nep-eec New Economics Papers
on European Economics
Issue of 2023‒05‒01
ten papers chosen by
Giuseppe Marotta
Università degli Studi di Modena e Reggio Emilia

  1. Financial asymmetries between Euro area and the United States: An International Political Economy Perspective By Audrey Allegret Sallenave; Jean-Pierre Allegret; Dalia Ibrahim
  2. Do non-banks need access to the lender of last resort? Evidence from fund runs By Breckenfelder, Johannes; Hoerova, Marie
  3. CEFTA: Trade and Growth Patterns Fifteen Years since Establishment By Nina Vujanović
  4. The role of localised, recombinant and exogenous technological change in European regions By T.E. Uberti; M.A. Maggioni; E. Marrocu; S. Usai
  5. Labor Market Effects of Monetary Policy Across Workers and Firms By Andreas Gulyas; Matthias Meier; Mykola Ryzhenkov
  6. Central Bank Forecasting: A Survey By Carola Conces Binder; Rodrigo Sekkel
  7. Interbank asset-liability networks with fire sale management By Feinstein, Zachary; Hałaj, Grzegorz
  8. Shocks to Occupational Pensions and Household Savings By Francesco Caloia; Mauro Mastrogiacomo; Irene Simonetti
  9. Returns to ICT Skills Use and Labour Market Institutions By Giorgio Cutuli; Alessio Tomelleri
  10. Nowcasting economic activity using transaction payments data By Laura Felber; Simon Beyeler

  1. By: Audrey Allegret Sallenave (LEAD - Laboratoire d'Économie Appliquée au Développement - UTLN - Université de Toulon); Jean-Pierre Allegret (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015-2019) - CNRS - Centre National de la Recherche Scientifique); Dalia Ibrahim (Banque de France - Banque de France - Banque de France)
    Abstract: This paper assesses financial asymmetries between the Euro area and the United Stats using a financial accelerator framework. We estimate a GVAR model from 1995Q1 to 2016Q4 and find (i) that American financial shocks have a global influence whereas those of the Euro area are regional and (ii) that American financial shocks have larger effects in size than those of the Euro area. We develop an International Political Economy framework based on the concept of asymmetrical interdependence to point out policy suggestions whose the main objective is to increase the autonomy of the Euro area.
    Keywords: Complex Interdependence, Financial Accelerator, United States, Euro area, GVAR
    Date: 2023
  2. By: Breckenfelder, Johannes; Hoerova, Marie
    Abstract: Are central bank tools effective in reaching non-banks with no access to the lender-of-last-resort facilities? Using runs on mutual funds in March 2020 as a laboratory, we show that, following the announcement of large-scale purchases, funds with higher ex ante shares of assets eligible for central bank purchases saw their performance improve by 3.6 percentage points and outflows decrease by 61% relative to otherwise similar funds. Following central bank liquidity provision to banks, the growth rate of repo lending to funds by banks more exposed to the system-wide liquidity crisis was up to five times higher compared to other banks. JEL Classification: E58, G01, G10, G21, G23
    Keywords: asset purchases, COVID-19 liquidity crisis, Investment funds, lender of last resort, market maker of last resort
    Date: 2023–04
  3. By: Nina Vujanović (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This research report investigates the trade and growth benefits of the CEFTA agreement for its members. Although the countries have not reached their end goal of membership of the European Union, the report shows that CEFTA has supported their economic growth. However, there is trade heterogeneity in terms of the extent to which individual countries use CEFTA value added in their manufacturing exports. Less-developed economies seem to rely more on regional (CEFTA) supply chains, while manufacturing-based economies are increasingly coming to rely on EU supply chains. The countries have not built a strong export advantage abroad, as very little of their value added is used in EU exports.
    Keywords: CEFTA, trade, supply chains, growth
    JEL: B17 F14 F43 F63
    Date: 2023–04
  4. By: T.E. Uberti; M.A. Maggioni; E. Marrocu; S. Usai
    Abstract: How do regions develop and evolve along their productive and technological path is a central question. Within an evolutionary perspective, a given region is likely to develop new technologies closer to its pre-existing specialization. We adopt the approach of Hidalgo et al. (2007) to map the regional European technology/knowledge space to investigate the pattern and the evolution of regional specialisation in the most innovative EU countries. These dynamics depend on the interaction of three factors - (i) localised technological change, (ii) endogenous processes of knowledge recombination, and (iii) exogenous technological paradigm shifts while accounting for spatial and technological spillovers. Our paper maps the technological trajectories of 198 EU regions over the period 1986-2010 by using data on 121 patent sectors at the NUTS2 level for the 11 most innovative European countries, plus Switzerland and Norway. The results show that regional technological specialization is mainly shaped by localised technological change and exogenous technological paradigm shifts, whereas recombinant innovation contributes to a lower extent and that these effects largely depends on the increasing, decreasing or stable regional dynamics.
    Keywords: Technology/knowledge space;spatial ordered models.;recombinant innovation;patent analysis;localised technology change;evolutionary economic geography;european regions
    Date: 2023
  5. By: Andreas Gulyas; Matthias Meier; Mykola Ryzhenkov
    Abstract: This paper uses Austrian social security records to analyze the effects of ECB monetary policy on the labor market. Our focus is on the role of worker and firm wage components, defined by an Abowd et al. (1999) wage regression. Our findings show that monetary tightening causes the largest employment losses for low-paid workers who are employed in high-paying firms before the tightening. Monetary tightening further causes a reallocation of workers to lower-paying firms. In particular low-paid workers who were originally employed by low-paying firms are prone to falling down the firm wage ladder.
    Keywords: Monetary policy, worker reallocation, heterogeneity, AKM
    JEL: E24 E32 E52
    Date: 2023–03
  6. By: Carola Conces Binder; Rodrigo Sekkel
    Abstract: Central banks’ forecasts are important monetary policy inputs and tools for central bank communication. We survey the literature on forecasting at the Federal Reserve, European Central Bank, Bank of England and Bank of Canada, focusing especially on recent developments. After describing these central banks’ forecasting frameworks, we discuss the literature on central bank forecast evaluation and new tests of unbiasedness and efficiency. We also discuss evidence of central banks’ informational advantage over private sector forecasters—which appears to have weakened over time—and how central bank forecasts may affect private sector expectations even in the absence of an informational advantage. We discuss how the Great Recession led central banks to evaluate their forecasting frameworks and how the COVID-19 pandemic has further challenged central bank forecasting. Finally, we consider directions for future research.
    Keywords: Monetary policy
    JEL: E47 E58
    Date: 2023–03
  7. By: Feinstein, Zachary; Hałaj, Grzegorz
    Abstract: Interconnectedness is an inherent feature of the modern financial system. While it con-tributes to efficiency of financial services, it also creates structural vulnerabilities: pernicious shock transmission and amplification impacting banks’ capitalization. This has recently been seen during the Global Financial Crisis. Post-crisis reforms addressed many of the causes of this event, but contagion effects may not be fully eliminated. One reason for this may be related to financial institutions’ incentives and strategic behaviours. We propose a model to study contagion effects in a banking system capturing network effects of direct exposures and indirect effects of market behaviour that may impact asset valuation. By doing so, we can embed a well-established fire-sale channel into our model. Unlike in related literature, we relax the assumption that there is an exogenous pecking order of how banks would sell their assets. Instead, banks act rationally in our model; they optimally construct a portfolio subject to budget constraints so as to raise cash to satisfy creditors (interbank and external). We assume that the guiding principle for banks is to maximize risk-adjusted returns gener-ated by their balance sheets. We parameterize the theoretical model with publicly available data for a representative sample of European banks; this allows us to run simulations of bank valuations and asset prices under a set of stress scenarios. JEL Classification: C62, C63, G11, G21
    Keywords: fire sales, interbank contagion, optimal portfolio, systemic risk
    Date: 2023–04
  8. By: Francesco Caloia; Mauro Mastrogiacomo; Irene Simonetti
    Abstract: This paper studies the saving response of households to shocks in the capital position of their pension fund. Using survey panel data matched to supervisory data of Dutch occupational pension funds for a period that involved three major economic crises, we provide evidence of an increase in savings driven by a worsening of the financial position of pension funds. The identification strategy exploits cross-sectional and time variations in the funding ratios of pension funds. These variations are exogenous shocks to the pension wealth of pension fund members as these result from asset price adjustments and asset allocations over which members have no direct control. We show significant saving responses to general changes in the funding ratios, as well as to direct shocks to pension funds such as in the event of a funding deficit or a stop to conditional indexation. The change in savings is especially seen among workers who participate in pension funds with historically lower returns.
    Keywords: D14; G51; H55
    Date: 2023–04
  9. By: Giorgio Cutuli; Alessio Tomelleri
    Abstract: This paper analyses the moderating role of institutional factors on returns to ICT skill usage among different groups of workers in eight European labour markets. Using PIAAC data, it leverages the ‘institutional salience’ of contractual status to analyse the returns on the use of ICT-related skills in the workplace, allowing for heterogeneous wage effects at the micro level among workers holding permanent and temporary contracts. It extends the analysis by considering how gaps in ICT wage premiums mirror the compositional differences in national-specific trade union densities among contractual groups. Wage premiums associated with ICT usage are not defined univocally by task content or demand-supply dynamics for specific occupations. Net of occupation and industry, the results show different returns between labour market segments and according to national-specific trade union densities of temporary and permanent workers, providing a test of how the consequence of technological change are shaped by institutional and regulative cleavages.
    Keywords: ICT skills, Wage premiums, European labour markets, Temporary contracts, Trade unions
    JEL: J2 E24 O30 J50
    Date: 2023–04
  10. By: Laura Felber; Simon Beyeler
    Abstract: In this paper, we assess the value of high-frequency payments data for nowcasting economic activity. Focusing on Switzerland, we predict real GDP based on an unprecedented 'complete' set of transaction payments data: a combination of real-time gross settlement payment system data as well as debit and credit card data. Following a strongly data-driven machine learning approach, we find payments data to bear an accurate and timely signal about economic activity. When we assess the performance of the models by the initially published GDP numbers (pseudo real-time evaluation), we find a state-dependent value of the data: the payment models slightly outperform the benchmark models in times of crisis but are clearly inferior in 'normal' times. However, when we assess the performance of the models by revised and more final GDP numbers, we find payments data to be unconditionally valuable: the payment models outperform the benchmark models by up to 11% in times of crisis and by up to 12% in 'normal' times. We thus conclude that models based on payments data should become an integral part of policymakers' decision-making.
    Keywords: Nowcasting, GDP, machine learning, payments data, COVID-19
    JEL: C52 C53 C55 E37
    Date: 2023

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