|
on European Economics |
|
Issue of 2024‒06‒17
thirty-two papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Alexander Karaivanov; Benoit Mojon; Luiz Pereira da Silva; Albert Pierres Tejada; Robert Townsend |
| Abstract: | We model a reinsurance mechanism for the national unemployment insurance programs of euro area member states. The risk-sharing scheme we analyze is designed to smooth country-level unemployment risk and expenditures around each country’s median level, so that participation and contributions remain incentive-compatible at all times and there are no redistributionary transfers across countries. We show that, relative to the status quo, such scheme would have provided nearly perfect insurance of the euro area member states’ unemployment expenditures risk in the aftermath of the 2009 sovereign debt crisis if allowed to borrow up to 2 percent of the euro area GDP. Limiting, or not allowing borrowing by the scheme would have still provided significant smoothing of surpluses and deficits in the national unemployment insurance programs over the period 2000–2019. |
| JEL: | E62 F32 J65 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32396&r= |
| By: | Granziera, Eleonora; Jalasjoki, Pirkka; Paloviita, Maritta |
| Abstract: | We test for state-dependent bias in the European Central Bank's inflation projections. We show that the ECB tends to underpredict when the observed inflation rate at the time of forecasting is higher than an estimated threshold of 1.8%. The bias is most pronounced at intermediate forecasting horizons. This suggests that inflation is projected to revert towards the target too quickly. These results cannot be fully explained by the persistence embedded in the forecasting models nor by errors in the exogenous assumptions on interest rates, exchange rates or oil prices. The state-dependent bias may be consistent with the aim of managing inflation expectations, as published forecasts play a central role in the ECB's monetary policy communication strategy. |
| Keywords: | Inflation Forecasts, Forecast Evaluation, ECB, Central Bank Communication |
| JEL: | C12 C22 C53 E31 E52 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bofrdp:295738&r= |
| By: | Alice Albonico; Guido Ascari; Qazi Haque |
| Abstract: | We estimate a medium-scale DSGE model for the Euro Area allowing and testing for indeterminacy since the introduction of the euro until mid-2023. Our estimates suggest that monetary policy in the euro area was passive, leading to indeterminacy and self-fulfilling dynamics. Indeterminacy dramatically alters the transmission of fundamental shocks, particularly for inflation whose responses are inconsistent with standard economic theory. Inflation increases following a positive supply or a negative demand shock. Consequently, demand shocks look like supply shocks and vice versa, making the dynamics of the model under indeterminacy challenging to interpret. However, this finding is not robust across different assumptions on the way the sunspot shock is specified in the estimation. Both under determinacy and indeterminacy, the model estimates a natural rate of interest that turned positive after the recent inflation episode. |
| Keywords: | monetary policy, indeterminacy, euro area, business cycle fluctuations, inflation |
| JEL: | E32 E52 C11 C13 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2024-34&r= |
| By: | Haroutunian, Stephan; Bańkowski, Krzysztof; Bischl, Simeon; Bouabdallah, Othman; Hauptmeier, Sebastian; Leiner-Killinger, Nadine; O'Connell, Marguerite; Oleaga, Iñigo Arruga; Abraham, Laurent; Trzcinska, Agnieszka |
| Abstract: | This paper reviews the main arguments underpinning the reform of the EU’s fiscal framework, which has culminated in the adoption by the EU legislators of a revised set of rules for the European economic governance including the Stability and Growth Pact (SGP). It takes a chronological approach by first discussing the Commission’s legislative proposals of April 2023 against the pre-reform set of fiscal rules, before assessing the final political agreement which has materialised in the revised set of rules. In view of the multi-dimensional reform outcome, it is argued that the success of the reform of the fiscal framework will ultimately depend on its future implementation by the Commission and the Council. Combining the reform of the fiscal rules with better fiscal coordination through the establishment of a permanent euro area fiscal capacity was not proposed in the context of this reform. This paper argues that completing the architecture of Economic and Monetary Union (EMU) is an important missing element and should remain a policy priority. JEL Classification: H6, H11, H50 |
| Keywords: | Economic and Monetary Union (EMU), fiscal rules, Stability and Growth Pact (SGP) |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2024349&r= |
| By: | Wauters, Joris (National Bank of Belgium); Zekaite, Zivile (Central Bank of Ireland); Garabedian, Garo (Central Bank of Ireland) |
| Abstract: | The ECB concluded its strategy review in 2021 with a plan to include owner-occupied housing (OOH) costs in its inflation measure in the future. This paper uses the Bundesbank’s online household panel to study how household expectations would react to this change. We conducted a survey experiment with different information treatments and compared long-run expectations for euro area overall inflation, interest rates, and OOH inflation. Long-run expectations are typically higher for OOH inflation than overall inflation, and both are unanchored from the ECB’s target at the time of the survey. We find significantly higher inflation expectations under the treatment where OOH costs are assumed to be fully included in the inflation measure. This information effect is heterogeneous as, among others, homeowners and respondents with low trust in the ECB react more strongly. However, inflation expectations remain stable when information about past OOH inflation is also given. Careful communication design could thus prevent expectations from becoming more de-anchored. |
| Keywords: | Owner-occupied housing costs, survey experiment, inflation measurement, inflation expectations, ECB. |
| JEL: | D83 D84 E31 E50 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:wpaper:3/rt/24&r= |
| By: | Sascha Keil (Chemnitz University of Technology); Walter Paternesi Meloni (Sapienza University of Rome) |
| Abstract: | Over the past decades, models of circular and cumulative causation, based on the endogenous relations between prices, exports, and labour productivity, have lost prominence in explaining economic dynamics. We argue that, in the absence of counterbalancing mechanisms, the combination of price-sensitive exports and the triggering effect of exports on productivity can enable feedback loops and can significantly shape macroeconomic reality in the short-to-medium run. We apply an adapted export-led model of cumulative causation to 10 major countries belonging the Euro area, a region characterized by divergent wage growth trajectories reflected in divergent export competitiveness and lack of equilibrating mechanisms. Specifically, the model is tested for the period 1995–2020 employing a country-level system of equations (3SLS-ARDL). Our findings indicate that for the majority of the countries examined, this feedback mechanism – comprising price-sensitive exports and export demand affecting productivity growth – exacerbates macroeconomic disparities in terms of labour productivity. While nominal wages act as a potential trigger through their impact on price competitiveness, they also serve as a central factor that retards the feedback mechanism due to the Verdoorn effect of wage-induced demand. Overall, our results affirm the significance of price-induced and export-led theories of cumulative causation while also delineating its limitations, particularly regarding price competitiveness-oriented export-led growth strategies. |
| Keywords: | international trade, export, competitiveness, unit labour cost, wages, productivity, European imbalances |
| JEL: | F16 F41 J30 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:tch:wpaper:cep063&r= |
| By: | António Afonso; Jorge Braga Ferreira |
| Abstract: | Using a panel data approach with bank-fixed effects, we study the impact of Targeted Longer-Term Refinancing Operations (TLTRO) on banks’ risk, given by their distance to default (DtD). The study aims to determine if the liquidity from TLTROs influences banks' risk-taking behaviour. For the period from 2012:Q1 to 2018:Q4, covering 90 listed banks from 16 Eurozone countries, our findings show that TLTRO is associated with an increase in banks' default risk. However, banks that participated in TLTRO experienced a positive effect on their default risk, indicating that they may have used liquidity to strengthen their financial position. Furthermore, we found no evidence that TLTRO liquidity encouraged banks to significantly increase lending or invest in riskier assets. Finally, our results also suggest that TLTRO’s impact is consistent across banks of different sizes and that the competition within the banking sector does not influence how banks utilize TLTRO liquidity. |
| Keywords: | ECB, TLTRO, Unconventional Monetary Policy, Bank Risk, Moral Hazard, Risk-Taking Channel |
| JEL: | C23 E52 E58 G21 G32 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp03202024&r= |
| By: | Sandra Eickmeier; Luba Petersen |
| Abstract: | We examine public trust in the European Central Bank (ECB) and its determinants using data from the Bundesbank Household Panel survey for Germany. Employing an interdisciplinary approach that integrates insights from political science and psychology, we offer a fresh perspective on the factors influencing central bank trust that is more holistic than the conventional one. Our primary findings can be summarized as follows. Households who state that competence, which we define as the ECB’s performance in maintaining stable prices and making decisions grounded in rules, science, and data, matters for their trust in the ECB, tend to express higher trust in the ECB. Conversely, those who place greater importance on values, particularly the integrity of top central bankers, honest communication and broader concern, tend to trust the ECB less. Trust in the ECB also hinges on trust in political institutions more generally and, to a lesser extent, on generalized trust (i.e. trust in others). |
| Keywords: | central banks, trust, survey, trust, central bank communication, values, experiences, credibility |
| JEL: | E7 E58 E59 C93 D84 Z13 Z18 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2024-31&r= |
| By: | Miguel Ampudia; Marco Jacopo Lombardi; Théodore Renault |
| Abstract: | This paper studies the pass-through from wages to producer prices using sectoral disaggregated data for the euro area. We find a positive and statistically significant wage-price pass-through that reaches 50% after three years, which differs across sectors. The wage-price pass-through in private services is significantly higher than in industry and takes longer before reaching its peak. While a higher labour intensity is a key component of the pass-through, our estimates indicate that differences in sectoral labour shares alone cannot explain the larger wage-price pass-through in private services compared to industry. Instead, the estimates hint at an important role for international competition in the domestic market for the tradeable sector. They also suggest that the sales destination matters: wage growth contributes to domestic inflation for goods but not to export inflation. Finally, we also provide evidence of an increase in the wage-price pass-through after 2020, particularly in private services. |
| Keywords: | inflation dynamics, wage-price pass-through, sectors, international competition |
| JEL: | E24 E31 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1192&r= |
| By: | ORFAO E VALE TABERNERO Guillermo; FERNANDEZ MACIAS Enrique (European Commission - JRC); MALO Miguel Angel |
| Abstract: | This working paper presents a comparative analysis of the role played by occupational changes in recent wage inequality trends in six European countries between 2002 and 2018. Using the European Union Structure of Earnings Survey, the analysis shows two patterns in the share of wage inequality explained by between-occupation differentials: while the relative importance of between-occupation trends has grown in Finland and the UK, it has diminished in Spain, France, Poland and Romania. Although between-occupation differentials account for a great share of total wages’ variance, changes in the occupational structure (in particular, the patterns of job polarisation and upgrading widely discussed in the literature) have not driven recent wage inequality trends in Europe. Wage inequality, instead, has been mostly driven by changes in wage differentials within occupations. Finally, we found that occupations effectively account for the distribution of wages, yet their explanatory significance markedly declines at the highest wage tiers. This work contributes to a better understanding of how within- and between-occupation differences have influenced wage inequality trends in Europe. Consequently, our results add significant value to the debate about recent stratification theory, which has challenged the idea that occupations structure economic disparities and wage inequality as importantly as they once did. |
| Keywords: | Europe, jobs, occupational structure, occupations, wage inequality |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:laedte:202401&r= |
| By: | Federico Favaretto; Michele Mariani |
| Abstract: | We study the link among populist vote, democratic expectations and democratic performances by using individual level data in 26 European countries in 2012 and 2020. We use a Heckman model to explain the determinants of both the decision to vote and voting for populists: both are predicted by the gap between democratic expectations and perceived performance (that we define as “ideal democracy gap”), while controlling for fixed effects, political and economic variables, and attitudes. These results confirm the expectancy-disconfirmation model (EDM) that links both expectations and ideal democracy gaps for twelve aspects within electoral, liberal, social and direct dimensions of democracy to democratic dissatisfaction. Our analysis reveals differences and similarities among voter groups and within European regions |
| Keywords: | populism, voting behaviour, democratic dissatisfaction, EDM |
| JEL: | C21 D72 H30 P00 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp24219&r= |
| By: | António Afonso; José Carlos Coelho |
| Abstract: | We assess the drivers of fiscal sustainability in 20 OECD economies between 1950 and 2019. We find stable long-term relationships between government revenues and expenditures as well as between the primary budget balance and past public debt ratio for the full panel. Performing an expanding window analysis, we conclude that the differential between the long-term real interest rate and the real GDP growth rate (r-g) plays a crucial role in fiscal sustainability, as well as the existence of fiscal rules in terms of the budget balance, and also the output gap. The effects of inflation, external accounts balance and fiscal rules on sustainability coefficients à la Hakkio and Rush (1991) and Bohn (1998) are heterogenous. Furthermore, before the global financial crisis of 2008, the effects of the (r-g) differential were particularly strong, and depended on its sign as well as on past debt-to-GDP ratios. |
| Keywords: | fiscal sustainability; primary budget balance; public debt; panel data; expanding window; fiscal rules. |
| JEL: | C23 H61 H63 E62 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp03252024&r= |
| By: | Rickels, Wilfried; Fridahl, Mathias; Rothenstein, Roland; Schenuit, Felix |
| Abstract: | A carbon central bank (CCB) that translates carbon removals into allowances would transform the European Union Emissions Trading System (EU ETS) from a fiat allowance to a gold standard system, ensuring unchanged net emissions on the path to net-zero greenhouse gas (GHG) targets. Meeting such expectations would require a CCB with a clear commitment to a net-zero GHG target, but also with the capacity to manage the market on the path to that target. This requires a strong institutional framework, which could be achieved by integrating the CCB into the European Central Bank (ECB), building on its reputation and capacity. Given the long lead time to set up such an institution, the European Commission should already take the first steps to fulfil the other requirement, namely building up a large carbon removal certificate (CRC) reserve, which would provide the CCB with the credibility to stabilize the market in the future. To fill the CRC reserve, the EU should emulate the US approach by immediately initiating result-based carbon removal procurement as a first key step of a sequential approach to integrated carbon removal into climate policy. This could be achieved by developing a centralized procurement program, supporting existing procurement programs, such as Sweden's or Denmark's, and incentivizing additional EU member states to initiate procurement. An important prerequisite for this is the ability to bank CRCs that are not yet eligible for compliance with near-term EU climate targets and use them in later crediting periods. |
| Abstract: | Eine CO2-Zentralbank (Carbon Central Bank, CCB), die atmosphärische CO2-Entnahme in Zertifikate übersetzt, würde das Emissionshandelssystem der Europäischen Union (EU ETS) langfristig von einem Fiat-Zertifikate-System in ein Goldstandard-System umwandeln und damit unveränderte Nettoemissionen auf dem Weg zu Netto-Null-Treibhausgasemissionen gewährleisten. Um diese Erwartungen zu erfüllen, bedarf es einer starken CCB mit einem klaren Bekenntnis zu einem Netto-Null-Treibhausgas-Ziel. Zudem sollte die CCB mit der Fähigkeit ausgestattet werden, den Markt auf dem Weg zu diesem Ziel zu stabilisieren. Dies erfordert einen starken institutionellen Rahmen, der durch die Eingliederung der CCB in die Europäische Zentralbank (EZB) erreicht werden könnte, wobei auf deren Ruf und Kapazität aufgebaut werden könnte. Angesichts der langen Vorlaufzeit für die Einrichtung einer solchen Institution sollte die Europäische Kommission bereits jetzt erste Schritte unternehmen, um die andere Voraussetzung zu erfüllen, nämlich eine Reserve an CO2-Entnahme Zertifikaten aufzubauen, die einer CCB in der Zukunft die Glaubwürdigkeit verleihen würde, den Markt zu stabilisieren. Um die CRC-Reserve aufzubauen, sollte die EU nach dem Vorbild der USA sofort mit der ergebnisorientierten Beschaffung von CO2-Entnahme zu beginnen, der dann den ersten Schritt für eine sequenzielle Integration von CO2-Entnahme in die Klimapolitik bilden würde. Dies könnte durch die Entwicklung eines zentralen Beschaffungsprogramms erreicht werden, das bestehende Programme wie in Schweden oder Dänemark unterstützt und neue Programme in weiteren Mitgliedstaaten anreizt. Eine wichtige Voraussetzung dafür ist die Möglichkeit, CO2-Entnahme-Zertifikate, die noch nicht für die Erfüllung der kurzfristigen EU-Klimaziele in Frage kommen, zu "sparen" und in späteren Anrechnungszeiträumen zu nutzen. |
| Keywords: | Carbon Dioxide Removal, Carbon Central Bank, Carbon Certificate Banking, Net-Zero Emissions Targets, Net-Negative Emissions Targets, CO2-Entnahme, CO2-Zentralbank, CO2-Zertifikatereserve, Netto-Null Emissionsziele, Netto-Negative Emissionsziele |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwkpb:295745&r= |
| By: | Akira Kohsaka (Osaka School of International Public Policy, Osaka University) |
| Abstract: | A breakup of Euro Zone appeared likely in the aftermath of the Global Financial Crisis (GFC), while EU has long been model regional integration to East Asia. Recognizing different political-economic contexts between East Asia and EU, what can we learn from the experiences of Euro Zone so far? This paper tries to answer the question by examining regional financial integration in two regions in view of international macroeconomics. Financial globalization since the 1990s plays the key role there. We can summarize our observations as follows:East Asia’s fundamental strength shown throughout GFC implies weak motivation to promote further regional financial integration toward a monetary/fiscal union as EU. The global sudden stop of capital inflow by GFC seriously damaged vulnerable links in Euro Zone, although crisis-driven policy innovations seem to strengthen its macro-financial policy framework. As to the future role of Euro Zone, at issue is the volatility intrinsic to the global financial market, which would aggravate the asymmetry across currencies, potentially harming resource allocation and growth. Post-Bretton Woods flexible exchange rates could not wipe away, but magnify this asymmetry (i.e. US dollar dominance). The Euro and Euro Zone could challenge this fundamental flaw of the present international monetary system. |
| Keywords: | regional integration, East Asia, Euro Zone, financial globalization |
| JEL: | E5 F3 F41 G15 O11 O16 P51 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:osp:wpaper:24e001&r= |
| By: | Gérard Pogorel (ECOGE - Economie Gestion - I3 SES - Institut interdisciplinaire de l’innovation de Telecom Paris - Télécom ParisTech - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique, IP Paris - Institut Polytechnique de Paris, SES - Département Sciences Economiques et Sociales - Télécom ParisTech); Augusto Preta |
| Abstract: | The relationship of European civilisation to democracy and culture is deeply complex and intellectually challenging. Cultural creation and production only mix with politics in a lopsided manner. The cultural dimension, however, is a fundamental tenet of the European Union (EU) and an indispensable foundation for strengthening its institutions and the performance and achievement of all European realities. A number of initiatives have been taken to allow the cultural dimension to support the European project. We examine here the status of one important part of European contemporary culture: the creation of audio-visual content, specifically how it is shaped by European civilisation and reciprocally shapes it. While total investments in original European content sharply increased with the entry of global streamers on the European market, these investments came as a net addition. The EU is succeeding in having ‘internationals' play by the rules in European creation. While they bring productions from around the world to European viewers, they also expand the viewership for European productions far beyond Europe itself. This has generated welcome opportunities for local job creation and audio-visual development. |
| Keywords: | Europe, Culture, diversity, cultural exception, audio-visual, television, streaming |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04571315&r= |
| By: | José Alves; Francisco Baptista; José Carlos Coelho |
| Abstract: | A panel data analysis was conducted for European Union (EU) countries spanning from 1995 to 2019 to gain insights into the impact of labor share on economic growth. The primary objective was to ascertain whether labor share actually remains less influential than capital share on economic growth, or if the changing landscape over the years necessitates a policy adjustment for optimizing economic growth. Notably, wage share exhibits a positive influence on economic growth when it experiences positive growth and when is higher than growth of total factor productivity. These results challenge conventional wisdom and suggest that economic policies may need to adapt to the evolving dynamics of labor share and its impact on growth. |
| Keywords: | economic growth; labor share; total factor productivity; first-differences Generalized Method of Moments. |
| JEL: | E24 O47 C23 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp03192024&r= |
| By: | Antea Barišić; Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw); Michael Landesmann (The Vienna Institute for International Economic Studies, wiiw); Alireza Sabouniha (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | In this note, we study the relationship between the use of new technologies (e.g. robots and various ICT assets), labour demand and migration patterns. The adoption of new technologies might change the demand for labour in various ways, which in turn will have an impact on skill composition and wage levels of different types of workers. We report the main results from a study that first analyses the impact of robot adoption on wages by sector and skills. Second, we study the impact of robot adoption in manufacturing industries on the attraction of migrants while controlling for other factors in the labour demand function. This is followed by an analysis of push and pull factors of bilateral migration that focuses on the impact of relative automation gaps across countries. Finally, using the OeNB Euro Survey, we examine determinants of the intention to migrate and the role of income differentials between the countries of origin and destination. |
| Keywords: | Migration, migrant jobs, wages, employment, novel technologies, adoption of robots, digitalisation, European labour markets, Central Eastern European countries |
| JEL: | F22 F66 J61 J24 J20 O33 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:wii:pnotes:pn:77&r= |
| By: | Antea Barišić; Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw); Alireza Sabouniha (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | This paper analyses the determinants of outward migration decisions while focusing on CESEE countries and using data from the OeNB Euro Survey conducted by the Oesterrichische Nationalbank (OeNB), a data source that has yet to be exploited at the individual level. Applying a two-stage Heckman procedure, we identify the determinants of the intention to migrate, including age, gender, ties at home, household characteristics and income. In the second stage, we analyse the characteristics of those who expressed a desire to migrate and investigate the determinants of the choice of the respective destination, distinguishing between EU15, EU-CEE and extra-EU countries. The insights in this paper might help to inform fact-based migration and public policies in addition to laying some groundwork for further research (a) concerning the impact of new technologies and demographic trends on the intentions to migrate as well as (b) establishing a firmer link between the intention to migrate and actual migration. |
| Keywords: | migration drivers, migration aspirations/desires, destination decision, choice model |
| JEL: | F22 O15 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:wii:wpaper:247&r= |
| By: | Fiesenig, Bruno; Grebe, Leonard; Schiereck, Dirk |
| Abstract: | The decision to establish the European authority for anti-money laundering and counter-terrorism financing (AMLA) in Frankfurt sets the stage for a natural experiment, offering insight into how the decision for the AMLA headquarter location and the future proximity to regulatory oversight influence the market value of financial institutions. Our results show that, while the introduction of a regulatory institution in Europe appears to have a significant positive impact on European markets, this effect, however, appears to be mitigated in countries directly affected by the decision of the geographical location of the new founded authority. |
| Date: | 2024–06 |
| URL: | http://d.repec.org/n?u=RePEc:dar:wpaper:144965&r= |
| By: | Stephen G. Cecchetti; Jens Hilscher |
| Abstract: | In response to the Global Financial Crisis, central banks engaged in large-scale asset purchases funded by the issuance of reserves. These “unconventional” policies continued during the pandemic, so that by 2022 central banks’ balance sheets had grown up to ten-fold. As a result of rapidly increasing interest rates, these massive portfolios began producing substantial losses. We interpret these losses as fiscal policy consequences of quantitative easing and stress that they must be balanced against the prior benefits of implementing purchase policies. Importantly, losses differ qualitatively depending on whether the central bank chooses to buy domestic or foreign assets, thus resulting in transfers either within or between countries. Effects of losses may differ due to accounting rules (when losses are realized) and when the fiscal authority compensates for losses (the structure of indemnification agreements). Data from the Federal Reserve, the Eurosystem, and the Bank of England show that maximum annual losses are between 0.3 and 1.5 percent of GDP. By contrast, the Swiss National Bank is sustaining losses up to 17 percent of GDP. |
| JEL: | E42 E52 E58 E63 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32478&r= |
| By: | Marcel Smolka |
| Abstract: | We investigate the effect of immigration on consumer prices in Spain between 1997 and 2013. Using variation across provinces, we first document a positive correlation between consumer prices and the share of migrants in the population. However, controlling for regional supply and demand shocks, and addressing endogeneity through an instrumental variables approach, we show that immigration has actually reduced consumer prices in Spain. An increase in the share of migrants by 10 percentage points reduces (CPI-weighted) consumer prices by approx. 1.25 percent. We show that the effect materializes around the years of the 2008 financial crisis, and that it is concentrated among non-tradable goods and services. Focusing on individual products, we find that some of those products that rely most heavily on migrant labor have been subject to considerable price reductions, while we find no such effects for those products that make intensive use of native labor. Finally, we find that it is immigration from outside Western Europe that led to a reduction in consumer prices, while the effect of immigration from Western Europe is zero. Overall, our results paint a complex picture of the effects of immigration on consumer prices. They support the idea that immigration can reduce consumer prices through both supply-side and demand-side channels. |
| Keywords: | immigration, consumer prices, Spain |
| JEL: | F22 J61 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11097&r= |
| By: | Asimakopoulos, Ioannis G.; Tröger, Tobias |
| Abstract: | The lack of a European Deposit Insurance Scheme (EDIS) - often referred to as the 'third pillar' of Banking Union - has been criticized since the inception of the EU Banking Union. The Crisis Management and Deposit Insurance (CMDI) framework needs to rely heavily on banks' internal loss absorbing capacity and provides little flexibility in terms of industry resolution funding. This design has, among others, led to the rare application of the CMDI, particularly in the case of small and medium sized retail banks. This reluctance of resolution authorities weakens any positive impact the CMDI may have on market discipline and ultimately financial stability. After several national governments pushed back against the establishment of an EDIS, the Commission recently took a different approach and tried to reform the CMDI comprehensively, without seeking to erect a 'third pillar'. The overarching rationale of the CMDI Proposal is to make resolution funding more flexible. To this end, the proposal seeks to facilitate contributions from (national) deposit guarantee schemes (DGS). At the same time, the CMDI Proposal tries to broaden the scope of resolution to include smaller and medium sized banks. This paper provides an assessment of the CMDI Proposal. It argues that the CMDI Proposal is a step in the right direction but cannot overcome fundamental deficiencies in the design of the Banking Union. |
| Keywords: | bank resolution, CMDI, EDIS, bail-in, transfer strategies, MREL, Banking Union |
| JEL: | G01 G18 G21 G28 K22 K23 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:295233&r= |
| By: | Martin, Ertl (Institute for Advanced Studies Vienna, Austria); Rabitsch, Katrin (Vienna University of Economics and Business) |
| Abstract: | We explore the natural rate of interest, shortly r*, in emerging economies. If economic growth originates from convergence, then growth, say, from technological progress will be lower than we ï¬ nd in the data and, hence, r* will be lower. Ignoring convergence upwardly biases our estimates of r*. We extend the New Keynesian small open economy model to take account of convergence. The model is estimated with Bayesian techniques for four emerging economies in Central and Eastern Europe: Poland, Czech Republic, Hungary and Romania. The estimation process is informed by empirical evidence about a rapid catch-up of our example economies during the period from 2003 to 2019. We conï¬ rm the decline in r* over the last decades. When we account for capital deepening, we ï¬ nd meaningful differences with non-negligible implications for monetary policy. |
| Keywords: | natural rate of interest; convergence; New Keynesian DSGE model; Central and Eastern Europe |
| JEL: | E3 E4 E5 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:ihs:ihswps:number55&r= |
| By: | Heinemann, Friedrich; Moessinger, Marc-Daniel |
| Abstract: | Die Zahlen zur deutschen Staatsverschuldung sind zunehmend unvollständig, weil sie die auf Deutsch- land entfallenden Verpflichtungen für wachsende EU-Schulden ausblenden. Nach Auszahlung aller Mittel aus dem Corona-Wiederaufbauplan Next Generation EU (NGEU) beläuft sich der deutsche Finanzierungs- anteil für die Tilgungen auf 109 Milliarden Euro. Zudem übernimmt Deutschland bis zur Rückzahlung aller NGEU-Kredite bis 2058 zusätzlich Garantien im Umfang von anfangs 134 Milliarden Euro für die Verbind- lichkeiten anderer Mitgliedstaaten. Der Umfang der nicht ausgewiesenen Beträge für Rückzahlung und Haftung aus allen heute existierenden europäischen Verschuldungsinstrumenten beläuft sich dann bereits auf mehr als 10 Prozent der gegenwärtigen deutschen Staatsschuld. Dies sind Ergebnisse einer aktuellen Studie, die das ZEW Mannheim mit Unterstützung der Strube-Stiftung durchgeführt hat. Durch neue Instrumente wie den Corona-Wiederaufbauplan "Next Generation EU" verschuldet sich die EU in beträchtlichem Maß. Die in der Pandemie aufgelegten neuen Fonds haben die europäische Verschul- dung auch qualitativ verändert. Anders als früher werden auch nicht rückzahlbare Zuschüsse an EU-Mit- gliedstaaten und operative EU-Programme im Rahmen von NGEU schuldenfinanziert. Nach den Regeln der europäischen Statistik werden diese EU-Schulden zu einem großen Teil nicht in den nationalen Schuldenstatistiken erfasst, obwohl auch die europäischen Schulden den fiskalischen Spiel- raum der Mitgliedstaaten verringern. |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewpbs:294874&r= |
| By: | Robert Lehmann; Lara Zarges |
| Abstract: | In this paper, we outline material and capital linkages across sectors to quantify the role of the German production network in amplifying sectoral dynamics on aggregate trend gross domestic product growth. This allows us to study the impact of sectoral labor input and total factor productivity trend growth variation on the persistent decline in long-run output growth. Our estimation reveals that sector-specific developments have historically accounted for half of this long-term decline. Zooming into the reunification period, we find a pronounced decline of total factor productivity growth in Professional and Business Services together with a fall in labor input growth in the Construction sector to drive the sharp decline of German trend output growth over the 1990s. We further document significant changes regarding the sectors’ importance as input suppliers to the economy over the past decades. Our analysis identifies the labor-intensive Construction sector as a major input hub in the production network, its long-run amplification effect exceeding four times its share in value added. Given the impending demographic change, the low potential for automation in this sector may significantly reduce future German trend output growth. |
| Keywords: | trend GDP growth, sectoral multiplier, amplification effects, structural change |
| JEL: | C32 E22 E23 O41 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11089&r= |
| By: | Philippe Aghion; Maxime Gravoueille; Matthieu Lequien; Stefanie Stantcheva |
| Abstract: | We use individual panel data and the introduction of simpler tax regimes for the self-employed in France to assess the extent to which individuals' shift towards the simpler tax regimes is driven by tax simplicity and by tax evasion motives. We find evidence of a quest for simplicity from estimating the amount of bunching at the eligibility thresholds for the simpler self-employment tax regimes, and from observing that bunching is increasing in the degree of simplicity of the tax regime. We argue that tax evasion plays a significant role in explaining individuals' attraction towards simpler tax regimes. We develop a structural model to quantitatively assess the importance of simplicity and evasion motives for choosing a simpler self-employment regime. The model suggests a considerable preference for tax simplicity, ranging from 162 to 5654 euros per year per self-employed individual, which in turn entails a sizeable evasion elasticity. |
| Keywords: | self-employment, taxation, entrepreneurship |
| Date: | 2024–05–16 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1999&r= |
| By: | Delia Sanchez Trancon; Xavier Leflaive |
| Abstract: | This paper examines the challenges and policy imperatives involved in implementing the Polluter Pays principle (PPP) in the context of the Water Framework Directive (WFD). It presents the state of play of the Polluter Pays principle in EU Member States. It also analyses the coherence with other policies in EU Member States, such as agriculture, land planning and industry. Furthermore, it examines the practical limitations of the Polluter Pays principle in relation to diffuse and legacy pollution. Finally, it questions how the principle fits into the Green Deal and future water-related challenges in the EU. This is the second in a sub-set of four working papers within the Environment Working Paper series destined to support the further implementation of the economic pillar of the Water Framework Directive. The four papers are best read in combination and provide lessons which are relevant beyond the European Union. |
| Keywords: | diffuse pollution, legacy pollution, polluter pays principle, pollution, water |
| JEL: | H23 H54 H76 O21 Q21 Q25 Q28 Q53 Q58 |
| Date: | 2024–05–24 |
| URL: | http://d.repec.org/n?u=RePEc:oec:envaaa:238-en&r= |
| By: | Pierluigi Angelino; Dirk Czarnitzki; Astrid Volckaert |
| Abstract: | The Flemish government launched its Spearhead Cluster (SHC) policy in 2017. The aim is to boost strategic sectors by setting up cluster initiatives which coordinate collaborative R&D initiatives. In this paper, we analyze whether becoming a member of such a cluster initiative has an impact on the Total Factor Productivity (TFP) of the firm. We exploit firm-level data between 2013 and 2020 to estimate TFP and apply a difference-in-differences approach to assess the programs’ treatment effects. We find that becoming a member of a cluster has an average positive impact on firmlevel TFP of between 1 to 4.4 percent, depending on the econometric specification. These results are the first to provide an insight into the impact of the Flemish SHC policy on productivity. |
| Keywords: | cluster associations, cluster policy, innovation policy, total factor productivity, conditional difference-in-difference |
| Date: | 2024–05–22 |
| URL: | http://d.repec.org/n?u=RePEc:ete:vivwps:741800&r= |
| By: | ANTONIOLI Federico (European Commission - JRC); CIAIAN Pavel (European Commission - JRC); BALDONI Edoardo (European Commission - JRC) |
| Abstract: | Relying on the EU FADN dataset for the period 2004-2020, the reports quantitatively estimates the impact of Geographical Indications (GIs) on the economic, environmental and social performances of GI vineyard farms. The empirical analyses employed the combined matching and difference-in-differences estimation technique, which allows several important sources of bias to be addressed, such as self-selection bias, time-invariant and time-variant systematic differences across farms and functional form misspecification. The estimated results suggest that GIs improve economic performance of vineyard farms. GIs also have some positive impact on social dimension by stimulating higher farm wages, while have statistically insignificant impact on farm employment. In contrast, GIs are found to have rather small impact on environmental performance of farms potentially leading to some reduction of energy use, while having no impact on plant protection use of vineyard farms. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc135467&r= |
| By: | Emanuele Ferrari (European Commission – JRC); Christian Elleby (European Commission – JRC); Beyhan DE JONG (European Commission – JRC); Robert M'barek (European Commission – JRC); Ignacio PEREZ DOMINGUEZ (European Commission – JRC) |
| Abstract: | This study investigates the potential effects of 10 upcoming free trade agreements (FTAs) under the current EU trade agenda. It quantifies the cumulative sectoral impacts in terms of bilateral trade, production, demand and price developments. Moreover, it provides insights into the evolution of supply, demand and farm-gate prices for the most relevant EU agricultural commodity markets. In contrast to a forecast exercise, this analysis compares two variants of a trade liberalisation scenario (conservative and ambitious) with a business-as-usual (baseline) situation in 2032, including an analysis of the effects of the UK trade agenda on EU agri-food trade. The study confirms that the analysed FTAs have the potential to benefit the EU agri-food sector, especially the dairy, pigmeat, processed food and beverages sectors. It also highlights the vulnerability of the beef, sheep meat, poultry meat, sugar and rice sectors. |
| Keywords: | Trade, EU, general equilibrium model, partial equilibrium model |
| JEL: | C68 F11 Q17 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc135540&r= |
| By: | Bergmann, Julian; Kosmehl, Miriam; Langbein, Julia; Sasse, Gwendolyn |
| Abstract: | Ukraine and its international partners are faced with an unprecedented task: advancing recovery efforts and the EU accession process while also providing critically important military and financial support to help Ukraine defend its sovereignty against Russian military aggression. Uncertainty over when and how the war will end makes planning for recovery and EU membership even more complex, but also underlines the need for their integration. Given a shared focus on a transformative modernisation, both processes can reinforce each other. Along this line of thinking, the EU has adopted the Ukraine Facility to provide reliable funding to Ukraine up to 2027, with the aim of supporting recovery and key institutional and administrative reforms required for Ukraine's EU accession. The main roadmap for implementation of both is the Ukrainian government's so-called Ukraine Plan. However, recovery and EU accession will not automatically create synergies, and may, at worst, overstretch Ukrainian government and private-sector capacities as well as societal support. To maximise synergies between the processes, policymakers should consider the following recommendations: ● Set priorities that address short-term demands and have long-term ambitions. Recovery measures should be prioritised that improve security, meet the basic needs of the people and are crucial to the functioning of the Ukrainian economy. In EU accession negotiations, the "fundamentals" and chapters that stimulate economic growth and competitiveness should be prioritised, because utilising the accession process to stimulate economic growth today can directly contribute to transformative rebuilding and vice versa. ● Ensure society-wide ownership of the Ukraine Plan. The German and Ukrainian governments, as co-hosts of the Ukraine Recovery Conference (URC) in June 2024, should make sure that the URC is the starting point for institutionalising an inclusive approach in the implementation of the Ukraine Plan. This can be achieved through the promotion of issue-specific coalitions of different actors across multiple levels of governance in Ukraine beyond this year's URC. ● Engage international donors in supporting the Ukraine Plan and leveraging recovery to accelerate Ukraine's EU accession path. Germany, as an EU and G7 member state, could serve as an important bridge-builder between EU and non-EU supporters of Ukraine's recovery. EU member states should align their bilateral assistance to Ukraine with the Ukraine Plan. ● Tailor technical assistance and capacity building. An asset map, developed jointly by Ukrainian and international actors, should identify and systematise strengths and unused potential (e.g. regarding infrastructure, public finance and industrial and commercial activities) in specific regions and municipalities, and in the private sector, taking into account the different development strategies that have evolved at different levels of governance over the past months. The Ukrainian diaspora in EU countries should be incentivised to actively engage in these processes without predicating their involvement on unrealistic expectations of a quick and large-scale return. ● Prepare for intermediate steps in Ukraine's EU accession. The German government should continue to advance the debate between EU institutions and member states about intermediate steps in Ukraine's EU accession before formal membership, including Ukraine's progressive integration into the EU single market. ● Adopt open and transparent communication. Building on open and transparent dialogue, both the Ukrainian government and the EU will need to develop an effective communication strategy towards the Ukrainian people to uphold their support for EU accession. Effective communication within the EU is required to limit the political space of veto players. |
| Keywords: | Ukraine, Ukraine-EU relations, recovery, reconstruction, EU accession, EU enlargement policy |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:idospb:294866&r= |