|
on European Economics |
|
Issue of 2011‒09‒22
fifteen papers chosen by Giuseppe Marotta University of Modena and Reggio Emilia |
| By: | Marco J. Lombardi (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt, Germany.); Philipp Maier (Bank of Canada, International Department, 234 Wellington, Ottawa, ON, K1A 0G9, Canada.) |
| Abstract: | We evaluate forecasts for the euro area in data-rich and ‘data-lean’ environments by comparing three different approaches: a simple PMI model based on Purchasing Managers’ Indices (PMIs), a dynamic factor model with euro area data, and a dynamic factor model with data from the euro plus data from national economies (pseudo-real time data). We estimate backcasts, nowcasts and forecasts for GDP, components of GDP, and GDP of all individual euro area members, and examine forecasts for periods of low and high economic volatility (more specifically, we consider 2002-2007, which falls into the ‘Great Moderation’, and the ‘Great Recession’ 2008-2009). We find that all models consistently beat naive AR benchmarks, and overall, the dynamic factor model tends to outperform the PMI model (at times by a wide margin). However, accuracy of the dynamic factor model can be uneven (forecasts for some countries have large errors), with the PMI model dominating clearly for some countries or over some horizons. This is particularly pronounced over the Great Recession, where the dynamic factor model dominates the PMI model for backcasts, but has considerable difficulties beating the PMI model for nowcasts. This suggests that survey-based measures can have considerable advantages in responding to changes during very volatile periods, whereas factor models tend to be more sluggish to adjust. JEL Classification: C50, C53, E37, E47. |
| Keywords: | Forecasting, dynamic factor model, PMI model. |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20111379&r=eec |
| By: | Bernd Hayo (University of Marburg); Pierre-Guillaume Méon (University of Brussels) |
| Abstract: | This paper aims at discovering the decision rule the Governing Council of the ECB uses to set interest rates. We construct a Taylor rule for each member of the council and for the euro area as a whole, and aggregate the interest rates they produce using several classes of decision-making mechanisms: chairman dominance, bargaining, consensus, voting, and voting with a chairman. We test alternative scenarios in which individual members of the council pursue either a national or a federal objective. We then compare the interest-rate path predicted by each scenario with the observed euro area’s interest rate. We find that scenarios in which all members of the Governing Council are assumed to pursue Euro-area-wide objectives are dominated by scenarios in which decisions are made collectively by a council consisting of members pursuing national objectives. The best-performing scenario is the one in which individual members of the Governing Council follow national objectives, bargain over the interest rate, and their weights are based on their country’s share of the zone’s GDP. |
| Keywords: | European Central Bank, Monetary Policy Committee, Decision rules |
| JEL: | D70 E43 E58 F33 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201135&r=eec |
| By: | Colignatus, Thomas |
| Abstract: | The 2007+ credit crunch and economic crisis put European governments in severe debt, with talk about a Greek partial default. It also put the European banks into a zombie condition, while under Basel III the capital requirement rises from 8% to 10.5% (which requirement does not cover public debt since that is considered reliable). Fiscal measures concern tax structures and that Germany and Holland eliminate their surplusses on the external account. A monetary measure is that the European Central Bank as lender of last resort helps to prevent a crisis of confidence. The ECB can create capital and neutralise this by higher reserve requirements. Two reasonable measures are: (1) EUR 400 billion of European Recovery Capital (ERC) will reduce Greek and Italian debt to 100% of their GDP (using 2010 data). Greece and Italy on their part can have a wealth tax or create 40 year leases (implictly at 10 billion per year excluding interest) like Hong Kong once was for investment areas under foreign law (think of Magna Graecia). (2) EUR 400 billion can be injected in eurozone equity (and not eurozone bonds) in banks to allow the increase from the 8% to the 10.5% target. This equity can be managed by newly created independent ERC Investment Banks (ERBs), where the shares are allocated to eurozone member states in proportion to their GDP. This partial nationalisation would reduce eurozone national debts by 4.3% of GDP. |
| Keywords: | Economic stability; monetary policy; monetary crisis; credit crunch; zombie banks; euro; European Central Bank; fiscal policy; tax; external balance |
| JEL: | E00 A10 P16 |
| Date: | 2011–09–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:33476&r=eec |
| By: | Adrian Alter (Department of Economics, University of Konstanz, Germany); Yves Stephan Schüler (Department of Economics, University of Konstanz, Germany) |
| Abstract: | This study analyzes the relationship between the default risk of several European states and financial institutions during the period June 2007 -May 2010. It investigates how bank bailout schemes affected this linkage. We consider sovereign credit default swap (CDS) spreads from seven Eurozone member states (France, Germany, Italy, Ireland, Netherlands, Portugal, and Spain) together with a selection of bank CDS series from these states. Our main finding suggest that in the period preceding government rescue schemes the contagion from bank credit spreads disperses into the sovereign CDS market. After government interventions, due to changes in the composition of both banks’ and sovereign balance sheets, our results underline the augmented importance of the government CDS spreads in the price discovery mechanism of banks’ CDS series. Furthermore, a financial sector shock affects more strongly the sovereign CDS spreads in the short-run, however the impact becomes insignificant at a long horizon. Our analysis emphasizes heterogeneous outcomes across countries but homogeneous across domestic banks. |
| Keywords: | credit default swaps, private-to-public risk transfer, bank bailout cointegration, generalized impulse responses |
| JEL: | G18 G21 |
| Date: | 2011–09–10 |
| URL: | http://d.repec.org/n?u=RePEc:knz:dpteco:1134&r=eec |
| By: | Alejandro Justiniano; Claudio Michelacci |
| Abstract: | We set-up a real business cycle model with search and matching frictions driven by several shocks, which nests full Nash Bargaining and wage rigidity as special cases and includes other transmission mechanisms suggested by the literature for the propagation and amplification of disturbances. The model is estimated using full information methods for two Anglo-Saxon countries (the US and the UK), two Continental European countries (France and Germany) and two Scandinavian countries (Norway and Sweden). We conduct inference with mixed frequency data, combining quarterly series for unemployment, vacancies, GDP, consumption, and investment, with annual data on unemployment flows. Parameters and shocks are estimated separately for each country, which can then vary in terms of search and hiring costs, workers' bargaining power, unemployment benefits levels, wage rigidity and the stochastic properties of disturbances. Overall, the structural model accounts reasonably well for differences in labor market dynamics observed between the two sides of the Atlantic and within Europe. Our estimates indicate that there is considerable cross-country variation in the contribution of technology shocks to the cyclical fluctuations of the labor market. Technology shocks alone replicate remarkably well the volatility in vacancies, unemployment and finding probabilities observed in US, with mixed success in Europe. In contrast, matching shocks and job destruction shocks play a larger role in most European countries relative to the US. |
| JEL: | E0 E24 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17429&r=eec |
| By: | António Afonso; Davide Furceri; Pedro Gomes |
| Abstract: | We use EU sovereign bond yield and CDS spreads daily data to carry out an event study analysis on the reaction of government yield spreads before and after announcements from rating agencies (Standard & Poor’s, Moody’s, Fitch). Our results show: significant responses of government bond yield spreads to changes in rating notations and outlook, particularly in the case of negative announcements; announcements are not anticipated at 1-2 months horizon but there is bi-directional causality between ratings and spreads within 1-2 weeks; spillover effects especially from lower rated countries to higher rated countries; and persistence effects for recently downgraded countries. |
| Keywords: | credit ratings; sovereign yields; rating agencies. Classification-C23; E44; G15. |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:ise:isegwp:wp142011&r=eec |
| By: | Trung Bui; Tamim Bayoumi |
| Abstract: | The financial crisis, originated from the collapse of US housing markets in 2008, reverberates around the world. Its destructive force was felt nowhere more keenly than Western Europe. Indeed, it continues to mire in financial volatility as the debt problem contagiously spreads around the periphery Euro area. Taking a wider historical view of the evolution over the recent decades of the North Atlantic economy, comprising North America and Western Europe, we argue that while trade links were in relative stasis, the increasing and uniquely-close Transatlantic financial relationship was a crucial conduit in transmitting US shocks into global ones. |
| Date: | 2011–09–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/212&r=eec |
| By: | Cecilio R. Tamarit Escalona (Universitat de València); Estrella Gómez (Dpto. Teoría e Historia Económica) |
| Abstract: | In this paper we present new evidence on the effect of the Euro on trade. We use a data set containing all bilateral combinations in a panel of 26 countries covering the period 1967-2008. We estimate the equation using two sets of variables: a standard one and a second one built according to the criticisms stated by Baldwin and Taglioni (2006). We implement a new generation of tests that allow us to solve some of the problems derived from the non-stationary nature of the data usually present in the macroeconomic variables used in gravitational equations (GDP, trade). To this aim we use some panel tests that account for the presence of cross-section dependence as well as discontinuities in the non-stationary panel data series. We test for cointegration between the variables using panel cointegration tests, especially the ones proposed by Banerjee and Carrión-i-Silvestre (2004, 2010). We also efficiently estimate the long-run relationships using the CUP-BC and CUP-FM estimators proposed in Bai et al. (2009). The results obtained are in line with those of Bun and Klaassen (2007). We argue that the creation of the European Monetary Union is best interpreted as a culmination of a series of policy changes that have been increasing economic integration in Europe during over four decades. En este trabajo presentamos nueva evidencia del efecto del Euro sobre el comercio. En este trabajo presentamos nueva evidencia del efecto del Euro sobre el comercio. Para ello utilizamos una base de datos que contiene todas las combinaciones bilaterales en un panel de 26 países para el periodo 1967-2008. Estimamos la ecuación de gravedad usando dos tipos de variables: la estándar en la literatura y la que recoge las críticas de Baldwin y Taglioni (2006), aplicando una nueva generación de contrastes que nos permiten resolver los principales problemas derivados de la naturaleza no estacionaria de las series. Con este propósito utilizamos algunos contrastes de panel que tienen en cuenta la presencia de dependencia cross-section así como de rupturas en las series. Para realizar el análisis de cointegración cabe destacar el uso del contraste de Banerjee y Carrion-i-Silvestre (2006, 2010). También estimamos de forma eficiente las relaciones de largo plazo mediante los estimadores CUPpc y CUPfm propuestos por Bai et al. (2009). Los resultados obtenidos están en línea con los de Bun y Klaassen (2007). Nuestro argumento es que la creación de la Unión Monteria Europea se debe interpretar como la culminación de un conjunto de cambios de política que han ido dando lugar a un proceso de integración económica en Europa durante las últimas cuatro décadas. |
| Keywords: | modelos de gravedad; comercio; cointegración con paneles; factores comunes; cambios estructurales; dependencia. gravity models; trade; panel cointegration; common factors; structural breaks, cross-section dependence. |
| JEL: | C12 C22 F15 F10 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasec:2011-07&r=eec |
| By: | Benjamin Elsner (Department of Economics, Trinity College Dublin); |
| Abstract: | This paper studies the impact of a large emigration wave on real wages in the source country. Following EU enlargement in 2004, a large share of the workforce of the Central and Eastern Europe emigrated to Western Europe. Using data from Lithuania for the calibration of a factor demand model I show that emigration had a significant short-run impact on real wages in the source country. In particular, emigration led to a change in the wage distribution between young and old workers. The wages of young workers increased by 6%, whereas the wages of old workers decreased by around 1%. On the contrary, I find no effect on the wage distribution between workers of different education levels. |
| Keywords: | Emigration, EU Enlargement, European Integration, Wage Distribution |
| JEL: | F22 J31 O15 R23 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:tcd:tcduee:tep1311&r=eec |
| By: | Maria-Grazia Attinasi (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt, Germany.); Cristina Checherita-Westphal (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt, Germany.); Malte Rieth (TU Dortmund University, Applied Economics Vogelpothsweg 87, D-44227 Dortmund, Germany.) |
| Abstract: | This paper investigates empirically the effect of personal income tax progressivity on output volatility in a sample of OECD countries over the period 1982-2009. Our measure of tax progressivity is based on the difference between the marginal and the average income tax rate for the average production worker. We find supportive empirical evidence for the hypothesis that higher personal income tax progressivity leads to lower output volatility. All other factors constant, countries with more progressive personal income tax systems seem to benefit from stronger automatic stabilisers. JEL Classification: E63, E32, H10. |
| Keywords: | Progressivity, personal income taxes, output volatility, automatic stabilisers. |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20111380&r=eec |
| By: | Gable, Susanna Lundstrom; Mishra, Saurabh |
| Abstract: | Technology has changed the nature of service activities and made them more productive, tradable and fragmented in the global supply chain. Has Europe's growth been benefiting from the ongoing globalization of services? Services dominate growth in EU-15 countries and, to a lesser extent, in New Member States (NMS) and Accession (ACC) countries. Except in the ACC region, Europe has maintained specialization in service exports. Service productivity, tradability, and exports of modern services are high in EU-15, growing fast in NMS while at a lower pace in ACC. Service export sophistication is important for growth across the region, but especially in NMS. |
| Keywords: | Commodities,Public Sector Corruption&Anticorruption Measures,Housing&Human Habitats,Economic Theory&Research,Banks&Banking Reform |
| Date: | 2011–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5793&r=eec |
| By: | Fabrizio Botti; Marcella Corsi |
| Abstract: | Microfinance promise to serve low-income or disadvantaged beneficiaries excluded from the formal banking sector in a financially sustainable way (thus to achieve the so called “double bottom line” of financial and social performance) built excitement around the development of a global industry. However, for a long time an anti-subsidy position embedded in the international key donor community have shown little concern of social performance data and information on beneficiaries profiles in terms of various dimension of social and financial exclusion. Until recently, most of the emphasis of microfinance advocates has been devoted to MFIs financial performance following the “win-win” proposition, according to which financial viability should be sufficient to show social impact, a view that is supported by a controversial evidence and is based on a selective understanding of conceptual facts. Nevertheless, several initiatives recently translated into the Social Performance Task Force (SPTF) attempt to explore social aspects of microfinance providing a new definition of social performance more focused on the whole process leading to a social impact. Aim of this paper is to measure European MFIs social performance according to a core set of common indicators developed by the SPTF but using data collected in 2010 by the European Microfinance Network (EMN) on a sample of 170 microfinance actors operating in 21 countries out of 27 European Union (EU) member countries, current EU candidate countries and countries belonging to the European Free Trade Area (EFTA). The reference framework followed in the current social performance analysis examines the whole process of translating MFIs mission into social impact and includes the analysis of three connected dimensions of the social performance process corresponding to different set of indicators: the intent of the MFI, the effectiveness of the internal system and activities in achieving its targets, MFI outputs and eventually its capacity to positively affect clients life and achieve social goals. |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:2013/97213&r=eec |
| By: | Russo, Giuseppe; Senatore, Luigi |
| Abstract: | According to the Lisbon Treaty the increasing cost of enforcing the European border against immigration shall be shared among the EU members. Nonetheless, the Treaty is rather vague with respect to the "appropriate measures" to adopt in order to distribute the financial burden. Members who do not share their borders with source countries have an incentive to free ride on the other countries. We study a contribution game where a northern government and a southern government minimize a loss function with respect to their national immigration target. We consider both sequential and simultaneous decisions and we show that the contribution of both governments is positive when their immigration targets are not too different. We show that total contribution is higher when decisions are simultaneous, but the conditions for both contributions to be positive are less restrictive in the sequential framework. |
| Keywords: | Policy making; Government expenditures; Local government expenditures; Federalism |
| JEL: | H77 H72 H41 D78 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:33421&r=eec |
| By: | Daniel Pérez (Banco de España); Vicente Salas-Fumás (Universidad de Zaragoza and Banco de España); Jesús Saurina (Banco de España) |
| Abstract: | Spanish banks had to set aside a countercyclical loan loss provision during the period 2000 2004. The amount of such provision as well as the allowance accumulated had to be disclosed by banks. The former creates a natural experiment to test whether banks smooth earnings to mislead investors and other interested parties, or, by contrast, income smoothing is used to avoid the existence of market frictions. Using panel data econometric techniques, we find evidence of income smoothing through loan loss provisions during the period previous to the implementation of the countercyclical provision (1988-1999). However, during 2000-2004, banks relied only on the newly created countercyclical provision to smooth income. This change in behaviour suggests that there may be efficiency gains in reducing the volatility of accounting earnings over time. |
| Keywords: | income smoothing, earnings management, transparency, countercyclical provisioning |
| JEL: | G18 G21 M41 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1118&r=eec |
| By: | Leila Maron; Danièle Meulders; Sile Padraigin O'Dorchai; Robert Plasman; Natalie Julie Simeu Keumoe |
| Abstract: | Dans le cadre de la Présidence belge de l’Union européenne au deuxième semestre 2010, l’Institut pour l’égalité des femmes et des hommes a demandé au Département d’économie appliquée de l’Université Libre de Bruxelles (DULBEA) de préparer un rapport européen qui présente les indicateurs quantitatifs et qualitatifs relatifs à l’écart salarial approuvés par le Conseil de l’Union européenne en 2001. Ce rapport incorpore un certain nombre de développements récents qui tiennent compte des conclusions de la Task Force spéciale d’Eurostat qui avait pour objectif d’étudier et d’améliorer le calcul de l’indicateur relatif à l’écart salarial. Le rapport comporte deux parties :la première partie est relative aux indicateurs quantitatifs (Ratio des salaires des femmes et des hommes pour tous les salariés ;Ratio pour la masse salariale ;Ratio pour le temps partiel ;Ratio par âge et par niveau d'éducation ;Désavantage salarial dans les professions où les femmes sont concentrées ;Décomposition de l’écart salarial horaire entre hommes et femmes par la technique d’Oaxaca) et la seconde est relative aux indicateurs qualitatifs (Indicateur sur les lois, réglementations et dispositifs de lutte contre les discriminations et les inégalités professionnelles ;Indicateur sur l’influence des autorités publiques en matière de négociation salariale ;Indicateur concernant le temps partiel et les suspensions temporaires de la carrière professionnelle), ces deux types d’indicateurs permettant d’analyser les inégalités salariales entre les pays européens dans des optiques différentes. Le but de ce rapport vise à donner un aperçu de la situation de l’écart salarial dans l’Union européenne, sur la base des neuf indicateurs approuvés par le Conseil des Ministres de l’Union européenne en 2001 et de formuler une proposition d’actualisation de ces indicateurs, tenant compte des développements statistiques et de l'évolution législative intervenus depuis lors. |
| Keywords: | écart salarial de genre |
| JEL: | J31 |
| Date: | 2011–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:dul:wpaper:2013/97157&r=eec |