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on European Economics |
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Issue of 2023‒12‒18
twelve papers chosen by Giuseppe Marotta, Università degli Studi di Modena e Reggio Emilia |
| By: | Hacker, Björn |
| Abstract: | Social Europe is back on the political agenda - as a result of severe economic crises, prior austerity policies and a change in the European discourse framework. Six years after being announced, the European Pillar of Social Rights - although legally non-binding - has become the central reference point for social policy projects at the EU level. Slowly but steadily, the EU's social situation is improving, although major divergences remain. In the Member States, the Pillar and its accompanying Social Scoreboard are used only erratically. Social investments and reforms financed through the Recovery and Resilience Facility are only partly oriented towards social deficits. At the same time, European crisis management during the pandemic contributed to the implementation of the Pillar of Social Rights. This success was made possible by financially supported instruments such as the SURE short-time working scheme loans. The implementation of the Pillar could be stabilised through a series of measures. It would be advisable to use the indicators of the Scoreboard in a more targeted way at the national level, to develop SURE into a European unemployment insurance scheme, to set up a procedure on social imbalances and to create scope for social investments in the Stability and Growth Pact. |
| Keywords: | social rights, European Union (EU), economic crises, austerity policies, social situation, pandemic, SURE, Scoreboard, unemployment insurance, Stability and Growth Pact, welfare state |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:swprps:279893&r=eec |
| By: | Jakub Mućk; Łukasz Postek |
| Abstract: | This article quantifies the effects of supply chains disruptions on inflation in European economies. We apply the local projections method in a panel framework and estimate responses of nine measures of consumer and producer inflation to shortages in materials and equipment reported by enterprises in the business surveys conducted by the European Commission. We find that supply chains disruptions are proinflationary for all considered measures of inflation, and a larger effect can be observed for inflation of prices of goods rather than services. The peak of impulse responses can be observed 4-6 quarters after shock, while the effect usually dies out after 8-12 quarters. The forecast error variance decomposition (FEVD) suggests that supply chain disruptions are much more important in explaining inflation changes at medium- rather than short-run forecast horizon. Moreover, supply chain shocks seem to matter relatively more for the variance of inflation of consumer prices of goods than for other measures of inflation. Interestingly, the positive estimates of the impact of supply chains disruptions on inflation can be related mainly to the period corresponding with the COVID-19 pandemics as well as the full-scale invasion of Ukraine and may exhibit asymmetric or regime-switching nature. |
| Keywords: | supply chains shock, inflation, local projections, panel data |
| JEL: | E31 E32 F41 C33 |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:sgh:kaewps:2023094&r=eec |
| By: | Christian Bayer; Alexander Kriwoluzky; Gernot J. Müller; Fabian Seyrich |
| Abstract: | The distributional and disruptive effects of energy supply shocks are potentially large. We study the effectiveness of alternative fiscal responses in a two-country HANK model that we calibrate to the euro area. Energy subsidies can stabilize the domestic economy, but are fiscally costly and generate adverse spillovers to the rest of the monetary union: What the subsidizing country gains, the other countries lose. Transfers based on historical energy consumption in the form of a Hicks/Slutsky compensation are less effective domestically as subsidies but do not harm economic activity abroad. In addition, transfers increase welfare at Home while subsidies reduce welfare. |
| Keywords: | Energy crisis, Subsidies, Transfers, HANK2, monetary union, spillovers, heterogeneity, inequality, households |
| JEL: | D31 E64 F45 Q41 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_474&r=eec |
| By: | Maciej Stefański |
| Abstract: | This paper extends the Laubach-Williams (2003) framework, which is widely used to estimate the natural rate of interest, to make it more suitable for studying small open economies. The model is augmented with consumer inflation expectations, foreign output gap, the exchange rate, energy prices and a lending spread. It also uses survey data to improve the accuracy of output gap and potential growth estimates. This model is subsequently applied to CEE countries (Poland, Czechia and Hungary) and the euro area. The natural interest rate is found to be relatively volatile and pro-cyclical; it fell following the global financial crisis, but rebounded in recent years; however, while it remains lower than before the crisis, it is positive for all analysed economies. The model gives more precise and robust estimates than the standard Laubach-Williams framework, but ex-post revisions remain substantial. |
| Keywords: | natural interest rate, small open economy, CEE, Kalman filter |
| JEL: | E43 E52 C32 |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:sgh:kaewps:2023093&r=eec |
| By: | Ider, Gökhan; Kriwoluzky, Alexander; Kurcz, Frederik; Schumann, Ben |
| JEL: | C22 E31 E52 Q43 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc23:277710&r=eec |
| By: | António Afonso; José Alves; Sofia Monteiro |
| Abstract: | We assess the impact of geopolitical risk and world uncertainty on the sovereign debt risk of 26 European Economies during the period 1984-2022, through the implementation of OLS-Fixed Effects regressions and the Generalized Method of Moments (GMM). We find that geopolitical tensions and global uncertainty in border countries contribute to the rise of European country’s sovereign risk as measured by 5- and 10-year Credit Default Swaps (CDS) and bond returns. Moreover, this interconnection is more pronounced during turbulent times such as the subprime crisis. Lastly, we found that geopolitical tensions in other country’ groups such as South America and Asia have a significant impact on the government risks of European countries. |
| Keywords: | FGeopolitical Risk; World Uncertainty; Political Tensions; Sovereign Risk; European Economy; GMM; Subprime crisis |
| JEL: | C23 E44 G32 H63 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp03002023&r=eec |
| By: | Łukasz Below |
| Abstract: | I confirm the foregoing state of the art for inflation and well-being correlation while filling the gap in the literature and estimating the effects of individuals' inflation perception on well-being. I also discover the significant heterogeneity in attitudes toward inflation, inflation perception, and unemployment among European countries. Inflation measured by official statistics, as well as inflation perceived by consumers, has a significant negative influence on people's well-being. The relation was confirmed by regressing reported life satisfaction on a wide set of individual characteristics, as well as macroeconomic variables. While the inflation perception influence on well-being in Eastern Europe is higher than the influence of HICP, for Western Europe, it is the opposite. Both country groups also differ in terms of the marginal rate of substitution between inflation and unemployment – the effects of higher unemployment are more severe in comparison to the influence of inflation in Western Europe. |
| Keywords: | inflation, happiness, unemployment, well-being |
| JEL: | D60 E31 E5 E7 I31 |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:sgh:kaewps:2023086&r=eec |
| By: | Hanna Adam; Mario Larch; Jordi Paniagua |
| Abstract: | We quantify the economic impact of a potential secession of Catalonia from Spain. Using a novel dataset of trade flows between 17 Spanish sub-national regions and 142 countries, we estimate effects of different levels of borders on trade flows and uncover heterogeneity in country-to-country, region-to-country, region-to-region, as well as EU border effects. We use a general equilibrium analysis to understand the consequences of a potential Catalan secession, considering the associated political uncertainty. In counterfactual experiments, we impose new borders on Catalan trade, potentially within or outside the EU, resulting in a welfare decline for Catalonia and the remaining Spanish regions. |
| Keywords: | international trade, regional trade, border effects, regional independence |
| JEL: | F10 F13 F14 H77 R12 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10742&r=eec |
| By: | Drolsbach, Chiara Patricia; Gail, Maximilian Maurice; Klotz, Phil-Adrian |
| JEL: | H23 L13 L91 Q48 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc23:277655&r=eec |
| By: | Grochola, Nicolaus |
| Abstract: | Between 2016 and 2022, life insurers in several European countries experienced negative longterm interest rates, which put pressure on their business models. The aim of this paper is to empirically investigate the impact of negative interest rates on the stock performance of life insurers. To measure the sensitivities, I estimate the level, slope, and curvature of the yield curve using the Nelson-Siegel model and empirical proxies. Panel regressions show that the effect of changes in the level is up to three times greater in a negative interest rate environment than in a positive one. Thus, a 1ppt decline in long-term interest rates reduces the stock returns of European life insurers by up to 10ppt when interest rates are below 0%. I also show that the relationship between the level and the sensitivity to interest rates is convex, and that life insurers benefit from rising interest rates across all maturity types. |
| Keywords: | Life insurance, interest rate risk, negative interest rates |
| JEL: | G01 G18 G22 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:icirwp:279897&r=eec |
| By: | Nicolas Hérault (University of Bordeaux and University of Melbourne); Stephen P. Jenkins (LSE and IZA) |
| Abstract: | We decompose the redistributive effect of direct taxes into vertical, horizontal, and reranking components applying the methods of Urban and Lambert (Public Finance Review, 2008). Inthe first such application to the UK, and using yearly data covering 1977–2020, we find thatredistributive effect increased over the period. However, there is no clear trend in horizontalinequity and this component forms a very small fraction of total redistributive effect bycomparison with reranking and especially vertical components. It is also the verticalcomponent that best tracks trends in redistributive effect. We give specific attention to thechoice of the bandwidth used to define ‘close equals’ in terms of pre-tax income. We alsoshow that implausible estimates of the horizontal inequity component arise for some yearsregardless of bandwidth used. |
| Keywords: | Redistributive effect, redistribution, horizontal inequity, reranking, Urban-Lambert decomposition, income tax |
| JEL: | D31 H24 H50 I38 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2023-660&r=eec |
| By: | Sümeyra Atmaca; Karolin Kirschenmann; Steven Ongena; Koen Schoors |
| Abstract: | We employ proprietary data from a large bank to analyze how – during crisis – deposit insurance affects depositor behavior. Our focus is on Belgium where the government increased explicit deposit insurance coverage and implemented implicit deposit insurance arrangements. Estimating sorting below the respective insurance limits shows that depositors are aware of and understand these interventions. Difference-in-differences estimates show that both the increase in the explicit deposit insurance limit and the implicit deposit insurance had the intended calming effect on depositors. Close depositor-bank relationships mitigate these effects, while political trust seems to boost the general effectiveness of such government policies. |
| Keywords: | deposit insurance; coverage limit; implicit deposit guarantee; bank nationalization; depositor heterogeneity |
| JEL: | G21 G28 H13 N23 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_476&r=eec |