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on European Economics |
| By: | Olli Castrén (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Stéphane Dées (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Fadi Zaher (Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS, United Kingdom.) |
| Abstract: | Modelling the link between the global macro-financial factors and firms’ default probabilities constitutes an elementary part of financial sector stress-testing frameworks. Using the Global Vector Autoregressive (GVAR) model and constructing a linking satellite equation for the firm-level Expected Default Frequencies (EDFs), we show how to analyse the euro area corporate sector probability of default under a wide range of domestic and foreign macroeconomic shocks. The results show that, at the euro area aggregate level, the median EDFs react most to shocks to the GDP, exchange rate, oil prices and equity prices. There are some intuitive variations to these results when sector-level EDFs are considered. Overall, the Satellite-GVAR model appears to be a useful tool for analysing plausible global macrofinancial shock scenarios designed for financial sector stress-testing purposes. JEL Classification: C33, F47, G32, G33. |
| Keywords: | Credit risk, Global VAR, corporate default probability, macro stress testing. |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080875&r=eec |
| By: | Tim Jenkinson |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:sbs:wpsefe:2008fe17&r=eec |
| By: | Koehler, Matthias |
| Abstract: | In 2005, the President of the Bank of Italy blocked the cross-border acquisition of two Italian banks for ‘prudential reasons and formal errors’. Following these events, the EU Commission brought actions against Italy for infringement of the principle of the free movement of capital. Although there is anecdotal evidence that prudential control may constitute a barrier to cross-border M&A in the banking sector, empirical evidence is missing until now. The main problem is the lack of data on the scope for politicians and supervisors to block M&A in the banking sector. The main contribution of this paper is to measure this scope for interference by constructing indices on the political independence and the transparency and strength of the supervisory review process of bank M&A. The main source of information to construct these indices is a questionnaire on banking regulation that was sent to the supervisory authorities in the 25 EU member countries between October 2006 and March 2007. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:7006&r=eec |
| By: | Zsolt Darvas (Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest and Argenta ZRt.); György Szapáry (Central European University and former Deputy Governor of Magyar Nemzeti Bank) |
| Abstract: | The paper discusses the risks and challenges faced by the new members on the road to the euro and the strategies for and timing of euro adoption. We investigate the real-nominal convergence nexus from the perspective of euro area entry. We argue that the initial level of economic development as measured by per capita income and the speed of real convergence have a bearing on the strategies to follow and on the timing of entry into euro area. This is because the lower is the per capita income, the larger is the price level gap to close and the greater is the danger of credit booms and overheating. We argue that inflation targeting with floating rates is better suited than hard pegs to manage the price level catching-up process. We suggest a modification in the Maastricht inflation criterion which as currently defined has lost its economic logic. |
| Keywords: | euro area enlargement, convergence, exchange rate, inflation, Maastricht |
| JEL: | E31 E52 E60 F30 |
| Date: | 2008–01–28 |
| URL: | http://d.repec.org/n?u=RePEc:mkg:wpaper:0801&r=eec |
| By: | Ambra Poggi; Massimo Florio |
| Abstract: | In the late 1990s many European countries started comprehensive restructuring of their energy industries, the typical ingredients of the reforms are full or partial privatization, vertical disintegration, liberalization. In this paper we focus on the way in which energy sector reforms affect social affordability. The aim of this paper is to analyze the effects of energy reforms on the household probability of experiencing utilities deprivation (that is, to be unable to pay scheduled utility bills) in seven European Countries: Denmark, Belgium, France, Ireland, Italy, Netherlands and Spain. The period of analysis is 1994-2001. We also explore the dynamics of utilities deprivations focusing on the causes behind deprivation persistence. We differentiate between household heterogeneity and true state dependence. Then, controlling for observed and unobserved heterogeneity, we use the magnitude of average partial effects to investigate the relevance of any state dependence and the impact of energy sector reforms on the probability of experiencing utilities deprivations and on state dependence. We find evidence that vertical disintegration in the energy sector and privatization increase the household probability of experiencing utilities deprivation. Moreover, vertical disintegration also increases the household persistence in the status of deprivation. |
| Keywords: | deprivation, utilities, privatization, liberalization, vertical disintegration, true state persistence. |
| JEL: | L97 I31 C23 C25 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wplabo:60&r=eec |
| By: | Matteo Pelagatti (University of Milan-Bicocca); Bruno Bosco (Università degli Studi di Milano-Bicocca); Lucia Parisio (Università degli Studi di Milano-Bicocca); Fabio Baldi (Università degli Studi di Milano-Bicocca and Ref. Ricerche per l’economia e la finanza) |
| Abstract: | This paper analyses the interdependencies existing in wholesale European electricity prices. The results of a multivariate long run dynamic analysis of weekly median prices reveal the presence of a strong although not perfect integration among some neighboring markets considered in the sample and the existence of common long-term dynamics of electricity prices and gas prices but not oil prices. The existence of long-term dynamics among gas prices and electricity prices may prove to be important for long-term hedging operations to be conducted even in markets where there are no electricity derivatives. |
| Keywords: | European Electricity Prices, Cointegration, Interdependencies, Equilibrium Correction Model, Oil Prices |
| JEL: | C15 C32 D44 L94 Q40 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2007.103&r=eec |
| By: | Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Josef Pöschl (The Vienna Institute for International Economic Studies, wiiw); Peter Havlik (The Vienna Institute for International Economic Studies, wiiw); Peter Lukas (The Vienna Institute for International Economic Studies, wiiw); Leon Podkaminer (The Vienna Institute for International Economic Studies, wiiw); Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Waltraut Urban (The Vienna Institute for International Economic Studies, wiiw); Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw); A. Mihailov; Sándor Richter (The Vienna Institute for International Economic Studies, wiiw); Hermine Vidovic (The Vienna Institute for International Economic Studies, wiiw); Gábor Hunya (The Vienna Institute for International Economic Studies, wiiw); Vladimir Gligorov (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | The Vienna Institute for International Economic Studies (wiiw) has just released an analysis of current economic developments in Central, East and Southeast Europe, Kazakhstan, Russia, Ukraine and China (including brief country reports), as well as a medium-term forecast for these countries in the period 2008 2010. A special section investigates labour market developments and the vulnerability of financial markets in individual countries. The majority of the new EU member states (NMS) have been enjoying a period of robust economic growth. The current turbulence on global financial markets is not going to hurt directly or seriously. Even the possible indirect effects should not be too severe. GDP growth is projected to slow down from about 6% in 2007 to some 5% per year over the period 2008 2010. Inflation will gradually decline, yet in most NMS it will stay above that of the eurozone. Economic growth will be mainly driven by rising consumption (supported by rising labour incomes) and by investments. The latter will be bolstered by much higher transfers from the EU budget. Except for Bulgaria, Romania and the Baltic States, all of which remain vulnerable to external shocks, current account deficits will not be excessively high. In sum, the NMS are expected to remain a region displaying dynamic growth in the years to come, maintaining their competitive advantages as attractive locations for both trading and investment purposes. The situation on the labour market has improved dramatically, unemployment has declined rapidly. The economic growth is no longer 'jobless'. On the contrary, most countries in the region are now reporting labour shortages - especially of skilled workers - which could well become a serious constraint on economic growth. After a slight dip in growth in 2008, wiiw expects the Southeast European region to enjoy faster GDP growth in 2009 and 2010 of up to 6%. Remittances and a credit boom will continue to fuel the core growth driver: domestic demand. Strong investment growth and incipient re industrialization go hand in hand with an increase in employment. Stable competitive performance (except for Serbia and Turkey) will also provide a better environment for stronger export growth. Nevertheless, the net export position is still unfavourable for want of FDI and technology transfer. The slowdown in global growth, the hikes in oil, metal and food prices on world markets, as well as the subprime crisis are expected to have only a minor impact on the region. However, Serbia's unbalanced growth path in the wake of the Kosovo crisis poses a regional risk. Prospects of EU accession have improved for all countries, except Turkey. Kazakhstan, Russia and Ukraine are all expected to grow by more than 6% per year in the period 2008 2010 - also slightly slower than in the previous two years. A modest cooling down of growth is projected for China as well. This forecast starts a new series with the title 'Current Analyses and Forecasts'. It contains an appendix with selected indicators of competitiveness. |
| Keywords: | Central and East European new EU member states, Southeast Europe, Balkans, former Soviet Union, China, Turkey, GDP, industry, productivity, labour market, foreign trade, exchange rates, inflation, fiscal deficits, EU integration |
| JEL: | O52 O57 P24 P27 P33 P52 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:wii:fpaper:fc:1&r=eec |
| By: | Hielke Buddelmeyer (Melbourne Institute of Applied Economic and Social Research and IZA, Contact address: Melbourne Institute of Applied Economic and Social Research, University of Melbourne, Alan Gilbert Building, 7th fl oor, 161 Barry Street, Carlton 3053 VIC, Australia.); Gilles Mourre (Corresponding author: European Commission, DG Economic and Financial Affairs (ECFIN) and Free University of Brussels (ULB, SBS, CEB), Contact address: BU-1 4/168, European Commission, Rue de la Loi 200, B-1049 Brussels, Belgium.); Melanie Ward (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | This empirical paper seeks to determine the relative contribution of the business cycle and structural factors to the development of part-time employment in the EU-15 countries over the 1980s and 1990s, exploiting a panel of EU countries. In the short-run, the business cycle is found to exert a short-term negative effect on part-time employment developments, which is consistent with firms utilising part-time work to adjust their labour force to changing economic conditions. Institutions and other structural factors such as changes in legislation affecting part-time employment are found to be key drivers of the rate of part-time employment, significant in the longer run. Overall, although the role of individual factors differs in the 1980s and 1990s, a contribution analysis considering the most significant factors shows that the main structural and institutional variables generally well explain the development in the part-time employment rate in the EU countries, which is not the case in the United States. JEL Classification: J21, J22, J28, J68. |
| Keywords: | Part-time employment, working time organisation, the business cycle, labour supply, labour market policies, institutions, regulations. |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080872&r=eec |
| By: | Lionel Perrier (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines, GRESAC - Groupe de Recherche en Economie de la SAnté et réseaux de soins en Cancérologie - CNRS : FRE2747); Pascal Pommier (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines, GRESAC - Groupe de Recherche en Economie de la SAnté et réseaux de soins en Cancérologie - CNRS : FRE2747); Marie-Odile Carrère (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines, GRESAC - Groupe de Recherche en Economie de la SAnté et réseaux de soins en Cancérologie - CNRS : FRE2747); Patrick Sylvestre-Baron (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines) |
| Abstract: | Cette étude de la transférabilité des résultats des évaluations de coûts en santé repose sur l’analyse en composantes principales et les distances euclidiennes. Elle permet de montrer si les résultats sont faiblement, moyennement ou largement transférables. Le recours à ces deux méthodes validées pour mesurer la transférabilité des résultats constitue, de ce point de vue, une démarche originale. Son opérationnalité est également démontrée dans le cadre d’un traitement innovant, la radiothérapie par ions carbone. Une analyse « globale » témoigne, par exemple, d’une forte distance entre l’Italie et les Pays-Bas. Tous facteurs confondus, les résultats sont donc faiblement transférables entre ces deux pays. Une analyse plus fine montre que les distances sont maximales et donc la transférabilité minimale pour les coûts des bâtiments et les paramètres organisationnels. |
| Keywords: | cost ; economic assessment ; health ; oncology ; transferability |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00260873_v1&r=eec |
| By: | Juan Yermo |
| Abstract: | Many countries around the world are partly prefunding their otherwise pay-as-you-go (PAYG) financed social security systems by establishing or further developing existing public pension reserve funds (PPRFs). Most OECD countries have put in place internal and external governance mechanisms and investment controls to ensure the sound management of these funds and better isolate them from undue political influence. These structures and mechanisms are in line with OECD standards of good pension fund governance and investment management. In particular, the requirements of accountability, suitability and transparency are broadly met by these reserve funds. However, some specific details of the funds’ governance and investment management could be improved in a few countries, such as enhancing the expertise in the funds’ governing boards and constraining discretionary interventions by government. Such reforms will ultimately raise the long-term investment performance of the funds and the solvency of social security systems. <P>La gouvernance et les investissements des caisses de réserve des régimes publics de retraite dans quelques pays de l’OCDE <BR>De nombreux pays dans le monde procèdent à une capitalisation préalable partielle de leurs régimes de protection sociale qui reposent par ailleurs sur la répartition. À cet effet, ils dotent leurs régimes publics de retraite de caisses de réserve ou développent les caisses existantes. La plupart des pays de l’OCDE ont mis en place des mécanismes internes et externes de gouvernance et de contrôle des investissements pour veiller à la saine gestion de ces caisses et à mieux les isoler d’influences politiques indues. Ces structures et mécanismes sont conformes aux normes de bonne gouvernance des fonds de pension et de gestion des investissements. En particulier, ces caisses respectent de façon générale les impératifs de responsabilité, de qualification et de transparence. Cela étant, dans quelques pays, on pourrait améliorer des spécificités de la gouvernance et de la gestion des investissements, notamment en renforçant les instances dirigeantes de ces caisses et en limitant les interventions discrétionnaires des pouvoirs publics. Ces réformes permettront en dernière analyse d’améliorer les performances de long terme des investissements de ces caisses et la solvabilité des régimes de protection sociale. |
| Keywords: | governance, social security, public pensions, pension fund, fond de pension, protection sociale |
| JEL: | G18 G23 G28 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:oec:dafaab:15-en&r=eec |
| By: | Stephan, Gesine (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]) |
| Abstract: | "This paper estimates the effects of several German labor market programs - starting in March 2003 - on the employment outcomes of participants using propensity score matching. The main objective is to compare estimated average treatment effects for treatment and comparison groups, which vary in the choice of the classification window that defines treatment and non-treatment. The first approach does not put any restrictions on the future of the treated as well as of the comparison group. This approach has become more and more common in the evaluation of European labor market policies. In contrast, the second approach considers only potential comparison group members, who have not entered any labor market program during the entire observation period of 3 1/2 years. The third approach additionally restricts itself to participants, who have not participated in further labor market programs during the observation period. The results differ considerably; program effectiveness is estimated to be much lower using the second approach. The paper highlights the fact that program careers are a non-trivial issue that deserves more attention in future research." (author's abstract, IAB-Doku) ((en)) |
| Date: | 2008–02–27 |
| URL: | http://d.repec.org/n?u=RePEc:iab:iabdpa:200812&r=eec |
| By: | Andersen, Erik Brink; van Dam, Rein |
| Abstract: | This paper examines the move towards risk-based supervision of pension institutions in Denmark. Although Denmark has not adopted a comprehensive model to assess risk it has developed a number of building blocks which it uses for risk-based assessment. The motivations for improving risk assessment include a desire to identify emerging problems, and concerns about the solvency of pension institutions. In Denmark there is extensive use of guaranteed minimum returns in both the accumulation and payout phases which create substantial obligations on pension institutions, and focus attention on the integrity and solvency of the institutions which provide them. In conjunction with freeing up investment restrictions and moving towards market valuation of assets, the supervisor has introduced a ' traffic light ' stress test model which calculates the effect of several market scenarios - the red test which is the more plausible and the yellow test which is possible but less likely. In addition to the use of the traffic light system, there has been a growing emphasis on the adequacy of internal risk control systems and greater reliance on market discipline. Pension institutions have sought to reduce their exposure to market volatility by better matching of assets and liabilities. There is a much better understanding of the risks inherent in the pension institutions ' portfolios, and there has been a substantial increase in the use of hedging instruments. |
| Keywords: | Debt Markets,,Emerging Markets,Insurance & Risk Mitigation,Banks & Banking Reform |
| Date: | 2008–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4540&r=eec |