nep-eec New Economics Papers
on European Economics
Issue of 2012‒12‒10
six papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Dynamic Correlations of Sovereign Bond Yield Spreads in the Euro zone and the Role of Credit Rating Agencies' Downgrades By Antonakakis, Nikolaos
  2. On the impact of the euro on international tourism By María Santana Gallego; Jorge Vicente Pérez Rodríguez; Francisco José Ledesma Rodríguez
  3. Immigration, jobs and employment protection: evidence from Europe before and during the Great Recession By Francesco D'Amuri; Giovanni Peri
  4. The Homeownership Rate among the Elderly and the Life Cycle Hypothesis:European Evidence Using Individual and Household Data By Joaquín Alegre Martín; Llorenç Pou Garcias
  5. EU Fiscal Stance Vulnerability: Are the Old Members the Gold Members? By Dybczak, Kamil; Melecky, Martin
  6. The long-term EU budget: size or flexibility? By Benedicta Marzinotto

  1. By: Antonakakis, Nikolaos
    Abstract: The European debt crisis that followed the global financial crisis, erupting first with Greece, then Ireland, Portugal, Italy and Spain, has threatened the very existence of the Euro zone. In this paper we examine the evolution of dynamic co-movements of sovereign bond yield spreads (BYS) in the Euro zone and the role of credit rating agency downgrades on those co-movements. Estimation results from a multivariate DCC-GARCH model on daily BYS data for nine Euro zone countries over the period 2007-2012 suggest an inverted U-shaped curve of BYS co-movements during the period of the financial and debt crisis. Credit rating downgrades by major rating agencies indicate rather idiosyncratic patterns of government bond yield spreads co-movements within and between the Euro zone periphery and the core.
    Keywords: Government bond yield spreads; credit rating agencies; dynamic conditional correlations; Euro zone sovereign debt crisis
    JEL: C32 E43 G12 G24
    Date: 2012
  2. By: María Santana Gallego (Universitat de les Illes Balears); Jorge Vicente Pérez Rodríguez (Universidad de Las Palmas de Gran Canaria); Francisco José Ledesma Rodríguez (Universided de La Laguna)
    Abstract: This paper studies the effect of the inception of the euro on the international tourism of the Eurozone. To do this, a gravity model is estimated using two different samples, the OECD countries and the European OECD countries, over the period 1995-2008. The results suggest a noticeable impact of the euro on tourism, bigger than estimated in previous research. However, evidence of tourism diversion is found. The estimates also indicate a greater impact of the introduction of coins and notes in 2002 than the effect of the irrevocable fixing of conversion rates in 1999. Furthermore, the results show that the euro effect on tourism could have been anticipated during earlier stages of the EMU.
    Keywords: currency unions, euro effect, panel data, international tourist arrivals
    JEL: F10 F15
    Date: 2012
  3. By: Francesco D'Amuri (Bank of Italy); Giovanni Peri (UC Davis)
    Abstract: In this paper we analyse the impact of immigrants on the type and quantity of natives’ jobs. We use data on fifteen Western European countries during the 1996-2010 period. We find that immigrants, by taking up manual-routine type of occupations pushed natives towards more “complex” (abstract and communication) jobs. This job upgrade was associated with a 0.7% increase in native wages for a doubling of the immigrants’ share. These results are robust to the use of an IV strategy based on the past settlement of immigrants across European countries. The job upgrade slowed, but did not come to a halt, during the Great Recession. We also document the labour market flows behind it: the complexity of jobs offered to new native hires was greater than that of lost jobs. Finally, we find evidence that the reallocation was larger in countries with more flexible labour laws.
    Keywords: immigration, jobs, task specialization, employment protection laws, Europe
    JEL: J24 J31 J61
    Date: 2012–10
  4. By: Joaquín Alegre Martín (Universitat de les Illes Balears); Llorenç Pou Garcias (Universitat de les Illes Balears)
    Abstract: One of the central predictions of the Life Cycle Hypothesis is that individuals run down their wealth during retirement. Although housing wealth is the largest component of total household wealth in most countries, empirical evidence supporting the decumulation hypothesis is mixed. In this paper we examine the housing tenure decision by the aged with microdata at both a household and individual level. The results, based on data from the European Community Household Panel for thirteen European countries, show that for nearly all countries (except for Germany and Denmark), the homeownership rate among the elderly does not decline with age, rejecting the Life Cycle Hypothesis. The results are robust to the (household or individual) level at which the data is analysed. The estimates also show a significant cohort effect for most European countries, so that the later the year of birth, the higher the homeownership rate.
    Keywords: homeownership rate, the elderly, age-cohort effects, Life Cycle Hypothesis.
    JEL: D12 D91 R21
    Date: 2012
  5. By: Dybczak, Kamil; Melecky, Martin
    Abstract: This paper investigates the effect of aggregate shocks on the fiscal stance of the EU, and of its old (OMS) and new (NMS) member states over a business cycle. The fiscal stance is measured by the government deficit. To study the impact of aggregate shocks, we use impulse responses derived from a pooled structural vector autoregression model estimated on annual panel data. We find that the fiscal deficits of OMS could be vulnerable to discretionary changes in government expenditures and revenues. In contrast, the fiscal stance of NMS shows vulnerability to GDP shocks, because the increase in revenues after a positive GDP shock is often outpaced by greater expenditure increases in NMS. The estimated fiscal vulnerabilities stem from disproportionate policy responses concerning government expenditures and a lacking discipline to control pro-cyclical fiscal spending. Our findings for the EU thus support application of fiscal rules focused on government expenditure rather than other fiscal variables.
    Keywords: Macroeconomic Shocks; Fiscal Stance; European Union; Panel Data Analysis; Pooled Structural Vector Autoregression Model
    JEL: E62 H68 E37
    Date: 2012–11
  6. By: Benedicta Marzinotto
    Abstract: The EU is in the process of negotiating its 2014-20 financial framework. Failure to reach an agreement would imply a delay in the preparation of the strategic plans each member state puts together to explain how it will use Structural and Cohesion Funds. Even if solutions are found â?? for example annual renewals of the budget based on the previous year's figures â?? there will be political and institutional costs. EU leaders have too often and too forcefully advocated the use of the EU budget for growth to be able to drop the idea without consequences. â?¢ The overwhelming attention paid to the size of the budget is misplaced. EU leaders should instead aim to make the EU budget more flexible, safeguard it from future political power struggles, and reinforce assessment of the impact of EU funded growth policies.â?¢ To improve flexibility a commitment device should be created that places the EU budget above continuous political disagreement. We suggest the creation of a European Growth Fund, on the basis of which the European Commission should be allowed to borrow on capital markets to anticipate pre-allocated EU expenditure, such as Structural and Cohesion Funds. Markets would thus be a factor in EU budget policymaking, with a potentially disciplining effect. Attaching conditionality to this type of disbursement appears legitimate, as capital delivered in this way is a form of assistance.
    Date: 2012–11

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