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on European Economics |
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Issue of 2021‒04‒19
twenty-two papers chosen by Giuseppe Marotta Università degli Studi di Modena e Reggio Emilia |
| By: | Roman Garcia; Dimitri Lorenzani; Daniel Monteiro; Francesco Perticari; Bořek Vašíček; Lukas Vogel |
| Abstract: | This paper analyses empirically the main direct and indirect transmission channels of financial spillovers and contagion risks in the euro area, focusing on the sovereign-to-sovereign, sovereign-to-bank, and bankto-bank channels. We employ correlation analysis, analysis of bank balance sheets, reduced-form models inferring the interconnectedness among agents from market data, and simulated structural models. The value added by this paper to the literature consists both in analysing the recent episodes of financial distress (until 2019), which happened after reforms of the Economic and Monetary Union (EMU) architecture were introduced in response to the euro area debt crisis, and in our reliance on complementary analytical tools (“tool kit”). Overall, the paper suggests that: (i) sovereign-to-sovereign spillover risks have weakened, arguably also due to a more limited role of redenomination risk; (ii) financial spillovers from sovereigns to banks (and vice versa) have become smaller in recent years; and (iii) the bank-to-bank transmission channel remains the most relevant in terms of financial spillovers and potential contagion. Finally, when analysing the impact of financial spillovers on the real economy, we find that higher financial risks can imply sizeable losses in terms of real GDP growth. |
| JEL: | C01 E43 G01 G21 G28 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:euf:dispap:137&r=all |
| By: | Louisa Grimm; Sven Steinkamp; Frank Westermann |
| Abstract: | The former EU president Jean-Claude Junker has proposed that all countries of the European Union should also adopt the euro as their currency and recent research has shown that countries currently pursuing this goal indeed fulfill the classical Optimal Currency Area (OCA) criterion of positively correlated shocks with the European Monetary Union (EMU). We illustrate, however, that not only the correlation of shocks but also a common impulse response pattern over time is needed for a currency area to be optimal. We test this additional OCA criterion using the concept of a common serial correlation test. The test clearly rejects the notion that the potentially acceding countries share a common cyclical response pattern with the EMU aggregate – except for Sweden. Instead, the business cycles in most of the other countries exhibit only a very weak form of codependence. |
| Keywords: | Codependent Business Cycles; Serial Correlation Common Feature; European Monetary Integration; Seasonality; Optimum Currency Area |
| JEL: | C32 E32 F36 |
| URL: | http://d.repec.org/n?u=RePEc:iee:wpaper:wp0120&r=all |
| By: | Georg Leitner (Department of Economics, Vienna University of Economics and Business); Teresa Hübel (Department of Economics, Vienna University of Economics and Business); Anna Wolfmayr (Department of Economics, Vienna University of Economics and Business); Manuel Zerobin (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | This paper empirically investigates the effect of monetary policy on systemic risk within the Euro area. We estimate a Bayesian proxy-VAR where we exploit high-frequency identified monetary policy surprises for identification. Employing aggregate as well as market specific systemic risk measures, we provide novel evidence on the heterogeneous risk transmission of conventional and unconventional monetary policy on different financial markets. We find that expansionary conventional monetary policy, near term guidance and forward guidance decrease systemic risk whereas quantitative easing (QE) increases systemic risk. While the effects are qualitatively homogeneous for near term guidance and forward guidance, there exists heterogeneity in the risk transmission of conventional monetary policy and QE across different financial markets. The latter increases systemic risk significantly within bond markets, foreign exchange markets and among financial intermediaries. This might be caused by increased search for yield behaviour as QE distinctively reduces longer term interest rates. Our analysis shows that there is a potential threat to financial stability caused by QE which should be concerned by monetary- and macroprudential policymakers. |
| Keywords: | Monetary Policy, CISS, Systemic Risk, Bayesian-Proxy-VAR, High-Frequency Identification |
| JEL: | C32 E44 E52 G10 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp312&r=all |
| By: | Laura Arnemann; Kai A. Konrad; Niklas Potrafke |
| Abstract: | We examine whether collective memories on the aid&reform programs chosen to handle the 2010 European debt crisis differ between citizens from borrower and lender countries. We use new international survey data for non-experts and experts in member countries of the euro area. The results show that non-experts from borrower and lender countries remember aspects of the programs in different manners; indicating biases for assessments of how the crisis outcomes are perceived in borrower and lender countries. Nation-serving biases may well explain if the European debt crisis has reduced the sense of belonging rather than bringing European citizens closer together. |
| Keywords: | Collective memories, European debt crisis, nation-serving biases, aid&reform programmes, experts. |
| JEL: | F36 F55 H12 H87 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:mpi:wpaper:tax-mpg-rps-2021-01&r=all |
| By: | Pablo Burriel (Banco de España); Víctor González-Díez (Banco de España); Jorge Martínez-Pagés (Banco de España); Enrique Moral-Benito (Banco de España) |
| Abstract: | Estimating the role of the business cycle on the General Government budget balance plays a key role on the real-time analysis of fiscal policy, especially under the Stability and Growth Pact framework. This paper studies, for a group of EU countries and the United Kingdom, the revisions in the structural balance estimated by the European Commission between its first publication and the most recent figures. The results suggest that revisions were negative (i.e. the budget balance measured ex-post is, on average, less favourable than assessed in real time) and significant for the period prior to 2008, but relatively smaller for later years. Overall, revisions are procyclical but negative on average. Furthermore, data revisions (on public expenditure and revenues as well as GDP growth) are as important as errors in estimating the unobservable potential GDP. According to these findings, the structural efforts required by the EU framework were in general insufficient during the boom up to 2008, since they were based on too optimistic estimates of the structural balances. However, there is no evidence of similar real-time errors in the assessment of fiscal positions during the crisis and the posterior recovery. |
| Keywords: | public accounts, business cycle, real-time revisions |
| JEL: | H68 E32 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:bde:opaper:2108e&r=all |
| By: | Leitner, Georg; Hübel, Teresa; Wolfmayr, Anna; Zerobin, Manuel |
| Abstract: | This paper empirically investigates the effect of monetary policy on systemic risk within the Euro area. We estimate a Bayesian proxy-VAR where we exploit high-frequency identified monetary policy surprises for identification. Employing aggregate as well as market specific systemic risk measures, we provide novel evidence on the heterogeneous risk transmission of conventional and unconventional monetary policy on different financial markets. We find that expansionary conventional monetary policy, near term guidance and forward guidance decrease systemic risk whereas quantitative easing (QE) increases systemic risk. While the effects are qualitatively homogeneous for near term guidance and forward guidance, there exists heterogeneity in the risk transmission of conventional monetary policy and QE across different financial markets. The latter increases systemic risk significantly within bond markets, foreign exchange markets and among financial intermediaries. This might be caused by increased search for yield behaviour as QE distinctively reduces longer term interest rates. Our analysis shows that there is a potential threat to financial stability caused by QE which should be concerned by monetary- and macroprudential policymakers. |
| Keywords: | Monetary Policy, CISS, Systemic Risk, Bayesian-Proxy-VAR, High-Frequency Identification |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wus005:8062&r=all |
| By: | Kapp, Daniel; Kristiansen, Kristian |
| Abstract: | This study analyses the effects of euro area monetary policy on equity risk premia (ERP). We find that changes in equity prices during periods of accommodative monetary policy mainly reflected adjustments in the discount factor and economic activity – rather than fluctuations in investors’ required risk compensation. Furthermore, the ERP appears to not have declined much since the introduction of unconventional monetary policy and stands higher than prior to the GFC. Use of identified monetary policy shocks points to insignificant effects of monetary policy on the ERP. Further breakdown of these shocks reveals that monetary policy has a significant upwards impact on the ERP if it is perceived as a negative information surprise, while the opposite prevails in the case of a genuine accommodative monetary policy surprise. Accumulating these effects over time suggests that the two might have largely offset each other since the introduction of unconventional monetary policy. JEL Classification: E22, E52, G12 |
| Keywords: | equity risk premia, monetary policy shocks, monetary policy transmission |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20212535&r=all |
| By: | Lorenzo Codogno; Paul van den Noord |
| Abstract: | The unprecedented fiscal package adopted by the European Council in the summer of 2020 ―dubbed Next Generation EU―is vital for the recovery of the euro area from the pandemic shock. However, there are risks that targets will not be met and that it may prove difficult to muster the same degree of European ‘solidarity’ in the future. Computations with a stylised macroeconomic model indicate that an alternative approach, with ex ante risk sharing through the creation of a Eurobond and permanent fiscal capacity at the centre, would be at least as powerful, yet it would be more sustainable, automatic and timely. |
| Keywords: | Fiscal Policy, Business fluctuations, Safe sovereign assests, Fiscal capacity |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:eiq:eileqs:166&r=all |
| By: | Agosto, Arianna; Ahelegbey, Daniel Felix; Giudici, Paolo |
| Abstract: | We propose a two-layered tree network model that decomposes financial contagion into a global component, composed of inter-country contagion effects, and a local component, made up of inter-institutional contagion channels. The model is effectively applied to a database containing time series of daily CDS spreads of major European financial institutions (banks and insurance companies), and reveals the importance of monitoring both channels to assess financial contagion. Our empirical application reveals evidence of a high inter-country and inter-institutional vulnerability at the onset of the global financial crisis in 2008 and during the sovereign crisis in 2011. The results identify France as central to the inter-country contagion in the Euro area during the financial crisis, while Italy dominates during the sovereign crisis. The application of the model to detect contagion between sectors of the European economy reveals similar findings, and identifies the manufacturing sector as the most central, while, at the company level, financial institutions dominate during the 2008 crisis. |
| Keywords: | Financial crisis; Graphical Lasso; Inter-country contagion; Inter-sector contagion; Inter-institutional contagion; Sovereign crisis; Sparse covariance selection |
| JEL: | C58 E02 G32 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107066&r=all |
| By: | Dilem Yıldırım (Department of Economics, Middle East Technical University, Ankara, Turkey); Dilan Aydın (University of Bologna, Department of Economics, Bologna, Italy) |
| Abstract: | This paper investigates the hypothesis of unemployment hysteresis for GIPS countries (Greece Ireland, Portugal, and Spain) over the period 1998(4)-2019(4). While most of the existing empirical studies assume constant order of integration for unemployment over the sample period, we consider the possibility that, like many macroeconomic variables, unemployment might display changes in persistence, which might result in potential switches between the natural rate and hysteresis hypotheses. In this respect, we adopt a multiple persistence change methodology. Our empirical results suggest that the structural natural rate (hysteresis) hypothesis is supported for Ireland (Portugal) over the entire sample without any change in persistence of the unemployment rate. For the cases of Greece and Spain, on the other hand, our results propose that unemployment is characterized by multiple changes in persistence with the observed dates for persistence changes coinciding with the Great Recession, the European Sovereign debt crisis, and the deepening of economic and labor market reforms launched to retrain the impact of the crises in those countries. |
| Keywords: | Unemployment, Persistence, Hysteresis, Structural changes, GIPS countries |
| JEL: | C12 C22 E24 G01 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:met:wpaper:2102&r=all |
| By: | Marco Di Cotaldo; Vassilis Monastiriotis; Andres Rodriguez-Pose |
| Abstract: | The introduction of Smart Specialisation (S3) as a fundamental pillar of the 2014 reform of the European Union (EU) Cohesion Policy has represented a significant strategic shift in European development intervention. S3 strategies are aimed at mobilising the economic potential of each country and region of the EU, by allowing a more place-based and bottom-up approach to development. However, despite the salience that S3 has acquired in a short period of time, there has been no Europeanwide evaluation of the extent to which S3 strategies truly reflect the economic characteristics and potential of the territories where they are being implemented. This paper examines the characteristics of S3 strategies across Europe – by focusing on their development axes, economic/scientific domains, and policy priorities – to assess whether this is the case. The results show that S3 strategies display a proliferation of objectives, a problem which particularly affects those areas with weaker government quality. Moreover, strategies are generally loosely connected with the intrinsic conditions of each region and mostly mimic what neighbouring areas are doing. The lack of more concise and focused S3 strategies is likely to undermine the effectiveness of what is, otherwise, a very interesting and worthwhile policy experiment. |
| Keywords: | Smart Specialisation, EU Policy, regions, Europe |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:eiq:eileqs:162&r=all |
| By: | Claudio Morana |
| Abstract: | In this paper, we introduce a new time-domain decomposition for weakly stationary or trend stationary processes, based on trigonometric polynomial modelling of the underlying component of an economic time series. The method is explicitly devised to disentangle medium to long-term and short-term fluctuations in macroeconomic and financial series, in order to accurately measure the financial cycle and the concurrent long swings in economic activity. The implementation of this decomposition is straightforward and relies on standard regression analysis and general to specific model reduction. Full support to the proposed method is provided by Monte Carlo simulation. In the paper, we also provide a multivariate extension, involving sequential univariate decompositions and Principal Components Analysis. Based on this multivariate approach, we introduce a set of new composite indexes of macro-financial conditions for the euro area and assess their information content. In particular, concerning the current pandemic, the indicators suggest that most of the GDP contraction has been of short-term, cyclical nature. This is likely due to the prompt monetary and fiscal policy responses. Yet our evidence suggests that the financial cycle might have currently achieved a peak area. Hence, the risk of further, deeper disruptions is high, particularly in so far as a new sovereign/corporate debt crisis were not eventually avoided. |
| Keywords: | trend-cycle decomposition, COVID-19 pandemics, subprime financial crisis, sovereign debt crisis, dot-com bubble, macroeconomic and financial conditions index, euro area |
| JEL: | C22 C38 E32 F44 G01 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:mib:wpaper:467&r=all |
| By: | Andrew Clark (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Conchita Ambrosio (University of Luxembourg [Luxembourg]); Anthony Lepinteur (University of Luxembourg [Luxembourg]) |
| Abstract: | We here use panel data from the COME-HERE survey to track income inequality during COVID-19 in France, Germany, Italy, Spain and Sweden. Relative inequality in equivalent household disposable income among individuals changed in a hump-shaped way over 2020. An initial rise from January to May was more than reversed by September. Absolute inequality also fell over this period. As such, policy responses may have been of more benefit for the poorer than for the richer. |
| Keywords: | COVID-19,COME-HERE,Income Inequality |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03185534&r=all |
| By: | Michael Christl (European Commission - JRC); Alain Bélanger; Alessandra Conte; Jacopo Mazza; Edlira Narazani |
| Abstract: | The increasing flows of immigrants in Europe over the last decade has generated a range of considerations in the policy agenda of many receiving countries. One of the main considerations for policy makers and public opinions alike is whether immigrants contribute their "fair" share to their host country tax and welfare system. This paper seeks to answer this question based on an empirical assessment of the net fiscal contributions of immigrants in the 27 EU member states using EUROMOD, a EU-wide tax-benefit microsimulation model. In addition to the traditional view of the tax-benefit system, we add indirect taxation and in-kind benefits to the analysis of net contributions. Our findings highlight that migrants on average contributed about 250 euro per year more than natives to the welfare state in 2015. However, when we take an average age-specific life-cycle perspective, we find that natives generally show a higher net fiscal contribution than both, intra-EU and extra-EU migrants, while extra-EU migrants contribute on average less than intra-EU migrants. |
| Keywords: | Migration Microsimulation Tax-benefit system EUROMOD |
| JEL: | J15 H2 H5 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:taxref:202101&r=all |
| By: | Spagnolo, Giancarlo (Stockholm Institute of Transition Economics); Nyreröd, Theo (Stockholm Institute of Transition Economics) |
| Abstract: | In the last two decades prolonged instances of corporate wrongdoing in Europe have been un-covered: from Siemens’ systemic bribery to HSBC and other major bank’s money laundering issues, Dieselgate, LIBOR price-rigging, and the recent Wirecard debacle. What has driven European firms to engage in such systematic wrongdoing? In this article, we first use data on US investigations to identify the European countries hosting most corporate wrongdoers. We then consider these countries’ legal, institutional, and political contexts in search for explanations of the main enablers of this behavior, ending with some policy recommendations. |
| Keywords: | corporate wrongdoing; financial fraud; money laundering; corruption; whistleblowers |
| JEL: | K42 |
| Date: | 2021–04–09 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hasite:0054&r=all |
| By: | Dmitry Khametshin (Banco de España) |
| Abstract: | This article documents the difference in corporate bond issuance between the euro area (EA) and the United States (US) in 2020, especially in the high-yield (HY) segment, and discusses the role that the monetary policy measures undertaken by the US Federal Reserve (Fed) and the ECB in response to the Covid-19 crisis may have played in explaining such difference. We document that the issuance of HY bonds since February 2020 has been lower by historical standards in the EA than in the US. The Fed’s measures aimed at the HY segment, mainly the purchase of HY bond exchange traded funds (ETFs), could have reduced credit spreads and improved market liquidity, which in turn could have stimulated debt issuance. Alternatively, HY issuers in the EA may have faced better bank funding conditions due to the ECB’s targeted longer term refinancing operations (TLTRO) and to other measures by national fiscal authorities, leading such issuers to substitute bank credit for bond finance. The article discusses these possibilities and argues that they all may have played a role to a certain extent. |
| Keywords: | corporate bond purchase programs, monetary policy, COVID-19 |
| JEL: | E58 E43 G12 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:bde:opaper:2110&r=all |
| By: | Mariam Camarero (University Jaume I and INTECO, Department of Economics, Castellón (Spain).); Gilles Dufrénot (Aix-Marseille Univ, CNRS, AMSE, Marseille, France and CEPII); Cecilio Tamarit (University of València and INTECO, Department of Applied Economics II, Valencia, Spain.) |
| Abstract: | In this paper we analyze how growing income/wealth inequality and the functional income distribution inequality have contributed to the sustained low potential growth observed in the industrialized economies during the last two decades, a period that includes the Great Recession (GR). Growing inequality may constitute a drawback for the recovery of these economies, especially after the Great Pandemic (GP). To this aim, we modify the semi-structural model originally proposed by Holston, Laubach and William, by considering the effects of several types of inequalities. We jointly estimate potential growth and the natural interest rates. We show that the latter can substantially modify the time path of the real interest rate that prevails when economies are at full strength and inflation is stable. |
| Keywords: | potential growth, Inequality, natural interest rate, G7, state-space model |
| JEL: | E62 E52 E21 C32 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:2123&r=all |
| By: | Mariam Camarero (University Jaume I, INTECO - Grupo de Investigacion en Integracion Economica); Gilles Dufrénot (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Cecilio Tamarit (Department of Applied Economics II, University of Valencia, Avda. dels Tarongers s/n, Valencia 46022 - affiliation inconnue) |
| Abstract: | In this paper we analyze how growing income/wealth inequality and the functional income distribution inequality have contributed to the sustained low potential growth observed in the industrialized economies during the last two decades, a period that includes the Great Recession (GR). Growing inequality may constitute a drawback for the recovery of these economies, especially after the Great Pandemic (GP). To this aim, we modify the semi-structural model originally proposed by Holston, Laubach and William, by considering the effects of several types of inequalities. We jointly estimate potential growth and the natural interest rates. We show that the latter can substantially modify the time path of the real interest rate that prevails when economies are at full strength and inflation is stable. |
| Keywords: | potential growth,inequality,natural interest rate,G7,state-space model |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03191667&r=all |
| By: | Federico M. Ferrara; Donato Masciandaro; Manuela Moschella; Davide Romelli |
| Abstract: | Previous scholarship on central bank accountability has generally focused on monetary authorities' deeds and words while largely ignoring the other side of the accountability relationship, namely politicians’ voice on monetary policy. This raises a fundamental question: what are central banks held accountable for by elected officials? To answer this question, we employ structural topic models on a new dataset of the Monetary Dialogues between the Members of the European Parliament (MEPs) and the President of the European Central Bank (ECB) from 1999 to 2019. Our findings are twofold. First, we uncover differences in how MEPs keep the ECB accountable for its primary, price stability objective. We show that European politicians also attempt to keep the central bank accountable for a broader set of issues that are connected with, but distinct from, the central bank's primary goal. Second, we show that unemployment is a key explanatory variable for the political voice articulated by individual MEPs in accountability settings. In particular, higher rates of domestic unemployment lead MEPs to devote less voice on issues related to the ECB’s price stability mission. These findings reveal the existence of a "political" Phillips curve reaction function, which enriches our understanding of the principal-agent accountability relationship between politicians and central bankers. |
| Keywords: | Accountability; European Central Bank; politicians; European Parliament |
| JEL: | E50 E52 E58 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp20159&r=all |
| By: | Spagnolo, Giancarlo (Stockholm Institute of Transition Economics); Latour, Chiara (University of Stockholm); Peracchi , Franco (University of Rome Tor Vergata and EIEF) |
| Abstract: | We compare different indicators of the spread and consequences of the COVID-19 pandemic, developing a novel method to adjust daily COVID-19 deaths to match weekly excess mortality. Focusing on Sweden, the only country that has good data and did not impose a lockdown, we construct counterfactuals for what would have happened if it had imposed a lockdown, using a synthetic control method. Correcting for data problems and optimizing the synthetic control for each indicator considered, we find stronger effects than previously estimated. Most importantly, studying the ratio of positives to the number of tests, we find that a lockdown would have had sizable effects already after a week. The 3–4 weeks delay highlighted in previous studies appears mainly driven by the large changes in testing frequency that occurred in Sweden during the period considered. |
| Keywords: | COVID-19 indicators; excess deaths; COVID-19 deaths; containment policies; lockdown; synthetic control method; Sweden |
| JEL: | I18 |
| Date: | 2021–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hasite:0055&r=all |
| By: | Beckmann, Joscha; Schweickert, Rainer; Ahlborn, Markus; Melnykovska, Inna |
| Abstract: | This article takes a novel look at the relationship between government activity, partisan preferences and varieties of capitalism. Evidence from panel regressions for 25 EU countries from 1990 to 2014 suggests that there are major divides among European countries in terms of the drivers of government activity, that is, government spending and government regulation. The European divide appears to be even more pronounced between liberal and coordinated economic systems than between the classical geographical divide of east and west, which is typically used in most contributions. While both divides apply to the determinants of government activity in general, a reversal of the classical partisan effect for the east is to be found only in specific cases and, is most likely in government spending in liberal eastern countries. |
| Keywords: | government activity,partisan preferences,varieties of capitalism |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwkie:230010&r=all |
| By: | Bob Hancke; Toon Van Overbeke; Dustin Voss |
| Abstract: | This paper presents a comparative political economic analysis of the policy responses to the Covid-19 crisis in Germany and the UK. These two countries responded to this symmetric economic shock with similar furlough and business loan schemes to stabilize both the demand and supply side of the economy. However, highly different political-economic structures in both countries meant these a priori similar policies produced different results. We argue that this divergence can best be explained through the lens of Varieties of Capitalism’s ‘institutional complementarities’. |
| Keywords: | political economy, economic policy, Europe |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:eiq:eileqs:165&r=all |