nep-eec New Economics Papers
on European Economics
Issue of 2020‒10‒26
thirteen papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Growth factors in developed countries: A 1960-2019 growth accounting decomposition By Cette Gilbert; Devillard Aurélien; Spiezia Vincenzo
  2. A review of economic analyses on the potential impact of Brexit By Committee, International Relations; Force, Brexit Task
  3. Payment Innovations, the Shadow Economy and Cash Demand of Households in Euro Area Countries By Hans-Eggert Reimers; Friedrich Schneider; Franz Seitz
  4. Real-time tracking of the economic impact of COVID-19: insights from the first wave of the pandemic across Europe By Carlo Fezzi; Valeria Fanghella
  5. Alternative Measures of Price Inflation and the Perception of Real Income in Germany By Karl-Friedrich Israel; Gunther Schnabl
  6. External imbalances from a GVAR perspective By Mariam Camarero Author-X-Name-Mariam; Josep Lluís Carrión-i-Silvestre; Cecilio Tamarit
  7. Macroprudential Policy in the Euro Area By Alvaro Fernandez-Gallardo; Ivan Paya
  8. Covid-19 across European Regions: the Role of Border Controls By Eckardt, Matthias; Kappner, Kalle; Wolf, Nikolaus
  9. Central bank information effects and transatlantic spillovers By Jarociński, Marek
  10. Determinants of FTTH tariffs: an empirical EU study By Aravantinos, Elias; Petre, Konstantin; Katsianis, Dimitris; Varoutas, Dimitris
  11. The Determinants of Economic Competitiveness By Kluge, Jan; Lappoehn, Sarah; Plank, Kerstin
  12. Decomposing Central and Eastern Europe’s trade: Extending the evidence By Robin Grözinger
  13. Nowcasting GDP growth using data reduction methods: Evidence for the French economy By Olivier Darne; Amelie Charles

  1. By: Cette Gilbert; Devillard Aurélien; Spiezia Vincenzo
    Abstract: Using a new and original database, our paper contributes to the growth accounting literature with three original aspects: first, it covers a long period from the early 60’s to 2019, just before the COVID-19 crisis; second, it analyses at the country level a large set of economies (30); finally, it singles out the growth contribution of ICTs but also of robots. The original database used in our analysis covers 30 developed countries and the Euro Area over a long period allowing to develop a growth accounting approach from 1960 to 2019. This database is built at the country level. Our growth accounting approach shows that the main drivers of labor productivity growth over the whole 1960-2019 period appear to be TFP, non-ICT and non-robot capital deepening, and education. The overall contribution of ICT capital is found to be small, although we do not estimate its effect on TFP. The contribution of robots to productivity growth through the two channels (capital deepening and TFP) appears to be significant in Germany and Japan in the sub-period 1975-1995, in France and Italy in 1995-2005, and in several Eastern European countries in 2005-2019. Our findings confirm also the slowdown in TFP in most countries from at least 1995 onwards. This slowdown is mainly explained by a decrease of the contributions of the components ‘others’ in the capital deepening and the TFP productivity channels.
    Keywords: Growth, Productivity, ICTs, Robots.
    JEL: O31 O33 O47
    Date: 2020
  2. By: Committee, International Relations; Force, Brexit Task
    Abstract: This paper summarises the economic analyses of the potential impact of Brexit on the United Kingdom, European Union (EU) and euro area performed by members of and contributors to the Brexit Task Force, a group reporting to the International Relations Committee of the European System of Central Banks. The studies were carried out between 2017 and the initial months of 2019 and have been independently published by the authors. The aim of this Occasional Paper is to present the studies in an organic manner, highlighting common features and results. JEL Classification: F14, F15, F21, F22
    Keywords: Brexit, FDI, global value chains, migration, trade
    Date: 2020–10
  3. By: Hans-Eggert Reimers; Friedrich Schneider; Franz Seitz
    Abstract: We analyze for the first time cash holdings of private households in all euro area countries from 2002 to 2019 within a panel cointegration framework. Besides the traditional determinants of cash demand like transactions balances and opportunity costs, we concentrate on cashless payments media as substitutes to cash payments and the role of the shadow economy. Moreover, we take due account of country-specific repercussions of the financial and economic crisis of 2008/09, time series properties and distinguish between small and large countries. We find a significant and positive relationship among households' cash holdings, the volume of transactions and the size of the shadow economy irrespective of country size for all euro area countries over our sample period. Additionally, there is a substitution relationship between the accessibility and availability of cashless payments media and cash demand. And a decreasing number of ATMs reduces cash holdings. These results have important political and financial implications.
    Keywords: cash, cashless payments, shadow economy, cash demand function, panel cointegration
    JEL: C23 E41 E58
    Date: 2020
  4. By: Carlo Fezzi; Valeria Fanghella
    Abstract: This paper develops a methodology for tracking in real time the impact of the COVID-19 pandemic on economic activity by analyzing high-frequency electricity market data. The approach is validated by several robustness tests and by contrasting our estimates with the official statistics on the recession caused by COVID-19 in different European countries during the first two quarters of 2020. Compared with the standard indicators, our results are much more chronologically disaggregated and up-to-date and, therefore, can inform the current debate on the appropriate policy response to the pandemic. Unsurprisingly, we find that nations that experienced the most severe initial outbreaks also grappled with the hardest economic recessions. However, we detect diffused signs of recovery, with economic activity in most European countries returning to its pre-pandemic level by August 2020. Furthermore, we show how delaying intervention or pursuing 'herd immunity' are not successful strategies, since they increase both economic disruption and mortality. The most effective short-run strategy to minimize the impact of the pandemic appears to be the introduction of early and relatively less stringent non-pharmaceutical interventions.
    Date: 2020–09
  5. By: Karl-Friedrich Israel; Gunther Schnabl
    Abstract: Since the 1980s inflationary pressures seem to materialize overproportionately outside of the sectors of consumer goods and services. We combine the Harmonized Index of Consumer Prices with indices for asset prices, such as stocks and real estate, as well as the costs of public goods to develop alternative inflation measures in Germany since the introduction of the euro. Real economic growth as well as median wage developments are reexamined in light of the alternative inflation estimates. Both turn out to be negative over the past decade in the most pessimistic scenarios.
    Keywords: inflation, harmonized index of consumer prices, hidden inflation, assets prices, costs of public goods, inflation targeting, monetary policy, real wages, real economic growth, Germany
    JEL: E31 E52 E58 O11
    Date: 2020
  6. By: Mariam Camarero Author-X-Name-Mariam (Department of Economics, University Jaume I and INTECO); Josep Lluís Carrión-i-Silvestre (Department of Econometrics, Statistics and Spanish Economy, University of Barcelona); Cecilio Tamarit (Department of Applied Economics II, University of Valencia and INTECO)
    Abstract: In this paper we study the drivers governing external disequilibria through a Global VAR (GVAR) analysis applied to a group of 24 countries during the period 1972-2017. The GVAR methodology is particularly well suited for our research question. First, it permits to measure the effects of both, domestic and foreign country-specific shocks. Second, it allows to analyze not only the long-run relationships, but also the dynamics through generalized impulse-response functions. Third, it enables to test many hypotheses from a macroeconomic perspective and the existence of spillovers. Our results show evidence of international financial integration in terms of the fulfillment of the real interest rate parity. Concerning the Twin Deficit hypothesis, we find no linkages between domestic current account and fiscal fiscal defficit. In addition, we show how German fiscal policy has relevant spillover effects on other European countries (such as France, Spain and the Netherlands) as well as on the US and India. Finally, the global shocks have long-lasting effects in most of the countries analyzed, especially through the real oil prices. These results provide some clues about how to implement a more symmetrical external adjustment, especially inside the euro area.
    Keywords: Current account, net foreign assets, twin deficit, panel data, Global VAR
    JEL: F32 F41 C23
    Date: 2020–09
  7. By: Alvaro Fernandez-Gallardo; Ivan Paya
    Abstract: It is now widely accepted that monetary authorities should have a mandate to safeguard financial stability and that macroprudential policies should be an integral part of such a mandate. However, our understanding of the effectiveness of macroprudential policies and their impact on monetary policy target variables and, more broadly, on macroeconomic outcomes, is still limited. This paper addresses that gap and examines the development and impact of macroprudential policies in the euro area. The contribution of the paper is twofold. First, we construct a novel index that captures the stance of the macroprudential policy and we highlight its main stylised facts since the inception of the euro in 1999. Second, we employ a combination of a narrative approach and a structural VAR method to identify both unanticipated and anticipated exogenous variations in macroprudential policies. Our results show that unanticipated or surprise shocks and anticipated or news macroprudential policy shocks exhibit differentiated effects on macroeconomic variables and that they both contribute over the medium term to safeguard financial stability. We also nd significant linkages between monetary and macroprudential policies over a sample period that includes events such as the great financial crisis and the sovereign debt crisis.
    Keywords: macroprudential policy, financial stability, euro area, monetary policy
    JEL: E58 E61
    Date: 2020
  8. By: Eckardt, Matthias (Humboldt University Berlin); Kappner, Kalle (Humboldt University Berlin); Wolf, Nikolaus (Humboldt University Berlin and CEPR)
    Abstract: Attempts to constrain the spread of Covid-19 included the temporal reintroduction of travel restrictions and border controls within the Schengen area. While such restrictions clearly involve costs, their benefits have been disputed. We use a new set of daily regional data of confirmed Covid19 cases from the respective statistical agencies of 18 Western European countries. Our data starts with calendar week 10 (starting 2nd March 2020) and extends to calendar week 17 (ending 26th April 2020), which allows us to test for treatment effects of border controls. Based on PPML methods and a Bayesian INLA approach we find that border controls had a significant effect to limit the pandemic.
    Keywords: Covid-19, border effects, INLA JEL Classification: C33, I18, R23
    Date: 2020
  9. By: Jarociński, Marek
    Abstract: The news about the economy contained in a central bank announcement can affect public expectations. This paper shows, using both event studies and vector autoregressions, that such central bank information effects are an important channel of the transatlantic spillover of monetary policy. They account for a part of the co-movement of German and US government bond yields around Fed policy announcements, for most of this co-movement around ECB policy announcements, and significantly affect a range of financial and macroeconomic quantities on both sides of the Atlantic. These findings shed new light on the nature of central bank information. JEL Classification: E52, F31, F42
    Keywords: high-frequency identification, international policy transmission, monetary policy shocks, structural VAR
    Date: 2020–10
  10. By: Aravantinos, Elias; Petre, Konstantin; Katsianis, Dimitris; Varoutas, Dimitris
    Abstract: This study examines the relevant factors that determine the FTTH tariffs within the European Union (EU) zone. FTTH networks, as a relevant new technology, have a significant impact on modern economies. This is reflected by their adoption and use across EU countries along with the increasing deployment. However, FTTH tariffs, play an important role in the technology's adoption, as they are driven both by the level of adoption and the market's competition. Looking at the EU countries between 2013 and 2018, we find a consistent effect of FTTH tariffs on national economic output with diminishing returns to scale. The study reveals that market player's competition is a moderator parameter on FTTH tariffs, in addition to the technology's adoption. Finally, FTTH tariffs tend to drop overall during the study's period across all the EU countries, motivating more residents to have access to high speed Internet and develop new applications. Hence, EU countries could achieve faster their goals, with subscribers' willingness to pay for high speed service with the right market competition and service offering in place, towards the 2020 national broadband plan regarding ultrafast connectivity.
    Keywords: FTTH,FTTP,Tariffs,NGA Broadband,Forecasting
    Date: 2020
  11. By: Kluge, Jan (Institute for Advanced Studies, Vienna, Austria); Lappoehn, Sarah (Institute for Advanced Studies, Vienna, Austria); Plank, Kerstin (Institute for Advanced Studies, Vienna, Austria)
    Abstract: This paper aims at identifying relevant indicators for TFP growth in EU countries during the recovery phase following the 2008/09 economic crisis. We proceed in three steps: First, we estimate TFP growth by means of Stochastic Frontier Analysis (SFA). Second, we perform a TFP growth decomposition in order to get measures for changes in technical progress (CTP), technical efficiency (CTE), scale efficiency (CSC) and allocative efficiency (CAE). And third, we use BART – a non-parametric Bayesian technique from the realm of statistical learning – in order to identify relevant predictors of TFP and its components from the Global Competitiveness Reports. We find that only a few indicators prove to be stable predictors. In particular, indicators that characterize technological readiness, such as broadband internet access, are outstandingly important in order to push technical progress while issues that describe innovation seem only to speed up CTP in higher-income economies. The results presented in this paper can be guidelines to policymakers as they identify areas in which further action could be taken in order to increase economic growth. Concerning the bigger picture, it becomes obvious that advanced machine learning techniques might not be able to replace sound economic theory but they help separating the wheat from the chaff when it comes to selecting the most relevant indicators of economic competitiveness.
    Keywords: Competitiveness, TFP growth, Stochastic Frontier Analysis, BART
    JEL: C23 E24 O47
    Date: 2020–10
  12. By: Robin Grözinger (IOS Regensburg)
    Abstract: In the early nineties Central and East European Countries (CEEC) took considerable liberalisation efforts which led to visible changes in CEEC trade. In the period under observation, from 1995 to 2016, these countries recorded high growth rates, which exceeded the performance of other regions, such as the OECD and Russia. These trade developments are described and interpreted in this note on a descriptive rather than an analytical basis. First, trade volumes by goods categories are examined to account for what kind of goods are the major trade growth drivers. The expansion of CEEC imports and exports can be accounted for by trade growth specifically of goods used in production, i.e., parts and components, capital goods and transport equipment. It can be associated with the development of vertical production networks among the old EU member states and the new EU-8 countries. Examining EU-8 exports to and imports from Germany confirms this finding: EU-8 states tend to import parts and components and intermediate goods from Germany to produce and export parts and components or final capital goods to Germany. Using the notion of comparative advantage further helps to attribute the extensive development of vertical linkages with the CEEC to the similarity of sectoral productivity vectors between the CEEC and the rest of the world. Second, the effects of liberalisation on the variety versus the intensity of trade are described. The liberalisation of the CEEC economies is expressed by the strong rise in newly traded goods, especially goods used in production, rather than volume growth in already traded goods. Considering imports, a higher input variety might thereby signal a change of the economy’s state of technology.
    Keywords: CEEC, intensive margin, extensive margin, vertical production networks, comparative advantage
    JEL: F1
    Date: 2020–10
  13. By: Olivier Darne (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - IUML - FR 3473 Institut universitaire Mer et Littoral - UBS - Université de Bretagne Sud - UM - Le Mans Université - UA - Université d'Angers - CNRS - Centre National de la Recherche Scientifique - IFREMER - Institut Français de Recherche pour l'Exploitation de la Mer - UN - Université de Nantes - ECN - École Centrale de Nantes - IEMN-IAE Nantes - Institut d'Économie et de Management de Nantes - Institut d'Administration des Entreprises - Nantes - UN - Université de Nantes); Amelie Charles (Audencia Business School)
    Abstract: In this paper, we propose bridge models to nowcast French gross domestic product (GDP) quarterly growth rate. The bridge models, allowing economic interpretations, are specified by using a machine learning approach via Lasso-based regressions and by an econometric approach based on an automatic general-to-specific procedure. These approaches allow to select explanatory variables among a large data set of soft data. A recursive forecast study is carried out to assess the forecasting performance. It turns out that the bridge models constructed using the both variable-selection approaches outperform benchmark models and give similar performance in the out-of-sample forecasting exercise. Finally, the combined forecasts of these both approaches display interesting forecasting performance.
    Date: 2020–09

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