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on European Economics |
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Issue of 2025–01–06
nineteen papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Bańkowski, Krzysztof; Benalal, Nicholai; Bouabdallah, Othman; De Stefani, Roberta; Dorrucci, Ettore; Jacquinot, Pascal; Modery, Wolfgang; Nerlich, Carolin; Rodríguez-Vives, Marta; Szörfi, Béla; Zorell, Nico; Zwick, Christoph; Huber, Christian |
| Abstract: | This paper takes stock of the implementation of the NextGenerationEU (NGEU) programme in the euro area four years after its inception, focusing on its principal instrument, the Recovery and Resilience Facility (RRF). The paper provides an updated quantitative assessment of its past and future impact on the euro area economy, using a set of models and scenarios to account for the uncertainty that still surrounds the implementation of this programme. The public expenditures and structural reforms linked to the RRF have the potential to increase the level of euro area gross domestic product (GDP) by around 0.4-0.9% by 2026 and 0.8-1.2% by 2031, depending on capital productivity and the degree of absorption of RRF funds. The contribution of structural reforms to these output effects is expected to increase over time, while the initially prevailing impact of RRF-funded public expenditures fades away. We provide tentative empirical evidence that reforms have started to modestly improve the growth outlook of some euro area Member States by increasing their institutional quality. The expected long-run increase in output is in turn a key factor behind the decline in the government debt ratios we project for the main NGEU beneficiary euro area Member States. At the same time, we estimate that NGEU will have a limited impact on euro area inflation. Compared with previous ECB staff analysis published in 2022, the macroeconomic impact of NGEU, particularly on GDP and government debt ratios, is expected to shift over time due to widespread delays in the implementation of NGEU-linked expenditures and reforms. It is crucial that euro area Member States address implementation challenges over the remaining lifetime of this programme to fully reap its benefits. JEL Classification: C54, E02, E22, E62, F45, H87, O52 |
| Keywords: | NGEU, public investment, RRF, structural reform |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbops:2024362 |
| By: | Guido Ascari; Dennis Bonam; Lorenzo Mori; Andra Smadu |
| Abstract: | We investigate the relationship between fiscal policy and inflation dynamics in the Euro Area, with a focus on the post-pandemic inflation surge. Using a BVAR identified via sign restrictions, we disentangle the effects of various demand- and supply-side shocks, including fiscal policy, on inflation. First, while both positive demand and adverse supply shocks contributed to the inflation surge, demand shocks were relatively more important. Second, fiscal stimulus played a substantial and progressively increasing role, particularly in influencing domestic-based measures of inflation. Finally, the relative impact of fiscal shocks on inflation dynamics varies across (selected) Euro Area countries. |
| Keywords: | E30; E31;E50 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbwpp:820 |
| By: | Ciola, Emanuele; Turco, Enrico; Rizzati, Massimiliano; Bazzana, Davide; Vergalli, Sergio |
| Abstract: | This paper evaluates the macroeconomic and financial risks of the energy transition using an extended MATRIX model, a multi-agent, multi-sector integrated assessment framework for the Euro Area. The model features endogenous, directed technical change in the energy sector and a decentralized electricity market based on merit-order rule. Energy firms switch technologies based on relative profitability, capturing feedback loops between R&D, productivity gains, and competitiveness, which may lead to either brown lock-in or green energy transition. We compare conventional policies – brown tax (BT), unconditional green subsidy (GS), and conditional green subsidy (CGS) linked to R&D – with alternative policy mixes, such as coordinated monetary policy, green finance and green industrial policy. Results show that while conventional policies modestly increase transition likelihood, they entail GDP losses due to production and financial constraints. These can be mitigated with green industrial policy and green finance, which alleviate sectoral bottlenecks and foster a more effective transition. |
| Keywords: | Climate Change, Resource /Energy Economics and Policy |
| Date: | 2024–11–25 |
| URL: | https://d.repec.org/n?u=RePEc:ags:feemwp:348229 |
| By: | Allayioti, Anastasia; Arioli, Rodolfo; Bates, Colm; Botelho, Vasco; Fagandini, Bruno; Fonseca, Luís; Healy, Peter; Meyler, Aidan; Minasian, Ryan; Zahrt, Octavia |
| Abstract: | This paper looks back on the 25-year history of the ECB Survey of Professional Forecasters (SPF). Since its launch in the first quarter of 1999, it has served as an important input for policymaking and analysis, especially over the past five years, where the euro area has, following a period of low inflation, navigated a global pandemic, Russia’s invasion of Ukraine and an unprecedented surge in inflation. The survey has evolved over time and provides not only a long time series of economic expectations and forecasts, but also valuable insights on key topical issues and on economic risks and uncertainties. We show that, for each of the three main macroeconomic variables forecast – HICP inflation, real GDP growth and the unemployment rate – the track record of the ECB SPF in forecasting has been broadly comparable to that of the Eurosystem. In addition, its combination of quantitative point forecasts and probability distributions with qualitative explanations has provided useful input for macroeconomic analysis. Beyond analyses of the forecasts for the main macroeconomic variables, there are also two further sections that examine the technical assumptions (oil prices, policy rates, exchange rates and wages) underlying SPF expectations and an analysis and assessment of measures of macroeconomic uncertainty. Technical assumptions are shown to account for the lion’s share of the variance in the inflation forecast errors, while uncertainty is shown to have increased considerably relative to that which prevailed during the early years of the SPF (1999-2008). Looking ahead, the SPF – with its long track record, its large and broad panel (spanning both financial and non-financial forecasters) and committed panellists – will undoubtedly continue to provide timely and useful insights for the ECB’s policymakers, macroeconomic experts, economic researchers and the wider public. JEL Classification: D84, E31, E37, E52, E66 |
| Keywords: | expectations, forecasts, inflation, SPF, survey |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbops:2024364 |
| By: | Ignacio Garcia Bercero |
| Abstract: | A reset in the relationship between the UK and the EU is underway. This paper recommends the main elements of the reset in terms of trade |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:bre:polbrf:node_10476 |
| By: | Angela Dalmonte; Tommaso Frattini; Sofia Giorgini |
| Abstract: | This paper explores the overeducation of tertiary-educated migrants in European labour markets. Using data from the European Labour Force Survey (2012-2022), we show that immigrants, particularly those from non-EU countries, are significantly more likely to be overeducated than natives. Despite a general decline in overeducation levels for all groups over time, the immigrant-native gap remains, especially for foreign-educated migrants. Furthermore, the likelihood of overeducation for foreign-educated migrants increases until 15-19 years after migration, a pattern consistent across all areas of origin and migration cohorts. Importantly, differences in educational quality between origin and destination countries do not primarily account for these overeducation differentials. The findings underscore the need for policies that better align immigrants' skills with labour market demands in Europe to avoid the waste of valuable immigrants' skills, which are harmful not only to migrants but to the economies of receiving countries too. |
| Keywords: | EU labour markets, immigration, Skill mismatch |
| JEL: | J15 J61 F22 |
| Date: | 2024–10–18 |
| URL: | https://d.repec.org/n?u=RePEc:csl:devewp:496 |
| By: | Poloni, Paolo |
| Abstract: | Supervisory data are typically not conceived for statistical purposes or considered “official statistics”, but they are disclosed to the public, either directly by the supervised institutions or indirectly by the competent authorities. This disclosure is required under Pillar 3 of the Basel framework on banking supervision. The aim of the framework is to promote market discipline, whereby market participants monitor the risks and financial positions of banks and take action to guide, limit and price their risk-taking to safeguard financial stability. The disclosure of supervisory data is therefore a public good. In addition, supervisory data can be a reliable source for official statistics such as financial accounts. On the other hand, the nature of supervisory data differs from that of standard official statistics and its quality is subject to a robust assessment framework, with distinct particularities. The aim of this paper is to analyse the EU supervisory reporting framework from an institutional and policy perspective, in view of its potential and desirable evolution over time, including its possible integration with the statistical framework. The paper is split into three main parts. First, it describes the historical and current EU institutional settings, including the role of the European Banking Authority (EBA) reporting framework and the role of the Single Supervisory Mechanism (SSM), focusing on the data quality assessment framework and the publication of supervisory statistics. […] JEL Classification: C81, G21, G28, G38 |
| Keywords: | data integration, data quality, Pillar 3, reporting policy, supervisory reporting |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbops:2024363 |
| By: | Casati, Paola; Kalantzis, Fotios |
| Abstract: | This study investigates how regional spillovers influence firms' climate investment decisions across EU regions using spatial econometric models. Using data from the European Investment Bank Investment Survey (EIBIS) 2023, we address two key questions: what triggers firms to adopt greener profiles, and how spillover effects impact investment decisions in neighbouring regions. Our study, reveals the existence of significant spatial dependence in firms' climate investment decisions across EU regions, underscoring at the same time the interconnected nature of adaptation and mitigation efforts. Further, risk perceptions, financial capabilities, external conditions like economic and institutional frameworks and EU funds, play a key role in shaping climate investment choices both locally and in neighbouring regions. The results underscore the critical need for spatial considerations in climate policy development, suggesting that policies tailored to regional dynamics can more effectively foster climate resilience and climate investments. |
| Keywords: | European Investment Bank Investment Survey, Green investment, Spatial regression analysis |
| JEL: | C21 Q54 Q55 Q56 Q58 R11 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:eibwps:306851 |
| By: | Conall Heussaff |
| Abstract: | Energy prices are higher in the European Union than in most other industrialised economies, presenting a fundamental competitiveness challenge |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:bre:polbrf:node_10517 |
| By: | Schilirò, Daniele |
| Abstract: | This contribution is, first and foremost, a reflection on the theme of political economy and the historical evolution of its ideas. It highlights some salient moments in the history of political economy and remembers the main protagonists who have contributed to the development of the discipline and its ideas. In analyzing the ideas of political economists, the themes examined include innovation, economic growth, and technological change. Finally, the essay discusses the European Monetary Union and the adoption of the single currency, the euro. It refers to the different crises this currency has experienced over the past twenty years and the various reforms implemented to ensure the survival of the European Monetary Union. |
| Keywords: | Political economy; innovation; growth; technological change; European Monetary Union; euro |
| JEL: | B0 E0 O10 O30 O40 O43 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123132 |
| By: | Amandine Crespy; Chloe Briere |
| Abstract: | This book constitutes a timely and unique interdisciplinary endeavour in law and political science to investigate whether the European Union is living up to its ambitions to tackle inequalities between, across, and within European societies and states. By gathering cutting-edge research by specialists of inequalities across Europe, the volume pushes conceptual frontiers as to the EU’s role in fighting or fuelling inequalities pertaining to antidiscrimination, mobility and migrations, and the European welfare model. It provides solid empirical insights on the EU policy tools and legal instruments and assesses whether they are effective.This book will be of key interests to scholars, students, and practitioners in EU policymaking, EU law, and more broadly in EU studies, comparative politics, and regionalism. |
| Date: | 2024–12–05 |
| URL: | https://d.repec.org/n?u=RePEc:ulb:ulbeco:2013/385626 |
| By: | d'Artis Kancs |
| Abstract: | To enhance the situational awareness of strategic readiness in Europe we look through two complementary angles. First, through a situational assessment of selected strategic readiness elements that have often been overlooked in Europe. Leveraging the newly augmented strategic readiness framework of the US DoD, we examine the defence industrial readiness for a protracted conflict and war, force mobility, and a sustained whole-of-society resilience. Second, through a scenario analysis in order to future-proof the strategic decision maker options to be resilient to changing boundary conditions. We stress test Europe's readiness in view of possible future systemic shocks across threat and time horizons by simulating selected scenarios of the NATO's Strategic Foresight Analysis 2023 and Future Operating Environment 2024 and evaluate potential impacts in the EU-EMS model. Situational assessment reveals that the defence industrial mobilisation, force mobility and sustained resilience readiness are off-track in view of the European Defence Readiness – as a steady state of preparedness. Second, by quantifying potential costs of unpreparedness, the Cold War 2.0 scenario analysis provides a rationale for European allies to embark on a gradual de-risking trajectory rather than waiting for a much more costly abrupt shock trigger dictated by geopolitical events. |
| Keywords: | Preparedness, readiness, Europe, Cold War 2.0, CRINK |
| JEL: | H56 H57 L11 |
| Date: | 2024–04–08 |
| URL: | https://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2024_08 |
| By: | Michael D. Bauer; Eric Offner; Glenn D. Rudebusch |
| Abstract: | Policymakers and researchers worry that the low-carbon transition may be inadvertently delayed by higher global interest rates. To examine whether green investment is especially sensitive to interest rate increases, we consider the effect of unanticipated monetary policy changes on the equity prices of green and brown European firms. We find that brown firms, measured in terms of carbon emission levels or intensities, are more negatively affected than green firms by tighter monetary policy. This heterogeneity is robust to different monetary policy surprises, emission measures, econometric methods, and sample periods, and it is not explained by other firm characteristics. This evidence suggests that higher interest rates may not skew investment away from a sustainable transition. |
| Keywords: | Monetary transmission; carbon premium; ESG; climate finance |
| JEL: | E52 G14 Q54 Q58 |
| Date: | 2024–12–17 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedfwp:99301 |
| By: | Tetiana Bogdan |
| Abstract: | This policy report makes an up-to-date assessment of Ukraine’s fiscal situation and locates the analysis in the longer-term context of the needs to keep the state viable in the current war situation, but also to deal with the challenges of reconstruction after the war and on its path towards EU accession. It studies in detail the structure and evolution of Ukraine’s budget revenue in a time of war and reveals social and economic needs of a war-torn country in the areas of social protection, housing recovery, health care and education reforms, transport infrastructure, energy sector, industry and agriculture. It outlines the necessity to increase public revenue and considers different tax policy initiatives for funding reconstruction program and restoring fiscal sustainability. The study elaborates a methodology for assessment and medium-term projections of consolidated budget expenditure, which are required for meeting Ukraine’s recovery and reconstruction needs. It also provides budget deficit projections and gross financing needs assessments over the period 2024-2028. It shows the substantial foreign financing gaps for 2025-2026 and following years and analyses in details the external and, especially, EU financial support pledged to Ukraine. Finally, it discusses the staged EU accession model in the context of addressing reconstruction challenges and Ukraine’s progressing on the path to EU membership. |
| Keywords: | Ukraine’s economic reconstruction, Ukraine’s fiscal situation, Ukraine’s external financing needs, EU staged accession model |
| JEL: | H3 H5 H6 O52 O11 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:wii:pnotes:pn:88 |
| By: | van der Tas, Leo (Tilburg University, School of Economics and Management); Van Roy, Michiel; Jorissen, Ann |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:tiu:tiutis:659281a7-60e8-42e8-bbbd-44c32e0822e3 |
| By: | Jean Pisani-Ferry; Simone Tagliapietra |
| Abstract: | In this Policy Brief, we assess the investment needed to achieve the 2030 climate goal and climate neutrality by 2050 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:bre:polbrf:node_10497 |
| By: | Ignacio García Bercero; Petros C. Mavroidis; André Sapir |
| Abstract: | This Policy Brief focuses on possible new Trump tariffs, based on statements made by the President-elect |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:bre:polbrf:node_10520 |
| By: | Fremerey, Melinda; Hentze, Tobias; Kolev-Schaefer, Galina; Sultan, Samina |
| Abstract: | Über die letzten 30 Jahre hat sich in der Europäischen Union (EU) ein komplexes Geflecht an nationalen und supranationalen Fiskalregeln mit dem Ziel nachhaltiger öffentlicher Finanzen herausgebildet. Derweil haben die staatlichen Maßnahmen zur Abfederung der wirtschaftlichen Folgen der Corona-Pandemie und des rus- sischen Angriffskriegs in der Ukraine die Staatsschulden in einigen Mitgliedstaaten erheblich ansteigen las- sen. Mit dem Inkrafttreten der reformierten europäischen Fiskalregeln in diesem Frühjahr ergibt sich ein erhöhter Handlungsdruck für die nationalen Haushaltsverhandlungen; zumal nun auch stärker mittelfristige Risiken, wie demografisch bedingte Kosten, in der Schuldentragfähigkeitsanalyse der Europäischen Kommis- sion berücksichtigt werden. Dies ist prinzipiell zu begrüßen. Diskussionswürdig sind dabei zwei Aspekte: Ers- tens kann der Grenzwert für den Schuldenstand von 60 Prozent des Bruttoinlandsprodukts (BIP) mit Blick auf die anstehende Transformation zu Fehlsteuerungen führen; eine Investitionsklausel gibt es nicht. Zweitens sind die Annahmen in Teilen sehr strikt. So ist zwar die Annahme einer konstanten Fiskalpolitik mit Blick auf die Handhabbarkeit der Simulationsrechnungen nachvollziehbar. Zudem kann dadurch die politische Not- wendigkeit für Fiskalreformen offengelegt werden. Jedoch kann dies im Ergebnis auch dazu führen, dass der Pfad der Nettoprimärausgaben eher flach, also mit hohen Risikoabschlägen, angesetzt wird. Gleichzeitig er- fordert die Transformation erhebliche Investitionen. In Deutschland verschärft sich diese Lage durch den In- vestitionsstau, der die Attraktivität des Standorts schmälert. Die strenge Regelung der Schuldenbremse setzt dem Bund und den Ländern derzeit enge Grenzen, um diesen Bedarf zu erfüllen. [...] |
| Keywords: | Europäische Union, Staatsverschuldung, Standort Deutschland, Steuer- und Finanzpolitik, Verteilung öffentlicher Finanzen |
| JEL: | H50 H54 H62 H63 H68 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iwkpps:306358 |
| By: | Kemmeren, Eric (Tilburg University, School of Economics and Management) |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:tiu:tiutis:920a5840-fd77-4bed-ba66-14d49fdb7f58 |