|
on European Economics |
|
Issue of 2022‒11‒07
thirteen papers chosen by Giuseppe Marotta Università degli Studi di Modena e Reggio Emilia |
| By: | Carvalho, Daniel; Schmitz, Martin |
| Abstract: | We study euro area investors' portfolio adjustment since the Brexit referendum in terms of securities issued in the UK or denominated in pound sterling, in the context of heightened policy uncertainty surrounding the exit process of the UK from the EU. Our sector-level analysis "looks-through" holdings of investment fund shares to gauge euro area sectors' full exposures to debt securities and listed shares. Our key finding is the absence of a negative "Brexit-effect" for euro area investors, which would have rendered UK-issued and pound-denominated securities generally less attractive. Instead, we observe that euro area investors increased their absolute and relative exposures to UK-issued and pound-denominated debt securities since the Brexit referendum. The analysis also reveals an increase in the euro area's exposure to listed shares issued by UK non-financial corporations, while the exposures to shares issued by UK banks declined. These findings should be seen against the backdrop of low yields on euro area debt securities and a strong recovery in UK share prices since the Brexit referendum, which appear to have largely outweighed the uncertainties associated with Brexit. JEL Classification: F30, F41, G15 |
| Keywords: | bilateral portfolio holdings, cross-border investment, investment funds, sovereign debt |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20222734&r= |
| By: | Mariam Camarero (University Jaume I and INTECO, Department of Economics, Campus de Riu Sec, E-12080 Castellón, Spain.); Silviano Sergi Moliner (University Jaume I and INTECO, Department of Economics, Campus de Riu Sec, E-12080 Castellón, Spain.); Salvador Cecilio Tamarit (University of València and INTECO, Department of Applied Economics II, Av. dels Tarongers, s/n Eastern Department Building E-46022 Valencia, Spain.) |
| Abstract: | This paper analyzes the potential determinants of the US stock of outward FDI (OFDI). As our research question is whether the introduction of the euro has changed the pattern of US OFDI, we consider a large group of host countries from different continents, zooming in on the European case, where we analyze different country groupings for the European Union and the Euro Area. With this aim, we estimate a gravity equation using the Pseudo Poisson Maximum Likelihood (PPML) estimator. Furthermore, we use the Bayesian Modelling Averaging (BMA) analysis results in Camarero et al. (2021) as a benchmark for the initial specification. We find that US OFDI is explained by horizontal and vertical FDI motives in all country groups. As for the euro effect, we show that the single currency has prominently promoted US OFDI to the EA members with effects ranging between 10% and 20%. However, while in the core Euro Area, the euro has favored both HFDI and intra-industry VFDI strategies, in the periphery has mainly stimulated pure VFDI. |
| Keywords: | FDI determinants; US; European Union; BMA; PPML |
| JEL: | F21 F23 C11 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:eec:wpaper:2209&r= |
| By: | Corradin, Stefano; Sundaresan, Suresh |
| Abstract: | We investigate banks' benefits and costs of having access to LOLR. Integrating novel data sets we estimate the borrowing capacities of euro area banks at the ECB. Controlling for ratings, we find that banks with more fragile funding are likely to borrow more from the ECB during the great financial and euro area sovereign debt crises. We develop a dynamic model of a bank and calibrate it to our empirical estimates. A bank with access to LOLR has higher equity value and makes larger investments in new loans, but it is more leveraged, pays more dividends and issues less equity. JEL Classification: G2, E5, E58 |
| Keywords: | borrowing capacity, collateral, haircut, liquidity, LOLR |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20222738&r= |
| By: | Stephen G. Hall (Leicester University, Bank of Greece, and Pretoria University); George S. Tavlas (Bank of Greece and the Hoover Institution, Stanford University); Yongli Wang (University of Birmingham) |
| Abstract: | We investigate the drivers of the recent inflation in three currency areas: the United States, the euro area, and the United Kingdom. To do so, we use a VAR set-up to examine the nature of the shocks that underpinned the recent inflation. We apply two methods to calculate shocks -- the standard Cholesky decomposition and a new method that captures more realistic shocks by solving the VAR backwards. We also use spatial modelling to investigate cross-country inflation spillovers. We find the inflationary shocks in the United States are transmitted to the euro area and the United Kingdom in a powerful and consistent way. The euro area transmits inflation to the other regions but to a lesser extent, while the inflation in the United Kingdom has little effect on the other two regions. |
| Keywords: | Inflation, VAR analysis, impulse responses, spatial spillovers |
| JEL: | C52 C53 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:bir:birmec:22-13&r= |
| By: | Bozena Gulija; Costanza Russo (Queen Mary University of London); Dalvinder Singh (University of Warwick) |
| Abstract: | The COVID-19 pandemic has caused an unprecedented degree of public and private intervention to avert a social, economic and financial crisis. EU member states, and especially participating member states of the European Banking Union (EBU), introduced a broad set of measures, including public guarantees, moratoria and amendments to the European Commission State Aid framework, to contain the negative effects of the pandemic on the economy. The EU suspended its fiscal rules and the European Central Bank increased its monetary operations. The paper uses an empirical analysis to review the impact of public support on the Single Supervisory Mechanism (SSM) banks and the acutely exposed participating EBU member states because of their significant increase in government debt levels. We argue that the containment of the crisis creates a major uncertainty, namely a possible insolvency lag once the benefits of the public support subside and insolvencies start to materialise. This uncertainty is associated with non-financial corporates, the safety and soundness of the SSM significant banks and sovereign debt sustainability, forming a new 'doom loop'. We suggest the design of a 'transition phase' as a mechanism of accountability to improve the understanding of those uncertainties to ensure financial stability. |
| Keywords: | deposit insurance, bank resolution |
| JEL: | G21 G33 |
| Date: | 2022–07 |
| URL: | http://d.repec.org/n?u=RePEc:awl:spopap:2&r= |
| By: | Baldo, Luca; Heider, Florian; Hoffmann, Peter; Sigaux, Jean-David; Vergote, Olivier |
| Abstract: | We study how banks manage their liquidity among the various assets at their disposal. We exploit the introduction of the ECB’s two-tier system which heterogeneously reduced the cost of additional reserves holdings. We find that the treated banks increase reserve holdings by borrowing on the interbank market, decreasing lending to affiliates of the same group, and selling marketable securities. We also find that banks have a preference for a stable portfolio composition of liquid assets over time. Our results imply that frictions in one market for liquidity can spill over to several markets. JEL Classification: G21, G11, E52 |
| Keywords: | bank liquidity, central bank reserves, government bonds, monetary policy implementation, money markets |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20222732&r= |
| By: | Chiara Drolsbach (Justus Liebig University Giessen); Maximilian Maurice Gail (Justus Liebig University Giessen); Phil-Adrian Klotz (Justus Liebig University Giessen) |
| Abstract: | Several European countries have implemented temporarily fuel tax reductions in 2022 to relieve the financial burden on their citizens. This paper provides estimates of the pass-through rates as well as the effect on retail margins for France, Germany and Italy. Using a unique data set containing daily consumer prices for gasoline and diesel in five European countries, we employ a staggered Difference-in-Differences design. Our results show a very heterogeneous pass-through of the fuel tax reductions depending on the country and on the type of fuel. These findings also have important implications for the effective design of unconventional fiscal policy as well as for competition policy in the fuel market. |
| Keywords: | pass-through, fuel taxes, staggered DiD |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:202239&r= |
| By: | Bartzokas, Anthony (RS: GSBE other - not theme-related research, Mt Economic Research Inst on Innov/Techn); Giacon, Renato; Macchiarelli, Corrado |
| Abstract: | The Covid-19 pandemic prompted economic policy innovations in response to new exogenous shocks, resulting in economic recovery policies at the national and supranational level. This paper considers the modalities of these policy innovations and their long-lasting effects in the case of the European Union (EU), focusing on the Next Generation EU (NGEU) programme and its centrepiece, the Recovery and Resilience Facility (RRF). We discuss the novelties in the design of the NGEU/RRF in comparison to previous EU structural funds, aimed at reducing regional divergences across the EU. The NGEU is changing the way the EU finances itself as never before had the European Commission borrowed at such large scale and long maturities on financial markets. In the paper, we identify potential gaps in the design of the EU Recovery Funds, due to their focus on thematic clusters with limited linkages to other vertically designed EU programmes, an absence of microeconomics considerations, and likely spending overlap with the Structural and Investment (ESI) Funds. The scope for coordination is evident as, on top of the new RRF Funds, EU countries will have to absorb the unspent ESI Funds from the 2014-20 Multi Financial Framework (MFF) and those recently allocated under the new 2021-27 MFF. Considering these challenges, we articulate a proactive resilience framework for the design and implementation of policy instruments in the EU. |
| JEL: | F36 O38 O52 Q28 |
| Date: | 2022–08–15 |
| URL: | http://d.repec.org/n?u=RePEc:unm:unumer:2022025&r= |
| By: | Gambacorta, Leonardo; Pancotto, Livia; Reghezza, Alessio; Spaggiari, Martina |
| Abstract: | Do female directors on banks’ boards influence lending decisions toward less polluting firms? By using granular credit register data matched with information on firm-level greenhouse gas (GHG) emission intensities, we isolate credit supply shifts and find that banks with more gender-diverse boards provide less credit to browner companies. This evidence is robust when we differentiate among types of GHG emissions and control for endogeneity concerns. In addition, we also show that female director-specific characteristics matter for lending behavior to polluting firms as better-educated directors grant lower credit volumes to more polluting firms. Finally, we document that the “greening” effect of the female members in banks’ boardrooms is stronger in countries with more female climate-oriented politicians. JEL Classification: G01, G21, G30, Q50 |
| Keywords: | bank lending, board diversity, credit registry, gender, GHG emissions |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20222741&r= |
| By: | Jonas Dovern; Johannes Frank; Alexander Glas; Lena Müller; Daniel Perico |
| Abstract: | We analyze the effectiveness of the German tax reduction on fuel prices (‘Tankrabatt’) that was introduced for three months, starting on 1 June 2022. Using the synthetic control method to compare actual prices of gasoline and diesel to those in a counterfactual situation without the tax reduction, we find that the tax reduction has been completely passed on to consumers for most of the three months. In early June, it took approximately two weeks for the full pass-through to take effect. Moreover, pass-through rates started to decline in August while the tax reduction was still in place. We observe an upward price jump smaller than the size of the expiring tax reduction at the start of September. Our results are robust to different approaches of constructing the synthetic control group. |
| Keywords: | fuel, gasoline, diesel, taxes, synthetic control group |
| JEL: | C22 E31 E65 H22 Q41 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9963&r= |
| By: | Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw); Maryna Tverdostup (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | Europe will be challenged by demographic changes over the next few decades, even under favourable assumptions about fertility and migration, but the economic effects are not yet fully understood. This paper studies the effects of population ageing on economic growth, capital deepening and robotisation in 27 European Union (EU) labour markets. First, we econometrically assess the effects of ageing and potential labour market shortages on growth. Second, we test the hypothesis of whether ageing leads to faster adoption of new technologies. We distinguish between various capital asset types, including non-ICT and ICT capital, tangible and intangible capital and the adoption of robots. The analysis is based on Eurostat, the European Labour Force Survey (EU-LFS) and International Federation of Robotics (IFR) data. Results indicate that ageing and demographic changes might contribute to secular stagnation, which decelerates the adoption of new technologies. |
| Keywords: | aging, growth, capital accumulation, new technologies, secular stagnation |
| JEL: | J11 O33 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:wii:wpaper:222&r= |
| By: | Elisa Casi; Mohammed Mardan; Rohit Reddy Muddasani |
| Abstract: | We study the short-term effect of the introduction of the mandatory disclosure programme for aggressive tax arrangements by focusing on the one introduced in May 2018 under Council Directive 2018/288/EU (or DAC6). Employing bilateral data on cross-border deposits, we study the effect of this new disclosure requirement on cross-border tax evasion. Our results show a reduction of cross-border deposits in EU countries with strong enforcement, captured by large monetary penalties for misreporting. |
| Keywords: | Tax evasion, Income under-reporting, Regulation, Wealth, Income |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2022-116&r= |
| By: | Giuli, Francesco; Maugeri, Gabriele |
| Abstract: | We study the economic effects generated by the proliferation of the Covid-19 epidemic and the implementation of non-pharmaceutical interventions by developing a SEIRD-RBC model, where the outbreak and policy interventions shape the labor input dynamic. We microfoundan Epidemic-Macro model grounded on the RBC tradition, useful for epidemic and economic analysis at business cycle frequency, which is able to reproduce the highly debated health-output trade-off. Assuming a positive approach, we show the potential of our model by matching the epidemic and macroeconomic empirical evidence of the Italian case. |
| Keywords: | Covid-19 pandemic; SIR-Macro model; |
| JEL: | E23 E32 I18 |
| Date: | 2022–07–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:114673&r= |