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on European Economics |
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Issue of 2024‒10‒21
seventeen papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Valentin Burban (Banque de France and Aix-Marseille University, Aix-Marseille School of Economics); Andreaa Liliana Vladu (European Central Bank); Bruno De Backer (National Bank of Belgium, Economics and Research Department) |
| Abstract: | This article measures the degree of potential de-anchoring of inflation expectations in the euro area vis-à-vis the inflation objective of the European Central Bank (ECB). A no-arbitrage term structure model that allows for a time-varying long-term mean of inflation expectations, πt*, is applied to inflation-linked swap (ILS) rates, while taking into account survey-based inflation forecasts. Estimates of πt* have been close to 2 % since the mid-2000s, indicating that long-term inflation expectations have overall remained well anchored to the ECB’s inflation objective. As this objective is however related to the "medium term", expectations components of various forward ILS rates are extracted: they appear to have been broadly anchored, with tentative signs of de-anchoring up to the two-year horizon. Using backcasted ILS rates, estimates of πt* are much above 2 % in the early 1990s, but they converge to levels below 2 % by the end of the decade when the ECB was established. |
| Keywords: | Inflation-linked swap rates, surveys, no-arbitrage, shifting endpoint, inflation expectations |
| JEL: | E31 E43 E47 E58 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbb:reswpp:202409-457 |
| By: | Pablo Garcia; Pascal Jacquinot; ÄŒrt LenarÄ iÄ; Kostas Mavromatis; Niki Papadopoulou; Niki Papadopoulou |
| Abstract: | We analyze the economic impact of the green transition in the euro area by extending the Euro Area and Global Economy (EAGLE) model with green and brown energy sectors. Energy goods are consumed as final goods by households and as inputs by intermediate goods firms. A carbon tax manifests itself as an adverse cost-push shock. Without subsidies to green energy firms, the green transition is limited to household expenditure switching towards green energy goods. When authorities direct subsidies to green energy firms a strong supply effect in the market for green energy is triggered lowering its price and boosting the intermediate good sector’s demand for green energy inputs. When carbon taxes are raised globally, the recession in the euro area deepens while inflationary pressures amplify, triggered partly by a weakening of the euro. Taxes on brown capital investment are also contractionary but lead to a decline in inflation. In this case, subsidies to investment in green capital can mitigate the recession and are essential to trigger a switch towards green energy consumption goods and inputs. |
| Keywords: | climate policy; Carbon Taxation; Monetary Policy; Fiscal Policy; Euro Area; DSGE modeling |
| JEL: | C53 E32 E52 F45 H30 Q48 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbwpp:816 |
| By: | Jaromir Baxa (Institute of Economic Studies of the Faculty of Social Sciences, Charles University; Prague, Czech Republic & The Czech Academy of Sciences, Institute of Information Theory and Automation, Prague, Czech Republic); Tomas Sestorad (aInstitute of Economic Studies of the Faculty of Social Sciences, Charles University; Prague, Czech Republic & The Czech Academy of Sciences, Institute of Information Theory and Automation, Prague, Czech Republic & The Czech National Bank, Prague, Czech Republic) |
| Abstract: | This paper proposes a novel approach to decompose the Economic Policy Uncertainty indices of European countries into the common and country-specific components using the time-varying total connectedness. Then, by employing a Bayesian panel VAR model, we assess how common and country-specific uncertainty shocks influence economic activity, prices, and monetary policy, with the shocks identified using zero and sign restrictions. Our results reveal that only common shocks have significant effects on all macroeconomic variables. This result is robust across alternative samples and structural identifications. Therefore, our findings imply that policymakers should focus on uncertainty shocks that are synchronized across countries. |
| Keywords: | Common uncertainty, economic policy uncertainty, panel VAR, spillovers |
| JEL: | C32 F42 F45 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:fau:wpaper:wp2024_34 |
| By: | Ratcliff, Ryan D. |
| Abstract: | Badinger and Schiman (2023) use a narrative high-frequency analysis of news and financial markets to develop a small set of restrictions on the structural shocks of a VAR of the Euro area. Their approach does not uniquely identify a structural representation, so their results are based on the distribution of a randomly generated set of parameters that satisfies the restrictions. Their method generates impulse responses that are consistent with macroeconomic theory, but that differ from previous studies that use alternative highfrequency identification strategies. They use this difference to argue that, unlike previous studies, their method is able to separate monetary policy surprises from confounding central bank information shocks - an important new contribution to the literature. I conducted two replication studies of their work on behalf of the Institute for Replication (I4R). First, I used the code provided in their replication package to replicate all of their main results, aside from the small variations expected in replicating a Monte Carlo study. Second, I attempted to use their original data to recreate their results using a different statistical software (Eviews 13). I was unable to replicate their results for two reasons. First, my program is unable to exactly replicate the custom prior they used to generate their reduced-form results. Second, my models routinely generated nonstationary VARs that nevertheless satisfied the identification restrictions. This differs from the author's results, but is not surprising given the ambiguous stationarity of the underlying macro variables. |
| Keywords: | Structural VAR, Residual Sign Restrictions, Replication |
| JEL: | C32 E43 E44 E52 E58 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:i4rdps:160 |
| By: | Frane Banić (Croatian National Bank, Croatia Author-Name2: Ivan Žilić Author-Name2-First: Ivan Author-Name2-Last: Žilić Author-Email2: ivan.zilic@hnb.hr Author-Workplace-Name2: Croatian National Bank, Croatia) |
| Abstract: | This paper estimates the effect of Excessive Deficit Procedure (EDP) on fiscal consolidation for EU member states between 2005 and 2019. Using the quarterly data which enables more time granularity and the recent advances in the difference-in-difference literature which allow for differently timed, non-absorbing treatments with dynamic effects, we estimate the causal effect of EDP on cyclically adjusted primary b alance. Our findings point to a strong fiscal consolidation effect in the EU under the EDP, measuring to 1.69 percentage point improvement in fiscal stance. While the improvement of fiscal stance under the EDP acted as a counter-cyclical measure during economic expansion, we descriptively show that fiscal consolidation due to the EDP directed policymakers towards a restrictive pro-cyclical stance, especially during the global financial c risis. Finally, we contextualize these findings within the new EU’s fiscal rules, which emphasize the medium-term fiscal adjustment. |
| Keywords: | Excessive Deficit Procedure, fiscal consolidation, difference-in-difference |
| JEL: | H30 H60 F62 |
| Date: | 2024–10–02 |
| URL: | https://d.repec.org/n?u=RePEc:hnb:wpaper:74 |
| By: | BATISTA E SILVA Filipe (European Commission - JRC); DIJKSTRA Lewis (European Commission - JRC); AUTERI Davide (European Commission - JRC); CURTALE Riccardo (European Commission - JRC); DORATI Chiara (European Commission - JRC); HORMIGOS FELIU Clara (European Commission - JRC); JACOBS-CRISIONI Chris; KOMPIL Mert; PERPIÑA CASTILLO Carolina; PIGAIANI Cristian (European Commission - JRC); RIBEIRO BARRANCO Ricardo; SCHIAVONE Matteo; SULIS Patrizia (European Commission - JRC) |
| Abstract: | This report assembles a series of separate scientific contributions to the European Commission’s Ninth Report on Economic, Social and Territorial Cohesion. The report includes seven short research papers providing background and insight under three broad topics with relevance to European regional and urban policy: Urbanisation and regional economic trends; Transport and digital accessibility; and Sectoral analyses (renewable energy and tourism). Each short paper documents a novel research or analysis based on the most recent data available, thus providing up-to-date and timely evidence on issues with a strong territorial dimension. Although covering a very diverse range of topics, the contributions articulate interrelated challenges and opportunities to promote territorial cohesion in Europe. These are related to, for example, the increasing urbanisation and implications for transport and mobility, population decline in rural areas, regional economic convergence/divergence trends, the improving access to broadband in the EU, the potential role of rural areas for the green transition and tourism as a heterogeneous but overall resilient industry contributing to many EU regional economies. An efficient Cohesion Policy should envisage targeted, place-based investments that consider these and other challenges and opportunities. |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc138304 |
| By: | Luckeneder, Sebastian; Giljum, Stefan; Maus, Victor; Sonter, Laura J.; Lenzen, Manfred |
| Abstract: | The integration of metals and minerals into global supply chains leads to mining impacts that manifest far from the location of final consumption. To address these distant impacts, new legal frameworks are emerging that require companies to exercise due diligence across their entire supply chains. However, accurately quantifying local mining impacts and tracing them from production to consumption remains challenging. This study examines global flows of forest loss within mine sites from 2001 to 2019, with a focus on final demand in the European Union. By integrating satellite imagery with a multi-region input-output framework, we find that 12% of global forest loss caused by mining is linked to EU consumption, with 89% of these impacts occurring outside EU borders. The study identifies variations in impact intensities across global mining areas, commodities, and European industry sectors, offering actionable strategies and highlighting challenges for responsible material sourcing in consumer and producer regions. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:wiw:wus045:67247598 |
| By: | Â Barra Roantree (Trinity College Dublin) |
| Abstract: | This paper explores the role fiscal policy plays in shaping the distribution of resources through the tax and transfer system in Ireland. It first shows that there has been a shift towards taxes on income and towards expenditure on income transfers as the size of government has increased. This has implications for the amount of redistribution, which appears relatively high compared to other European countries and has risen over the last three decades. However, the tax and transfer system can also shape the distribution of income through the effects it has on the behaviour of individuals, households and firms. Despite an explosion of international research on these effects in recent decades, we have little credible empirical evidence on the magnitude of these effects in Ireland, in large part due to the lack of access for researchers to administrative data. |
| Keywords: | redistribution; inequality; efficiency; Ireland |
| JEL: | H21 H23 H30 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:tcd:tcduee:tep0824 |
| By: | Marco Cucculelli (Universita' Politecnica delle Marche, Dipartimento di Scienze economiche e sociali); Noemi Giampaoli (Polytechnic University of Marche, Department of Economics and Social Sciences,); Matteo Renghini (LUISS "Guido Carli" University, Department of Economics and Finance) |
| Abstract: | Assessing the presence and distribution of strategic and net-zero technologies in companies is crucial for European competitiveness. However, due to the complexity and evolving nature of these technology areas, this is a challenging task. This paper presents a process for identifying and mapping strategic and net-zero technologies (as described in the Strategic Technologies for Europe Platform (STEP) and the Net-Zero Industry Act (NZIA)) in European companies. STEP and NZIA technologies are identified using text mining techniques based on the titles and abstracts of patents filed with the EPO and retrieved in PATSTAT for the years 2002 to 2022. The paper describes the classification process of STEP and NZIA technologies based on IPC codes of file patents. The IPC codes were then matched with the patent portfolio of almost 100, 000 European companies to determine the company's technological profile and the distribution of these technologies by sector, geographic area, and company characteristics in the European panorama. |
| Keywords: | PATSTAT, Orbis, Patents, Text mining, Innovation, STEP, NZIA, Unconventional data |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:anc:wmofir:188 |
| By: | Cappelletti, Francesco; Bohlin, Erik |
| Abstract: | The European Union's attention to telecommunications and its infrastructure has increased over the past years. This invigorated approach highlights the need for adaptive policymaking to keep pace with technological advancements and market dynamics towards a unified European telecom market. This paper examines the concept of strategic legislation, emphasizing the need for adaptive, flexible, and forward-looking policies. It discusses the advantages of an adaptive and proactive legislative approach, which can enable the telecommunication sector to keep pace with and influence market dynamics and technology integration. With the digital landscape evolving faster than traditional policy cycles can adapt, this work advocates for a dynamic approach that integrates flexibility and responsiveness into EU telecommunications policy. This approach is identified as crucial for fostering a competitive landscape, encouraging innovation, and attracting investment. |
| Keywords: | Adaptive Policymaking, Strategic Legislation, EU, Telecommunication, Technological Advancement |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:itsb24:302481 |
| By: | Joosen, Bart; Pulgar Ezquerra, Juana; Tröger, Tobias |
| Abstract: | Banking Union is crucial for European integration, ensuring financial stability in the single market for financial services. The Court of Justice of the European Union (CJEU) plays an essential role in interpreting and enforcing the legal framework of the Banking Union, especially regarding the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM). This in-depth analysis scrutinises the pertinent CJEU case law and highlights its implications for the Banking Union and the EU legal order. This document was provided/prepared by the Economic Governance and EMU Scrutiny Unit at the request of the ECON Committee. |
| Keywords: | Banking Union, European integration, Legal framework, EU Legal Order |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewh:303047 |
| By: | Erik Engberg (Orebro University); Holger Gorg (Kiel Institute for the World Economy); Magnus Lodefalk (Örebro University); Farrukh Javed; Martin Langkvist; Natalia Monteiro; Hildegunn Nordas; Giuseppe Pulito (Rockwool Foundation Berlin); Sarah Schroeder (Aarhus University); Aili Tang (Örebro University) |
| Abstract: | We unbox developments in artificial intelligence (AI) to estimate how exposure to these developments affect firm-level labour demand, using detailed register data from Denmark, Portugal and Sweden over two decades. Based on data on AI capabilities and occupational work content, we develop and validate a time-variant measure for occupational exposure to AI across subdomains of AI, such as language modelling. According to the model, white collar occupations are most exposed to AI, and especially white collar work that entails relatively little social interaction. We illustrate its usefulness by applying it to near-universal data on firms and individuals from Sweden, Denmark, and Portugal, and estimating firm labour demand regressions. We find a positive (negative) association between AI exposure and labour demand for high-skilled white (blue) collar work. Overall, there is an up-skilling effect, with the share of white-collar to blue collar workers increasing with AI exposure. Exposure to AI within the subdomains of image and language are positively (negatively) linked to demand for high-skilled white collar (blue collar) work, whereas other AI-areas are heterogeneously linked to groupsof workers. |
| Keywords: | Artificial intelligence; Labour demand; Multi-country firm-level evidence |
| JEL: | E24 J23 J24 N34 O33 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2414 |
| By: | Sagade, Satchit; Scharnowski, Stefan; Theissen, Erik; Westheide, Christian |
| Abstract: | We examine the impact of increasing competition among the fastest traders by analyzing a new low-latency microwave network connecting exchanges trading the same stocks. Using a difference-in-differences approach comparing German stocks with similar French stocks, we find improved market integration, faster incorporation of stock-specific information, and an increased contribution to price discovery by the smaller exchange. Liquidity worsens for large caps due to increased sniping but improves for mid caps due to fast liquidity provision. Trading volume on the smaller exchange declines across all stocks. We thus uncover nuanced effects of fast trader participation that depend on their prior involvement. |
| Keywords: | Latency, Market Fragmentation, Arbitrage, Liquidity, Price Efficiency, High-Frequency Trading |
| JEL: | G10 G14 G15 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewp:303051 |
| By: | Álvaro Carbonell Rodríguez; Jean Fouré; Elisa Lanzi |
| Abstract: | To meet the goal of net-zero emissions by 2050, Spain will need to take further climate action in the years ahead. Enhanced policy measures, such as taxes, subsidies and standards, will have implications for the public budget and for the economy. This paper quantifies these implications by comparing two scenarios developed with the ENV-Linkages model: a baseline with current policies, and a net-zero scenario in which more ambitious climate policy measures are implemented to reduce CO2 emissions. The analysis shows that ambitious climate action and economic growth can go hand-in-hand. While the consequences for the public budget will be strongly influenced by the chosen climate policy instruments, the findings illustrate that the changes in net fiscal revenues induced by additional climate policy can be small compared to the overall size of government revenues in 2050. |
| Keywords: | climate change mitigation, computable general equilibrium models, net-zero, public budget |
| JEL: | C68 H20 H61 Q43 Q54 H23 |
| Date: | 2024–10–10 |
| URL: | https://d.repec.org/n?u=RePEc:oec:envaaa:250-en |
| By: | Kontonikas, Alexandros; Pyrgiotakis, Emmanouil |
| Abstract: | We study the Greek residential property market during the recovery period using data from the Property Transfer Value Registry. We examine 132, 189 transactions from 2017 to 2024 and find a significant increase in both the number and value of transactions. Markedly, this increase is more profound among older properties and flats. The findings indicate potential overheating in the residential property market, as we move away from an era of relative undervaluation and head toward higher levels of transactions and prices. However, there is significant geographical heterogeneity both across the country and within the Athens area. The econometric analysis reveals a significant relationship between the market value and the objective value of properties. Finally, we find that the “My Home” government program is not associated with an increase in transaction values for homes that meet its criteria. |
| Keywords: | Greek residential property market, Property Transfer Value Registry, “My home” program, hedonic model |
| Date: | 2024–10–03 |
| URL: | https://d.repec.org/n?u=RePEc:esy:uefcwp:39310 |
| By: | Schuster, Florian; Heilmann, Felix; Krahé, Max; Sigl-Glöckner, Philippa; Steitz, Janek |
| Abstract: | Deutschland benötigt bis 2030 zusätzliche öffentliche Ausgaben in Höhe von 782 Mrd. Euro für die Modernisierung. Bislang fehlt der deutschen Politik dafür ein verlässlicher Finanzierungsrahmen; diskutiert werden stets eine grundlegende Reform der Schuldenbremse oder Einsparungen. Beide Strategien sind kurzfristig nicht realistisch umsetzbar. In diesem Policy Paper zeigen wir, dass viele der ermittelten Bedarfe auch ohne Grundgesetzänderung finanziert werden können, und zwar kurzfristig: Im Rahmen der Schuldenbremse sind Verschuldungsmöglichkeiten für produktive Ausgaben im Rahmen der Konjunkturkomponente und finanzieller Transaktionen bereits angelegt. Dennoch sind diese Finanzierungslösungen unzureichend, komplex und teurer als nötig. Eine Reform der Schuldenbremse ist deshalb sinnvoll, erfordert aber zunächst ein neues Verständnis nachhaltiger Staatsfinanzen. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:dzimps:303028 |
| By: | Elodie Andrieu; John Morrow |
| Abstract: | How do firms diffuse resources and do they spillover outside headquarter intensive areas? We show R&D subsidies induce French firms to hire new workers, often in new establishments and commuting zones. Using subsidy induced labor demand shocks and past employment patterns, we estimate a within industry spillover elasticity of .26 to non-subsidy firms, rising to .35 for openings outside of headquarter areas. Spillovers are also significant across firm branches and for firms. While subsidies are nominally awarded to headquarters, firms expand to distribute spillovers more broadly. |
| Keywords: | multi-establishment firms, subsidies, directed growth, spillovers |
| Date: | 2024–09–24 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2035 |