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on European Economics |
| By: | Nidhaleddine Ben Cheikh |
| Abstract: | This paper investigates whether the exchange rate pass-through (ERPT) to CPI inflation is a nonlinear phenomenon for five heavily indebted euro area (EA) countries, namely the so-called GIIPS group (Greece, Ireland, Italy, Portugal, and Spain). Using logistic smooth transition models, we explore the existence of nonlinearity with respect to sovereign bond yield spreads (versus German) as an indicator of confidence crisis/macroeconomic instability. Our results provide strong evidence that the extent of ERPT is higher in periods of macroeconomic distress, i.e. when sovereign bond yield spreads exceed some threshold. For all the GIIPS countries, we reveal that the increasing of macroeconomic instability and the loss of confidence during the recent sovereign debt crisis has entailed a higher sensibility of CPI inflation to exchange rate movements. |
| Keywords: | Exchange Rate Pass-Through, Inflation, Smooth Transition Regression |
| JEL: | C22 E31 F31 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:wsr:wpaper:y:2013:i:123&r=eec |
| By: | Kaitila, Ville |
| Abstract: | We analyse the degree of EU countries’ specialisation in their exports and manufacturing value added using the Herfindahl-Hirschmann index and the degree of structural similarity using the similarity index developed by Finger and Kreinin (1979). We also analyse the convergence of GDP growth rates over time and compare it with export similarity. At the industry level (HS2), EU15 countries’ exports became more specialised before the introduction of the euro and less specialised thereafter. However, exports have become more specialised at the product level (HS6) during the euro years. Manufacturing value added (21 sectors) has become more specialised both before and after 1999. The results for the ten ex-transition countries’ exports are different reflecting their economic transformation. Also the post-2008 period with economic distress creates special cases. Export structures became more similar before 2008. However, manufacturing value added similarity decreased. GDP growth rates have been more uniform after the introduction of the euro than in 1992–1999. We find that similarity in export structures is positively associated with the degree of GDP growth rate correlation vis-à-vis the Euro Area average. There are a half a dozen outliers that differ in their GDP growth developments, among them the Euro Area members Greece, Malta and Slovakia |
| Keywords: | Exports, manufacturing, specialisation, similarity, GDP growth |
| JEL: | F14 F15 F44 |
| Date: | 2013–06–13 |
| URL: | http://d.repec.org/n?u=RePEc:rif:wpaper:12&r=eec |
| By: | Sauer, Beate; Sell, Friedrich L. |
| Abstract: | The Target imbalances within the Eurozone can be interpreted as a sign of a missing balance of payments adjustment mechanism for the member countries. As the Eurozone lacks a fiscal union, in economic theory it is more an exchange rate union or a system of fixed exchange rates than a monetary union. In the latter, there would not be any national balances of payments, but only one for the whole Eurozone. This paper will show why the Target System is a crucial indicator for the Eurozone not being a monetary union, but an exchange rate union and why countries holding Target liabilities against the European System of Central Banks can be compared to a reserve currency country, e.g. like the US during the Bretton-Woods-System. -- |
| Keywords: | Target Imbalances,Balance of Payments Crisis,Balance of Payments Adjustment Mechanism,Eurozone,Fixed Exchange Rates,Fiscal Union |
| JEL: | E40 E41 E42 E50 E52 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ubwwpe:20132&r=eec |
| By: | Sell, Friedrich L.; Reinisch, David C. |
| Abstract: | In this paper, the authors present a new concept of the 'modified output gap' based on the New Keynesian Phillips curve and on the Beveridge curve. In the first part of the paper, both mentioned curves are derived analytically. In doing so, we identify key parameters for the shift of the Beveridge curve (up- or downwards) and prove that - fulfilling a minimum of assumptions - the New Keynesian Phillips curve is (also) a falling convex relationship between the inflation rate and the unemployment rate in the tradition of Phillips (1958). Inserting the Phillips curve into the Beveridge curve reveals the explicit positive relationship between the vacancy ratio and the inflation rate. In the second part of the paper, we put all three relationships under an empirical 'stress test' using panel data from eleven of the EA 12 countries for three different samples during the world economic crisis: In all cases, the parameter estimates confirm the presumed existence of the three functions. -- |
| Keywords: | labor market,Phillips and Beveridge curves,policy ineffectiveness,world economic crisis and output gap |
| JEL: | J63 J64 J38 E24 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ubwwpe:20131&r=eec |
| By: | Paulo Horta (Portuguese Securities Market Commission, CMVM – Lisbon, Portugal) |
| Abstract: | This paper analyses the contagion effects of the Greek stock market to the European stock markets of the NYSE Euronext group (Belgium, France, the Netherlands and Portugal), in the context of the 2010 sovereign debt crisis. Three tests of contagion are performed using copula models. The first test assesses the existence of contagion on the relevant stock markets’ indices, the second checks the homogeneity of contagion intensities between the indices, and the third compares contagion intensity during the 2008 Subprime crisis and the 2010 European sovereign debt crisis. Results of the first test suggest that contagion exists only in the Portuguese stock market. The other three markets in the sample show interdependence and no contagion. The second test suggests that the Portuguese index exhibits more intensity than the other indices, and the intensity displayed by the Belgian, French and Dutch indices, is not different among these last three indices. Finally, the third test shows that the contagion effects of the 2008 Subprime crisis are clearly more intense than those caused by the 2010 sovereign debt crisis. |
| Keywords: | Financial contagion; 2010 European sovereign debt crisis; 2008 Subprime crisis; Stock markets; Copula theory. |
| JEL: | F30 G14 G15 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:cfe:wpcefa:2013_12&r=eec |
| By: | Elisabeth Beusch; Barbara Döbeli; Andreas M. Fischer; Pinar Yesin |
| Abstract: | Merchanting is goods trade that does not cross the border of the firm's country of residence. Merchanting grew strongly in the last decade in several small open economies, particularly in Finland, Ireland, Sweden, and Switzerland, and has become an important driver of these countries' current account. Because merchanting firms reinvest their earnings abroad to expand their international activities, this practice raises national savings in the home country without increasing domestic investment. This results in a significantly large current account surplus. To show the empirical links between merchanting and the current account balance, two exercises are performed in this paper using a sample of 53 countries during 1980-2011. The first exercise estimates the savings impact of merchanting countries in empirical models of the medium-term current account and shows that the presence of merchanting activity in a country indeed increases its current account balance by 3% on average. The second exercise shows that merchanting's impact on the country's current account is sensitive to firm mobility. |
| Keywords: | Merchanting, industry dynamics, current account adjustment |
| JEL: | F10 F20 F32 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:snb:snbwpa:2013-06&r=eec |
| By: | Christoph Basten (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Michael Siegenthaler (KOF Swiss Economic Institute, ETH Zurich, Switzerland) |
| Abstract: | We estimate the causal effect of immigration on the labor market outcomes of resident employees in Switzerland, whose foreign labor force has increased by 32.8% in the last decade. To address endogeneity of immigration into different labor market cells, we develop new variants of the shift-share instrument, tailored for small-open economies, that exploit only that part in the variation of immigration which can be explained by migration push-factors in the source countries. We find that immigration has reduced unemployment of residents and has enabled them to fill more demanding jobs, while it had no adverse effect on wages and employment. |
| Keywords: | Immigration, native employment, labor shortage, shift-share instrument |
| JEL: | F22 J21 J61 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:kof:wpskof:13-335&r=eec |
| By: | Laurence Nayman |
| Abstract: | This study compares French and German manufacturing price levels in 2007 and investigates in both countries over the 1991-2010 period value added price growth rates in manufacturing and services. Using the ICOP methodology and the data from the Eurostat production surveys, we calculate production price levels in the French and German manufacturing sector. Results show they are quite close to each other. As to growth rates, using national accounts data, while German manufacturing value added prices have been relatively stable between 1995 and 2010, French manufacturing prices have been falling. This relative decrease could be attributed to the relative fall in the French gross margins over the last years. This gap is not replicated in the aggregate value added prices. The latter have been rising more steeply in France than in Germany, and this is due to price fluctuations in services. The increase in the French compensation rate in services has been significantly larger than the hourly labour productivity. In Germany, with falling unit labour costs over the 2005-2007 years in the manufacturing sector, German firms could hoard substantial gross margins that, however, have only been partly allocated to investment. |
| Keywords: | France;Germany;relative price level;hourly labour productivity;unit labour costs;gross margins;investment |
| JEL: | E31 J24 J30 L60 O47 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2013-16&r=eec |
| By: | Francesco Papadia |
| Abstract: | During the Great Recession, central banks went well beyond their normal operations and provided liquidity in unlimited amounts, in foreign currency and to foreign banks. Central bank cooperation took the form of a swap network, and amounted to an episode of global monetary policy. However, though bank cooperation will continue to contribute to global governance, the swap network should not be made permanent and given an institutional basis to provide international lending of last resort. Swaps are a monetary policy tool and should continue to be decided on by central banks like all other monetary policy tools,to avoid impinging on their independence, which a difficult historical process has shown to be the best basis for price stability. In comments appended to this Policy Contribution, Edwin Truman, Senior Fellow, Peterson Institute for International Economics, concludes in favour of making the swap network permanent, while William Dudley, President of the Federal Reserve Bank of New York, stresses the importance of central banks around the world being able to coordinate closely so that there can be a viable, credible backstop on a global basis. |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:bre:polcon:782&r=eec |