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on European Economics |
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Issue of 2026–02–16
sixteen papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Consolo, Agostino; Foroni, Claudia; Hjelm, Linnéa |
| Abstract: | Unlike past high-inflation episodes, the euro area labour market remained surprisingly resilient during the inflation surge of the early 2020s. This paper investigates the drivers of this resilience by combining long-span euro area macroeconomic data (1970–2025) with a structural VAR analysis that disentangles the roles of aggregate demand and supply, monetary policy, and factor-substitution shocks. Our findings show that, in contrast to the 1970s and 1980s, the decline in real wages has supported labour demand and, more broadly, the labour market, thereby helping to explain the decoupling between output and employment. We also find that monetary policy shocks have had a stronger impact on output than on employment, further amplifying the pro-cyclicality of labour productivity. JEL Classification: E24, E32, C32 |
| Keywords: | Bayesian VAR, labour markets, monetary policy, real wages |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263180 |
| By: | Alexander Mihailov; Giovanni Razzu; Zhe Wang |
| Abstract: | This paper examines the gendered effects of monetary policy shocks on key labour market outcomes in the Euro Area spanned by the 11 original member states from 2000 to 2016. Using a quarterly panel dataset and an identification strategy based on high-frequency financial surprises, we isolate exogenous monetary policy shocks from central bank information effects and trace their transmission across labour market outcomes for men and women. We provide new evidence on the distributional consequences of the common monetary policy shocks originating at the European Central Bank. A contractionary shock significantly increases unemployment for both genders, with systematically larger effects for men. At the same time, women exhibit a stronger rise in labour force participation, consistent with household labour supply adjustments. Gender differences in unemployment and participation are primarily driven by individuals aged 25–55 and are most pronounced among those with basic and intermediate education. Finally, labour market institutions shape the magnitude of these effects, either mitigating or amplifying gender disparities. |
| Keywords: | gender gaps, labour market outcomes, monetary policy shocks, labour market institutions, Euro Area |
| JEL: | E24 E32 E52 F45 J16 J24 |
| Date: | 2026–02–08 |
| URL: | https://d.repec.org/n?u=RePEc:rdg:emxxdp:em-dp2026-01 |
| By: | Fotios Gkatzoglou (DUTH - Democritus University of Thrace); Emmanouil Sofianos (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Amélie Barbier-Gauchard (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | This study examines the evolution of public debt among the 27 EU member states using Graph Theory tools; the Threshold Weighted-Minimum Dominating Set (TW-MDS) and the k-core decomposition method, alongside a standard network quantitative metric, the density. By separating the data into three distinct periods, pre-crisis (2000-2007), European sovereign debt crisis (2008-2015), and post-crisis (2016-2023), we examine the potential synchronization of the debt ratios among EU countries through cross-correlations of the public debts. The findings reveal that public debt correlation was at its highest level during the 2008-2015 period, reflecting the universal impact of the crisis and the subsequent synchronized fiscal and monetary policy measures taken within EU. A significantly lower network density is observed in both the pre-and post-crisis periods. These results contribute to the overall debate on fiscal stability and policy coordination by showing how EU countries tend to align their fiscal behaviors during periods of crisis while behaving more independently during stable times. In addition, we yield a deeper insight into how economic shocks reorganize public debt interconnections within the crisis period. Finally, this analysis highlights to what extent European economic integration strengthens connections between the fiscal positions (through public debt) of the European Union member countries. |
| Keywords: | E62, C63, O52, graph theory JEL Classification: H63, synchronization, correlation, complex networks, European integration, public debt, public debt European integration complex networks correlation synchronization graph theory JEL Classification: H63 O52 E62 C63 |
| Date: | 2025–06–27 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05464661 |
| By: | Don Bredin (University College Dublin); Stilianos Fountas (University of Macedonia); Paraskevi Tzika (Swansea University, UK) |
| Abstract: | This paper investigates the impact of Economic Policy Uncertainty (EPU) on income inequality across a broad set of European countries from 1995 to 2022, with a particular focus on the core-periphery divide. Applying both time series and panel data methodologies—including Vector Autoregressions (VAR), panel VAR, and local projections—we assess how economic uncertainty influences inequality dynamics. Our findings reveal three key insights. First, uncertainty shocks significantly affect income inequality in nearly all countries, and the effect is time-varying. Second, the effect is heterogenous across countries but varies: uncertainty tends to reduce inequality in core European countries such as Belgium, Germany, Ireland, and the Netherlands, while mainly increasing it in periphery and intermediate countries like France, Greece, Italy, and Spain. Third, panel analysis confirms this asymmetry, showing more persistent and positive inequality effects in periphery countries. These results suggest that income inequality in Europe’s periphery is more vulnerable to economic uncertainty, underscoring the importance of stable policy environments and targeted fiscal responses. |
| Keywords: | economic uncertainty, income inequality, VAR models, rolling impulse response functions, panel LP |
| JEL: | C32 D3 D8 E32 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:mcd:mcddps:2026_05 |
| By: | Gautier, Erwan; Conflitti, Cristina; Fadejeva, Ludmila; Grimaud, Alex; Jouvanceau, Valentin; Menz, Jan-Oliver; Paulus, Alari; Petroulas, Pavlos; Roldan-Blanco, Pau; Wieland, Elisabeth; Enderle, Daniel; Gutiérrez, Eduardo |
| Abstract: | We use CPI micro data for nine euro area countries to document new evidence on consumer price stickiness in the euro area during the 2021-2024 inflation cycle. In 2022, the monthly frequency of price changes reached 12%, compared with an average of 8% over 2010–2019, roughly a four-percentage-point increase; it then fell quickly in 2023 and more slowly in 2024, ending close to its pre-pandemic level. The decline in the frequency of price changes was faster for food and nonenergy industrial goods (NEIG) than for services, where frequencies remained elevated in 2024. The overall frequency rose mainly because there were more price increases, while the magnitude of the average size of the price increases or decreases changed only marginally during the surge. Products with a larger imported-energy cost share responded more strongly, and hazard-rate evidence shows that the probability of price adjustments increases with the gap between actual and optimal prices, consistent with state-dependent pricing and a steepening of the Phillips curve. To illustrate the implications of this state dependence, a macro model suggests that peak inflation would have been almost 1 percentage point lower if the frequency had not responded to the inflation surge. JEL Classification: E31, E52, F33, L11 |
| Keywords: | euro area, inflation surge, micro price data, price rigidity |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263181 |
| By: | Nocciola, Luca |
| Abstract: | We document empirically the money demand by European non-financial corporations by exploiting a unique and brand-new survey on their cash usage in a stress period. We also assess: (i) the relation between cash held and firm size; and (ii) estimate point values of cash holdings and carry out statistical comparisons along the sectoral and country dimensions. First, we find that cash holdings are inversely related to firm size, providing additional evidence that Small and Medium Enterprises (SMEs) tend to store more cash relative to their larger peers. Second, we find that cash-intensive sectors and” cash-friendly” countries display right-shifted distributions of cash holdings with statistically-significant larger average holdings. We argue that in a low interest rate and low inflation environment cash holdings serve as a store of value for European firms, in particular for SMEs which are more likely to be financially constrained, especially in crisis times. JEL Classification: D22, D25, E41, G01, G32 |
| Keywords: | cash demand, financial crisis, monetary economics, precautionary savings, store of value |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263182 |
| By: | Ilias Aarab; Thomas Gottron; Andrea Colombo; J\"org Reddig; Annalauro Ianiro |
| Abstract: | Micro-structural models of contagion and systemic risk emphasize that shock propagation is inherently multi-channel, spanning counterparty exposures, short-term funding and roll-over risk, securities cross-holdings, and common-asset (fire-sale) spillovers. Empirical implementations, however, often rely on stylized or simulated networks, or focus on a single exposure dimension, reflecting the practical difficulty of reconciling heterogeneous granular collections into a coherent representation with consistent identifiers and consolidation rules. We close part of this gap by constructing an empirically grounded multilayer network for euro area significant banking groups that integrates several supervisory and statistical datasets into layer-consistent exposure matrices defined on a common node set. Each layer corresponds to a distinct transmission channel, long- and short-term credit, securities cross-holdings, short-term secured funding, and overlapping external portfolios, and nodes are enriched with balance-sheet information to support model calibration. We document pronounced cross-layer heterogeneity in connectivity and centrality, and show that an aggregated (flattened) representation can mask economically relevant structure and misidentify the institutions that are systemically important in specific markets. We then illustrate how the resulting network disciplines standard systemic-risk analytics by implementing a centrality-based propagation measure and a micro-structural agent-based framework on real exposures. The approach provides a data-grounded basis for layer-aware systemic-risk assessment and stress testing across multiple dimensions of the banking network. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.10960 |
| By: | Robin Fischer; Anton Pichler |
| Abstract: | Mobilising private capital is a critical bottleneck of the energy transition, yet recent crisis-driven windfall profits for fossil power firms suggest that market signals may still favour carbon-intensive assets. Here we analyse a panel of 900 European power firms (2001-2023) to resolve whether these profits reflect a durable profitability advantage or a crisis-driven anomaly. Using machine-learning clustering and Bayesian model averaging, we identify a structural divergence: wind and solar portfolios exhibit rising profitability, with return on assets among wind-dominated firms increasing by over 6% between 2014 and 2023. Conversely, higher fossil portfolio shares are increasingly associated with lower profitability, with marginal effects reaching -4% by 2023, while renewable-dominated firms match or outperform their fossil-heavy counterparts across most European regions. These findings suggest that the record profits of fossil incumbents were distinct outliers, masking an ongoing decline in the profitability of carbon-intensive business models. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.22167 |
| By: | Mariam Camarero (Universitat Jaume I = Jaume I University); Antonia López-Villavicencio (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique); Cecilio Tamarit (UV - Universitat de València = University of Valencia = Universidade de Valencia) |
| Abstract: | This paper examines the relationship between globalization and unemployment in the EU from 1990–2015, focusing on Global Value Chains (GVCs). We analyze the effects of the composition of the workforce and GVC-type trade on unemployment. Our findings show that GVC participation reduces unemployment in less advanced EU economies but increases it in core countries. Lower labor costs and low-skilled workers enhance the positive impact on reducing unemployment. Some sectors (especially services such as Telecommunications) experience significant employment gains. We recommend policies to remove regulatory barriers and support technological advancement to ensure equitable benefits from GVC integration across the EU. |
| Keywords: | Global value chains, EU, Local projections, Unemployment |
| Date: | 2025–08–11 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05474157 |
| By: | Sebastian Ritter (AQR-IREA, University of Barcelona); Vicente Royuela (AQR-IREA, University of Barcelona) |
| Abstract: | As the EU races to meet its 2030 emissions reduction target, regional disparities in transition progress threaten to leave some territories behind. We introduce the Regional Green Transition Performance Index (RGTP), a novel composite measure capturing progress across seven pillars (environmental; energy; circular economy and waste; sustainable development; just transition; innovation and policy; and transport and mobility) for 232 European NUTS2 regions over 14 years. Drawing on 31 indicators, we map spatial patterns and dynamic processes. Furthermore, we argue that the green transition acts as a structural force whose potential effects on regional development can be expressed along two axes: vulnerability and opportunity. We propose an alternative measure of Regional Green Transition Opportunity index (RGTO) which we combine with the existent Regional Green Transition Vulnerability index (RGTV) of RodríguezPose & Bartalucci (2024) to construct a simple 2×2 typology of regions. We translate this evidence into a policy playbook: pair risk-mitigation with opportunity-creation and embed diffusion mechanisms so gains propagate beyond individual regions. The paper contributes an open dataset, a transparent methodology to separate performance, opportunities, and vulnerabilities which responds to the EU’s performance-based policy agenda by offering a region-level monitoring tool that complements cohesion instruments (ERDF/CF/JTF/ESF+) and flags where to reduce vulnerabilities while mobilizing opportunities in the green transition. |
| Keywords: | green transition; European Union; regional inequality; green transition index. JEL classification: C43; Q56; R11; R12 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:aqr:wpaper:202601 |
| By: | Jamasb, Tooraj (Department of Economics, Copenhagen Business School); Sikow-Magny, Catharina (Department of Economics, Copenhagen Business School) |
| Abstract: | Cross-border interconnection (IC) projects are central to achieving the European Union’s goals of energy market integration, system resilience, and security of supply. However, their implementation often encounters financial and policy challenges stemming from uneven distribution of costs and benefits across the countries and exacerbated jurisdictional differences and information asymmetry. This paper proposes an approach that reorients the current practice of CBCA policy to one that embeds economic theory that informs the project assessment and negotiation process. We present a conceptual framework that integrates bargaining theory and incentive design into the Cross-Border Cost Allocation (CBCA). It considers the joint interests of project promoters, National Regulatory Authorities (NRAs), and the European Commission (EC) when assessing investments and co-funding from the Connecting Europe Facility (CEF). A new role for CEF, not as an ex-post subsidy, but as a directed policy instrument enables elicitation of true values of benefits and incentive-compatible cost allocation that aligns national and EU objectives. We conclude with policy recommendations for enabling implementation of cross-border investments in the EU’s evolving energy grid policy. |
| Keywords: | Electricity grid; Cross-border investment; Cost allocation; Information asymmetry; Energy policy |
| JEL: | C70 D00 L94 Q40 |
| Date: | 2026–02–06 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:cbsnow:2026_004 |
| By: | Süß, Juliana |
| Abstract: | Space capabilities are a core element of any modern defence arsenal. In Europe, however, military space capabilities are limited and dependence on the United States remains high. Europe must develop its capabilities in order to reduce dependencies and enhance its capacity to act on its own, thereby fostering European autonomy. To ensure that European space capabilities are developed efficiently, it is necessary to identify which dependencies on the US are particularly critical and which obstacles would hinder the development of such capabilities. Priority should be given to space situational awareness, military reconnaissance, navigation resilience and missile early warning. |
| Keywords: | Space capabilities, United States, Europe, European Space Agency (ESA), Starlink, dependency, space situational awareness, satellite communication, Intelligence, Surveillance and Reconnaissance (ISR), Positioning, Navigation and Timing (PNT), early warning, nflict, Russia, NATO |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:swpcom:335919 |
| By: | Keil, Samuel; Martin, Pascal; Schiereck, Dirk |
| Abstract: | Announcements of emerging technologies often lead to notable stock market reactions, with Artificial Intelligence standing out due to its transformative potential and growing regulatory attention. Yet, most research on investor responses to AI disclosures focuses on U.S. firms, leaving the distinct European context unexplored. Using a short-term event study of 526 AI-related announcements by STOXX Europe 600 firms between 2015 and 2024, we report a significantly negative average stock return of -0.176% within a three-day window. However, announcements detailing specific AI technologies, involving collaborations with AI specialists, or made after the release of ChatGPT are associated with less negative reactions. In contrast, references to EU regulatory frameworks like the AI Act show no significant effect. Our findings confirm generally negative investor reactions to AI announcements but show that in Europe, strategic factors such as announcement specificity, collaborations, and timing also significantly mitigate these effects. |
| Date: | 2026–01–06 |
| URL: | https://d.repec.org/n?u=RePEc:dar:wpaper:159306 |
| By: | Don Bredin (University College Dublin); Stilianos Fountas (University of Macedonia); Georgios Karras (University of Illinois at Chicago) |
| Abstract: | We examine the impact of economic upturns and downturns on subsequent economic performance in Europe over six plus centuries. Instead of utilizing the conventional post-World War II framework, we employ a comprehensive panel of GDP data for England, Holland and Italy spanning more than 600 years. We find consistent evidence in favor of asymmetry. Downturns are followed by statistically significant higher growth rates, while upturns are followed by mildly lower growth rates which are often not statistically significant. Our finding of asymmetry suggests that business cycle properties are consistent with mechanisms similar to Friedman’s plucking hypothesis |
| Keywords: | scarring, cleansing, economicdownturnsandupturns, economic growth |
| JEL: | C22 E32 E60 N10 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:mcd:mcddps:2026_04 |
| By: | Marc Aliana (Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain); Maria Teresa Balaguer-Coll (Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain); Diego Prior (Department of Business, Universitat Autònoma de Barcelona, Spain); Emili Tortosa-Ausina (IVIE, Valencia and IIDL and Department of Economics, Universitat Jaume I, Castellón, Spain) |
| Abstract: | This paper examines eco-productivity convergence across European Union regions while explicitly incorporating institutional quality within a multilevel governance framework. Using a panel of 216 NUTS-2 regions over the period 2010–2023, we analyse whether regions converge in their ability to generate economic output while limiting environmental pressures, and how this process is shaped by both national and regional Quality of Government (QoG). Ecoproductivity is measured using a nonparametric frontier approach based on Data Envelopment Analysis, with labour and capital as inputs, GDP as a desirable output, and Greenhouse Gas (GHG) emissions, transformed into an outputoriented ‘GHG savings’ indicator. The results show that average eco-productivity levels are around 8% higher when QoG is accounted for, cross-regional dispersion is considerably lower, and β-convergence is consistently stronger and statistically significant across all subperiods. Overall, eco-productivity convergence is associated with QoG, suggesting that sustainable regional catch-up is more likely where green investment is matched by improvements in institutional quality. |
| Keywords: | Cohesion Policy; Eco-productivity convergence; Multilevel governance; Quality of Government. |
| JEL: | C14 C61 O18 Q56 R11 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:jau:wpaper:2026/05 |
| By: | Schmidt, Sebastian |
| Abstract: | I study price level determination in a currency union when some member countries’ government securities earn a convenience yield. These ”convenience assets” generate fiscal seigniorage revenues that, given appropriate fiscal and monetary policies, back the union’s price level, much like primary surpluses and monetary seigniorage do. An exogenous drop in the private-sector demand for convenience assets reduces seigniorage revenues and raises the price level. It also results in a wealth transfer across countries owing to the heterogeneity in convenience yields. JEL Classification: E31, E63, F45 |
| Keywords: | convenience yield, cross-country heterogeneity, currency union, fiscal theory of the price level |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263183 |