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on European Economics |
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Issue of 2025–09–29
fifteen papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Angelini, Elena; Bokan, Nikola; Ciccarelli, Matteo; Lalik, Magdalena; Zimic, Srečko |
| Abstract: | This paper introduces the European Central Bank’s Multi Country model (ECB-MC), a coherent macroeconomic framework designed to support economic forecasting and policy analysis within the Eurosystem. The ECB-MC captures the economic dynamics of the five major economies in the euro area – Germany, France, Italy, Spain, and the Netherlands – which account for more than 80 percent of the euro area total GDP. By incorporating detailed structural features and data-driven insights, the model provides the main reference for the ECB’s staff macroeconomic projections, acting as a disciplined tool for forecasting, enabling scenario, risk and sensitivity analyses, and giving a framework to understand the transmission channels of various economic shocks. The paper offers a detailed account of the structure, the estimation and the model properties, and provides a primer on the potential uses of the ECB-MC in the Eurosystem macroeconomic projections. JEL Classification: C3, C5, E5, E6 |
| Keywords: | euro area countries, forecasting, monetary policy, semi-structural model |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253119 |
| By: | Allaire, Nolwenn; Le Coz, Victor; Benzaquen, Michael; Challe, Damien |
| Abstract: | Using the secured transactions recorded within the Money Markets Statistical Reporting database of the European Central Bank, we test several stylized facts regarding the interbank market of the 47-largest banks in the eurozone. We observe that the surge in the volume of traded evergreen repurchase agreements followed the introduction of the LCR regulation and we measure a rate of collateral re-use consistent with the literature. Regarding the topology of the interbank network, we confirm the high level of network stability but observe a higher density and a higher in– and out–degree symmetry than what is reported for unsecured markets. JEL Classification: E42, E51, E52, G21, G28 |
| Keywords: | collateral re-use, excess liquidity, interbank network, liquidity coverage ratio, monetary policy |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253113 |
| By: | Paul Hubert; Rose Portier |
| Abstract: | This paper establishes the asymmetric transmission of monetary policy to nominal yields of the four largest euro area countries. We document that the effect of easing monetary surprises is stronger than the effect of monetary tightening. The asymmetry holds beyond the nonlinearities related to the economic or financial environment and does not stem from information effects. We provide evidence that this asymmetry is driven by signals about the future policy path. Decomposing euro area interest rates between common and country-specific components, we show that the common component, likely capturing expectations of future short-term rates, generates the differentiated effects, while risk premium signals amplify the asymmetry. Using textual analysis to extract policymakers’ signals about the future monetary policy space from press conferences, we find that central bank communication can affect this asymmetric transmission to yields. Our results suggest a key role for the signaling channel in determining long-term interest rates. |
| Keywords: | Term Structure, Asymmetric Effects, Central Bank Communication, Signaling, Long-Term Interest Rates |
| JEL: | E43 E52 E58 G12 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:999 |
| By: | Adrian Ifrim; Robert Kollmann; Philipp Pfeiffer; Marco Ratto; Werner Roeger |
| Abstract: | The Euro Area faces persistently weak productivity growth alongside a sustained trade surplus and a trendless real exchange rate. This column shows that persistent productivity growth differentials relative to the rest of the world, are a key driver of Europe’s external surplus. Structural trade shifts, such as declining home bias and falling import prices, have offset the appreciation pressures from the productivity-growth gap. Weak domestic investment is partly driven by global forces, highlighting the limits of purely demand-based explanations and associated policy prescriptions. |
| Keywords: | European Union, trade surplus, real exchange rate, productivity growth. |
| Date: | 2025–09–04 |
| URL: | https://d.repec.org/n?u=RePEc:eca:wpaper:2013/394306 |
| By: | Adrian Ifrim; Robert Kollmann; Philipp Pfeiffer; Marco Ratto; Werner Roeger |
| Abstract: | Based on an estimated two-region dynamic general equilibrium model, we show that the persistent productivity growth differential between the Euro Area (EA) and rest of the world (RoW) has been a key driver of the EA trade surplus since the launch of the Euro. A secular decline in the EA’s spending home bias and a trend decrease in relative EA import prices account for the stability of the EA real exchange rate, despite slower EA output growth. By incorporating trend shocks to growth and trade, the analysis departs from much of the open-economy macroeconomics literature which has focused on stationary disturbances. Our results highlight the relevance of non-stationary shocks for the analysis of external adjustment. |
| Date: | 2025–07–16 |
| URL: | https://d.repec.org/n?u=RePEc:eca:wpaper:2013/394303 |
| By: | Klodiana Istrefi; Florens Odendahl; Giulia Sestieri |
| Abstract: | We track how markets reacted to over 5, 000 communication events by Governing Council members. We find that communication between monetary policy meetings often moves markets as much as formal ECB decisions, and helps identify how monetary policy affects interest rate expectations, stock markets, inflation, and unemployment in the euro area. <p> Nous suivons la manière dont les marchés ont réagi à plus de 5 000 événements de communication des membres du Conseil des gouverneurs. Nous constatons que la communication entre les réunions de politique monétaire fait autant réagir les marchés que les décisions formelles de la BCE et contribue à identifier la manière dont la politique monétaire influe sur les anticipations de taux d’intérêt, les marchés d’actions, l’inflation et le chômage dans la zone euro. |
| Date: | 2025–08–01 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:econot:411 |
| By: | Jouvanceau, Valentin; Darracq Pariès, Matthieu; Dieppe, Alistair; Kockerols, Thore |
| Abstract: | This paper examines the macroeconomic impact of substantial tariffs imposed by the second Trump administration on imports from China and the euro area and their transmission through direct and indirect channels. Using the ECB-Global 3.0 semi-structural model, we show that tariffs raise US import prices and lead to tighter US monetary policy, with the managed float of the renminbi partly offsetting adverse effects in China, while appreciation of the dollar undermines US export competitiveness. In the euro area, euro depreciation provides limited output support but intensifies imported inflation and triggers additional policy tightening. We assess the sensitivity of these results to key assumptions, such as the global amplification of inflation via dominant US dollar invoicing, partial trade diversion, and alternative monetary policy frameworks that attenuate monetary tightening and output contraction. Quantitative assessments of tariffs enacted up to 26 May 2025 and of an escalation scenario indicate significant global output losses and heightened inflationary pressures, requiring widespread policy rate increases. Further escalation of the trade conflict magnifies these effects. These findings quantify the economic cost of tariff related trade disputes and highlight the challenges central banks face in navigating the trade off between price stability and growth. JEL Classification: F12, F41, F42 |
| Keywords: | dominant-currency pricing, open-economy, semi-structural model, tariffs |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253117 |
| By: | Anaya Longaric, Pablo; Kostakis, Vasileios; Parisi, Laura; Vinci, Francesca |
| Abstract: | Europe’s lack of energy independence raises concerns about its vulnerability to external energy shocks, such as Russia’s 2022 invasion of Ukraine. This paper examines how energy shocks impact firm-level investment, comparing European and US firm responses. Using global oil supply news shocks, S&P’s Compustat data, and a local projections approach, the study reveals that European firms significantly cut capital and R&D expenditures after an oil shock, unlike US firms. The disparity is primarily driven by financially constrained firms in energy-intensive sectors. Additionally, differences in capital market structures play a role, as European firms relying more on market-based financing reduce investment by less. Lastly, our analysis confirms that the US shale revolution was a contributing factor in shaping Europe’s relative vulnerability. These findings highlight the need for national and EU policies to securethe energy supply, lower prices, and deepen capital markets, enhancing resilience and future competitiveness amid energy volatility. JEL Classification: D22, E22, F15, Q43 |
| Keywords: | competitiveness, corporate investment, energy, oil shocks |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253116 |
| By: | McGuinness, Seamus (Economic and Social Research Institute, Dublin); Staffa, Elisa (Economic and Social Research Institute, Dublin); Lee, Sangwoo (University of Warwick); Kelly, Lorcan (Economic and Social Research Institute, Dublin); Redmond, Paul (ESRI, Dublin) |
| Abstract: | Skill shortages are a type of skill mismatch whereby employers are unable to fill existing vacancies due to a lack of suitably qualified and/or skilled candidates. Despite representing a significant concern for policy makers, both at national and EU level, the literature on skill shortages is hugely underdeveloped. There is a lack of clarity and consistency on how skill shortages are defined and measured. In this study, using data from the 2021 European Skills and Jobs Survey combined with Lightcast job vacancy data, we attempt to bridge the methodological gap by developing a measure of potential skill shortages that can be readily replicated across countries over time. We estimate that approximately 2% of job vacancies in the European Union are likely to experience skill shortages. However, there is substantial variation across occupations, ranging from 5.1% for ICT professionals to approximately zero in more elementary occupations. There is also substantial variation in the estimated incidences of potential skill shortages at member state level. Our analysis also shows that occupations that are most likely to experience skill shortages also tend to experience relatively high rates of changes in skill requirements over time. |
| Keywords: | measurement, skill shortages, policy |
| JEL: | J6 J20 J22 J23 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18133 |
| By: | Christophe Blot; Paul Hubert; Fabien Labondance |
| Abstract: | We investigate whether dissent in monetary policy committees affects 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, Disagreement, Monetary Policy Committee, Bad News, European Central Bank |
| JEL: | G14 E43 E52 D70 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1001 |
| By: | Vasilki Dimakopoulou; George Economides; Apostolis Philippopoulos |
| Abstract: | This paper investigates whether the new expenditure rule of the European Union (EU) can restore dynamic stability and determinacy with bounded public debt in an otherwise unstable economic environment. We build upon the standard New Keynesian dynamic general equilibrium model so as to compare our results to the well-known results of Leeper (1991, 2016) and, more generally, to the literature on the fiscal-monetary policy mix. We find that the EU's new fiscal rule, despite its intentions, works practically like active fiscal policy. Given this, it does not leave room for active monetary (interest rate) policy; instead, the central bank has to accommodate the active fiscal policy which means that the policy interest rate can react only weakly to inflation. This will undermine the ECB's key mandate. |
| Keywords: | fiscal rules, macroeconomic policy assignment |
| JEL: | E62 E63 E52 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12139 |
| By: | Faella, Francesca; Scheins, Christopher; Schwarz, Claudia; van Breemen, Vivian |
| Abstract: | In this paper, we empirically investigate how suitability concerns detected by the SSM in the fitness and propriety of management body appointees impact the performance of European banks in the period 2014-2023. We provide evidence that management body appointees where the assessment of the supervisory authorities raised concerns, had a negative impact on the bank’s future performance. The negative effect can be attributed to appointees where the supervisory assessment revealed such severe concerns that ancillary measures were imposed. These results outline the importance of the SSM’s work for safeguarding the quality of bank’s corporate governance and suggest that the Supervisors seem to be effective in pointing out those appointees that exhibit severe concerns. In addition, we find that the designation of female appointees by supervised entities increased the bank’s performance sustainably. This result indicates that stimulating diversity, in terms of gender, in the management bodies of banks positively contributed to bank performance. JEL Classification: G21, G28, G30, M14 |
| Keywords: | ancillary measures, banking supervision, management body appointees |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253115 |
| By: | McGuinness, Seamus (Economic and Social Research Institute, Dublin); Kelly, Lorcan (Economic and Social Research Institute, Dublin); Devlin, Anne (Economic and Social Research Institute, Dublin); Whelan, Adele (ESRI, Dublin) |
| Abstract: | This paper examines the earnings and job satisfaction of Vocational Education and Training (VET) graduates in the European Union (EU) using two definitions of vocational education: a self-reported definition and a more specific definition that incorporates work-based learning. The incidence of third-level VET falls from 74% to 29% under the stricter definition. Across the EU, the returns to vocational and academic qualifications are comparable for upper secondary, post-secondary and tertiary qualifications. Earnings premia vary between countries, with VET generating higher returns in just under one-third of all EU-28 members. Additionally, third level VET graduates enjoy higher levels of job satisfaction. |
| Keywords: | work-based learning, european countries, job satisfaction, earnings, vocational education, on-the-job training |
| JEL: | I21 I26 J24 J30 J31 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18134 |
| By: | Marie-Sophie Lappe; Francesco Nicoli |
| Abstract: | Green public procurement supports EU climate goals but may conflict with other objectives, creating trade-offs that challenge its effectiveness |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:bre:wpaper:node_11304 |
| By: | Cigna, Luca; Di Carlo, Donato; Durazzi, Niccolò |
| Abstract: | The green transition is fundamentally transforming contemporary economies and societies. This article investigates how European models of capitalism perform and specialize across the green value chain—conceptualized as innovation, manufacturing, services, and deployment—and how national skill formation systems underpin these specializations. Integrating insights from comparative capitalism literatures with descriptive statistics and principal component analysis (PCA), we develop and test expectations about growth regime‐specific patterns of green specialization and skill profiles. Our findings reveal marked cross‐national variation between green leaders and laggards: Nordic economies characterized by dynamic services and continental manufacturing‐based models are frontrunners in the green transition, while Eastern Europe's FDI‐led regimes and Southern Europe's demand‐led regimes emerge as laggards. Furthermore, PCA results uncover two distinct decarbonization pathways among European green leaders: one group of countries (Austria, Finland, Germany) specializes in green manufacturing, supported by high shares of STEM graduates; another (Denmark, Switzerland, and to a lesser extent Norway and Sweden) focuses on green innovation and dynamic services, sustained by a strong supply of STEM doctorates. This article contributes to political economy debates on the green transition by identifying distinct green specializations and decarbonization pathways across European models of capitalism and by underscoring the growing centrality of high‐level STEM skills in the green transition. |
| Keywords: | growth regimes; skill formation; global value chains; green transition; comparative political economy |
| JEL: | N0 R14 J01 |
| Date: | 2025–09–23 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129591 |