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on European Economics |
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Issue of 2025–12–15
27 papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Mariam Camarero (University Jaume I); Juan Sapena (Catholic University of Valencia); Cecilio Tamarit (University of Valencia) |
| 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: | H62 E62 C22 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:drx:wpaper:202539 |
| By: | Ceglar, Andrej; Jwaideh, Mark; Danieli, Francesca; Pasqua, Carlo; Hutchinson, John; Ranger, Nicola; Heemskerk, Irene; O’Donnell, Emma; Cimini, Francesco; Sabuco, Juan; Alvarez, Jimena |
| Abstract: | Degraded ecosystems undermine productivity, disrupt supply chains and heighten vulnerability to shocks, creating risks for the real economy and the financial sector. Biodiversity loss and ecosystem degradation also pose a growing risk to price stability, with increasing evidence that ecosystem shocks contribute to inflationary pressures in the euro area. This paper moves from dependency mapping to a risk-based assessment of the euro area economy and banks, applying the nature value-at-risk (NVaR) framework, which links biophysical shocks to ecosystem services with sectoral-production functions1. Water-related risks, including flood protection, surface water and groundwater scarcity, and water quality, emerge as the most material for the euro area economy. Surface-water scarcity alone could expose up to 24% of euro area output to risk under a drought event with a 100-year return period. A complementary endogenous-risk analysis that was conducted, quantified the extent to which euro area firms and banks may contribute to the very ecosystem degradation on which their activities depend, creating feedback loops that could amplify financial risks over time. The results showed material feedback loops between ecosystem degradation and banks’ own portfolios, with water-related risks being the dominant transmission channel. Overall, this study takes a first step towards the identification of risk hotspots and provides a more robust assessment of nature-related risks than prior studies. It also discusses the remaining data gaps and methodological constraints, and outlines the next steps to be taken, as a priority, to address this. JEL Classification: Q51, Q54, E31 |
| Keywords: | ecosystem degradation, endogenous risk, nature-related financial risks, price stability, sectoral output at risk, water scarcity and quality |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbops:2025380 |
| By: | Casas Pablo (European Commission - JRC); Christou Tryfonas (European Commission - JRC); Garcia Rodriguez Abian (European Commission - JRC); Lazarou Nicholas Joseph (European Commission - JRC); Lopez Cobo Montserrat (European Commission - JRC); Salotti Simone (European Commission - JRC); Signorelli Serena (European Commission - JRC); Torrecillas Jodar Juan (European Commission - JRC); Torrecilla Salinas Carlos (European Commission - JRC) |
| Abstract: | This paper examines the macroeconomic effects of digital investments in the European Union during the 2021–2027 period. Using a dynamic spatial multi-country and multi-sector general equilibrium framework calibrated for all EU Member States, we analyse how different forms of digital interventions, such as public infrastructure investment, firm-level digitalisation, and skills development, affect the macroeconomy of EU27. The analysis draws on a novel dataset that covers approximately €175 billion of planned investments financed through five major EU programmes. Results show that digital investments have a positive and lasting impact on output, employment, as well as on capital accumulation and household consumption across the Union, revealing an interesting price-competitiveness channel for net exports. The inclusion of cross-border digital spillovers further amplifies these effects, suggesting that improvements in digital connectivity and infrastructure generate benefits beyond national economies. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:termod:202510 |
| By: | David Worms |
| Abstract: | I document that high-frequency euro area monetary policy surprises – measured as changes in risk-free rates around the Eurosystem‘s policy announcements – are not exogenous to information regarding macroeconomic news and financial market developments that pre-date the announcements. More specifically, around 20% of the variation of surprises can be explained by pre-dated information. I show that the violation of the exogeneity of conventional surprise measures introduces a considerable bias into estimates on the effects of monetary policy on euro area macroeconomic outcomes. |
| Keywords: | High-Frequency Identification; Macro News; Monetary Policy |
| JEL: | E43 E52 E58 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbwpp:850 |
| By: | Beatrice Pataracchia; Philipp Pfeiffer; Marco Ratto; Jan Teresiński |
| Abstract: | We estimate a large-scale open-economy DSGE model to assess the role of energy commodity prices in euro area inflation and short-run output dynamics. The model features rich pass-through from energy import prices to consumer and producer prices, distinguishing between natural gas and crude oil and their use in both consumption and production. Transmission is quantified through direct effects on household energy consumption, indirect effects via energy as an intermediate input, and second-round general-equilibrium effects through, for example, wages and markups. Bayesian estimation suggests that in 2022, shocks to energy import prices alone added about 2 percentage points (pps) to inflation. Integrating broader energy measures increases this contribution to over half of the 2021–22 surge (to around 3 pps). Backward-looking indexation, often associated with wage–price spirals, is estimated to be limited. The post-2020 surge leaves substitution elasticities broadly unchanged but points to a steeper Phillips curve and slightly lower real wage rigidity. |
| JEL: | C51 E31 F41 Q43 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:233 |
| By: | Giovanni Sciacovelli |
| Abstract: | This paper studies the role of adjustable-rate mortgages (ARMs) in monetary policy transmission within the Euro Area. Conventional wisdom holds that ARMs are relevant per se. This study finds that the presence of liquidity-constrained households strongly influences their impact. Using Euro Area survey data, I document that transmission is stronger in countries that exhibit both high ARM shares and sizable shares of liquidity-constrained households. To interpret this finding, I develop a heterogeneous-agent model featuring: (i) heterogeneity in marginal propensities to consume (MPCs), (ii) agents making both housing and mortgage choices, and (iii) a fraction of households with ARMs. In the model, MPCs determine the extent to which changes in mortgage payments translate into changes in consumption, making ARMs an important transmission vehicle only when paired with high MPCs. These results highlight that accounting for household heterogeneity in MPCs is essential to assess the strength of transmission through ARMs. |
| Keywords: | Adjustable-rate mortgages; Euro Area; household heterogeneity; marginal propensity to consume; monetary policy |
| Date: | 2025–12–05 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/257 |
| By: | Hirschbühl, Dominik; Ceglar, Andrej; Emambakhsh, Tina; Pasqua, Carlo; Cojoianu, Theodor; Qi, Yifan; Rho, Caterina; Hu, Elsie; Petracco, Marco; Biganzoli, Fabrizio; de Jager, Alfred; Herrero, Laura Garcia; Mandrici, Andrea |
| Abstract: | This study examines how euro area banks factor pollution-induced biodiversity risks into lending decisions, using data from 832 banks and 5, 000 major polluters. Our results show that banks are increasingly pricing these risks by adjusting loan-to-value ratios and interest rates. Banks adjust lending conditions in line with EU pollution and biodiversity protection legislation, particularly for companies with large pollution footprints near biodiversity-protected areas or those contributing to Environmental Quality Standards failures of downstream surface waters. The former is driven primarily by banks’ adoption of biodiversity policies and public commitments to the Equator Principles, while the latter is a result of regulatory risks. Our findings inform financial supervisors on how banks manage risks associated with the EU’s zero pollution ambition, shed light on the interplay between biodiversity protection legislation and banks’ lending decisions, and offer actionable guidance on leveraging existing regulatory frameworks to address the climate-biodiversity-pollution nexus. JEL Classification: G1, G21, Q53, Q57 |
| Keywords: | biodiversity loss, chemical pollution, EU Biodiversity Strategy, loan pricing, Natura 2000 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253164 |
| By: | Vanegas, Juan Duran; Jordan, Michelle Alicia; Siedschlag, Iulia |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:esr:wpaper:wp812 |
| By: | Francesco Ravazzolo (BI Norwegian Business School, Free-University of Bozen-Bolzano and RCEA); Luca Rossini (University of Milan and Fondazione Eni Enrico Mattei); Andrea Viselli (University of Milan) |
| 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: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:fem:femwpa:2025.25 |
| By: | Christophe Hulin; Pierre-Antoine Laprat; Christelle Sapata; Hugo Ségard |
| Abstract: | This study investigates the impact of specific policy announcements made by the European Commission (EC) on European Union Member States’ sovereign yield spreads, specifically those related to the Excessive Deficit Procedure (EDP), Adjustment Programmes linked to financial assistance, and Post Programme Surveillance (PPS). We employ an original time series intervention analysis based on an Autoregressive Distributed Lag (ARDL) model. While time series intervention analysis is frequently used in various fields, this study is the first attempt to utilise this approach to estimate the impact of a policy announcement on financial markets. Furthermore, the innovative application of the ARDL model in this context allows us to identify the dynamic effects of policy announcements over time, capturing both short-term and long-term relationships between yield spreads and their key macroeconomic and financial determinants. Thus, the policy announcement effect is determined by carefully comparing the behaviour of the dependent variable prior to and following the intervention. We consider various specifications of the intervention variable and its associated transfer function. Our findings reveal that EDP implementation or abrogation exerts a significant, albeit moderate, reduction in EU Member States’ sovereign spreads. PPS announcements appear to have a negligible impact. In contrast, adjustment programmes-related announcements substantially reduce the yields, not only in the country under consideration but also across other European sovereign bond markets. This may show that EC announcements, especially those pertaining to adjustment programmes, surprise financial market participants and contribute to a decrease in yield spreads, whereas PPS and EDP announcements are largely already priced in by financial market participants. |
| JEL: | E44 E60 G15 G28 C33 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:235 |
| By: | Ravazzolo, Francesco; Rossini, Luca; Viselli, Andrea |
| 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: | Environmental Economics and Policy, Resource/Energy Economics and Policy, Sustainability |
| Date: | 2025–11–12 |
| URL: | https://d.repec.org/n?u=RePEc:ags:feemwp:376266 |
| By: | Christian Buelens; Staffan Lindén |
| Abstract: | This paper looks at household inflation attention in the euro area, using the European Commission's Business and Consumer Survey. The main contributions are to measure inflation inattention and its drivers and to illustrate how inflation inattention differs across socio-economic categories (gender, income, education and age). We use two measures: self-reported inflation inattention, corresponding to the share of `don't know' responses and a new index of revealed inflation attention. This index assesses how well consumer inflation perceptions match actual inflation outturns and takes into account biases by survey participants. We find that inflation attention increases with inflation, and accelerates when inflation exceeds a certain level. Our results also show that inflation perceptions and expectations change not only due to revisions in views, but also because individuals switch from having no view to holding a view when inflation is high. We also find that there are structural differences in inflation inattention across socio-economic categories, which are closely related to the overestimation of inflation in these categories. These findings have implications for the interpretation of inflation perceptions and expectations and are relevant for the targeting of policy communication towards specific groups and depending on the inflation environment. |
| JEL: | C81 D83 D84 E31 E7 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:225 |
| By: | Adina-Elena Fudulache (EUROPEAN CENTRAL BANK AND GOETHE UNIVERSITY FRANKFURT); María del Carmen Castillo Lozoya (BANCO DE ESPAÑA) |
| Abstract: | We exploit banks’ early repayments of targeted longer-term refinancing operations (TLTRO) following the program’s recalibration in October 2022 as a laboratory to uncover demand drivers of central bank liquidity. We formulate and estimate a discrete-time hazard model to early exit from TLTRO to identify what bank (country) characteristics drive a sticky, prolonged demand for central bank (long-term) operations as opposed to an early exit from such facilities. We also examine whether the more liquidity-risk exposed banks during the TLTRO phasing out period had a higher probability of becoming “liquidity dependent” on the ECB when exiting (Acharya et al., 2023). Finally, we discuss the policy implications of our findings, particularly in the context of the recent review of the ECB’s operational framework. |
| Keywords: | monetary policy normalisation, TLTRO, demand-driven operational frameworks, discrete-time hazard models |
| JEL: | E52 E58 G21 C41 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2548 |
| By: | Claudia Fernandez Garcia; Johannes Schuffels; Valeria Ferreira; Luis Pedauga; Jose Manuel Rueda Cantuche; Daria Ciriaci |
| Abstract: | This paper examines the expected economic impact of the Recovery and Resilience Facility (RRF) in the Netherlands in the medium term and its sectoral and regional distribution, leveraging a novel sectoral database and the dynamic general equilibrium FIDELIO model. The overall results show that the RRF has a total expected impact in the Dutch economy of EUR 13 bn in the medium term, with EUR 4.3 bn in direct impact and EUR 8.8 bn in spillover effects from other Member States' plans. The Dutch 'Construction' sector is expected to benefit the most from the Dutch RRP. This is largely driven by an energy efficiency subsidy, for which we provide evidence that the largest effects in terms of economic impact can be expected in the more rural parts of the country. Regarding spillovers from other Member States’ RRPs, the ‘Wholesale trade’ sector is expected to benefit the most due to Rotterdam’s central role as a logistics hub for the EU. The impact of the RRF in the Netherlands is spread out over the country, with significant differences across sectors. Overall, the findings underscore the importance of considering the EU as a whole when assessing the RRF's impact and highlight that potential effects of the RRF in open and competitive economies are significantly larger than their initial allocation. |
| JEL: | C82 E61 E62 F15 F17 F41 F42 F62 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:232 |
| By: | Casoli, Chiara; Manera, Matteo; Pedini, Luca; Valenti, Daniele |
| Abstract: | We construct a comprehensive set of climate indices for European countries that account for several variables related to weather, atmospheric conditions, and water availability. Our dataset includes monthly gridded climate observations from ERA5-Land, aggregated at the country level. Employing a Multilevel Dynamic Factor Model, we disentangle a global indicator, capturing overall climate dynamics across Europe, from country-specific local indices. While most empirical studies proxy climate through temperature or precipitation, our approach acknowledges that other atmospheric dimensions, such as humidity, radiation, and evaporation, jointly shape climatic variability and its economic effects. The global index primarily reflects temperature patterns common to most European countries, whereas the local indicators capture other meteorological phenomena and variations in water reserves. Finally, we show, via panel local projections, that different filtering and detrending procedures used to construct climate anomalies influence the estimated effects of climate shocks on economic activity. |
| Keywords: | Climate Change, Environmental Economics and Policy, Sustainability |
| Date: | 2025–11–10 |
| URL: | https://d.repec.org/n?u=RePEc:ags:feemwp:376264 |
| By: | Gergő Motyovszki |
| Abstract: | US trade policy has taken a sharp protectionist turn under the second Trump administration, with the aim of boosting domestic manufacturing production, reducing the US trade deficit, and raising budgetary revenues ”paid by foreigners.” This paper assesses the macroeconomic consequences of recent US tariff announcements, based on quantitative simulations by the European Commission’s multi-region New Keynesian DSGE model, QUEST. Results indicate that, rather than aiding domestic production, tariff hikes weaken the US economy. While tariffs shift demand from imports towards US-produced goods, they also act as an adverse supply shock. In addition, the equilibrium terms-of-trade appreciation crowds out exports, and monetary tightening in response to inflationary pressures hurts domestic demand as well. Although tariff revenues generate additional fiscal space for the US government, only around a quarter of the burden falls on foreigners in the form of a US terms-of-trade gain. Finally, tariff hikes reduce US trade deficits only temporarily. The effects on EU GDP are moderately negative, driven mainly by weaker exports to the US. At the same time European exporters gain market share in third countries at the expense of less competitive American firms. US tariffs on other countries lead to trade diversion, slightly deepening the short-term economic losses in Europe, but reversing later on. A general tit-for-tat retaliation would deepen the negative impacts in both the US and the EU. Beyond the direct effects of tariffs, rising uncertainty and a loss of investor confidence in the US economy further aggravates the adverse economic consequences by tightening financing conditions. Sensitivity analyses highlight the role of tariff persistence, the currency of trade invoicing and the monetary policy response. |
| JEL: | E62 F13 F41 F42 F47 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:234 |
| By: | Eberhartinger Eva; Speitmann Raffael (European Commission - JRC); Sureth-sloane Caren |
| Abstract: | This study investigates the impact of mandatory public country-by-country reporting (CbCR) on European banks’ engagement in tax and regulatory havens characterized by financial secrecy. Employing a difference-in-differences approach, we find that following the introduction of CbCR, European banks reduced their number of tax haven subsidiaries by approximately one-third compared to insurers, which were exempt from the disclosure requirement. Further analysis reveals that this decline is primarily driven by withdrawals from economically insignificant “dot tax havens” and from countries that serve as both tax and regulatory havens. Additionally, we observe that banks with low exposure to reputational risk prior to the reform are more likely to reduce their presence in bank havens. These results reveal that public CbCR prompts withdrawals from low-tax locations but only under specific conditions. Public CbCR curtails tax haven presence when both financial secrecy and reputational concerns are at play, but on its own may not curb tax haven use. These insights contribute to ongoing tax policy debates by highlighting the limitations and conditional effectiveness of transparency-driven regulations. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:taxref:202505 |
| By: | Dutt, Nilanjana (Bocconi University); Espinosa, Miguel (Bocconi University); Li, Ruyue (Boston University); Rath, Johan (Bocconi University); Sung, Elie (HEC Paris) |
| Abstract: | While we know a lot about how lobbying works in the United States, we know much less about how it operates in the European Union (EU), despite the EU's major global influence. The EU's complex system of governance creates unique challenges and opportunities for corporate lobbying, with important implications for policymaking. This paper helps fill that gap by building a new dataset on lobbying activities in the EU and documenting how companies engage with key institutions like the European Commission and the European Parliament. We also compare lobbying in the EU and the U.S. and examine what drives companies to lobby. Our findings raise important questions about corporate influence in EU policymaking and provide a foundation for future research. |
| Keywords: | Lobbying; European Union |
| JEL: | D72 |
| Date: | 2025–06–02 |
| URL: | https://d.repec.org/n?u=RePEc:ebg:heccah:1577 |
| By: | José E. Bosca; Javier Ferri; Margarita Rubio |
| Abstract: | We study the macroeconomic and welfare consequences of bond preference convergence within a monetary union. Using a two-country DSGE model calibrated to Germany and Spain, we compare two scenarios: convergence toward Spanish bond preferences and convergence toward German bond preferences. The direction of convergence proves decisive. When preferences shift toward those of Spain, union-wide private debt expands, long-run GDP declines, and macro-financial volatility rises, though inflation volatility falls. Welfare increases for the union as a whole in this scenario, with Germany gaining the most and Spain benefiting more modestly. By contrast, convergence toward German bond preferences reduces union-wide private debt and output volatility, but generates only moderate welfare gains for Germany and significant welfare losses for Spain. These results highlight that financial convergence does not yield uniform benefits. Its consequences depend on both the direction of convergence and its distributional effects across countries and households. The findings also point to a trade-off between welfare and stability, underscoring the need for macroprudential tools and fiscal arrangements to manage the risks associated with deeper convergence in bond preferences. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:fda:fdaddt:2025-12 |
| By: | Federico Zilia (Department of Environmental Science and Policies, University of Milan); Paolo Nota (Department of Environmental Science and Policies, University of Milan); Alessandro Olper (Department of Environmental Science and Policies, University of Milan) |
| Abstract: | This paper examines how weather variability influences inter-sectoral labour reallocation and sectoral value-added (GVA) growth across 238 European regional units (NUTS2 level) from 1980 to 2022. Leveraging this large and granular dataset, we employ flexible functional forms within a fixed-effects panel framework, where the impact of weather shocks is conditional on long-term climate. Unlike previous empirical research in climate economics, which primarily focused on inter-annual variations in average temperature, this study emphasizes the significant role of daily temperature variability. Temperature variability is particularly critical in warmer regions with low seasonal variability, which are more vulnerable to sudden temperature shifts or rainfall shocks. In hot and low seasonal variability regions – i.e. Mediterranean ones – we find a robust adaptive response of the labour market where workers move from climate-sensitive agriculture to less affected service sector. The heterogeneous effects of weather shocks on sectoral value-added growth appear to be a possible mechanism driving this labour reallocation, although more complex factors may also be at play. |
| Keywords: | climate change, labour reallocation, day-to-day temperature variability, panel econometrics, European NUTS2 |
| JEL: | O13 Q51 Q54 J43 J31 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:fem:femwpa:2025.30 |
| By: | Guillaume Cousin; Christine Frayne; Vítor Dias Martins; Bořek Vašíček |
| Abstract: | House prices have risen sharply across the European Union over the past decade, following cycles of boom, correction, and renewed growth, with recent increases driven by structural factors. This has outpaced income growth and reduced affordability, particularly in the context of higher interest rates, while underdeveloped rental markets often fail to provide effective alternatives. Housing demand is influenced by incomes, wealth, demographics, and mortgage conditions, with wealthier households and investors playing a growing role. Urbanisation, migration, and changing family structures continue to amplify pressures in cities with limited supply. At the same time, shifts in preferences, the rise of short-term rentals, and institutional investors have added to demand in specific markets, while climate risks are increasingly priced into assets. On the supply side, new construction has lagged behind demand due to regulatory barriers, sector inefficiencies, and labour shortages, with renovation often prioritised over building. Rising land prices, concentrated ownership, and restrictive zoning further constrain supply. Addressing affordability requires a comprehensive policy mix, balancing direct housing interventions with broader fiscal, macroprudential, and environmental measures. Evidence suggests supply-side reforms—such as land-use changes, social housing investment, and infrastructure improvements—are more effective than demand-side subsidies, which tend to inflate prices. Other tools, including rent regulation, taxation, and macroprudential measures, involve tradeoffs and distributional impacts. Given the complexity of housing policy and its multi-level governance, tailored approaches at EU, national, and local levels are essential. |
| JEL: | G51 R21 R31 R52 R5 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:228 |
| By: | Simona Pojar; Johanna Bärnreuther |
| Abstract: | Numerous workstreams have been developed to foster more climate- and environmentally friendly public and private financial management systems. They include green budgeting at national level, meaning using the tools of budgetary policymaking to help achieve climate and environmental goals, green mainstreaming of the EU budget, climate tracking under the various EU funding programmes, minimum spending requirements contributing to climate objectives, including in the recovery and resilience plans, the EU Taxonomy for sustainable finance, the ‘Do No Significant Harm’ principle, a methodology to identify environmentally harmful subsidies, and green bond standards. Since these workstreams and the related tools are rooted in policy commitments taken in different contexts and times, harmonising, integrating and mutually reinforcing their implementation, where appropriate, would help guide policy makers. This paper takes stock of workstreams and associated tools and investigates existing and potential links between them, as well as challenges in creating such links. It also presents good practices from Member States. For green budgeting, the paper suggests that there is no single “optimal” combination of tools, but that practices need to be tailored to the national context. Close cooperation between the ministries and departments involved, transparency, and a stepwise approach are crucial to ensuring coherence between various green workstreams to strengthen their effectiveness and raise the efficiency of their application. |
| JEL: | H5 H61 Q58 Q51 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:230 |
| By: | Phoebe Koundouri; Miranda McLannahan; Giannis Arampatzidis; Angelos Alamanos; Dimitris Raptis |
| Abstract: | This paper investigates cost-optimal electricity generation pathways for Europe to achieve carbon neutrality by 2050. Using a pan-European optimization framework developed in the Low Energy Analysis Platform (LEAP) with its NEMO least-cost solver, the study models 35 interconnected countries and incorporates harmonized technology costs, fuel prices and electricity demand projections. The model minimizes total discounted system costs while allowing cross-border trade to capture the effect of transmission on balancing variable renewable energy. Results indicate significant geographical disparities in decarbonization trajectories: by 2050, 14 countries achieve fully renewable electricity systems, while others continue to rely on biomass or nuclear due to capacity and land constraints. Large-scale renewable deployment increases generation costs in several regions, whereas early adopters benefit from long-term fuel savings and export opportunities. Cross-border electricity flows prove essential for system stability and cost efficiency, emphasizing the importance of interconnection and aligned national strategies. Our findings highlight both the feasibility and complexity of a coordinated European energy transition and offer policy recommendations regarding infrastructure investment, decarbonization alignment and targeted support for lagging regions. The study underscores the need for improved spatial and temporal cost datasets to enhance future policy-relevant modelling. |
| Keywords: | Energy, LEAP, Emissions, Least-Cost Optimization, Europe, Sustainable development |
| Date: | 2025–12–01 |
| URL: | https://d.repec.org/n?u=RePEc:aue:wpaper:2567 |
| By: | Diermeier, Matthias; Bayerlein, Michael |
| Abstract: | Mehr Geld allein hilft nicht mehr: Trotz Milliarden aus der EU-Kohäsionspolitik ist die EU-Skepsis gerade in den ärmeren Regionen Osteuropas seit deren EU-Beitritt stetig gewachsen. Anstatt nur auf die Höhe der Zahlungen zu achten, sollte die EU auf spürbare Wachstumsimpulse und Sichtbarkeit Ihrer Projekte setzen, um bei der Bevölkerung zu punkten. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iwkkur:333603 |
| By: | Frédérique Bec; François Courtoy; Philipp Mohl; Frederic Opitz |
| Abstract: | Stochastic debt projections are essential for understanding uncertainties in debt dynamics and ensuring robust debt sustainability analyses. The Commission’s stochastic debt sustainability analysis (SDSA) currently features two technical aspects that deserve to be addressed: i) the non-consideration of the persistence of shocks and ii) the assumption of a Gaussian distribution for simulating shock trajectories. This paper presents two technical refinements to improve the Commission’s SDSA by i) allowing for the persistence of shocks by applying a pre-filtering approach with a shock-specific lag structure across all countries and ii) implementing a bootstrapping technique to relax the Gaussian distribution assumption. These new features will be incorporated in the Commission’s DSA, to identify fiscal sustainability risks. |
| JEL: | H63 E62 C15 C22 C53 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:226 |
| By: | Angelini, Elena; Darracq Pariès, Matthieu; Haertel, Thomas; Lalik, Magdalena; Aldama, Pierre; Brázdik, František; Damjanović, Milan; Fantino, Davide; Sanchez, Pablo Garcia; Guarda, Paolo; Kearney, Ide; Mociunaite, Laura; Saliba, Maria Christine; Sun, Yiqiao; Tóth, Máté Barnabás; Stoevsky, Grigor; Van der Veken, Wouter; Virbickas, Ernestas; Bulligan, Guido; Castro, Gabriela; Feješ, Martin; Grejcz, Kacper; Hertel, Katarzyna; Imbrasas, Darius; Kontny, Markus; Krebs, Bob; Opmane, Ieva; Rapa, Abigail Marie; Sariola, Mikko; Sequeira, Ana; Duarte, Rubén Veiga; Viertola, Hannu; Vondra, Klaus |
| Abstract: | This report provides a comprehensive overview of the models and tools used for macroeconomic projections within the European System of Central Banks (ESCB). These include semi-structural models, dynamic stochastic general equilibrium (DSGE) models, time series models and specialised satellite models tailored to particular questions or country-specific aspects. Each type of model has its own strengths and weaknesses and can help answer different questions. The models should therefore be seen as complementary rather than mutually exclusive. Semi-structural models are commonly used to produce baseline projection exercises, since they offer the flexibility to combine expert judgement with empirical data and have enough complexity and structure to provide a good representation of the economy. DSGE models, valued for their internal consistency and strong theoretical foundations, are another core forecasting tool used by some central banks, particularly to analyse counterfactuals. Time series models tend to be better suited to forecasting the short term, while scenario analysis and special events may require satellite models, extensions of existing models or even the development of new models tailored to the question at hand. The report also addresses the challenges to macroeconomic projections posed by data quality, including revisions and missing data, and describes the methods implemented to mitigate their effects. The report identifies “quick wins” to improve the projection process by enhancing the transparency and comparability of results through standardised reporting frameworks and better measurement of the judgement integrated in forecasts. The findings highlight the fundamental role of macroeconomic models in underpinning the ESCB’s projection exercises and ensuring that the Governing Council’s assessments and deliberations rest on coherent, granular and credible analysis of both demand-side and supply-side dynamics. JEL Classification: C30, C53, C54, E52 |
| Keywords: | economic models, forecasting, macroeconometrics, monetary policy |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbops:2025381 |
| By: | Henger, Ralph; Kawka, Rupert; Schröder, Christoph; Wendt, Jan |
| Abstract: | Die regionalen Preisunterschiede in Deutschland sind in den letzten Jahren weitgehend konstant geblieben, obwohl die Jahre 2022 bis 2024 mit hohen Inflationsraten von 6, 9 Prozent, 5, 9 Prozent und 2, 2 Prozent geprägt waren und es starke Preisschwankungen bei Energie, Nahrungsmitteln und Wohnkosten gab. Die Gründe hierfür sind vielfältig. Viele der preistreibenden Effekte zeigten sich in allen Räumen gleichermaßen. So waren von den zunächst stark steigenden und dann wieder rückläufigen Energiepreisen alle Regionen betroffen. Und auch die Steigerungen der Mieten und der Rückgang der Immobilienpreise verliefen zwischen den wirtschaftlich starken und schwachen Regionen sowie städtischen und ländlichen Kreisen weitgehend gleichförmig. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iwkkur:333601 |