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on European Economics |
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Issue of 2016‒06‒18
twenty papers chosen by Giuseppe Marotta Università degli Studi di Modena e Reggio Emilia |
| By: | Alexander Herzog-Stein; Heike Joebges; Torsten Niechoj; Ulrike Stein; Rudolf Zwiener |
| Abstract: | Based on Eurostat data the Macroeconomic Policy Institute (IMK) regularly analyses the development of labour costs and unit labour costs in Europe. This report presents labour cost trends in the private sector, disaggregated for private as well as public services and manufacturing industry, for a selection of European countries, the Euro Area and the European Union. In addition the development of unit labour costs in Europe is analysed, so allowing for labour productivity. Subsequently, the report examines the development of unit labor costs and the relationship between price competitiveness, export prices and unit labor costs.In 2014 hourly labour cost in the German private sector averaged 31.9 Euros. The German economy is in eighth position in the ranking of EU countries as in the previous year. With an annual rate of change of 1.8 %, the rise in labour costs in the German private sector was slightly above the European average. In the so-called European crisis countries hourly labour costs decreased again. Hourly labour costs in German manufacturing rose by 2.5 %. This is a slightly faster rate than in private services, where labour costs grew by 1.7 %. Consequently, the difference in labour costs between the two sectors diverged further and is now equal to 21 %, the largest intersectoral wage gap of all the EU countries.The adjustment process in the European crisis countries continued in 2014. Hence, the average rate of change in unit hourly labour cost in the Eurozone of 1.2 % was significantly below the ECB's inflation target of slightly below 2 % per annum. Therefore, the development of unit labour costs in the Euro Area as a whole does not comply with the ECB's inflation target. In Germany unit labour costs rose by 1.9 %. Overall, since the start of the currency union the rate of growth of unit labour costs in Germany was substantially below the ECB's inflation target. Therefore, wages in Germany should grow at an above average rate for several years to support the adjustment process in the European crisis countries. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:imk:report:109e-2015&r=eec |
| By: | Darracq Pariès, Matthieu; Jacquinot, Pascal; Papadopoulou, Niki |
| Abstract: | The euro area experience during the financial crisis highlighted the importance of financial and sovereign risk factors in macroeconomic propagation, as well as the constraints that bank lending fragmentation would pose for monetary policy conduct in a currency union. We design a 6-region multi-country DSGE model which provides a structural interpretation of the salient features of these developments. The model spans the relevant "financial wedges" at play during the crisis, together with its cross-country heterogeneity within the euro area, focusing on Ger- many, France, Italy, Spain, and rest-of-euro area. We construct three stylised macro-financial scenarios as a synopsis of the euro area financial crisis and argue that the adverse interactions between sovereign, banking and corporate risk, can account to a large extent for the financial repression and poor economic performance observed in some parts of the euro area. JEL Classification: E4, E5, F4 |
| Keywords: | bank lending rates, banking, cross-country spillovers, DSGE models, financial regulation |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20161891&r=eec |
| By: | Sophie Steins Bisschop; Martijn Boermans; Jon Frost |
| Abstract: | Do market illiquidity and concentrated holdings of bonds aggravate price volatility during periods of stress? We seek to answer this question with a new and unique ECB dataset and price information on European corporate, sovereign and bank bonds during the 2013 Taper Tantrum and 2015 Bund Tantrum. Results suggest that market illiquidity, as measured by bid-ask spreads and a new Bloomberg measure, is a strong and statistically significant driver of price volatility in European bonds during both periods. Concentration of holdings by one sector has a significant upward effect on volatility only during the recent Bund Tantrum. During both periods, we can show that households, money market funds and other financial intermediaries engaged in procyclical selling of bonds, while banks and pension funds have been contrarian investors. We sketch how liquidity shocks and concentration can impact financial stability in the euro area, through several amplification channels and the investment behavior of different sectors. The results have implications for systemic risk analysis and the design of macroprudential policy for the non-bank financial sector. |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbocs:1401&r=eec |
| By: | Soares Esteves, Paulo; Prades, Elvira |
| Abstract: | During economic downturns, weak domestic demand developments seem to be an additional driver of exports, as firms increase their efforts to serve markets abroad to compensate the fall in domestic sales. This may constitute an additional mechanism adjustment for the euro area countries where real exchange rate variations are limited by the common currency itself and the present low inflation environment. However, this substitution effect between domestic and foreign sales could be different across euro area members. This paper uses panel data techniques to assess the role of the export structure in explaining these differences. Building a novel indicator for product concentration, the results suggest that domestic demand developments are more relevant to explain exports in countries with a lower product concentration index (that is, more diversified exports). This contributes to explain why euro area countries under stress registered different economic performance during the most recent years. JEL Classification: C22, E03, F10 |
| Keywords: | domestic demand pressures, external adjustment |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20161909&r=eec |
| By: | Patrice Ollivaud; Yvan Guillemette; David Turner |
| Abstract: | The OECD framework for estimating potential output is combined with previous OECD empirical research to analyse the causes of recent weak productivity growth. Current weak labour productivity growth in many OECD countries reflects historically weak contributions from both total factor productivity (TFP) growth and capital deepening. The slowdown in trend productivity growth in the pre-crisis period is mostly explained by a long-established slowdown in TFP growth, but since the crisis, the further deceleration is mainly due to weak capital deepening, a development apparent in practically every OECD country. Much of the weakness in the growth of the capital stock since the financial crisis can be explained by an accelerator response of investment to continued demand weakness, leading in turn to a deterioration in potential output via a hysteresis-like effect. Circumstantial evidence suggests that a misallocation of capital in the pre-crisis period also contributed to the slowdown in capital stock growth, particularly among the most severely affected countries. In many OECD countries, declining government investment as a share of GDP has further exacerbated post-crisis weakness in capital stock growth, both directly and probably indirectly via adverse spillover effects on business investment. Finally, at a time when the use of conventional macro policy instruments has become increasingly constrained, the slower pace of structural reform represents a missed opportunity, not least because more competitionfriendly product market regulation could have boosted both investment and potential growth. Les liens entre la faiblesse de l'investissement et le ralentissement de la croissance de la productivité et de la production potentielle dans l'OCDE Le cadre général de l’OCDE pour l’estimation du potentiel de production est combiné à des résultats empiriques antérieurs de l’OCDE pour analyser les causes de la faiblesse récente de la croissance de la productivité. La faible croissance de la productivité du travail de ces dernières années reflète des contributions historiquement faibles à la fois de la productivité totale des facteurs (PTF) et de l’intensité capitalistique. Le ralentissement de la croissance tendancielle de la productivité avant la crise est principalement expliqué par un ralentissement de longue date de la croissance de la PTF ; néanmoins, depuis la crise, l’accentuation de la décélération s’explique surtout par une plus faible contribution de l’intensité capitalistique, qui s’observe dans pratiquement tous les pays de l’OCDE. Une part substantielle de la faiblesse de la croissance du stock de capital depuis la crise financière peut s’expliquer par la réponse de l’investissement, via un effet accélérateur, à la faiblesse prolongée de la demande, conduisant à son tour à une détérioration de la production potentielle suivant un effet de type hystérèse. Des preuves circonstancielles suggèrent qu’une mauvaise allocation du capital avant la crise a aussi contribué au ralentissement de la croissance du stock de capital, notamment parmi les pays les plus sévèrement touchés. Dans beaucoup de pays de l’OCDE, la baisse de l’investissement public en point de PIB a encore aggravé la faiblesse post-crise de la croissance du stock de capital, à la fois directement et aussi probablement indirectement via des effets négatifs sur l’investissement des entreprises. Enfin, dans un contexte où les instruments conventionnels de politiques macroéconomiques sont de plus en plus contraints, le ralentissement du rythme des réformes structurelles représente une opportunité manquée, ne serait-ce qu’en raison du soutien à la fois à l’investissement et à la croissance du potentiel qu’auraient pu fournir des réglementations plus adéquates du marché des produits. |
| Keywords: | investment, potential output, financial crisis, capital stock, global financial crisis, investissement, stock du capital, crise financière, potentiel de production, crise financière globale |
| JEL: | E22 E27 E32 E65 E66 |
| Date: | 2016–06–08 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1304-en&r=eec |
| By: | Benedicta Marzinotto |
| Abstract: | This paper explains the build-up and reversal of euro area macroeconomic imbalances by considering the interaction between the underlying income distribution in each country and EMU-induced financial liberalization. The argument is that the sharp increase in money supply since the early 1990s had the effect of relaxing collateral constraints for illiquid lower- income groups, whilst having no specific impact on other households. The former started over-borrowing against optimistic expectations about their future income. It follows that unequal countries such as Greece, Ireland, Italy, Portugal and Spain - where the share of lower-income groups is relatively high - had greater private debt burdens and worse external positions than equal countries. Consequently, current account reversal was asymmetric because the crisis forced these indebted households to abruptly reduce consumption not least because they were the first to be pulled out of the labour market and hardly had financial buffers. The hypothesis is tested using a difference-in-difference approach to panel data. |
| Keywords: | current account, income inequality, financial liberalization, debt leverage, difference-in-difference |
| JEL: | F32 F41 E2 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:eiq:eileqs:110&r=eec |
| By: | van Riet, Ad |
| Abstract: | This paper reviews the debate on the longer-term requirements for safeguarding the euro as a currency beyond the state that is anchored through collective governance instead of a central government. The strengthening of EU economic and financial governance in the wake of the euro area crisis goes a long way towards creating the minimum conditions for a more perfect EMU. At the same time, the current principle of nation states coordinating their sovereignty to ‘do whatever is required’ to stabilise the euro area as a whole rather than sharing their sovereignty in common institutions to achieve this common objective has its limitations. Challenges in this context relate inter alia to the effectiveness of market discipline and reinforced economic policy surveillance, the requirement of a truly single financial system, the demand for eurobonds and a euro area fiscal capacity, and the transnational democracy that should legitimate EMU decision-making based on common values. To safeguard the euro as a currency beyond the state, euro area countries should consider pooling their national sovereignty over a wider range of EMU-related policy areas, as necessary to achieve more effective risk control and more efficient risk sharing. JEL Classification: E4, E6, F15, F33 |
| Keywords: | collective governance, euro area stability, national sovereignty |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2016173&r=eec |
| By: | Sophie Robin-Olivier |
| Abstract: | This paper is part of the joint project between the Directorate General for Migration and Home Affairs of the European Commission and the OECD’s Directorate for Employment, Labour and Social Affairs on “Review of Labour Migration Policy in Europe”. This document has been produced with the financial assistance of the European Union. The views expressed herein can in no way be taken to reflect the official opinion of the European Union. Grant: HOME/2013/EIFX/CA/002 / 30-CE-0615920/00-38 (DI130895) A previous version of this paper was presented and discussed at the OECD Working Party on Migration in June 2015.The paper investigates the notion of the “community preference” which in filling job posts gives a priority to EU-nationals over third-country nationals. Analysing the impact of the principle on the European labour migration policy, the report presents a brief history of the notion, and discusses how it is referred to in EU labour migration policy documents. It also examines the challenges that the principle is facing as the EU immigration policy develops, tending to give increasing rights to third-country nationals. |
| JEL: | F22 K31 K37 N44 |
| Date: | 2016–06–10 |
| URL: | http://d.repec.org/n?u=RePEc:oec:elsaab:182-en&r=eec |
| By: | Corinne Balleix |
| Abstract: | This paper is part of the joint project between the Directorate General for Migration and Home Affairs of the European Commission and the OECD’s Directorate for Employment, Labour and Social Affairs on “Review of Labour Migration Policy in Europe”. This document has been produced with the financial assistance of the European Union. The views expressed herein can in no way be taken to reflect the official opinion of the European Union. Grant: HOME/2013/EIFX/CA/002 / 30-CE-0615920/00-38 (DI130895) A previous version of this paper was presented and discussed at the OECD Working Party on Migration in June 2015.The paper presents the main instruments for co-operation with third countries in the area of labour immigration – policy instruments constituted by the mobility partnerships, financial instruments, as well as legal instruments. For each of them, the study examines the reference sources underpinning the activity, the manner in which labour immigration is organised, and the ways of promoting ethical recruitment. The paper then draws up a frame of reference on these instruments, followed by specific references to the labour immigration policies of certain Member States, and certain third countries, serving to illustrate the arguments. |
| JEL: | F22 F53 F55 N44 |
| Date: | 2016–06–10 |
| URL: | http://d.repec.org/n?u=RePEc:oec:elsaab:183-en&r=eec |
| By: | Flore Gubert; Jean-Noël Senne |
| Abstract: | This paper is part of the joint project between the Directorate General for Migration and Home Affairs of the European Commission and the OECD’s Directorate for Employment, Labour and Social Affairs on “Review of Labour Migration Policy in Europe”. This document has been produced with the financial assistance of the European Union. The views expressed herein can in no way be taken to reflect the official opinion of the European Union. Grant: HOME/2013/EIFX/CA/002 / 30-CE-0615920/00-38 (DI130895) A previous version of this paper was presented and discussed at the OECD Working Party on Migration in June 2015. The paper investigates the main likely drivers of migration towards the EU. It encompasses a literature review on the determinants of potential and actual migration, followed by an illustrative empirical investigation of worldwide migration intentions – focused on intentions to move permanently in a restricted time span, based on the Gallup surveys on the opinions and aspirations of people around the globe. The paper then continues with a descriptive analysis of migration intentions using both aggregated figures and figures disaggregated by region or country of destination and region or country of origin. It then investigates if individuals intending to move to European countries differ from those intending to move elsewhere using basic individual characteristics such as sex, age, education, and marital and employment status. When feasible, it compares the findings with the profile of recent migrants residing in OECD countries derived from the Database on Immigrants in OECD and non-OECD Countries. |
| JEL: | F22 O15 |
| Date: | 2016–06–10 |
| URL: | http://d.repec.org/n?u=RePEc:oec:elsaab:188-en&r=eec |
| By: | Andreou, Elena; Eminidou, Snezana; Zachariadis, Marios |
| Abstract: | We use monthly data across fifteen euro-area economies for the period 1985:1-2015:3 to obtain different monetary policy shocks pertaining to more versus less informed individuals. We then investigate how these affect inflation expectations of different types of consumers before and after the incidence of the recent Crisis. Shocks obtained based on the assumption that individuals are well informed can have different impact on inflation expectations as compared to shocks obtained based on the assumption that they are not as informed. Moreover, monetary policy can have different effects on inflation expectations for different types of consumers. Finally, monetary policy has different effects on inflation expectations after as compared to before the incidence of the recent Crisis. |
| Keywords: | crisis; Inflation expectations; Monetary policy; shocks |
| JEL: | E31 E52 F41 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11306&r=eec |
| By: | Swati Dhingra; Gianmarco Ottaviano; Thomas Sampson; John Van Reenen |
| Abstract: | Investment from overseas brings many benefits to the UK economy, including higher pay and productivity. According to CEP research, leaving the European Union could lead to a fall in inward foreign direct investment in the UK of close to a quarter. This would damage productivity and could lower people's real incomes by more than 3%. |
| Keywords: | Brexit, productivity, foreign direct investment, UK economy, EU Referendum |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepcnp:470&r=eec |
| By: | László Á. Kóczy (Óbuda University) |
| Abstract: | The possible exit of the United Kingdom from the European Union will have profound economic and political effects. Here we look at a particular aspect, the power distribution in the Council of the Euro- pean Union. Since the Lisbon treaty the exit does not require new negotiations as the success of a voting initiative only depends on the number and total population of the supporting member states. Using the Shapley-Shubik power index we calculate the member states' pow- ers with and without the United Kingdom and update earlier power forecasts using the Eurostat's latest population projections. There is a remarkably sharp relation between population size and the change in power: Brexit increases the largest members', while decreases the smallest ones' powers. |
| Keywords: | European Union, Council of the European Union, qualifed majority voting, power index, a priori voting power, demographics. JEL Codes: D72, D78, D62 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:pkk:wpaper:1601&r=eec |
| By: | Fiscalis Tax Gap Project Group |
| Abstract: | Effective collection of taxes is a cornerstone of a fair taxation system. Taxes that remain unpaid cause revenue loss in the budget of Member States and may lead to an excessive burden on the honest taxpayers who correctly fulfil their tax obligations. Furthermore, effective collection of taxes is essential for level playing field and avoids economic distortions. Tackling the issue of unpaid taxes is therefore a collective responsibility which starts with understanding the scale and the scope of the issue. Tax gap estimations are rough indicators of revenue loss. In the past decades several methods have been developed by national (tax) administrations and international institutions to estimate revenue loss. In order to pool knowledge and share experience in existing tax gap estimations, the Tax Gap Project Group (TGPG) was established under the Fiscalis 2020 Program. The TGPG consisted of national experts of 15 Member States and its work was coordinated by the European Commission. |
| Keywords: | European Union, VAt gap, tax gap, Member states, VAT, tax revenue |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:tax:taxstu:0065&r=eec |
| By: | Stijn Ferrari; Mara Pirovano (Prudential Policy and Financial Stability, National Bank of Belgium) |
| Abstract: | Given the indisputable cost of policy inaction in the run-up to banking crises as well as the negative side effects of unwarranted policy activation, policymakers would strongly benefit from earlywarning thresholds that more accurately predict crises and produce fewer false alarms. This paper presents a novel yet intuitive methodology to compute country-specific and state-dependent thresholds for early-warning indicators of banking crises. Our results for a selection of early-warning indicators for banking crises in 14 EU countries show that the benefits of applying the conditional moments approach can be substantial. The methodology provides more robust signals and improves the early-warning performance at the country-specific level, by accounting for country idiosyncrasies and state dependencies, which play an important role in national supervisory authorities’ macroprudential surveillance. |
| Keywords: | Banking crises, Early warning systems, Country-specific thresholds, State-dependent thresholds |
| JEL: | C40 E44 E47 E61 G21 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbb:reswpp:201606-297&r=eec |
| By: | Almas Heshmati; Shahrouz Abolhosseini |
| Abstract: | This research reviews relevant literature on the current state and effectiveness of developing renewable energy on energy security in general, and on energy security in the European Union in particular. The paper elaborates on primary energy import sources, possible alternatives, and how energy security is affected by the sources of supply. It also gives an analysis of the effects of the Ukrainian crisis, the isolation of Iran on diversification sources, and on European energy security. It examines European Union.s energy policy, analyses the best motivation for a new energy policy direction within Europe, and suggests alternative solutions for enhanced energy supply security. The aim is to suggest suitable solutions for energy security in Europe through energy supply diversification. Supply diversification includes alternative energy corridors for reducing dependency on Russia as a supplier and enhancing the power generated by renewable energy sources under the European Union 2020 strategy. |
| Keywords: | energy security, green energy, renewable energy, Ukraine crisis, Iran sanctions |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2016-021&r=eec |
| By: | Chrysa Leventi; Holly Sutherland; Iva Valentinova Tasseva |
| Abstract: | In this paper we provide evidence of the relative cost-effectiveness of different types of policy instrument in reducing the risk of poverty (or limiting its increase). We do that by measuring the implications of increasing or reducing the size of the instrument within its national context, comparing across 7 diverse EU countries: Belgium, Bulgaria, Estonia, Greece, Hungary, Italy and the UK. We consider four types of commonly-applied policy instrument that have a direct effect on household income and hence potentially on the risk of income poverty: child benefits, minimum income components of social assistance, income tax lower thresholds and minimum wages; and one general aspect of policymaking, the regular indexation of benefit levels and tax thresholds. We focus on changing the scale of the instrument rather than its structure. Hence, in each case we take the existing policy instrument and calculate the direct effects on household income of inflating/deflating the relevant thresholds and payment levels by common proportions (5%, 20% and 90%), taking account of interactions with the rest of the tax-benefit system. To do this we make use of EUROMOD, the taxbenefit microsimulation model for the European Union, based on microdata from the European Union Statistics on Income and Living Conditions (EU-SILC). The effect on income poverty (FGT0 and FGT1) is calculated and compared across instruments and countries and is assessed relative to the budgetary effect of the policy change. The aim of this paper is not necessarily to present realistic or politically feasible policy reform scenarios but rather to compare the cost-effectiveness of some common “building blocks” of policy making, drawing on analysis of seven national policy systems and contexts. |
| Keywords: | Poverty, Europe 2020, EU, social policy, fiscal policy, microsimulation |
| JEL: | D3 D13 D30 H53 I38 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:hdl:improv:1616&r=eec |
| By: | Daniel Rais |
| Abstract: | European Commission, JRC Technical Reports, Institute for Prospective Technological Studies, Digital Economy Working Paper 2015/09 by Melisande Cardona, Nestor Duch-Brown, Joseph Francois, Bertin Martens, Fan Yang: This paper examines the economic impact of a change in retail technology - the shift from offline to online shopping – and a change in policy – measures to reduce the barriers to online trade perceived by consumers and retailers. Contrary to the prevalent micro-economic partial equilibrium consumer modelling approach to e-commerce, we use a macro-economic general equilibrium model that brings together the impact on consumers as well as on producers. We use survey data on cross-border e-commerce between EU Member States to estimate the implied cross-border trade cost reduction when consumers move from offline to online consumption as well as the implied costs of perceived regulatory barriers to e-commerce. We distinguish between cross-border and domestic trade costs effects. We find that cross-bordere-commerce reduces trade costs compared to offline trade. Increased price competition squeezes domestic retail price margins and has a negative output effect in that sector (-2.6%). However, the resulting retail efficiency gains have a positive effect on production in other sectors (between 0.9 and 2.6%) and on household consumption (+1.07%). The combined macro-economic effect of these transmission channels adds 0.14% to EU GDP. Additional policy measures to facilitate cross-border e-commerce between EU Member States could add another 0.3% to household consumption and 0.04% to GDP, or 0.03% in the more conservative estimate. The relatively weak GDP effect in comparison with the production and consumption effects indicates that the shift from offline to online retail induces considerable welfare redistribution from retailing to other sectors and to households, more so than a production effect. |
| Date: | 2016–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:wti:papers:987&r=eec |
| By: | Jonathan Chaloff |
| Abstract: | This paper is part of the joint project between the Directorate General for Migration and Home Affairs of the European Commission and the OECD’s Directorate for Employment, Labour and Social Affairs on “Review of Labour Migration Policy in Europe”. This document has been produced with the financial assistance of the European Union. The views expressed herein can in no way be taken to reflect the official opinion of the European Union. Grant: HOME/2013/EIFX/CA/002 / 30-CE-0615920/00-38 (DI130895). This paper is a revised version of an earlier paper (DELSA/ELSA/MI(2015)3) presented and discussed at the OECD Working Party on Migration in June 2015. The paper examines the mechanisms for labour migration management across individual European countries. Distinguishing between high- and low-skilled workers, it investigates the policies aiming at attracting and retaining qualified migrants. It finds that in EU countries there are several different forms of barriers to labour migration, each of which is affected differently by EU legislation. It then specifically focuses on the Student, Researchers and EU Blue Card Directives, studying their effects on the real policy framework in the EU countries affected, in terms of approach. It finds that the first two directives have had a modest impact on the legislative framework, which was largely aligned with the Directive prior to transposition in many cases. The Blue Card scheme is compared in detail with national schemes, in terms of the key parameters of the Directive (criteria, processing standards, benefits, etc.). The paper examines the use of a salary threshold and its different effect according to the country in which it is applied. The paper concludes by examining the impact of these directives on recruitment opportunities, attractiveness and levelling the playing field among EU countries. It explores some options for adjusting the policies in the future. |
| JEL: | F22 F53 F55 K37 |
| Date: | 2016–06–11 |
| URL: | http://d.repec.org/n?u=RePEc:oec:elsaab:180-en&r=eec |
| By: | Bucalossi, Annalisa; Fonseca Coutinho, Cristina; Junius, Kerstin; Luskin, Alaoishe; Momtsia, Angeliki; Rahmouni-Rousseau, Imene; Sahel, Benjamin; Scalia, Antonio; Schmitz, Stefan; Prior Soares, Rita Isabel; Schobert, Franziska; Wedow, Michael |
| Abstract: | Following the emergence of the financial crisis in August 2007, the Basel Committee on Banking Supervision established in 2010 a new global regulatory framework. In addition to raising capital requirements, it introduced three ratios, two of which set out minimum standards for liquidity and funding risk, i.e. the liquidity coverage ratio and the net stable funding ratio, and one which aims to limit leverage in the banking system, i.e. the leverage ratio. All three ratios can have a number of implications for monetary policy implementation, in particular the liquidity coverage ratio and the net stable funding ratio owing to the special role of central banks in providing liquidity. This paper investigates the extent to which the regulatory initiatives might have already had an impact on banks’ behaviour in Eurosystem monetary policy operations. It also provides an overview of the regulatory state of play and major recent advancements in banks’ compliance with the three Basel III ratios. Based on aggregate data, the empirical evidence generally supports some of the theoretically predicted effects of the three ratios. However, no firm conclusions can be drawn as to whether the introduction of the three ratios could cause a significant change in banks’ recourse to Eurosystem monetary policy operations. This is partly due to the fact that, in aggregate, major developments, such as substantial fluctuations in the recourse to Eurosystem refinancing operations in the years between 2012 and 2015, have been driven by the financial crisis and the gradual recovery from it, as well as by the accommodative stance of monetary policy. JEL Classification: G28, E58 |
| Keywords: | Basel III, liquidity regulation, monetary policy implementation |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2016171&r=eec |