|
on European Economics |
|
Issue of 2025–04–14
thirty papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | António Afonso; Catarina Farinha Miranda |
| Abstract: | Through fiscal reaction functions, we investigate fiscal sustainability for five European country-group panels and check for a change in fiscal behaviour after countries adopted the euro as their currency. Using annual data for the period between 1990 and 2021, we identify evidence of average compliance with sustainability restrictions among Eurozone nations. However, for the Eurozone countries there is a smaller response, 0.046 percentage points (pp), to an increase in the debt ratio than in the case of the European economies without euro, where the response is around 0.1036 pp. Conversely, the euro membership has decreased the average responsiveness of primary balances to debt shocks as compared to the period before the implementation of the euro. |
| Keywords: | Fiscal Sustainability, Debt, Primary Budget Balance, Fiscal Reaction Functions, Euro Area. |
| JEL: | E62 H62 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:ise:remwps:wp03712025 |
| By: | Evrard, Johanne; Parisi, Laura; Rouveyrol, Clément; van Overbeek, Fons; Arampatzi, Alexia-Styliani; Christie, Rebecca |
| Abstract: | The European Union requires a single market for capital. Well-developed and integrated capital markets support economic growth and resilience across the region, offering benefits for businesses, households, and financial stability. This paper examines the importance of CMU in achieving five strategic objectives: supporting innovation and productivity, financing the twin transition, shoring up pension savings, strengthening alternatives to bank financing, and fostering convergence and inclusion. It highlights the progress made over the past decade, the challenges encountered, and the renewed impetus behind the CMU initiative. The paper proposes concrete steps to move forward, building on long-standing priorities supported by the ECB and the current policy debate on CMU. First, it suggests facilitating access to capital markets, via the creation of a new standard for a European savings and investment product. Second, it emphasises the importance of expanding capital markets across-borders which would be facilitated by improvements towards a more integrated supervisory ecosystem, an integrated trading and post-trading landscape leveraging on the potential benefits of digitalisation, and a more active securitisation market that does not compromise on financial stability. Third, the paper highlights the need to channel capital towards innovative and competitive firms by increasing opportunities for equity and venture capital financing. These actions should be complemented by longer-term initiatives, including continuing to address barriers stemming from the lack of harmonisation in insolvency, corporate and taxation regimes, designing a safe asset for Europe, completing the Banking Union, and promoting financial literacy and inclusion. JEL Classification: E61, F36, G18, G24, G51, O16 |
| Keywords: | capital markets union, convergence, financial integration, innovation financing, savings |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbops:2025369 |
| By: | Filip, Marinela-Daniela; Setzer, Ralph |
| Abstract: | This paper investigates the impact of regional institutional quality on economic growth and economic resilience. Using data collected by the Quality of Government Institute, we conduct a two-way fixed effect panel regression model for around 200 European regions during the period 2010 to 2021. Our findings establish a positive relationship between institutional quality and medium-term GDP growth. This effect is more pronounced in regions with low-income per capita, highlighting the importance of asymmetries across European regions. A convergence of regions with low institutional quality to the EU median would increase annual GDP per capita growth by 0.5 percentage points over the medium-term. Additionally, regions with high quality institutions are more resilient to adverse shocks and have a lower incidence of crisis. Our results suggest that regional institutional reforms, such as increasing public sector efficiency or reducing corruption, would spur growth, resilience, and convergence in the European economy. JEL Classification: O43, E02, R11, R50, C23 |
| Keywords: | economic growth, EU, reforms, regional institutional quality, resilience |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253045 |
| By: | Christian Bayer (University of Bonn, CEPR, CESifo & IZA); Alexander Kriwoluzky (Freie Universität Berlin & DIW Berlin); Gernot J. Müller (University of Tübingen, CEPR & CESifo); Fabian Seyrich (Frankfurt School of Finance & Management & DIW Berlin) |
| Abstract: | The distributional and disruptive effects of energy supply shocks are potentially large. We study the effectiveness of alternative fiscal responses in a two-country HANK model calibrated to the euro area. Subsidies can stabilize the domestic economy, but they are fiscally costly and generate negative spillovers to the rest of the monetary union: What the subsidizing country gains, other countries lose. Transfers based on historical gas consumption in the form of a Slutsky compensation are less effective domestically than subsidies, but do not harm economic activity abroad. Moreover, transfers increase domestic welfare, while subsidies decrease it. |
| Keywords: | Energy Crisis, Subsidies, Transfers, HANK2, Monetary Union, International Spillovers, Heterogeneity, Inequality, Households |
| JEL: | D31 E64 F45 Q41 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:361 |
| By: | Bokan, Nikola; Lenza, Michele; Araujo, Douglas; Comazzi, Fabio Alberto |
| Abstract: | Word embeddings are vectors of real numbers associated with words, designed to capture semantic and syntactic similarity between the words in a corpus of text. We estimate the word embeddings of the European Central Bank’s introductory statements at monetary policy press conferences by using a simple natural language processing model (Word2Vec), only based on the information and model parameters available as of each press conference. We show that a measure based on such embeddings contributes to improve core inflation forecasts multiple quarters ahead. Other common textual analysis techniques, such as dictionary-based metrics or sentiment metrics do not obtain the same results. The information contained in the embeddings remains valuable for out-of-sample forecasting even after controlling for the central bank inflation forecasts, which are an important input for the introductory statements. JEL Classification: E31, E37, E58 |
| Keywords: | central bank texts, embeddings, forecasting, inflation |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253047 |
| By: | Antonia Lopez Villavicencio; Hugo Oriola |
| Abstract: | This paper investigates Political Business Cycles during national elections across European Union countries and their subnational regions from 1995 to 2022, with a focus on the role of national and supranational fiscal rules. We find robust evidence that national elections are associated with increased regional public spending and reduced income and wealth tax rates. While strong fiscal rules tend to constrain or have limited effect on spending-related PBCs, they simultaneously incentivize tax-based fiscal manipulation, indicating a shift in electoral strategies from expenditure to taxation. This pattern holds across most European countries at both national and regional levels, with variations depending on specific electoral and political systems. We also show that right-wing incumbents engage in both public spending and tax-based opportunistic PBCs, while left-wing incumbents primarily focus on tax-based manipulations. Furthermore, newly elected left-wing incumbents pursue fiscal conservatism, whereas right-wing incumbents typically maintain the fiscal status quo. |
| Keywords: | Elections; Fiscal rules; Political business cycle; National and regional politics; European Union. |
| JEL: | D72 E62 H30 H71 H72 O52 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:drm:wpaper:2025-15 |
| By: | Álvaro Fernández-Gallardo (BANCO DE ESPAÑA); Simon Lloyd (BANCO DE ESPAÑA); Ed Manuel (BANCO DE ESPAÑA) |
| Abstract: | We estimate the causal effects of macroprudential policies on the entire distribution of GDP growth for advanced European economies using a narrative-identification strategy in a quantile-regression framework. While macroprudential policy has near-zero effects on the centre of the GDP-growth distribution, tighter policy brings benefits by reducing the variance of future growth, significantly boosting the left tail while simultaneously reducing the right. Assessing a range of channels through which these effects materialise, we find that macroprudential policy particularly operates through ‘credit-at-risk’: it reduces the right tail of future credit growth, dampening booms, in turn reducing the likelihood of extreme GDP-growth outturns. |
| Keywords: | growth-at-risk, macroprudential policy, narrative identification, quantile local projections. |
| JEL: | E32 E58 G28 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2519 |
| By: | Behn, Markus; Claessens, Stijn; Gambacorta, Leonardo; Reghezza, Alessio |
| Abstract: | We investigate the interaction between monetary and macroprudential policy in affecting banks’ lending and risk-taking behaviour using rich euro area credit registry data and exploiting a unique setting that combined a sharp and unexpected monetary tightening with a wave of macroprudential tightening initiated before. While, for the average bank, required capital buffer increases did not significantly reduce lending additionally during the monetary tightening, for those banks that became capital-constrained lending fell by about 1.3-1.8 percentage points more for existing credit relationships and new bank-firm relationships were 2.5-4.4 percentage points less likely to be established, both relative to better-capitalized banks. In addition, such banks were more reluctant to pass higher policy interest rates on to their borrowers and took fewer risks, with a greater reduction in the LTV ratio for newly originated loans, and less reliance on risky assets, such as commercial real estate, as collateral. Our analysis shows that when calibrating monetary and macroprudential policies, it is crucial to account for the effects of policy interactions and the role of bank heterogeneity. JEL Classification: E5, E51, G18, G21 |
| Keywords: | bank lending, macroprudential policy, monetary policy, risk-taking |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253043 |
| By: | Arjona, Román (European Commission, Directorate-General for Internal Market, Industry, Entrepreneurship and SME; Avenue d'Auderghem 45, 1040 Brussels, Belgium); Connell, William (European Commission, Directorate-General for Internal Market, Industry, Entrepreneurship and SME; Avenue d'Auderghem 45, 1040 Brussels, Belgium); Herghelegiu, Cristina (European Commission, Directorate-General for Internal Market, Industry, Entrepreneurship and SME; Avenue d'Auderghem 45, 1040 Brussels, Belgium) |
| Abstract: | This paper investigates how the import relations of the European Union (EU) have recently shifted in an increasingly fragmented global trade environment. Using trade data at a highly disaggregated product level, we analyse the reallocation of EU import flows, examining its implications in terms of changes in import diversification levels and price dynamics |
| Keywords: | European Union, trade fragmentation, supply chain reorganisation, resilience, dependencies, raw materials, semiconductors, net-zero technologies |
| JEL: | L52 L60 F14 F15 F61 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:bda:wpsmep:wp2024/28 |
| By: | Tom Massart |
| Abstract: | The Covid-19 pandemic triggered unexpected changes within European socio-economic governance, contrasting with the European Union’s (EU) approach during the financial crisis. Instead of strengthening fiscal rules and implementing austerity policies, member states agreed to create a Recovery Plan based on common debt. Joint borrowing within the framework of EU institutions is not new and mostly occurred before the creation of the Economic and Monetary Union (EMU). Since the creation of the European Economic Community in 1957, European institutions have issued common bonds at various times, particularly to help countries with a deteriorating balance of payments. Nevertheless, after the establishment of EMU in the Nineties, no permanent mechanism for mitigating economic shocks was established among member states for fear of moral hazard as well as burden-sharing concerns. A Eurozone budget and common bond issuance were discarded in favour of economic coordination based on a set of rules, known as the Stability and Growth Pact (SGP). At the height of the financial crisis (2010-2013), political leaders refused to create a common debt under the EU umbrella to stabilise countries in difficulty. Yet, in 2020, the Covid-19 pandemic brought about an unexpected shift: the issuance of European and Green Bonds under the NextGenerationEU (NGEU) program, aimed at stabilising the economy while supporting digital and green transitions. The agreement to jointly issue bonds marks a temporary departure from the longstanding refusal to establish common debt. This doctoral dissertation focuses on the emergence of the unexpected by investigating the political conditions that led to the NextGenerationEU agreement and the breaking the EU bond taboo. Existing research examines the creation of the NGEU agreement from four analytical perspectives: first, through a naturalist lens, which focuses on the diagnosis of the crisis as an endogenous disaster; second, from supranationalist and intergovernmentalist views, analysing the roles of political actors involved in the Recovery Plan’s design and implementation; third, through historical institutionalism, which explores the temporal processes and institutional shifts leading to NGEU; and finally, from a constructivist perspective, emphasising the ideas mobilised by actors that shaped the Recovery Agreement. While each explanation contributes to the understanding of the return of common debt at the EU level, they are limited by an overemphasis on specific variables, challenges in operationalising theoretical assertions, or deterministic tendencies. Furthermore, a piece of the puzzle is still missing in the literature. How can we explain the fact that common debt issuance, which had occurred in the past, became a taboo that was ultimately broken during the pandemic? In particular, no research provided a convincing analysis of how ideas were strategically reconfigured in a process leading to the emergence of common debt whereas other instruments could have been chosen instead. The answer presented in this doctoral dissertation is grounded in strategic constructivism, providing insights into the political strategies employed by institutional and governmental actors to build consensus amid diverging—and at times opposing—interests and policy preferences. Strategic constructivism allows to analyse the politics of European bonds, where ideas are mobilised strategically and contingently by national and EU actors. In this research, strategic constructivist insights are adapted to include contingency and discourse, away from rationalist assumptions. Concretely, political actors express, legitimise and reconfigure their ideas through discourse contingently. These ideas shape their view about their interests and political preferences. Understanding the political strategy of EU leaders offers a way to grasp how they strategically conceive a phenomenon or a policy in accordance with their interests and policy preferences. In the case of European bonds, the different understandings (polysemy) of the concept enabled EU leaders to forge a consensus, even if they attributed different meanings to common debt because of their divergent interests. Specifically, this doctoral thesis analyses EU leaders’ discourse to make sense of European bonds politics. Through a frame analysis complemented by a study of metaphors, I show that the various understandings of EU bonds evolved during the last decade (2010-2021), following actor’s contingent reconfiguration of their interests and preferences. The country cases selected for this research are the Spanish and Dutch governments, representing opposing interests and preferences along the creditor-debtor cleavage. This focus complements existing research on the influential role of the Franco-German tandem in shaping the Recovery Plan. Additionally, two institutional actors were chosen as case studies: the President of the European Council (EUCO), who formally serves as a consensus-builder, and the Commission’s political leadership, central to European socio-economic governance.Overall, the Spanish and Dutch governments alongside the Commission acted as discursive entrepreneurs during the decade, by forging a consensus on EU bonds close to their respective interests through discourse. Over the decade, the EUCO President aligned at different times with the interests of either low-indebted or high-indebted member states. The reason lies in the fact that the three EUCO Presidents interpreted their mandate differently, viewing themselves either as ‘political’ or ‘diplomatic chairmen’. The Commission’s main interest during the decade was related to the avoidance of policy failure. The institution's discourse demonstrated a desire to legitimise and defend its common debt proposals. For example, the institution tried to reconfigure the meaning of common debt away from fiscal integration. The Commission also attempted to depoliticise EU bond issuance and frame EU bonds as providing financial resources in the form of investment. The Spanish government initially conceived common debt as a tool to accommodate low-indebted countries' interests, while providing southern countries financial support and a deepening of fiscal integration. The Spanish government tried to reshape the prevailing view of the common debt burden by highlighting the contributions of southern debtor countries as well as the collective responsibility of the EU. This reframing was a core part of Spain’s political strategy to foster consensus among member states, alongside an attempt to put pressure on low-indebted member states. The Dutch government acted as a discursive entrepreneur by first opposing joint borrowing and then reluctantly agreeing to it. The Dutch U-turn was part of a political strategy that attempted to tie the financial resources coming from the Recovery Plan with an obligation for countries to implement structural reforms. Following a stable interest in fiscal discipline, the government was able to shift the burden of EU obligations onto highly indebted countries by forcing them to implement long-term reforms in exchange for EU funding. This doctoral thesis extends existing knowledge on the breaking of the common debt taboo, by analysing the political strategy of the opposing countries and institutional actors. This research considers political actors as ‘beings in action’ whose interests and preferences are not a ‘given’ but are relentlessly reconfigured, and so is their political strategy. Strategic constructivism provides a way to bridge the gap between the study of ideas, institutions and actors. In this perspective, further research is needed to shed light on the political strategy of France and Germany and to what extent NGEU’s debt was the result of discursive entrepreneurship from these countries. The mechanisms shaping EUCO Presidents’ view and political strategy also need to be further investigated. In addition, a study of interests and preferences within the European Commission would be interesting to understand the establishment of the institution's political strategy. Finally, this research provides a macro-level forward-looking analysis of the vision regarding public debt and power and the way it feeds into actors’ political strategy. A disconnection exists between the vision of sovereign debt and European bonds, which requires more in-depth knowledge. From this perspective, the NGEU agreement could mark the emergence of a new ‘ontological’ vision, particularly about joint borrowing, considered as a means of protecting the ‘European way of life’. |
| Keywords: | European Bonds; Strategic Constructivism; Discourse Analysis; Covid-19 Pandemic; Recovery Plan |
| Date: | 2025–02–17 |
| URL: | https://d.repec.org/n?u=RePEc:ulb:ulbeco:2013/388153 |
| By: | Alessandro Borin (Bank of Italy); Peonare Caka (Bank of Slovenia); Gianmarco Cariola (Bank of Italy); Dennis Essers (National Bank of Belgium); Elena Gentili (Bank of Italy); Laura Lebastard (Bank of Italy); Andrea Linarello (Bank of Italy); Michele Mancini (Bank of Italy); Tullia Padellini (Bank of Italy); Ludovic Panon (Bank of Italy); Francisco Requena (University of Valencia); Jacopo Timini (Bank of Spain) |
| Abstract: | We study how disruptions to the supply of foreign critical inputs (FCIs) —defined as vulnerable inputs and key inputs for the digital and green transition —may affect value-added at different levels of aggregation. Using firmlevel customs and balance sheet data for Belgium, France, Italy, Slovenia and Spain, our framework allows us to assess how geoeconomic fragmentation may affect European economies differently. Our baseline calibration suggests that a 50% reduction in imports of FCIs from China and other countries with a similar geopolitical orientation would result in sizable losses with significant heterogeneity across firms, sectors, regions, and countries, driven by the heterogeneous exposure of firms. Our findings highlight that the short-term costs of supply disruptions of FCIs can be substantial, especially when firms cannot easily substitute away from these products. |
| Keywords: | Geoeconomic fragmentation, global value chains, global sourcing, international trade, imported inputs. |
| JEL: | F10 F14 F50 F60 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:eec:wpaper:2506 |
| By: | Peter Claeys; Bettina Bökemeier; Benjamin Owusu; Juan Equiza Goñi; Michael Stierle; Andreea Stoian |
| Abstract: | Concerns about fiscal sustainability and worsening balance sheet conditions of major banks triggered a doom loop between banks and sovereigns during the 2010-2013 sovereign debt crisis. Despite closer financial integration and additional institutional safeguards, the home bias, i.e. domestic bank holdings of domestic sovereign debt, is still high in most EU countries. We examine the effects of home bias on fiscal sustainability. In this paper, fiscal sustainability is understood in a broad sense of a government's ability to manage its finances in a way that ensures the long-term viability of its economic and social programmes, without compromising the stability of its financial system. We first extend two IMF databases on sovereign debt holdings to all EU Member States. We then apply panel smooth transition regression models on a fiscal rule. We find that a high home bias does not reduce the reaction of governments to public debt, but only if the financial system is sufficiently developed. A developed banking system allows sovereigns to raise more public debt at acceptable conditions to support economic stabilisation. An increased presence of foreign banks has a benign effect on sustainability by reducing governments’ debt bias, but state-owned banks reduce it. We further test fiscal responses to public debt shocks with an interacted panel Vector Auto Regression model. Even though governments respond to public debt under a high home bias, they react only slowly and delay fiscal consolidations. Developing financial markets further through the completion of the Banking and Capital Markets Unions in the EU could help countries in the trade-off between economic stabilisation and debt sustainability, while bringing in more foreign banks might enforce stronger fiscal discipline. |
| JEL: | E43 G21 H62 H63 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:218 |
| By: | List, Sophia; Metiu, Norbert |
| Abstract: | This paper examines the impact of monetary policy and central bank information on banks' lending using data on German bank balance sheets from 2002 to 2018. Local projection estimates show that the volume of loans to non-financial corporations declines significantly after a restrictive monetary policy shock that is independent of non-monetary information in central bank announcements. This decline is stronger for relatively small banks with less liquid balance sheets, which have less access to external financing. By contrast, the volume of loans increases significantly following an unexpected monetary policy rate tightening that is associated with favorable information on the economic outlook. This increase is stronger for relatively small banks with more liquid balance sheets, which are better able to boost lending. This insight adds a new dimension to the role of banks in the transmission of central bank policy. |
| Keywords: | Bank lending, Central bank, Credit, Information shock, Monetary policy, Transmission mechanism |
| JEL: | C33 E51 E58 G21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:314412 |
| By: | Iva Hasikova (Department of Department of Finance and Accounting, Faculty of Business and Economics, Mendel University in Brno, Czech Republic); Jan Hanousek (Department of Department of Finance and Accounting, Faculty of Business and Economics, Mendel University in Brno, Czech Republic) |
| Abstract: | This paper analyses factors affecting VAT compliance using a panel of 22 European countries from 2000 to 2021. In particular, we studied the influence of the shadow economy, macroeconomic conditions, quality and efficiency of public institutions, and the control of corruption influencing VAT compliance. The GDP growth proxying the phases of the business cycle has a stable and positive effect on VAT compliance. Similarly, the impact of the shadow economy has been negative, statistically, and economically significant. Also, we observe a substantial impact of the government quality indicators on reducing the VAT gap. We also examine the possible “import†of tax morale through foreign subsidiaries operating in the country, and the impact remains inconclusive. Likely positively induced VAT compliance is mitigated by a negative impact of possibly sizeable exports of foreign-owned subsidiaries. From the public administration perspective, we show that all factors that affect the shadow economy are almost at the same rate transferred into increasing VAT compliance, which could make the quest for policymakers more effective. |
| Keywords: | Value-added tax (VAT), VAT gap, Gross Value Added, Shadow Economy, Tax Collection, Policy and Governance, Economic sectors |
| JEL: | H26 C33 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:men:wpaper:100_2025 |
| By: | Holm-Hadulla, Fédéric; Pool, Sebastiaan |
| Abstract: | We study how short-term interest rate volatility affects the transmission of monetary policy. To identify exogenous changes in volatility, we exploit the pronounced heteroskedasticity visible in the time-series of euro area short-term rates over the past two and a half decades. Interacting the exogenous variation in volatility with high-frequency-identified monetary policy shocks, we find that increases in volatility dampen the effects of monetary policy on output and prices. This dampening effect is visible already at the earlier stages of transmission, including in the pricing and volume of bank lending. JEL Classification: E44, E52, E58 |
| Keywords: | interest rate volatility, monetary policy implementation, monetary policy transmission |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253048 |
| By: | Liza Archanskaia; Plamen Nikolov; Wouter Simons; Lukas Vogel |
| Abstract: | The EU corporate sector has been subject to severe shocks in recent years, i.e., the administrative restrictions on activity in the context of the COVID-19 pandemic, the supply bottlenecks in its aftermath, and more recently the spike in energy prices in the context of the full-scale invasion of Ukraine by the Russian Federation. This paper uses the latest available industry- and firm-level data to quantify the impact of the spike in energy prices on cost-price dynamics and corporate profitability of non-financial corporations (NFCs). Firstly, we document price-cost margin developments at the country-industry level by computing production cost indices at quarterly frequency. In this step, input-output tables are used to construct implicit input deflators. Secondly, we plug these price-cost margin developments into the latest available financial statements of the firm to simulate the evolution of profitability over 2022-2023. Thirdly, we characterise the evolution of profitability for publicly listed EU firms, based on their published financial accounts up to 2023. In the first step, we uncover a positive relationship between production cost increases and the energy intensity of the industry, only partly compensated by producer price growth. In the second step, we find that 20% of NFCs had negative cumulative operating profits over 2022-2023. About half of these firms posted positive profits in 2021, underpinning the contribution of partial pass-through to a deterioration of corporate profitability. In the third step, we provide an indirect robustness check of our simulations, by showing that the spike in energy prices had a negative effect on NFC profitability overall. Further, we assess the role of exposure to the shock. We find that profitability growth of energy intensive firms was pushed into negative territory over 2016-2023. This result holds for gross, operating, and net profit margins. Overall, the results suggest that while there has been substantial pass-through of production cost increases to producer prices, dampening the impact on profitability, the spike in energy prices was associated with a deterioration in cost competitiveness. Longer-term challenges remain, particularly for energy-intensive industries, that require more structural solutions. |
| JEL: | C23 C67 D22 D24 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:216 |
| By: | Robayo-Abril, Monica; Echeverría, Lucía |
| Abstract: | The European Union has improved living standards, yet welfare disparities persist across regions, countries, and demographic groups. This paper uses data from European Union Statistics on Income and Living Conditions cross-sectional and longitudinal surveys and the at-risk-of-poverty or social exclusion framework to analyze recent temporal trends in absolute multidimensional poverty across the 27 countries in the European Union and its subregions. The analysis quantifies the extent, composition, and factors associated with the higher risks of multidimensional poverty across four countries (Bulgaria, Romania, Croatia, and Poland) and extends the at-risk-of-poverty or social exclusion framework to consider other dimensions of deprivations. The paper analyzes the extent of multidimensional poverty among the Roma population in Bulgaria and assesses the extent of chronic income poverty and chronic material deprivation among this group. The analysis reveals that some European Union member states present strikingly divergent trends in multidimensional poverty compared to the European Union average, and there have been different rates of progress across subregions. Results of the analysis of the four countries of interest indicate that although monetary poverty risks are comparable across these countries, there are notable variations in the incidence of nonmonetary indicators and the intensity of deprivations. However, the likelihood of being multidimensionally poor is conditioned by similar individual, socioeconomic, and family characteristics across countries. The Roma population in Bulgaria encounters more concurrent disadvantages compared to the broader population and is significantly more likely to be disproportionately represented among those experiencing chronic poverty and material deprivations. These findings underscore the urgent need for targeted policy interventions that tackle the most pressing needs of disadvantaged populations. Finally, the study proposes a set of potential policy interventions to address structural inequalities and improve the well-being of vulnerable populations. |
| Keywords: | Pobreza; Medición; Unión Europea; |
| Date: | 2025–01–09 |
| URL: | https://d.repec.org/n?u=RePEc:nmp:nuland:4265 |
| By: | Botsari, Antonia; Gvetadze, Salome; Lang, Frank |
| Abstract: | This working paper provides an updated overview of the key markets the EIF focuses on, highlighting the challenges and opportunities in SME financing during these uncertain times. It reviews the overall market environment, explores developments in SME equity, guarantees, securitisation, and inclusive finance markets, and discusses how these areas are shaping the support available to SMEs. The paper reflects the EIF's commitment to addressing financing gaps and fostering sustainable growth across Europe. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:eifwps:313620 |
| By: | Andrea Bastianin (Department of Economics, Management and Quantitative Methods, University of Milan and Fondazione Eni Enrico Mattei); Chiara F. Del Bo (Department of Economics, Management and Quantitative Methods, University of Milan); Luqman Shamsudin (Fondazione Eni Enrico Mattei and Department of Environmental Science and Policy, University of Milan) |
| Abstract: | We map the mining sector in Europe, with a focus on Energy Transition Metals (ETMs), and present an in-depth analysis of the environmental impact and associated monetary costs, at the regional level, of extraction activities. We aim to offer a spatially disaggregated view of the current mining projects and associated environmental costs in terms of CO2 emissions and their monetary value. To do this, we collected global warming potential (GWP) data from Life Cycle Assessment Impact Analysis (LCIA) and linked these to their expected monetary value. By considering the full spectrum of sourced ETMs, we map the environmental, physical, and monetary impact of current mining activities in Europe, and understand what a further increase in exploiting European reserves to reduce dependence from abroad and facilitate the green transition, could imply for European regions. |
| Keywords: | Critical raw materials, Europe, Life Cycle Assessment Impact Analysis, mining, regional |
| JEL: | L72 O52 Q32 Q51 R11 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:fem:femwpa:2025.08 |
| By: | Torój , Andrzej (SGH Warsaw School of Economics); Bęza-Bojanowska, Joanna (Ministry of Finance); Chmura, Rafał (Ministry of Finance); Kroschel, Dominika (Ministry of Finance); Szczypińska, Agnieszka (Ministry of Finance); Wiśnicki, Bartłomiej (SGH Warsaw School of Economics) |
| Abstract: | We investigate the properties of the Polish numerical stabilizing expenditure rule (SER) in the context of economic governance review in the EU. To this aim, we use the macroeconometric model NEMPF (Chmura et al., 2024) that offers nuanced, disaggregated mapping between the general government (GG) expenditure categories, the macroeconomic variables (including GDP), and GG revenue categories. This set of detailed links allows for heterogeneous fiscal multipliers by expenditure category, and hence scenario-specific calculation of our categories of interest: the GG revenue, expenditure and balance developments as ratios to GDP. The model-based, endogenous denominator properly accounts for tax base and hence revenue responses to expenditure-side measures. As the Polish SER represents a forward-looking perspective, we propose model solution procedures under model-consistent expectations of policymakers applicable when the perfect foresight assumption is not met. We find that SER generally ensures lower GG deficits (and hence GG debt paths) than policies targeting just-compliance with the Stability and Growth Pact (SGP) thresholds. That results in lower GG debt trajectories, as well as creates room for counter-cyclical responses. We also demonstrate a few specific numerical properties of the Polish SER, including how the correction mechanism encourages a more restrictive fiscal policy to build countercyclical buffers. |
| Keywords: | fiscal rules; macroeconomic simulation; public finance; European Union |
| JEL: | C54 E62 H30 |
| Date: | 2025–03–31 |
| URL: | https://d.repec.org/n?u=RePEc:ris:mfplwp:0044 |
| By: | Leonardo Ciambezi (Université Côte D’Azur, CNRS, GREDEG and Institute of Economics and l’Embeds, Scuola Superiore Sant’Anna di Pisa); Mattia Guerini (Department of Economics and Management, University of Brescia, Fondazione Eni Enrico Mattei, Université Côte D’Azur, CNRS, GREDEG and Institute of Economics and l’Embeds, Scuola Superiore Sant’Anna di Pisa); Mauro Napoletano (Université Côte D’Azur, CNRS, GREDEG, OFCE - SciencesPo and Institute of Economics and l’Embeds, Scuola Superiore Sant’Anna di Pisa); Andrea Roventini (Institute of Economics and l’Embeds, Scuola Superiore Sant’Anna di Pisa and OFCE - SciencesPo) |
| Abstract: | We develop a macroeconomic agent-based model to study the role of demand and supply factors in determining inflation dynamics. Local interactions of heterogeneous firms and households in the labor and goods markets characterize the model. Asymmetric information implies that firm selection is imperfect and depends both on firms’ relative prices and on their size. We calibrate the model on EU data by using the method of simulated moments and show that it can generate realistic inflation dynamics and a non-linear Phillips curve in line with recent empirical evidence. We then find that the traditional demand-led explanation of inflation stemming from a tight labor market only holds when selection in the goods markets is mostly driven by relative prices in comparison to firm size. Finally, we study the response of inflation to shocks impacting consumption, labor productivity, or energy costs. The results indicate that only demand shocks lead to wage-led inflation surges. Productivity shocks are entirely passed through to prices without affecting the income distribution. Energy shocks, instead, induce sellers’ inflation after changes in both firms’ cost structure and profit margins. This is in line with the recent empirical evidence for the Euro Area. |
| Keywords: | Inflation, agent-based models, market structure, mark-up rates, sellers’ inflation |
| JEL: | E31 E32 C63 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:fem:femwpa:2025.10 |
| By: | Bontadini, Filippo (Luiss Institute for European Analysis and Policy); Meliciani, Valentina (Luiss Institute for European Analysis and Policy) |
| Abstract: | This paper focuses on a selection of products where Europe has a dependence and on a set of products relevant for the twin transition and, based on the economic literature on capabilities, identifies which products are closest to countries’ productive capabilities. |
| Keywords: | Single Market, Industrial Policy |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:bda:wpsmep:wp2025/30 |
| By: | Heise, Arne |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cessdp:313613 |
| By: | Magerman, Glenn (ECARES at ULB, CEPR and CESIfo); Palazzolo, Alberto (ECARES at ULB and NBB) |
| Abstract: | This paper analyzes a policy toolbox encompassing trade, industrial, and public policies and their effects on the EU and its geographical regions. We develop a multi-sector, multi-region general equilibrium framework with imperfect competition, input-output linkages, and external economies of scale. Regional and supranational governments set policies and raise taxes and provide subsidies to fund these |
| Keywords: | Deglobalization, Regional Inequalities, Trade policy, Industrial Policy, Public Policy, Supply Chains, General Equilibrium |
| JEL: | F10 R12 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:bda:wpsmep:wp2024/29 |
| By: | Enriques, Luca; Nigro, Casimiro A.; Tröger, Tobias |
| Abstract: | Policymakers around the globe have sought to stimulate Venture Capital (VC) investments, and an extensive literature has inquired into the institutional determinants of a vibrant VC market, including corporate law. We contribute to that literature by exploring the significance of corporate law for VC contracting and hence VC investments. Corporate law's relative rigidity or flexibility is key to the efficiency of the contractual technology governing VC deals. Importantly, it can hamper such transactions through a number of "constraints, " which we have identified in a companion paper. To illustrate our point, in another companion paper, we take German and Italian corporate laws as two case studies and show how they are largely averse to VC contracting. In addition, we show that the regulatory constraints they impose stem from blackletter corporate law much less often than from scholarly constructs and courts' interpretations. This chapter anticipates two objections that cast doubt over the importance of our findings as to the construction of vibrant VC markets in Germany and Italy. Specifically, the first of these objections is that VC funds and entrepreneurs planning to run their startups in Germany and Italy can circumvent the strictures of local corporate laws by incorporating abroad, and the other is that formal contracts are inconsequential in VC deals, meaning that the regulatory constraints we document are irrelevant. Meanwhile, the chapter also shows that the detailed understanding of regulatory constraints unveiled by our research can inform more effective policymaking. Ultimately, we make two policy recommendations: first, we propose the adoption of a statutory provision that would explicitly insulate the arrangements that typically shape U.S. VC deals from undue interventions; and, second, we argue in favor of a standard charter aligned with U.S. VC transactional practice that the law itself should declare entirely enforceable. |
| Keywords: | Comparative Corporate Law, Comparative Corporate Governance, Entrepreneurship, Financial Contracting, Private Ordering, Startups, Venture Capital, Entrepreneurial Finance |
| JEL: | G38 K22 L26 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:lawfin:313660 |
| By: | Botsari, Antonia; Lang, Frank |
| Abstract: | Based on responses from 226 European private equity fund managers, the 2024 EIF PE Mid-Market Survey (the largest of its kind in Europe; conducted during July-August 2024) provides insights on the latest trends and developments in the European PE market. Key findings: Despite a still challenging market environment, the developments of the past two years reflect a normalisation away from the crisis mode seen in 2022, when PE Mid-Market fund managers' key concerns had been geopolitical uncertainty and market volatility. Fundraising and geopolitical uncertainty remain the two biggest challenges for the PE Mid-Market business, followed by portfolio company performance and the exit environment. General difficulties in finding potential buyers and a thin M&A market are mentioned as key challenges for exits. Approximately 2 in 5 PE Mid-Market fund managers state that the scale-up financing conditions have worsened in the last year. Recruiting high-quality professionals, the costs of production and labour and geopolitical uncertainty (and related consequences) have remained the three most important challenges for PE Mid-Market portfolio companies. PE Mid-Market fund managers report, on balance, a higher number of incoming investment proposals as well as of new investments undertaken. Respondents see promising investment opportunities in several sectors, particularly in the areas of Healthcare, ICT and the transition to greener and more efficient energy sources. With regard to respondents' expectations for future developments, for many market sentiment indicators the level of optimism expressed for the next 12 months has almost recovered to or even surpassed that observed in 2021- which was a record year for the PE/VC markets in Europe. Background: The EIF Equity Survey (combined EIF VC Survey and EIF Private Equity Mid-Market Survey) is the largest regular survey among General Partners across Europe, with a total of 624 respondents (398 VC, 226 PE). It feeds into our flagship publications delivering unique market insights on an annual basis. This publication is based on the results of the EIF PE Mid-Market Survey 2024. The study focuses on market sentiment and looks at the current situation, developments in the recent past as well as fund managers' expectations for the future |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:eifwps:313621 |
| By: | Rouvinen, Petri; Ylhäinen, Ilkka |
| Abstract: | Abstract Finnish businesses face fewer financial challenges than their European peers. To the extent financial challenges do exist, they disproportionately affect young, small, innovative, internationally focused, and growth-seeking companies. Our findings are based on extensive firm-level data. The data and our approach dictate that the results should be interpreted from the point of view of a representative firm and from a long-term, structural perspective, with a focus on debt financing. Finland’s financing challenges stem primarily from equity, not debt. The nation’s bank-centric financial system inadequately supports growth driven by intangible assets. Moreover, the growth ambitions and abilities of company owners, boards, and executives leave something to be desired. We posit that Finland’s fundamental issue is demand, not supply, of financing. Capital availability is sufficient. The core problem is insufficient initiative in identifying, capitalizing on, and scaling new ideas. |
| Keywords: | Business finance, Financial constraints, Debt finance, Economic growth |
| JEL: | E22 G30 G32 O16 |
| Date: | 2025–04–08 |
| URL: | https://d.repec.org/n?u=RePEc:rif:report:161 |
| By: | Lisandra Flach; Lisa Scheckenhofer |
| Abstract: | Key MessagesThe average tariff gap for traded products between the US and the EU is around 0.5 percentage points, which is relatively low compared to other US trade partners.US tariff changes aimed at closing the tariff gap between the US and the EU could affect 53% of German exports to the US and 6% of German global exports. While a wide range of products would be affected, the tariff increase would remain relatively small for three quarters of traded products, as their tariff gaps are below 2.3%.Our simulations show that higher US “reciprocal” tariffs reduce German exports to the US between 2.4% and 3.0% and decrease value added by 0.02%. These small effects for Germany, compared to scenarios with a flat 20% increase in US tariffs, are mostly due to the relatively low tariff gap between the US and the EU.However, the opposite scenario arises if the EU negotiates “full reciprocal tariffs” with the US – implying that the US also lowers tariffs when its own are higher. In this case, German value added and welfare increase. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:econpb:_71 |
| By: | Giuseppe Canzonieri; Luigi Giamboni |
| Abstract: | This paper measures the efficiency of public spending in the education and health sectors using Stochastic Frontier Analysis (SFA) and Data Envelopment Analysis (DEA). It covers all EU Member States from 2000 to 2022. The model uses panel data and accounts for country-specific factors such as school systems, economic structure, socio-economic background, and health risks, treated as fixed effects. A common frontier approach, assuming equal access to production technologies across countries, is estimated with both methods. DEA also evaluates variable returns to scale and considers multi-output and multi-input analysis. The analysis shows that most countries operate near their efficiency frontiers for quantitative outcomes (tertiary education attainment rates and life expectancy at 65) while significant gaps seem to exist for qualitative targets (PISA scores and years of healthy life expectancy at 65). DEA analysis suggests the presence of decreasing returns to scale between public spending and outcomes in both domains. Malmquist index calculation points to technological shifts of the frontier to have a role in explaining inefficiency over time. |
| JEL: | H40 H51 H52 I11 I21 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:217 |
| By: | Boysen-Hogrefe, Jens; Groll, Dominik; Hoffmann, Timo; Jannsen, Nils; Kooths, Stefan; Schröder, Christian; Sonnenberg, Nils |
| Abstract: | The German economy is stuck in stagnation. There are no signs of a significant economic recovery. Instead, there are increasing signs that the economic weakness is primarily structural rather than cyclical, which means there is little room for improvement in economic activity in the short term. There is also a risk of additional headwinds in the coming year. If the new US administration follows through on its protectionist announcements, as assumed in this forecast, this will be a further drag on exports. Exports have already failed to keep pace with world trade recently, as companies have become less competitive. The provisional budget management, which is necessary due to the end of the coalition and will remain in place well into next year, could also slow economic output, although the effects are likely to be small. Against this backdrop, we have lowered our forecast and expect GDP to stagnate next year (fall forecast: +0.5%), following a decline of 0.2% in the current year (fall forecast: -0.1%). In 2026, economic output is expected to grow by 0.9% (fall: 1.1%), whereby almost 0.3 percentage points are attributed to the additional number of working days. The economic weakness is leaving its mark on the labor market. The unemployment rate will rise from 5.7% in 2023 to 6% this year and 6.3% next year. After a noticeable increase this year, real disposable household income will barely grow in the next two years. As a result, private consumption will not gain much momentum either. Gross fixed capital formation will gradually bottom out as financing conditions improve somewhat. The budget deficit is expected to be around 2 percent of GDP over the next two years, down from 2.3 percent this year. |
| Keywords: | Germany, Financial Markets, Growth, Labor Market, Monetary Policy, Economic Policy in German, Business Cycle Germany |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkeo:313569 |