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on European Economics |
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Issue of 2025–03–10
twenty-six papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Nuno Vilarinho Goncalves |
| Abstract: | This paper applies the Bernanke and Blanchard (2023) model to analyse the drivers of postpandemic inflation in Portugal, comparing the results with those for the euro area. The analysisreveals that transitory supply-side shocks, particularly related to energy and food prices, alongside global supply chain disruptions, were the primary drivers of inflation in Portugal until 2023. Labour market tightness emerged as a significant inflationary factor from 2023, contributing to persistent inflationary pressures through a stronger wage-to-price pass-through than in the euro area. Conditional projections suggest a slow decline in inflation, though remaining above 2% in the short-term, as labour market conditions continue to exert upward pressure on prices. These findings imply that the inflation dynamics in Portugal, while aligned with broader euro area trends, exhibit distinct labour market-driven inflation persistence. |
| JEL: | C5 E24 E31 E37 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ptu:wpaper:w202418 |
| By: | Eickmeier, Sandra; Petersen, Luba |
| Abstract: | As central banks, including the European Central Bank (ECB), adopt climaterelated responsibilities, gauging public support becomes essential. Drawing on a June 2023 Bundesbank household survey, we find that 69% of households report increased trust in the ECB due to its climate actions, valuing the institution's broader scope and concern. While 17% and 20% of households express concerns over risks to price stability or independence, 23% believe climate engagement reinforces the ECB's core objectives. An information intervention indicates minimal impact on household inflation expectations, suggesting a disconnect between institutional trust and inflation outlooks. An internal survey reveals that central bankers accurately gauge trust impacts but tend to overestimate effects on inflation expectations. Overall, our findings indicate broad public support for the ECB's climate initiatives. |
| Keywords: | Central bank trust, central bank credibility, inflation expectations, climate change, green policies, survey, central bank communication, uncertainty |
| JEL: | E7 E59 C93 D84 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:311842 |
| By: | Westermeier, Carola |
| Abstract: | The European Central Bank (ECB) has entered the preparation phase for the potential issuance of a digital euro. The digital euro under consideration represents a retail Central Bank Digital Currency (CBDC), a digital representation of central bank money that is intended for use by the general public. This article foregrounds the digital euro as an infrastructure that furthers European security ambitions. It argues that the development of the digital euro is a materialization of European (in)security rationales that aim to secure pan-European financial transactions amid growing geopolitical tensions. It focuses on the development of the technology and analyses how central bankers’ scenarios of the future manifest in the anticipated design and prototypes. While the provision of a financial infrastructure is the most decisive security-related implication of the digital euro, the introduction of a new form of public money is the decisive financial feature with potentially wide-ranging implications for banks. Although the ECB seeks to balance the interests of banks and other financial actors in the development of the digital euro, its plans are still met with criticism. Finally, the paper argues that the European Central Bank exerts itself more explicitly than before as geopolitical actors in its own regard. |
| Date: | 2024–03–21 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:x45eg_v1 |
| By: | Sara Riscado; Antonio F. Amores; Henrique Basso; Johannes Simeon Bischl; Paola De Agostini; Silvia De Poli; Emanuele Dicarlo; Maria Flevotomou; Maximilian Freier; Sofia Maier; Esteban Garcia-Miralles; Myroslav Pidkuyko; Mattia Ricci |
| Abstract: | Following the inflation surge in the aftermath of the pandemic crisis, governments adopted a large array of fiscal measures to cushion its impact on households and firms. In the euro area, discretionary fiscal measures are estimated to amount to around 2% of GDP, in both 2022 and 2023. In the analysis of the impact of inflation and related fiscal measures the distributional dimension is particularly relevant, since the sudden and strong increase in prices affected families differently depending on their position in the income distribution. Furthermore, the evaluation of the cost of fiscal measures and their targeting is fundamental to improve the efficiency and effectiveness of policy interventions. Using a microsimulation approach, this paper uncovers the aggregate and distributional impact of high consumer inflation, as well as the impact of the government measures aimed at supporting households and containing prices. This analysis is carried out for 2022 and includes Germany, France, Italy, Spain, Portugal and Greece, which together proxy for the euro area. Our work confirms that the purchasing power and welfare of lower-income households was more severely affected by the 2022 inflation surge than that of high-income households. Fiscal measures contributed significantly to closing the inflation gap, though with country differences. However, most fiscal measures were not particularly targeted to low-income households, implying a low cost-effectiveness in protecting the poorest in some countries. |
| JEL: | E31 D31 H12 H50 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ptu:wpaper:w202424 |
| By: | Khalil, Makram; Osten, David; Strobel, Felix |
| Abstract: | In recent years, major exporting economies experienced rising geopolitical risk. From the perspective of the US and the euro area, we employ detailed product data panels to study the consequences of trading-partner geopolitical risk shocks on bilateral imports. We find that these shocks lower import volumes and raise import prices. The decline in imports is stronger when the shocks hit countries that exhibit greater geopolitical distance to the US and the euro area, or when geopolitical risk shocks hit countries that are under US sanctions. Thus, increasing geopolitical risk triggers dynamics that are conducive to a fragmentation of global trade. A case in point are large effects for geopolitical risk shocks originating in China. We find that US and euro area imports from non-Chinese trading partners are also affected by such shocks, which also owes to US dollar and global oil price movements as well as trading-partner value chain linkages with China. |
| Keywords: | Geopolitical risk, imports, United States, euro area |
| JEL: | F14 F41 F61 F62 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:311836 |
| By: | Schmidt, Kirsten; Tonzer, Lena |
| Abstract: | We study whether the low interest rate environment paired with booming housing markets affected banks' foreign activities in terms of commercial and residential real estate backed lending. Using a unique dataset covering systemically relevant banks in the euro area over the period 2015-2022, we find that banks expand their foreign real estate backed lending in the presence of higher lending spreads. The result is especially present given a lack of or misalignment in macroprudential policies across home and destination country. Furthermore, we assess whether banks disclose potential losses conditional on higher lending spreads and borrowing country exposure. We find only better capitalized banks to show higher forbearance ratios. In line with search-for-yield motives, we find that during the COVID-19 crisis low capitalized banks experienced larger loan losses on real-estate backed loans in countries having offered higher rates. |
| Keywords: | International banking, real estate backed loans, macroprudential regulation, financial stability |
| JEL: | F21 F34 G10 G21 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:311839 |
| By: | Fiuratti, Federico Ivan; Nikolova, Desislava Enikova; Pennings, Steven Michael; Schiffbauer, Marc Tobias |
| Abstract: | The European Commission’s “NextGenerationEU” COVID-19 recovery package has underscored interest in the size of regional fiscal multipliers in Europe. While the objective of these funds is the long-term transformation toward more sustainable green growth and digitalization in EU economies, several recent papers have also focused on their short-term stimulatory effects and have estimated large short-term regional multipliers on historical EU structural and investment fund spending. This has contributed to a view that EU funds can boost growth substantially not only in the long term, but also in the short term in countries receiving large flows, particularly in Central and Eastern Europe. This paper reevaluates the evidence by estimating regional short-term multipliers using recent data on EU fund spending and a leave-one-out predicted disbursement schedule instrument. In contrast with much of the recent literature, there is little evidence of large relative GDP multipliers at either the national or subnational level in the short term. This is despite a strong response of regional investment to EU funds, which often increases euro for euro. The results suggest that expectations should be tempered on using EU structural and investment funds as a tool for short-term regional fiscal stimulus, and instead policy makers may want to focus on the long-term benefits of EU funds, in line with their original purpose. |
| Date: | 2024–01–09 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10658 |
| By: | Freeman, Rebecca; Garofalo, Marco; Longoni, Enrico; Manova, Kalina; Mari, Rebecca; Prayer, Thomas; Sampson, Thomas |
| Abstract: | How does dismantling deep integration affect international trade? This paper provides new evidence on the consequences of disintegration by estimating the impact of Brexit on goods trade by UK firms. The UK's exit from the EU's single market and customs union in January 2021 led to an immediate, sharp drop in both exports and imports with the EU for the average firm. In addition, many exporters and importers stopped trading with the EU entirely. However, heterogeneous firm-level responses to the implementation of trade barriers mitigated Brexit's impact on aggregate trade. The decline in exports was concentrated among smaller firms, but insignificant for the largest firms. Our estimates imply that, in the short run, leaving the EU reduced worldwide UK exports by 6.4% and worldwide imports by 3.1%. The fall in imports was driven by lower imports from the EU, which importers offset by sourcing more from the rest of the world. |
| Keywords: | deep integration; brexit; trade policy; firms |
| JEL: | F13 F14 F15 |
| Date: | 2024–12–18 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126762 |
| By: | Longaric, Pablo Anaya; Cera, Katharina; Georgiadis, Georgios; Kaufmann, Christoph |
| Abstract: | We document that compared to all other investor groups investment funds exhibit a distinctly procyclical behavior when financial-market beliefs about the probability of a euro-related, institutional rare disaster spike. In response to such euro disaster risk shocks, investment funds shed periphery but do not adjust core sovereign debt holdings. The periphery debt shed by investment funds is picked up by investors domiciled in the issuing country, namely banks in the short term and insurance corporations and households in the medium term. JEL Classification: F34, F45, G23 |
| Keywords: | euro disaster risk, investment funds, non-bank financial intermediation, sovereign debt markets |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253029 |
| By: | Peter Bednarek (Deutsche Bundesbank); Olga Briukhova (University of Zurich - Department of Banking and Finance; Swiss Finance Institute); Steven Ongena (University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)); Natalja von Westernhagen (Deutsche Bundesbank) |
| Abstract: | What is the impact of a sudden and sizeable increase in bank capital requirements on the lending activity by directly affected banks and by non-affected non-bank financial institutions (NBFIs)? To answer this question, we apply a difference-in-differences methodology around the capital exercise by the European Banking Authority (EBA) in 2011 with German credit register data. We find that insurance companies, financial enterprises, and factoring companies — but not leasing companies or very large NBFIs — and Non-EBA banks expand their corporate lending relative to EBA banks. In particular, NBFIs use the opportunity to expand their credit activities, in riskier and more competitive borrower segments. |
| Keywords: | non-bank financial intermediation, bank capital requirements, EBA capital exercise |
| JEL: | E50 G21 G23 G28 C33 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:chf:rpseri:rp2512 |
| By: | Sidenros, Jonathan |
| Abstract: | This study explores the European Union's role in Europe's housing crisis. While much attention has been given to the EU's impact on other welfare state sectors, housing remains underexplored. Using Aalbers' theory of housing financialisation and Scharpf's theory of positive and negative EU integration, this study examines four modes of housing financialisation: mortgage debt, mortgage securitization, financialisation of rental housing, and financialisation of social housing companies. The findings suggest that the EU has contributed to housing commodification through channels such as mortgage market liberalisation, fiscal regulations, monetary policy, capital mobility, and competition law. A hierarchical struggle emerges between the single market and local housing administration, with EU law dominating this relationship through negative integration, since the elimination of market barriers, whether between or within member states, is at the essence of the single market project. This stands in contrast to the EU's commitments to housing as a human right. By highlighting housing as the primary surplus absorber of capitalism, and by integrating Aalbers theory of housing financialisation with Scharpf's theory of EU integration, this study underscores the essential role of housing in the broader EU integration process, i.e. housing commodification is shown to be both a driver and product of the EU's political economy. On a positive note, a theoretical argument can be made of the potential of EU housing to escape the determinism inherent to the negative integration perspective. Housing right obligations in EU treaties do exist, which offer the possibility for housing integration based on social commitments rather than market forces. |
| Keywords: | Financialisation of housing, economic geography, EU integration, welfare state transformation, commodification, decommodification |
| JEL: | P1 P16 R1 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ipewps:312409 |
| By: | Metiu, Norbert |
| Abstract: | This paper describes the Bundesbank's weekly financial stress indicator for Germany. The indicator condenses several financial market variables into a summary measure of financial stress. It represents a contemporaneous, market-based indicator that captures the materialisation of systemic risk along three different risk dimensions - credit, liquidity and market risk. Judged by this measure, the German financial system has experienced its most severe financial stress period since 2002 during the 2008 global financial crisis, with highly elevated levels in all three dimensions of financial stress. The indicator also points to historically high stress levels during the euro area sovereign debt crisis in the early 2010s. Recent readings of the indicator, by contrast, indicate historically low levels of financial stress. |
| Keywords: | diffusion index, factor model, financial conditions, financial stability |
| JEL: | E44 E51 G12 G17 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubtps:312405 |
| By: | Calligaris, Sara; Chaves, Miguel; Criscuolo, Chiara; De Lyon, Joshua; Greppi, Andrea; Pallanch, Oliviero |
| Abstract: | Concentration - the share of an industry's output accounted for by its largest firms and a frequently used proxy of competition - has increased in European countries. This paper provides evidence about this development by introducing several methodological refinements in the cross-country measurement of concentration: it defines industries at a disaggregated level, mostly 3-digit; it takes into account the geographic level at which competition takes place - domestic, European or global; and it accounts for linkages between firms within the same domestic and multinational business group in the relevant geographic region of competition. It then applies these improvements to representative data for fifteen European countries, showing that average concentration increased by about 5 percentage points over the period 2000-2019, from 26% to more than 31%. Third, the paper investigates how each of the methodological improvements affects the levels and trends of concentration. |
| Keywords: | concentration; competition; market power |
| JEL: | L11 L22 F14 |
| Date: | 2024–12–13 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126768 |
| By: | Lnenicka, Martin; Nikiforova, Anastasija; Luterek, Mariusz; Milic, Petar; Rudmark, Daniel; Neumaier, Sebastian; Santoro, Caterina; Flores, Cesar Casiano; Janssen, Marijn; Rodríguez Bolívar, Manuel Pedro (University of Granada) |
| Abstract: | Open government and open (government) data are seen as tools to create new opportunities, eliminate or at least reduce information inequalities and improve public services. More than a decade of these efforts has provided much experience, practices, and perspectives to learn how to better deal with them. This paper focuses on benchmarking of open data initiatives over the years and attempts to identify patterns observed among European countries that could lead to disparities in the development, growth, and sustainability of open data ecosystems. To do this, we studied benchmarks and indices published over the last years (57 editions of 8 artifacts) and conducted a comparative case study of eight European countries, identifying patterns among them considering different potentially relevant contexts such as e-government, open government data, open data indices and rankings, and others relevant for the country under consideration. Using a Delphi method, we reached a consensus within a panel of experts and validated a final list of 94 patterns, including their frequency of occurrence among studied countries and their effects on the respective countries. Finally, we took a closer look at the developments in identified contexts over the years and defined 21 recommendations for more resilient and sustainable open government data initiatives and ecosystems and future steps in this area. |
| Date: | 2023–12–01 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:v7msn_v1 |
| By: | Ana M. de Almeida; Graeme Walsh; Horatiu Lovin; Marek Benda; Wilko Bolt |
| Abstract: | This article provides an overview of recent developments in the EU-UK foreign direct investment (FDI) relationships since Brexit. We begin with a conjunctural analysis that looks at recent trends in EU-UK FDI at a broad level, which includes detail at the sectoral and geographical level. Also included in the conjunctural analysis is a breakdown of foreign affiliates and an investigation of new FDI projects and jobs in the UK. We then look at recent developments in the financial sector, in terms of the real economy, FDI flows, banks, insurance companies, pension funds, and its evolving status as a leading global financial centre. The final part of the article turns to non-conjunctural analysis and provides an econometric investigation into the potential impact of Brexit in EU-UK FDI using a gravity-modelling approach. The formal analysis is a non-trivial exercise because the Brexit period overlaps with other significant events, such as the COVID-19 pandemic. Compared to a no-Brexit scenario, we find that Brexit contributed to a decline in EU FDI flows between the EU and the UK of around 4 per cent. Furthermore, business relocations involving temporary capital flows among important European financial centers marked the significant challenge the UK exit from the EU brought to the financial sector. |
| JEL: | F21 F36 C54 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ptu:wpaper:o202403 |
| By: | Rebecca Freeman; Marco Garofalo; Enrico Longoni; Kalina Manova; Rebecca Mari; Thomas Prayer; Thomas Sampson |
| Abstract: | The UK left the EU's single market and customs union at the start of 2021, entering into the Trade and Cooperation Agreement with the EU. Rebecca Freeman, Marco Garofalo, Enrico Longoni, Kalina Manova, Rebecca Mari, Thomas Prayer and Thomas Sampson find that it is smaller UK firms that have been hit hardest, with a significant drop in their exports to the EU. |
| Keywords: | UK Economy: Brexit, Trade |
| Date: | 2025–02–20 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepcnp:701 |
| By: | Holubová, Barbora |
| Abstract: | The DEFEN-CE project's Defence Database safeguards vulnerable groups in post-COVID-19 European labour markets. The research teams analysed data from EU-27 Member States, Turkey, and Serbia, including indicators covering policy, target groups, and social partners' involvement. The analysis includes 853 policies. |
| Date: | 2024–01–08 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:43msb_v1 |
| By: | Jaccard, Ivan; Kockerols, Thore; Schüler, Yves |
| Abstract: | Does it pay to invest in green companies? In countries where a market for carbon is functioning, such as those within the European Union, our findings suggest that it should be beneficial. Using a sample of green and brown European firms, we initially demonstrate that green companies have outperformed brown ones in recent times. Subsequently, we develop a production economy model in which brown firms acquire permits to emit carbon into the atmosphere. We find that the presence of a well-functioning carbon market could account for the green equity premium observed in our data. Incorporating a preference for green financial assets is also unlikely to overturn our results. JEL Classification: E32, Q51, G18 |
| Keywords: | asset pricing, composite habits, equity premium, general equilibrium, monopolistic competition |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253030 |
| By: | Burilkov, Alexandr; Wolff, Guntram B. |
| Abstract: | We provide initial estimates of the additional weapons and troops Europe will need to defend itself, assuming an effective US withdrawal from Europe. Russia's military production has ramped up: In 2024, Russia produced and refurbished an estimated 1, 550 tanks, 5, 700 armoured vehicles and 450 artillery pieces of all types. If the US withdraws from supporting Ukraine, the EU would have to spend only another 0.12 percent of its GDP to replace the US military contributions - a feasible amount. A US-Russian deal on Ukraine, resulting in a continued Russian military build-up would require an increase in European capacities equivalent to the fighting capacity of 300, 000 US troops, with a focus on mechanised and armoured forces to replace US army heavy units. European defence spending will have to increase substantially from the current level of about 2 percent of GDP. An initial assessment suggests an increase by about €250 billion annually (or around 3.5 percent of GDP) is warranted in the short term. |
| Abstract: | Wir liefern erste Schätzungen über die zusätzlichen Waffen und Truppen, die Europa zur Selbstverteidigung benötigen würde, falls sich die USA aus Europa zurückziehen. Die russische Militärproduktion wurde hochgefahren: Es wurden schätzungsweise 1.550 Panzer, 5.700 gepanzerte Fahrzeuge und 450 Artilleriegeschütze produziert oder instand gesetzt. Falls die USA ihre militärische Unterstützung für die Ukraine einstellen, müsste die EU lediglich zusätzliche 0, 12 Prozent ihres BIP aufwenden, um die Lücke auszugleichen - ein machbarer Betrag. Ein amerikanisch-russisches Abkommen über die Ukraine, das zu einer weiteren Aufrüstung Russlands führen würde, würde eine Aufstockung der europäischen Kapazitäten um die Kampfstärke von 300.000 US-Soldaten erfordern. Die europäischen Verteidigungsausgaben müssten erheblich über das derzeitige Niveau von etwa 2 Prozent des BIP hinaus steigen. Erste Schätzungen legen nahe, dass kurzfristig eine Erhöhung um etwa 250 Milliarden Euro jährlich (oder etwa 3, 5 Prozent des BIP) erforderlich ist. |
| Keywords: | USA, Europe, Germany, Ukraine, Defense, Security policy, USA, Europa, Deutschland, Ukraine, Verteidigung, Sicherheitspolitik |
| JEL: | H56 F51 F52 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkpb:312398 |
| By: | Burilkov, Alexandr; Wolff, Guntram B. |
| Abstract: | Wir liefern erste Schätzungen über die zusätzlichen Waffen und Truppen, die Europa zur Selbstverteidigung benötigen würde, falls sich die USA aus Europa zurückziehen. Die russische Militärproduktion wurde hochgefahren: Es wurden schätzungsweise 1.550 Panzer, 5.700 gepanzerte Fahrzeuge und 450 Artilleriegeschütze produziert oder instand gesetzt. Falls die USA ihre militärische Unterstützung für die Ukraine einstellen, müsste die EU lediglich zusätzliche 0, 12 Prozent ihres BIP aufwenden, um die Lücke auszugleichen - ein machbarer Betrag. Ein amerikanisch-russisches Abkommen über die Ukraine, das zu einer weiteren Aufrüstung Russlands führen würde, würde eine Aufstockung der europäischen Kapazitäten um die Kampfstärke von 300.000 US-Soldaten erfordern. Die europäischen Verteidigungsausgaben müssten erheblich über das derzeitige Niveau von etwa 2 Prozent des BIP hinaus steigen. Erste Schätzungen legen nahe, dass kurzfristig eine Erhöhung um etwa 250 Milliarden Euro jährlich (oder etwa 3, 5 Prozent des BIP) erforderlich ist. |
| Abstract: | We provide initial estimates of the additional weapons and troops Europe will need to defend itself, assuming an effective US withdrawal from Europe. Russia's military production has ramped up: In 2024, Russia produced and refurbished an estimated 1, 550 tanks, 5, 700 armoured vehicles and 450 artillery pieces of all types. If the US withdraws from supporting Ukraine, the EU would have to spend only another 0.12 percent of its GDP to replace the US military contributions - a feasible amount. A US-Russian deal on Ukraine, resulting in a continued Russian military build-up would require an increase in European capacities equivalent to the fighting capacity of 300, 000 US troops, with a focus on mechanised and armoured forces to replace US army heavy units. European defence spending will have to increase substantially from the current level of about 2 percent of GDP. An initial assessment suggests an increase by about €250 billion annually (or around 3.5 percent of GDP) is warranted in the short term. |
| Keywords: | USA, Europa, Deutschland, Ukraine, Verteidigung, Sicherheitspolitik, USA, Europe, Germany, Ukraine, Defense, Security policy |
| JEL: | H56 F51 F52 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkpb:312397 |
| By: | Cusolito, Ana Paula; Fattal Jaef, Roberto N.; Mare, Davide Salvatore; Singh, Akshat Vikram |
| Abstract: | This paper leverages the novel methodology by Whited and Zhao (2021) to identify financial distortions and applies it to a sample of 24 European countries. The analyses reveal that less developed economies face more severe financial misallocation. Distortions in the allocation of financial resources raise the relative cost of finance for younger, smaller, and more productive firms. Counterfactual analysis indicates that alleviating financial distortions could boost aggregate productivity by approximately 30-70 percent. On average, 75 percent of these gains across countries result from better access to finance, with the remainder from optimizing the debt-to-equity ratio. The paper also quantifies the link between financial misallocation and real-input allocative inefficiency, showing that reducing financial misallocation from the median to the 25th percentile of the cross-industry distribution can increase aggregate productivity by an average of 5.2 percent. The effect is larger, at 6.4 percent, for industries heavily reliant on external finance. |
| Date: | 2024–06–20 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10811 |
| By: | Müller, Henrik; Blagov, Boris; Schmidt, Torsten; Rieger, Jonas; Jentsch, Carsten |
| Abstract: | We present an Uncertainty Perception Indicator (UPI) for Germany based on the dynamic topic modelling technique RollingLDA. In contrast to conventional LDA, where all data is processed in one go, the recursive structure of RollingLDA ensures that data is made available for modeling as soon as it is actually published, which prevents information leakage. Employing this approach facilitates the close-to-realtime identification of both the magnitude of an uncertainty shock as well as its specific characteristics. Thereby, more precise predictions about the likely impact are possible, as different sources of uncertainty have different repercussions in the macroeconomy. Employing a Bayesian VAR approach, we analyze the effects of various uncertainty shocks on fixed investment and other macroeconomic variables. Our results document the asymmetric nature of uncertainty shocks, as their consequences are highly dependent on the respective sources of uncertainty. We find that international shocks only have weak effects on the German macroeconomy, while domestic policy shocks prove to be highly significant. Uncertainty hurts most when it originates close to home. These results markedly differ from earlier studies that, in the case of Germany, tend to maintain the opposite. Interestingly, the results for the entire UPI (the sum of all individual UPI time-series) are broadly insignificant. In contrast, some single uncertainty topics show quite strong effects. We attribute this to information losses that occur when the entirety of uncertainty-related reporting is employed. Different UPI topics tend to offset one other. The RollingLDA technique helps disentangling the information hidden in the analysis corpus. |
| Keywords: | Uncertainty, topic modeling, business cycle, fixed investment, geoeconomics |
| JEL: | C32 C82 D80 E20 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:rwirep:312430 |
| By: | Aris A. Avgousti (Central Bank of Cyprus) |
| Abstract: | This paper presents updated estimates of short-run elasticities for the fiscal variables that depend upon the economic cycle for Cyprus. First, we construct a ‘policy-neutral’ time-series dataset, adjusting fiscal data for the estimated or assumed impact of discretionary policy measures. Then, for each fiscal variable, we estimate various specifcations using different macro bases and control variables (year dummies, structural breaks, or tax reforms), applying two econometric models (first differences and error correction model) to annual data for the period 1995-2023. In addition, we employ rolling-window regressions to detect possible trends in the fiscal-to-base elasticities. For each fiscal variable, we select the specifcations that satisfy the pre-specifed model-selection criteria and identify the most suitable specification. Based on the estimation results, we propose the use of updated fiscal elasticities for our forecasts. The proposed changes to the fiscal elasticities involve adjustments to the macro bases for three main revenue categories – personal income tax, social security contributions, and value added tax – but most importantly, they generally suggest the use of higher elasticities compared to those previously applied, particularly for revenue from direct taxes (personal and corporate income taxes). The impact of these changes on the June 2024 fiscal projections of the CBC is signifcant. All else equal (i.e. without any changes in judgment), public revenue would rise by 0.1 percent of GDP in 2024, 0.3 percent of GDP in 2025 and 0.7 percent of GDP in 2026. The largest impact would stem from the changes in the elasticities of personal and corporate income taxes, with average annual impacts of 0.12 percent of GDP and 0.10 percent of GDP, respectively. The updated estimates of fiscal elasticities could improve the accuracy of our fiscal projections and provide a clearer understanding of the factors driving government revenue and unemployment-related expenses. |
| Keywords: | Fiscal elasticities, Public revenue, Fiscal Projections, Public fnances |
| JEL: | H68 H30 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:cyb:wpaper:2025-1 |
| By: | Pia Andres |
| Abstract: | Should policymakers protect European firms by restricting imports of solar technology from China? Pia Andres finds that Chinese competition has resulted in many European firms going out of business, but it has also prompted more intense innovative activity among some of those that have survived. |
| Keywords: | Green Growth, Economic geography, Globalisation, Technological change |
| Date: | 2025–02–20 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepcnp:694 |
| By: | Burgold, Peter; Ernst, Anne; Hinterlang, Natascha; Jäger, Marius; Stähler, Nikolai |
| Abstract: | In this paper, we compare the economic and welfare implications of two carbon pricing policies, namely the European Cap and Trade (CaT) regime and the Chinese Tradeable Performance Standard (TPS). The former sets an economy-wide emissions target and forces firms to purchase sufficient certificates. The latter sets an emissions intensity and requires firms with a higher intensity to either abate or buy emissions allowances from firms with lower-than-target intensities. It can be shown that TPS is equivalent to CaT when carbon pricing revenues are redistributed to firms according to output. In a dynamic multi-sector general equilibrium TANK model, we show that TPS outperforms a CaT regime that redistributes carbon revenues to households in a lump-sum manner, both, in terms of output gains and welfare due to lower costs on the production side. However, CaT with labor tax reduction increases welfare most because it alleviates distortions on the production side and improves the income situation of all households. |
| Keywords: | Carbon Pricing, Cap and Trade, Tradable Performance Standard, Dynamic General Equilibrium Model, Sectoral Heterogeneity, Input-Output Matrix |
| JEL: | E32 E62 H23 H32 Q58 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:311837 |
| By: | Kahancová, Marta |
| Abstract: | The COVID-19 pandemic has generated unprecedented health and far-reaching life consequences, triggering a global social and economic crisis through its protective measures aimed at safeguarding lives. This crisis compels social scientists and researchers to scrutinize the deficiencies in social and economic readiness and responses to the pandemic. The DEFEN-CE project, supported by the European Commission, delves into institutional strategies and power dynamics in social protection, policy formulation, and implementation. It sought to safeguard labour markets and workers by examining the governance of vulnerable groups in the (post) COVID-19 labor markets. Moreover, it aimed to generate research-based knowledge at EU and national levels, including candidate countries, on the role of social partners in creating and implementing protective policies vis-à-vis vulnerable groups. This report spotlights all key project findings both at the EU-level and the national level in 12 countries, embedding them to a conceptual understanding of vulnerability in general and labour-market related vulnerability in particular. |
| Date: | 2024–01–08 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:v45ty_v1 |