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on European Economics |
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Issue of 2015‒08‒19
fourteen papers chosen by Giuseppe Marotta Università degli Studi di Modena e Reggio Emilia |
| By: | Leo Krippner; Sandra Eickmeier; Julia von Borstel (Reserve Bank of New Zealand) |
| Abstract: | We investigate the pass-through of monetary policy to bank lending rates in the euro area during the sovereign debt crisis, in comparison to the pre-crisis period. We make the following contributions. First, we use a factor-augmented vector autoregression, which allows us to assess the responses of a large number of country-specifi c interest rates and spreads. Second, we analyze the effects of monetary policy on the components of the interest rate pass-through, which reflect banks' funding risk (including sovereign risk) and markups charged by banks over funding costs. Third, we not only consider conventional but also unconventional monetary policy. We find that while the transmission of conventional monetary policy to bank lending rates has not changed with the crisis, the composition of the IP has changed. Specifically, expansionary conventional monetary policy lowered sovereign risk in peripheral countries and longer-term bank funding risk in peripheral and core countries during the crisis, but has been unable to lower banks' markups. This was not, or not as much, the case prior to the crisis. Unconventional monetary policy helped decreasing lending rates, mainly due to large shocks rather than a strong propagation. |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:nzb:nzbdps:2015/03&r=all |
| By: | Christophe Blot (OFCE - OFCE - Sciences Po); Marion Cochard (OFCE - OFCE - Sciences Po); Bruno Ducoudre (OFCE - OFCE - Sciences Po); Danielle Schweisguth (OFCE - OFCE - Sciences Po); Xavier Timbeau (OFCE - OFCE - Sciences Po); Jérôme Creel (OFCE - OFCE - Sciences Po) |
| Abstract: | EMU countries have engaged in a consolidation of fiscal policies since 2011. This paper deals with the public debt and output dynamic consequences of this strategy. To this end, we develop a simple macroeconomic model of the Euro area, where fiscal multiplier is time-varying. Recent empirical evidence has indeed shown that fiscal multipliers were higher in time of crisis. We then analyze the ability of EMU countries to comply with the new fiscal rules on public debt. The path of public debt and output gap is simulated according to different hypothesis related to fiscal multiplier, monetary policy and hysteresis effects. Not all EMU countries would be able to reach a 60% debt-to-GDP ratio in 2032. An alternative strategy may be to spread austerity in order to report part of consolidation to periods where the fiscal multiplier will be weaker. The gain of spreading austerity may yet be partly offset by higher risk premium. There is then a need to find institutional arrangements to avoid panics in the sovereign debt markets. Finally, it is shown that it would not be very efficient to implement an expansionary fiscal policy in Germany in order to balance austerity in the Euro area. Since output gap is nearly closed in Germany, the multiplier effect of a positive fiscal stance would be low and spillover effects would not be significant. |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01052440&r=all |
| By: | Pietro Dallari; Antonio Ribba |
| Abstract: | In this paper we aim to investigate the effects of several types of shocks on unemployment in peripheral European countries under the EMU. We use a structural near- VAR model to account for the supranational conduct of monetary policy on the one hand, and domestic fiscal policy and financial shocks on the other hand. Our main findings are: (i) the unemployment multipliers of government spending shocks are higher than the ones associated with government revenues shocks, and they vary across countries; (ii) instability in the unemployment responses over time is marked, with evidence that a regime shift took place in some countries since 2007; (iii) fiscal and financial shocks are not among the long-term drivers of unemployment, but instead a more important role is played by Euro area-wide shocks, with a pre-eminent role for the common monetary policy shock. |
| Keywords: | business cycles, unemployment, euro area, near-Structural VARs |
| JEL: | E32 E62 C32 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:mod:dembwp:0057&r=all |
| By: | Carolina Osorio; Esteban Vesperoni |
| Abstract: | This report analyzes the possible spillover effects that could result if the U.S. normalizes its monetary policy while euro area countries are increasing monetary stimulus (a situation referred to as asynchronous monetary conditions). This analysis identifies country-specific shocks to economic activity and monetary conditions since the early 1990s, finding that real and monetary conditions in the United States and the euro area have oftentimes been asynchronous and have often resulted in significant spillover effects, particularly since early 2014. |
| Keywords: | Spillovers;Negative spillovers;Positive spillovers;United States;Euro Area;Monetary policy;spillovers;monetary policy |
| Date: | 2015–07–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfpdp:15/01&r=all |
| By: | Catherine Mathieu (OFCE); Henri Sterdyniak (OFCE) |
| Abstract: | The 11th EUROFRAME Conference on economic policy issues in the European Union was held in Paris on 6 June 2014. The aim of the conference is to provide an economic forum for debate on economic policy issues relevant in the European context. In June 2014 the Conference topic was: “What future for taxation in the EU?”. The programme and conference papers are available at the EUROFRAME Conference webpage: www.euroframe.org. Six of the papers given at the Conference are released in this issue of the Revue de l’OFCE. European economies have high taxation levels, which allow financing the European Social Model,characterised by a high level of public and social spending. In 2012, the tax-to-GDP ratio was 39.4% for the whole EU, 40.4% for the euro area, as compared to 39.4% for Japan and 24.5% for the US. There are however wide disparities within the area. The tax-to-GDP ratio is higher than 45% in Denmark, Belgium and France, and ranges between 45% and 40% in Sweden, Finland, Italy and Austria. But it is below 35% in Greece, Spain, Poland, and Portugal; 30% in Slovakia, Ireland, Romania, and Bulgaria. There was no trend in the tax-to-GDP ratio developments at the EU level over the last 20 years. |
| Keywords: | Taxation; Prospective évonomique; Union européenne |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/6m2bi4eoh48hnr5ile6iol143v&r=all |
| By: | Sarah Guillou (OFCE - OFCE - Sciences Po); Lionel Nesta (OFCE - OFCE - Sciences Po) |
| Abstract: | We investigate the effects of the establishment of the euro on the markups of French manufacturing firms. Merging firm-level census data with customs data, we estimate time-varying firm-specific markups and distinguish between eurozone exporters from other firms between 1995 and 2007. We find that the establishment of the euro has had a pronounced pro-competitive impact by reducing firm markups by 14 percentage points. By reducing export costs, the euro represented an opportunity for eurozone exporters to increase their margins relative to other firms. Quantile regressions show that the euro has led to a reduction in the variance of markups. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01101153&r=all |
| By: | Meller, Barbara; Metiu, Norbert |
| Abstract: | We study the synchronization of credit booms and busts among 12 major European economies and the United States between 1972-2011. We propose a regression-based procedure to test whether boom-bust phases of credit cycles coincide across countries and to cluster countries with positively synchronized credit cycles. We find strong evidence against the existence of a common credit cycle across all countries. Instead, the credit cycles of Austria, Belgium, Germany, Ireland, and the Netherlands are clustered together, while Denmark, Finland, France, Italy, Spain, Sweden, the UK, and the US belong to another distinct cluster. Overall, the relationship among credit cycles is found to be stable over time. However, within each of the two clusters, credit cycles have been converging at least since the last decade. Using a simultaneous equations model, we find that deeper financial integration and a higher degree of business cycle co-movement are associated with stronger credit cycle synchronization. |
| Keywords: | Business cycles,Credit booms,Financial cycles,Financial integration,Synchronization |
| JEL: | C32 F34 G15 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:202015&r=all |
| By: | Juan F. Jimeno (Banco de España) |
| Abstract: | The Great Recession and the subsequent European crisis may have long-lasting effects on aggregate demand, aggregate supply and, hence, on macroeconomic performance over the medium and long run. Besides the fact that financial crises last longer and are succeeded by slower recoveries, and apart from the hysteresis effects that may operate after episodes of long-term unemployment, the combination of high (public and private) debt and low population and productivity growth may create significant constraints for monetary and fiscal policies. In this paper I develop an OLG model, one earlier used by Eggertsson and Mehrotra (2014) to rationalise the «secular stagnation hypothesis», to show how high debt and low population and productivity growth may condition the macroeconomic performance of some European countries over the medium and long run. |
| Keywords: | natural rate of interest, zero lower bound, population and productivity growth, inter-generational transfers, secular stagnation. |
| JEL: | E20 E43 E52 E66 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1522&r=all |
| By: | Michal Andrle; John C Bluedorn; Luc Eyraud; Tidiane Kinda; Petya Koeva Brooks; Gerd Schwartz; Anke Weber |
| Abstract: | Successive reforms have brought many positive elements to the European Union’s fiscal framework. But they have also increased its complexity. The current system involves an intricate set of fiscal constraints, which hampers effective monitoring and public communication. Compliance has also been weak. This note discusses medium-term reform options to simplify the framework and improve compliance. Based on model simulations and practical considerations, it argues for moving to a two-pillar approach, with a single fiscal anchor (public debt-to-GDP) and a single operational target (an expenditure growth rule, possibly with an explicit debt correction mechanism) linked to the anchor. |
| Keywords: | European Economic and Monetary Union;Euro Area;Fiscal reforms;Fiscal policy;Fiscal rules;Fiscal Governance, European Economic, Monetary Union, debt, expenditure, public debt, budget, deficit, General, Intergovernmental Relations, |
| Date: | 2015–05–21 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfsdn:15/9&r=all |
| By: | Pesliakaite, Jurgita |
| Abstract: | The view that an institutional structure causes rigidities of the labour market is broadly accepted by policy makers. This assessment is conventionally based on unemployment theories that establish a linkage between labour market institutions and unemployment in the long run. Empirical research engages in investigation if the theoretical link between unemployment and labour market institutions could be proved to prevail. This paper provides an econometric analysis of determinants of unemployment in the long run in a set of Central and Eastern European countries for the period of 2002–2012. The evidence that institutional structure cause rigidities of the labour market and have direct effects on unemployment rate in these economies is found in this study. A set of non-structural indicators, accounted by macroeconomic shocks, also prove to have effects on the labour market outcomes. From a policy making perspective such implications suggest that structural labour market reforms and increases in the overall labour market flexibility in these economies is required to bring unemployment rates down. |
| Keywords: | unemployment, labour market institutions, Central and Eastern European economies |
| JEL: | E02 J60 |
| Date: | 2015–08–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66041&r=all |
| By: | Maarten van Oordt; Chen Zhou |
| Abstract: | Rules and regulations may have different impacts on risk-taking by individual banks and on banks' systemic risk levels. That is why implementing prudential rules and policies requires careful consideration of their impact on bank risk and systemic risk. This chapter assesses whether market-based measures of systemic risk and recent regulatory indicators provide similar rankings on the systemically importance of large European banks. We find evidence that regulatory indicators of systemic importance are positively related to systemic risk. In particular, banks with higher scores on regulatory indicators have a stronger link to the system in the event of financial stress, rather than having a higher level of bank risk. |
| Keywords: | G-SIBs; financial stability; macroprudential regulation; systemic importance |
| JEL: | G01 G21 G28 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:478&r=all |
| By: | Lewis, John (Bank of England); De Schryder, Selien (University of Ghent) |
| Abstract: | Using a panel model of goods exports for 16 OECD economies, we quantify advanced economies’ export performance since the ‘Great Trade Collapse’ (GTC). We go beyond the traditional determinants of trade to include a variable measuring shifts in the sectoral composition of world trade and split the real exchange rate into its constituent parts to allow for a differential response to unit labour costs and the nominal exchange rate. We find that, a pre-crisis model based on average coefficients explains the recovery in aggregate exports since the GTC well. But at the country level, we do find substantial cross-country variation in export performance. |
| Keywords: | International trade; forecasting; cross-country panel |
| JEL: | C23 F14 F17 |
| Date: | 2015–07–24 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0535&r=all |
| By: | Maas, Daniel; Mayer, Eric; Rüth, Sebastian |
| Abstract: | We investigate the drivers of the negative correlation between housing markets and the current account in Spain. By employing robust sign restrictions, which we derive from a DSGE model for a currency union, we analyze the effects of domestic pull and foreign push factors in the mixed frequency VAR framework. Savings glut, risk premium, and house price expectations shocks are capable of generating the negative co-movement of housing markets and the current account in the data. In contrast, and counter-factual to the Spanish housing boom, financial easing shocks predict a decline in residential investment. Among the four identified shocks, savings glut shocks have most explanatory power for real house prices, residential investment, and the current account. We also reveal an important role of risk premium and house price expectations shocks for housing markets, whereas financial easing shocks do not explain sizeable fluctuations in the key variables. |
| Keywords: | current account,housing markets,monetary union |
| JEL: | E32 F32 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wuewep:94&r=all |
| By: | Calmfors, Lars (Research Institute of Industrial Economics (IFN)) |
| Abstract: | The paper describes the monetary and fiscal policy frameworks in Sweden and analyses how they were established as well as current challenges. Sweden provides a good example of how deep economic crisis, in interaction with independent thinking by academics and other experts as well as policy influences from abroad, can lead to fundamental reforms of policy frameworks. It remains to be seen whether it will be possible in Sweden to adapt the monetary and fiscal frameworks to changed circumstances, while still preserving the benefits they have delivered |
| Keywords: | Independent central banking; Inflation targeting; fiscal rules; Fiscal councils |
| JEL: | E58 H61 |
| Date: | 2015–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1075&r=all |