% despite a variety of factors, common to most EU countries. According to neo-classical economics all would be expected to exert a positive impact on its evolution: population ageing and the demographic decline, low labor cost of young workers, flexibility of working arrangements, higher educational attainment, low unionization of young workers, early retirement practices of workers 50+. But neither seems to provide a convincing explanation. Historically based institutions and political tradition, cultural values, social capital – factors that go beyond the standard explanation of economic theory – provide a more satisfying interpretation. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wplabo:102&r=eec |