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on European Economics |
| By: | Abbassi, Puriya; Linzert, Tobias |
| Abstract: | The financial crisis has deeply affected money markets and thus, potentially, the proper functioning of the interest rate channel of monetary policy transmission. Therefore, we analyze the effectiveness of monetary policy in steering euro area money market rates looking at, first, the predictability of money market rates on the basis of monetary policy expectations, and second the impact of extraordinary central bank measures on money market rates. We find that during the crisis money market rates up to 12 months still respond to revisions in the expected path of future rates, even though to a lesser extent than before August 2007. We attribute part of the loss in monetary policy effectiveness to money market rates being driven by higher liquidity premia and increased uncertainty about future interest rates. Our results also indicate that the ECB's non-standard monetary policy measures as of October 2008 were effective in addressing the disruptions in the euro area money market. In fact, our estimates suggest that non-standard monetary policy measures helped to lower Euribor rates by more than 80 basis points. These findings show that central banks have effective tools at hand to conduct monetary policy in times of crises. -- |
| Keywords: | Monetary transmission mechanism,Non-standard monetary policy measures,European Central Bank,Interbank money market |
| JEL: | E43 E52 E58 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:142012&r=eec |
| By: | Holton, Sarah (Central Bank of Ireland); Lawless, Martina (Central Bank of Ireland); McCann, Fergal (Central Bank of Ireland) |
| Abstract: | This paper analyses the effects of the recent euro area economic, financial and debt crisis on SMEs’ access to bank finance. We use a survey on access to finance of SMEs in the euro area carried out by the European Central Bank during 2009 and 2010 to examine the impact of macroeconomic factors on developments in loan applications and approvals as well as changes in credit terms and conditions. At the country level, we identify three distinct aspects of the recent crisis in Europe affecting firm credit through different channels. A weak real economy is found to affect the demand for bank financ- ing. Financial conditions (proxied by the median credit default swap for banks in each country and sovereign yields) predominantly affect the probability of loan rejection and the terms and conditions of credit rather than the demand for credit. We interpret this as evidence of a bank balance sheet channel negatively impacting credit provision. Crucially, the level of debt overhang affects all aspects of SME financing, with suggestive evidence that the effect on credit rejection operates through the bank balance sheet channel, as opposed to being due to the borrower balance sheet. |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:wpaper:04/rt/12&r=eec |
| By: | Bargain, Olivier; Dolls, Mathias; Fuest, Clemens; Neumann, Dirk; Peichl, Andreas; Pestel, Nico; Siegloch, Sebastian |
| Abstract: | The current debt crisis has given rise to a debate about deeper fiscal integration in Europe. The view is widespread that moving towards a fiscal union would have a stabilising effect in the event of macroeconomic shocks. In this paper we study the economic effects of introducing two elements of a fiscal union: Firstly, an EU-wide tax and transfer system and secondly, an EU-wide system of fiscal equalisation. Using the European tax-benefit calculator EUROMOD, we exploit representative household microdata from 11 Eurozone countries to simulate these policy reforms and to study their effects on the distribution of income as well as their impact on automatic fiscal stabilisers. We find that replacing one third of the national tax and transfer systems by a European system would lead to significant redistributive effects both within and across countries. These effects depend on income levels and the structures of the existing national tax and transfer systems.The EU system would improve fiscal stabilisation especially in credit constrained countries. It would absorb between 10 and 15 per cent of a macroeconomic income shock. Introducing a fiscal equalisation system based on taxing capacity would redistribute revenues from high to low income countries. The stabilisation properties of this system, however, are ambiguous. This suggests that not all forms of fiscal integration will improve macroeconomic stability in the Eurozone. |
| Date: | 2012–07–07 |
| URL: | http://d.repec.org/n?u=RePEc:ese:emodwp:em6-12&r=eec |
| By: | D'Elia, Enrico |
| Abstract: | In general, rational economic agents trade off the cost of waiting for the statistical agencies disseminate the final results of the relevant surveys before making a decision, on the one hand, and of making use of some model based predictions. Thus, from the viewpoint of agents, predictions and preliminary results from surveys often compete against each other. Comparing the loss attached to predictions, on the one hand, and to possible preliminary estimate from incomplete samples, on the other, provides a broad guidance in deciding if and when statistical agencies should release preliminary and final estimates. In this paper, the case of the dissemination of figures on quarterly GDP in the Euro Area is examined. The main conclusion is that the so called “flash estimates” actually provide valuable information to the users, while intermediate releases, published before three months from the end of the reference quarter can be substituted by model based estimation without any loss of accuracy. |
| Keywords: | Accuracy; Data Dissemination; Forecast; Nowcast; Preliminary Estimates; Timeliness |
| JEL: | C44 C82 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:40264&r=eec |
| By: | Jose M. Pastor; Lorenzo Serrano |
| Abstract: | We analyze the effects of the expansions of the European Union on inequality over the period 1960-2005 using an approach based on individuals' lifecycle incomes. This allows us to estimate permanent incomes and consider the effect of both survival rates and different rates of economic growth. According to our estimates, inequality in terms of permanent income was substantially less than that actually observed in current per capita income at the time of almost all the expansions (1973, 1981, 1986, 1995) except those of the last ten years (from 2004 onwards). The results point to the key role of policies that stimulate growth in the less developed countries. In fact, according to our estimates, with an annual β-convergence of 2% in current income, inequality in permanent income would be one third lower. |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa10p1424&r=eec |
| By: | Ansgar Belke; Jens Klose |
| Abstract: | We propose an alternative way of estimating Taylor reaction functions if the zero-lowerbound on nominal interest rates is binding. This approach relies on tackling the real rather than the nominal interest rate. So if the nominal rate is (close to) zero central banks can influence the inflation expectations via quantitative easing. The unobservable inflation expectations are estimated with a state-space model that additionally generates a timevarying series for the equilibrium real interest rate and the potential output - both needed for estimations of Taylor reaction functions. We test our approach for the ECB and the Fed within the recent crisis. We add other explanatory variables to this modified Taylor reaction function and show that there are substantial differences between the estimated reaction coefficients in the pre- and crisis era for both central banks. While the central banks on both sides of the Atlantic act less inertially, put a smaller weight on the inflation gap, money growth and the risk spread, the response to asset price inflation becomes more pronounced during the crisis. However, the central banks diverge in their response to the output gap and credit growth. |
| Keywords: | zero-lower-bound, Federal Reserve, European Central Bank, equilibrium real interest rate, Taylor rule |
| JEL: | E43 E52 E58 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1218&r=eec |
| By: | Klara Stovicek; Alessandro Turrini |
| Abstract: | This paper proposes a methodology for benchmarking unemployment benefits systems, with a view to assess reform needs and priorities. The methodology permits to assess different dimensions of unemployment benefit systems and to consider alternative relevant benchmarks. Looking at all relevant dimensions allows to better gauge how unemployment benefit systems perform in terms of their multi-faceted objectives (such as income support and stabilisation, incentives to take up work) and to have a more thorough assessment of each objective. Comparisons with alternative benchmarks offer the possibility of assessing against more meaningful country comparators, which take into account similarities in terms of economic fundamentals, institutions and policy settings. The methodology is applied to EU countries and results are discussed. |
| JEL: | J65 J68 H20 H53 |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0454&r=eec |
| By: | Sascha Sardadvar |
| Abstract: | Recent empirical studies on regional economic growth have extended regressions on convergence to account for externalities and spatial dependencies. Most of these studies, however, set the focus on whether regional output levels display convergence trends and consequently tend to ignore persisting or widening disparities that may occur at the same time. This paper examines the simultaneous occurrence of regional convergence and divergence tendencies in Europe by applying a spatial econometric model specification that is derived from a neoclassical growth model. Depending on factor endowments and relative locations in space, divergence may occur within sub-groups of regions despite an overall observation of convergence. The observation area comprises 253 European regions of the EU and EFTA on the NUTS2 and equivalent level, with empirical results provided for an observation period from 2001 to 2007. |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa10p575&r=eec |
| By: | Fabrice Orlandi |
| Abstract: | Variables commonly used, in a panel setting, to explain unemployment rate developments (e.g. Bassanini and Duval (2006a, 2006b)) provide similarly good fit for structural unemployment rate, as measured by the Commission services (i.e. the so-called NAWRU). Those variables include labour market structural indicators, thus confirming the impact of labour market structural reforms on the NAWRU. In addition, we find that persistent demand shocks also have a bearing on the NAWRU. Such shocks are related to crisis events (i.e. unwinding of unsustainable developments). In particular, housing boom-bust episodes have statistically significant impacts on the NAWRU. Real interest rate and TFP growth, which controls more generally for the presence of such shocks, also matter. Put together, the explanatory variables account for 90% of the variance of NAWRU, in a 13 EU countries panel covering the period 1985-2009. The tight fit leaves no scope for statistically significant linear trend or period-effects. The paper also presents a new measure of the degree of generosity of unemployment benefit schemes, which has superior explanatory power compared to alternative measures commonly used to account for the role of this variable in similar studies. |
| JEL: | J38 J60 J65 J68 J69 E02 |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0455&r=eec |
| By: | Per-Olof Bjuggren; Andreas Högberg |
| Abstract: | This paper investigates the impact of legal tradition and firm size on investment performance for firms in 16 European countries. Europe as a region is of special interest in this sense since the legal systems differs widely within a concentrated geographical area. Anglo Saxon, German, French as well as Scandinavian variants of legal systems can be found in representative forms in Europe. Previous studies suggest that minority shareholders enjoy a higher degree of property rights in common law (Anglo Saxon) countries compared to civil law (French, German and Scandinavian) countries. Expropriation of minority shareholders may be observed as excessively large organizations and non transparent hierarchies of the management in the firm. This study differs from earlier studies by concentrating on the firm size and its effects on investment performance by connecting it to the legal origin in each of the 16 European countries included in the study. We find a negative relation between firm size and performance as expected for civil law countries and no effect for common law countries. However, for individual countries, the effects of firm size and legal origin on investment performance is ambiguous |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa10p1488&r=eec |
| By: | Juan R. Cuadrado-Roura; Andres Maroto-Sanchez |
| Abstract: | The relationship between economic structure and productivity growth has been a subject of increasing interest over recent decades. The innovative focus of this paper concerns the role of the service sector in this relationship at a regional level. Services play a core role in advanced economies, both from a quantitative and a strategic point of view. Traditionally, productivity has been introduced as explaining factor of tertiarization processes in advanced economies, while it has been simultaneously assessed that services display lower productivity levels and growth rates than other economic industries. Nevertheless, in recent years many papers and authors have refuted or limited these conventional theses. This paper focuses on the impact of tertiarization on overall productivity growth, using a sample of European NUTS-2 regions in the period between 1980 and 2007. The results partially refute traditional knowledge on the productivity of services. Contrary to what conventional theories suggest, this research demonstrates that several tertiary activities have shown dynamic productivity growth rates, while their contribution to overall productivity growth plays a more important role than was historically believed. KEY WORDS: General Regional Economics, Service sector, Productivity, Structural change. JEL CLASSIFICATION: L80, O04, C67, R11. |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa10p163&r=eec |
| By: | Siyi Zhu |
| Abstract: | The European trade and post-trade industries have seen increased competition in the past few years. As a result of the intensifying competitive market pressure, a series of tariff reduction and alterations of risk management models have been implemented by some central counterparties (CCPs) in Europe, which raises the concern of overseers and regulators that the fi nancial soundness and risk mitigation capacity of CCPs could be threatened, leading to a “race to the bottom”. To address the concern, this paper presents CCPs’ competitive responses both in the fi eld of tariffs and risk management based on the practices of the three CCPs in European equity market-LCH.Clearnet SA, EMCF and EuroCCP. It concludes that, 1) competition in the pan-European equity clearing industry has given rise to CCPs’ tariffs-cutting activities, which in part enhances market effi ciency; 2) there’s no fi tfor-all risk management mechanism: the CCPs studied apply a common framework while they employ certain different specifi cations in modeling and loss sharing procedures; 3) no solid evidence implies that competition among CCPs has led to a deterioration in the robustness of CCPs’ risk management. |
| Keywords: | Central counterparty; competition; risk management; loss mutualization |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbocs:906&r=eec |