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on European Economics |
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Issue of 2025–11–10
sixteen papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Camarero, Mariam; Sapena, Juan; Tamarit, Cecilio |
| Abstract: | This paper estimates time-varying tax-tilting parameters for eleven EMU member states from 1970 to 2024 using a panel time-varying parameter state-space model that extends the traditional tax-smoothing framework to capture both common and country-specific dynamics. Core countries such as Austria, Belgium, Germany, the Netherlands, France, Ireland, and Finland display a more prudent fiscal stance, while peripheral countries, including Greece, Italy, Portugal, and Spain, shift taxation toward the future, generating current deficits. These patterns are driven by differences between government discounting of future revenues and market rates, and are further influenced by structural factors such as aging populations and unemployment. Periods of negative real interest rates relax fiscal constraints, encouraging governments to delay tax adjustments. The results underscore the need to reduce cross-country fiscal heterogeneity to strengthen long-term sustainability and advance fiscal integration in the Euro Area. |
| Keywords: | Tax-smoothing, time-varying cointegration, multiple structural breaks, Kalman Filter, Time-varying parameters, EU fiscal policy |
| JEL: | C22 E62 H62 |
| Date: | 2025–08–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125942 |
| By: | Camille Jehle; Florian Le Gallo |
| Abstract: | Using a large language model, we build a unique 400, 000 corpus of articles related to the European Union (EU) published between 2005 and 2023 in more than 100 French local and national newspapers. Drawing on this dataset, we show that the interest of French newspapers in European issues has remained stable since 2005 and is primarily driven by the European elections every 5 years. An analysis of polarity and topics covered reveals that the local press pays greater attention to tangible EU initiatives—such as cultural exchange programs—which are generally portrayed in a positive light. Finally, we show that French media sentiment towards the European Union deteriorated significantly following the financial and sovereign debt crises, mirroring the trend observed in Eurobarometer opinion surveys on EU sentiment. However, from 2013 onward, a divergence emerged since sentiment in the press gradually returns to pre-crisis levels while public image of the European Union in the opinion remains below these levels. Focusing on the Euro area, we do not observe such a divergence. |
| Keywords: | Sentiment Indicator, European Sentiment, Press Text Mining |
| JEL: | C55 F59 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1008 |
| By: | Blatnik, Nina; Kavonius, Ilja Kristian; Morais, Luís Teles |
| Abstract: | In recent years, projects have sought to embed distributional aspects within national accounts, with household distributional information set to feature in the next System of National Accounts. There is growing emphasis on capturing all material dimensions of welfare—income, consumption, and wealth—at both macro and micro levels within a unified framework. This paper develops distributional multidimensional accounts for income and wealth, building on the Distributional Wealth Accounts (DWA), an experimental quarterly dataset first released in January 2024 by the European System of Central Banks. The DWA integrates the Household Finance and Consumption Survey (HFCS) with macro statistics on household financial and non-financial balance sheets. We use the HFCS’s micro population to estimate consistent joint income transactions for these households, enabling analysis of the joint distribution of income and wealth, including wealth by income decile. This is the first multi-country approach to cover complete income accounts to disposable income and full balance sheets on a shared household sample. JEL Classification: D30, D31, E01, E21 |
| Keywords: | distributional national accounts, households, income, income distribution, national accounts |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253142 |
| By: | Valentin Burban; Sophie Guilloux-Nefussi |
| Abstract: | Inflation in the euro area reached its peak at 10.6% in October 2022 and receded quickly afterwards. Solidly anchored inflation expectations proved instrumental to this disinflation. But how can we gauge anchoring in practice? This blog post reviews various metrics to monitor the anchoring of inflation expectations in the euro area. <p> L’inflation dans la zone euro a atteint son pic à 10, 6 % en octobre 2022 et a reflué rapidement par la suite. Les anticipations d’inflation solidement ancrées se sont révélées déterminantes dans le processus de désinflation. Mais comment évaluer l’ancrage dans la pratique ? Ce billet de blog examine diverses mesures afin de suivre l’ancrage des anticipations d’inflation dans la zone euro. |
| Date: | 2025–09–18 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:econot:412 |
| By: | Ifrim, Adrian; Kollmann, Robert; Pfeiffer, Philipp; Ratto, Marco; Roeger, Werner |
| 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: | Euro Area, Trade Balance, Real Exchange Rates, Productivity Growth Gap |
| JEL: | E2 E3 F3 F4 |
| Date: | 2025–09–04 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126077 |
| By: | Allegra Pietsch; Dilyara Salakhova |
| Abstract: | The green bond market has experienced rapid growth in recent years, driven by increasing global awareness of climate change. However, the existence, magnitude and driving forces behind the “greenium” in the secondary market - a price premium associated with green bonds - remain subject to debate. This study investigates the evolution of the greenium in the euro area from 2016 to 2023, encompassing a period of significant macroeconomic shifts, including the COVID-19 pandemic, energy crisis, and the subsequent period of heightened inflation and monetary tightening. Our analysis applies a k-prototypes matching algorithm to construct a closely matched panel of European green and conventional bonds and documents a novel finding that retail investors' demand for green bonds partly drives the greenium. Sensitivity of retail investors' financial conditions to the macroeconomic situation and particularly tighter monetary policy may explain investors' appetite for green bonds and thus the greenium time dynamics. Finally, we confirm investors' preferences for green bonds with higher credibility of both bonds and bond issuers. |
| Keywords: | Green Bonds; Greenium; Retail Investors; Sustainable Finance; Corporate Sustainability |
| JEL: | G12 G14 Q50 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1010 |
| By: | Jens Christensen; Sarah Mouabbi; Caroline Paulson |
| Abstract: | We document that German inflation-linked government bond yields contain a convenience or safety premium averaging 0.33 percent. Despite that, the German Federal Finance Agency decided to cease all future issuance of these bonds in November 2023. We examine the market response to this announcement and find that neither the safety premia nor the trading conditions of these bonds have been negatively impacted. Hence, this bond market remains a rich source of information on real rates in the euro area in addition to offering investors a safe inflation-protected asset. |
| Keywords: | Affine Arbitrage-Free Term Structure Model, Financial Market Frictions, Convenience Premium, Safety Premium, Rstar |
| JEL: | C32 E43 E52 G12 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1012 |
| By: | Rania Antonopoulos |
| Abstract: | Despite the gradual economic recovery and positive policy responses during the COVID-19 pandemic, the problem of long-term unemployment continues to plague millions in Europe. To effectively address this and other overlapping crises in Europe, we need radical changes, according to Senior Scholar Rania Antonopoulos; and in this context, the job guarantee policy has been gaining support from progressive forces throughout the EU. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:lev:levypn:24-4 |
| By: | Giancarlo Giorgetti |
| Abstract: | Paolo Baffi Lecture |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp25256 |
| By: | Victor Le Coz (LadHyX - Laboratoire d'hydrodynamique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique); Nolwenn Allaire (European Central Bank - European Central Bank); Michael Benzaquen (LadHyX - Laboratoire d'hydrodynamique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique); Damien Challet (MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec - Université Paris-Saclay, FiQuant - Chaire de finance quantitative - MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec - Université Paris-Saclay) |
| Abstract: | Using the secured transactions recorded within the Money Markets Statistical Reporting database of the European Central Bank, we test several stylized facts regarding 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. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05273325 |
| By: | Avirup Chakraborty |
| Abstract: | The European Union Emissions Trading System (EU ETS), the worlds largest cap-and-trade carbon market, is central to EU climate policy. This study analyzes its efficiency, price behavior, and market structure from 2010 to 2020. Using an AR-GARCH framework, we find pronounced price clustering and short-term return predictability, with 60.05 percent directional accuracy and a 70.78 percent hit rate within forecast intervals. Network analysis of inter-country transactions shows a concentrated structure dominated by a few registries that control most high-value flows. Country-specific log-log regressions of price on traded quantity reveal heterogeneous and sometimes positive elasticities exceeding unity, implying that trading volumes often rise with prices. These results point to persistent inefficiencies in the EU ETS, including partial predictability, asymmetric market power, and unconventional price-volume relationships, suggesting that while the system contributes to decarbonization, its trading dynamics and price formation remain imperfect. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.22341 |
| By: | Rania Antonopoulos |
| Abstract: | In comparison to the policy responses in the aftermath of the 2008-9 global financial crisis, the reactions of EU policymakers to the combined shocks of the COVID-19 crisis and Ukraine-Russia conflict reveal a greater willingness to deploy public finance in support of the population. Yet, while this display of renewed solidarity is commendable, policymakers have a long way to go in building a more resilient and sustainable EU. A confrontation with long-standing "business as usual" EU rules and policies is necessary, and it is in this context that the job guarantee deserves serious consideration. Acting for the common purpose of reducing and eventually eliminating long-term unemployment would send a clear message that a Social Europe is possible. |
| Date: | 2023–12 |
| URL: | https://d.repec.org/n?u=RePEc:lev:levyop:op_71 |
| By: | Franziska Funke; Théo Konc; Linus Mattauch; Michael Pahle; Antonia Schwarz; Stephan Sommer |
| Abstract: | We propose a theory of public appraisal and employ it to explain divergent public opinion on similar economic policy instruments. In a survey-based policy design experiment with 13, 665 respondents from seven European countries, we study how policy perceptions and support rates differ across carbon pricing designed as “carbon taxation” and “emissions trading”. While there is considerable cross-country variation in the appraisal of both instruments, the emissions trading design reduces opposition in all countries except Germany. We find that the treatment effects of instrument design on policy perceptions are substantial: carbon taxes are consistently more often perceived as increasing the state budget, harming the economy, and increasing costs of living and production. Using causal mediation analysis, we ascertain that lower opposition to emissions trading is partly due to its perception as less costly. Overall, our results suggest that the public consistently perceives taxes as a “tougher” measure, and that emissions trading appeals more to European constituencies not already supportive of climate policy. |
| Keywords: | political economy, climate change, cap-and-trade, carbon tax, perceptions |
| JEL: | Q54 Q58 D78 H23 P48 |
| Date: | 2025–10–09 |
| URL: | https://d.repec.org/n?u=RePEc:bdp:dpaper:0076 |
| By: | Arnone, Massimo; Costantiello, Alberto; Drago, Carlo; Leogrande, Angelo |
| Abstract: | This paper explores the connection between innovation dynamics and the Bank Capital to Asset Ratio (CAR) in the context of 39 European nations from 2018 to 2025. With a multidimensional panel data approach that incorporates a combination of static and dynamic panel models and machine learning algorithms—specifically Decision Tree Regression—the study conducts a data-oriented analysis of the impact of various types of innovation on the resilience of the banking sector. The study differentiates innovation inputs (e.g., trademark applications, innovator share), outputs (e.g., new-to-marketing and new-to-firm product sales), and productivity factors and factors permitting a finely grained comprehension of innovation inputs and financial consequences. Cluster analysis is applied to classify countries into innovation performance groups and is followed by regression and variable importance calculations. The study identifies that process innovations executed by small and medium enterprises (SMEs) are positively linked with CAR and that information is associated with greater financial stability, whereas innovation outputs and productivity indicators at times relate inversely and register corresponding financial stress in the face of innovation-driven transitions. Further, pre-stage innovation inputs may raise banks' uncertainty and register systematic risk escalation. The model of a Decision Tree also reveals the sales of innovative products and labor productivity to be the most robust determinants of CAR with varied directional impacts between them. These results document the innovation-finance nexus complexity and refute the supposition that innovation equally strengthens economic prudence. The study contributes new knowledge to the literature through the combination of the assessment of financial prudency with the type of innovation and provides clear policy directions for the synchronization of innovation strategies with macroprudency aims across the European region. |
| Keywords: | Innovation, Bank Capital, Financial Stability, Decision Tree Regression, Europe. |
| JEL: | C38 E44 G21 O31 O52 |
| Date: | 2025–08–31 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125982 |
| By: | Amady Léchenet |
| Abstract: | This paper investigates the impact of extending Flow-Based Market Coupling (FBMC) on electricity price convergence in Europe. Market coupling mechanisms, particularly FBMC, play a crucial role in harmonizing electricity prices between bidding zones by optimizing cross-border capacity allocation. We analyze the transition from the Available Transfer Capacity (ATC) approach to FBMC, highlighting its advantages for improving price con- vergence. Using daily day-ahead electricity prices from 12 member countries of the Core Capacity Calculation Region (CCR), we construct a price dispersion indicator. Our results show a temporary reduction in price spreads in the region Core Europe following the market coupling reform. The short-term effect is significant but transitory, whereas structural deter- minants such as gas prices remain dominant. Comparing countries that adopted Flow-Based (FB) mechanism in 2015 with those that joined in 2022, we find evidence of a permanent and significant reduction in price spreads for the late adopters. |
| Keywords: | Electricity wholesale markets, market coupling, price convergence |
| JEL: | Q41 Q42 Q48 L94 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:drm:wpaper:2025-41 |
| By: | Nicolas Fanta (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic) |
| Abstract: | We ask whether ECB communication outside monetary policy meeting days moves the EUR/USD exchange rate within minutes. We build an event study on one-minute prices and a Reuters-based corpus of 1, 868 statements coded as dovish, neutral, or hawkish from 2008 to 2016. Identification combines strict exclusion windows for macro and central bank confounders, time-of-day–matched controls, and Monte Carlo resampling to test sensitivity. We also open four splits that theory suggests may matter: President, conventional versus unconventional topics, Purdah versus outside the pre-meeting window, and the regime before and during the zero lower bound. Across the full sample and every split, price responses are small and short-lived. Cumulative abnormal returns remain within a few basis points by t=+20, and scattered significant minutes are not sequential. Volatility reacts only modestly. After intraday seasonality adjustment in the matched-difference design, dovish items are associated with a brief decline in volatility in the first half hour, while neutral and hawkish items are statistically similar to controls. The contribution is twofold. First, we provide a comprehensive intraday assessment of ECB communication outside meeting days for the EUR/USD market over a consistently coded 2008–2016 window. Second, we deliver a transparent identification template for high-frequency communication research by combining time-of-day–matched controls with systematic resampling. Together, the results indicate that such communication does not generate lasting directional moves; any impact appears as small and short-lived changes in realised volatility. |
| Keywords: | central bank communication, monetary policy, ECB, exchange rates, AI, event study |
| JEL: | E52 E58 F31 C55 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:fau:wpaper:wp2025_23 |