nep-eec New Economics Papers
on European Economics
Issue of 2012‒01‒10
six papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Structural Convergence of the Central and Eastern European Countries: Achivements in the Last Decade By Tatomir, Cristina F.
  2. World Technology Shocks and the Real Euro-Dollar Exchange Rate By Lambrias, Kyriacos
  3. The challenges to long run fiscal sustainability in Romania By Canagarajah, Sudharshan; Brownbridge, Martin; Paliu, Anca; Dumitru, Ionut
  4. Choice in European reforms of social policies: The case of public employment services By Waltraud Schelkle
  5. Immigration and Welfare State Cash Benefits: The Danish Case By Pedersen, Peder J.
  6. A tale of three countries: recovery after banking crises By Zsolt Darvas

  1. By: Tatomir, Cristina F.
    Abstract: The paper studies the structural convergence of the Central and Eastern European countries (CEECs) with the Euro area, in order to determine whether the last decade led an increase or a decrease of the gaps between these two regions. The main findings of the paper indicate that only three CEECs out of ten reached a higher level of structural convergence with the Euro area in the last decade, namely Latvia, Bulgaria and Slovenia. Romania remains by far the country with the highest level of structural divergence. The analysis is based on cluster methodology and the structural divergence index developed by Krugman (2001).
    Keywords: structural convergence; Central and Eastern Europe; Euro area; clusters
    JEL: F15 F41
    Date: 2011–09–22
  2. By: Lambrias, Kyriacos
    Abstract: We extend the empirical SVAR literature on real exchange rates by extracting a common stochastic trend in productivity, interpreted as a permanent world technology shock. Overall, we find that innovations to world technology constitute an important, albeit not the dominant, source of movements in the real euro-dollar exchange rate. First, the dollar appreciates significantly in response to such an impulse. Second, the world technology shock accounts for approximately one-fifth of the variance of the forecast error in the real euro-dollar rate at business-cycle frequencies. Our results are in line with previous studies who find that demand or nominal shocks are the dominant sources of fluctuations in relative prices and provides limited support to productivity-based models of real exchange rate determination.
    Keywords: Euro-Dollar Real Exchange Rate, World Technology Shocks, Structural VAR
    JEL: C32 F41 E32
    Date: 2011–12–15
  3. By: Canagarajah, Sudharshan; Brownbridge, Martin; Paliu, Anca; Dumitru, Ionut
    Abstract: Romania, along with many other countries in the European Union, faces daunting fiscal challenges. Fiscal balances deteriorated sharply following the global economic crisis, forcing Romania to implement a fiscal consolidation that was one of the largest in the European Union, but which may not be sustainable without a recovery of economic growth. Although the ratio of public debt to gross domestic product is still relatively modest, at around 35 percent, long-term fiscal solvency is threatened by the costs of funding the public pension system in the face of adverse demographic shifts over the next 50 years. Because of widespread tax evasion, the tax system in Romania is one of the least efficient in the European Union. Tax reforms that can reduce the amount of tax lost to evasion and fraud could make a major contribution to enhancing fiscal sustainability.
    Keywords: Debt Markets,Public Sector Expenditure Policy,Emerging Markets,Public Sector Economics,Fiscal Adjustment
    Date: 2012–01–01
  4. By: Waltraud Schelkle
    Abstract: Many European countries have embraced the choice agenda in welfare arrangements with a view of improving efficiency and/or quality. The motivations range from legitimising public welfare and administrative modernisation, to electoral politics and cost containment. Our research project included case studies on education, long-term care and public employment services which are very different in terms of stakeholders, fiscal relevance and the role of the European Union in enhancing choice within social and welfare institutions. The overall aim of the research project was to explore the possibility that rather than presenting a challenge to solidaristic welfare citizenship, the introduction of choice may in the longer term safeguard the public provision of services by providing the basis for a new political consensus. If so, this would be good news for Europe’s nascent polity and emerging social union. This paper presents the research design for three case studies and presents the findings of the case study on the reform of public employment services coordinated in and influenced by European integration processes.
    Keywords: social policy; welfare state
    Date: 2011–12–15
  5. By: Pedersen, Peder J. (University of Aarhus)
    Abstract: The purpose in this paper is to summarize existing evidence on welfare dependence among immigrants in Denmark and to supply new evidence with focus on the most recent years. Focus is on immigrants from non-western countries. The paper contains an overview of the background regarding immigration in recent decades followed by a survey of relevant benefit programmes in the Danish welfare state. Existing studies focus on both macro analyses of the overall impact from immigration on the public sector budget and on micro oriented studies with focus on specific welfare programs. Existing studies focus on the importance for welfare dependence of demographic variables, on the big variation between countries of origin and on the importance of cyclical factors at time of entry and during the first years in the new country. Evidence from the most recent years reinforce the importance of aggregate low unemployment in contrast to fairly small effects found from policy changes intending to influence the economic incentives between welfare and a job for immigrants.
    Keywords: immigration, general welfare programs, effects of welfare programs
    JEL: H53 I38 J61
    Date: 2011–12
  6. By: Zsolt Darvas
    Abstract: Three small, open European economies â?? Iceland, Ireland and Latvia â?? experienced serious trouble during the global financial crisis. Behind their problems were rapid credit growth and expansion of other banking activities in the years leading up to the crisis, largely financed by international borrowing. The crisis hit Latvia harder than any other country, and Ireland also suffered heavily, while Iceland exited the crisis with the smallest fall in employment, despite the greatest shock to the financial system. The purpose of this Policy Contribution is to compare the policy responses in, and the adjustments made by, the three countries. Based on this comparison, it draws lessons for exchange rate policy, internal devaluation, capital controls, banking sector restructuring and fiscal consolidation. It makes a strong case for a European banking federation.
    Date: 2011–12

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