nep-eec New Economics Papers
on European Economics
Issue of 2019‒11‒04
seventeen papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia
  1. Synchronization Patterns in the European Union By Mattia Guerini; Duc Thi Luu; Mauro Napoletano
  2. Fixed rate versus adjustable rate mortgages: evidence from euro area banks By Albertazzi, Ugo; Ongena, Steven; Fringuellotti, Fulvia
  3. Small Firms and Domestic Bank Dependence in Europe's Great Recession By Mathias Hoffmann; Egor Maslov; Bent E. Sørensen
  4. Predicting Ordinary and Severe Recessions with a Three-State Markov-Switching Dynamic Factor Model By Kai Carstensen; Markus Heinrich; Magnus Reif; Maik H. Wolters
  5. Information Effects of Euro Area Monetary Policy By Kerssenfischer, Mark
  6. Measuring Redenomination Risks in the Euro Area - New Evidence from Survey Data By Klose, Jens
  7. Indicator-based estimates of the output gap in the euro area By Weiske, Sebastian
  8. Avoiding the Fall into the Loop: Isolating the Transmission of Bank-to-Sovereign Distress in the Euro Area and its Drivers By Böhm, Hannes; Eichler, Stefan
  9. Bayesian VAR Forecasts, Survey Information and Structural Change in the Euro Area By Gergely Ganics; Florens Odendahl
  10. A search and matching approach to business-cycle migration in the euro area By Hart, Janine; Clemens, Marius
  11. What accounts for the German Labor Market Miracle? A Macroeconomic Investigation By Schiman, Stefan; Klein, Mathias
  12. The Corporate Saving Glut and the Current Account in Germany By Klug, Thorsten; Mayer, Eric; Schuler, Tobias
  13. Spillovers of asset purchases within the real sector: Win-win or joy and sorrow? By Sondershaus, Talina
  14. Banks’ holdings of risky sovereign bonds in the absence of the nexus By Frey, Rainer; Weth, Mark Andreas
  15. Adjustment dynamics and business cycle heterogeneity in the EMU By Giovannini, Massimo; Hohberger, Stefan; Ratto, Marco; Vogel, Lukas
  16. ECB Announcements and Stock Market Volatility By Neugebauer, Frederik
  17. Economic Sentiment in Europe: Disentangling Private Information from Public Knowledge By Lindner, Axel; Heinisch, Katja
  1. By: Mattia Guerini (Université Côte d'Azur, CNRS, GREDEG, France; Sciences Po., OFCE); Duc Thi Luu (University of Kiel); Mauro Napoletano (OFCE Sciences-Po; SKEMA Business School)
    Abstract: We propose a novel approach to investigate the synchronization of business cycles and we apply it to a Eurostat database of manufacturing industrial production time-series in the European Union (EU) over the 2000-2017 period. Our approach exploits Random Matrix Theory and extracts the latent information contained in a balanced panel data by cleaning it from possible spurious correlation. We employ this method to study the synchronization among different countries over time. Our empirical exercise tracks the evolution of the European synchronization patterns and identifies the emergence of synchronization clusters among different EU economies. We find that synchronization in the Euro Area increased during the first decade of the century and that it reached a peak during the Great Recession period. It then decreased in the aftermath of the crisis, reverting to the levels observable at the beginning of the 21st century. Second, we show that the asynchronous business cycle dynamics at the beginning of the century was structured along a East-West axis, with eastern European countries having a diverging business cycle dynamics with respect to their western partners. The recession brought about a structural transformation of business cycles co-movements in Europe. Nowadays the divide can be identified along the North vs. South axis. This recent surge in asynchronization might be harmful for the European Union because it implies countries’ heterogeneous responses to common policies.
    Keywords: Business Cycle Synchronization, Random Matrix Theory, European Union
    JEL: E32 F44 F45
    Date: 2019–10
    URL: http://d.repec.org/n?u=RePEc:gre:wpaper:2019-30&r=all
  2. By: Albertazzi, Ugo; Ongena, Steven; Fringuellotti, Fulvia
    Abstract: Why do residential mortgages carry a fixed or an adjustable interest rate? To answer this question we study unique data from 103 banks belonging to 73 different banking groups across twelve countries in the euro area. To explain the large cross-country and time variation observed, we distinguish between the conditions that determine the local demand for credit and the characteristics of banks that supply credit. As bank funding mostly occurs at the group level, we disentangle these two sets of factors by comparing the outcomes observed for the same banking group across the different countries. Local demand conditions dominate. In particular we find that the share of new loans with a fixed rate is larger when: (1) the historical volatility of inflation is lower, (2) the correlation between unemployment and the short-term interest rate is higher, (3) households' financial literacy is lower, and (4) the use of local mortgages to back covered bonds and mortgage-backed securities is more widespread. JEL Classification: F23, G21, G41
    Keywords: cross-border banks, interest rate fixation, mortgages
    Date: 2019–10
    URL: http://d.repec.org/n?u=RePEc:ecb:ecbwps:20192322&r=all
  3. By: Mathias Hoffmann; Egor Maslov; Bent E. Sørensen
    Abstract: Small businesses (SMEs) depend on banks for credit. We show that the severity of the Eurozone crisis was worse in countries where firms borrowed more from domestic banks (“domestic bank dependence”) than in countries where firms borrowed more from international banks. Eurozone banking integration in the years 2000–2008 mainly involved cross-border lending between banks while foreign banks’ lending to the real sector stayed flat. Hence, SMEs remained dependent on domestic banks and were vulnerable to global banking shocks. We confirm, using a calibrated quantitative model, that domestic bank dependence makes sectors and countries with many SMEs vulnerable to global banking shocks.
    Keywords: small and medium enterprises, SME access to finance, banking integration, domestic bank dependence, international transmission, Eurozone crisis
    JEL: F30 F36 F40 F45
    Date: 2019
    URL: http://d.repec.org/n?u=RePEc:ces:ceswps:_7897&r=all
  4. By: Kai Carstensen (University of Kiel, Ifo Institute, CESifo); Markus Heinrich (University of Kiel); Magnus Reif (University of Kiel, Ifo Institute); Maik H. Wolters (University of Jena, Kiel Institute for the World Economy, IMFS at Goethe University Frankfurt)
    Abstract: We estimate a Markow-switching dynamic factor model with three states based on six leading business cycle indicators for Germany preselected from a broader set using the Elastic Net soft-thresholding rule. The three states represent expansions, normal recessions and severe recessions. We show that a two-state model is not sensitive enough to reliably detect relatively mild recessions when the Great Recession of 2008/2009 is included in the sample. Adding a third state helps to clearly distinguish normal and severe recessions, so that the model identifies reliably all business cycle turning points in our sample. In a real-time exercise the model detects recessions timely. Combining the estimated factor and the recession probabilities with a simple GDP forecasting model yields an accurate nowcast for the steepest decline in GDP in 2009Q1 and a correct prediction of the timing of the Great Recession and its recovery one quarter in advance.
    Keywords: Markov-Switching Dynamic Factor Model, Great Recession, Turning Points, GDP Nowcasting, GDP Forecasting
    JEL: C53 E32 E37
    Date: 2019–09–17
    URL: http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2019-006&r=all
  5. By: Kerssenfischer, Mark
    JEL: E52 E44 E32 C32
    Date: 2019
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc19:203524&r=all
  6. By: Klose, Jens
    JEL: E43 F45 G01
    Date: 2019
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc19:203484&r=all
  7. By: Weiske, Sebastian
    JEL: E32 E37 E6
    Date: 2019
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc19:203604&r=all
  8. By: Böhm, Hannes; Eichler, Stefan
    JEL: G21 G15 G28 F3 E44
    Date: 2019
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc19:203515&r=all
  9. By: Gergely Ganics; Florens Odendahl
    Abstract: We incorporate external information extracted from the European Central Bank's Survey of Professional Forecasters into the predictions of a Bayesian VAR, using entropic tilting and soft conditioning. The resulting conditional forecasts significantly improve the plain BVAR point and density forecasts. Importantly, we do not restrict the forecasts at a specific quarterly horizon, but their possible paths over several horizons jointly, as the survey information comes in the form of one- and two-year-ahead expectations. Besides improving the accuracy of the variable that we target, the spillover effects to ``other-than-targeted'' variables are relevant in size and statistically significant. We document that the baseline BVAR exhibits an upward bias for GDP growth after the financial crisis and our results provide evidence that survey forecasts can help mitigate the effects of structural breaks on the forecasting performance of a popular macroeconometric model.
    Keywords: : Survey of Professional Forecasters, Density forecasts, Entropic tilting, Soft conditioning.
    JEL: C53 C32 E37
    Date: 2019
    URL: http://d.repec.org/n?u=RePEc:bfr:banfra:733&r=all
  10. By: Hart, Janine; Clemens, Marius
    JEL: J61
    Date: 2019
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc19:203659&r=all
  11. By: Schiman, Stefan; Klein, Mathias
    JEL: C32 E24 E32
    Date: 2019
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc19:203593&r=all
  12. By: Klug, Thorsten; Mayer, Eric; Schuler, Tobias
    JEL: E32 F32 F45
    Date: 2019
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc19:203523&r=all
  13. By: Sondershaus, Talina
    Abstract: Events which have an adverse or positive effect on some firms can disseminate through the economy to firms which are not directly affected. By exploiting the first large sovereign bond purchase programme of the ECB, this paper investigates whether more lending to some firms spill over to firms in the surroundings of direct beneficiaries. Firms operating in the same industry and region invest less and reduce employment. The paper shows the importance to consider spillover effects when assessing unconventional monetary policies: Differences between treatment and control groups can be entirely attributed to negative effects on the control group.
    Keywords: asset purchase programmes,small and medium enterprises,investments
    JEL: D22 E58 G21 G28
    Date: 2019
    URL: http://d.repec.org/n?u=RePEc:zbw:iwhdps:222019&r=all
  14. By: Frey, Rainer; Weth, Mark Andreas
    JEL: G21 F23 F34
    Date: 2019
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc19:203537&r=all
  15. By: Giovannini, Massimo; Hohberger, Stefan; Ratto, Marco; Vogel, Lukas
    JEL: E32 F41 F44 F45
    Date: 2019
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc19:203548&r=all
  16. By: Neugebauer, Frederik
    JEL: E52 E58 G12 G14
    Date: 2019
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc19:203554&r=all
  17. By: Lindner, Axel; Heinisch, Katja
    JEL: D12 E32 E37 C83
    Date: 2019
    URL: http://d.repec.org/n?u=RePEc:zbw:vfsc19:203501&r=all
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