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on European Economics |
| By: | Dolls, Mathias; Fuest, Clemens; Neumann, Dirk; Peichl, Andreas |
| Abstract: | The 2008-09 crisis has shown that some euro area member countries were unable to sufficiently stabilize their economies which has given rise to a debate about deeper fiscal integration in Europe. In this paper, we analyze the redistributive and stabilizing effects of two scenarios of fiscal integration in the Eurozone, namely the introduction of i) a joint tax and transfer system that replaces 10 per cent of national systems and ii) a system of fiscal equalization that equalizes 10 per cent of differences in taxing capacity. Based on the European tax-benefit calculator EUROMOD and representative household micro data for the current 17 euro area member states, our conceptual experiment shows that a joint tax and transfer system would only lead to moderate gains in terms of stabilization while redistribution would flow especially towards the Eastern European member states. In contrast, a fiscal equalization mechanism that redistributes revenues across countries could even lead to destabilizing effects. -- |
| Keywords: | European fiscal integration,redistribution,automatic stabilization |
| JEL: | F55 H23 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:13106&r=eec |
| By: | Herrmann, Sabine; Jochem, Axel |
| Abstract: | The paper evaluates current account dynamics in countries with different exchange rate regimes within the EU. In this, the empirical analysis explicitly differentiates between countries with a flexible and a fixed exchange rate regime and members of a monetary union. In addition, we model the adjustment process of external disequilibria by referring to the flexibility of exchange rates and interest rates. The sample covers annual data for 27 EU countries from 1994 to 2011. The estimation is based on a simple autoregressive model and comes to the conclusion that current account adjustment is significantly hampered in countries that are members of a monetary union. This holds particularly in comparison with floating exchange rate regimes owing to lower exchange rate flexibility. However, the persistence of current account balances in member countries of a monetary union is also more pronounced than in fixed-rate regimes due to less flexible interest rates as a result of the single monetary policy. -- |
| Keywords: | Balance of Payments,European Monetary Union,Exchange Rate Regime,Current Account Adjustment,Financial Crisis |
| JEL: | E52 F32 F33 F34 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:492013&r=eec |
| By: | Dockner, Engelbert J.; Mayer, Manuel; Zechner, Josef |
| Abstract: | Credit risk has become an important factor driving government bond returns. We therefore introduce an asset pricing model which exploits information contained in both forward interest rates and forward CDS spreads. Our empirical analysis covers euro-zone countries with German government bonds as credit risk-free assets. We construct a market factor from the first three principal components of the German forward curve as well as a common and a country-specific credit factor from the principal components of the forward CDS curves. We find that predictability of risk premiums of sovereign euro-zone bonds improves substantially if the market factor is augmented by a common and an orthogonal country-specific credit factor. While the common credit factor is significant for most countries in the sample, the country-specific factor is significant mainly for peripheral euro-zone countries. Finally, we find that during the current crisis period, market and credit risk premiums of government bonds are negative over long subintervals, a finding that we attribute to the presence of financial repression in euro-zone countries. -- |
| Keywords: | Sovereign bond risk premiums,Market and credit risk factors,Financial repression |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:201328&r=eec |
| By: | Antonio Bassanetti (Bank of Italy and IMF); Matteo Bugamelli (Bank of Italy); Sandro Momigliano (Bank of Italy); Roberto Sabbatini (Bank of Italy); Francesco Zollino (Bank of Italy) |
| Abstract: | This paper reviews the main macroeconomic trends and the debate on policy priorities in Italy since the end of the Nineties. In the decade up to the outbreak of the global crisis (1998-2007), in Italy the reform process came to a virtual standstill; this is partly due to the fragmentation of the political constituency, while a variety of favourable contingent factors masked the difficulties of the productive system. Had Italy been better positioned in terms of public finances and structural features in 2007, some of the adverse effects of the global and sovereign crises would have been avoided. |
| Keywords: | EMU, fiscal policy, macroeconomic imbalances, global crisis |
| JEL: | E6 H3 K0 N1 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_211_13&r=eec |
| By: | Hermine Vidovic (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | Summary Employment and activity rates in the new EU Member States (NMS) declined significantly up to the early 2000s and started to increase along with strong GDP growth thereafter. Job losses following the outbreak of the economic and financial crisis varied substantially across countries and have not been offset yet. Overall, the low-educated and the young people are very disadvantaged on the NMS labour markets. With the exception of Poland and Slovenia, non-standard types of employment are uncommon in the NMS, following the pattern of Southern EU countries. Employment protection legislation has been adjusted to ‘European standards’ in the entire region. Union density and consequently the impact of trade unions on wage setting and employment in the NMS fell dramatically. In all NMS unemployment insurance schemes as well as minimum wage regulations were introduced at the beginning of the 1990s, but are less generous than in the EU-15. |
| Keywords: | labour market, labour market institutions |
| JEL: | J21 J52 J60 J64 J65 K31 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:wii:rpaper:rr:392&r=eec |
| By: | Alberto Locarno (Banca d’Italia); Alessandro Notarpietro; Massimiliano Pisani (Bank of Italy) |
| Abstract: | This paper briefly reviews the literature on fiscal multipliers and then presents results for the Italian economy obtained by simulating a dynamic general equilibrium model that allows for the possibility (a) that the zero lower bound may be binding and (b) that the initial public debt-to-GDP ratio may affect the financing conditions of the public and private sectors (sovereign risk channel). The results are the following. First, the public consumption multiplier is in general less than 1. Second, it goes above 1 only under extremely strong assumptions, namely the constancy of the monetary policy rate for an exceptionally long period (at least five years) and there is full time-coincidence between the fiscal and the monetary stimuli. Third, when the sovereign risk channel is active the government spending multiplier is much lower. Finally, in all cases tax multipliers are lower than government consumption multipliers. |
| Keywords: | Fiscal multiplier, monetary policy, zero lower bound, sovereign risk. |
| JEL: | E32 E52 E62 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_943_13&r=eec |
| By: | John Bonin (Department of Economics, Wesleyan University); Marko Kosak (Faculty of Economics, University of Ljubljana, Ljubljana, Slovenia) |
| Abstract: | The recent global financial crisis has generated considerable interest in reviewing the regulatory environment surrounding the banking sectors in most countries and proposals for changes designed to avoid such a severe outcome in the future. In this paper, we consider a particular aspect relevant to bank regulation, namely, the cyclicality of loan loss provisioning, in a region of emerging market economies. All eleven of the countries in our sample are currently new members of the European Union, the first group entering 2004 and the last country joining in 2013. Our time period from 1997 to 2010 covers roughly one and a half business cycles, starting with the impact of the Russian financial crisis and followed by a rapid growth of bank credit prior to the included global financial crisis. We find that the determinants of loan loss provisioning by banks in the region are similar to those found in the literature for other countries both developed and developing ones. We find evidence on income smoothing through provisioning and capital management by substitution. Unlike the results in much of the literature, we do not find statistically significant evidence of bank-specific pro-cyclicality, i.e., a strong positive relationship between provisioning and individual bank loan growth. However, we do find strong and robust evidence of macroeconomic pro-cyclicality, i.e., a strong positive relationship between provisioning and country GDP growth. Based on the innovative policy of dynamic (statistical) provisioning instrument adopted by Spanish regulators in 2000 to smooth provisioning over the business cycle, we draw implications for regulatory design specific to this region in which financial sectors are bank-centric and financial deepening is occurring. |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:wes:weswpa:2013-010&r=eec |
| By: | D’Albis, H.; Bonnet, C.; Navaux, J.; Pelletan, J.; Toubon, H.; Wolff, F. C. |
| Abstract: | We use the National Transfer Accounts methodology to calculate the lifecycle deficit in France for the years 1979‐2005. During this period, consumption profiles were roughly constant over age, while labor income profiles shifted to higher ages. The share of the aggregate lifecycle deficit in GDP rose sharply in the 1980s due to an increase in the mean age of the population. In contrast, the per capita shares of the lifecycle deficit attributed to the population under 20 and over 60 varied little during this period, even though the relative weights of these two age‐segments has shifted continuously in favor of the latter. |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpm:docweb:1307&r=eec |