|
on European Economics |
|
Issue of 2012‒01‒18
thirteen papers chosen by Giuseppe Marotta University of Modena and Reggio Emilia |
| By: | Tatomir, Cristina F.; Alexe, Ileana |
| Abstract: | This research paper develops a comparative analysis between the new members states of the European Union (EU) – from Central and Eastern Europe (CEE) – and PIIGS countries (Portugal, Italy, Ireland, Greece and Spain) in terms of economic convergence with the Euro area, in the last decade. In addition, the paper emphasizes the changes in the economic convergence levels determined by the recent international crisis. In order to assess these evolutions, we compute an aggregated index of economic convergence, made up of real and structural convergence indexes. Then, by using cluster methodology, we highlight the similarities between the states in the two groups, CEE and PIIGS, from the economic convergence perspective. The comparative analysis reveals that in 2010 only Estonia, Hungary and Slovenia report resembling characteristics to PIIGS group. We also report an important progress of the countries analyzed, as regards real and structural convergence with the Euro area. However, after a decade of catching-up, Romania remains by far the most distanced country from the Euro area. |
| Keywords: | real convergence; structural convergence; Central and Eastern Europe; PIIGS; clusterization |
| JEL: | F15 C43 F43 |
| Date: | 2011–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:35715&r=eec |
| By: | C. Randall Henning (Peterson Institute for International Economics); Martin Kessler (Peterson Institute for International Economics) |
| Abstract: | European debates over reform of the fiscal governance of the euro area frequently reference fiscal federalism in the United States. The "fiscal compact" agreed by the European Council during 2011 provided for the introduction of, among other things, constitutional rules or framework laws known as "debt brakes" in the member states of the euro area. In light of the compact and proposals for deeper fiscal union, we review US fiscal federalism from Alexander Hamilton to the present. We note that within the US system the states are "sovereign": The federal government does not mandate balanced budgets nor, since the 1840s, does it bail out states in fiscal trouble. States adopted balanced budget rules of varying strength during the nineteenth century and these rules limit debt accumulation. Before introducing debt brakes for euro area member states, however, Europeans should consider three important caveats. First, debt brakes are likely to be more durable and effective when "owned" locally rather than mandated centrally. Second, maintaining a capacity for countercyclical macroeconomic stabilization is essential. Balanced budget rules have been viable in the US states because the federal government has a broad set of fiscal powers, including countercyclical fiscal action. Finally, because debt brakes threaten to collide with bank rescues, the euro area should unify bank regulation and create a common fiscal pool for restructuring the banking system. |
| Keywords: | fiscal federalism, balanced budget rules, US financial history, state debt, euro crisis, fiscal compact |
| JEL: | H77 F33 N41 N42 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp12-1&r=eec |
| By: | Esteban Perez-Caldentey; Matias Vernengo |
| Abstract: | Conventional wisdom suggests that the European debt crisis, which has thus far led to severe adjustment programs crafted by the European Union and the International Monetary Fund in both Greece and Ireland, was caused by fiscal profligacy on the part of peripheral, or noncore, countries in combination with a welfare state model, and that the role of the common currency-the euro-was at best minimal. This paper aims to show that, contrary to conventional wisdom, the crisis in Europe is the result of an imbalance between core and noncore countries that is inherent in the euro economic model. Underpinned by a process of monetary unification and financial deregulation, core eurozone countries pursued export-led growth policies-or, more specifically, "beggar thy neighbor" policies-at the expense of mounting disequilibria and debt accumulation in the periphery. This imbalance became unsustainable, and this unsustainability was a causal factor in the global financial crisis of 2007-08. The paper also maintains that the eurozone could avoid cumulative imbalances by adopting John Maynard Keynes's notion of the generalized banking principle (a fundamental principle of his clearing union proposal) as a central element of its monetary integration arrangement. |
| Keywords: | European Union; Current Account Adjustment; Financial Aspects of Economic Integration |
| JEL: | F32 F36 O52 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_702&r=eec |
| By: | G. PEERSMAN |
| Abstract: | I find that the Eurosystem can stimulate the economy beyond the policy rate by increasing the size of its balance sheet or the monetary base, that is so-called quantitative easing. The transmission mechanism turns out to be different compared to traditional interest rate innovations: (i) whilst the effects on economic activity and consumer prices reach a peak after about one year for an interest rate innovation, this is more than six months later for a shift in the monetary base that is orthogonal to the policy rate (ii) interest rate spreads charged by banks decline persistently after quantitative easing policies, whereas the spreads increase significantly after a fall in the policy rate (iii) there is no significant short-run liquidity effect after an interest rate innovation, that is additional bank loans are generated by a greater credit multiplier. In contrast, the multiplier declines considerably after an expansion of the Eurosystem’s balance sheet. |
| Keywords: | Unconventional monetary policy, SVARs |
| JEL: | C32 E30 E44 E51 E52 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:11/734&r=eec |
| By: | Francesco Farina |
| Abstract: | This paper interprets the GDP growth experienced by the economies of the European Union in the perspective of the growth and the agglomeration models. The objective consists in understanding to what extent the growth and convergence paths followed by Europe during the last decades of economic integration process have been affected by the evolution of the exchange rate regime and by increasingly constraining monetary and fiscal policies. |
| Keywords: | growth, beta and sigma convergence, human capital, European Union. |
| JEL: | J24 O47 O52 |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:usi:depfid:0411&r=eec |
| By: | Francesco Spadafora; Emidio Cocozza; Andrea Colabella |
| Abstract: | This paper analyzes the impact of the global crisis on six South-Eastern European countries. The main objective is to compare macro-financial conditions and policies in the run-up to the crisis as well as to compare the policy responses to it, so as to highlight, inter alia, possible country-specific constraints. While sharing a common pre-crisis pattern of strong capital inflows and robust growth, a key difference in the conduct of macroeconomicpolicies is that some countries adopted expansionary (and procyclical) fiscal policies. These moves exacerbated external vulnerabilities and compromised the ability to discretionarily use the fiscal instrument in acountercyclical fashion. |
| Keywords: | Banks , Capital flows , Credit expansion , Credit risk , Current account deficits , Eastern Europe , Economic growth , External debt , Financial crisis , Financial sector , Fiscal consolidation , Fiscal policy , Global Financial Crisis 2008-2009 , Monetary policy , |
| Date: | 2011–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/300&r=eec |
| By: | Cronin, David (Central Bank of Ireland); Dowd, Kevin (Cass Business School, City University, London) |
| Abstract: | This paper sets out a methodology for constructing fan charts for the government deficit and debt ratios over the medium-term. It relies on information contained in Stability/Convergence Programme Updates, a model of the relevant stochastic process (for example, the real GDP process) or processes, and a parameter estimate of the sensitivity of the primary budget balance to the output gap for the member state under consideration. A model of the dynamic deficit-debt relationship allows the impact of random output growth to work its way through the fiscal arithmetic in a consistent and traceable way to produce fan charts over a five-year forecast horizon. The initial set of fiscal fan charts included here for Ireland use the indicative public finance projections set out in the 2011 Update for Ireland. The range of possible fiscal outcomes in the charts assumes no fiscal policy response to any change in the budgetary position over the period such as could arise from changes in growth rates. This assumption of “no policy change” is a standard one in the construction of fan charts. Governments will, however, generally be in a position to adjust fiscal policy towards meeting a specific fiscal target, such as reaching a deficit position of less than 3 percent of GDP in the medium-term. A second set of fan charts is included which indicates how the probabilistic range of fiscal outcomes could be affected by a tightening of fiscal policy in 2013-2015. |
| Keywords: | Programme Updates, fan charts, fiscal arithmetic, stochastic processes, prediction regions |
| JEL: | C15 C63 E62 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:wpaper:15/rt/11&r=eec |
| By: | Sandrine Cazes (International Labour Office, Employment Analysis and Research Unit); Sher Verick (ILO Decent Work Team for South Asia and ILO Country Office for India); Fares Al-Hussami |
| Abstract: | The global financial crisis deeply impacted labour markets around the globe, particularly in a number of OECD countries. However, in such cases as the United States, some commentators have argued that the subsequent rise in unemployment has exceeded previous estimates of the elasticity of the unemployment rate with respect to output growth, a statistical relationship known as Okun’s law. In line with the literature on this topic, the estimates of Okun’s coefficients presented in this paper display considerable variation across countries, which captures the heterogeneity in the responsiveness of unemployment to the global financial crisis. In the United States, Canada, Spain and other severely affected economies, the coefficient increased sharply, departing from pre-crisis levels in the 2000s. In other countries where unemployment has remained subdued, namely Germany and the Netherlands, the coefficient has fallen dramatically. While different factors can potentially explain how the crisis has been transmitted to the labour market, the role of labour market institutions is the focus of this paper. In this regard, empirical evidence exploring the relationship between the shift in Okun’s coefficients and such institutions confirms that the responsiveness in the unemployment rate during the Great Recession was lower in countries where workers are afforded greater employment protection (such as Germany). |
| Keywords: | unemployment / employment / employment security / labour legislation / comment / economic recession / OECD countries / USA |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ilo:emwpap:2012-106&r=eec |
| By: | Claeys Peter; Maravalle Alessandro |
| Abstract: | The Financial Crisis has hit particularly hard countries like Ireland or Spain. Procyclical fiscal policy has contributed to a boom-bust cycle that undermined fiscal positions and deepened current account deficits during the boom. We set up an RBC model of a small open economy, following Mendoza (1991), and introduce the effect of fiscal policy decisions that change over the cycle. We calibrate the model on data for Ireland, and simulate the effect of different spending policies in response to supply shocks. Procyclical fiscal policy distorts intertemporal allocation decisions. Temporary spending boosts in booms spur investment, and hence the need for external finance, and so generates very volatile cycles in investment and the current account. This economic instability is also harmful for the steady state level of output. Our model is able to replicate the relation between the degree of cyclicality of fiscal policy, and the volatility of consumption, investment and the current account observed in OECD countries. |
| Keywords: | RBC, current account, small open economy, fiscal rule, spending |
| JEL: | E32 E62 F41 H62 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:ter:wpaper:0090&r=eec |
| By: | A. ROGGEMAN; I. VERLEYEN; P. VAN CAUWENBERGE; C. COPPENS |
| Abstract: | First, this paper gives an overview of the progress Europe has made in its development of a Common Consolidated Corporate Tax Base (CCCTB). Second, we use firm level data from a listed multinational to investigate how several designs for the CCCTB apportionment formula could affect the allocation of the consolidated tax base. The design is relevant in the light of member states’ concern for protecting their tax revenues, as well as for the multinational companies’ tax minimizing possibilities. Moreover, it plays an important role in achieving an efficient and simple tax system. Simulating different apportionment formulas, the results show that including more factors and using more equal weights distributes the common tax base more equally, which could reduce the incentive to shift factors from high to low tax countries. The results also indicate that simplifying the factor definitions, leads to rather minor changes in the allocation. Using unpublished data, this study allows to investigate the consequences of different formulas in detail, which contributes to the current discussion on corporate tax harmonization in the EU. |
| Keywords: | CCCTB, corporate tax, European Union, apportionment formula |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:11/744&r=eec |
| By: | B. MERLEVEDE; G. RAYP; S. VAN PARYS; T. VERBEKE |
| Abstract: | Empirical research on international tax competition has mainly considered cor- porate taxation. Because of the limited international mobility of labour, labour tax competition tends to be overlooked. This may be unjusti ed. The tax base in labour taxation is the wage mass that depends on employment. While labour is largely in- ternationally immobile, jobs are certainly not because of the international mobility of goods. Given the higher share of labour tax in government revenues, labour tax competition could also have more important welfare consequences than corporate tax competition. We model the possibility of labour tax competition using a standard Dixit-Stiglitz two-country model with immobile rms and workers and transportation costs in exporting goods. The model is extended with the assumptions of non-clearing labour markets and income redistribution by the government, nanced by a labour tax. The model results in an empirical speci cation of the labour tax reaction function in the form of a spatial lag panel. The tax reaction function is then estimated for the EU15 member states using an instrumental variable approach. Our results point to the presence of small, but signi cant labour tax competition within the EU15. |
| Keywords: | tax competition, labour tax, spatial autocorrelation, strategic interactions. |
| JEL: | H0 H25 H77 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:11/750&r=eec |
| By: | Jan Bena; Peter Ondko; Evangelia Vourvachaki |
| Abstract: | As part of the Single Market Program the European Commission commanded the liberalization and regulatory harmonization of utilities, transport and telecommunication services. This paper investigates whether and how this process affected the productivity of European network firms. Exploiting the variation in the timing and degree of liberalization efforts across countries and industries, we find that liberalization increased firm-level productivity but had no reallocation impact. Based on our estimates, the average firm-level productivity gain from liberalization amounts to 38 percent of the average total within-firm productivity gain in network industries. The results underscore the growth-promoting role of liberalization efforts. |
| Keywords: | productivity; liberalization; allocative efficiency; services; firm-level data; |
| JEL: | D24 K23 L11 L51 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp452&r=eec |
| By: | Olivier Rozenberg |
| Abstract: | This contribution tries both to assess the impact of the European Union on France and to discuss the rich literature on that topic originating both from EU studies, opinion studies, public policy analysis and institutional analysis. France’s relationship with the EU appears paradoxical given the contrast between the traditional pro-EU involvement of French elites and regular expressions of reticence, such as the opposition to the Draft Constitutional Treaty by referendum in 2005. This paper offers an account of this paradoxical relationship by highlighting the heterogeneity of adaptation to the EU. While public policy and legislation are becoming increasingly Europeanised, the EU has a limited impact on political life and the domestic institutional system. As a result of this mixed situation, the national narratives for supporting French membership to the EU suffer from progressive erosion and Euroscepticism subtly gaining ground. |
| Keywords: | Europeanization; France; public opinion; institutions; political science |
| Date: | 2011–12–31 |
| URL: | http://d.repec.org/n?u=RePEc:erp:scpoxx:p0049&r=eec |