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on European Economics |
| By: | Murphy, Gavin; Siedschlag, Iulia |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:rb2011/3/3&r=eec |
| By: | Brissimis, Sophocles; Hondroyiannis, George; Papazoglou, Christos; Tsaveas, Nicholas; Vasardani, Melina |
| Abstract: | The purpose of this paper is to explore the main macroeconomic, financial and structural factors that influenced current account developments in the euro area countries over the period from 1980 to 2008. The analysis, which theoretically rests on the intertemporal approach, uses a panel consisting of the twelve EU member states that initially joined the euro area, which is then expanded to seventeen countries with the aim to see whether the enlargement or potential enlargement of the euro area would alter the identified set of current account determinants. The results show that factors such as the level of development, demographics, macroeconomic policies and competitiveness, are important in explaining current account positions of individual euro area countries. Moreover, the analysis of short-run dynamics indicates that the EMU has resulted in longer periods of adjustment of current account imbalances. |
| Keywords: | Current account determinants; euro area imbalances |
| JEL: | F32 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:35362&r=eec |
| By: | Xin Zhang (VU University Amsterdam); Bernd Schwaab (European Central Bank); Andre Lucas (VU University Amsterdam) |
| Abstract: | The Eurozone debt crisis raises the issue of measuring and monitoring interconnected sovereign credit risk. We propose a novel empirical framework to assess the likelihood of joint and conditional failure for Euro Area sovereigns. Our model captures all the salient features of the data, including skewed and heavy-tailed changes in the price of CDS protection against sovereign default, as well as dynamic volatilities and correlations to ensure that failure dependence can increase in times of stress. We apply the model to Euro Area sovereign CDS spreads from 2008 to mid-2011. Our results reveal significant time-variation in risk dependence and considerable spill-over effects in the likelihood of sovereign failures. We further demonstrate the importance of capturing higher-order time-varying moments during times of crisis for the assessment of dependent risks. |
| Keywords: | sovereign credit risk; higher order moments; financial stability surveillance |
| JEL: | C32 G32 |
| Date: | 2011–12–13 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20110176&r=eec |
| By: | Pessoa, Argentino |
| Abstract: | After the beginning of the euro area, countries in its periphery engaged in weighty borrowing from foreign private investors, allowing domestic spending to outpace incomes. Now, these countries face debt crises reflecting a loss of creditor confidence in the sustainability of their finances from which results an abrupt end in private foreign lending to these economies. The debt crisis made evident the asymmetry between core and periphery countries, which is visible in trends in saving, consumption and investment. These divergent patterns have contributed to view the debt crisis as a problem of the PIIGS (Portugal, Ireland, Italy, Greece, Spain) that can be contained in the periphery, or as a new version of the fable of the Grasshopper and the Ant. We dispute this reductionism showing that the debt crisis is systemic and its solution cannot be found with more fiscal rules and austerity in peripheral countries alone. It will imply, if not an increase in fiscal and political integration, at least a higher coordination at the political and economic front and a new governance structure. |
| Keywords: | Debt crisis; Euro Area; EFSF; ESM; Fiscal rules; PIIGS; Systemic crisis; Solvency |
| JEL: | F15 E62 F34 E44 F36 G01 |
| Date: | 2011–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:35328&r=eec |
| By: | Maria Cipollina; Giorgia Giovannetti; Filomena Pietrovito; Alberto Franco Pozzolo |
| Abstract: | We simulate the macroeconomic and welfare implications of different fiscal consolidation scenarios in Italy using a medium scale two-areas dynamic general equilibrium currency-union model. Differently from similar models, ours is rich in the terms of fiscal features. We assume distortionary taxes (on labor income, capital income and consumption) and welfare-enhancing public expenditure. We distinguish between public spending on final goods and services, public employment and transfers to households. The scenarios that we consider envisage a decreases in the public debt to GDP ratio of 10 percentage points in 5 years. Based on our simulations we find that: first, fiscal distortions are quantitatively significant; second, a consolidation strategy that reduces expenditure and simultaneously lowers tax rates has a positive effect on long-run GDP of 5% to 7% and on welfare of 4% to 7% of the initial levels, depending on the composition of the adjustment; third, consumption and investment are stable or grow on impact and along the path to the new steady state; finally, spillovers to the rest of the euro area are expansionary and sizeable both in the long run and along the transition. |
| Keywords: | Foreign direct investment; Economic growth; Capital intensity; Technological progress; Patents; Labor productivity |
| JEL: | F23 F36 F43 O16 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:itt:wpaper:wp2011-10&r=eec |
| By: | Fröhling, Annette; Lommatzsch, Kirsten |
| Abstract: | We investigate output sensitivity of inflation in the euro area through a disaggregated analysis using price indices at the COICOP 4-digit level and compare cyclical sensitivity of a newly created index of cyclically sensitive items (ICSP) with that of headline HICP and core price indices. We also relate the ICSP to the first common factor extracted from the disaggregated prices, which best reflects the common dynamics of the underlying price indices. Our results indicate that two thirds of the items in the euro area HICP are cyclically sensitive. Categories most robustly related to the business cycle are food items (processed and unprocessed), non-durable industrial goods and services related to recreation. Output sensitivity of the ICSP is significantly higher than that of headline inflation. The difference in output sensitivity is most striking between the ICSP and core inflation because of the rather strong cyclical sensitivity of processed and unprocessed food prices (both in prevalence and the estimated parameter of output sensitivity). The index of cyclically sensitive prices is highly correlated with the first common factor. Given the weak factor structure of disaggregated prices, however, we conclude that the domestic business cycle is an important determinant of inflation but it is only one among a number of nearly equally important factors. -- |
| Keywords: | Output sensitivity,inflation,disaggregated price indices,heterogeneity,euro area,factor analysis |
| JEL: | E31 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdp1:201125&r=eec |
| By: | Stefano D'Addona (University of Roma Tre); Ilaria Musumeci (University of Roma Tre) |
| Abstract: | We analyze the current state of the monetary integration in Europe focusing on the UK position regarding the European Monetary Union. The interest rates decisions of the European Central Bank and the Bank of England are compared through different specifications of the Taylor Rule. The comparison of the monetary conducts provides a useful feedback when looking for the differences claimed by the British government as motivating the UK refusal to join the European Monetary Union. Testing for a forward looking behavior and possible asymmetries in the policy responses, we show evidence supporting the opt-out by the UK monetary authorities. |
| Keywords: | Taylor rule; European monetary integration; Regime switching models; Interest rate smoothing. |
| JEL: | E32 E52 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:rcr:wpaper:06_11&r=eec |
| By: | Hanna Kröger; Sandra Schaffner |
| Abstract: | Labour supply is determined by two factors: the participation of workers in the labour market (extensive margin), and the number of hours supplied by those working (intensive margin). Based on the European Union Labour Force Survey (EU-LFS), we analyse which margin is more decisive in determining overall labour supply in 24 Member States. The results reveal large diff erences between countries, even after controlling for composition effects in terms of socio-demographic and household characteristics. In addition to individual labour supply, our focus is on differences between EU Member States concerning household labour supply. Joint determination of the number of hours worked between spouses can be observed for dual-income couples in Austria, the Netherlands and Spain. |
| Keywords: | Female labour supply; household labour supply; European Union; EU-LFS |
| JEL: | J22 J21 J16 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0291&r=eec |
| By: | Ashoka Mody; Damiano Sandri |
| Abstract: | We use the rise and dispersion of sovereign spreads to tell the story of the emergence and escalation of financial tensions within the eurozone. This process evolved through three stages. Following the onset of the Subprime crisis in July 2007, spreads rose but mainly due to common global factors. The rescue of Bear Stearns in March 2008 marked the start of a distinctively European banking crisis. During this key phase, sovereign spreads tended to rise with the growing demand for support by weakening domestic financial sectors, especially in countries with lower growth prospects and higher debt burdens. As the constraint of continued fiscal commitments became clearer, and coinciding with the nationalization of Anglo Irish in January 2009, the separation between the sovereign and the financial sector disappeared. |
| Keywords: | Banks , Cross country analysis , Economic growth , Economic models , Europe , Financial crisis , Financial sector , Global competitiveness , Sovereign debt , |
| Date: | 2011–11–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/269&r=eec |
| By: | Günter Franke (Department of Economics, University of Konstanz, Germany) |
| Abstract: | This paper argues that the strong member states of the European Currency Union are hostages of a financially distressed member state so that they are compelled to provide financial support. Moreover, due to the dynamics of the interaction game, a debt relief is a free lunch for the distressed country. This fosters moral hazard of distressed countries. In the absence of capital market control, European politics do not effectively monitor fiscal politics of member states. The lack of a long term strategy of the European Currency Union to deal with distressed states has undermined the credibility of politics. This lack is also explained by a lack of a European Insolvency Charter. A viable Union requires such a charter with rules for handling distress. Moreover, politics should determine a mechanism to coordinate politics and capital markets in their monitoring of fiscal and economic policy of member states. |
| Keywords: | European Currency Union, European Insolvency Charter, hostages, free lunch, externalization hypothesis |
| JEL: | E62 F36 F53 H30 H60 |
| Date: | 2011–11–20 |
| URL: | http://d.repec.org/n?u=RePEc:knz:dpteco:1147&r=eec |
| By: | Skopek, Nora; Buchholz, Sandra; Blossfeld, Hans-Peter |
| Abstract: | Past sociological inequality research focused on (labor) market outcomes, while neglecting the even more important role of wealth. In our study we investigate the distribution of wealth among the elderly across Europe within the framework of Esping-Andersen’s typology of welfare states. Using SHARE data, our analyses suggest (1) that there is strong variation in the distribution of wealth between European countries, and (2) that patterns of wealth inequality differ strongly from patterns of income inequality. Surprisingly high levels of wealth disparity were found in the social democratic welfare regimes commonly known as very egalitarian societies. We conclude that Esping-Andersen’s scheme requires reconsideration because it is based on a one-sided understanding of social stratification not accounting for the central role of wealth in the stratification process. |
| Keywords: | Inequality; wealth; net worth; income; SHARE; stratification; welfare state; Europe |
| JEL: | D31 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:35307&r=eec |