nep-eec New Economics Papers
on European Economics
Issue of 2015‒06‒05
27 papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Interest rates, eurobonds and intra-European exchange rate misalignments: the challenge of sustainable adjustments in the eurozone By Vincent Duwicquet; Jacques Mazier; Jamel Saadaoui
  2. The determinants of sovereign bond yield spreads in the EMU By Afonso, António; Arghyrou, Michael G.; Kontonikas, Alexandros
  3. A measure of redenomination risk By De Santis, Roberto A.
  4. Exploring price and non-price determinants of trade flows in the largest euro-area countries By Giordano, Claire; Zollino, Francesco
  5. On the bi-directional causal relationship between public debt and economic growth in EMU countries By Marta Gómez-Puig; Simón Sosvilla-Rivero
  6. Europe?s Long-Term Growth Prospects: With and Without Structural Reforms By McQuinn, Kieran; Whelan, Karl
  7. Do professional forecasters behave as if they believed in the new Keynesian Phillips Curve for the euro area? By López Pérez, Víctor
  8. Exports and domestic demand pressure: a dynamic panel data model for the euro area countries By Bobeica, Elena; Soares Esteves, Paulo; Rua, António; Staehr, Karsten
  9. Global value chains: a view from the euro area By Amador, João; Cappariello, Rita; Stehrer, Robert
  10. The 2012 Eurozone Crisis and the ECB’s OMT Program: A Debt-Overhang Banking and Sovereign Crisis Interpretation The 2012 Eurozone Crisis and the ECB’s OMT Program: A Debt-Overhang Banking and Sovereign Crisis Interpretation By Occhino, Filippo
  11. Bank and sovereign risk feedback loops By Erce, Aitor
  12. The impact of fiscal policy announcements by the Italian government on the sovereign spread: a comparative analysis By Falagiarda, Matteo; Gregori, Wildmer Daniel
  13. The Great Leveraging in the GIIPS Countries: Domestic Credit and Net Foreign Liabilities By Juan Carlos Cuestas; Karsten Staehr
  14. Detection of Implicit Fluctuation Bands in The European Union Countries By Simón Sosvilla-Rivero; María del Carmen Ramos-Herrera
  15. Banking Union as a Shock Absorber By Ansgar Belke; Daniel Gros
  16. Currency Unions and Trade: A Post-EMU Mea Culpa By Glick, Reuven; Rose, Andrew K
  17. Central bank balance sheet policies and inflation expectations By Jan Willem van den End; Christiaan Pattipeilohy
  18. An automatic leading indicator, variable reduction and variable selection methods using small and large datasets: Forecasting the industrial production growth for euro area economies By Camba-Méndez, Gonzalo; Kapetanios, George; Papailias, Fotis; Weale, Martin R.
  19. Exploring Differences in Household Debt Across Euro Area Countries and the United States By Dimitris Christelis; Michael Ehrmann; Dimitris Georgarakos
  20. Incorporating Anchored Inflation Expectations in the Phillips Curve and in the Derivation of OECD Measures of Equilibrium Unemployment By Elena Rusticelli; David Turner; Maria Chiara Cavalleri
  21. Detection of Implicit Fluctuation Bands and their Credibility in Candidate Countries By Simón Sosvilla-Rivero; María del Carmen Ramos-Herrera
  22. Real estate markets and macroprudential policy in Europe By Hartmann, Philipp
  23. Comparing fiscal multipliers across models and countries in Europe By Kilponen, Juha; Pisani, Massimiliano; Schmidt, Sebastian; Corbo, Vesna; Hlédik, Tibor; Hollmayr, Josef; Hurtado, Samuel; Júlio, Paulo; Kulikov, Dmitry; Lemoine, Matthieu; Lozej, Matija; Lundvall, Henrik; Maria, José R.; Micallef, Brian; Papageorgiou, Dimitris; Rysanek, Jakub; Sideris, Dimitris; Thomas, Carlos; de Walque, Gregory
  24. European Export Performance By Angela Cheptea; Lionel Fontagné; Soledad Zignago
  25. The wage inflation-unemployment curve at the macroeconomic level By Saglio, Sophie; lopez-villavicencio, antonia
  26. How to deal with inequality: Welfare system challenges and European responses By Friedl, Andreas; Görlich, Dennis; Horn, Sebastian; Krieger-Boden, Christiane; Lücke, Matthias
  27. Labour market adjustments in Europe and the US: How different? By Beyer, Robert C. M.; Smets, Frank

  1. By: Vincent Duwicquet (CLERSE - Centre lillois d'études et de recherches sociologiques et économiques - CNRS - Université Lille 1 - Sciences et technologies); Jacques Mazier (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris 13 - Université Sorbonne Paris Cité (USPC) - CNRS); Jamel Saadaoui (BETA - Bureau d'économie théorique et appliquée - CNRS - Université Louis Pasteur - Strasbourg I)
    Abstract: The euro zone crisis illustrates the deficiencies of adjustment mechanisms in a monetary union characterized by a large heterogeneity. Exchange rate adjustments being impossible, they are very few alternative mechanisms. At the level of the whole euro zone the euro is close to its equilibrium parity. But the euro is strongly overvalued for Southern European countries, France included, and largely undervalued for Northern European countries, especially Germany. The paper gives a new evaluation of these exchange rate misalignments inside the euro zone, using a FEER approach, and examines the evolution of competitiveness. In a second step, we use a two-country SFC model of a monetary union with endogenous interest rates and eurobonds issuance. Three main results are obtained. Facing a competitiveness loss in southern countries due to exchange rates misalignments, increasing intra-European financing by banks of northern countries or other institutions could contribute to reduce the debt burden and induce a partial recovery but public debt would increase. Implementation of eurobonds as a tool to partly mutualize European sovereign debt would have a rather similar positive impact, but with a public debt limited to 60% of GDP. Furthermore, eurobonds could also be used to finance large European projects which could impulse a stronger recovery in the entire euro zone with stabilized current account imbalances. However, the settlement of a European Debt Agency in charge of the issuance of the eurobonds would face strong political obstacles.
    Date: 2014–05–31
  2. By: Afonso, António; Arghyrou, Michael G.; Kontonikas, Alexandros
    Abstract: We use a panel of euro area countries to assess the determinants of long-term sovereign bond yield spreads over the period 1999.01-2010.12. We find that, on top of the fundamentals themselves, changes in the sensitivity of bond prices to fundamentals are also necessary to explain yields over the crisis period. We also find that the menu of macro and fiscal risks priced by markets has been significantly enriched since March 2009, including international financial risk and liquidity risk. Finally, we find that sovereign credit ratings are statistically significant in explaining spreads, yet compared to macro- and fiscal fundamentals their role is limited. JEL Classification: C23, E62, H50
    Keywords: credit ratings, government debt, panel analysis, sovereign yields
    Date: 2015–04
  3. By: De Santis, Roberto A.
    Abstract: Euro redenomination risk is the risk that a euro asset will be redenominated into a devalued legacy currency. We propose a time-varying, country-specific market perception of intra-euro area redenomination risk measure, defined as the quanto CDS of a member country relative to the quanto CDS of a benchmark member country. Focusing on Italy, Spain and France and using Germany as benchmark, we show that the redenomination risk shocks, defined as the unexplained component of the market perception of redenomination risk orthogonal to exchange rate, global, regional and liquidity risks, significantly affect sovereign yield spreads, with Italy and Spain being the countries most adversely affected, followed by France. Finally, foreign redenomination risk shocks spill over and above local redenomination risk shocks, corroborating the fact that this risk is systemic. JEL Classification: C32, F36, G12, G15
    Keywords: euro, redenomination risk, sovereign credit spreads, systemic risk
    Date: 2015–04
  4. By: Giordano, Claire; Zollino, Francesco
    Abstract: Since the mid-2000s price-competitiveness indicators for some euro-area countries have been providing conflicting signals. Against a stability of the producer price (PPI)-based measure, the manufacturing unit labour cost (ULCM)-deflated indicator points to a major competitiveness loss in Italy; we argue that the discrepancy mostly reflects a divergence of ULCM and PPI trends in competitor countries. Owing to the fading representativeness of labour on overall costs, price-based indicators appear to be more appropriate than those based on ULCMs to assess external competitiveness. In Italy ULC-based indicators play a less relevant role relative to price-deflated measures in explaining exports; the opposite holds true for Germany and France, whereas in Spain exports are insensitive to prices. Non-price competitiveness proves important in explaining Italian, German and, in particular, Spanish exports. Imports react to price-competitiveness dynamics only in Italy; considering the participation in global value chains is useful to correctly identify import sensitivity to domestic and foreign demand. JEL Classification: F14, F62
    Keywords: non-price competitiveness, price competitiveness, producer prices, unit labour costs
    Date: 2015–05
  5. By: Marta Gómez-Puig (Department of Economic Theory - Universitat de Barcelona); Simón Sosvilla-Rivero (Department of Quantitative Economics, Universidad Complutense de Madrid)
    Abstract: New evidence is presented on the possible existence of bi-directional causal relationships between public debt and economic growth in both central and peripheral countries of the European Economic and Monetary Union. We test for heterogeneity in the bi-directional Granger-causality across both time and space during the period between 1980 and 2013. The results suggest evidence of a “diabolic loop” between low economic growth and high public debt levels in Spain after 2009. For Belgium, Greece, Italy and the Netherlands debt has a negative effect over growth from an endogenously determined breakpoint and above a debt threshold ranging from 56% to 103% depending on the country.
    Keywords: Public debt, economic growth, Granger-causality, euro area, peripheral EMU countries, central EMU countries
    JEL: C22 F33 H63 O40 O52
    Date: 2015–06
  6. By: McQuinn, Kieran; Whelan, Karl
    Abstract: Even before the financial crisis of 2007/08, there were significant questions about Europe's long-term growth prospects. After a long period of catching up with US levels of labour productivity, euro area productivity growth had, from the mid-1990s onwards, fallen significantly behind. Using data for the period 1970 to 2006, McQuinn and Whelan (2008) identified declining rates of total factor productivity (TFP) growth and weaker capital accumulation as areas for concern in an European context. In updating this earlier analysis, we find that the growth prospects of the euro area have deteriorated further. With TFP growth continuing to fall, Europe's demographics are now also contributing to a decline in the workforce. Against this backdrop, we provide a long-term projection for euro area GDP based on unchanged policies and discuss the possible impacts of certain structural reforms including potential changes in the unemployment rate, pension reform and the successful implementation of a significant wider programme of regulatory reform that boosts TFP growth. We argue that, even with the successful adoption of these measures, the European economy is still likely to grow at a slower pace than it has in the past.
    Date: 2015–05
  7. By: López Pérez, Víctor
    Abstract: This paper finds that participants in the European Central Bank’s Survey of Professional Forecasters have submitted forecasts that are consistent with a (mostly forward-looking) New Keynesian Phillips Curve for the euro area. The estimation results suggest that euro-area inflation forecasts have reacted less to unemployment forecasts after the start of the financial crisis but another cost measure (energy inflation) remains significant. This finding is consistent with a flatter Phillips Curve in the euro area. However, the reasons suggested by the International Monetary Fund for this finding, namely a better anchoring of inflation expectations and increases in structural unemployment do not seem to find support in the survey data. Instead, downward wage rigidities may be playing a prominent role. JEL Classification: E31, J30
    Keywords: downward wage rigidities, inflation, new Keynesian Phillips curve, panel data, survey of professional forecasters, unemployment
    Date: 2015–03
  8. By: Bobeica, Elena; Soares Esteves, Paulo; Rua, António; Staehr, Karsten
    Abstract: The paper investigates the link between domestic demand pressure and exports by considering an error correction dynamic panel model for eleven euro area countries over the last two decades. The results suggest that there is a statistically significant substitution effect between domestic and foreign sales. Furthermore, this relationship appears to be asymmetric, as the link is much stronger when domestic demand falls than when it increases. Weakness in the domestic market translates into increased efforts to serve markets abroad, but, conversely, during times of boom, exports are not negatively affected by increasing domestic sales. This reorientation towards foreign markets was particularly important during the crisis period, and thus could represent a new adjustment channel to strong negative domestic shocks. The results have important policy implications, as this substitution effect between domestic and external markets might allow the euro area countries under stress to improve their trade outcomes with a relatively small downward pressure on domestic prices. JEL Classification: C22, C50, F10
    Keywords: asymmetry, domestic demand pressure, exports
    Date: 2015–04
  9. By: Amador, João; Cappariello, Rita; Stehrer, Robert
    Abstract: This paper describes the main features of Global Value Chains (GVCs) in the euro area taken as a whole and compares with other large trade players like the US, China and Japan. In addition, the perspective of individual euro area countries is considered, with a focus on intra euro area linkages. The analysis relies primarily on the concept of foreign value added in exports, as a way to assess the pervasiveness of GVCs, it covers the period 2000-2011 and bases on the World Input-Output Database (WIOD). The paper finds that GVCs are important for the euro area as whole and they have rebounded after the great trade collapse. Moreover, there is a strong relevance of regional production linkages in Europe, with Germany playing a key role. JEL Classification: F1, F14, F15
    Keywords: euro area, global value chains, international trade
    Date: 2015–03
  10. By: Occhino, Filippo (Federal Reserve Bank of Cleveland)
    Abstract: This paper develops a model to interpret the 2012 eurozone crisis and the ECB’s policy response. In the model, bank lending is distorted by debt overhang, banks hold sovereign bonds, and the government guarantees the bailout of bank creditors. A self-fulfilling pessimistic view of the economy can trigger a banking and sovereign crisis: with pessimistic economic expectations, the value of sovereign bonds declines, the bank risk of default rises, and the debt overhang distortion worsens; this leads to a contraction in bank lending and to a decline in economic activity, which confi rms the initial pessimistic expectations. A commitment by the central bank to purchase the sovereign bonds at pre-crisis market spreads manages to eliminate the crisis equilibrium.
    Keywords: Debt overhang; multiple equilibria; self-fulfilling expectations; financial fragility; systemic risk
    JEL: G01
    Date: 2015–06–02
  11. By: Erce, Aitor (European Stability Mechanism)
    Abstract: Measures of Sovereign and Bank Risk show occasional bouts of increased correlation, setting the stage for vicious and virtuous feedback loops. This paper models the macroeconomic phenomena underlying such bouts using CDS data for 10 euro-area countries. The results show that Sovereign Risk feeds back into Bank Risk more strongly than vice versa. Countries with sovereigns that are more indebted or where banks have a larger exposure to their own sovereign, suffer larger feedback loop effects from Sovereign Risk into Bank Risk. In the opposite direction, in countries where banks fund their activities with more foreign credit and support larger levels of non-performing loans, the feedback from Bank Risk into Sovereign Risk is stronger. According to model estimates, financial rescue operations can increase feedback effects from bank risk into sovereign risk. These results can be useful for the official sector when deciding on the form of financial rescues.
    JEL: E58 G21 G28 H63
    Date: 2015–02–01
  12. By: Falagiarda, Matteo; Gregori, Wildmer Daniel
    Abstract: This paper attempts to evaluate the impact of fiscal policy announcements by the Italian government on the long-term sovereign bond spread of Italy relative to Germany. After collecting data on relevant fiscal policy announcements, we perform an econometric comparative analysis between the three administrations that followed one another during the period 2009-2013. The results indicate that only fiscal policy announcements made by members of Monti's cabinet had a significant impact on the Italian spread. We argue that these findings may be partly explained by a credibility gap between Monti's technocratic administration and Berlusconi's and Letta's governments. JEL Classification: E43, E62, G01, G12
    Keywords: fiscal policy announcements, GARCH models, interest rate spread, political communication, sovereign debt crisis
    Date: 2015–04
  13. By: Juan Carlos Cuestas (Department of Economics, University of Sheffield); Karsten Staehr (Tallinn University of Technology, Estonia)
    Abstract: This paper analyses the relationship between domestic credit and foreign capital flows in the GIIPS countries during the Great Moderation before the global financial crisis. Cointegration analyses on the pre-crisis sample reveal that domestic credit and net foreign liabilities are cointegrated for Greece, Italy, Portugal and Spain, but not for Ireland. For the first four countries the long-run coefficient is in all cases around one, suggesting a close relationship between domestic leveraging and foreign capital inflows. Estimation of VECMs shows that the adjustment to deviations from the long-run relationship takes place through changes in domestic credit for Greece and Italy, while the adjustment is bidirectional for Spain and possibly also Portugal. These results suggest that “push” factors related to foreign capital inflows were important in the pre-crisis leveraging. The deleveraging after the crisis was largely unrelated to developments in foreign capital flows.
    Keywords: leveraging, capital flows, financial crisis, cointegration
    JEL: F32 E51 E44 C32
    Date: 2015–05
  14. By: 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: This paper attempts to identify implicit exchange rate regimes for currencies of European Union member states vis-à-vis the euro. To that end, we apply three sequential procedures that consider the dynamics of exchange rates to data covering the period from 1999:01 to 2012:12 for twelve European countries. Our results indicate the presence of ± 2% and ± 1% implicit fluctuation bands in high percentages of the sample period even reach 100% in countries such as Bulgaria, Cyprus and Slovenia, among others. This paper provides new empirical evidence that strengthens the hypothesis of that the implemented policies differ from those announced by the monetary authorities, identifying the existence of de facto fixed monetary systems along large number of sub-periods for different currencies. It seems that the countries under study try to capture the benefits of their participation in the ERM-II moderating somewhat the potential problems arising from formal participation in the ERM-II.
    Keywords: Exchange-rate regimes, Implicit fluctuation bands, Exchange rates, De facto and de iure fixed regimes
    JEL: F31 F33
    Date: 2015–09
  15. By: Ansgar Belke; Daniel Gros
    Abstract: This study investigates the shock-absorbing properties of a banking union by providing a detailed comparison between the way regional financial shocks have been absorbed at the federal level in the US, but have led to severe regional (national) financial dislocation and tensions in the euro area. The extent to which the institutions of the banking union, which is now emerging in the euro area, should increase its capacity to deal with future regional boom and bust cycles is also discussed. Cross-border capital flows in the form of equity appear to be much more stable than those taking the form of credit, especially inter-bank credit. Moreover, credit booms and bust leave a debt overhang and losses can materialise only via insolvencies, whereas equity flows absorb automatically losses in case of a bust and provide the cross border owner with incentives to continue to provide financing. It follows that cross-border banks can absorb regional shocks. But large banks pose the ‘too big to fail’ problem and they would also propagate regional shocks, especially if they originate in large countries, to the entire area.
    Keywords: Child health; health behavior; communication; intergenerational transmission; socioeconomic inequality; continuous treatment effect
    JEL: C31 D83 I12 I14
    Date: 2015–04
  16. By: Glick, Reuven; Rose, Andrew K
    Abstract: In our European Economic Review (2002) paper, we used pre-1998 data on countries participating in and leaving currency unions to estimate the effect of currency unions on trade using (then-) conventional gravity models. In this paper, we use a variety of empirical gravity models to estimate the currency union effect on trade and exports, using recent data which includes the European Economic and Monetary Union (EMU). We have three findings. First, our assumption of symmetry between the effects of entering and leaving a currency union seems reasonable in the data but is uninteresting. Second, EMU typically has a smaller trade effect than other currency unions, often estimated to be negligible or negative. Third and most importantly, estimates of the currency union effect on trade are sensitive to the exact econometric methodology; we find no substantive reliable and robust effect of currency union on trade.
    Keywords: bilateral; common; country; exports; fixed; gravity; Poisson; specific; time-varying
    JEL: F15 F33
    Date: 2015–05
  17. By: Jan Willem van den End; Christiaan Pattipeilohy
    Abstract: We analyse the empirical effects of credit easing and quantitative easing on inflation expectations and exchange rates. Both monetary policy strategies are summarised in measures for composition and size of the central bank balance sheet and included in a VAR model. The empirical results show that changes in balance sheet size had positive effects on inflation expectations in Japan, while the effects where negligible in the euro area. By contrast, an increasing balance sheet size is associated with reduced short-term inflation expectations in the US and UK, pointing at negative signalling effects. Shocks to balance sheet size or composition have no substantial effects on long-term inflation expectations in the euro area, US and UK. An expanding balance sheet size is associated with an appreciation of the US dollar and a depreciation of the euro, pound sterling and Japanese yen.
    Keywords: central banks and their policies; monetary policy
    JEL: E58 E52
    Date: 2015–05
  18. By: Camba-Méndez, Gonzalo; Kapetanios, George; Papailias, Fotis; Weale, Martin R.
    Abstract: This paper assesses the forecasting performance of various variable reduction and variable selection methods. A small and a large set of wisely chosen variables are used in forecasting the industrial production growth for four Euro Area economies. The results indicate that the Automatic Leading Indicator (ALI) model performs well compared to other variable reduction methods in small datasets. However, Partial Least Squares and variable selection using heuristic optimisations of information criteria along with the ALI could be used in model averaging methodologies. JEL Classification: C11, C32, C52
    Keywords: Bayesian shrinkage regression, dynamic factor model, euro area, forecasting, Kalman filter, partial least squares
    Date: 2015–04
  19. By: Dimitris Christelis; Michael Ehrmann; Dimitris Georgarakos
    Abstract: We use internationally comparable household-level data for ten euro area economies and the United States to investigate cross-country differences in debt holdings and the potential of debt overhang. U.S. households have the highest prevalence of both collateralized and non-collateralized debt, hold comparatively large amounts of loans outstanding, and face a higher debt-service burden. These differences are mainly attributed to the U.S. economic environment, which appears to be more conducive to both types of debt. For instance, differences in the economic environment between the United States and the median European country explain more than 85% of the overall difference in the prevalence of debt holdings. Even though U.S. households have higher income and financial wealth than their European counterparts, their debt burden remains comparatively elevated, primarily because a given level of collateral translates into a higher prevalence of collateralized debt, and larger amounts of it, in the United States. This suggests that U.S. households are relatively more vulnerable to adverse shocks.
    Keywords: Credit and credit aggregates; Econometric and statistical methods; International topics
    JEL: D12 E21 G11
    Date: 2015
  20. By: Elena Rusticelli; David Turner; Maria Chiara Cavalleri
    Abstract: Inflation has become much less sensitive to movements in unemployment in recent decades. A common explanation for this change is that inflation expectations have become better anchored as a consequence of credible inflation targeting by central banks. In order to evaluate this hypothesis, the paper compares two competing empirical specifications across all OECD economies, where competing specifications correspond to the ‘former’ and ‘new’ specification for deriving measures of the unemployment gap which underlie the OECD’s Economic Outlook projections. The former OECD specification can be characterised as a traditional ‘backward-looking’ Phillips curve, where current inflation is partly explained by an autoregressive distributed lag process of past inflation representing both inertia and inflation expectations formed on the basis of recent inflation outcomes. Conversely, the new approach adjusts this specification to incorporate the notion that inflation expectations are anchored around the central bank’s inflation objective. The main finding of the paper is that the latter approach systematically out-performs the former for an overwhelming majority of OECD countries over a recent sample period. Relative to the backward-looking specification, the anchored expectations approach also tends to imply larger unemployment gaps for those countries for which actual unemployment has increased the most. Moreover, the anchored expectations Phillips curve reduces real-time revisions to the unemployment gap, although these still remain uncomfortably large, in the case of countries where there have been large changes in unemployment.<P>Intégrer des anticipations ancrées d'inflation à la courbe de Phillips pour le calcul de mesures du chômage d'équilibre<BR>L'inflation est devenue beaucoup moins sensible aux fluctuations du chômage au cours des dernières décennies. Une explication couramment avancée à cet égard, est que l'ancrage des anticipations d'inflation s'est amélioré. Ni cette explication ni l'approche économétrique retenue ne sont nouvelles, mais un des apports de ce document tient au fait que nous y utilisons deux spécifications économétriques différentes pour l'ensemble des économies de l'OCDE, celles-ci correspondant à l'« ancienne » et à la « nouvelle » spécifications employées pour calculer les mesures de l'écart de chômage sur lesquelles reposent les prévisions des Perspectives économiques de l'OCDE. L'ancienne spécification employée par l'OCDE peut être caractérisée comme une courbe de Phillips « rétrospective » classique, suivant laquelle l'inflation est expliquée en partie à l'aide d'un modèle autorégressif à retards échelonnés appliqué à l'inflation antérieure, représentant à la fois l'inertie de l'inflation et les anticipations d'inflation formées sur la base des récents résultats d'inflation. Inversement, la nouvelle approche consiste à ajuster cette spécification de manière à intégrer la notion que les anticipations d'inflation sont ancrées aux alentours de l'objectif d'inflation de la banque centrale. La principale conclusion de ce document est que la nouvelle approche donne systématiquement de meilleurs résultats que l'ancienne pour une écrasante majorité de pays de l'OCDE sur une période d'observation récente. Par rapport à la spécification rétrospective, l'approche fondée sur les anticipations ancrées tend également à mettre en évidence des écarts de chômage plus importants pour les pays où le taux de chômage effectif a le plus augmenté. En outre, la courbe de Phillips fondée sur des anticipations ancrées réduit les révisions en temps réel de l'écart de chômage, même si celles-ci restent d'une ampleur préoccupante, dans le cas des pays où le chômage a fortement varié.
    Keywords: Phillips curve, equilibrium unemployment, Anchored expectations, real-time revisions, anticipations ancrées, révisions en temps réel, chômage d’équilibre, courbe de Phillips
    JEL: C22 E24 E31 J64
    Date: 2015–05–28
  21. By: 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: This paper attempts to identify implicit exchange rate regimes for currencies of candidate countries vis-à-vis the euro. To that end, we apply three sequential procedures that consider the dynamics of exchange rates to data covering the period from 1999:01 to 2012:12. Our results would suggest that implicit bands have existed in many sub-periods for almost all currencies under study. Once we detect de facto discrepancies between de facto and de iure exchange rate regimes, we make use of different methods to study the credibility of the detected fluctuation bands. The detected lack of credibility in a high percentage of the sample is robust using the Drift Adjustment method and discrete choice models, suggesting that economic agents do not behave as if these bands actually were in force at time of making their financial plans. These countries do not improve the confidence on the fluctuation bands as time evolves.
    Keywords: exchange-rate regimes; implicit fluctuation bands; credibility; exchange rates.
    JEL: F31 F33
    Date: 2015–08
  22. By: Hartmann, Philipp
    Abstract: Boom-bust cycles in real estate markets have been major factors in systemic financial crises and therefore need to be at the forefront of macroprudential policy. The geographically differentiated nature of real estate market fluctuations implies that these policies need to be granular across regions and countries. Before the financial crisis that started in 2007 property markets were overvalued in a range of European countries, but much like in other constituencies active policies addressing this were an exception. An increasing number of studies suggest that borrower-based regulatory policies, such as reductions in loan-to-value or debt-to-income limits, can be effective in leaning against real estate booms. But many of the new macroprudential policy authorities in Europe do not have clear powers to determine them. Moreover, the cross-border spillovers they may give rise to suggest the establishment of a well-defined macroprudential coordination mechanism for the single European market. European System of Central Banks Macroprudential Research Network (MaRs) suggests, first, that policies adjusting loan-to-value ratios in a countercyclical way and combining them with debt-to-income limits can be expected to be more effective than traditional approaches. Second, cross-border regulatory spillovers may be significant. Much like in other constituencies, before the crisis active regulatory policies leaning against burgeoning real estate markets were the exception in Europe rather than the rule. A lesson from this experience is that going forward policy makers need be bold enough to lean against booming real estate markets that imply systemic risks. In terms of completing the regulatory setup in European Union (EU) countries for this purpose, it is important to note that only a subset of countries have the necessary legislation in place to actively use loan-to-value or debt-to-income limits. And among those who have, not all allocate their use to macroprudential authorities. Finally, the Single Supervisory Mechanism for banks, which started at the European Central Bank in November 2014, has a coordinating role for some lender based regulatory instruments (as included in the Capital Requirements Directive IV and the Capital Requirements Regulation implementing Basel III) in that it can tighten relevant bank regulations in countries that joined but not relax them. A more complete macroprudential policy framework for supporting the EU single market for financial services would probably require a legal basis for the use of borrower based instruments by macroprudential policy authorities in all member countries, including a well-defined cross-border coordination mechanism for both lender and borrower based instruments. JEL Classification: G01, G28, R39, G17, E5
    Keywords: bubbles, financial crises, financial regulation, financial stability indicators, macroprudential policy, real estate markets, systemic risk
    Date: 2015–05
  23. By: Kilponen, Juha; Pisani, Massimiliano; Schmidt, Sebastian; Corbo, Vesna; Hlédik, Tibor; Hollmayr, Josef; Hurtado, Samuel; Júlio, Paulo; Kulikov, Dmitry; Lemoine, Matthieu; Lozej, Matija; Lundvall, Henrik; Maria, José R.; Micallef, Brian; Papageorgiou, Dimitris; Rysanek, Jakub; Sideris, Dimitris; Thomas, Carlos; de Walque, Gregory
    Abstract: This paper employs fifteen dynamic macroeconomic models maintained within the European System of Central Banks to assess the size of fiscal multipliers in European countries. Using a set of common simulations, we consider transitory and permanent shocks to government expenditures and different taxes. We investigate how the baseline multipliers change when monetary policy is transitorily constrained by the zero nominal interest rate bound, certain crisis-related structural features of the economy such as the share of liquidity-constrained households change, and the endogenous fiscal rule that ensures fiscal sustainability in the long run is specified in terms of labour income taxes instead of lump-sum taxes. JEL Classification: E12, E13, E17, E62, E63
    Keywords: fiscal policy, model comparison, output multipliers, zero lower bound
    Date: 2015–03
  24. By: Angela Cheptea (SMART - Structures et Marché Agricoles, Ressources et Territoires - Institut national de la recherche agronomique (INRA) - Agrocampus Ouest); Lionel Fontagné (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, Banque de France, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS); Soledad Zignago (Centre de recherche de la Banque de France - Banque de France)
    Abstract: Using an econometric shift-share decomposition, we explain the redistribution of world market shares at the level of the product variety and by technological content. We decompose changes in market shares into structural eff ects (geographical and sectoral) and a pure performance e ffect. We regard the EU-27 as an integrated economy, excluding intra-EU trade. Revisiting the competitiveness issue in such a perspective sheds new light on the impact of emerging countries on the reshaping of world trade. Since 1995 the EU-27 withstood the competition from emerging countries better than the United States and Japan. The EU market shares for high-technology products, as well as in the upper price range of the market, proved comparatively resilient, though less so since the crisis.
    Date: 2014
  25. By: Saglio, Sophie; lopez-villavicencio, antonia
    Abstract: This paper tests the reduced form New Keynesian Wage Phillips Curve in several advanced countries for the 1985-2014 period. Based on this approach, we estimate wage rigidity at the aggregate level. We document that rigidity is heterogenous among our sample of countries: nominal wage rigidities are more important in the United States, while wage indexation is dominant in European Countries. We also present evidence that wage rigidity is not linked to the institutional environment at the macroeconomic level. Finally, we show that there is significant time variation in the estimated coefficients on the implied equation that is usually not taken into account in the theoretical literature.
    Keywords: wage rigidity, European Union, New keynesian Wage Phillips Curve
    JEL: C32 E24 J3 J30
    Date: 2015–06–01
  26. By: Friedl, Andreas; Görlich, Dennis; Horn, Sebastian; Krieger-Boden, Christiane; Lücke, Matthias
    Abstract: [Introduction ...] In this paper, we seek to identify innovative ways to limit inequality in households’ disposable incomes and living standards while keeping welfare systems fiscally sustainable. We focus on the welfare systems of EU countries in comparison, to better understand their key features. To set the scene, we review trends in income inequality in Europe in relation to other major world regions. We compare inequality before and after taxes and transfers across European countries to gain insights into the extent of redistribution and, hence, the impact of the national welfare systems (Section 2). Next we review the experience of five European countries that have been identified as examples of distinct welfare system models. We characterize national welfare systems in terms of the extent to which they decommodify labour, emphasize or relax stratification, and engage in social investment rather than income replacement during spells of unemployment (Section 3). We go on to assess the performance of our selected countries in terms of income redistribution, economic growth, polarization between rich and poor, and labour market developments (Section 4). We complement the picture by looking closely at evidence from surveys and economic experiments to assess inequality aversion in our selected countries and relate our findings to the extent of redistribution and other features of the national welfare systems (Section 5). We look for recent challenges for and responses by the welfare systems and reflect on adjustment requirements that lie ahead (Section 6). The final section concludes (Section 7). [...]
    Date: 2015
  27. By: Beyer, Robert C. M.; Smets, Frank
    Abstract: We compare the labour market response to region-specific shocks in Europe and the US and to national shocks in Europe and investigate changes over time. We employ a multi-level factor model to decompose regional labour market variables and then estimate the dynamic response of the employment level, the employment rate and the participation rate using the region-specific variables and the country factors. We find that both in Europe and the US labour mobility accounts for about 50% of the long run adjustment to region-specific labour demand shocks and only a little more in the US than in Europe, where adjustment takes twice as long. In Europe labour mobility is a less important adjustment mechanism in response to country-specific labour demand shocks that cause stronger and more persistent reactions of the employment and the participation rate. However, we detect a convergence of the adjustment processes in Europe and the US, reflecting both a fall in interstate migration in the US and a rise in the role of migration in Europe. Finally, we show that part of the difference between Europe and the US in previous studies may be due to the use of different data sources. JEL Classification: F2, J6, R23, R30
    Keywords: European integration, labour mobility, migration, regional labour markets
    Date: 2015–03

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