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on European Economics |
| By: | Hale, Galina (Federal Reserve Bank of San Francisco); Obstfeld, Maurice (University of California Berkeley,) |
| Abstract: | Greater financial integration between core and peripheral EMU members had an effect on both sets of countries. Lower interest rates allowed peripheral countries to run bigger deficits, which inflated their economies by allowing credit booms. Core EMU countries took on extra foreign leverage to expose themselves to the peripherals. The result has been asset-price bubbles and collapses in some of the peripheral countries, area-wide banking crisis, and sovereign debt problems. We analyze the geography of international debt flows using multiple data sources and provide evidence that after the euro’s introduction, Core EMU countries increased their borrowing from outside of EMU and their lending to the EMU periphery. |
| Keywords: | international debt; EMU; international banking; global imbalances; euro crisis |
| JEL: | F32 F34 F36 |
| Date: | 2014–04–14 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:2014-10&r=eec |
| By: | Marta Gómez-Puig (Department of Economic Theory, Riskcenter-IREA, Universitat de Barcelona); Simón Sosvilla-Rivero (Department of Quantitative Economics, Universidad Complutense de Madrid) |
| Abstract: | This paper contributes to the literature by applying the Granger-causality approach and endogenous breakpoint test to offer an operational definition of contagion to examine European Economic and Monetary Union (EMU) countries public debt behaviour. A database of yields on 10-year government bonds issued by 11 EMU countries covering fourteen years of monetary union is used. The main results suggest that the 41 new causality patterns, which appeared for the first time in the crisis period, and the intensification of causality recorded in 70% of the cases, provide clear evidence of contagion in the aftermath of the current euro debt crisis. |
| Keywords: | Sovereign bond yields, Granger causality, contagion, Euro area |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:bak:wpaper:201403&r=eec |
| By: | Marta Gómez-Puig (Department of Economic Theory, Riskcenter-IREA, Universitat de Barcelona); Simón Sosvilla-Rivero (Department of Quantitative Economics, Universidad Complutense de Madrid); María del Carmen Ramos-Herrera (Department of Quantitative Economics, Universidad Complutense de Madrid) |
| Abstract: | We empirically investigate the determinants of EMU sovereign bond yield spreads with respect to the German bund. Using panel data techniques, we examine the role of a wide set of potential drivers. To our knowledge, this paper presents one of the most exhaustive compilations of the variables used in the literature to study the behaviour of sovereign yield spreads and, in particular, to gauge the effect on these spreads of changes in market sentiment and risk aversion. We use a sample of both central and peripheral countries from January 1999 to December 2012 and assess whether there were significant changes after the outbreak of the euro area debt crisis. Our results suggest that the rise in sovereign risk in central countries can only be partially explained by the evolution of local macroeconomic variables in those countries. Besides, without exception, the marginal effects of sovereign spread drivers (specifically, the variables that measure global market sentiment) increased during the crisis compared to the pre-crisis period, especially in peripheral countries. |
| Keywords: | Sovereign bond spreads, panel data, eurozone |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:bak:wpaper:201404&r=eec |
| By: | Edlira Narazani |
| Abstract: | This research investigates what drives the euroization in Albania. By using survey data collected in one of the main Albanian cities, we find that factors like remittances, financial literacy, perception of high inflation and trust in financial system play an important role in the extent of euroization together with the experience of past events. Factors related to the future, such as the expectation on the exchange rate fluctuations, seem to not be correlated with the extent of euroization. As regards the current Eurozone crisis, its impact on euroization results to be mediated by the (mis)trust in EURO rather than local currency. |
| Keywords: | Euroization, currency substitution, survey data, eurozone crisis |
| JEL: | E41 E50 D14 C83 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:wii:bpaper:109&r=eec |
| By: | Alfredo Marvão Pereira (Department of Economics, The College of William and Mary); Jorge M. Andraz (Faculdade de Economia, Universidade do Algarve) |
| Abstract: | We estimate the long-term impact of social security and social protection spending in a set of twelve EU countries. We estimate country-specific VARs relating GDP, unemployment, savings, and social spending. We find that social spending has a negative effect in most countries while the effects on savings are either not significant or positive but small. In turn, the negative effects on output are significant and in some cases large. Unemployment is the dominant channel through which social spending affects output. Our results imply that any increase in generosity would, under the current situation, bring detrimental macroeconomic effects. In addition, a less distortionary tax mix should be used to finance redistributive spending and the insurance component of the systems should be changed in the direction of a capitalization regime based on defined contributions. Obviously, this transition would take time and would not be costless but neither is maintaining the status quo. |
| Keywords: | Social security spending, unemployment, saving, output, fiscal multipliers, VAR, EU. |
| JEL: | C32 C51 C52 H55 |
| Date: | 2014–04–12 |
| URL: | http://d.repec.org/n?u=RePEc:cwm:wpaper:150&r=eec |