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on European Economics |
| By: | David Guerreiro; Marc Joëts; Valérie Mignon |
| Abstract: | The aim of this paper is to investigate whether price dynamics is homogeneous across the Eurozone countries. Relying on monthly data over the January 1970-July 2011 period, we test for the absolute purchasing power parity (PPP) hypothesis through the implementation of second-generation panel unit root and cointegration tests. Our results show that price dynamics are heterogeneous depending on both the time period and the considered group of countries. More specifically, while PPP is validated for the core EMU countries, this hypothesis does not hold for Northern peripheral economies. Turning to the Southern countries, PPP is observed only before the launch of the euro. |
| Keywords: | price convergence, Eurozone, panel unit root tests, half-life |
| JEL: | C23 E31 F15 F41 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2012-4&r=eec |
| By: | Dolls, M.; Fuest, C.; Andreas Peichl (Institute for the Study of Labor (IZA)) |
| Abstract: | This paper investigates to what extent the tax and transfer systems in Europe protect households at different income levels against losses in current income caused by economic downturns like the present financial crisis. We use a multi country micro simulation model to analyse how shocks on market income and employment are mitigated by taxes and transfers. We find that the aggregate redistributive effect of the tax and transfer systems increases in response to the shocks. But the extent to which households are protected differs across income levels and countries. In particular, there is little stabilization of disposable income for low income groups in Eastern and Southern European countries. |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:aia:ginidp:dp23&r=eec |
| By: | Sebastian Dellepiane (University of Strathclyde); Niamh Hardiman (University College Dublin) |
| Abstract: | This paper adopts a new analytical approach to explaining choices in fiscal politics in Ireland and Spain between 2008 and 2010, in response to international economic crisis. It adopts a comparative cross-national research design to explore why two countries with similar pre-crisis fiscal profiles adopted radically different strategies in the initial phase of the crisis: Ireland adopted an orthodox deficit-reduction strategy, while Spain implemented a ‘heterodox’ stimulus fiscal package. Yet by mid-2010, Spain’s fiscal stance had converged with Ireland’s, as the wider European crisis deepened and the scope for autonomous national policy choice narrowed. The paper tracks this shift in a second stage of the research design, examining within-country variation over time, to provide a nuanced and sophisticated analysis of strategic choices at critical moments. It argues that the shift toward a European politics of austerity is different in a number of important ways from the older politics of fiscal consolidation, and that this has far-reaching implications not only for the evolution of European integration, but also for the balance between democratic politics and transnational markets. |
| Keywords: | 2008 banking crisis, regulatory failure, Ireland, principles based regulation, public debt |
| Date: | 2012–02–23 |
| URL: | http://d.repec.org/n?u=RePEc:ucd:wpaper:201207&r=eec |
| By: | Matthias Stöckl; Hannes Winner (WIFO) |
| Abstract: | This paper analyses the impact of corporate taxation on a firm's debt policy. We contribute to the existing literature in two ways: 1. we incorporate firm heterogeneity with respect to firm size and legal form, 2. we explicitly model persistence in the debt-to-asset ratio. Econometrically this implies the use of dynamic panel data econometrics. We employ a panel of about 110,000 firms from 22 EU countries between 1999 and 2007. In line with theoretical expectations, we find that the debt ratio is positively affected by the statutory corporate income tax rate. Additionally, we find that capital structures exhibit a substantial degree of persistence over time. Finally, our empirical results show that large firms react more sensitively to the incentives of corporate taxation, while this effect is considerably smaller for stock companies. |
| URL: | http://d.repec.org/n?u=RePEc:wfo:wpaper:y:2012:i:422&r=eec |
| By: | Agnès Bénassy-Quéré; Guillaume Roussellet |
| Keywords: | Fiscal sustainability, systemic banking risk, off-balance sheet liabilities |
| JEL: | H21 H23 J41 A A A A |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2012-05&r=eec |
| By: | Ziegler, Christina |
| Abstract: | Monetary policy in CEE is an important determinant in the wage bargaining process, because trade unions have to predict inflation as one component of future real wages. This paper scrutinizes whether countries in CEE that officially announce an inflation target are tempted to act time-inconsistently and switch from the announced inflation target to an exchange rate target in order to sustain higher output via surprise inflation. If market participants discover the time-inconsistency, they will adjust their inflation expectations, which result in higher average rates of price increases. The time-inconsistent behavior in central bank interest rate setting is modeled by several Taylor rules. An empirical application provides evidence that some monetary authorities in CEE such as the Czech Republic and Slovakia have acted timeinconsistent and have focused on the exchange rate in periods of official inflation targeting, which might have contributed to higher average rates of inflation and welfare losses. Furthermore, uncertainty in wage determination process has risen due to a harder predictability of productivity and inflation as components of future nominal wages. -- |
| Keywords: | monetary policy,Taylor rules,exchange rate regime,Central and Eastern Europe,inflation targeting |
| JEL: | E52 E58 F31 O52 P20 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:leiwps:104&r=eec |