|
on European Economics |
|
Issue of 2024‒08‒26
27 papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Burban, Valentin; De Backer, Bruno; Vladu, Andreea Liliana |
| Abstract: | This article measures the degree of potential de-anchoring of inflation expectations in the euro area vis-à-vis the inflation objective of the European Central Bank (ECB). A no-arbitrage term structure model that allows for a time-varying long-term mean of inflation expectations, π∗t , is applied to inflation-linked swap (ILS) rates, while taking into account survey-basedinflation forecasts. Estimates of π∗t have been close to 2% since the mid-2000s, indicating that long-term inflation expectations have overall remained well anchored to the ECB’s inflation objective. As this objective is however related to the "medium term", expectations components of various forward ILS rates are extracted: they appear to have been broadlyanchored, with tentative signs of de-anchoring up to the two-year horizon. Using backcasted ILS rates, estimates of π∗t are much above 2% in the early 1990s, but they convergence to levels below 2% by the end of the decade when the ECB was established. JEL Classification: E31, E43, E47, E58 |
| Keywords: | inflation-linked swap rates, inflation expectations, no-arbitrage, shifting endpoint, surveys |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20242964 |
| By: | Berger, Tino; Ochsner, Christian |
| Abstract: | The European Central Bank (ECB) strives to maintain inflation at a 2% target rate, yet the Euro area's diverse economies pose challenges to achieving this goal with a single nominal interest rate. Effective monetary policy transmission hinges on synchronizing the Natural Rate of Interest (NRI) across constituent economies. This note investigates NRI synchronization between Germany, the largest Euro area economy, and the entire Euro area. Utilizing Bayesian estimation of the Holston et al. (2017) model, we find robust synchronization between Germany's NRI and that of the entire Euro area, even amid level differences, supporting effective monetary policy coordination. |
| Keywords: | unobserved component model, natural rate of interest, HLW model, Euro area, Germany |
| JEL: | C32 E43 E52 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:svrwwp:300653 |
| By: | Vinci, Francesca; Schang, Christopher |
| Abstract: | The European fiscal governance framework remains incomplete, hindering policy coordination during economic shocks and affecting the transmission of the single monetary policy. High public debt and low public investment worsen resilience across Member States. Many policymakers, institutions, and academics support establishing a central fiscal capacity (CFC) as a solution. Against this backdrop, we propose a framework to assess a CFC in the euro area, aimed at stabilizing the business cycle, promoting sovereign debt sustainability, and reducing procyclicality in public investment. Our two-region DSGE model with a permanent CFC allocates resources based on the relative output gap while earmarking funds for public investment and imposing fiscal adjustment requirements for the high-debt region. The CFC enhances business cycle stabilization for both regions and significantly reduces the welfare cost of fluctuations. We also explore European bond issuance and a supranational investment strategy to address investment needs through European Public Goods. JEL Classification: E12, E32, E62, F45 |
| Keywords: | EU governance, European public goods, macroeconomic stabilisation, public debt sustainability |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20242962 |
| By: | António Afonso; Francisco Gomes-Pereira |
| Abstract: | This paper studies the impact of monetary policy on fiscal sustainability in the euro area. Our sample includes 12 euro area countries and covers the period from 2003:Q1 to 2022:Q4. We extend a fiscal reaction function (Bohn’s rule) by including the monetary policy stance as an interaction term. Our findings are as follows: First, a contractionary (expansionary) monetary stance tends to lead to an increase (decrease) in the primary balance. Second, the ECB’s monetary policy stance significantly influences the fiscal reaction function coefficient. In other words, contractionary monetary policy induces a larger increase in primary balances in response to an increase in the debt-to-GDP ratio than if monetary policy was neutral or expansionary. Our findings suggest that expansionary monetary policy has the potential to help fiscal sustainability, and potentially mitigate fiscal fatigue. Conversely, contractionary monetary policy can exacerbate the fiscal effort required to satisfy the government intertemporal budget constraint. |
| Keywords: | Monetary Policy Stance, Fiscal Sustainability, Debt Sustainability. |
| JEL: | E52 E58 E63 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ise:remwps:wp03352024 |
| By: | Krenz, Johanna; Tsiaras, Stylianos |
| Abstract: | We estimate the dynamic effects of a high-frequency identified unionwide quantitative easing (QE) shock on real GDP, inflation and unemployment in all euro area countries. We document that the effects of QE are very heterogenous across countries as regards size, significance and timing, especially with respect to GDP and unemployment. Exploiting the panel structure of our dataset, we show that the effect of QE on real GDP is amplified by a larger fraction of liquidity-constrained households in a country. The latter result seems to be driven by the general equilibrium impact of QE on unemployment. |
| Keywords: | Quantitative easing, inequality, LP-IV, DSGE, Household Finance and Consumption Survey (HFCS), Europe |
| JEL: | E52 E58 E24 C23 C26 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:uhhwps:300655 |
| By: | Marqués-Ibáñez, David; Santilli, Gianluca; Scardozzi, Giulia |
| Abstract: | In the aftermath of the European sovereign debt crisis, the question of who should bear the burden of banking crises has been a cornerstone of the new supervisory framework in Europe. We evaluate the bail-in regulation (BRRD) for bank bond holdings using a proprietary database covering holdings of all euro-denominated securities. We focus on hard-to-value bailinable bank bonds and show that banks increased their holdings of bailinable bank bonds while households and non-financial corporations reduced their holdings of bailinable bonds issued by riskier banks. JEL Classification: G21, G28 |
| Keywords: | bail-in, bond allocation, bond holdings |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20242959 |
| By: | Adjemian, Stéphane; Bokan, Nikola; Darracq Pariès, Matthieu; Müller, Georg; Zimic, Srečko |
| Abstract: | This paper introduces ECB-(RE)BASE as the model-consistent, or rational expectation version of the ECB-BASE model. It brings new analytical capabilities to consider varying degrees of heterogeneity in expectation formation across the agents of the model. While the original version of ECB-BASE features VAR-based expectations, we examine two alternative versions either with full model-consistent expectations or with hybrid expectations. The paper provides a didactic exposition of the changes in the model properties brought by the various expectation settings. Furthermore, we conduct illustrative scenarios around the macroeconomic shocks experienced over the recent years. The simulations notably suggest that moving from VAR-based to model-consistent expectations would limit the pandemic-induced macroeconomic volatility but would exacerbate the price pressures during the inflation surge period. Overall, this model development extends the range of possibilities for risk and policy analysis which can enhance the contribution of ECB-(RE)BASE to monetary policy preparation. JEL Classification: C3, C5, E1, E2, E5 |
| Keywords: | euro area, model-consistent expectations, monetary policy, semi-structural model |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20242965 |
| By: | Luna Bellani; Kattalina Berriochoa; Mark Kapteina; Guido Schwerdt |
| Abstract: | We study the effects of information on attitudes towards inheritance taxation using survey experiments fielded in Germany. We show that information about tax allowances increases demand for higher taxes and shifts public opinion from favoring abolition to supporting the tax. Effects are primarily due to a prevalent underestimation of tax allowances and the alteration of people’s expectations of being affected by such taxes. In contrast, information highlighting the increasing proportion of inherited wealth only negligibly affects policy demand. Our results suggest that pocketbook motives and misinformation may contribute to explaining the paradox of limited demand for inheritance taxation despite growing inequality concerns. |
| Keywords: | capital taxation, equality of opportunity, inheritance tax, information, randomized experiment |
| JEL: | H20 D72 D83 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11189 |
| By: | Agnes Norris Keiller |
| Abstract: | In 2016, the UK voted to leave the European Union and growth in UK manufacturing investment ground to a halt. This paper uses administrative trade data to investigate the causal relationship between these events. We exploit firm-level customs data from 2005 on-wards to quantify firms' exposure to EU and non-EU trade in inputs and outputs. Focusing on investment as a forward-looking, dynamic outcome (since the UK did not leave the EU until 2021), we relate firms' investment to their pre-referendum EU exposure. This analysis shows firms' exposure to EU trade had a negative impact on investments post-referendum, especially in 2021. Estimated impacts are stronger for import exposure than for export exposure and there is some evidence of depressed investment from exposure to non-EU imports, likely due to the large depreciation in sterling that followed the vote. Had the UK voted to remain in the EU, these estimates imply manufacturing investment would have been over 7% higher, about £2.4 billion annually between 2016 and 2021. Data Disclaimer: this work was produced using statistical data from the UK Office for National Statistics ("ONS"). The use of ONS data does not imply the endorsement of the ONS in relation to its interpretation or analysis. Analysis using ONS research datasets may not exactly reproduce ONS aggregates and was carried out in the Secure Research Service, part of the Office for National Statistics. |
| Keywords: | firm level, investment, international trade, European Union, manufacturing, Brexit |
| Date: | 2024–08–05 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2025 |
| By: | Jochen Güntner; Magnus Reif; Maik Wolters; Maik H. Wolters |
| Abstract: | We use a structural VAR model to study the German natural gas market and investigate the impact of the 2022 Russian supply stop on the German economy. Combining conventional and narrative sign restrictions, we find that gas supply and demand shocks have large and persistent price effects, while output effects tend to be moderate. The 2022 natural gas price spike was driven by adverse supply shocks and positive storage demand shocks, as Germany filled its inventories before the winter. Counterfactual simulations of an embargo on natural gas imports from Russia indicate similar positive price and negative output effects compared to what we observe in the data. |
| Keywords: | energy crisis, German natural gas market, narrative sign restrictions, natural gas price, structural scenario analysis, vector-autoregression |
| JEL: | E32 F51 Q41 Q43 Q48 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11191 |
| By: | Charles Yuji Horioka (Center for Computational Social Science and Research Institute for Economics & Business Administration (RIEB), Kobe University, Asian Growth Research Institute, Institute of Social and Economic Research, Osaka University, and National Bureau of Economic Research, JAPAN); Luigi Ventura (Department of Economics and Law, Sapienza, University of Rome, ITALY) |
| Abstract: | In this paper, we analyze the saving motives of European households using micro-data from the Household Finance and Consumption Survey (HFCS), which is conducted by the European Central Bank. We find that the rank ordering of saving motives differs greatly depending on what criterion is used to rank them. For example, we find that the precautionary motive is the most important saving motive of European households when the proportion of households saving for each motive is used as the criterion to rank them but that the retirement motive is the most important saving motive of European households if the quantitative importance of each motive is taken into account. Moreover, the generosity of social safety nets seems to affect the importance of each saving motive, with saving for the retirement motive being less important in countries with generous public pension benefits and saving for the precautionary motive being less important in countries with generous health systems. These findings suggest that the retirement motive and the precautionary motive are the dominant motives for saving in Europe partly because social safety nets are not fully adequate. Our finding that saving motives that are consistent with the selfish life-cycle model as well as saving motives that are consistent with the altruism model are important in Europe implies that the two models coexist in Europe, as is the case in other parts of the world. However, our finding that the retirement motive, which is the saving motive that most exemplifies the selfish life-cycle model, is of dominant importance in Europe strongly suggests that this model is far more applicable in Europe than is the altruism model. Moreover, our finding that the intergenerational transfers motive, which is the saving motive that most exemplifies the altruism model, accounts for only about one-quarter of total household wealth in Europe provides further corroboration for this finding. |
| Keywords: | Altruism model; Bequests; European Central Bank; Household Finance and Consumption Survey; Households; Household saving; Household wealth; Inheritances; Inter vivos transfers; Intergenerational transfers; Precautionary saving; Retirement; Saving; Saving motives; Selfish life-cycle model; Wealth; Wealth-to-income ratio |
| JEL: | D12 D14 D15 D64 E21 J14 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:kob:dpaper:dp2024-26 |
| By: | Ricardo Barradas; João Alcobia |
| Abstract: | Portugal has historically displayed strong external imbalances, which have already resulted in three requests for international financial assistance from the International Monetary Fund, the European Commission and the European Central Bank. Stemming from the framework of mainstream economics literature, these institutions imposed demanding austerity measures based on internal devaluation, huge wage restraint policies and strict control on government balance in order to contain the Portuguese domestic demand and to promote Portuguese external competitiveness. Accordingly, Portuguese labour costs have registered a general decreasing trend, and government balance has substantially improved in the last four decades, but the Portuguese external imbalances remain unsolved, which suggests that we need to go beyond the conventional economic literature in order to better ascertain the right determinants of external imbalances. This paper aims to contribute to the current theoretical debate about the determinants of the external imbalances by relying on the post-Keynesian economics literature and performing a time series econometric analysis for Portugal from 1988 to 2023. Results evidence that the fall of labour costs and the surge of both stock and housing prices are the main drivers behind the Portuguese external imbalances over the last four decades. |
| Keywords: | External Imbalances, Labour Costs, Financial and Housing Asset Prices, Portugal, Time Series, Autoregressive Distributed Lag Estimator |
| JEL: | C32 E12 F32 F41 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ise:remwps:wp03342024 |
| By: | Estrin, Saul; Hanousek, Jan; Shamshur, Anastasiya |
| Abstract: | We explore how the type of owner affects private enterprise investment decisions in Europe. In contrast to the literature, we analyze firms with concentrated (>95%) ownership stakes to reduce the potential that agency problems contaminate our results. We consider four types of supermajority owners – family, institutional, corporate, and state and use detailed ownership and financial information from a large sample of private firms from 24 European countries from 2001 to 2018. We find that family-owned firms exhibit higher gross investment rates and substantially higher sensitivity to investment opportunities, profitability, cash flow, and value-added growth compared to corporate and institutional owners. At the same time, and more consistent with the literature, family-owned firms invest significantly less in intangible assets than other ownership types. To demonstrate the robustness of our results, we employ matching samples complemented by analysis of owner-type transitions from family owners to corporate and institutional owners. |
| Keywords: | private firms; panel data; Europe; ownership types; investments; cash flow sensitivity; profitability; business opportunities; Elsevier deal |
| JEL: | G31 G32 |
| Date: | 2024–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:124030 |
| By: | Ondarza, Nicolai$cvon |
| Abstract: | Labour has won a landslide in the United Kingdom (UK) snap elections and will now lead the government. Following the mutual estrangement caused by Brexit, among other changes, this provides an opportunity to revitalise relations with the European Union (EU). Particularly in foreign, security and defence policy, cooperation has already increased in the wake of Russia's war of aggression, but mainly on an ad hoc basis. In the medium term, it is not a question of reversing Brexit, but rather of establishing an EU-UK Common Strategic Initiative - in other words, a new model for structured relations with a partner that is very important for the EU and Germany. Here, the EU should also show more flexibility than in the past. |
| Keywords: | Vereinigtes Königreich, Europäische Union, Beziehungen zwischen EU und Großbritannien, Außen- und Sicherheitspolitik, britische Unterhauswahl 2024, Gemeinsame Strategische EU-UK-Initiative, Premierminister Rishi Sunak, Keir Starmer, Labour-Partei, United Kingdom (UK), European Union (EU), Northern Ireland, Brexit, EU-UK Common Strategic Initiative, Rishi Sunak, Kier Starmer, Nigel Farage, Conservative Party, elections, Labour, Liberal Democrats, Permanent Structured Cooperation (PESCO) |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:swpcom:300619 |
| By: | Clemens Fuest |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:econpb:_62 |
| By: | Matzner, Anna; Steininger, Lea |
| Abstract: | We study the heterogeneous pass-through of carbon pricing on investment across firms. Using balance sheet data of 1.2 million European firms and identified carbon policy shocks, we find that higher carbon prices reduce investment, on average. However, less carbon-intensive firms and sectors reduce their investment relatively more compared to otherwise similar firms after a carbon price tightening shock. Following carbon price tightening, firms in demand-sensitive industries see a relative decrease not only in investment but also in sales, employment and cashflow. Moreover, we find no evidence that higher carbon prices incentivise carbon-intensive firms to produce less emission-intensively. Overall, our results are consistent with theories of the growth-hampering features of carbon price increases and suggest that carbon pricing policy operates as a demand shock. JEL Classification: Q54, Q58, D22, H23 |
| Keywords: | carbon pricing, climate crisis, corporate finance, economic growth, public policy |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20242958 |
| By: | Arnaud Lechevalier (UP1 - Université Paris 1 Panthéon-Sorbonne) |
| Abstract: | Social Europe" refers to the European Union's social policy in areas of shared competence with the member states. In the course of European integration, social policy has mainly been conceived as a product or means of the single market and single currency. The protective and redistributive function of social policies has remained essentially within the competence of the member states, even though they are subject to increased mutual competition. This trajectory is to be understood against the backdrop of the inter-state logic that predominates within the EU, and the conflicts of interest between member states. Despite certain achievements, the European Socle of Social Rights, proclaimed in 2017, could not, on its own, substantially alter this trajectory. To go further, the EU should evolve towards a genuine fiscal and budgetary union, and the social dimension should be integrated into all EU policies, including macroeconomic and budgetary surveillance, instead of being considered as a subordinate "social pillar" |
| Abstract: | « L'Europe sociale » désigne la politique sociale de l'Union européenne dans les domaines des compétences partagées avec les Etats membres. Dans le cours de la construction européenne, elle a été principalement conçue comme produit ou moyen du marché et de la monnaie uniques. La fonction protectrice et redistributive des politiques sociales est restée pour l'essentiel de la compétence des Etats membres, pourtant soumis à une concurrence mutuelle accrue. Cette trajectoire est à comprendre sur fond de la logique interétatique qui prédomine au sein de l'UE, et des conflits d'intérêts entre les Etats membres. En dépit de certaines avancées, le Socle européen des droits sociaux, proclamé en 2017, ne pouvait, à lui seul, infléchir substantiellement cette trajectoire. Pour aller plus loin, l'UE devrait évoluer vers une véritable union budgétaire et fiscale, et la dimension sociale devrait être intégrée dans toutes les politiques de l'UE, notamment dans la surveillance macroéconomique et budgétaire, au lieu d'être considérée comme un « pilier social » subordonné. |
| Keywords: | Social Europe, European Pilar of Social Rights, Europe sociale, Socle européen des droits sociaux |
| Date: | 2024–04–01 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04639348 |
| By: | Elliot Aurissergues (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po); Christophe Blot (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po); Edgar Carpentier-Charléty; Magali Dauvin (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po); François Geerolf (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po); Eric Heyer (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po); Mathieu Plane (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po) |
| Abstract: | The eurozone has gone through a series of crises that have sometimes threatened its survival, but these have also led to reforms in its fiscal governance and to changes in how it conducts monetary policy. On the eve of the European elections, 25 years after its creation, the question arises of how well the eurozone's economy has performed in comparison with the US economy. While the trajectories of their GDP per capita were relatively similar between 1999 and 2008, since then they have diverged markedly. We look at the possible causes of this growing gap, distinguishing between supply and demand factors. ■ On the supply side, the eurozone's productivity has grown much less than in the United States over the period as a whole. In contrast, while the employment rate of the workingage population has stagnated in the United States, it has improved significantly in European countries, although there continue to be disparities within the continent. More recently, the divergence has been due to the impact of the energy crisis and the steeper rise in energy prices in Europe as a result of the drop in the supply of Russian natural gas following the outbreak of the Ukraine war. ■ On the demand side, it has to be said that there is a very real deficit in aggregate demand in the eurozone. Saving has clearly outstripped investment since 2010, fuelling global trade imbalances. One reason for this extra saving is a more restrictive fiscal policy in Europe than in the United States. The aggregate under-performance of the eurozone as a whole has gone together with very heterogeneous trajectories within the zone. For the period as whole, the "northern" countries have grown faster than France and the "southern" countries, although some countries, notably Italy, have recently closed part of the gap. The challenge over the years ahead will be to handle fiscal consolidation and its impact on activity. ■ It is imperative not to repeat the mistake of 2011-2014. Fiscal consolidation may be appropriate during a period of economic recovery, but it is pernicious or at least ineffective when the economy is sluggish; if it proves necessary during a period of economic weakness, it will harm activity less if it is gradual, smoothed out and not synchronized across the eurozone. ■ Furthermore, the priority on this side of the Atlantic cannot solely be to restore public finances, when this risks further widening the economic gap with the United States: given the new global and geostrategic challenges, Europe must finance its security, the ecological transition and new green industries. An ambitious European recovery plan should use its structural saving surplus to target both supply and demand, so as to make it possible to meet these challenges and put pressure on the economies, thereby stimulating growth and productivity. Higher potential growth is crucial to ensure the long-term sustainability of the public debt. |
| Date: | 2024–07–27 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04634067 |
| By: | Broadberry, Stephen; Lennard, Jason |
| Keywords: | business cycle; economic growth; Europe |
| JEL: | N10 E32 O47 |
| Date: | 2024–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:123968 |
| By: | Codogno, Lorenzo |
| Abstract: | Since the Global Financial Crisis in 2008-2009, there has been flourishing literature on the role of fiscal policy in stimulating demand when the economy is in a deep recession. Past studies suggest the stimulus may make sense if it is temporary, targeted, and withdrawn quickly. However, since the pandemic, there has been a case for going big, when necessary, to prop up expectation, confidence and demand. This was exemplified by Italy's Superbonus 110%, a generous subsidy scheme to allow the energy-efficient renovation of residential buildings, which emerged as a significant policy response to the economic challenges posed by the pandemic. I argue that the Superbonus, while having a respectable economic aim, ended up impinging on the same sectors supported by the EU-funded investment plan, resulting in significant capacity constraints and misallocation of resources. Its excessive generosity brought a massive deterioration in public finances, while its returns in terms of economic growth were short of expectations. I conclude by drawing some policy lessons from Italy's experience, on what should be preserved and avoided, and on a possible reinvented role for fiscal policy in deep economic crisis. |
| Keywords: | policy designs and consistency; crisis management; deficit and debt; national budget |
| JEL: | E61 H60 H10 |
| Date: | 2024–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:124239 |
| By: | Rubén Domínguez-Díaz (BANCO DE ESPAÑA); Samuel Hurtado (BANCO DE ESPAÑA) |
| Abstract: | We use an endogenous growth model calibrated to the Spanish economy to evaluate the effects of a rapid doubling of international prices of brown energy inputs. In the baseline calibration of the model, which resembles the current state of the Spanish economy, this results in a 0.30% drop in GDP on impact. After increasing the share of renewables in the energy mix from 26% to 85%, in line with the 2050 targets for the Spanish economy, the same shock results in a 0.24% fall in GDP on impact, and the recovery is faster: the present discounted value of the full GDP response is reduced by 65%. The three main conclusions that we draw from this exercise are: i) an increase in the share of renewables makes the economy less vulnerable to shocks in international prices of brown energy inputs; ii) this vulnerability reduction is less than proportional: dividing the share of brown energy by approximately five only reduceds the size of the effects on GDP by between 21% and 65%; and iii) the main statistic that determines how much the vulnerability is reduced is not the share of brown energy inputs, but the degree to which final energy prices respond to the shock to brown energy prices. |
| Keywords: | energy prices, green transition, external shocks, carbon tax |
| JEL: | O38 O52 O44 E32 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2425 |
| By: | Xu, Diheng (Tilburg University, School of Economics and Management) |
| Date: | 2023 |
| URL: | https://d.repec.org/n?u=RePEc:tiu:tiutis:84d5de65-30a0-4767-ad89-0d29c23d2c52 |
| By: | Gao, Xinchuchu |
| Abstract: | In order to achieve the goal of climate neutrality, while also enhancing Europe’s industrial competitiveness on the global stage, the acceleration of the twin – green and digital – transitions has been among the top priorities for the European Union (EU). Given the multiplicity of policy areas involved in these twin transitions as well as the nature of the EU as a multilevel organisation, coherence is the key requirement for the twin transitions to be successful. Drawing on the concept of coherence, this article explores whether the EU can be considered a coherent actor when pursuing the twin transitions. It understands coherence as a process to reduce contradictions across different policy domains rather than as a status where no contradictions exist. It also challenges previous views centred solely on coherence during policy implementation, and proposes a broader assessment that begins by framing different policy domains as mutually beneficial and aligned towards common goals. This perspective introduces two dimensions of coherence – conceptual and operational – along horizontal and vertical levels. By examining how policies are framed and interconnected across different levels of governance and policy agendas, this study reveals that while the link between the green and digital transitions and the need for coordination across different governance levels has been widely accepted, conceptual coherence varies across governance levels and policy areas. Furthermore, the study argues that operational coherence – putting ideas into practice – lags behind conceptual coherence, which highlights the challenges of implementing the twin transitions effectively. |
| Keywords: | European Union; climate neutrality; green and digital twin transitions; digitalisation; coherence |
| JEL: | N40 N43 |
| Date: | 2024–06–29 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:124203 |
| By: | van der Heide, Arjen |
| Abstract: | Confronted with increased difficulties to raise taxation, high inflation, and pressures to maintain social spending, many rich democracies have increasingly sought to raise funds in financial markets since the 1970s. Using the notion of "infrastructural power, " this paper examines the various ways in which states have become infrastructurally entangled with key actors in financial markets that provide the infrastructure of today's markets for government bonds. Drawing on twenty-two interviews with debt managers and market participants, and documentary material, the article analyses the rise to prominence of MTS (Mercato dei Titoli di Stato), an electronic platform for trading government bonds that has become a key feature of Europe's government bond market infrastructure. It traces the emergence of MTS in Italy, its rapid diffusion through Europe and its limited (or even non-existent) success in gaining market share in Germany and the UK. In so doing, this paper finds that some debt management units actively regulate their secondary bond markets to stimulate competition among dealer banks; they "orchestrate" the market for government bonds. Others take a more handsoff approach and only engage with secondary markets mostly as market participants by issuing debt instruments and perhaps buying and selling them in the secondary market. These differences are important for understanding the politics of sovereign debt: they reflect power relations, may impact states' cost of borrowing and their capacity to withstand moments of fiscal stress. |
| Abstract: | Unter dem Eindruck zunehmender Schwierigkeiten bei der Besteuerung, der Inflation und der Belastungen durch die Aufrechterhaltung der Sozialausgaben haben sich viele reiche Demokratien seit den 1970er-Jahren verstärkt darum bemüht, Kapital an den Finanzmärkten zu beschaffen. Ausgehend vom Begriff der "infrastrukturellen Macht" untersucht dieses Papier verschiedene Formen struktureller Verbindungen zwischen Staaten und Schlüsselakteuren auf den Finanzmärkten, die die Infrastruktur der heutigen Märkte für Staatsanleihen bereitstellen. Auf der Grundlage von 22 Interviews mit Schuldenmanagern und Marktteilnehmern sowie Quellenmaterial analysiert der Beitrag die wachsende Bedeutung des MTS (Mercato dei Titoli di Stato), einer elektronischen Handelsplattform für Staatsanleihen, die im Laufe der Zeit zu einem zentralen Element der Infrastruktur des europäischen Marktes für Staatsanleihen geworden ist. Er zeichnet die Entwicklung des MTS in Italien, seine schnelle Verbreitung in Europa und seinen mäßigen (oder sogar nicht vorhandenen) Erfolg bei der Sicherung von Marktanteilen in Deutschland und Großbritannien nach. Im Ergebnis zeigt sich, dass einige Schuldenmanagement-Agenturen ihre Sekundärmärkte für Anleihen aktiv regulieren, um Anreize für den Wettbewerb zwischen Händlerbanken zu schaffen; sie "manipulieren" den Markt für Staatsanleihen. Andere verfolgen einen eher passiven Ansatz und treten auf den Sekundärmärkten hauptsächlich nur als Markteilnehmer in Aktion, indem sie Schuldtitel ausgeben und möglicherweise auf dem Sekundärmarkt kaufen und verkaufen. Diese Unterschiede sind für das Verständnis der Staatsschulden-Politik von entscheidender Bedeutung: Sie spiegeln Machtverhältnisse wider und wirken sich gegebenenfalls auf die Kosten der Kreditaufnahme durch Staaten und deren Widerstandsfähigkeit gegenüber haushaltspolitischen Herausforderungen aus. |
| Keywords: | dealer banks, financial markets, government bonds, infrastructural power, public debt, Finanzmärkte, Händlerbanken, Infrastrukturelle Macht, Staatsanleihen, Staatsverschuldung |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:mpifgd:300667 |
| By: | Bosone, Costanza; Stamato, Giovanni |
| Abstract: | Rising trade tensions, a spate of trade-inhibiting policy measures and a weakening of multilateral institutions have sparked a growing concern about the potential implications of global trade fragmentation. Yet, empirical evidence that geopolitical considerations are already materially affecting trade flows is scant. In this study, we quantify the impact of geopolitical tensions on trade of manufacturing goods over the period 2012-2022 in a structural gravity framework. To capture the influence of geopolitical tensions, we use a measure of geopolitical distance based on UN General Assembly voting. The econometric analysis offers robust evidence that geopolitical distance has become a trade friction and its impact has steadily increased over time. Our results suggest that a 10% increase in geopolitical distance, like the observed increase in the US-China distance since 2018, is associated with a reduction in trade by about 2%. Our findings also highlight a differential and stronger impact on advanced economies and the emergence of friend-shoring. JEL Classification: F10, F13, F14, F15 |
| Keywords: | friend-shoring, geopolitics, structural gravity models, trade costs, trade fragmentation |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20242960 |
| By: | Beckert, Jens; Arndt, H. Lukas R. |
| Abstract: | Between 2009 and 2015 Greece underwent a profound sovereign debt crisis that led to a serious political crisis in Europe and the restructuring of Greek debt. We argue that the prevalence of negative narratives about the future contributed to the changes in spreads of Greek bonds during the crisis. We support our argument by presenting results from text mining a corpus of 9, 435 articles from the Financial Times and the Wall Street Journal. Based on sentiments and a machine learning model predicting future reference, we identify newspaper articles which generate negative and uncertain outlooks for the future in the expert discourse. We provide evidence from time series regression analysis showing that these negative imagined futures have explanatory power in models estimating spread development of Greek vs. German sovereign bonds. We suggest that these findings provide good evidence for the relevance of "imagined futures" for investors' behavior, and give directions for an innovative contribution of sociology to understanding the microfoundations of financial crises. |
| Abstract: | Zwischen 2009 und 2015 durchlebte Griechenland eine tiefgreifende Staatsschuldenkrise, die zu einer schweren politischen Krise in Europa und zur Umstrukturierung der griechischen Schulden führte. Wir argumentieren, dass die Prävalenz negativer Narrative über die Zukunft zu den Veränderungen der Spreads griechischer Anleihen während der Krise beigetragen hat. Zur Untermauerung dieser These präsentieren wir die Ergebnisse der Textanalyse eines Korpus von 9.435 Artikeln aus der Financial Times und dem Wall Street Journal. Auf der Grundlage von Sentiments und einem maschinellen Lernmodell zur Erkennung von Zukunftsvorhersagen identifizieren wir Zeitungsartikel, die negative und unsichere Zukunftsaussichten im Expertendiskurs erzeugen. Wir zeigen anhand von Zeitreihen-Regressionsanalysen, dass diese negativen Zukunftsvorstellungen Erklärungskraft in Modellen zur Schätzung der Spread-Entwicklung von griechischen gegenüber deutschen Staatsanleihen haben. Diese Ergebnisse liefern Evidenz für die Relevanz imaginierter Zukünfte für das Verhalten von Anlegern und ermöglichen einen innovativen Beitrag der Soziologie zum Verständnis der Mikroebene von Finanzkrisen. |
| Keywords: | bond spreads, economic sociology, financial markets, Greek debt crisis, imagined futures, sentiment analysis, sovereign debt, valuation, Anleihen-Spreads, Bewertung, Finanzmärkte, griechische Schuldenkrise, imaginierte Zukünfte, Staatsverschuldung, Sentimentanalyse, Wirtschaftssoziologie |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:mpifgd:300665 |
| By: | Bachmann, Rüdiger; Baqaee, David Rezza; Bayer, Christian; Kuhn, Moritz; Löschel, Andreas; Moll, Ben; Peichl, Andreas; Pittel, Karen; Schularick, Moritz |
| Abstract: | This paper discusses the economic effects of a potential cut-off of the German economy from Russian energy imports. We use a multi-sector open-economy model and a simplified approach based on an aggregate production function to estimate the effects of a shock to energy inputs. We show that the effects are likely to be substantial but manageable because of substitution of energy imports and reallocation along the production chain. In the short run, a stop of Russian energy imports would lead to an output loss relative to the baseline situation, without the energy cut-off, in the range 0.5% to 3% of GDP. |
| Keywords: | Wiley deal |
| JEL: | J1 |
| Date: | 2024–07–10 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:124094 |