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on European Economics |
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Issue of 2011‒07‒21
thirteen papers chosen by Giuseppe Marotta University of Modena and Reggio Emilia |
| By: | Yu Sun |
| Abstract: | This paper investigates the degree of bank competition in the euro area, the U.S. and U.K. before and after the recent financial crisis, and revisits the issue whether the introduction of EMU and the euro have had any impact on bank competition. The results suggest that the level of bank competition converged across euro area countries in the wake of the EMU. The recent global financial crisis led to a fall in competition in several countries and especially where large credit and housing booms had preceded the crisis.. |
| Keywords: | Banks , Competition , Cross country analysis , Economic models , Euro Area , European Economic and Monetary Union , United Kingdom , |
| Date: | 2011–06–24 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/146&r=eec |
| By: | Richard T. Harmsen; Jarkko Turunen; Tamim Bayoumi |
| Abstract: | Concerns about export growth within the euro area peripheral countries due to a lack of competitiveness within the euro area are a key policy issue. Our analysis suggests that: (i) Long-term price elasticities for intra-euro area exports are at least double those for extra-euro area exports, so traditional real effective exchange rate indexes may overstate the effectiveness of euro depreciation in restoring exports growth in the euro area periphery and; (ii) There are surprisingly wide divergences across alternative relative price measures and even when relative price data suggest a steady loss in intra- (and extra-) euro area competitiveness, the pace of deterioration depends on the measure of relative prices used. |
| Keywords: | Cross country analysis , Demand , Economic models , Euro Area , Export competitiveness , Export growth , Export performance , Exports , Price elasticity , Real effective exchange rates , |
| Date: | 2011–06–16 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/140&r=eec |
| By: | Francesca Pancotto; Filippo Pericoli (Department of Economics, University of Bologna) |
| Abstract: | A sustainable path of relative competitiveness among the EMU countries is a key factor for the survivorship of the currency union in the long run. We analyze unit labor costs in the European Union with VECM methodology to evaluate relative competitiveness of euro area countries, controlling for exchange rate on the adjustment dynamics, for the economy as a whole and for the manufacturing sector, considered as a proxy of the tradable sector. Results show a lack of convergence of member countries, which is more pronounced for the tradable sector. Persisting idiosyncratic dynamics may be driven by different bargaining policies and institutional structures of national labor markets, and by differential path of technological advance deterring convergence of long run productivity. |
| Keywords: | Unit labor costs, Exchange Rates, Convergence, Competitiveness, Manufacturing Sector |
| JEL: | E31 O47 C32 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:dsc:wpaper:14&r=eec |
| By: | João Sousa (Banco de Portugal); Ricardo M. Sousa (Universidade do Minho - NIPE) |
| Abstract: | The goal of thes paper is to analyze predictability of future asset returns in the context of model uncertainty. Using data for the euro area, the US and the U.K., we show that one can improve the forecasts of stock returns using a Bayesian Model Averaging (BMA) approach, and there is a large amount of model uncertainty. The empirical evidence for the euro area suggests that several macroeconomic, financial and macro-financial variables are consistently among the most prominent determinants of risk premium. As for the U.S, only a few number of predictors play an important role. In the case of the UK, future stock returns are better forecasted by financial variables. These results are corroborated for both the M-open and the M-closed perspectives and in the context of "in-sample" and "out-of-sample" forescating. Finally, we highlight that the predictive ability of the BMA framework is stronger at longer periods, and clearly outperforms the constant expected returns and the autoregressive benchmark models. |
| Keywords: | stock returns, model uncertainty, Bayesian Model Averaging |
| JEL: | E21 G11 E44 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:21/2011&r=eec |
| By: | Etienne Farvaque (Department of Economics, University of Lille 1); Muhammad Azmat Hayat (Department of Economics, University of Lille 1); Alexander Mihailov (Department of Economics, University of Reading) |
| Abstract: | This paper addresses empirically the still debated issue of the legitimacy of the European Central Bank (ECB) with regard to European polities, presenting evidence on public opinion support for the ECB as elicited from responses in the recent waves of the Eurobarometer survey. We employ a rich set of potential determinants, combining macroeconomic and socio-demographic data in logistic regressions, to explain trust in the ECB. We find that people with higher level of income and education and centre to right-wing political orientation tend to support the ECB, as well as people with optimistic expectations on the economic situation. Moreover, our results indicate that socio-demographic determinants of trust in the ECB dominate macroeconomic ones, in particular inflation performance, by a considerable margin of magnitude and in a quite robust way. The policy relevance of such results is important for ECB’s communication strategy with the EU public, especially in the years ahead of likely reforms of the European Monetary Union (EMU). |
| Keywords: | European Central Bank, communication, legitimacy, determinants of trust, Eurobarometer survey, logistic regression |
| JEL: | C23 E58 F33 H11 Z13 |
| Date: | 2011–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:rdg:emxxdp:em-dp2011-04&r=eec |
| By: | Ricardo M. Sousa (Universidade do Minho - NIPE) |
| Abstract: | I show that when the ratio of asset wealth to human wealth falls, investors become more exposed to idiosyncratic shocks and demand higher stock and government bond risk premia. I find that the residuals from the cointegrating vector among asset wealth and labour income, wy, predict both future stock and bond returns in the Euro Area. Consequently, it can be used to track time-variation in risk premium. The results are robust to the inclusion of control variables and vis-a-vis other benchmark models. Finally, I show that, conditioning the predictive ability of wy on the financial stress conditions allows one to track better future time-variation in risk premium. Moreover, when financial stress increases, investors perceive a larger risk for both stocks and government bonds. |
| Keywords: | wealth, income, stock returns, government bond yields |
| JEL: | E21 E44 D12 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:22/2011&r=eec |
| By: | Canale, Rosaria Rita |
| Abstract: | European Monetary Union experiences the division into two major blocks according to their ability to respect fiscal criteria and replace their bonds on the market. The so-called PIIGS countries are asked to hardly reduce their deficit and debt in order to prevent speculative attacks and preserve the Currency Union. The aim of the paper is to show that speculative attacks on government debt are not directly linked to default probability, but to liquidity requirements and to the EU fiscal constraints. In times of crisis the path of deficit/GDP ratio goes up and send the signal that governments are loosening their fiscal stance. As far as there are liquidity constraints, markets increase the spreads and force governments to fiscal retrenchments, hardly increasing the cost of adjustment. The result is that in the absence of a bailout shared mechanism financial markets give policy prescriptions and exert a political pressure without having fiscal sovereignty. |
| Keywords: | Fiscal policy; sovereign debt crisis; EMU |
| JEL: | E65 E61 F33 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32215&r=eec |
| By: | Martin Bijsterbosch (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Tatjana Dahlhaus (Universitat Autònoma de Barcelona, Spain.) |
| Abstract: | This paper aims to shed light on the characteristics and particularly the determinants of credit-less recoveries. After building a dataset and documenting some stylised facts of credit-less recoveries in emerging market economies, this paper uses panel probit models to analyse key determinants of credit-less recoveries. Our main findings are the following. First, our frequency analysis confirms earlier findings that credit-less recoveries are not at all rare events. Moreover, our analysis shows that the frequency of credit-less recoveries doubles after a banking or currency crisis. Second, results from estimated panel probit models suggest that credit-less recoveries are typically preceded by large declines in economic activity and financial stress, in particular if private sector indebtedness is high and the country is reliant on foreign capital inflows. Finally, we find that the predicted probability of a credit-less recovery in central and eastern European EU Member States during the coming years varies across countries, but is relatively high in the Baltic States. JEL Classification: C23, C25, E32, E51, G01. |
| Keywords: | Credit-less Recoveries, Financial Crises, Panel Probit Models. |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20111358&r=eec |
| By: | Andrzej P. Dabkowski |
| Abstract: | Endogenous growth theory assigns an important role for entrepreneurship in the process of economic development. This paper sets to formally test the impact of entrepreneurship on economic growth. Entrepreneurship is represented by a number of proxy variables, whereas Total Factor Productivity is used as a measure of economic growth. Panel data of 26 European countries repeatedly sampled over a period of 11 years is used to estimate a Random Effects model. This study finds that entrepreneurship contributes to growth moderately. It is not, nonetheless, a dominant force shaping changes in TFP growth rates. Business Birth Rate, Self-employment Rate, Business Investment and Labour Productivity Growth were all found to be highly significant. The article concludes that more encompassing measure of entrepreneurship needs to be developed, one that would reflect the complexity of the notion. |
| Keywords: | entrepreneurship, total factor productivity, economic growth, the EU |
| JEL: | O11 O30 O47 O52 L26 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:sec:cnstan:0427&r=eec |
| By: | Michael Artis; Declan Curran; Marianne Sensier |
| Abstract: | This paper investigates agglomeration economies in an annual panel of NUTS 2 and NUTS 3 city regions across France, Germany, Ireland, Italy, Spain and the UK over 1980-2006 and comparing three sub-samples to see if the effects have changed over time. We uncover evidence of long run agglomeration effects of around 6% for NUTS 2 and NUTS 3 city regions for the full sample. The underlying pattern that this data reflects is changing sectoral composition in which manufacturing was declining, to be largely replaced by services; then more recently a period of city-based economic growth with the financial and business services-led boom at its heart. |
| Keywords: | agglomeration, system dynamic panel data estimations |
| JEL: | C22 E32 E37 E40 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:cep:sercdp:0078&r=eec |
| By: | Golinelli, Roberto (University of Bologna); Rovelli, Riccardo (University of Bologna) |
| Abstract: | How did post-communist transformations affect people's perceptions of their economic and political systems? We model a pseudo-panel with 89 country-year clusters, based on 13 countries observed between 1991 and 2004, to identify the macro and institutional drivers of the public opinion. Our main findings are: (i) When the economy is growing, on average people appreciate more extensive reforms; they dislike unbalanced reforms. (ii) Worsening of income distribution and higher inflation interact with an increasing share of the private sector in aggravating nostalgia for the past regime. (iii) Cross-country differences in the attitudes towards the present and future (both in the economic and political dimensions) are largely explained by differences in the institutional indicators for the rule of law and corruption. (iv) Cross-country differences in the extent of nostalgia towards the past are mainly related to differences in the deterioration of standards of living. |
| Keywords: | economic performance, economic reforms, post-communist transition, political economy, support for reforms, public opinion |
| JEL: | O11 O57 P2 P36 P52 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5836&r=eec |
| By: | Battaglia, Lauren; Larouche, Pierre; Negrinotti, Matteo |
| Abstract: | This paper is the first of a larger project aimed at exploring, among other things, whether Europe has a consistent innovation policy in the context of EU economic law (competition policy, intellectual property law, sector regulation). As such, its primary aim is to present our approach for answering this question and outline the anticipated contributions of the project. Part I of the paper sets forth the theoretical foundations of the project--namely an integrated approach to economic law that moves beyond apparent conflicts and assumes innovation as the starting point. Taking this as the foundation, the two primary components of the project are described. First, a theoretical component involving the development of an analytical grid to be used to identify ways in which economic law impacts innovation, and second an applied component that explores observable instances where choices, both implicit and explicit, are made regarding innovation in economic law. Part II of the paper builds on this and offers a preliminary illustration of the proposed analysis in the context of pharmaceuticals, specifically drug reformulation regulatory gaming. |
| Keywords: | antitrust; economic law; innovation; pharmaceuticals |
| JEL: | K21 L41 O31 O34 O38 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8481&r=eec |
| By: | Matteo Lucchese (Università di Urbino "Carlo Bo") |
| Abstract: | The model and the empirical test developed in this paper address the determinants of structural change for six major European economies from 1995 to 2007. The performances of sectors are explained by the unfolding of uneven technological opportunities and different conditions of demand. Building on the literature on structural change and on previous studies on the link between sectoral patterns of innovation and economic performance of sectors, a set of tests is developed on a panel of 21 manufacturing sectors and 17 services, merging three different sources of data. The results show the importance of breaking up the innovative efforts of sectors and the role of demand in shaping their trajectories of development. |
| Keywords: | Structural change, Demand, Innovation, Industry-level analysis. |
| JEL: | O10 O33 O41 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:urb:wpaper:11_09&r=eec |