nep-eec New Economics Papers
on European Economics
Issue of 2022‒11‒14
ten papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Private bank deposits and macro/fiscal risk in the euro-area By Arghyrou, Michael G; Gadea, Maria-Dolores; Kontonikas, Alexandros
  2. Natural Disasters and Inflation in the Euro Area By Beirne, John; Dafermos, Yannis; Kriwoluzky, Alexander; Renzhi, Nuobu; Volz, Ulrich; Wittich, Jana
  3. Macroeconomic effects of growth-enhancing measures in the euro area By Alessandro Cantelmo; Alessandro Notarpietro; Massimiliano Pisani
  4. Fiscal and Macroprudential Policies in a Monetary Union By José E. Boscá; Javier Ferri; Margarita Rubio
  5. CBDC and cash in the euro area: Crowding out or co-circulation? By Rösl, Gerhard; Seitz, Franz
  6. Talking about growth, the discourse of the European Central Bank, 1997-2021 By Eric Dehay
  7. Who is Afraid of Eurobonds? By Francesco Bianchi; Leonardo Melosi; Anna Rogantini Picco
  8. The role of central bank communication in inflation-targeting Eastern European emerging economies By Valerio Astuti; Alessio Ciarlone; Alberto Coco
  9. Asymmetric Macroeconomic Effects of QE and Excess Reserves in a Monetary Union By Neyer, Ulrike; Stempel, Daniel; Horst, Maximilian
  10. Does information substitute or complement energy? - A mediation analysis of their relationship in European economies By Theile, Philipp; Farag, Markos; Kopp, Thomas

  1. By: Arghyrou, Michael G; Gadea, Maria-Dolores; Kontonikas, Alexandros
    Abstract: We use a panel of ten euro area member states to examine the link between macro/fiscal risk and private bank deposits relative to Germany. Our main findings are summarised as follows: First, the relationship between relative deposits and macro/fiscal risk factors is not stable over time. Second, the significant time variation characterizing this relationship is driven by aggregate EMU-wide macro/fiscal risk conditions. Third, relative deposits in periphery EMU countries are generally more responsive to macro/fiscal risk. Fourth, the ECB’s unconventional monetary policy moderated the effect of the global financial and European debt crises on the relationship between relative deposits and macro/fiscal risk. Our empirical findings can inform the ongoing policy debate regarding the completion of the European Banking Union.
    Keywords: Private bank deposits, macro/fiscal risk, euro area, TVP panel
    Date: 2022–10–19
  2. By: Beirne, John; Dafermos, Yannis; Kriwoluzky, Alexander; Renzhi, Nuobu; Volz, Ulrich; Wittich, Jana
    JEL: E31 E52 Q54
    Date: 2022
  3. By: Alessandro Cantelmo (Bank of Italy); Alessandro Notarpietro (Bank of Italy); Massimiliano Pisani (Bank of Italy)
    Abstract: We evaluate the short- and long-term effects of different growth-enhancing policy measures implemented in the euro area by simulating a calibrated New Keynesian model featuring endogenous growth via the private sector's R&D accumulation. We find that higher public investment in infrastructures, pro-competition reforms in the product market, and subsidies to R&D have a positive effect on long-term growth and raise the natural rate of interest. In the short term, these measures can have mildly negative effects on inflation through their positive effect on aggregate supply.
    Keywords: endogenous growth, R&D spending, new keynesian model, monetary policy, euro area
    JEL: E30 E52 O30 O42
    Date: 2022–10
  4. By: José E. Boscá; Javier Ferri; Margarita Rubio
    Abstract: In the European Monetary Union (EMU), monetary policy is decided by the European Central Bank (ECB). This can create some imbalances that can potentially be corrected by national policies. So far, Öscal policy was the natural candidate to adjust those imbalances. Nevertheless, after the global Önancial crisis (GFC), a new policy candidate has emerged, namely national macroprudential policies, with the mission of reducing Önancial risks. This issue gives rise to an interesting research question: how do macroprudential and Öscal policies interact? By a§ecting real interest rates and the level of activity, a discretionary macroprudential policy alters the evolution of public debt and can impose a Öscal cost when the government is forced to increase tax rates to stabilize the public debt-to-GDP ratio. In a monetary union, a domestic macroprudential shock creates substantial crossborder Önancial e§ects and also ináuences the foreign country Öscal stance. Moreover, a discretionary government spending policy a§ects housing prices, so the strenght with which macroprudential policy reacts to a change in the price of houses has an impact on the Öscal multiplier.
    Date: 2022–10
  5. By: Rösl, Gerhard; Seitz, Franz
    Abstract: Cash usage at the point-of-sale decreased perceptibly in the past years. This is mainly due to the ongoing trend towards digitalization, but there are also indications that consumers were somewhat pushed into cashless payments by government regulations and supply-side restrictions by commercial banks. Nonetheless, overall demand for euro cash remained strong and even increased relative to GDP since the financial crisis in 2008. In this process, however, we observe a supply-driven shift towards lower banknote denominations. Central banks all over the world are intensively thinking about the potential issue of a Central Bank Digital Currency as a substitute or complement to cash. Although the characteristics of a possible digital euro have become more perceptible, its fundamental design properties remain unknown. We propose a double pre-paid scheme combining central elements of TARGET Instant Payment Settlement and electronic money features enabling offline and online instant payments. The issuance of a digital euro would be neutral to total money supply as banks act only as intermediaries. Since anonymity is categorically discarded by the ECB and as cash has some special advantages from a consumer perspective, the digital euro will rather co-circulate with cash than replace it in transactions.
    Keywords: Cash,banknotes,money,CBDC
    JEL: E41 E51 E58
    Date: 2022
  6. By: Eric Dehay (RIME-Lab - Recherche Interdisciplinaire en Management et Économie Lab - ULR 7396 - UA - Université d'Artois - Université de Lille)
    Abstract: The text proposes an analysis of the way the European Central Bank (ECB) considers the notion of economic growth or its limits and how the question of envi-ronmental risk has become an issue for it. For this purpose, an analysis of the speeches of the members of its board is carried out over the period 1997-2021. An automated statistical analysis of the corpus reveals the standard approach to growth adopted by the ECB. This is followed by a more qualitative reading of the discourse, which shows that the notions of sustainability and the climate crisis are becoming increasingly important in the rhetoric of the ECB, without leading to a radical revision of the way growth is conceived or to a questioning of its limits. In order to expand its discourse and action in the climate field, the ECB is rather pro-ceeding by superimposition, adding new ideas rather than replacing its initial paradigm. In doing so, it protects the legitimacy of its mandate and its epistemic credibility.
    Keywords: E58,textual analysis,growth,climate change,European central bank (ECB)
    Date: 2022
  7. By: Francesco Bianchi; Leonardo Melosi; Anna Rogantini Picco
    Abstract: The growing asymmetry in the size of fiscal imbalances poses a serious challenge to the macroeconomic stability of the Euro Area (EA). We show that following a contractionary shock, the current monetary and fiscal framework weakens economic growth even in low-debt countries because of the zero lower bound (ZLB) constraint. At the same time, the current framework also exposes the EA to the risk of fiscal stagflation if one country were to refuse to implement the necessary fiscal consolidations. We study a new framework that allows EA policymakers to separate the need for short-run macroeconomic stabilization from the issue of long-run fiscal sustainability. Following a contractionary shock, the central bank tolerates the increase in inflation needed to stabilize the amount of Eurobonds issued in response to a large EA recession. National governments remain responsible to back their country-level debt by fiscal adjustments. The policy acts as an automatic stabilizer that benefits both high-debt and low-debt countries, generating a moderate increase in inflation that mitigates the recession and allows the central bank to move away from the ZLB. At the same time, the proposed policy lowers the risk of fiscal stagflation because it endows EA countries with effective stabilization policies.
    Keywords: Monetary and Fiscal Policy Coordination; Monetary Union; Eurobonds; Zero Lower Bound; Government Debt
    JEL: E50 E62 E30
    Date: 2022–10–03
  8. By: Valerio Astuti (Banca d'Italia); Alessio Ciarlone (Banca d'Italia); Alberto Coco (Banca d'Italia)
    Abstract: In this paper, we analyze whether central bank communication can be an additional tool to provide guidance on monetary policy, drive private agents’ inflation expectations and financial asset prices in the main countries of Central and Eastern Europe. By applying natural language processing techniques to monetary policy statements and minutes, we first derive a series of salient topics on which central bank communications focused over the last two decades, and then develop indices of tone to gauge their respective degrees of hawkishness (dovishness) about the economic outlook. By using these indices in an econometric set-up, we find that a more hawkish (dovish) tone – reflecting a more positive (negative) assessment of the economic outlook – anticipates a more restrictive (accommodative) monetary policy decision, raises (lowers) short-term inflation expectations of private sector agents, increases (reduces) market interest rates across different maturities, and drives share prices down (up). Overall, our analysis suggests that communication may be a complementary and effective monetary policy tool available to central banks in emerging economies.
    Keywords: central banks, communication, natural language processing, Taylor rule, inflation expectations, financial markets, CEE-3
    JEL: C22 C25 C45 E44 E52 E58
    Date: 2022–10
  9. By: Neyer, Ulrike; Stempel, Daniel; Horst, Maximilian
    JEL: E51 E52 E58 F41 F45
    Date: 2022
  10. By: Theile, Philipp; Farag, Markos; Kopp, Thomas
    Abstract: In its decarbonization efforts, the European Union aims to decrease energy consumption through technological advances. One of the most prominent advances is the increased extension and utilization of digital information and communication technologies. However, there is little understanding of how precisely digitalization and energy consumption are related. This study aims to empirically analyze the impact and transmission channels of digitalization on energy consumption in the European Union. We build our empirical analysis in two steps. First, we employ the two-step sys-GMM estimator to examine the direct impact of digitalization on energy consumption, controlling for the effects of the mediation variables. Second, we use the causal mediation approach to estimate the relative importance of each mediation variable through which digitalization affects energy consumption. We rely on a sample of 28 European countries from 2007 to 2019. The empirical results suggest that digitalization significantly reduces energy consumption. We find that a 10% increase in digitalization reduces energy consumption by 0.4%, on average. The causal mediation analysis reveals that digitalization has an indirect positive effect on energy consumption through GDP per capita and industrial structure and an indirect negative impact through financial development and human capital.
    Keywords: Digitalization,Mediation Analysis,Energy Consumption,Digitalization indices,Embodied Energy,Panel data,Two-step sys-GMM
    JEL: C33 C50 Q41 Q43 Q55
    Date: 2022

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