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on European Economics |
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Issue of 2022‒03‒07
eleven papers chosen by Giuseppe Marotta Università degli Studi di Modena e Reggio Emilia |
| By: | Hakan Yilmazkuday (Department of Economics, Florida International University) |
| Abstract: | This paper investigates inflation convergence among European countries by using sector-level data for the period between 1997:M1 and 2019:M12. Panel unit root tests at the country-sector level are conducted by using moving windows, which is useful for analyzing changes in inflation convergence and the corresponding speed of convergence over time. The results suggest that there is evidence for inflation convergence for the majority of sectors within Europe, although certain countries have experienced disruptions, especially during the 2008 financial crisis. Regarding the speed of inflation convergence, the average half-life across European countries decreased from about 15 months to about 8 months during the sample period. Important sector-level implications follow for European Union (EU) candidate countries and non-euro EU member countries in regard to the Maastricht Treaty. |
| Keywords: | Inflation Convergence, Half-Life, Sector-Level Analysis, European Union, Euro Area |
| JEL: | C32 E31 E58 F45 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:fiu:wpaper:2201&r= |
| By: | Ruben Durante; Andrea Fabiani; Luc Laeven; José-Luis Peydró |
| Abstract: | Do media slant news in favor of the banks they borrow from? We study how lending connections affect news coverage of banks earnings reports and of the Eurozone sovereign debt crisis on major European newspapers. We find that newspapers cover announcements by their lenders - relative to those of other banks - significantly more when they report profits than when they report losses. Such pro-lender bias is stronger for more leveraged outlets, and tends to operate on the extensive margin for general- interest newspapers and on the intensive margin for financial newspapers. Regarding the Eurozone crisis we find that newspapers connected to banks more exposed to stressed sovereign bonds are more likely to promote a narrative of the crisis favorable to banks and to oppose debt-restructuring measures detrimental to creditors. Our findings support the concern that financial distress and increased dependence on creditors may undermine media companies' editorial independence. |
| Keywords: | Media bias, Banks, Newspapers, Earnings reports, Eurozone crisis |
| JEL: | G21 L82 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1817&r= |
| By: | Martin T. Bohl; Dimitrios Kanelis; Pierre L. Siklos |
| Abstract: | In this paper, we analyze the relevance of central bank mandates on the content and tone of communication via speeches. Comparing this communication channel for mandate-related objectives between the Federal Reserve and the European Central Bank reveals similarities before the Great Financial Crisis, while notable differences emerge afterward. Furthermore, we propose a study design to examine how hawkish the tone of speeches becomes in light of current versus expected macroeconomic developments. We find that, since the GFC, expectations of unemployment drive the tone of FED speeches while inflation expectations influence the tone of ECB speeches. |
| Keywords: | ECB, Expectations, FED, Inflation, Central Bank Mandates, Speeches, Structural Topic Model, Unemployment |
| JEL: | E50 E52 E58 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:cqe:wpaper:9622&r= |
| By: | Tröger, Tobias; Kotovskaia, Anastasia |
| Abstract: | We investigate whether the bank crisis management framework of the European banking union can effectively bar the detrimental influence of national interests in cross-border bank failures. We find that both the internal governance structure and decision making procedure of the Single Resolution Board (SRB) and the interplay between the SRB and national resolution authorities in the implementation of supranationally devised resolution schemes provide inroads that allow opposing national interests to obstruct supranational resolution. We also show that the Single Resolution Fund (SRG), even after the ratification of the reform of the European Stability Mechanism (ESM) and the introduction of the SRF backstop facility, is inapt to overcome these frictions. We propose a full supranationalization of resolution decision making. This would allow European authorities in charge of bank crisis management to operate autonomously and achieve socially optimal outcomes beyond national borders. |
| Keywords: | SRB,SRF,bank resolution,banking union,bail-in,ESM,national interest,political economy,bureaucrats' incentives |
| JEL: | G01 G18 G21 G28 K22 K23 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:340&r= |
| By: | Riccardo Di Clemente; Bal\'azs Lengyel; Lars F. Andersson; Rikard Eriksson |
| Abstract: | Core objectives of the European integration are convergence and economic growth, but these are challenged by competition and value chain asymmetries within the common market. A difficult challenge for the EU is how to harmonize specialization of industries and countries to reach global competitiveness, and at the same time bridge productivity differences across more and less developed countries. Here, we develop a novel bipartite network approach and trace pairwise co-specialization, by applying the widely used revealed comparative advantage (RCA) method, within and between EU15 and Central and Eastern European (CEE) member states from 2000. This new co-specialization approach can be used to assess redundancies and division in the system as a whole, and at the level of industries and countries as well. This latter feature enables us to investigate how co-specialization across countries impact economic growth. We find significant overlap of RCA among CEE countries but a diverging RCA structure between EU15 and CEE. Our econometric analysis indicates that productivity increases in those CEE industries that have co-specialized with other CEE countries after EU accession, while co-specialization across CEE and EU15 countries is less related to productivity growth. These results inform European policy that a division of sectoral specialization can lead to productivity convergence between EU15 and CEE member states. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.01080&r= |
| By: | Tomasz Serwach (Eksoc - Faculty of Economics and Sociology, University of Lodz - University of Lódź) |
| Abstract: | Although addressing income inequalities is one of the main challenges in the European Union (EU), whether the EU has influenced income distributions, possibly causing a rise in inequalities, is still a heavily underexplored topic. Using the newest methodological developments associated with the counterfactual estimations, I assessed the distributional effects of the 2004 EU enlargement. The results indicate that EU accession cannot be held responsible for any significant changes in income inequalities in the New Member States. That finding is robust to changes in the method of estimation, and it is also supported by dynamic panel data methods. |
| Keywords: | income inequalities,Gini coefficient,European Union,counterfactual estimators |
| Date: | 2022–01–30 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03548416&r= |
| By: | Gamze Danisman (Faculty of Economics, Administrative and Social Sciences, Kadir Has University, Turkey); Amine Tarazi (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges) |
| Abstract: | This paper explores how banks' environmental, social, and governance (ESG) activities affect their lending during financial crises. We use a sample of 83 listed banks from 20 European countries for the 2002-2020 period and consider the global financial crisis of 2007-2009 and the European sovereign debt crisis of 2010-2012. We implement two-step system GMM dynamic panel data estimation techniques. We also address potential endogeneity issues using instrumental variables (IV) and two-stage least squares (2SLS) estimations by instrumenting ESG activity with board gender diversity. We find that lending falls to a lesser extent for banks with higher ESG scores during crisis times. Looking at the different potential channels shows that, during crises, banks more engaged in ESG activities are less affected in terms of credit and asset risk, and profitability. They also face a lower reduction in market funding, allowing them to downsize to a lesser extent during crises, and their deposit rates do not increase as much as in less ESG-engaged banks. Going deeper reveals that our findings are mainly driven by the environmental pillar component of ESG scores. |
| Keywords: | Environmental Social Governance (ESG) scores,Bank Lending,Bank Risk,Environmental pillar,Financial Crisis,European banks |
| Date: | 2022–01–28 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03547104&r= |
| By: | Filippo Gusella |
| Abstract: | This paper proposes a macroeconometric analysis to depict and measure possible financial cycles that emerge due to the dynamic interaction between heterogeneous market participants. We consider 2-type heterogeneous speculative agents: Trend followers tend to follow the price trend while contrarians go against the wind. As agents' beliefs are unobserved variables, we construct a state-space model where heuristics are considered as unobserved state components and from which the conditions for endogenous cycles can be mathematically derived and empirically tested. Further, we specifically measure the length of endogenous financial cycles. The model is estimated using the equity price index for the 1960–2020 period for the UK, France, Germany, and the USA. We find empirical evidence of endogenous financial cycles for all four countries, with the highest frequencies in the USA and the UK. |
| Keywords: | Heterogeneous Agent Models, Heterogeneous Expectations, Endogenous Cycles, State Space Model, Period of Cycles |
| JEL: | C13 C32 G10 G12 E32 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2022_02.rdf&r= |
| By: | Verhoeven, Loesje (UNU-MERIT, Maastricht University); Ritzen, Jo (UNU-MERIT, Maastricht University) |
| Abstract: | Institutional trust and interpersonal trust are supposedly threatened by globalisation. In a case study of twelve countries in Northern- and Western Europe, however, we show that the substantial globalisation of the first two decades of the 21st century has contributed to institutional trust and - less significant - to interpersonal trust. This relation is non-linear. The "usual suspects" of income inequality and diversity have decreased institutional and interpersonal trust. Only specific Government expenditures (education and culture) have contributed to trust, more so in combination with high quality of institutions. High trusting countries (compared to Austria) turn out to be: France, Germany, Sweden, Switzerland and the UK. The positive effect of globalization on trust is "carried" by the higher educated and those with higher incomes. |
| Keywords: | Globalisation, Social Cohesion, Institutional Trust, Interpersonal trust, Diversity, Inequality, Government Expenditure, Government Intervention |
| JEL: | F15 F68 D31 D78 E61 H5 O24 O52 |
| Date: | 2022–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:unm:unumer:2022005&r= |
| By: | Delanote, Julie; Rückert, Désirée |
| Abstract: | Using survey data on climate innovation, we map climate innovation patterns across different regions and technologies, and study the cooperation, protection and reach of climate innovation. Our analysis confirms that there is a strong link between climate innovation and firm performance. We nevertheless observe that European firms seem to suffer from the availability of finance. If European policymakers want to create more successful firms in the climate sector, they should strengthen policies that aim to reduce regulatory uncertainty and work actively to improve access-to finance conditions, in particular for start-ups. |
| Keywords: | Climate action and environment,Economics |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:eibwps:202202&r= |
| By: | Karen Hermans; Johanna Greiss; Heleen Delanghe; Bea Cantillon |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:hdl:wpaper:2111&r= |