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on European Economics |
| By: | Dinger, Valeriya (Universitaet Osnabrueck); Steinkamp, Sven (Universitaet Osnabrueck); Westermann, Frank (Universitaet Osnabrueck) |
| Abstract: | Central bank credit has expanded dramatically in some of the euro area member countries since the beginning of the financial crisis. This paper makes two contributions to understand this stylized fact. First, we discuss a simple model of monetary policy that includes (i) a credit channel and (ii) a common pool problem in a monetary union. We illustrate that the interaction of the two elements leads to an inflation bias that is independent of the standard time-inconsistency bias. Secondly, we present empirical evidence that is consistent with the view that national central banks in the euro area have indeed followed an independent monetary policy. We show that after 2007, central bank credit has been highly correlated with unemployment, but not with inflation in the respective countries. |
| Keywords: | Tragedy of the Commons, Inflation Bias, Credit Channel, TARGET2, Euro Area |
| JEL: | E52 E58 H41 |
| Date: | 2012–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:iee:wpaper:wp0094&r=eec |
| By: | Hubert Gabrisch; Karsten Staehr |
| Keywords: | European integration , policy coordination , unit labor costs , current account imbalances, economic crises |
| JEL: | E61 F36 F41 |
| Date: | 2012–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:eea:boewps:wp2012-5&r=eec |
| By: | Karl Aiginger; Matthias Firgo; Peter Huber |
| Abstract: | Given the recent economic problems of southern EU countries that are rooted in lacking competitiveness, this task will summarise existing knowledge on the factors impeding on or facilitating the economic development of peripheral/low income regions in the EU, and discuss policy options to improve economic performance of Southern european countries while at the same time maintaining (or improving) sustainability. In the light of recent developments a central focus will be put on Greece, Italy, Portugal and Spain, and on the question of how national, community wide policies and spillovers from the centre can contribute to the double objective of improving competitiveness and sustainability in these countries. A substantial part of the empirical evidence for the policy conclusion comes from anylyzing the catching up experience of regions within countries, since this situation resembles the chances and problems of countires catching up within a Monetary Union (without the possibility to improve competitiveness and correct policy failures by devaluations). The results of this task will be reported in a separate deliverable (in the form of a policy brief) and will serve the researchers involved in all tasks of this work package as a starting point for further analysis. |
| Keywords: | Competitiveness; economic growth path; European economic policy; labour markets; peripheral areas; rural areas |
| JEL: | R11 E60 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:feu:wfepbr:y:2012:m:12:d:0:i:2&r=eec |
| By: | Dirk Schoenmaker (Duisenberg School of Finance, VU University Amsterdam); Arjen Siegmann (VU University Amsterdam) |
| Abstract: | Cross‐border banking needs cross‐border recapitalisation mechanisms. Each mechanism, however, suffers from the financial trilemma, which is that cross‐border banking, national financial autonomy and financial stability are incompatible. In this paper, we study the efficiency of different burdensharing agreements for the recapitalisation of the 30 largest banks in Europe. We consider bank bailouts for these banks in a simulation framework with stochastic country‐specific bailout benefits. Among the burden sharing rules, we find that the majority and qualified‐majority voting rules come close to the efficiency of a bailout mechanism with a supranational authority. Even a unanimous voting rule works better than home‐country bailouts, which are very inefficient. |
| Keywords: | Financial Stability; Public Good; International Monetary Arrangements; International |
| JEL: | F33 G28 H41 |
| Date: | 2012–10–24 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20120111&r=eec |
| By: | Barbara Lipszyc; Etienne Sail; Ana Xavier |
| Abstract: | Public provision of long-term care (LTC) will pose an increasing challenge to the sustainability of public finances in the EU, due to an ageing population. In this view, the paper aims to provide indications on the timing and potential fiscal impact associated to changes in the demographic structure. The ageing of the population is expected to put pressure on governments to provide long-term care services as (very) old people often develop multi-morbidity conditions, which require not only long-term medical care but assistance with a number of daily tasks. This paper presents the projections of public expenditure on LTC in the long run (2060) under alternative assumptions. All scenarios project a non-negligible increase in public expenditure. All other things being equal, the expected increase in the demand for formal LTC support will vary across EU-27 Member States according to their current patterns of LTC provision: the balance between formal and informal care, the emphasis they put on institutional care, home care or provision of cash benefits, the supply constraints both in the formal and informal care sectors, the current average cost and coverage rate for each type of care and their distribution across age groups. The paper also discusses policy implications of the projection results. |
| JEL: | H51 I18 J14 J18 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0469&r=eec |
| By: | Patrice Muller; Graham Bishop; Shaan Devnani; Mark Lewis; Rohit Ladher |
| Abstract: | The study paper examines how non-bank financial institutions (in particular money market funds, private equity firms, hedge funds, pension funds and insurance undertakings, central counterparties, and UCITS and ETFs) have performed over the last decade and during the financial crisis. The report addresses the risks run by each of this type of institutions (credit, counterparty, liquidity, redemption, and fire sales risk), and highlights also the risks arising from a number of activities frequently undertaken by these institutions, in particular securitisation (a.o. agency risk), securities lending (a.o. counterparty risk) and repos (a.o. liquidity risk). The report finally provides a selected overview of approaches for the measurement of financial instability and financial distress. |
| JEL: | G23 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0472&r=eec |
| By: | Matteo Governatori; David Yim |
| Abstract: | In recent years, the concern that the behaviour of subnational governments may hinder the achievement of national budgetary targets has been increasingly raised across the EU. In this paper the relationship between fiscal decentralisation and budgetary outcomes of the general government is analysed. Results suggest that fiscal decentralisation is not harmful per se for budgetary discipline, although it is likely to have an adverse effect if predominantly financed by transfers from the central government rather than by subnational taxes and fees. Moreover, borrowing rules applying to subnational governments appear to partly counteract the adverse effect of transfers on fiscal balances. Therefore, policy concerns should not focus on decentralisation as such but rather on a 'bad' design of decentralisation, i.e. one which is not accompanied by subnational financial responsibility. |
| JEL: | E62 H62 H71 H72 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0468&r=eec |
| By: | d'Agostino, Giorgio; Scarlato, Margherita |
| Abstract: | This paper investigates the theoretical and empirical foundations of the links between inclusive institutions, innovation and economic growth. Its first contribution to the literature is to provide a non-scale R&D-based growth model incorporating negative externalities linked to low institutional quality that not only affect the productivity of private and human capital, but also constrain the diffusion of existing technological knowledge. In turn, these negative externalities reduce economic growth. The second contribution of this paper is to run estimates for a sample of European Union countries. Empirical analysis based on pooled long- and short-run estimates confirms the importance of private capital and technology as instruments to increase economic growth in European countries and suggests the existence of a positive relationship between inclusive institutions, innovation and economic growth. The estimates also show that market failures linked to the degree of market competition and to the level of network interaction in the economic system significantly condition the influence of formal institutions on private capital, technology and GDP growth. |
| Keywords: | Innovation; economic growth models; institutions and growth |
| JEL: | O41 O43 O30 C23 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:43098&r=eec |
| By: | Atanas Christev; Jacques Melitz |
| Abstract: | We take a new approach to the study of the impact of EMU on consumption smoothing. Rather than relying on inferences based on the behavior of consumption levels or growth, we focus on consumption volatility and therefore on smoothing more directly. Consequently, we find that even though EMU tends to smooth consumption, it is not through cross-country property and claims. Rather it comes through the promotion of the tradability of goods, capital in particular: specifical-ly, the encouragement of price competition, contestable home markets, ability to borrow and buy insurance at home, and the harmonization of regulations. Some of the consumption smoothing may also depend on EU membership rather than EMU as such but EMU adds to it. As a funda-mental part of the analysis, the paper uses a new index of currency union which focuses on the ratio of trade with other countries sharing the same currency relative to total foreign trade. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:hwe:hwuedp:1209&r=eec |
| By: | Giorgio Barba Navaretti (University of Milan and Centro Studi Luca d’Agliano); Davide Castellani (University of Perugia and Centro Studi Luca d’Agliano); Fabio Pieri (Universitat de València) |
| Abstract: | This paper provides new insights on the firm age and growth nexus along the entire distribution of (positive and negative) growth rates. Using data from the EFIGE survey, and adopting a quantile regression approach we uncover evidence for a sample of French, Italian and Spanish manufacturing firms in the period from 2001 to 2008. After controlling for several firms’ characteristics, country and sector specificities we find that: (i) young firms grow faster than old firms, especially in the highest growth quintiles (ii) young firms face the same probability of declining than their older counterparts; (iii) high growth is associated with younger CEOs and other attributes which capture the attitude of firm toward growth and change, i.e. the number of employees involved in R&D activities and the number of graduate employees; (iv) results are robust to the inclusion of other firms’ characteristics like labor productivity, capital intensity, and the financial structure. Overall, our results are consistent with several theoretical arguments, like love for risk and learning. |
| Keywords: | firm growth, age, quantile regression |
| JEL: | L21 L25 L26 L60 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:eec:wpaper:1217&r=eec |
| By: | Damiani, Mirella; Pompei, Fabrizio; Ricci, Andrea |
| Abstract: | Liberalisation of temporary contracts has become an important component of recent labour reforms but up to now available research has not paid attention to the impacts of these institutional changes on functional income distribution. The present paper intends to fill this gap by focussing on the reduction in strictness of employment protection of temporary jobs and analysing its effects on factor shares. We have estimated labour share, as well as its components, worker pays and employment, by considering country-sector evidence for 14 EU economies and the sample period 1995-2007. We have found that these legislative changes, that have favoured the extensive use of temporary contracts, have contributed to instability of working conditions and caused negative effects on workers’ pays. These impacts have more than counterbalanced the scanty positive effects on employment (due to greater access to the labour market of additional workers, likely young and women), thus leading to a decrease in income share accruing to workers. |
| Keywords: | factor income distribution, labour regulation |
| JEL: | E25 J5 |
| Date: | 2012–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:43050&r=eec |