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on European Economics |
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Issue of 2026–03–16
eleven papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Michal Marencak (National Bank of Slovakia); Giang Nghiem (Leibniz University Hannover) |
| Abstract: | Using ECB Consumer Expectations Survey microdata, we construct household-level inflation measures for the euro area. Four findings emerge. (1) Personal inflation varies systematically across households, countries, and over time, with disparities widening markedly during the 2022–23 inflation surge. (2) Greater dispersion in personal inflation is closely associated with stronger disagreement in both perceived and expected inflation. (3) A one-percentage-point increase in personal inflation raises one-year-ahead inflation expectations by up to 0.2 percentage points. (4) Personal inflation affects consumption primarily through inflation expectations channel. |
| JEL: | D30 D84 E31 E52 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:svk:wpaper:1125 |
| By: | Barauskaitė Griškevičienė, Kristina; Brand, Claus; Nguyen, Anh Dinh Minh |
| Abstract: | We analyze the sources of the pandemic-era inflation surge in the euro area using a Bayesian vector autoregression (BVAR) model. By applying narrative, sign, zero, and inequality restrictions, this study is the first that jointly analyzes the inflationary effects of energy and non-energy supply and policy and non-policy demand factors, including fiscal policy, conventional and unconventional monetary policy. Factoring in that energy price dynamics also responded to aggregate demand conditions, we find that the pandemic-era inflation surge in the euro area was driven by a combination of supply and demand factors. Energy-related supply side constraints, even if less important than often estimated, were a key factor in the run up of inflation. Fiscal and monetary policies were accommodative but not the dominant drivers. JEL Classification: C11, C32, E31, E52 |
| Keywords: | energy supply, fiscal policy, inflation, monetary policy, pandemic |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263201 |
| By: | Casas Aljama Pablo (European Commission - JRC); Christou Tryfonas (European Commission - JRC); Garcia Rodriguez Abian (European Commission - JRC); Lazarou Nicholas (European Commission - JRC); Salotti Simone (European Commission - JRC) |
| Abstract: | This paper presents an assessment of the macroeconomic impact of the Digital Europe Programme, a cornerstone of the EU's commitment to drive digital transformation. Using the RHOMOLO spatial dynamic computable general equilibrium model, the analysis quantifies the effects of the programme's investments on EU economies. The results show a positive impact on GDP, with significant returns on investment, and improved EU competitiveness. The modelling simulations consider different scenarios, including digital spillovers, which enhance the programme's impact. The findings suggest that the programme can have a substantial effect on EU economies, with cumulative GDP multipliers increasing over time. The analysis provides valuable insights for policymakers, highlighting the potential benefits of investing in digital transformation and the importance of considering digital spillovers in policy evaluations. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:termod:202601 |
| By: | Lisandra Flach; Philip Bodenschatz |
| Abstract: | Key MessagesIn 2024, Iran and neighboring countries relying on the Strait of Hormuz accounted for roughly 0.4 percent of German imports and 1.8 percent of extra-EU importsLess than 1 percent of total German imports and roughly 1.7 percent of extra-EU imports pass directly through the Strait of HormuzFor Germany, a blockade would mainly affect the sourcing of products such as unalloyed aluminum and medium and crude petroleum oilsFor the EU, the impact is more significant: About 6.2 percent of crude oil and 8.7 percent of the LNG imported from non-EU member states pass through the Strait of HormuzA prolonged blockade of the Strait is the primary threat to the EU and Germany, as it would spike energy prices and disrupt supply chains |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:econpb:_81 |
| By: | Olivier De Jonghe (European Central Bank); Konstantıns Benkovskis (Latvijas Banka); Karolis Bielskis (Bank of Lithuania); Diana Bonfim (Banco de Portugal; Católica Lisbon); Margherita Bottero (Banca d’Italia); Tamás Briglevics (Central Bank of Hungary); Martin Cesnak (Národná banka Slovenska); Mantas Dirma (Bank of Lithuania); Marina Emiris (National Bank of Belgium); Pálma Filep-Mosberger (Central Bank of Hungary); Valentin Jouvanceau (Bank of Lithuania); Nicholas Kaiser (Central Bank of Ireland); Dmitry Khametshin (Banco de España); Tibor Lalinskı (Národná banka Slovenska); Viola M. Grolmusz (Central Bank of Hungary); Laura Moretti (Central Bank of Ireland); Arturs Janis Nikitins (Latvijas Banka); Angelo Nunnari (Banca d’Italia); Maria Rodriguez-Moreno (Banco de España); Elitsa Stefanova (European Central Bank); Lajos Tamás Szabó (Central Bank of Hungary); Karlis Vilerts (Latvijas Banka); Sujiao Emma Zhao (Banco de Portugal) |
| Abstract: | We study heterogeneity in households’ credit across nine European countries (Belgium, Spain, Hungary, Ireland, Italy, Latvia, Lithuania, Portugal, and Slovakia) during 2022-2024 using granular credit register data. We first document substantial between- and withincountry variation in mortgage and consumer lending by borrower age, loan maturity, and interest rate fixation. We then quantify the pass-through of the ECB’s recent tightening cycle to household borrowing costs, and assess its heterogeneous impact across households. Pass-through is nearly complete for mortgages (around 0.9) but considerably weaker for consumer credit (around 0.4). While mortgage pass-through is relatively homogeneous across countries, consumer credit shows pronounced cross-country differences that cannot be explained by borrower or loan characteristics. Younger households face stronger mortgage pass-through but weaker consumer credit pass-through relative to older borrowers, and longer maturities areassociated with stronger pass-through in both credit markets. |
| JEL: | E52 G21 D14 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:svk:wpaper:1131 |
| By: | Ricci Mattia (European Commission - JRC); Lanterna Federica |
| Abstract: | The application of reduced VAT rates in the EU generally aims to alleviate the regressivity of consumption taxation. However, while these measures generate redistribution across income groups, they also create redistribution effects within income groups, leading to arbitrary redistribution among households with similar incomes but different consumption patterns. Using the Analysis of Gini (ANOGI) decomposition, we evaluate the redistributive impact of reduced VAT rates across EU Member States. Our results indicate that, while reduced VAT rates lower the regressivity of VAT taxation, their total redistributive effect is modest. That is because the between-group pro-redistributive effect is largely offset by the within-group anti-redistributive one. This analysis highlights the limited effectiveness of reduced VAT rates as a tool for redistribution |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:taxref:202602 |
| By: | KÄ rlis Vilerts (Latvijas Banka); Sofia Anyfantaki (European Central Bank); KonstantÄ«ns Beņkovskis (Latvijas Banka); Sebastian Bredl (Deutsche Bundesbank); Massimo Giovannini (Bank of Malta); Florian Horky (National Bank of Slovakia); Vanessa Kunzmann (Deutsche Bundesbank); Tibor Lalinskı (National Bank of Slovakia); Athanasios Lampousis (Bank of Greece); Elizaveta Lukmanova (Central Bank of Ireland); Filippos Petroulakis (Bank of Greece); KlÄ vs Zutis (Latvijas Banka) |
| Abstract: | Does the maturity of the relevant risk-free rate influence the strength of monetary policy pass-through to interest rates on new loans? To address this question, we present novel empirical evidence on lending practices across all euro area countries, using AnaCredit data covering nearly seven million new loans issued to non-financial corporations in 2022–2023. We document substantial variation in (a) the prevalence of fixed- vs floating-rate loans, (b) rate fixation periods, and (c) reference rates. This variation results in lending rates being exposed to different segments of the risk-free rate yield curve which, in turn, influence their sensitivity to monetary policy changes. We show that loans linked to shorter-maturity riskfree rates experience more pronounced monetary pass-through. Importantly, this effect is not purely mechanical, as part of the effect is offset by adjustments in the premium, revealing previously less-explored heterogeneity in the pass-through to lending rates. |
| JEL: | E52 E43 G21 E58 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:svk:wpaper:1123 |
| By: | Esteban Garcıa-Miralles (Banco de Espana); Maximilian Freier (ECB); Sara Riscado (OECD, on leave from Banco de Portugal); Chrysa Leventi (European Commission, Joint Research Centre); Alberto Mazzon (European Commission, Joint Research Centre); Glenn Abela (Central Bank of Malta); Laura Boyd (Central Bank of Ireland); Baiba Brusbarde (Latvijas Banka); Marion Cochard (Banque de France); David Cornille (National Bank of Belgium); Emanuele Dicarlo (Banca d’Italia); Ian Debattista (Central Bank of Malta); Mar Delgado-T´ellez (Banco de Espana); Mathias Dolls (ifo Institute); Ludmila Fadejeva (Latvijas Banka); Maria Flevotomou (Bank of Greece); Florian Henne (Banque centrale du Luxembourg); Alena Harrer-Bachleitner (Office of the Austrian Fiscal Council); Viktor Jaszberenyi-Kiraly (Magyar Nemzeti Bank); Max Lay (ifo Institute); Laura Lehtonen (De Nederlandsche Bank); Mauro Mastrogiacomo (De Nederlandsche Bank); Tara McIndoe-Calder (Central Bank of Ireland); Mathias Moser (Oesterreichische Nationalbank); Martin Nevicky (National Bank of Slovakia); Andreas Peichl (ifo Institute); Myroslav Pidkuyko (Banco de Espana); Mojca Roter (Banka Slovenije); Frederique Savignac (Banque de France); Andreja Strojan Kastelec (Banka Slovenije); Vaidotas Tuzikas (Lietuvos bankas); Nikos Ventouris (Bank of Greece); Lara Wemans (Banco de Portugal) |
| Abstract: | This paper presents a comprehensive characterization of “fiscal drag†—the increase in tax revenue that occurs when nominal tax bases grow but nominal parameters of progressive tax legislation are not updated accordingly—across 21 European countries using a microsimulation approach. First, we estimate tax-to-base elasticities, showing that the progressivity built in each country’s personal income tax system induces elasticities around 1.7–2 for many countries, indicating a potential for large fiscal drag effects. We unpack these elasticities to show stark heterogeneity in their underlying mechanisms (tax brackets or tax deductions and credits), across income sources (labor, capital, self-employment, public benefits), and across the individual income distribution. Second, we extend the analysis beyond these elasticities to study fiscal drag in practice between 2019 and 2023, incorporating observed income growth and legislative changes. We quantify the actual impact of fiscal drag and the extent to which government policies have offset it, either through indexation or other reforms. Our results provide new insights into the fiscal and distributional effects of fiscal drag in Europe, as well as useful statistics for modeling public finances. |
| JEL: | D31 H24 E62 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:svk:wpaper:1132 |
| By: | Mathias Dolls; Esteban García-Miralles; Max Lay; Andreas Peichl |
| Abstract: | Key MessagesIn 21 EU countries, tax-to-base (TTB) elasticities mostly range from 1.7 to 2: tax burdens tend to respond similarly to nominal income growtTTB elasticities tend to be highest for labor income, followed by capital income and pensions and benefitsFiscal drag reduces the progressivity of the tax system, with lower-earnings groups facing higher TTB elasticitiesIn 2019–23, about one-third of the countries analyzed only partially offset fiscal dragIn these countries, tax revenue in 2023 was higher than in a scenario with full indexation |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:econpb:_82 |
| By: | Ignacio Belloc (University of Zaragoza); José Alberto Molina (IEDIS, Universidad de Zaragoza) |
| Abstract: | The fraction of households living with insufficient liquid assets is important to understand consumption responses to income changes. Using harmonized data for 23 European countries over 2010–2023 from the Household Finance and Consumption Survey, we investigate the prevalence and characteristics of hand-to-mouth (HtM) households, grouped into non-HtM, poor HtM and wealthy HtM. Our findings indicate significant variability across countries in the shares of HtM households, with the majority in all countries being wealthy households with sizeable wealth in housing and other real estates. We also find that poor HtM households exhibit the highest marginal propensity to consume (MPC), whereas wealthy HtM households display a negative association with the MPC. The relationship for poor HtM households seems to be driven by unobserved factors, whereas the relationship with wealthy HtM is negative and significant even controlling for unobserved preference heterogeneity. These results align with life-cycle models with liquidity constraints and precautionary savings. |
| Keywords: | hand-to-mouth, savings, marginal propensity to consume, HFCS data |
| JEL: | D12 D14 D15 E21 G51 |
| Date: | 2026–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:boc:bocoec:1107 |
| By: | Garbers, Julio (LISER); Gregory, Terry (LISER) |
| Abstract: | We develop a novel firm-level indicator of Artificial Intelligence adoption in Europe (MAP-AI) by extracting information from more than three million firm websites in Belgium, France, Germany, and Luxembourg between 2016 and 2024 using a Large Language Model. The indicator captures realized AI use as publicly signaled by firms, rather than potential exposure, and distinguishes firms by their role in the AI ecosystem and the type of AI technologies employed. Validation against human-coded benchmarks and external data confirms high accuracy. We show that the share of AI-active firms increased from 1% in 2016 to 12% in 2024, with a marked acceleration after 2022. This growth reflects a structural shift toward widespread adoption and more integrated AI use, including generative AI. AI adoption is concentrated among larger, younger, knowledge-intensive firms in urban regions, with workforce skills emerging as a key driver. Foundational data skills are necessary for adoption, while specialized AI skills—such as machine learning and natural language processing—act as strong complements, highlighting the central role of human capital in AI diffusion. |
| Keywords: | Artificial Intelligence, firm-level data, Large Language Models, AI diffusion, human capital, skills |
| JEL: | O33 C81 L25 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18434 |