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on European Economics |
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Issue of 2025–06–16
eighteen papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | O'Grady, Michael (Central Bank of Ireland) |
| Abstract: | Employing an augmented version of the synthetic control method, we estimate the effects of the Brexit vote shock and Irish border guarantees on trade patterns between Ireland and the UK, relative to other euro area economies. We let a matching algorithm determine a combination of comparison economies that best resembles the path of Irish bilateral trade with the UK before (i) the Brexit referendum and (ii) guarantees from both the UK and the EU to deliver a “no-border solution” to the island of Ireland. The differences between imports and exports for Ireland and its synthetic doppelganger represent this commitment to a “no-border solution” between Northern Ireland and the Irish Republic, mitigating the negative effects of the Brexit vote shock on bilateral Irish-UK trade. We show that, contrary to the prevailing narrative, Irish imports and exports did not respond to the uncertainty surrounding the Brexit vote to the same extent as other euro area member countries |
| Keywords: | Brexit, European Union, Synthetic Control Methods, Trade Policy Uncertainty, Globalization. |
| JEL: | E65 F13 F42 F68 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:wpaper:2/rt/25 |
| By: | Carla Soares |
| Abstract: | This study investigates to what extent the significant liquidity injections by the ECB over the past 15 years may have created a dependency by banks on central bank liquidity itself. Following Acharya et al. (2024), I examine whether the ECB’s liquidity provision changed banks’ incentives to increase liquid deposits, potentially heightening their susceptibility to liquidity shocks. Using both aggregate and bank-level data, I find that euro area banks tend to increase demand deposits and decrease time deposits with their holdings of excess reserves over the liquidity expansion phase and do not revert when aggregate liquidity starts to shrink. However, this is contained to specific periods, when interest rates were low and stable. The differences relative to the US could be related to distinct sources of liquidity and regulatory frameworks governing liquidity. |
| JEL: | E5 G21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ptu:wpaper:w202505 |
| By: | Leek, Lauren Caroline (European University Institute) |
| Abstract: | It has been well-established that central bank policy agendas are shaped by the spread of ideas, individual governors’ agency and economic and political pressures. However, in the case of the European Central Bank (ECB) the influence of the multi-level set-up of the Eurosystem consisting of both the ECB and National Central Banks (NCBs) is often not considered. How does this peculiar institutional setup shape the agenda? This study argues that NCBs act as intermediaries, channeling national and public priorities to the ECB level. Using a transformer model, alongside sequence and cross-sectional time-series analyses of ECB and NCB speeches from 1997 to 2024, I find that the ECB agenda and issue-responsiveness vis-a-vis `new' topics are driven primarily by NCBs. By revealing how NCBs shape what and when the ECB talks about certain topics, I also contribute more broadly to implications of the multi-level structure of the EU as well as how independent central banks and international organisations respond to outside pressures. |
| Date: | 2025–05–27 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:pb24v_v1 |
| By: | Anne Michels; Daria Ciriaci; José Manuel Rueda-Cantuche; Luis Pedauga; Valeria Ferreira; Christina Kattami; Daniel Schulz; Marta Pilati |
| Abstract: | The Recovery and Resilience Facility (RRF) is the cornerstone of NextGenerationEU, the EU’s post-covid Recovery Plan. With a budget of EUR 650 billion, amounting to around 4% of the EU GDP, the RRF finances over 2, 800 reform and investment measures aross the EU from 2020 to 2026. To date, most studies on the RRF have focused on the broad macro-economic picture or on specific policy domains and country experiences. This paper introduces a novel approach to enhance the understanding of the RRF. First, by leveraging artificial intelligence, a new sectoral database was created, which classifies all RRF reform and investment measures according to economic sectors and enables more detailed and systematic analysis of macro-economic, sectoral and policy impacts. The paper presents an overview of this classification, across the EU and for each Member State. The sectors benefitting most from the RRF include those related to the green transition, such as energy efficiency, renewable energy production and sustainable transport; those supporting the manufacturing sector and broader business environment, including digitisation, public administration and justice reforms; and those related to societal resilience, such as healthcare, skills and education. We also observe significant synergies between reform and investment measures in those areas. Second, by applying the well-established FIDELIO model to this new sectoral dataset, it is now possible to assess the direct and spillover impacts of RRF-funded investments and to break down these results across 64 economic sectors, for the EU and for each Member State. Looking at Germany by way of illustration, the analysis shows that, assuming full implementation of the 27 plans, the German economy stands to benefit from a medium-term stimulus of about EUR 66 billion (1.6% of Germany’s GDP), more than twice the size of Germany’s Recovery and Resilience Plan. This reflects both the direct impact of the RRF and significant positive spillovers, driven by the strong integration within the EU Single Market. This paper identifies the sectors that benefit most from these effects and highlights how these novel data and techniques can support further research and evaluations. |
| JEL: | C82 E61 E62 F15 F17 F41 F42 F62 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:221 |
| By: | Albora Giambattista (European Commission - JRC); Diodato Dario (European Commission - JRC); Fenoaltea Enrico; Mazzilli Dario; Patelli Aurelio; Sbardella Angelica; Sciarra Carla (European Commission - JRC); Tacchella Andrea; Zaccaria Andrea |
| Abstract: | The European Commission adopted the Digital Europe Programme to equip the EU workforce with the necessary skills to cope with labour market changes induced from innovation in advanced digital technologies as AI. Clerical work and cognitive tasks are considered to be more exposed to AI substitution, whereas manual, operational, and technical tasks are comparatively less exposed. AISE is a job-specific AI exposure metric based on data from financed start-ups whose output could potentially replace a job. Results reveal the existence of a gap between potential and actual AI exposure, as start-ups are more likely to adopt AI development in niche tasks. The AISE-based analysis reveals that cognitive jobs are heterogeneously AI-exposed, and exposure depends on advanced cognitive skills requirements. Beyond technical feasibility and economic viability, ethical and social considerations and trust in AI capabilities determine job expo-sure to AI. Considering EU countriesâ structure of the labour market, Germany and Belgium are the most actually AI-exposed. The largest gap between potential and actual exposure is detected for Sweden and Italy, the former being more potentially AI-exposed than actually. The opposite is true for Italy. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc141782 |
| By: | Giovanni Bonaccolto; Nicola Borri; Andrea Consiglio; Giorgio Di Giorgio |
| Abstract: | This paper investigates the dynamic interdependencies between the European insurance sector and key financial markets-equity, bond, and banking-by extending the Generalized Forecast Error Variance Decomposition framework to a broad set of performance and risk indicators. Our empirical analysis, based on a comprehensive dataset spanning January 2000 to October 2024, shows that the insurance market is not a passive receiver of external shocks but an active contributor in the propagation of systemic risk, particularly during periods of financial stress such as the subprime crisis, the European sovereign debt crisis, and the COVID-19 pandemic. Significant heterogeneity is observed across subsectors, with diversified multiline insurers and reinsurance playing key roles in shock transmission. Moreover, our granular company-level analysis reveals clusters of systemically central insurance companies, underscoring the presence of a core group that consistently exhibits high interconnectivity and influence in risk propagation. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.02635 |
| By: | Michael Landesmann (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | Industrial policy has become a core item in the policy agenda of many governments as well as of the EU which has come up with many policy initiatives over the past two decades. This paper emphasises the important shifts taking place in the global economy with the rise of China but also of other emerging/ed economies that affect the competitiveness of the European economy and challenges its traditional comparative advantages. The challenge to the European economy is compounded by having been left behind in some of the most innovative areas and branches of economic activity (IT, most recently AI, quantum and cloud computing) and also lagging behind in important technological shifts in more traditional industries (such as EVs in the transport equipment industry). On top of this – but also linked to global economic developments – have come rather big ruptures in geo-political relationships such as the decline of multilateral institutions and increasing conflictual relationships amongst the major acting powers on the global political stage. We discuss in this paper the challenges that EU industrial policy has to meet given the trends in geo-politics and geo-economics. |
| Keywords: | EU, industrial policy, geo-economics, geo-politics, industrial restructuring |
| JEL: | F02 F42 F51 F6 L5 L16 L52 O25 O31 O33 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:wii:pnotes:pn:96 |
| By: | Joanna Wolszczak-Derlacz (Gdansk University of Technology, Gdansk, Poland); Aleksandra Parteka (Gdansk University of Technology, Gdansk, Poland); Sabina Szymczak (Gdansk University of Technology, Gdansk, Poland); Piotr Platkowski (Gdansk University of Technology, Gdansk, Poland) |
| Abstract: | Relatively poor transfer of knowledge from higher education to the market remains a concern in Europe, universities being involved in at most 10% of all patented inventions. We examine the role of university funding in patenting, addressing three key research gaps: (i) the limited, country-specific samples rather than pan-European data used in most patent-funding studies; (ii) scarce evidence on the impact of the funding structure on patent quality; and (iii) the lack of precise estimates of interactions between university patenting, funding structures, and regional systems. We fill these gaps thanks to a micro-level database of almost 2, 900 higher education institutions (HEIs) in 31 European countries and 295 NUTS2 regions (2011-2019), containing detailed information on their activity as direct patent applicants and various institutional characteristics, including financial records. We show that universities with a greater share of third-party funds (research grants, contracts) apply for more patents and have better quality patents than those that rely mainly on core funding, i.e. national/regional allocations. The HEIs that do patent are richer and have more than twice the share of third-party revenues. This indicates that the very marked core-periphery pattern of university patenting in Europe is related both to the amount of university funding and to its sources. Additionally, we find that regional economic systems also influence the way in which the funding structure impacts university patenting. The positive effect of third-party funding is strongest in the wealthy European regions, less so in developed areas, and negligible in the poorest regions. |
| Keywords: | Patents, Higher Education Institutions, University, Funding |
| JEL: | O31 O34 I23 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:gdk:wpaper:75 |
| By: | Carpentier Elodie (European Commission - JRC); D'adda Diego (European Commission - JRC); Nepelski Daniel (European Commission - JRC); Stake Johan (European Commission - JRC) |
| Abstract: | The European Digital Innovation Hubs (EDIH) Network of digital innovation intermediaries, established in 2023, aims to accelerate the adoption of advanced digital technologies among SMEs and Public Sector Organisations across European regions. Covering nearly 90% of European regions, the EDIH Network provides tailored digitalisation support services, including AI, cybersecurity, and high-performance computing. As of September 2024, EDIHs have reached over 200, 000 participants and/or companies through 5, 000 events, delivering over 18, 000 services. EDIHs operate close to their customers, with a broad regional but limited international service coverage. The Digital Maturity Assessment Tool (DMAT) reveals that firms' digitalisation processes follow a structured path, with digital business strategy driving development and human-centric digitalisation and data management becoming central at higher levels of maturity. 90% of firms show an increase in their digital maturity level score after EDIH interventions. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc140547 |
| By: | Laurène Thil; Stella Sophie Zilian (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | This paper studies how atypical work, alongside other labour market conditions, affect intra-EU migration and vice versa in 17 EU countries from 2004 to 2019. Relative increases of part-time and self-employment shares in sending countries increase net migration, whereas relative increases in short fixed-term shares reduce net migration. Net migration shocks persistently reduce part-time share differentials, initially reduce self-employment share differentials and increase short fixed-term share differentials. Atypical work explains about one-fifth of net migration fluctuations five and ten years after a shock. The findings highlight the trade-off between internal (employment flexibility) and external (migration) labour market adjustments. |
| Keywords: | atypical employment; intra-EU mobility; pVAR; labour market adjustment |
| JEL: | C33 F22 J21 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:wii:wpaper:263 |
| By: | Sulis Patrizia (European Commission - JRC) |
| Abstract: | Access to broadband networks is increasingly an essential enabler to drive the economic and social development of territories, improving access to essential services such as education and contributing to the number of workplaces. The improvement of digital connectivity and Internet network performance is a long-standing policy priority for the European Commission to strengthen regional development and resilience and overcome spatial disparities in access to opportunities across different European regions. In this sense, mapping and understanding the spatial patterns of broadband network access and performance across regions in the EU27 is critical to adequately address the possible disparities and needs of different places and territories. Results presented in this report show that, over the last years, there has been a generalised improvement in broadband performance across all EU Member States, both for the fixed and mobile broadband networks. Whereas performance differences between cities and rural areas are still significant, contributing to a well-known âdigital divideâ, results also illustrate how, for several countries, the best performance improvements in network performance occurred in rural areas in recent years. These findings represent a promising signal for the current efforts to bridge the digital gap across territories in many European countries, envisioned by the Commission and sustained through dedicating policies. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc141281 |
| By: | Gabelberger Fabian; Marques Anabela; Doussineau Mathieu (European Commission - JRC) |
| Abstract: | This paper introduces a novel approach to measuring synergies between Horizon 2020 and cohesion policy funding in the field of R&I during the 2014-2020 programming period. Leveraging project-level data, we calculate regional cosine similarity indices based on societal grand challenges (SGCs) addressed to assess alignment between the two EU funding instruments in EU NUTS-3 regions. Results indicate that synergies are less likely in rural areas, emerging innovators, and â though not statistically significant â less developed regions, highlighting the role of business environments and innovation ecosystems. Regression analysis reveals that funding alignment is positively linked to the presence of universities and specialization in knowledge-intensive services, though the latter exhibits a nonlinear effect under certain circumstances. However, a higher number of SGCs addressed in smart specialization (S3) policy objectives is negatively associated with thematic funding similarity, likely due to fragmentation and dilution of focus. Regions that prioritize too many SGCs may reduce their ability to develop strong specialization and align different funding sources effectively. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:termod:202505 |
| By: | Dieter, Heribert |
| Abstract: | Am 2. April 2025 verkündete Donald Trump beispiellose Zollerhöhungen, mit denen die USA eine folgenreiche Kehrtwende in ihrer Handelspolitik vollziehen. Auf der ganzen Welt wurde der Präsident dafür kritisiert. Übersehen wird oft, dass die amerikanische Wirtschaft vor großen Herausforderungen steht. Nicht nur, dass die Staatsverschuldung immens ist und weiter wächst. Der US-Dollar ist überbewertet, die verarbeitende Industrie wird immer schwächer, und im Ausland nimmt das Land seit Jahrzehnten hohe Kredite auf. Damit ist das amerikanische Wirtschaftsmodell nicht nachhaltig. Trump hat die prekäre Lage erkannt und versucht, Gegenmaßnahmen zu ergreifen. Die EU sollte gerade jetzt den Dialog mit Washington suchen. Sie müsste Schritte einleiten, um die europäischen Leistungsbilanzüberschüsse abzubauen und die Unterbewertung des Euro zu reduzieren. |
| Keywords: | Vereinigte Staaten, US-Präsident Donald Trump, Handelspolitik, Zollerhöhungen, US-Staatsverschuldung, US-Dollar, Weltreservewährung, US-Rüstungsindustrie, Handelsbilanz, Überschuss- und Defizitländer, Freihandelsabkommen |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:swpakt:318320 |
| By: | Salvatore Amico Roxas; Matteo Cuda; Marina Kisvarday; Filippo Munisteri; Francesco Scotti |
| Abstract: | National Promotional Banks and Institutions (NPBIs) are state-owned or partially state-owned financial entities mandated to pursue specific socioeconomic objectives. Their role has been widely analysed in the literature, particularly in relation to sustainable development and addressing market failures. NPBIs contribute to long-term investments by financing socially desirable projects, often acting countercyclically and providing financial support where private investment is insufficient. They also operate under an “additionality” logic, ensuring that their funding complements rather than replaces private sector investment. Recent regulatory developments, such as the Non-Financial Reporting Directive (NFRD) and the Corporate Sustainability Reporting Directive (CSRD), have increased transparency regarding NPBIs’ impact on sustainability. However, research has not yet fully assessed their ability to implement proactive strategies aligned with the Sustainable Development Goals (SDGs). While studies have examined their contributions to carbon abatement and clean innovation, other key sustainability dimensions, such as water, sanitation, and biodiversity, remain underexplored. Additionally, existing literature often conflates NPBIs with broader public finance mechanisms, failing to distinguish their specific contributions. This paper addresses these gaps by analysing how NPBIs in Europe align their strategies with SDGs. It examines their impact across different sustainability dimensions and explores the correlation between NPBIs' actions and national progress on SDGs. The study also considers the evolving role of NPBIs in the EU policy landscape, particularly regarding the green transition and financial instruments such as InvestEU. Findings of this research show that NPBIs are highly committed to delivering sustainable goals and SDGs, but while historically counter-cyclical, in this analysis NPBIs prioritize long-term policy goals, such as green and digital transitions, which may reduce their flexibility in responding to short-term economic crises. This trade-off highlights the need for a strategic balance between long-term structural objectives and economic resilience, making these findings particularly relevant for policymakers, academia and strategists. |
| JEL: | G23 M14 O19 Q58 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:220 |
| By: | Christos Axioglou; Marco Ratto; Josselin Roman |
| Abstract: | The European Economic Forecasts (EEFs) are an integral part of the European Commission's Treatybased economic and budgetary surveillance framework. To increase the transparency and credibility of its forecasts, the Commission regularly evaluates forecast performance, focusing on point estimates of three prominent variables in the Commission's economic surveillance: GDP growth, inflation, and the general government budget balance. This paper updates the previous regular report, covering the additional period 2018-2023. The analysis evaluates the quality of the forecasts – in terms of unbiasedness, efficient use of the information available, and correction of past errors. To this purpose, a number of basic metrics are calculated and econometric methodologies/tests are run, as in past exercises, but with the additional challenge posed by the large volatility in the economic variables due to the pandemic and energy crises. The study also explores the potential sources of forecast inaccuracies, including the role played by the assumptions underpinning the forecasts and economic uncertainty. The analysis is reinforced by model-based decompositions of forecast errors using the Commission's Global Multi-Country Model. Lastly, the report updates the comparison of the Commission's forecast performance with that of other international institutions. Overall, this updated exercise confirms that the Commission’s forecasts provide a largely unbiased picture of the near-term economic outlook, accurately foresee the trends in its key variables and tend to perform better than ‘naïve’ forecasts that utilise no other information than the most recent reading for the target variable. The accuracy of the Commission’s GDP growth forecasts was found broadly similar to that of other major international institutions. |
| JEL: | C1 E60 E66 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:222 |
| By: | Drago, Carlo; Costantiello, Alberto; Savorgnan, Marco; Leogrande, Angelo |
| Abstract: | This article investigates macroeconomic factors that support the adoption of Artificial Intelligence (AI) technologies by large European Union (EU) enterprises. In this analysis, panel data regression is combined with machine learning to investigate how macroeconomic variables like health spending, domestic credit, exports, gross capital formation, and inflation, along with health spending and trade openness, influence the share of enterprises that adopt at least one type of AI technology (ALOAI). The results of the estimations—based on fixed and random effects models with 151 observations—show that health spending, inflation, and trade and GDP per capita have positively significant associations with adoption, with significant negative correlations visible with and among domestic credit, exports, and gross capital formation. In adjunct to this, the regression of machine learning models (KNN, Boosting, Random Forest) is benchmarked with MSE, RMSE, MAE, MAPE, and R² measures with KNN performing perfectly on all measures, although with some concerns regarding data overfitting. Furthermore, cluster analysis (Hierarchical, Density-Based, Neighborhood-Based) identifies hidden EU country groups with comparable macroeconomic variables and comparable ALOAI. Notably, those with characteristics of high integration in international trade, access to credit, and strong GDP per capita indicate large ALOAI levels, whereas those with macroeconomic volatility and under-investment in innovation trail behind. These findings suggest that securing the adoption of AI is not merely about finance and infrastructure but also about policy alignment and institutional preparedness. This work provides evidence-driven policy advice by presenting an integrated data-driven analytical framework to comprehend and manage AI diffusion within EU industry sectors. |
| Keywords: | Artificial Intelligence Adoption, Macroeconomic Indicators, Panel Data Regression, Machine Learning Models, EU Policy and Innovation. |
| JEL: | C23 C45 E22 L86 O33 |
| Date: | 2025–06–08 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124973 |
| By: | Mrs. Nina Budina; Oyun Erdene Adilbish; Mr. Diego A. Cerdeiro; Mr. Romain A Duval; Balázs Égert; Dmitriy Kovtun; Anh Thi Ngoc Nguyen; Augustus J Panton; Ms. Michelle Tejada |
| Abstract: | Europe has a large and persistent per capita income gap with the United States. Deficiencies in total factor productivity, labor utilization, and capital intensity all play a role. While deeper intra-Europe integration is one key element towards closing these gaps, remaining structural domestic policy gaps with respect to most growth-friendly regulatory settings highlight the scope for complementary policy action at the national level. This paper compiles IMF staff’s structural policy priorities for European countries to lift output over the medium term, reviews key implementation challenges, and discusses complementarities with EU-level efforts. While addressing these domestic reform priorities will require overcoming long-standing political economy and—in some cases—technical obstacles to reform, successful implementation could entail sizeable medium-term gains of around 5, 7 and 9 percent for advanced European, Central Eastern and Southeastern European, and Western Balkan economies, respectively. |
| Keywords: | Productivity; potential output; structural reforms; labor markets; human capital; business regulations; product market reforms; innovation; governance; political feasibility. |
| Date: | 2025–05–29 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/104 |
| By: | Byrne, David (Central Bank of Ireland); Goodhead, Robert (Central Bank of Ireland); McMahon, Michael (Central Bank of Ireland); Naylor, Matthew (Central Bank of Ireland); Parle, Conor (Central Bank of Ireland) |
| Abstract: | The ECB’s communication strategy has changed in recent years, driven first by reforms from the 2021 Strategy Review and then by the post-pandemic inflation surge. Its communication has shifted rapidly from forward guidance to giving detailed information on its reaction function and its evaluation of data. Focusing on the Monetary Policy Statement, which is delivered at ECB press conferences, we examine these changes through the dimensions of temporal orientation and textual complexity. We find that the reforms led communication to be less semantically complex and to have fewer references to the past, reflecting reduced emphasis on evaluating data. However, as inflation rose and the ECB became “data-dependent”, its discussions of past data became more detailed again. While communication remained less semantically complex, it became more conceptually complex. This suggests a trade-off: giving more information on data and the reaction function may result in more conceptually complex communication. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:ecolet:2/el/25 |