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on European Economics |
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Issue of 2025–10–20
ten papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Andrii Babii; Luca Barbaglia; Eric Ghysels; Jonas Striaukas |
| Abstract: | The paper studies the nowcasting of Euro area Gross Domestic Product (GDP) growth using mixed data sampling machine learning panel data regressions with both standard macro releases and daily news data. Using a panel of 19 Euro area countries, we investigate whether directly nowcasting the Euro area aggregate is better than weighted individual country nowcasts. Our results highlight the importance of the information from small- and medium-sized countries, particularly when including the COVID-19 pandemic period. The empirical analysis is supplemented by studying the so-called Big Four -- France, Germany, Italy, and Spain -- and the value added of news data when official statistics are lagging. From a theoretical perspective, we formally show that the aggregation of individual components forecasted with pooled panel data regressions is superior to direct aggregate forecasting due to lower estimation error. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.24780 |
| By: | Nagengast, Arne J.; Rios-Avila, Fernando; Yotov, Yoto |
| Abstract: | We use heterogeneity-robust difference-in-differences (DiD) methods to evaluate the impact of membership in the European Union (EU) Single Market on international trade. On the policy front, we provide evidence that: (i) On average, the EU has been very effective in promoting trade among its member states; (ii) The trade effects of the EU have been long-lasting, but heterogeneous across EU cohorts; and (iii) While the EU has benefited both 'old' and 'new' members, the increase in the exports from the 'old' members to the 'new' joiners has been disproportionately larger. From a methods and practical perspective, the contribution of this paper is to introduce a new, fast, and flexible estimation command that combines leading estimation techniques from the gravity literature with recent methods from the heterogeneity-robust DiD literature. |
| Keywords: | EU membership, Staggered Difference-in-Differences, Gravity Model, Estimation Command |
| JEL: | C13 C23 F10 F13 F14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:328249 |
| By: | Maximilian Boeck (Friedrich-Alexander-Universität Erlangen-Nürnberg); Christian Glocker (WIFO) |
| Abstract: | We examine how labor market institutions shape monetary policy transmission in euro area countries. A theoretical model suggests that higher union density flattens the Phillips curve, amplifying output responses while dampening the inflation effects of monetary shocks. This is empirically confirmed using an interacted panelVAR. In contrast, benefit replacement rates and employment protection legislation have a limited impact. Our findings point to a structural, not cyclical, driver of monetary policy effectiveness, highlighting the importance of labor market features. In a monetary union, such heterogeneity can lead to inefficient inflation and output differentials across member states. |
| Keywords: | Monetary policy, Labor market institutions, Euro area, Interacted panel VAR |
| Date: | 2025–10–15 |
| URL: | https://d.repec.org/n?u=RePEc:wfo:wpaper:y:2025:i:713 |
| By: | Lucía Cuadro-Sáez (BANCO DE ESPAÑA); Corinna Ghirelli (BANCO DE ESPAÑA); Maximiliano Moreno-López (BANCO DE ESPAÑA AND PARIS SCHOOL OF ECONOMICS); Javier J. Pérez (BANCO DE ESPAÑA) |
| Abstract: | This paper presents a comprehensive framework developed by the Banco de España to monitor and forecast food price dynamics in the euro area, particularly in response to the sharp increase in food inflation observed between 2022 and 2024. The study introduces a suite of models tailored to different aspects of the food value chain, integrating data from consumer and producer prices, farm-gate prices and international commodity and futures markets. Key tools include a Food Value Chain Model (VARx) to estimate the pass-through of commodity and fuel price shocks to consumer prices, an Asymmetric Price Transmission Model to capture non-linear effects and a Conditional Forecasting framework using different modelling approaches and futures data to simulate inflation scenarios. Additionally, a Vector Error Correction Model (VECM) assesses the long-term relationship between food and non-food prices. These tools aim to enhance central bank decision-making and food security analysis by providing timely, scenario-based insights into food inflation trends. |
| Keywords: | food prices, food inflation, inflation, euro area, monitoring, forecasting, central bank |
| JEL: | E31 C53 Q11 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bde:opaper:2521e |
| By: | Signorelli Serena (European Commission - JRC); Fernández Cruzado Ana (European Commission - JRC); De Prato Giuditta (European Commission - JRC) |
| Abstract: | "The Science for Policy Brief explores the digital ecosystem in EU regions through the DGTES approach, focusing on research, innovation, and startups. It first highlights key NUTS 3 regions where research organizations are concentrated and discusses strategies to enhance competitiveness in Europe. The brief then identifies top NUTS 3 regions for research and innovation activities and examines economic indicators (GDP, employment and number of startups) to uncover potential growth opportunities." |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc143080 |
| By: | Quinet, Alain; Jaravel, Xavier; Schularick, Moritz; Zettelmeyer, Jeromin |
| Abstract: | • We present five guiding principles for European rearmament. Europe's rearmament should be (i) innovation-driven to support European technological capabilities, competitiveness, and productivity growth; (ii) aim for a rapid increase in production capacities for a high-low mix of military capabilities; (iii) rely on quantitative goalpost for R&D expenditures and an unmanned autonomous systems; (iv) build on independent European capabilities alongside NATO to reduce dependence on increasingly unreliable American assets; (v) substantially increase military support for Ukraine as the cost-efficient way towards European security in the short-run. • The central steps are the creation of a European defense single market, the reduction of national fragmentation, and the development of joint European defense capabilities. |
| Abstract: | • In diesem Papier formulieren wir fünf Leitprinzipien für die europäische Aufrüstung. Die europäische Aufrüstung sollte (i) innovationsgetrieben sein, um die technologischen Fähigkeiten, die Wettbewerbsfähigkeit und das Produktivitätswachstum Europas zu stärken; (ii) auf einem schnellen Hochfahren industrieller Kapazitäten sowohl im Hoch- als auch im Niedrigtechnologiebereich abzielen; (iii) auf quantitativen Zielvorgaben für FE-Ausgaben und den Ausbau unbemannter autonomer Systeme beruhen; (iv) unabhängige europäische Fähigkeiten neben der NATO aufbauen, um die Abhängigkeit von zunehmend unzuverlässigen amerikanischen Ressourcen zu verringern; (v) die militärische Unterstützung für die Ukraine substanziell ausweiten, da eine siegreiche Ukraine kurzfristig der günstigste Weg für mehr Sicherheit in Europa darstellt. • Zentrale Schritte dorthin sind die Schaffung eines europäischen Verteidigungsbinnenmarktes, der Abbau nationaler Fragmentierung und der Aufbau gemeinsamer europäischer Verteidigungskapazitäten. |
| Keywords: | Europe, defense, single market, procurement, Europa, Verteidigung, Gemeinsamer Markt, Beschaffung |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkpb:328252 |
| By: | Ikonen, Pasi; Kurronen, Sanna; Rönkkö, Risto; Vilmi, Lauri |
| Abstract: | This brief presents impact assessments of increased tariffs based on simulations using the Global Integrated Monetary and Fiscal (GIMF) macroeconomic model. The current increases in US import tariffs are shown to reduce aggregate output across all major economic regions. The most pronounced negative effects in the simulations are observed in the United States and China. For the euro area, the estimated decline in aggregate output due to the currently implemented tariffs is around 0.2 percent-relatively modest. However, the final effects are subject to considerable uncertainty, including potential shifts in trade flows and the impact of trade barriers on investment. These estimates do not account for any additional uncertainty related to the future path of tariffs. |
| Keywords: | global trade, tariffs, trade war |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bofitb:328266 |
| By: | Flavio Angelini (University of Perugia); Stefano Herzel (DEF, University of Rome "Tor Vergata"); Marco Nicolosi (Università La Sapienza) |
| Abstract: | We adopt an affine short-rate model for the contemporaneous evolution of the term structures based on EURIBOR and on eSTR. The model is based on the observation that the risk-free rate follows a constant trajectory and moves only at deterministic times (depending on the European Central Bank meetings). We calibrate the model using Kalman filtering on a panel of term structure zero rates and compare its performances to the dynamic version of the Nelson-Siegel model, both in- and out-of-sample. The model is able to reproduce some common features of the term structure dynamics, such as the “snake” shaped term structure volatility and the fact that the volatility increases in periods containing the meeting dates. We analyze the sensitivity of the eSTR term structure to variations in monetary policy expectations and apply the model to estimate the level and the probability distribution of the future rates, and to show how to compute the fallback risk of a on-going contract in case EURIBOR would be replaced by eSTR. |
| Keywords: | Affine Short-Rate Models, Bond Yields, Deterministic Jump Times, Fallback Risk, eSTR Transition |
| JEL: | C5 C6 E4 E5 |
| Date: | 2024–10–07 |
| URL: | https://d.repec.org/n?u=RePEc:rtv:ceisrp:613 |
| By: | María Alejandra Amado (BANCO DE ESPAÑA); Carlos Burga (PUC-CHILE); José E. Gutiérrez (BANCO DE ESPAÑA) |
| Abstract: | We document a novel channel through which domestic bank regulations generate cross-border real effects via international trade. Our setting is a one-time, unexpected increase in loan loss provisions in Spain in 2012. Using comprehensive administrative data from the Spanish credit register matched with customs data, we show that importers relying on the most affected banks experienced sharp reductions in credit supply, which led to a decline in their purchases abroad. Leveraging bilateral trade data at the country-product level, we find that Spanish aggregate imports declined, indicating limited reallocation across firms: the shock on highly exposed importers was not offset by the expansion from less exposed ones. This decline in Spain’s import demand is transmitted internationally, as total exports of Spain’s trading partners fell. The effect was stronger for countries with less developed financial systems, for exporters facing higher bilateral trade costs vis-à-vis Spain, and for products that are harder to reallocate across markets. Our findings highlight international trade as a key transmission mechanism of banking regulation –and domestic shocks more broadly– with implications for the cross-border coordination of prudential policy. |
| Keywords: | bank regulations, spillovers, international trade |
| JEL: | F14 F36 F42 G21 G28 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2538 |
| By: | Jean, Sebastian; Méjean, Isabelle; Schularick, Moritz |
| Abstract: | • In this paper, we (i) discuss the drivers of Chinese success in manufacturing; (ii) analyse the resulting challenges for the German and French economies: and (iii) present economic guidelines for economic policies to deal with China. • Over the past two decades, China has emerged as the world's leading industrial power, accounting for roughly one-third of global manufacturing value. Chinese industrial success was driven by a combination of supportive industrial and macroeconomic policies, but also by fierce domestic competition and economies of scale. • European businesses face acute challenges due to growing competition at home and in export markets, declining demand from China, and increasing protectionism in the global economy. China now leads Europe in a number of cutting-edge technologies. • Confronted with these challenges, we propose a precautionary strategy for Europe that maintains the benefits of openness, but does not naively hand over sensitive areas of the European economy to Chinese dominance. This applies most clearly to sectors closely linked to national security in the communication, technology, and defence space. • In important sectors where Europe lags technologically (e.g., batteries), the best policy is a strategy that welcomes Chinese and other countries' foreign direct investment in Europe, preferably linked to technology transfers and joint ventures. In sectors that have little strategic relevance and where Europe is not competitive, the best policy response is to let European buyers reap the benefits of low Chinese prices. |
| Abstract: | • In diesem Papier (i) erörtern wir die Treiber des chinesischen Erfolgs in der Industrie, (ii) analysieren die daraus resultierenden Herausforderungen für die europäische Wirtschaft und (iii) präsentieren wirtschaftspolitische Leitlinien für die Wirtschaftspolitik im Umgang mit China. • In den vergangenen zwei Jahrzehnten hat sich China zur weltweit führenden Industrienation entwickelt und steht inzwischen für rund ein Drittel der globalen Wertschöpfung im verarbeitenden Gewerbe. Der industrielle Erfolg Chinas wurde durch eine Kombination aus unterstützender Industrie- und Makropolitik, aber ebenso durch intensiven binnenwirtschaftlichen Wettbewerb und Skaleneffekte begünstigt. • Europäische Unternehmen sehen sich zunehmend mit gravierenden Herausforderungen konfrontiert: wachsender Konkurrenz im Binnen- und Exportmarkt, rückläufige Nachfrage aus China sowie einer Zunahme des Protektionismus in der Weltwirtschaft. In mehreren Schlüsseltechnologien hat China Europa inzwischen überholt. • Angesichts dieser Herausforderungen schlagen wir für Europa eine Strategie vor, welche die Vorteile wirtschaftlicher Offenheit wahrt, ohne jedoch in naiver Weise sensible Bereiche der europäischen Ökonomie einer chinesischen Dominanz zu überlassen. Dies gilt in besonderem Maße für Sektoren, die eng mit nationaler Sicherheit im Bereich Kommunikation, Hochtechnologie und Verteidigung verknüpft sind. • In bedeutenden Sektoren, in denen Europa technologisch im Rückstand ist (z. B. Batterien), besteht die beste Politikstrategie darin, chinesische wie auch andere ausländische Direktinvestitionen in Europa zuzulassen - vorzugsweise gekoppelt an Technologietransfers und Joint Ventures. In Sektoren, die weder strategisch relevant sind noch in denen Europa wettbewerbsfähig ist, besteht die sinnvollste Politikantwort darin, europäischen Konsumenten und Produzenten die Vorteile niedriger chinesischer Preise zugutekommen zu lassen. |
| Keywords: | EU, China, Trade policy, Handelspolitik |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkpb:328251 |