|
on European Economics |
|
Issue of 2022‒09‒26
seven papers chosen by Giuseppe Marotta Università degli Studi di Modena e Reggio Emilia |
| By: | Bandera, Nicolò; Bodnár, Katalin; Le Roux, Julien; Szörfi, Béla |
| Abstract: | The COVID-19 crisis has affected economic sectors very heterogeneously, with possible risks for permanent losses in some sectors. This paper presents a sectoral-level, bottom-up method to estimate euro area potential output in order to assess the impact of the crisis on it. The estimates are based on a supply-demand shock decomposition and are meant to quantitatively support the estimation of scarring effects stemming from the pandemic. The results show that sectors of “trade, transport and accommodation”, “other services” and “industry” may suffer a loss in trend output of around 1.4-1.6% by 2025. Aggregate potential output in 2025 might be about 0.8% lower than it would have been without the crisis, and importantly, without support from the Next Generation EU (NGEU), signalling somewhat larger losses than embedded in the Autumn 2021 forecast of the European Commission (which takes the NGEU into account). JEL Classification: C32, D24, E32, E37 |
| Keywords: | COVID-19, forecasting, potential output, production function, sectoral approach |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20222717&r= |
| By: | Avignone, Giuseppe; Girardone, Claudia; Pancaro, Cosimo; Pancotto, Livia; Reghezza, Alessio |
| Abstract: | Do negative interest rates affect banks’ cost efficiency? We exploit the unprecedented introduction of negative policy interest rates in the euro area to investigate whether banks make a virtue out of necessity in reacting to negative interest rates by adjusting their cost efficiency. We find that banks most affected by negative interest rates responded by enhancing their cost efficiency. We also show that improvements in cost efficiency are more pronounced for banks that are larger, less profitable, with lower asset quality and that operate in more competitive banking sectors. In addition, we document that enhancements in cost efficiency are statistically significant only when breaching the zero lower bound (ZLB), indicating that the pass-through of interest rates to cost efficiency is not effective when policy rates are positive. These findings hold important policy implications as they provide evidence on a beneficial second-order effect of negative interest rates on bank efficiency. JEL Classification: E43, E44, E52, G21, F34 |
| Keywords: | bank cost efficiency, difference-in-differences, NIRP, Stochastic frontier approach |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20222718&r= |
| By: | Enisse Kharroubi |
| Abstract: | How do aggregate conditions affect the dynamics of firm entry? Do recessions force more firms out, allowing for more firms to enter subsequently? Or does this process require other circumstances to thrive? I look into these questions using sectoral data on firm entry and exit for the main economies of the Euro Area over 2009-2019. My main finding is that expected, rather than current, GDP growth shapes the dynamics of firm entry. Specifically, I find that entry increases with past exits at the sector-level, but only when aggregate GDP growth is forecasted to be strong. Also, with strong growth forecasts, past entry developments weight less on the subsequent sectoral entry dynamics. Periods of low entry and high exit, can therefore be followed by strong entry subsequently, when the economy is expected to grow strongly. These findings are robust to the inclusion of several controls. This includes the quality of insolvency proceedings, firms' ability to obtain credit or the presence of barriers to entry. Finally, I show that expectations of private and public investment drive the impact of growth expectations on the dynamics of firm entry. |
| Keywords: | firm entry, exit, growth expectations, private and public investment |
| JEL: | D25 D84 E32 E62 H32 M13 |
| Date: | 2022–08 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:1036&r= |
| By: | Aleksandra Kordalska; Magdalena Olczyk; Roman Stöllinger (The Vienna Institute for International Economic Studies, wiiw); Zuzana Zavarská (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | Geographically dispersed production networks have allowed countries to specialise in different functions of the value chain. By making use of two methodologies for quantifying the magnitude of functional specialisation – one based on trade flows and one based on FDI flows – detailed profiles of the functional specialisations of EU member states are identified. The analyses are conducted at the country, industry and regional level. In line with the existing literature, they reveal that EU-CEE countries are predominantly specialised in the fabrication stage, that is, they serve as ‘factory economies’, while the Western EU countries are mainly performing knowledge-intensive pre-fabrication activities – a characteristic of ‘headquarter economies’. This dualism within the EU is confirmed by a cluster analysis. While functional specialisation patterns tend to be persistent, especially in the fabrication stage, there are also some signs of functional diversification in EU-CEE countries in more recent years. Still, these functional changes remain limited to a few industries. The dichotomy of factory and headquarter economies is also clearly discernible at the regional level. However, the fact that in most EU countries – mainly in the capital regions – there are some headquarter-type regions implies that a complete functional ‘lock-in’ in fabrication is less likely than suggested by the country-level patterns. Hence, while the results point towards major difficulties of functional diversification beyond the fabrication stage in the EU-CEE countries and regions, there are also several promising elements and trends discernible, in particular at the industry and the regional level. |
| Keywords: | functional specialisation, global value chains, smile curve, factory economy, greenfield FDI |
| JEL: | F15 F21 F23 F60 |
| Date: | 2022–08 |
| URL: | http://d.repec.org/n?u=RePEc:wii:rpaper:rr:461&r= |
| By: | Asger Lau Andersen (University of Copenhagen, CEBI and DFI); Niels Johannesen (University of Copenhagen, CEBI, DFI and CEPR); Mia Jørgensen (University of Copenhagen and CEBI); José-Luis Peydró (Imperial College, UPF-BSE-CREI-ICREA and CEPR) |
| Abstract: | We analyze the distributional effects of monetary policy on income, wealth and consumption. We use administrative household-level data covering the entire population in Denmark over the period 1987-2014 and exploit a long-standing currency peg as a source of exogenous variation in monetary policy. We consistently find that gains from softer monetary policy in terms of income, wealth and consumption are monotonically increasing in the ex-ante income level. The distributional effects reflect systematic differences in exposure to the various channels of monetary policy, especially non-labor channels (e.g. leverage and risky assets). Our estimates imply that softer monetary policy increases income inequality. |
| Keywords: | Monetary policy, Inequality, Household heterogeneity, Risky assets, Leverage |
| JEL: | E2 E4 E5 G1 G2 G5 |
| Date: | 2022–08–22 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kucebi:2209&r= |
| By: | Bernhard Dachs; Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw); Maria Yoveska |
| Abstract: | In view of the importance of the export economy for Austria this study examines the role and characteristics of Austrian exporting firms compared with non-exporting firms. Specifically, it assesses how the share of exporting firms has developed in recent years, whether exports have become more important for firms over time and to what extent exporters have an advantage over other firms (export premium). The results show that about two third of the Austrian manufacturing firms are engaged in exporting activities and indicate that – in line with existing literature - exporting firms are larger, more productive, generate higher surpluses, invest more, and spend more on environmental protection than non-exporters. Further, the results highlight that only a small number of firms account for a large share of Austrian manufacturing exports. Finally, the results point towards a mutual positive relationship between export behaviour, productivity, and R&D expenditures. |
| Keywords: | export premium, firm-level analysis, productivity and exporting |
| JEL: | D22 F14 |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:wii:rpaper:rr:462&r= |
| By: | Lei Fang; Fang Yang |
| Abstract: | We document large differences between the United States and Europe in allocations of expenditures and time for both market and home activities. Using a life-cycle model with home production and endogenous retirement, we find that the cross-country differences in consumption tax, social security system, income tax and TFP together can account for 68-95 percent of the cross-country variations and more than half of the average differences between Europe and the United States in aggregate hours and expenditures. These factors can also account well for the cross-country differences in allocations by age and generate substantially lower market hours in Europe for the age group of sixty and above as in the data. All the factors, except income tax, are quantitatively important for determining cross-country differences in expenditure allocations. While the differences in social security system and income tax are crucial in explaining the difference in market hours around retirement ages, TFP and consumption tax are more important for the difference in market hours for prime ages. |
| Keywords: | Consumption expenditure; home production; labor supply; fiscal policy |
| JEL: | E21 E62 J22 O57 H31 |
| Date: | 2022–09–08 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddwp:94739&r= |