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on European Economics |
| By: | Riccardo Bonci (Bank of Italy) |
| Abstract: | This paper provides new evidence on the transmission of monetary policy in the euro area, assessing the impact of an unexpected increase of the short-term interest rates on the lending and borrowing activity in different economic sectors. We exploit the information content of the flow-of-funds statistics, providing the best framework to analyse the flow of funds from lenders to borrowers. After estimating a small VAR for the euro area, we extend the benchmark model with the flow-of-funds series, analysing the response of these variables to a contractionary monetary policy shock. We find that the policy tightening is followed by a worsening of the budget deficit, firms cut down on their demand for bank loans, partially replacing them with inter-company loans, and draw on their liquidity to try to offset the fall in revenue associated with the slowdown in economic activity, while households increase precautionary saving in the short run. Consistent with the bank lending channel of monetary policy, the interest rate hike is followed by a short-run deceleration in credit growth, mainly driven by the response of banks. |
| Keywords: | euro area, monetary policy, flow of funds, credit growth. |
| JEL: | E32 E4 E52 G11 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_861_12&r=eec |
| By: | Jean Pisani-Ferry; Guntram B. Wolff |
| Abstract: | The Bank of England, the Federal Reserve (Fed) and the European Central Bank (ECB) have responded to the crisis with exceptional initiatives resulting in a major increase in their balance sheets. After the ECBâ??s end-2011 launch of three-year bank refinancing (LTRO), there has been speculation that all three have de facto embarked on â??quantitative easingâ??. However, major differences remain: the Bank of England and Fed have mostly relied on large-scale purchases of government bonds, while the ECB has relied on lending to financial institutions with repurchase agreements of collateral (repos). The LTRO has successfully mitigated funding needs and reduced interbank stress, and has had a significant impact on sovereign bond yields in southern euro-area countries, and increased southern banksâ?? government debt holdings, while northern banks have reduced sovereign exposure. The LTRO has had only weak effects on funding for households and non-financial corporations; credit dynamics remain weak particularly in the southern euro area. Underlying structural problems relating to banks, the macroeconomic adjustment and the euro areaâ??s governance need to be addressed before financial stability and economic growth can return. Monetary policy cannot fundamentally address these problems and is made less effective by economic/institutional heterogeneity. This Policy Contribution is based on a briefing paper prepared for the European Parliament Economic and Monetary Affairs Committeeâ??s Monetary Dialogue of 25 April 2012. In the video below, Jean Pisani-Ferry and Guntram Wolff discuss the findings of this policy contribution. <iframe width="400" height="288" src="http://www.youtube.com/embed/rtSRmyNCd8U" frameborder="0" allowfullscreen></iframe> |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:bre:polcon:721&r=eec |
| By: | John, Whittaker |
| Abstract: | The public debt of Greece to foreign governments, including debt to the EU/IMF loan facility and debt through the eurosystem, rose from €47.8bn to €180.5bn between January 2010 and September 2011. €17.1bn of the rise in eurosystem debt was due to an 86% increase in the Greek issue of euro banknotes. If EU/IMF loans to Greece cease, they will be replaced by larger Greek borrowing from the eurosystem, for as long as Greece stays in the euro. Eurozone governments would only escape from lending to Greece if access of the Bank of Greece to eurosystem credit were restricted. But this would impede the clearance of payments out of Greece, it would imply that cross-border payments by means of euro banknotes would also have to be restricted, and it would force Greece out of the euro. |
| Keywords: | eurozone operations; TARGET2; |
| JEL: | E42 E58 |
| Date: | 2011–11–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:38406&r=eec |
| By: | Abel L. Costa Fernandes (Universidade do Porto - Faculdade de Economia); Paulo R. Mota (Universidade do Porto - Faculdade de Economia) |
| Abstract: | The eurozone faces a profound sovereign debt crisis threatening the very existence of the euro. As a result, the recovery of the world economy has become more uncertain. Therefore, the study of the foundations of this crisis is of the utmost importance. Three of the countries involved, Portugal, Greece and Spain, share some important attributes: they are all recent democracies and comparatively less developed economies in the set of the twelve initial member States of the eurozone. For these three countries this paper shows that the behavior of the political variables emphasized by the literature as determining the performance of fiscal variables, is indeed statistically different from the ones observed for the other countries in difficulties, Ireland and Italy, which are mature democracies and comparatively developed economies. These outcomes are in line with what the relevant literature expects from countries with those characteristics, such as election year budget cycles. Besides, post-election year budget effects were also detected implying no fiscal consolidation. |
| Keywords: | fiscal policy; political budget cycles; new democracies |
| JEL: | H2 H5 H6 |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:por:fepwps:458&r=eec |
| By: | Marx, Ive (University of Antwerp); Marchal, Sarah (University of Antwerp); Nolan, Brian (University College Dublin) |
| Abstract: | This paper focuses on the role of minimum wages, tax and benefit policies in protecting workers against financial poverty, covering 21 European countries with a national minimum wage and three US States (New Jersey, Nebraska and Texas). It is shown that only for single persons and only in a number of countries, net income packages at minimum wage level reach or exceed the EU's at-risk-of poverty threshold, set at 60 per cent of median equivalent household income in each country. For lone parents and sole breadwinners with a partner and children to support, net income packages at minimum wage are below this threshold almost everywhere, usually by a wide margin. This is the case despite shifts over the past decade towards tax relief and additional income support provisions for low-paid workers. We argue that there appear to be limits to what minimum wage policies alone can achieve in the fight against in-work poverty. The route of raising minimum wages to eliminate poverty among workers solely reliant on it seems to be inherently constrained, especially in countries where the distance between minimum and average wage levels is already comparatively small and where relative poverty thresholds are mostly a function of the dual-earner living standards. In order to fight in-work poverty new policy routes need to be explored. The paper offers a brief discussion of possible alternatives and cautions against 'one size fits all' policy solutions. |
| Keywords: | minimum wage, poverty, taxes, social transfers, subsidies |
| JEL: | I3 H2 J8 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6510&r=eec |
| By: | Eric Dor (IESEG School of Management (LEM-CNRS)) |
| Abstract: | La stratégie de restauration de la solvabilité des Etats surendettés par une déflation interne accélérée semble être une voie sans issue. Une politique de relance de la croissance est nécessaire. Les perspectives de croissance du reste du monde sont insuffisantes pour relancer la zone euro par ses exportations. Un programme de relance de la demande intérieure en zone euro implique de dénouer la contrainte du financement des Etats. Une solution innovante, moyennant un changement du rôle de la BCE, est proposée. |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:ies:wpaper:e201207&r=eec |
| By: | Thomas Nitschka |
| Abstract: | Cross-border asset and liability holdings allow countries to insulate their consumption streams from idiosyncratic output shocks, i.e. consumption risk sharing. By contrast, banks' international interconnectedness spread the U.S. subprime mortgage crisis to various economies with adverse macroeconomic consequences. This paper evaluates the partial impact of banks' cross-border links on the ability of their host countries to share consumption risk internationally. It shows that the impact of banks' links to the non-bank sector in the rest-of-the-world on consumption risk sharing is negligible while strong interbank links are associated with relatively little consumption risk sharing of banks' host countries. |
| Keywords: | banking sector, cross-border assets, consumption risk sharing, interconnectedness,systemic risk |
| JEL: | E2 F15 G15 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:snb:snbwpa:2012-04&r=eec |
| By: | Werner Eichhorst (IZA); Corrado Giulietti (IZA); Martin Guzi (IZA); Michael J. Kendzia (IZA) |
| Abstract: | Based on a study conducted for the European Parliament, Bonn 2011 (133 pages) |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izarrs:40&r=eec |
| By: | Werner Eichhorst (IZA); Maarten Gerard (IDEA Consult); Michael J. Kendzia (IZA); Christine Mayrhuber (WIFO); Conny Nielsen (NIRAS); Gerhard Rünstler (WIFO); Thomas Url (WIFO) |
| Abstract: | Based on a study conducted for the European Parliament, Bonn 2011 (144 pages) |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izarrs:42&r=eec |
| By: | Marie-Noëlle Calès (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); Laurent Granier (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); Nadège Marchand (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon) |
| Abstract: | For several years, European financial markets have been the place of important mutations. These mutations have hit both stock markets themselves as well as the infrastructures including all necessary services for the transactions on financial securities. Among the market services to which the investors appeal, is the clearing of the orders, the service which allows reducing exchanged flows while guaranteeing their safety. The market of clearing became strongly competitive with the arrival of new Pan European clearing houses. Confronted with aggressive pricing policies, "incumbent" clearing houses have to adopt new strategies : merger, simple or mutual links of interoperability. We develop a model of industrial organization to appreciate the consequences of these various strategies in terms of price and social welfare. The strategic incentives of clearing houses and their effects on their customers, i.e. investors, are observed by means of a sequential game. We show that the interoperability agreements are never reached at the equilibrium in spite of the fact that the "European code of good practice" of postmarkets incites them to accept this type of agreements. On the other hand, a merger between incumbent clearing houses can occur under some conditions. The merger is beneficial to these last ones as well as to the investors, but it is unfavourable to the Pan European clearing houses. |
| Keywords: | bundling; clearing house; interoperability; merger; post-market organization |
| Date: | 2012–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00690901&r=eec |