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on European Economics |
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Issue of 2026–10–19
twelve papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Alicia Aguilar (BANCO DE ESPAÑA) |
| Abstract: | This paper provides a novel and high-frequency index of sovereign fragmentation in the euro area. The proposed methodology offers a decomposition of sovereign yields into the common trend, market conditions, and fundamentals-based divergence, which are uncorrelated to fragmentation. Therefore, the fragmentation index constitutes a bottom-line indicator for euro area central banks, as it measures disorderly market dynamics in sovereign markets not warranted by fundamentals. In that sense, this paper provides relevant conclusions about the effectiveness of monetary policy interventions, pointing to the significant effect of market stabilisation announcements, such as the Transmission Protection Instrument (TPI), in reducing sovereign fragmentation. I contribute to the literature by estimating the uncorrelated drivers of euro area yields divergence using a restricted principal components analysis. The estimated factors are then used to assess the effect of fragmentation, market conditions and fundamentals on country yields through several economic regimes, pointing to differences across countries and over time. |
| Keywords: | principal components, monetary policy, quantitative easing, sovereign debt, financial crises, sovereign bond rates |
| JEL: | C38 E52 E58 H63 G01 G12 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2520 |
| By: | Banu, Elena; Vinci, Francesca; Best, Lea |
| Abstract: | This paper develops novel firm-level measures of shareholder geographical concentration and examines how elevated home bias in equity holdings affects investment resilience in the euro area. We combine security-level holdings data from the ECB’s Securities Holdings Statistics (SHS-S) with firm-level financial-statement data from Compustat, and document that equity ownership remains strongly concentrated domestically, with limited cross-border diversification within the monetary union. Using a difference-in-differences design around the COVID-19 shock, combined with a propensity score matching approach, we then analyse whether equity home bias shapes firms’ responses to macroeconomic disruptions. Against an average 16% decline in exports among the firms in the sectors most affected by the pandemic, those with more concentrated, home-biased shareholder bases reduced investment by 20% more than their more diversified peers after the shock. The effect operates mainly through weaker equity resilience, with equity declining by 13%, while sales and bank financing remain comparable. Our findings highlight the benefits of deeper cross-border equity integration for corporate resilience. JEL Classification: F36, G32, G15, D22, E44 |
| Keywords: | COVID-19 shock, cross-border equity integration, difference-in-differences, firm resilience, macroeconomic shocks, shareholder geographical concentration |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263296 |
| By: | Davide Arnaudo (Bank of Italy); Vincenzo Cuciniello (Bank of Italy); Giorgio Gobbi (Bank of Italy); Federico Guerra (Bank of Italy); Federico Labianca (Bank of Italy); Valentina Nigro (Bank of Italy); Sara Pinoli (Bank of Italy); Massimiliano Rigon (Bank of Italy); Paola Rossi (Bank of Italy); Federico Maria Signoretti (Bank of Italy); Pietro Tramontano (Bank of Italy) |
| Abstract: | This paper analyses the Italian private equity and venture capital market. Although total investment more than doubled between 2015 and 2025, the Italian market remains less developed than those of the other main European economies. Private equity investment is strongly oriented towards technology- and knowledge-intensive sectors, with significant participation by foreign funds. The public sector plays a prominent role in fundraising by Italian operators, whereas the contribution of private institutional investors remains relatively limited. Compared with firms in the same sector, size class and geographical area, private equity target firms are larger, more profitable and better capitalized; after turning to private equity, they record faster growth in total assets, employment, and investment, particularly in intangible assets. The further development of private capital markets in Italy could be fostered by a greater involvement of private investors and a wider availability of patient capital to support firms' growth and innovation. |
| Keywords: | private equity, venture capital, firm growth |
| JEL: | G23 G24 L25 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:bdi:opques:qef_1061_26 |
| By: | Romain Meuwissen; Martin Rohár |
| Keywords: | Stablecoins, flow of funds, financial intermediation, financial stability, financial regulation, monetary architecture, dollarisation, international role of the euro, bank funding, digital money |
| JEL: | E42 E44 G28 O33 |
| Date: | 2026–10–05 |
| URL: | https://d.repec.org/n?u=RePEc:stm:wpaper:79 |
| By: | OECD |
| Abstract: | Timely and accurate distributional income data are essential for monitoring inequality, assessing the adequacy of tax-benefit systems, and designing policy responses during periods of rapid economic change. However, income and inequality statistics derived from EU-SILC are typically published with a lag of 12 to 18 months, limiting their usefulness during fast-moving shocks such as the COVID-19 pandemic, the 2022 energy price shock, or a severe recession. This paper presents results from a new nowcasting framework designed to reduce this information gap for EU Member States. By combining machine-learning (ML) forecasts of market income with EUROMOD microsimulation under the latest available tax-benefit rules, the framework produces timely estimates and forecasts of income inequality. |
| Keywords: | inequality, machine learning, microsimulation, nowcasting, poverty rate |
| JEL: | D31 C53 |
| Date: | 2026–10–13 |
| URL: | https://d.repec.org/n?u=RePEc:oec:wiseaa:41-en |
| By: | Biswajit Banerjee (Ashoka University); Juraj Zeman (National Bank of Slovakia) |
| Abstract: | Motor vehicle production in the Visegrád Four economies (Czechia, Hungary, Poland, Slovakia) has undergone a profound structural transformation since their EU accession. This transformation has unfolded along two fronts: ever-deepening integration into European and global value chains, and, more recently, the industry's shift to electrification. This paper examines both over 2010–2023. We test a prominent claim in the recent literature: that since 2018, global value chains have been reshoring, regionalising and shortening in response to pandemic disruption and geopolitical risk. Decomposing Eurostat FIGARO input-output tables and measuring production-chain length, we find no support for reshoring, shortening or derisking: backward linkage and chain length both rose in every country; where domestic sourcing increased, it was not matched by additional domestically generated value; and diversification away from EU suppliers occurred alongside longer, not shorter, chains. Testing a monthly Comext series on lithium-ion battery imports for structural breaks, we find the EV transition offers no exception: battery-import growth and break timing diverge sharply by country, tracking individual firm investments more closely than EU or national policy. These findings are consistent with the Dependent Market Economy framework, which predicts persistent foreign dependence rather than upgrading. But the four countries do not follow one shared trajectory. Slovakia, Czechia and Hungary form a cluster of increasingly import-dependent assembly platforms with lengthening, internationalising chains, while Poland retains a structurally deeper domestic base than the other three, though this gap narrows as all four countries' chains internationalise. The paper's central contribution is to show that a shared institutional exposure to foreign capital does not imply a shared national trajectory, and that treating the V4 as a single regional production platform obscures the differentiated way dependence is deepening within it. |
| Date: | 2026–10–06 |
| URL: | https://d.repec.org/n?u=RePEc:ash:wpaper:172 |
| By: | Sevrin Waights; Liliana Cuccu; Maximilian Priem |
| Abstract: | We provide the first estimates of minimum wage effects on the aggregate price level using data on the near-full German consumer basket across four national reforms, 2015-2024. Drawing on a structural model of pricing under imperfect competition, we utilise minimum wage cost shocks rather than the commonly used firm-level ‘bite’ that we show to be biased under strategic complementarity. Labour cost pass-through is 83-94 percent, at the higher end of estimates for other cost shocks. The implied macro-price elasticity is 0.024. The largest increase in October 2022 to €12 raised the aggregate price level by 0.39 percent. |
| Keywords: | Minimum wages, Consumer prices, Inflation, Cost pass-through, Strategic complementarity |
| JEL: | E31 J08 J30 J38 L11 |
| Date: | 2026–10–02 |
| URL: | https://d.repec.org/n?u=RePEc:bdp:dpaper:0112 |
| By: | Marina Diakonova (Banco de España); Julia Estefania-Flores (Banco de España); Corinna Ghirelli (Banco de España); Ana Peñalosa (Banco de España); Javier J. Pérez (Banco de España); Aitana Simó (Banco de España) |
| Abstract: | We propose a narrative-based approach to construct high-frequency measures of political polarization and legislative gridlock for seven democracies: France, Germany, Spain, Italy, the United Kingdom, the United States and Canada. Our indices reveal that polarization has risen markedly since the Global Financial and Sovereign Debt Crises, with a faster increase in North America than in Europe. Through a range of exercises we show that the two indices respond differently to elections and unified government control, and that the latter weakens the pass-through between political polarization and gridlock. Consistent with the literature, we also find that investment declines following an increase in either index. Together, these high-frequency, cross-country measures provide a new tool for comparative political economy analysis. |
| Keywords: | political polarization, legislative gridlock, textual analysis, cross-country analysis |
| JEL: | D72 D74 H3 P16 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2636e |
| By: | Sardo, Alessio; Arlia, Daniela; Cerruti, Gianluca |
| Abstract: | Purpose This paper aims to explore the interaction between labor market reforms and housing policies in Italy, Spain and the UK. Design/methodology/approach By providing a comparative legal analysis of significant policy changes at the macro level and a descriptive overview of the evolution of their main economic determinants – wages and housing prices – at the micro level, the study highlights the socioeconomic impact of these reforms and their contribution to urban disparities. Findings The analysis suggests that the implementation of labor market reforms aimed at increasing flexibility and competitiveness coincided with heightened precarity, particularly for low-wage and nonstandard workers across all countries. Research limitations/implications The analysis does not address causality. Practical implications The paper suggests that stratified labor policy and work deregulation have an impact on urban inequality and wage distribution at sub-city level. Social implications The study argues that these reforms, coupled with macro-events such as the increase in global trades and the advent of ICT, might have exacerbated the socioeconomic inequalities at both national and local levels over the last decades by disfavoring less skilled workers, particularly in large cities. Originality/value The originality of the paper lies in its integrated analysis of labor-market reforms and housing policies as jointly producing urban disparities. Rather than treating wage stagnation, employment precarity and housing unaffordability as separate phenomena, the paper connects them through a comparative framework covering Italy, Spain and the UK. Its contribution is also empirical and spatial: it combines national regulatory trajectories with city-level evidence from Milan, London and Madrid, showing how macro-level reforms translate into uneven urban outcomes. This multi-scalar approach offers a distinctive perspective on the legal, economic and territorial roots of contemporary inequality. |
| Keywords: | European Cities;housing affordability;housing market analysis;housing prices;reforms;wage disparities |
| JEL: | R14 J01 N0 |
| Date: | 2026–12–14 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:141253 |
| By: | Comisión Nacional de los Mercados y la Competencia (CNMC) (Comisión Nacional de los Mercados y la Competencia (CNMC)) |
| Abstract: | The granting of public aid constitutes one of the most significant forms of public intervention in the economy. However, for aid measures to be effective, they must be implemented in a way that avoids unnecessarily disrupting the efficient functioning of markets. Traditionally, Spanish authorities have focused on ensuring compliance with EU State aid rules and national subsidy legislation. However, this approach cannot and should not be regarded as the only relevant one, since it does not provide answers to equally important questions, such as the type of aid instrument used or the choice of beneficiaries, among others. This Guide provides guidelines for the proper use, design and evaluation of public aid from the perspective of compliance with the principles of better regulation, good administration and free competition. |
| Keywords: | Public aid, State aid, subsidies, industrial policy |
| JEL: | H57 K20 K23 L26 L50 L51 L53 |
| Date: | 2026–06–03 |
| URL: | https://d.repec.org/n?u=RePEc:awo:epaper:g-2025-01_eng |
| By: | Yann Coatanlem |
| Abstract: | In order to close the competitiveness gap between the U.S. and Europe, particularly in fast-moving technology sectors, firms must have the ability to take elevated risks and reorganize workforces rapidly. However, Germany's strict employment protection regime makes corporate restructuring exceptionally costly. The high “cost of failure” discourages risk-taking, stifles disruptive innovation, and structurally penalizes hiring senior workers. How much does this rigidity actually cost employers, and how can it be mitigated without unraveling Germany's foundational labor protections?To answer these questions, the author of this report constructed a bottom-up cost model using a dataset of 55 large German restructuring programs announced between 2008 and 2025, covering roughly 150, 000 paid exits. The findings are striking: the average cost per exit of restructuring equals 2.49 times an employee's annual salary, driven primarily by expensive early retirement packages and lengthy procedural delays.Addressing this barrier requires targeted legislative action rather than wholesale deregulation. The report proposes a seven-amendment reform package specifically designed for senior high-earners (those with fixed pay above the social security contribution ceiling). By introducing formulaic capped severance, condensing works council notifications to a seven-day window, and shifting incentives away from early retirement, the central estimate suggests that average restructuring costs for this group could be reduced to 1.28 times their annual salary. These reforms, complemented by a Federal Senior Hiring Risk Pool to boost older workforce participation, provide a concrete roadmap to make German restructuring as agile as in flexible economies like Denmark and the U.S. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:econpr:_59 |
| By: | Cristina Rossetti; Nicola Caravaggio; Giovanni Lamura; Giuliano Resce |
| Abstract: | The study of the factors driving the dynamics of healthcare spending is of paramount importance to guide policymakers in the allocation of resources and to measure the effectiveness of the healthcare system under consideration. The identification of these drivers can be supported by the use of machine learning techniques, which enable the discovery of hidden patterns within vast amounts of data. In contrast to black-box methods, Symbolic Regression (SR) is an approach that allows for the identification of analytical models that explicitly capture the functional relationships within the data, thus enhancing interpretability. In this paper, we present the use of SR for identifying the drivers of healthcare expenditure in Italian regions. Given the dynamic and complex nature of this phenomenon, we generated several models based on distinct temporal windows, enabling us to analyze the drivers across different time horizons. In addition to identifying the main drivers based on variable frequency in the generated models, we also conducted a study on recurring substructures. The results show that SR was able to generate models with a good level of predictive accuracy for private healthcare expenditure, enabling a reliable analysis of its driving factors, but failed to do so for public healthcare expenditure. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.04439 |