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on European Economics |
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Issue of 2025–12–22
thirteen papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Duarte, João B.; Pires, Mariana N. |
| Abstract: | We study how financial integration shapes the transmission of monetary policy to consumer prices and output in the euro area. Using local projections, we document that the effect of financial integration is continuous: greater integration systematically strengthens the pass-through of monetary policy. When integration falls to low levels—around the first quartile of its historical distribution— transmission to both prices and output becomes statistically and economically insignificant. The amplification pattern is pervasive across member states and more pronounced in peripheral economies. These results show that financial integration is a key determinant of monetary policy effectiveness within the euro area. JEL Classification: E44, E52, F36, F45 |
| Keywords: | financial integration, local projections, monetary policy, monetary union |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253165 |
| By: | Le Roux, Thomas |
| Abstract: | Abstract This paper argues that the dominant risk to Euro Area stability has structurally shifted from cyclical inflation to a direct conflict between geopolitically-driven fiscal policy and central bank independence. We construct a novel quarterly dataset of exogenous geopolitical fiscal shocks (GEO_SHOCK) using a narrative approach (Ramey, 2011). A Structural Vector Autoregression (SVAR) for the EA aggregate finds these shocks are persistently inflationary, with a peak impact of +0.08% on the HICP. A Panel SVAR, robust to local projections, finds the shocks drive significant fragmentation: a 1-std-dev shock widens spreads in high-debt (90th percentile) member states by 22 basis points, an effect absent in pandemic-related fiscal shocks. The shock accounts for 34% of medium-term spread variance. A high-frequency event study confirms this, showing an immediate +11.2 bps impact on Italian spreads post-announcement. A counterfactual simulation shows that a TPI "spread cap" would stabilize debt but amplify inflation, quantifying the fiscal dominance trade-off. |
| Keywords: | Fiscal Dominance, Monetary Policy, Geopolitical Risk, TPI, Fragmentation, SVAR, Local Projections |
| JEL: | E52 E58 E62 E63 F45 H63 |
| Date: | 2025–11–07 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126750 |
| By: | Martin Ertl; Adrian Wende |
| Abstract: | Abstract:This policy brief examines the extent to which Austrian exports are exposed to exchange rate risk and how exchange rate fluctuations affect exports to countries outside the euro area. As exchange rates are largely disconnected from macroeconomic fundamentals, they are likely driven to some extent by financial shocks, resulting in significant volatility and exchange rate risk. Nevertheless, Austria’s overall exposure to such risk is relatively limited. Most exports go to countries with comparatively stable currencies, while highly volatile currencies account for only a small share of both total exports and exporting firms. Survey evidence indicates that many Austrian exporters manage exchange rate risk by invoicing in euros, which substantially reduces short-term risk, especially for small and medium-sized firms. In addition, a considerable number of firms use trade insurance. Empirical studies show that Austrian exports react only moderately to exchange rate movements, although the degree of sensitivity varies significantly across sectors and products. |
| Keywords: | International Competitiveness, Austria, export performance, Currency volatility, Euro invoicing, Exchange rate risk |
| JEL: | F31 F14 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:wsr:pbrief:y:2025:m:12:i:71 |
| By: | Dijkstra Lewis (European Commission - JRC); Testori Giulia (European Commission - JRC); Hormigos Feliu Clara (European Commission - JRC); Kompil Mert (European Commission - JRC); Proietti Paola; Jacobs-crisioni Chris; Pigaiani Cristian (European Commission - JRC); Tucci Michele (European Commission - JRC) |
| Abstract: | This policy brief provides an overview of the main opportunities and challenges facing EU cities in support of the EU Agenda for Cities (2025). It covers demographic, economic, social and environmental issues as well as transport, and safety. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc144683 |
| By: | Tomaso Duso; Martin Peitz |
| Abstract: | Trade conflicts, geopolitical tensions, digital disruption, and the climate crisis pose major challenges for the European Union (EU) and its member states. As called for in the Draghi Report, industrial policy measures can increase competitiveness, strengthen resilience, and facilitate the twin transformation. This article explores ways in which competition policy can be realigned to better accommodate industrial policy objectives. Using German competition law as a reference point, it presents options with which legislatures and competition authorities can respond to current challenges, reconcile conflicting objectives, and adapt the decision-making framework. It then considers elements of a competition-oriented industrial policy, understood as an evidence-based, targeted approach in which competition serves both as a guiding principle and as a control variable. |
| Keywords: | industrial policy, protection of competition, competition, regulation, competition policy, competitiveness, internal market |
| JEL: | L40 L50 L52 K21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwwpp:dp2145 |
| By: | Ziegler, Marc; Weck, Thomas |
| Abstract: | The evolving EU-China economic relationship reflects a shift from cooperation to systemic rivalry, driven by China’s increasingly assertive geoeconomic posture and the European Union’s evolving focus on economic security. This article examines the EU's collective securitisation efforts, applying a political and legal lens to assess challenges and opportunities. While legal tools and strategic policy shifts in favour of “de-risking” signify progress, the Union faces substantial hurdles in aligning Member States’ diverse interests and perceptions of China as a threat. Drawing on the evolution of EU-China relations in the past three decades, the analysis underscores the need for enhanced policy coherence and pragmatic measures to address economic security risks. The findings advocate leveraging existing Treaty provisions to foster resilience and strategic autonomy, emphasizing that coordinated action is critical to navigating the complexities of EU-China relations. |
| Keywords: | collective Securitisation; de-risking; economic security; EU foreign policy; EU-China relations |
| JEL: | J1 |
| Date: | 2025–10–07 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130467 |
| By: | Brühl, Volker |
| Abstract: | The European Green Deal (EGD) has the intention to transform the EU into a sustainable, resource efficient and competitive economy, ensuring zero net emissions of greenhouse gases (GHG) by 2050. This article illustrates the complex regulatory architecture of the EGD, which is often overlooked. While each of the initiatives is reasonable, their combined impact - often reinforcing each other - could impede Europe's global competitiveness, especially in a fragile economic environment. There are some fields where a thoughtful discussion about implementation deadlines and reporting requirements could help to resolve trade-offs between environmental objectives and competitiveness. |
| Keywords: | European Green Deal, Regulatierung, Wettbewerbsfähigkeit, European Green Deal, Regulation, Competitiveness |
| JEL: | A10 K20 L50 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cfswop:333951 |
| By: | Calza Elisa (European Commission - JRC); Napolitano Lorenzo (European Commission - JRC); Soguero Escuer Jorge (European Commission - JRC); De Prato Giuditta (European Commission - JRC); Tuebke Alexander (European Commission - JRC); Tuebke Alexander (European Commission - JRC) |
| Abstract: | We analyse the advanced manufacturing (AM) industrial landscape via the Digital Techno-Eco-nomic ecoSystem (DGTES) and position the EU Industrial R&D Investment Scoreboard firms. Over 70% of global AM firms are concentrated in China (45%), the US (17%), and Europe (10%), pointing to a clear regional dominance in the DGTES AM ecosystem. The EU is still well positioned relative to its number of activities in critical technologies for the AM industry, like´3D Printing´. The EU and Japan have higher R&D investment and patent filings of Scoreboard firms compared to the broader DGTES AM ecosystem (e.g., 16% vs. 10% in the EU) making them candidates for driving the uptake of AM technologies. However, China leads in overall AM ecosystem patent activity. ´3D printing´ dominates the AM ecosystem (27%), but Scoreboard firms excel in ´Power Electronics´ (35% vs. 20%). The manufacturing sector leads in both (47% overall, 68% for Scoreboard firms), with significant presence in ´ICT´ and ´professional services´. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc142720 |
| By: | Lasarte Lopez Jesus (European Commission - JRC); M'barek Robert (European Commission - JRC) |
| Abstract: | The bioeconomy encompasses a wide range of activities that utilise renewable biological resources, from agriculture and forestry to biotechnology and bio-based industries, to produce food, materials, and energy, as well as related services. In 2023, the biomass producing and converting sectors created 17.1 million jobs, equivalent to 7.9% of total EU’s employment. Additionally, it generated a value added of EUR 863 billion, accounting for 5% of EU’s GDP. The bio-based industry accounted for EUR 583 billion in economic value added, half of which (EUR 305 billion) are generated by food, beverages and other agro-manufacturing. The manufacturing of bio-based pharmaceuticals with EUR 102 billion, followed by wood products and furniture (EUR 61 billion), paper (EUR 52 billion), and bio-based textiles (EUR 29 billion), bio-based chemicals (EUR 14 billion) and bio-based plastics and rubber (EUR 4 billion). When including the services, the size of all bioeconomy-relevant sectors is significantly higher. The bioeconomy-relevant sectors generated EUR 1.9-2.7 trillion in value added (11-16% of EU’s GDP) and created between 42 and 60 million jobs (19-28% of EU’s total employment). In 2023, the business expenditure in research and development (R&D) from the biomass producing and converting sectors in the EU was estimated at EUR 17.3 billion, corresponding to 6.7% of the total EU's business expenditure in R&D. If related scientific and knowledge-based activities are included, the amount is EUR 23.2 billion (9.0% of total EU´s business expenditure). Over the last years, the socioeconomic indicators of the bioeconomy have shown an increasing contribution to GDP and R&D expenditure, evincing the potential for fostering innovation, productivity and competitiveness. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc143759 |
| By: | Philippidis George; Van Leeuwen Myrna; Bartelings Heleen; Smeets Kristkova Zuzana; Laquai Verena; Sturm Viktoriya; Alvarez Rodrigo Xavier; M'barek Robert (European Commission - JRC) |
| Abstract: | The present report summarises the enhancements made with recognised (bioeconomy) economic modelling tools (MAGNET and AGMEMOD/BioMAT) to better capture the nuances of bio-based markets and provides a plausible medium-term baseline that combines the strengths of the simulation models. As such, this study is envisaged as an initial preparatory step for further scenario-based analyses that might serve as further insides into different pathways for the EU bioeconomy, in the event of the upcoming update of EU Bioeconomy Strategy and Action Plan expected at the end of 2025. The design of the modelling framework, which started in 2023, considers a range of modelling enhancements and alignments that are relevant to policy documents and topics. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc143688 |
| By: | Fabiani Josefina (European Commission - JRC); Fernández Cruzado Ana (European Commission - JRC); De Prato Giuditta (European Commission - JRC) |
| Abstract: | This study underscores the EU's progress and challenges in the twin transition, offering insights into the EU's competitive position and potential areas for policy action. Despite twin patents filed by EU players increasing on average of 14% annually since 2009, the number of patents is still far behind those from China and the US, clear leaders in twin technologies innovations. China and the US host also most co-applicants for patent filings of EU-based players, and the study underscores potential dependencies on Chinese partnerships. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc142637 |
| By: | Ali Hassan (Aix-Marseille Univ., CNRS, AMSE, Marseille, France); Jean-Baptiste Hasse (Aix-Marseille Univ., CNRS, AMSE, Marseille, France & UCLouvain, LIDAM-LFIN, Louvain-La-Neuve, Belgium); Christelle Lecourt (Aix-Marseille Univ., CNRS, AMSE, Marseille, France) |
| Abstract: | In this paper, we examine the determinants of investor money flows in sustainable mutual funds. Owing to differences in preferences, we posit that ESG investors are more sensitive to mutual fund financial attributes than impact investors are. Using a dataset of 840 actively managed European sustainable equity funds for the period 2018–2025, we find that fund flows are significantly more sensitive to past performance for ESG funds than for impact funds. Our empirical results are in line with impact investor specificity among sustainable investors: the first invest for ESG values, whereas the latter invest with ESG values. Our findings are robust to alternative sustainable classifications, geographical investment areas, investor types and time sampling. |
| Keywords: | Impact investing; Mutual funds; Investor behavior; Cash flows |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:aim:wpaimx:2521 |
| By: | Lindner, Vincent; Pelizzon, Loriana |
| Abstract: | This paper argues that the European macroprudential regime has evolved into a complex architecture of buffers, national discretion, and instrument-specific controls due to persistent doubts regarding the credibility of the EU bank resolution regime. Moreover, macroprudential controls are structurally constrained by the dynamics of financial innovation, particularly the rapid growth of non-bank financial intermediaries (NBFIs), which continually move risk outside the traditional regulatory perimeter. In such an environment, ex ante macroprudential tools can at best respond to the last innovation but can never anticipate the next one. Thus, macroprudential policy should be lean and focused. If political capital for a major reform is available, it should be directed towards strengthening the resolution regime, which is the only institutional mechanism capable of disciplining risk-taking ex ante and providing stability ex post. |
| Keywords: | Macroprudential Regulation, Resolution Regime, NBFIs |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safepl:333936 |