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on European Economics |
| By: | Ludger Schuknecht (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Philippe Moutot (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Philipp Rother (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Jürgen Stark (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main) |
| Abstract: | The sovereign debt crisis in the euro area is a symptom of policy failures and deficiencies in – among other things – fiscal policy coordination. The first nine years of the euro were not used effectively in order to improve public finances, while the Stability and Growth Pact was watered down. Spillovers from the financial and economic crisis compounded fiscal difficulties in the euro area, especially in certain member countries. This paper looks back at the history of fiscal policies and rules in Economic and Monetary Union (EMU). It makes proposals to strengthen fiscal policy governance that go well beyond the legislation set to be adopted in autumn 2011. The authors consider these additional governance measures to be essential for effective policy coordination and sound public finances in the future. JEL Classification: H6, E6 |
| Keywords: | fiscal rules, Stability and Growth Pact, fiscal deficits, public debt, EU institutional reform |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:20110129&r=eec |
| By: | Pirovano M.; Van Poeck A. |
| Abstract: | This paper presents new evidence on inflation differentials in the Euro Area from different perspectives, and extending the sample including the recent financial crisis. First, we give an informal analysis of the evolution of inflation dispersion and inflation differentials since the start of EMU. Second, we perform formal statistical analyses of the stability properties of inflation differentials in the period 1999-2010. Univariate and multivariate tests reject the null of stability of inflation differentials when conducted over the entire sample period. However, when the financial crisis is excluded, the null of stability is not rejected for the large majority of countries. This finding implies the beginning of a new tendency since the global financial turmoil, and new challenges for the common monetary policy. Finally, we analyze the determinants of inflation differentials, empirically testing a number of theories including price level equalization, productivity differentials, differences in cyclical positions, labor and product market rigidities. We conclude that inflation differentials are not the result of equilibrating, transitory forces, but rather of persistent structural and country-specific factors. This calls for structural reforms in labor and product markets, and countercyclical fiscal policy measures at the individual country level. As inflation differentials pose a serious challenge for the monetary policy of the ECB, we further believe that the ECB should be equipped with additional policy instruments to cope with them in a more direct way. |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:ant:wpaper:2011014&r=eec |
| By: | Kari E.O. Alho |
| Abstract: | We reassess the result of unsustainability of the euro with respect to inflation differentials claimed by Wickens (2007) by specifying an open-economy version of a two-region New Keynesian model for EMU and demonstrate that the result by Wickens does not hold in general. We are able to derive a result that the model is determinate for a wide range of policy rules so that the sustainability of the euro area and the member countries is reached over time with respect to supply and demand shocks and emerged imbalances in price levels and competitiveness. We then enlarge the numerical analysis to consider EMU and sustainability in the case, prevailing currently, where a high debt country should both restore its competitiveness and its fiscal balance, and the policies re-quired from the single monetary policy and the national fiscal policies. Strong fiscal consolidation and far-reaching successful structural reforms are needed to reach sustainability in the sense that emerged imbalances in competitiveness and price levels and the threat of ever mounting debt levels could be eliminated over the medium run. We also illustrate how the current deflationary adjustment involves a major polarisation in economic developments within the euro area. |
| JEL: | E43 E52 E62 |
| Date: | 2011–09–21 |
| URL: | http://d.repec.org/n?u=RePEc:rif:dpaper:1259&r=eec |
| By: | Hirose, Yasuo |
| Abstract: | We estimate a two-country open economy version of the New Keynesian DSGE model for the U.S. and the Euro area, using Bayesian techniques that allow for both determinacy and indeterminacy of the equilibrium. Our empirical analysis shows that the worldwide equilibrium is indeterminate due to a passive monetary policy in the Euro area, even if U.S. policy is aggressive enough. We demonstrate that the impulse responses under indeterminacy exhibit different dynamics than those under determinacy and that sunspot shocks affect the Euro economy to a substantial degree, while the transmission of sunspots to the U.S. is limited. |
| Keywords: | Monetary Policy; Indeterminacy; Sunspot Shock; Open Economy Model; Bayesian Analysis |
| JEL: | E52 F41 C11 C62 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:33693&r=eec |
| By: | Marion Salines (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Gabriel Glöckler (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Zbigniew Truchlewski (Central European University, Nador u. 9, 1051 Budapest, Hungary); Paola del Favero (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main) |
| Abstract: | This Occasional Paper examines how and why the institutional framework governing EMU has evolved since the creation of the euro. Building on theories of institutionalism, the paper in particular investigates to what extent functional spillovers from the single currency into other policy domains, like macroeconomic policies or financial regulation, met with an adequate institutional response, and to what extent the existing institutional framework conditioned the response to the fi nancial crisis. The interaction between policy requirements and institutional capabilities is examined both in “ordinary times” (1999-2007) and under “crisis conditions” (2007-10). The paper uses a typology of change which helps to put into perspective both the resilience of the institutional framework of EMU and its capacity to adapt. In this respect, it allows for a better understanding and framing of the current reforms of EMU economic governance. It concludes that even though the crisis will accelerate institutional development, it will do so only gradually, as path dependence and an inbuilt bias towards incremental change will prevent policy-makers from pursuing a “clean slate” strategy. JEL Classification: D79, E02, F02, F51, F53, F55, F59 |
| Keywords: | EMU institutional architecture, historical institutionalism, rational choice, institutional change. |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:20110127&r=eec |
| By: | Dybczak, Kamil; Melecky, Martin |
| Abstract: | The recent global financial crisis has had a diverse effect on countries’ fiscal stance, especially throughout the EU. This paper examines the impact of macroeconomic shocks, including those to government revenues and expenditures, on EU countries’ fiscal stance, on aggregate, and within the EU’s sub-regions as defined by the length of countries’ membership in the EU and their level of indebtedness. The fiscal stance is measured by means of the government deficit, and the impact of macroeconomic shocks is examined using impulse responses from a structural vector autoregression (SVAR) model estimated on annual panel data. The analyzed system of macroeconomic variables includes, government revenues and expenditures, GDP growth, CPI inflation, the interest rate, the terms of trade, and the real effective exchange rate. The paper discusses the policy implications and the challenges for the EU and its sub-regions concerning the fiscal policy setting and balanced fiscal stance. |
| Keywords: | Macroeconomic shocks; Fiscal Stance; European Union; Panel Data Analysis; Structural Vector Autoregression Models |
| JEL: | E62 H68 E37 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:33684&r=eec |
| By: | Fabrizio Cafaggi; Olha Cherednychenko; Marise Cremona; Kati Cseres; Lukasz Gorywoda; Rozeta Karova; Hans-Wolfgang Micklitz; Karolina Podstawa |
| Abstract: | Since its creation, European Union (hereinafter: ‘the EU’) has experienced various enlargements. In 1973, Denmark, Ireland and the United Kingdom joined the EU. Greece became a Member in 1981 and was followed by Spain and Portugal in 1986. Austria, Finland and Sweden accessed the EU in 1995. In 2004, ten Central and Eastern European Countries (hereinafter: ‘the CEECs’) became EU members. Finally, another two CEECs, i.e. Bulgaria and Romania, joined the EU on 1 January 2007. What impact did previous enlargements have on national systems of private law? It is an important question since there are ongoing accession negotiations with Croatia and Turkey and also other countries (Macedonia, Bosnia and Herzegovina, Albania Serbia and Montenegro, Ukraine and Moldova) are interested in adhering to the EU. Not only these countries but also Russia has developed specific relationships with the EU which affect its private law system. Learning from previous experience may help structuring better pattern of Europeanization. But the broader question is whether the process of Europeanization of private law in CEECs can be considered concluded with membership or ‘regional policies’ are needed to contextualize the implementation of EU law and to govern its spillovers. |
| Keywords: | European law; harmonisation; East-Central Europe |
| Date: | 2010–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:erp:euilaw:p0138&r=eec |
| By: | Benedicta Marzinotto; Guntram B. Wolff; Mark Hallerberg |
| Abstract: | The European Semester is a new institutional process that provides EU member states with ex-ante guidance on fiscal and structural objectives. The Semesterâ??s goals are ambitious and it is still uncertain how it will fit into the new EU economic governance framework. We find that member states are only slowly internalising the new procedure. Furthermore, the Semester has so far lacked legitimacy due to the minor role assigned to the European Parliament, the marginal involvement of national parliaments and the lack of transparency of the process at some stages. Finally, there remains room to clarify the implications from a unified legal text. In fact, diluting the legal separation of recommendations on National Reform Programmes and Council opinions on Stability and Convergence Programmes may compromise effective surveillance and governance. The European Parliament has an important role to play. It needs hold the Commission and the Council accountable. This and the overall objective of enhancing the new procedureâ??s effectiveness and legitimacy can be done by means of a regular Economic Dialogue on the Semester. |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:bre:wpaper:612&r=eec |
| By: | Olczyk, Magdalena; Lechman, Ewa |
| Abstract: | The main aim of the paper to test for structural convergence among arbitrary selected European countries. The authors choose four transition economies: Poland, Czech Republic, Hungary and Slovak Republic which are widely recognized as structurally similar economies. All four countries` economy structures are consequently compared with the structure of German economy – here selected as the reference country. The authors want to find out whether it is possible to confirm the hypothesis about the structural convergence between the four selected economies and Germany. The data sample covers the period of 2000-2007. The empirical part of analysis bases on 18 different indicators connected with the economy structure. To verify the hypothesis the authors apply multidimensional taxonomy methods |
| Keywords: | structural convergence; structural changes |
| JEL: | F00 F43 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:33656&r=eec |