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on European Economics |
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Issue of 2025–07–14
25 papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Matteo Barigozzi; Claudio Lissona; Matteo Luciani |
| Abstract: | We measure the Euro Area (EA) output gap and potential output using a non-stationary dynamic factor model estimated on a large dataset of macroeconomic and financial variables. From 2012 to 2024, we estimate that the EA economy was tighter than policy institutions estimate, suggesting that the slow EA growth results from a potential output issue, not a business cycle issue. Moreover, we find that a decline in trend inflation, not slack in the economy, kept core inflation below 2% before the pandemic and that demand forces account for at least 30% of the post-pandemic increase in core inflation. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.05536 |
| By: | Guglielmo Maria Caporale; Anamaria Diana Sova; Robert Sova |
| Abstract: | This study provides new panel evidence on the effects on climate risk on financial stability in the European banking sector using yearly data over the period 2000-2021. More specifically, the impact of a number of climate risk indices on the Z-score (capturing the probability of default of a country’s banking system) is assessed after controlling for various macro and bank-related factors. The estimation is carried out using the GMM method. The analysis is also performed for two subsets of countries, namely EU (European Union) and non-EU ones. Finally, the role of governance quality is investigated. The results suggest that higher emissions growth tends to be associated with lower Z-scores, which indicate lower financial stability. However, the size of this effect differs between EU and non-EU European countries, suggesting that differences in policies, regulatory environments, and economic structures may influence how emissions growth affects financial stability across these areas. Our analysis also shows that the climate risk–financial stability relationship is affected by the quality of governance since the WGI (World Governance Index) does not appear to have a mitigating effect in non-EU countries with poorer governance. |
| Keywords: | climate risk, financial stability, Z-score, Europe, panel data, GMM (Generalized Method of Moments) estimator |
| JEL: | C33 G12 G18 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11958 |
| By: | Brignone , Davide (Bank of England); Mazzali, Marco (University of Bologna) |
| Abstract: | What drives business cycle fluctuations in the euro area (EA)? To answer this question, we build a rich, high-dimensional dataset of quarterly time series covering both EA aggregates and its major member countries. We find that just two shocks account for the bulk of the EA’s cyclical dynamics, and that they map cleanly onto standard demand and supply disturbances, consistent with textbook macroeconomic theory. Beyond this aggregate result, we uncover a high degree of synchronization in how member states respond to these shocks, highlighting the presence of a shared underlying cycle across the region. We also provide a historical decomposition of key EA macro variables based on the identified demand and supply components, with a particular focus on the recent inflation surge. Our findings show that supply-side factors dominated the initial phase of inflation through mid-2022, while demand-side pressures intensified and became increasingly important from mid-2022 onward. |
| Keywords: | Business cycle; identification; frequency domain; euro area economy; dynamic factors; inflation. |
| JEL: | C38 E32 |
| Date: | 2025–04–25 |
| URL: | https://d.repec.org/n?u=RePEc:boe:boeewp:1124 |
| By: | Claudio Lissona; Esther Ruiz |
| Abstract: | We analyse economic growth vulnerability of the four largest Euro Area (EA) countries under stressed macroeconomic and financial conditions. Vulnerability, measured as a lower quantile of the growth distribution conditional on EA-wide and country-specific underlying factors, is found to be higher in Germany, which is more exposed to EA-wide economic conditions, and in Spain, which has large country-specific sectoral dynamics. We show that, under stress, financial factors amplify adverse macroeconomic conditions. Furthermore, even severe sectoral (financial or macro) shocks, whether common or country-specific, fail to fully explain the vulnerability observed under overall stress. Our results underscore the importance of monitoring both local and EA-wide macro-financial conditions to design effective policies for mitigating growth vulnerability. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.14321 |
| By: | Jules Ducept (EU Tax Observatory, EPEE-CEPS UniversitéParis-Saclay); Sarah Godar (EU Tax Observatory, DIW Berlin) |
| Abstract: | This paper documents the rise of corporate tax-base narrowing measures in the EU using a novel dataset covering both tax rate and tax base reforms implemented between 2014 and 2022. Our findings indicate a shift away from the ’cut rate – broaden base’ approach, as governments increasingly align corporate taxation with industrial policy objectives. We show that EU tax competition exerts downward pressure on high-tax countries, while the likelihood of tax cuts also varies with the political orientation of governments. Using financial accounts from more than 40, 000 affiliates, we find that the average effective tax rate of multinational enterprises in the EU has declined more rapidly than the statutory rate and estimate that tax base reforms account for 24% of this decline. The estimated revenue cost of all reforms combined amounts to 3.5% of total corporate tax revenue collected from the sample firms. These revenue losses should be carefully weighed against the anticipated benefits of tax reforms. |
| Keywords: | Effective Tax Rates, Multinationals, Tax Competition, Corporate Income Tax, Tax Reform, Political Orientation, European Union |
| JEL: | F23 H25 H26 P11 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:030 |
| By: | Simone Vannuccini (Graduate School of Economics and Management, University Cote d'Azur) |
| Abstract: | In this paper, I use the case of artificial intelligence (AI) to analyse the challenges and opportunities in designing a European industrial policy that (i) adopts a pro-competitive posture, (ii) does not fall victim of the risk of double weaponization by pro-nationalistic and pro-oligopolistic narratives, and (iii) re-orients its goals away from the AI ‘arms race’ and to the provision of public goods. At the moment, the AI industry is an infant industry, and the European digital stack enabling AI applications is controlled by non-European actors, which reduces European autonomy and justifies policy support. I suggest that while AI’s economic impact are overestimated and hyped, AI should be a pillar of European industrial policy due to its strategic asset and dual-use nature. Through a series of proposals, I outline the contours of a European AI industrial policy; its features can be summarised by three keywords: public, as in the public assets that the EU should aim to build on the basis of open source technology and in the public interest; federated, through variety and the decentralisation of AI solutions conceived as a non-oligopolistic European alternative to large scale systems; and federal, realising decoupling across the technology stack, when possible and advisable, through supranational tools, institutions, and finances. |
| Keywords: | Artificial Intelligence, Strategic Asset, Industrial Policy, European Union, Geopolitical Rivalries |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:bdj:smioir:2025-02 |
| By: | Barbara Brixová (Technical University of Kosice, Faculty of Economics); Anna Tykhonenko (Université Côte d'Azur, CNRS, GREDEG, France); Ľubica Štiblárová (Technical University of Kosice, Faculty of Economics); Marianna Siničáková (Technical University of Kosice, Faculty of Economics) |
| Abstract: | This study examines the Middle-Income Convergence Trap (MICT) in Central and Eastern European (CEE) countries by analysing their economic trajectories and the factors shaping their convergence with more advanced EU economies. Using data from 1995 to 2022 and an iterative Bayesian clustering approach, the analysis reveals heterogeneous convergence patterns. While countries like Bulgaria and Romania exhibit strong catch-up dynamics, others—such as Slovenia and the Czech Republic—show signs of stagnation, suggesting potential entrapment in the MICT. Further analysis using a dynamic fixed effects model identifies trade openness, human capital, and institutional quality as key drivers of convergence, whereas high public debt is associated with increased stagnation risk. The findings underscore the need for comprehensive policy strategies that promote innovation, enhance education systems, and improve governance. Addressing these structural challenges is essential for sustaining long-term convergence and avoiding the risks associated with the MICT in the CEE region. |
| Keywords: | middle-income trap, convergence, economic growth, Central and Eastern Europe, Bayesian shrinkage estimator |
| JEL: | F02 F15 O47 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2025-25 |
| By: | Christophe Blot; Paul Hubert; Fabien Labondance |
| Abstract: | We investigate whether dissent in monetary policy committees affect asset prices. We exploit a feature of the ECB communication for identification: the revelation of dissent during press conferences is separated from policy decision announcements. Following a narrative approach, we compute a novel granular index of ECB dissent for each instrument and identify the dissent direction. Using tick data, we isolate asset price changes exactly when dissent is revealed. Dissent has a strong negative effect on stock prices, that operates specifically around status quo decisions. Dissent is a key driver of stock prices on these days, explaining one-third of their variation. |
| Keywords: | Asset prices, Monetary Policy Committee, European Central Bank, Disagreement, Bad news. |
| JEL: | G14 E43 E52 D70 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:drm:wpaper:2025-31 |
| By: | Kalantzis, Fotios; Revoltella, Debora; Gatti, Matteo |
| Abstract: | Leveraging data from the European Investment Survey (EIBIS) spanning 2019-2022, encompassing the pandemic crisis and the 2022 energy price shocks, our study investigates how uncertainty influence firms' climate action investment decisions in Europe at a time of one of the largest energy shocks in recent history. Our results offer insights into firms' investment behaviors across various dimensions including country, sector, and firm size. We find that increasing energy prices drove European firms to invest in both energy efficiency and climate action investments to maintain competitiveness, albeit with a more pronounced effect on the former. By contrast, uncertainty deters firms from investing in climate action and reaching their potential, making them prioritize short-term challenges over long-term climate concerns. Additionally, we observe that firm characteristics, notably energy intensity, play a significant role in shaping investment decisions, with firms operating in energyintensive sectors demonstrating a greater likelihood to invest in climate action regardless of uncertainty levels. Our results reveal the challenges and trade-offs that firms face when investing in climate action under uncertainty and high energy prices and emphasize the need for consistent and supportive policies to foster a green transition. |
| Keywords: | European Investment Bank Investment Survey, Uncertainty, Energy efficiency, Corporate investments, Energy costs, Climate Action |
| JEL: | D22 P28 Q5 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:eibwps:319634 |
| By: | Samuel Fiifi Eshun (Institute of Economic Studies, Charles University, Prague, Czech Republic); Evzen Kocenda (Institute of Economic Studies, Charles University, Prague, Czech Republic; Environment Centre, Charles University, Prague, Czech Republic; CESifo Munich; IOS Regensburg); Princewill Okwoche (Environment Centre, Charles University, Prague, Czech Republic; Namibia University of Science and Technology, Windhoek, Namibia; School of Economics, University of Cape Town); Milan Scasny (Institute of Economic Studies, Charles University, Prague, Czech Republic; Environment Centre, Charles University, Prague, Czech Republic) |
| Abstract: | We analyze the determinants of industrial energy demand in five new European Union member states (Czechia, Lithuania, Poland, Romania, and Slovenia) with a focus on the effects of energy prices, sectoral output, energy-saving investment, and technological progress. Using a panel dataset covering 16 industrial sectors over more than two decades (1995-2018), we employ advanced estimation approaches employed in related literature to address issues of heterogeneity, cross-sectional dependence, and persistence, often overlooked in studies relying solely on fixed effects. Our empirical results show that output levels and energy prices consistently drive energy consumption, with their effects amplified when cross-correlations are accounted for. From our preferred estimation procedure (Dynamic Common Correlated Effects - Mean Group), we obtain evidence of intuitively relevant values: the energy price elasticity is -0.42, and the output elasticity is 0.32. Energy demand exhibits moderate levels of persistence, showing that past consumption patterns drive current energy consumption. Energy-saving investments tend to increase energy use, as they often accompany industrial growth or modernization, whereas research and development show only a limited effect. These findings provide valuable insights to policymakers on energy solutions to influence energy demand and mitigate the pressures of industrial growth. |
| Keywords: | Energy demand; cross-sectoral dependency; income elasticity; price elasticity |
| JEL: | C23 O52 Q41 Q43 Q48 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:fau:wpaper:wp2025_11 |
| By: | Bardt, Hubertus; Busch, Berthold |
| Abstract: | Die veränderte und verschärfte Sicherheitslage der letzten Jahre trifft vor allem Europa. Nach den Kriegen gegen Georgien und die Ukraine muss daher die Verteidigung der Europäischen Union (EU) und der Ostflanke der NATO an die neuen Gefahren angepasst werden. Deutliche Anstiege der Verteidigungsausgaben erfolgten erst nach dem vollumfänglichen russischen Überfall auf die Ukraine. Im Zeitraum 2022 bis 2024 ist der Anteil der gesamteuropäischen Verteidigungsausgaben am Bruttoinlandsprodukt (BIP) um rund ein Viertel angestiegen. 2024 konnte damit das NATO-Ziel von 2 Prozent des BIP erstmals für Gesamteuropa erreicht werden. Verglichen mit den USA verfügt Europa über eine ähnlich große Anzahl von Soldaten, aber ein systematisch viel kleineres Budget. Die USA gaben in den letzten Jahren fast drei Mal so viel für die Verteidigung aus wie die EU-Länder. Zuletzt ist der Faktor nur noch auf das 2, 3-Fache gefallen. Verstärkend kommt zu der schlechteren finanziellen Aufstellung hinzu, dass die europäischen Ausgaben tendenziell weniger effizient eingesetzt werden. So findet militärische Beschaffung bisher im Wesentlichen national statt. Dies führt zu zusätzlicher Komplexität aufgrund der deutlich erhöhten Vielfalt von eingesetzten Systemen (Centrone/Fernandes, 2024), aber auch zu höheren Kosten. Skaleneffekte bei Entwicklung und Produktion können nicht genutzt werden, bessere Marktkonditionen einer gemeinsamen Beschaffung werden nicht realisiert. Ein Binnenmarkt für militärische Güter existiert nicht, dabei wäre der effiziente Einsatz öffentlicher Mittel in diesem schnell wachsenden Bereich von hoher Bedeutung. (...) Genauso wichtig wie eine Ausweitung der Finanzierung sind Fortschritte im Binnenmarkt für Verteidigung, der sowohl auf der Angebots- als auch auf der Nachfrageseite stark fragmentiert ist. Wichtig dabei ist eine vermehrte gemeinsame Beschaffung mehrerer Mitgliedstaaten mit einer Gemeinschaftspräferenz. Nur mit europaweiten Ausschreibungen ohne nationale Präferenz können die Chancen des Wettbewerbs im Binnenmarkt genutzt werden. Für die öffentliche Hand wäre mit niedrigeren Preisen und intensiverem Kosten- und Innovationswettbewerb zu rechnen. Die Unternehmen hätten perspektivisch Chancen auf größeren Märkten und könnten sich durch innovative Angebote behaupten und damit auch die internationale Wettbewerbsfähigkeit stärken. Dies würde mutmaßlich zu einer gewissen Konsolidierung führen und damit Kostenvorteilen durch höhere Stückzahlen führen. Neben der Finanzierung und der Organisation einer gemeinsamen oder koordinierten Beschaffung von Verteidigungsgütern kann die EU bestimmte Funktionen übernehmen, die auf nationalstaatlicher Ebene nicht erreicht werden können. Das Papier diskutiert abschließend fünf mögliche Arbeitsschwerpunkte auf europäischer Ebene: Forschung und Entwicklung, Cyber-Abwehr und KI, Luftverteidigung, Logistik und medizinische Versorgung, Nachrichten und Satelliten. |
| Abstract: | The changed and intensified security situation of recent years has particularly affected Europe. After the wars against Georgia and Ukraine, the defence of the European Union (EU) and NATO's eastern flank must therefore be adapted to the new threats. Significant increases in defence spending only occurred after Russia's full-scale invasion of Ukraine. In the period 2022 to 2024, the share of pan-European defence spending in gross domestic product (GDP) rose by around a quarter. In 2024, the NATO target of 2 percent of GDP for Europe as a whole was thus achieved for the first time. Compared to the US, Europe has a similar number of soldiers, but a systematically much smaller budget. In recent years, the US has spent almost three times as much on defence as the EU countries. Most recently, the factor has only fallen to 2.3 times. To make matters worse, the poor financial situation is compounded by the fact that European spending tends to be less efficient. So far, military procurement has essentially taken place nationally. This leads to additional complexity due to the significantly increased variety of systems used (Centrone/Fernandes, 2024), but also to higher costs. Economies of scale in development and production cannot be utilised, and the better market conditions of joint procurement are not realised. There is no single market for military goods, although the efficient use of public funds in this rapidly growing area would be of great importance. (...) Just as important as expanding financing is making progress in the single market for defence, which is highly fragmented on both the supply and demand sides. It is important to increase joint procurement by several member states with a European preference. Only with Europe-wide tenders without national preference can the opportunities offered by competition in the single market be exploited. The public sector would benefit from lower prices and more intensive competition on costs and innovation. In the long term, companies would have opportunities in larger markets and could assert themselves by offering innovative solutions, thereby also strengthening their international competitiveness. This would presumably lead to a certain degree of consolidation and thus to cost advantages through higher unit volumes. In addition to financing and organising joint or coordinated procurement of defence equipment, the EU can take on certain functions that cannot be achieved at the national level. The paper concludes by discussing five possible areas of work at the European level: research and development, cyber defence and AI, air defence, logistics and medical care, intelligence and satellites. |
| Keywords: | Branchen und Unternehmen, Europäische Union, Industrie, Unternehmen und Märkte, Companies and Markets |
| JEL: | F30 F50 H56 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iwkpps:319643 |
| By: | Geis-Thöne, Wido |
| Abstract: | Seit dem EU-Beitritt der ehemals sozialistischen Länder im östlichen Teil Europas und dem Auslaufen der darüber hinaus noch geltenden Einschränkungen bei der Freizügigkeit ist von dort eine sehr starke Zuwanderung nach Deutschland erfolgt. So ist die Anzahl der Personen mit Staatsangehörigkeiten der neuen EUMitgliedsländer in Deutschland zwischen dem 31.12.2009 und dem 31.12.2024 um 2, 15 Millionen von 966.000 auf 3, 11 Millionen gestiegen. Allein diese Zunahme entspricht einem Anteil von 2, 6 Prozent der aktuellen Gesamtbevölkerung. Hiervon hat der vor dem Hintergrund des demografischen Wandels zunehmend von Engpässen betroffene deutsche Arbeitsmarktsehrstark profitiert. Die Zahl der sozialversicherungspflichtig Beschäftigten mit Staatsangehörigkeiten der neuen EU-Mitgliedsländer hat zwischen Januar 2010 und 2025 um rund 1, 42 Millionen von 254.000 auf 1, 68 Million zugenommen, womit der Anstieg 4, 1 Prozent der aktuellen Gesamtbeschäftigung entspricht. Gleichzeitig sind nur 113.000 erwerbsfähige Beziehende von Leistungen nach dem zweiten Sozialgesetzbuch, derzeit Bürgergeld, mit Staatsangehörigkeiten der neuen EUMitgliedsländer hinzugekommen, was 2, 9 Prozent des aktuellen Gesamtbestands entspricht. Dabei haben nicht nur die Metropolen, sondern auch viele ländliche Bereiche in Deutschland profitiert. So haben sich etwa auch viele Personen aus den neuen EU-Mitgliedsländern im westlichen Niedersachsen niedergelassen. Allerdings dürfte diese Erfolgsgeschichte inzwischen abgeschlossen sein. So sind der Ausländerstatistik zufolge im Jahr 2024 mehr Personen mit Staatsangehörigkeiten der neuen EU-Mitgliedsländer ab- als zugewandert und ihre Beschäftigung war ebenfalls leicht rückläufig. Ob sich hieraus eine stärkere Rückwanderungsbewegung entwickeln wird, bleibt abzuwarten. Dagegen spricht, dass das Wohlstandsniveau in den ehemals sozialistischen Ländern noch immer wesentlich niedriger ist als in Deutschland, obschon in den letzten Jahrzehnten ein starker Aufholprozess stattgefunden hat. Mit großer Sicherheit lässt sich davon ausgehen, dass es auf absehbare Zeit nicht wieder zu einer starken Zuwanderung nach Deutschland kommen wird, da in den neuen EU-Mitgliedsländern aus demografischer Sicht kaum mehr Migrationspotenziale vorhanden sind. So muss die deutsche Migrationspolitik auch vorwiegend im außereuropäischen Bereich Fachkräfte gewinnen, um Wachstum und Wohlstand im Land zu sichern. Im September 2024 übten 944.000 Personen mit Staatsangehörigkeiten der neuen EU-Mitgliedsländer derartige Tätigkeiten aus, die typischerweise einen beruflichen oder akademischen Abschluss voraussetzen. Gleichzeitig müssen Strategien zur Sicherung des Arbeitskräfteangebots im Bereich der Saisonbeschäftigung und weiterer einfacher Tätigkeiten, die derzeit häufig von Personen aus den neuen EU-Mitgliedsländern ausgeübt werden, entwickelt werden. Ansonsten drohen auch hier Engpässe, da die Unternehmen trotz an sich ausreichendem Angebot an Arbeitssuchenden mit Qualifikationen im Helferbereich im Inland häufig kaum geeignete Bewerber finden. |
| Abstract: | Since the former socialist countries in the eastern part of Europe joined the EU and the restrictions on freedom of movement expired, there has been very strong immigration to Germany from these countries. Between 31 December 2009 and 31 December 2024, the number of people with citizenship of the new EU member states in Germany rose by 2.15 million from 966, 000 to 3.11 million. This increase alone corresponds to 2.6 per cent of the current total population. Against the backdrop of demographic change, the German labour market, which is increasingly affected by labour shortages, has benefited greatly from this. Between January 2010 and 2025, the number of employees subject to social security contributions who are nationals of the new EU member states increased by around 1.42 million from 254, 000 to 1.68 million. This increase corresponds to 4.1 per cent of current total employment. At the same time, only 113, 000 employable recipients of benefits under the Second Social Security Code with citizenship of the new EU member states have been added, which corresponds to 2.9 per cent of the current total. Not only the metropolises, but also many rural areas in Germany have benefited. For example, many people from the new EU member states have settled in the western part of Lower Saxony. However, this success story is likely to be over by now. According to the statistics on foreigners, more people with citizenship of the new EU member states emigrated than immigrated in 2024 and their employment also declined slightly. It remains to be seen whether this will result in a stronger return migration movement. One argument against this is that the level of prosperity in the former socialist countries is still considerably lower than in Germany, although a strong catch-up process has taken place in recent decades. It is quite certain that there will not be another strong influx of migrants to Germany in the foreseeable future, as there is hardly any migration potential in the new EU member states from a demographic perspective. Therefore, German migration policy must attract skilled labour primarily from outside Europe in order to secure growth and prosperity in the country. In September 2024, 944, 000 people with citizenship of the new EU member states were working in such jobs, which typically require a vocational or academic qualification. At the same time, strategies must be developed to secure the labour supply in the area of seasonal employment and other simple jobs that are currently often carried out by people from the new EU member states. Otherwise, there is a risk of labour shortages here too, as companies are often unable to find suitable applicants in Germany, despite a sufficient supply of jobseekers with qualifications in the helper sector. |
| JEL: | F22 J15 J21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iwkrep:319654 |
| By: | Weber, Michael |
| Abstract: | This paper assesses the European Central Bank (ECB)'s monetary policy stance as of June 2025, analysing its evolving interest rate path, balance sheet developments, and communication strategy. It highlights the transition toward a neutral policy rate, ongoing quantitative tightening, persistent inflation dispersion, and increasing macroeconomic uncertainty. The analysis concludes that while inflation is converging toward target, elevated uncertainty, and divergence between interest rate policy and balance sheet reduction demand cautious calibration and transparent communication. This document was provided/prepared by the Economic Governance and EMU Scrutiny Unit at the request of the ECON Committee of the European Parliament. |
| Keywords: | ECB, Monetary Policy, Inflation, Neutral Policy Rate |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewh:319903 |
| By: | Francesco Ravazzolo (Norwegian Business School, Norway; Free-University of Bozen-Bolzano, Italy; Rimini Centre for Economic Analysis); Luca Rossini (University of Milan, Italy; Fondazione Eni Enrico Mattei, Italy); Andrea Viselli (University of Milan, Italy) |
| Abstract: | This paper introduces a novel Bayesian reverse unrestricted mixed-frequency model applied to a panel of nine European electricity markets. Our model analyzes the impact of daily fossil fuel prices and hourly renewable energy generation on hourly electricity prices, employing a hierarchical structure to capture cross-country interdependencies and idiosyncratic factors. The inclusion of random effects demonstrates that electricity market integration both mitigates and amplifies shocks. Our results highlight that while renewable energy sources consistently reduce electricity prices across all countries, gas prices remain a dominant driver of cross-country electricity price disparities and instability. This finding underscores the critical importance of energy diversification, above all on renewable energy sources, and coordinated fossil fuel supply strategies for bolstering European energy security. |
| Keywords: | Dynamic panel model, Mixed-frequency, Bayesian time series, Electricity Prices, Renewable energy sources, Market Integration |
| JEL: | C11 C32 C33 C55 Q40 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:rim:rimwps:25-06 |
| By: | Grimm, Veronika; Malmendier, Ulrike; Schnitzer, Monika; Truger, Achim; Werding, Martin; Landais, Camille; Sraer, David |
| Abstract: | Die EU muss stärkere, tiefere Kapitalmärkte aufbauen, um Chancen wie die grüne Transformation oder den Aufstieg der künstlichen Intelligenz zu finanzieren und die Widerstandsfähigkeit der europäischen Volkswirtschaften gegenüber finanziellen Schocks zu fördern. Tiefe und liquide Kapitalmärkte sind eine wesentliche Voraussetzung für langfristiges Wachstum und die Überwindung des Rückgangs des Wachstumspotenzials der Volkswirtschaften in Europa. Die europäische Finanzarchitektur ist jedoch hauptsächlich bankenbasiert mit weitgehend nationalen Finanzströmen. Die Autorinnen und Autoren schlagen fünf Maßnahmen zur Unterstützung einer wachstumsorientierten Agenda für eine Kapitalmarktunion vor. Erstens sollte die EU die Bewertung von ausländischen Finanzanlagen vereinfachen, um grenzüberschreitende Investitionen zu fördern. Dazu sollte sie sowohl die ESAP-Initiative (European Single Access Point) auf Privatunternehmen ausweiten als auch das Insolvenzrecht harmonisieren. Zweitens sollte die EU eine stärkere Marktintegration fördern, indem sie die Europäische Wertpapier- und Marktaufsichtsbehörde (ESMA) reformiert und stärkt. Drittens würde die Stärkung der kapitalgedeckten Altersvorsorge das von institutionellen Investoren eingesammelte Kapital erhöhen, was wiederum auf den Aktienmärkten investiert werden kann. Viertens sollten die EU und die Mitgliedstaaten die Mittel für die staatliche Kofinanzierung von Wagniskapital erhöhen und die Ressourcen durch europäische Institutionen und Initiativen wirksam einsetzen. Schließlich sollte langfristig das Vertrauen in die Kapitalmärkte gestärkt und die Partizipation erhöht werden, wozu die Einführung von individuellen Investitionskonten für Kinder dienen könnte. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:svrwpb:320353 |
| By: | Kalantzis, Fotios; Kesidou, Effie; Ri, Anastasia; Roper, Stephen |
| Abstract: | This paper investigates how firms navigate the dual challenges of digitalisation and climate change. Our comprehensive approach considers climate change strategies, distinguishing adaptation-only, mitigation-only and 'dual' adaptation and mitigation strategies. Drawing on theoretical insights from the literature on digital affordances, we argue that digitalisation enables firms to recognise better the opportunities and risks associated with climate change. These affordances significantly influence strategic decisions regarding adaptation, mitigation, or a combination of both, ultimately impacting the intensity of their implementation efforts. To empirically examine these dynamics, we analyse data from the 2022 and 2023 European Investment Bank Investment Survey waves. Our sample includes over 24, 000 firms, spanning small and medium-sized enterprises (SMEs) and large businesses across 27 EU Member States and the USA. Our results reveal that firms with higher digitalisation are more likely to adopt a 'dual' strategy that combines mitigation and adaptation efforts rather than pursuing a single climate strategy or no climate response. Furthermore, we find a positive relationship between digitalisation and climate action intensity across mitigation and adaptation measures. Importantly, these patterns hold consistently across different sectors and firm sizes. Overall, our study sheds light on the critical role of digital technologies in shaping firms' climate responses, emphasising the need for organisations to leverage their technological strengths to address environmental challenges effectively. |
| Keywords: | Business, Strategic management, Digitalization, Climate change, Climate protection, Environmental management, EU countries, USA |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:eibwps:319607 |
| By: | Tröster, Bernhard; Papatheophilou, Simela; Küblböck, Karin |
| Abstract: | Global demand for specific mineral raw materials is increasing, driven largely by the energy and digital transition. Although the EU is making efforts to boost domestic supply, it will remain highly dependent on imports of those minerals from third countries to achieve strategic autonomy in manufacturing capacities for both transition-related and military sectors in Europe. As global competition over access to raw materials intensifies, the EU is adapting its policy approaches in response. This briefing paper examines how geopolitical dynamics and evolving EU priorities are shaping EU's external raw materials policies. It assesses the use of different trade policy instruments and raw materials diplomacy, including new approaches such as the introduction of Strategic Projects, Raw Materials Club or Strategic Partnerships on raw materials. These partnerships reflect the EU's broader goal of strengthening manufacturing in Europe by integrating raw materials sectors from partner countries into these new value chains. However, we find that the incentives offered by the EU - such as more sustainable mining, increased investment, and mutual economic gains - remain non-binding and challenging to implement in practice. This is largely due to the lack of enforceable sustainability provisions and the absence of a coherent strategy to support investment and value-added processing in the raw materials sector. At the same time, traditional tools such as free trade agreements and regulatory cooperation remain central. These instruments must balance EU interests with the development needs of partner countries, particularly by allowing policy space for industrialization strategies and ensuring that environmental and social standards are effectively implemented. |
| Keywords: | EU raw materials policy, Critical Raw Materials, Critical Raw Materials Act (CRMA), Strategic Partnerships, Energy and Raw Materials Chapters in Free Trade Agreements |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:oefseb:319648 |
| By: | Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw); Francesca Micocci; Armando Rungi |
| Abstract: | This paper investigates how the presence of foreign direct investment (FDI) contributes to domestic innovation with a focus on green technologies in the European regions between 2013 and 2018. Using a rich dataset combining patent data, firm-level data and FDI proxies, we identify a clear pattern when foreign investors are technologically sophisticated, domestic firms in the regions where they invested show a higher propensity for patenting. The patenting activity by the parent companies of multinational enterprises (MNEs) and their corporate perimeter plays a more crucial role than local foreign subsidiaries. Furthermore, we find that the technological focus of MNEs – green vs. non-green – shapes the direction of these spill-overs. Notably, we provide novel evidence of linkages between the green patenting activity of MNE parents located abroad and the green innovation of domestic firms in the European Union, mediated through foreign subsidiaries operating in close proximity. Policy efforts aiming to foster green innovation should therefore prioritise attracting foreign investors with strong innovation records in environmentally sustainable technologies. |
| Keywords: | technological spill-overs, multinational enterprises, FDI, domestic innovation, firm-level data |
| JEL: | O32 F23 O34 L23 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:wii:wpaper:266 |
| By: | Chiara Castelli (The Vienna Institute for International Economic Studies, wiiw); Ronald B. Davies; Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw); Francesca Guadagno (The Vienna Institute for International Economic Studies, wiiw); Javier Flórez Mendoza (The Vienna Institute for International Economic Studies, wiiw); Francesca Micocci; Armando Rungi |
| Abstract: | Foreign direct investment (FDI) has become a driver of growth in both developed and developing countries, as it enables the transfer of know-how and advanced technologies to host economies. This policy note discusses how FDI can effectively support innovation and green growth within the European Union (EU). It focuses on the role of regulatory harmonisation and technological alignment as factors that can significantly influence the location decisions and effectiveness of FDI. Similarly, as spill-overs from foreign affiliates substantially enhance local innovation capabilities, particularly in green technologies, we argue in favour of policies enhancing domestic absorptive capacity and of policy mechanisms that can systematically integrate sustainability criteria into FDI screening processes. Aligning investment policies with regional technological strengths and green transition goals will enable the EU to leverage FDI strategically for sustainable economic growth and climate resilience. |
| Keywords: | FDI, regulatory distance in NTMs, technological proximity, environmental technology, regional spill-overs |
| JEL: | F23 L23 O24 O33 O34 R58 Q55 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:wii:pnotes:pn:97 |
| By: | António Afonso; José Alves; Wojciech Grabowski; Sofia Monteiro |
| Abstract: | We examine the effects of debt distribution characteristics, specifically skewness and maturity concentration, on sovereign yields across OECD countries over the period 1995Q1 to 2020Q4. After computing specific Lorenz curves and Gini coefficients, we find that positive skewness generally exerts a dominant influence. Employing Panel Cointegration Techniques, we show that greater skewness is associated with higher sovereign bond yields and higher short-term interest rates, whether measured in face or market value. In contrast, an increase in debt concentration tends to reduce both sovereign bond yields and short-term interest rates. |
| Keywords: | dsovereign debt concentration, yields, Gini coefficient, skewness, Panel Cointegration, OECD |
| JEL: | C23 C58 G15 E44 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11961 |
| By: | Paola Galfrascoli; Gianna Serafina Monti; Elisa Ossola |
| Abstract: | We propose a synthetic green indicator incorporating several dimensions contributing to the definition of greenness at the bond level. We include information on the presence of a green label attributed by a data provider based on the use of proceeds of the funds raised and certifications by external institutions. Variables regarding how the proceeds of green bonds are managed and whether a commitment exists to ongoing reporting on the funded projects are also added to account for the transparency of the bond issuance. To establish its role among the determinants of green bond yields, we perform a regression analysis consistent with the literature on measuring the greenium. The study comprehends a sample of European corporate green bonds between 2013 and 2024, and results highlight a significant negative premium, indicating that, ceteris paribus, “the more green†a bond is, the higher its greenium. |
| Keywords: | corporate green bonds, green premium, sustainable finance, climate policy, multilevel models. |
| JEL: | G12 G28 Q5 C21 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:mib:wpaper:556 |
| By: | Maximilian Langer; Joshua Hassib; Lars P. Feld; Daniel Nientiedt |
| Abstract: | This paper assesses the effectiveness and public finance implications of the German debt brake, a constitutional balanced budget rule introduced in 2009 that aims to ensure a sustainable path of public indebtedness. In order to estimate its causal effects, our paper employs a synthetic control strategy: We compare the counterfactual developments of six relevant outcome variables in a synthetic Germany without this rule to their actual developments. Overall, our empirical analysis suggests that the debt brake bears the main responsibility for the consolidation of German public finances during the 2010s. By reducing the deficit, the debt brake in all likelihood also reduced financing costs, though this effect cannot be solely attributed to it. Furthermore, our analysis finds that the debt brake did not negatively and robustly impact public investment, at least on the federal level. The results are supported by a variety of significance and robustness tests. |
| Keywords: | fiscal rules, fiscal federalism, german debt brake, policy evaluation, synthetic control method |
| JEL: | C13 C53 D78 H60 H63 H77 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_119333 |
| By: | Blanchard, Olivier; Ubide, Angel |
| Abstract: | • Die Unsicherheit im Markt für US-Staatsanleihen nimmt zu und Investoren suchen nach Alternativen. Für Europa entsteht daraus eine historische Chance, einen großen und liquiden europäischen Anleihenmarkt zu schaffen und dadurch die Finanzierungskosten europäischer Staatsschulden zu senken. • Notwendig dafür ist ein liquider gemeinsamer Markt für Staatsanleihen in Europa. Damit könnte es gelingen, den USA die ökonomischen Vorteile streitig zu machen, die aus der zentralen Stellung von US-Staatsanleihen im globalen Finanzsystem resultieren. • Dazu muss Europa einen Teil der bestehenden Staatsschulden als gemeinsame Anleihen (Eurobonds) ausgeben. Unser Vorschlag zur Umsetzung sind "Blue Bonds". Sie sollen einen Teil des Bestands nationaler Anleihen europäischer Staaten ersetzen. • Ein Austausch nationaler Anleihen gegen Blue Bonds von bis zu 25 Prozent des BIP sollte ausreichen, um Liquiditätszwecke zu erfüllen, ohne die Sicherheit der Anleihen infrage zu stellen. |
| Keywords: | Europa, Eurobonds, Finanzmärkte |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkpb:320413 |