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on European Economics |
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Issue of 2023‒11‒27
thirteen papers chosen by Giuseppe Marotta, Università degli Studi di Modena e Reggio Emilia |
| By: | Emiel Sanders; Mathieu Simoens; Rudi Vander Vennet (-) |
| Abstract: | At the outbreak of the Covid-19 pandemic, the European Central Bank issued a strong recommendation towards banks to halt dividend payouts. The goal of this de facto dividend ban was to boost banks’ capital to ensure the supply of new credit. However, given the importance of dividends for stock market investors, this unprecedented measure is likely to have impacted bank valuations. Hence, banks may have chosen to preserve their higher capital buffers to boost payouts after the lifting of the ban, rendering the intended positive effect on credit supply a priori uncertain. We first investigate the effect of the dividend ban announcement on euro area banks’ valuations and find a significantly negative impact. Second, we assess the effect of the dividend ban on syndicated lending, including potential heterogeneity depending on the stock market reaction. We show that credit supply significantly increased, without counteracting effect of the negative stock market reaction. |
| Keywords: | Covid-19; dividend, euro area banks; market valuation; syndicated lending |
| JEL: | E51 G21 G28 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:23/1078&r=eec |
| By: | Senni, Chiara Colesanti; Pagliari, Maria Sole; van 't Klooster, Jens |
| Abstract: | This paper investigates the climate impact of central bank refinancing operations, with a focus the ECB’s TLTRO III program. Notably, we construct a novel database that combines i) confidential data on loans granted by EU banks to non-financial corporations; ii) confidential data on TLTRO III participation and iii) data on sectoral emissions. We find that the emissions content of bank loans granted over the TLTRO III reference period amount to 8% of overall Euro Area 2019 emissions and that more than 80% of total cumulated loans issued in the reference period was directed towards polluting companies. We then investigate the effectiveness of a green credit easing scheme via a general equilibrium model. Our findings are twofold: first, the central bank policy can increase the costs for lending to polluting companies, thus re-directing loans to less-polluting firms; second, the financial stability implications of such a policy should be carefully considered. Finally, we address legal and operational challenges to such a policy by outlining three alternative ways of implementing a “green” TLTRO programme. |
| Keywords: | TLTRO; CO2 emissions; transition risk; monetary policy; financial stability |
| JEL: | E40 E50 Q50 Q54 |
| Date: | 2023–05–31 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:120562&r=eec |
| By: | Lelli, Chiara; Parisi, Laura; Heemskerk, Irene; Boldrini, Simone; Ceglar, Andrej |
| Abstract: | The loss of biodiversity and the degradation of natural ecosystems pose a significant threat to the broader economy and financial stability that central banks and financial supervisors cannot ignore. To gain further insights into the implications of nature and ecosystem service degradation for financial stability, this study assesses the dependencies of euro area non-financial corporations and banks on different ecosystem services. The study then develops a method to capture banks’ credit portfolio sensitivity to possible future changes in the provision of ecosystem services. Our results show that 75% of all corporate loan exposures in the euro area have a strong dependency on at least one ecosystem service. We also find that loan portfolios may be significantly affected if nature degradation continues its current trend, with greater vulnerabilities concentrated in certain regions and economic sectors. JEL Classification: C55, G21, G38, Q5 |
| Keywords: | biodiversity loss, economy, ENCORE, impact, input-output table, materiality score, nature degradation, nexus |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2023333&r=eec |
| By: | Hugo Oriola; Matthieu Picault |
| Abstract: | We define the concept of Opportunistic Political Central Bank Coverage (OPCBC) which corresponds to an opportunistic modification of parties’ popularity induced by media coverage of monetary policy. More precisely, we suppose that the treatment of monetary policy in the press has a significant impact on the popularity of national political parties prior to an election. To investigate on the existence of this concept, we collect monthly popularity ratings for 6 German political forces on the period between January 2005 and December 2021. Then, we measure media coverage through a textual analysis on more than 26.000 press articles from 6 different German newspapers. Finally, we estimate popularity functions for these German political parties in which we introduce our textual measures interacted with a dummy taking the value 1 in the month prior to an election. Our analysis underlines the existence of OPCBCs in Germany in the month preceding federal elections and elections to the European Parliament. This result is robust to the use of a SUR model, alternative pre-electoral periods, the implementation of two different tone analysis, the use of Google Trends data and the interest of the public for members of the ECB. Finally, it seems that the existence of OPCBCs depend on the partisanship of the media studied. |
| Keywords: | European Central Bank; Press; Textual Analysis; Tone Analysis; Elections; Political Cycles; Germany |
| JEL: | E58 D72 P35 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2023-30&r=eec |
| By: | Vrânceanu, Alina; Dinas, Elias; Heidland, Tobias; Ruhs, Martin |
| Abstract: | What preferences do people have for cross‐country cooperation on irregular migration and refugee protection? Existing research improves our understanding of how voters react to large‐scale inflows of asylum seekers, like those experienced by European countries in 2015–2016, and the type of asylum seekers and policies preferred by European citizens. We know less, however, about people's views concerning a particular European Union (EU) response to the so‐called ‘refugee crisis’, namely the cooperation with Turkey in March 2016 to stem inflows of asylum seekers and other migrants. To study such views, we build on several strands of the international relations literature exploring key determinants of public preferences for international cooperation on cross‐national issues, namely (a) sociotropic concerns, (b) humanitarian considerations, and (c) perceptions of fairness and reciprocity. Our research design leverages conjoint experiments conducted simultaneously in Germany, Greece and Turkey. We find that the three factors indeed play a role in explaining preferences in the three countries. Moreover, while respondents are favourable to several core features of the current EU–Turkey migration deal (regarding the return of irregular migrants, financial aid to refugees, and border controls), we also find evidence of public support for increased cooperation on resettlement and EU support to Greece to deal with migration, which goes beyond the status quo. In certain aspects of cooperation, public preferences seem to respond to interactions between policy dimensions that capture reciprocity. These findings have important implications for research on public preferences for asylum and migration policies and public support for international cooperation more generally. |
| Keywords: | public opinion, cross-country cooperation, migration, EU-Turkey agreement, conjoint analysis |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwkie:279441&r=eec |
| By: | Alexis Pourcelot; Alain Coen |
| Abstract: | The purpose of this study is to investigate the effect of conventional and unconventional monetary policy shocks on housing price dynamics and the economy. We also examine the effect of a housing price shock on monetary policy and its implications for the economy. To do so, we implement an SVAR model for the six major European countries (France, Germany, Italy, Netherlands, Spain and the United Kingdom) and thirteen European markets (Paris, Lyon, Marseille, Berlin, Munich, Frankfurt, Amsterdam, Madrid, Barcelona, Seville, London, Birmingham and Manchester) for the last 20 years (2000-2020). We use impulse response functions to understand the effect of a policy rate and a balance sheet shock on housing prices. We also conduct a forecast error variance decomposition analysis to explore each shock’s effect on housing prices across markets. We find that a contractionary policy rate has a negative influence on house prices. Moreover, an expansionary balance sheet shock has a positive impact on housing prices in all countries, but the effect is heterogeneous according to markets. An unconventional monetary policy shock has greater explanatory power regarding housing prices than a conventional one except in the United Kingdom. The market-level analysis indicates that a conventional monetary policy shock explains a larger share of total housing price variance than an unconventional monetary policy shock in markets such as Paris, Lyon, Madrid, London, Birmingham, Manchester and Amsterdam whereas the opposite is true in the German markets, Barcelona and Seville. In Marseille, both policy types have the same explanatory power. Finally, we find that conventional and unconventional monetary policy shocks have a greater impact in more liberalized credit markets. |
| Keywords: | Conventional and unconventional monetary policy; House Prices; SVAR model |
| JEL: | R3 |
| Date: | 2023–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2023_266&r=eec |
| By: | Guillem Vidal-Lorda (European Commmission - JRC); Andreas Thiemann (German Federal Ministry of Labour and Social Affairs); Leire Salazar (European Commmission - JRC); José A. Noguera (Universitat Autònoma de Barcelona (UAB)) |
| Abstract: | The idea of a Universal Inheritance (UI) has been recently gaining weight amongst scholars concerned over increasing wealth inequality. A UI consists of a one-off public payment of an agreed sum to each citizen of young adulthood. In this article, we provide the results of novel simulations to assess the cost and the distributive impact of such policy by testing different parameters for both the benefit amount and its financing. The simulations run on a top-tail adjusted version of the Household Financial Consumption Survey covering four countries: Finland, Germany, Ireland, and Italy. We find that, under some parameters, a UI would significantly reduce inequality and could be realistically financed by taxing the top 1%. |
| Keywords: | Universal Inheritance; Wealth; Inequality; Simulation; Redistribution; Policy |
| JEL: | H24 D31 I38 H23 |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:dclass:202310&r=eec |
| By: | Groiss, Martin; Sondermann, David |
| Abstract: | Labour shortages have become prevalent across advanced economies. Yet, little is known about which firms are more likely to face them and the impact they have on the labour market. We create a firm-level data set spanning 28 EU countries, 283 regions and 18 sectors, contributing to close this gap. We find that structural factors play the dominant role. Firms in regions with limited labour supply as well as innovative and fast-growing firms are particularly prone to face labour shortages. Moreover, shortages tend to aggravate at business cycle peaks. In a second stage, we empirically determine the impact of labour shortages on wages and hiring. Firms with higher shortages pay a wage growth premium to keep and attract workers, increasingly so if they face excess demand. At the same time, those are the firms that hire less than the average. JEL Classification: C36, E24, J20, J23, J30 |
| Keywords: | labour shortages, matching, shift-share instrument, tightness |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20232863&r=eec |
| By: | Kashnitsky, Ilya (University of Southern Denmark); Trias-Llimós, Sergi; Villavicencio, Francisco (Johns Hopkins Bloomberg School of Public Health) |
| Abstract: | This paper explores differences in mortality dynamics between urban and rural areas of 20 European countries during the two pandemic years 2020 and 2021. The link between population density and the spread of communicable diseases is a well-established phenomenon, yet to what extent this results in a mortality gap after years of ongoing epidemics is a less explored question. We find pronounced and significant differences, with urban areas being harder hit by COVID-19 mortality in most countries. |
| Date: | 2023–11–03 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:7rwck&r=eec |
| By: | Lena Anayi; Nicholas Bloom; Philip Bunn; Paul Mizen; Gregory Thwaites; Ivan Yotzov |
| Abstract: | We use data from a large panel survey of UK firms to analyze the economic drivers of price setting since the start of the Covid pandemic. Inflation responded asymmetrically to movements in demand. This helps to explain why inflation did not fall much during the negative initial pandemic demand shock. Energy prices and shortages of labor and materials account for most of the rise during the rebound. Inflation rates across firms have become more dispersed and skewed since the start of the pandemic. We find that average price inflation is positively correlated with the dispersion and skewness of the distribution. Finally, we also introduce a novel measure of subjective inflation uncertainty within firms and show how this has increased during the pandemic, continuing to rise in 2022 even as sales uncertainty dropped back. |
| Keywords: | price setting, energy prices, labour shortages, Covid |
| Date: | 2023–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1922&r=eec |
| By: | Philippe Aghion; Ufuk Akcigit; Maxime Gravoueille; Matthieu Lequien; Stefanie Stantcheva |
| Abstract: | We exploit individual panel information from introducing of new and simpler tax regimes for the self-employed in France, in order to assess the extent to which individuals' shift towards the new regimes is driven by a quest for tax simplicity, and the extent to which the demand for tax simplicity is itself at least partly driven by tax evasion motives. We find evidence of a quest for tax simplicity from observing a significant amount of bunching at the eligibility thresholds for the simpler self-employment tax regimes and from the fact that bunching is increasing in the degree of simplicity of the self-employment regime. We also argue that tax evasion plays an important role in accounting for individuals' attraction towards simpler tax regimes. Finally, we quantitatively assess the importance of simplicity and evasion motives for choosing a simpler self-employment regime. More precisely, we combine bunching estimates and a structural model to jointly estimate the real income elasticities, the value of tax simplicity, and the evasion elasticity. We find that the parameters values which generate the best fit with the observed bunching across different tax brackets and years, imply noticeable preference for tax simplicity with a sizeable evasion elasticity behind it, and a negligible real income elasticity. |
| Keywords: | tax simplicity, simplicity of evasion, taxation of self-employment, France |
| Date: | 2023–05–05 |
| URL: | http://d.repec.org/n?u=RePEc:cep:poidwp:050&r=eec |
| By: | Nikhil Datta |
| Abstract: | The estimation of labour supply elasticities is central to the measurement of monopsony power in the labor market. In this paper I provide new, firm-level estimates of the labour supply elasticity that distinguish between a recruitment elasticity (for potential new workers) and a separation elasticity (as relevant to incumbents). My study uses comprehensive HR data for a large multi-establishment firm in the UK. This setting allows me to develop job-establishment level variation in wages derived from both a government wage floor policy which only effects my firm under study and arbitrary variation in advertised wages resulting from idiosyncratic HR department decisions. My estimates show that, in contrast to common assumptions, the recruitment elasticity is almost double the size of the separation elasticity. Heterogeneity analysis is suggestive that differences in wage-saliency for job seekers versus incumbents is likely a factor in this difference. Combined the elasticities give a labour supply elasticity to the firm of 4.6 implying a wage markdown of 18% from the marginal product of labour. I find no evidence of spillovers from wage changes to the local market despite establishments being relatively large, indicating a monopsonistic wage setting framework is more suitable than an oligopsonistic one. |
| Keywords: | monopsony, recruitment elasticity, separation elasticity, markdown, market power |
| Date: | 2023–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1930&r=eec |
| By: | Lovisa Reiche |
| Abstract: | The gender gap in inflation expectations, i.e., women reporting systematically higher inflation expectations in consumer surveys, is a well-established phenomenon. The dis parity has been attributed to women’s greater involvement in grocery shopping and exposure to volatile food prices. I evaluate this hypothesis using a Bayesian learning framework, which suggests that signal volatility increases mean expectations only when ever the prior is flat. Such a flat prior could be caused by low financial literacy, which is more prevalent in women. Using data from the “Bundesbank Online Panel – House holds”, I find that grocery shopping increases expectations only for a low literacy sample and including a control for financial literacy closes the gender gap fully. This observation has significant macroeconomic implications, including potential gender-based disparities in retirement investment and monetary policy targeting. |
| Date: | 2023–10–23 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:1025&r=eec |