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on European Economics |
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Issue of 2025–03–03
sixteen papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Wächter, Maybrit; Proano, Christian; Peña, Juan Carlos |
| Abstract: | This paper revisits the "one-size-fits-all" challenge posed by the European Central Bank's (ECB) monetary policy within the heterogeneous economic landscape of the euro area. Using a dataset spanning from 1999Q1 to 2019Q4 for the ECB interest rate and from 2004Q4 onwards for the Wu-Xia shadow rate, we compute country-specific hypothetical Taylor rates across EU-11 countries and examine the dynamic effects of the difference between these rates and the actual ECB policy rate, the so-called Taylor Rate Gaps (TRGAPs), on GDP growth and inflation. Employing panel and country-specific local projections, our findings reveal that positive TRGAPs negatively impact economic growth, with this effect being more pronounced in periphery countries compared to core countries. The analysis highlights the limitations of a uniform monetary policy in addressing the diverse economic conditions within the euro area, suggesting the need for a more tailored approach to foster balanced and sustainable growth across the region. |
| Keywords: | Monetary Policy, Taylor Rule, Euro Area, Economic Growth, Interest Rate Gap |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bamber:311824 |
| By: | Ursel Baumann; Annalisa Ferrando; Dimitris Georgarakos; Yuriy Gorodnichenko; Timo Reinelt |
| Abstract: | Does a successful disinflation contribute to the anchoring of inflation expectations? We provide novel survey evidence on the dynamics of euro area firms’ inflation expectations during the disinflation episode since 2022. We show that firms’ short term inflation expectations declined steadily towards the inflation target as the disinflation progressed. However, we also document a thick tail in longer-term inflation expectations, substantial disagreement about the inflation outlook, and an increased sensitivity of longer-term inflation expectations to short-term inflation expectations. These findings suggest that it may take more time to bring inflation expectations fully in line with central bank objectives. |
| JEL: | E3 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33440 |
| By: | Ward Romp; Roel Beetsma; Matthias Busse; Martin Larch |
| Abstract: | Long-term projections are the bedrock of any analysis looking at the sustainability of public finances. This paper computes the changes in economic growth in individual European Union (EU) countries needed for government debt-to-GDP ratios to stay on their baseline trajectories (taken from the European Commission’s Debt Sustainability Monitor 2023) under low-fertility, high-fertility, low-migration and high-migration scenarios. These scenarios are provided in the Commission’s Ageing Report (2024). We find that deviations of migration from the baseline entail the largest effect on the required rate of economic growth. The effects of the low-fertility scenario kick in only in the very long run and even exceed those of low migration. Our findings inform policymakers on the urgency to apply measures to raise productivity growth. The urgency is heightened by the fact that in some countries demographic projections tend to be optimistic. Whether the necessary measures are taken is eventually a matter of political will more than anything else. |
| Keywords: | demography, migration, fertility, debt, GDP |
| JEL: | H50 H60 J11 J13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11669 |
| By: | Stefania Albanesi; António Dias da Silva; Juan F. Jimeno; Ana Lamo; Alena Wabitsch |
| Abstract: | We examine the link between the diffusion of artificial intelligence (AI) enabled technologies and changes in the female employment share in 16 European countries over the period 2011-2019. Using data for occupations at the 3-digit level, we find that on average female employment shares increased in occupations more exposed to AI. Countries with high initial female labor force participation and higher initial female relative education show a stronger positive association. While there exists heterogeneity across countries, almost all show a positive relation between changes in female employment shares within occupations and exposure to AI-enabled automation. |
| JEL: | J23 O33 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33451 |
| By: | Koetter, Michael; Noth, Felix; Wöbbeking, Carl Fabian |
| Abstract: | We study whether and how EU banks comply with tighter macroprudential policy (MPP). Observing contractual details for more than one million securitized loans, we document an elusive risk-shifting response by EU banks in reaction to tighter loan-to-value (LTV) restrictions between 2009 and 2022. Our staggered difference-in-differences reveals that banks respond to these MPP measures at the portfolio level by issuing new loans after LTV shocks that are smaller, have shorter maturities, and show a higher collateral valuation while holding constant interest rates. Instead of contracting aggregate lending as intended by tighter MPP, banks increase the number and total volume of newly issued loans. Importantly, new loans finance especially properties in less liquid markets identified by a new European Real Estate Index (EREI), which we interpret as a novel, elusive form of risk-shifting. |
| Keywords: | European Real Estate Index, LTV, macroprudential policy, risk shifting |
| JEL: | H30 R00 R31 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iwhdps:311202 |
| By: | Ganev, Georgy |
| Abstract: | In the lively public policy debate in Bulgaria on the country joining the Eurozone, a claim is being made that real convergence of at least 90% is a crucial precondition for joining and therefore Bulgaria should wait until the early 2040s, because only then it is expected to achieve such convergence. The claim is supported with theoretical arguments, empirical evidence and forecasts. Here they are examined in some detail in the context of Bulgaria’s unique position as a country in the EU with a Currency board regime anchored in the euro. It is concluded that economic theory does not pose a requirement for any level of real convergence for an economic area to join a monetary union. In theory, problems due to a less-rich country joining a more affluent monetary union may, but also may not, cause problems such as excess inflation or amplified business cycle. It is also concluded that neither the claim that there exists a convergence threshold of 90% of real income per capita, nor the claim that Bulgaria will necessarily need at least two decades to reach it can withstand even most elementary checks for empirical robustness. Both the theoretical and the empirical claims that Bulgaria should wait for a 90% real convergence until at least the early 2040s before joining the Eurozone are found to have no real economic foundation. |
| Keywords: | Bulgaria; optimal currency area; monetary union; real convergence; currency board |
| JEL: | E52 E58 E63 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123599 |
| By: | Benjamin Cornejo Costas; Nicola Cortinovis; Andrea Morrison; |
| Abstract: | This paper investigates the relationship between migrant inventors, informal institutions and the development of green technologies in European regions. We argue that migrant inventors act as an unlocking mechanism that transfers external knowledge to host regions, and that informal institutions (i.e. social capital, migrant acceptance) mediate this effect. The work is based on an original dataset of migrant inventors covering 271 NUTS2 regions in the 27 EU countries, the UK, Switzerland, and Norway. The analysis shows that migrant inventors help their host regions to diversify into green technologies. The regions with the highest levels of both measures of social capital show a higher propensity of migrant inventors to act knowledge brokers. Conversely, regions with lower levels of migrant acceptance and social capital do not seem to contribute to this effect. |
| Keywords: | lock-in, international migration, green innovation, social capital, acceptance, regional diversification, EU regions |
| JEL: | F22 J61 O30 R12 Q55 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2503 |
| By: | Bickenbach, Frank; Bode, Eckhardt; Dohse, Dirk; Görg, Holger; Heidland, Tobias; Hinz, Julian; Langhammer, Rolf J.; Liu, Wan-hsin; Rickels, Wilfried; Schularick, Moritz |
| Abstract: | Europe: • Germany must once again see itself as an important part of and a leading nation within the EU. The new German government should consistently think and act in a European way on foreign trade issues. • Only a strong EU single market can compete on equal terms with the USA and China. Together, the EU has strong market power that can be used to counteract trade-restricting measures and enable fair international competition. • The markets for digital products, financial services and energy are still highly fragmented in Europe. The single market must therefore finally be completed. Furthermore, a strong European market for venture capital, a capital market and banking union is needed. China: • In the negotiations on countervailing duties for electric cars produced in China, the EU should not engage in sham solutions such as minimum prices or import quotas but should insist on the reduction of unfair subsidies and better protection of European companies against discrimination in the Chinese market. The German government should support the Commission in this. • Together with the other EU member states and the Commission, the new German government should quickly develop an appropriate regulatory framework to effectively counter threats to national security that may arise from the use of Chinese products in safety-related areas and critical infrastructures in the EU. USA: • Trump's announced import tariffs on European goods would affect the German automotive industry and other export-oriented sectors. With additional tariffs of 10%, German exports to the US would fall by up to 10% in the medium term. • The EU's united stance on targeted countermeasures and increased investment in defense in Europe should be part of the strategic response to Trump's unpredictable trade policy. At the same time, Europe should champion openness and liberalization in its relations with the rest of the world. Trade Agreements: • The EU Commission's plans to conclude trade agreements with regional communities beyond Mercosur should be supported by the German government. The EU's sustainability standards should be adapted to the level of development of the partners to trade agreements. Africa: • Germany must develop a strategic Africa policy that aims at long-term common interests. Germany should act as a long-term and reliable partner to Africa, taking a leading role within the EU and developing resource partnerships. Migration policy should not aim at isolation but be orientated towards opportunity. Security of raw materials: • The German government should support the EU's plans for intensive monitoring of the supply situation for strategically important raw materials, intermediate and finished products, and define criteria for security of supply in selected areas, such as antibiotics. In addition, it should promote the research for and development of economically superior alternative products European climate policy: • The EU emissions trading system for the transport and building sector should be implemented swiftly and established as a central climate instrument in the long term by adjusting the initial allocation of allowances. CO2 removal should be supported and corresponding certificates stored for later crediting periods. • The introduction of the carbon border adjustment mechanism (CBAM) should be maintained, but other trade barriers should be removed at the same time. Developing countries should be supported in collecting emissions data. |
| Abstract: | Europa: • Deutschland muss sich wieder als wichtiger Teil und als eine der Führungsnationen der EU verstehen. Die neue Bundesregierung sollte in außenwirtschaftlichen Fragen konsequent europäisch denken und handeln. • Nur ein starker EU-Binnenmarkt schafft Augenhöhe mit den USA und China. Gemeinsam hat die EU eine starke Marktmacht, die eingesetzt werden kann, um handelsbeschränkenden Maßnahmen entgegenzuwirken und einen fairen internationalen Wettbewerb zu ermöglichen. • Die Märkte für digitale Produkte, Finanzdienstleistungen und Energie sind in Europa nach wie vor stark fragmentiert. Der Binnenmarkt muss daher endlich vollendet werden. Es bedarf eines starken europäischen Marktes für Risikokapital sowie einer Kapitalmarkt- und Bankenunion. China: • In den Verhandlungen über Ausgleichszölle für in China produzierte Elektroautos sollte sich die EU nicht auf Scheinlösungen wie Mindestpreise oder Importquoten einlassen, sondern auf dem Abbau unfairer Subventionen und einem besseren Schutz europäischer Unternehmen vor Diskriminierung auf dem chinesischen Markt bestehen. Die Bundesregierung sollte der Kommission dabei den Rücken stärken. • Gemeinsam mit den anderen EU-Mitgliedstaaten und der Kommission sollte die neue Bundesregierung rasch ein geeignetes regulatorisches Regelwerk erarbeiten, um Gefahren für die nationale Sicherheit, die sich aus dem Einsatz chinesischer Produkte in sicherheitsrelevanten Bereichen und kritischen Infrastrukturen der EU ergeben können, effektiv zu begegnen. USA: • Die angekündigten Importzölle auf europäische Waren würden die deutsche Automobilindustrie und andere exportorientierte Sektoren treffen. Bei zusätzlichen Zöllen von 10% würden die deutschen Exporte in die USA mittelfristig um bis zu 10% fallen. • Geschlossenes Auftreten der EU bei gezielten Gegenmaßnahmen und höhere Investitionen in Verteidigung in Europa sollten Teil der strategischen Antwort auf die unberechenbare Handelspolitik von Trump sein. Sein Streben nach schnellen Deals kann aber auch Chancen bieten. Europa sollte gleichzeitig zum Champion von Offenheit und Liberalisierung gegenüber dem Rest der Welt werden. Handelsabkommen • Pläne der EU-Kommission, mit regionalen Gemeinschaften über Mercosur hinaus Handelsabkommen zu schließen, sollten von der Bundesregierung unterstützt werden. Nachhaltigkeitsstandards der EU sollten an den Entwicklungsstand der Partner von Handelsabkommen angepasst werden. Afrika: • Deutschland muss eine strategische Afrika-Politik entwickeln, die auf langfristige gemeinsame Interessen zielt. Deutschland sollte gegenüber Afrika als langfristiger und verlässlicher Partner auftreten und darin eine Führungsrolle innerhalb der EU übernehmen und Ressourcenpartnerschaften entwickeln. Die Migrationspolitik sollte nicht von Abschottung, sondern von Chancenorientierung geprägt sein. Rohstoffsicherheit: • Die Bundesregierung sollte das von der EU geplante intensive Monitoring der Versorgungslage mit strategisch wichtigen Rohstoffen, Zwischen- und Fertigprodukten unterstützen und in auch in anderen Bereichen wie z.B. bei Antibiotika Kriterien für Versorgungssicherheit definieren. Die Bundesregierung sollte zudem die Erforschung und Entwicklung wirtschaftlich überlegener alternativer Produkte gezielt fördern. Europäische Klimapolitik: • Das EU-Emissionshandelssystem für den Verkehrs- und Gebäudesektor sollte zügig umgesetzt und langfristig als zentrales Klimainstrument mit Anpassung der Zertifikateallokation etabliert werden. Die CO2-Entnahme sollte unterstützt und die entsprechenden Zertifikate für spätere Anrechnungszeiträume gespeichert werden. • An der Einführung des CO2-Grenzausgleichs (CBAM) sollte festgehalten werden, aber gleichzeitig andere Handelshemmnisse abgebaut werden. Entwicklungsländer sollten bei der Erfassung von Emissionsdaten unterstützt werden. |
| Keywords: | foreign trade, German federal election, China, USA, Africa, trade agreement, climate policy, Außenwirtschaft, Bundestagswahl, China, USA, Afrika, Handelsabkommen, Klimapolitik |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkpb:311213 |
| By: | Velthuis, Sanne; Le Petit-Guerin, Mehdi; Royer, Jeroen; Leibert, Tim; Cauchi-Duval, Nicolas; Franklin, Rachel S. (Newcastle University); MacKinnon, Danny |
| Abstract: | Over the past ten years or so, concern has mounted about places in the Global North that have been ‘left behind’ by the growth and prosperity experienced in superstar cities and other wealthy regions. This briefing paper summarises the findings from the one of the strands of the ‘Beyond Left Behind Places’ project, which involved quantitative analysis of residential migration patterns in economically ‘left behind’ regions in the UK, France, and Germany during the immediate pre-COVID period. In addition, we conducted qualitative research with residents of economically ‘left behind’ regions in the three countries to get their perceptions. We use national administrative and census data for the three countries to examine whether economically lagging regions tend to lose or gain population through migration, and what age groups are moving in or out. Economic theories often assume that individuals migrate from economically lagging regions to areas offering better economic conditions. But actually, economically lagging regions in the UK, France and Germany generally tend to experience net population inflows. In other words, more people are moving to these regions than are moving out. In fact, when it comes to internal migration (i.e. people moving within the same country), these lagging regions tend to attract more new residents, on average, than more economically successful regions do. |
| Date: | 2024–11–11 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:t4vbd_v1 |
| By: | Oyun Erdene Adilbish; Mr. Diego A. Cerdeiro; Mr. Romain A Duval; Mr. Gee Hee Hong; Luca Mazzone; Lorenzo Rotunno; Hasan H Toprak; Maryam Vaziri |
| Abstract: | Europe faces a well-known productivity malaise, with a large and widening aggregate productivity gap relative to the U.S. In this paper, we provide a novel diagnosis of the firm-level roots of Europe’s productivity growth slowdown through an analysis of data covering the universe of firms in Europe and the U.S over their life cycles. Compared to their U.S. counterparts, we identify critical performance gaps among both Europe’s frontier firms and young high-growth firms. Our firm-level analyses reveal that smaller markets and limited market-based financing are key bottlenecks for frontier European firms, while skill shortages and insufficient risk capital, such as venture capital, hinder the formation and subsequent growth of young firms in Europe. These findings suggest that removing remaining intra-Europe barriers to accelerate factor and product markets integration, alongside national reforms to facilitate swifter resource reallocation and enhance human capital, could help revive Europe’s productivity growth. |
| Keywords: | Firm-level productivity; business dynamism. |
| Date: | 2025–02–14 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/040 |
| By: | Neubauer, Sven (RWTH Aachen University); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Morgan, M. Granger (Carnegie Mellon University) |
| Abstract: | This paper analyzes the factors that influence the manufacturing costs of high-voltage-direct- current (HVDC) cables in the EU, projects price developments through the year 2050, and provides potential measures to stabilize cable production costs. HVDC cables play an important role in the energy transition, because the economic operation of an increasingly decentralized power grid due to renewable energies requires technology with low transmission losses. The paper further identifies the contribution of each cost component and forecasts future values under various scenarios. Since the EU lists copper as a strategic raw material, a partial equilibrium model is employed to reduce uncertainty in price estimates for this commodity, the availability of which is critical for the manufacturing of HVDC cables. In a sensitivity analysis, the contribution of each input variable to our cable cost model is assessed. The results suggest that copper demand due to HVDC cable manufacturing exerts a negligible effect on EU copper prices, although cost trends diverge significantly across relevant Shared Socioeconomic Pathway scenarios. The paper concludes that cable costs are tied to the affordability of copper. Metal availability and regulatory framework impact the timely development of the HVDC connections that will be necessary for the energy transition in Europe. |
| Keywords: | HVDC cable; HVDC costs; partial equilibrium model; copper supply; European Green Deal |
| JEL: | Q31 Q41 Q55 |
| Date: | 2024–09–01 |
| URL: | https://d.repec.org/n?u=RePEc:ris:fcnwpa:0000_000 |
| By: | Bruno Merlevede; Annelies Van Maele (-) |
| Abstract: | This paper documents how the composition of value added per worker in Europe is distributed over manufacturing, services, and other industries based on a large panel of firmlevel data. We show that a non-negligible part of value added is accounted for by services industries. We then explore how micro-data at the firm level can be used to analyse this important component of aggregate productivity growth. We further discuss and explore using our data whether semi-parametric estimators of total factor productivity that are commonly found in the literature and typically tailored towards manufacturing are fit for analysing firms services sectors. |
| Keywords: | Productivity slowdown, firm-level data, services industries |
| JEL: | E24 J24 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:rug:rugwps:25/1109 |
| By: | Silva, Jose I.; Okabe, Tomohito; Urzay, Sergi |
| Abstract: | This study examines the relationship between firms’ market power, captured by product markups and labor markdowns, and the labor share within European firms. Using firm-level data from the CompNet database, we develop a microeconomic framework linking the labor share to firms’ market power. Empirical results show that labor markdowns reduce the labor share, while product markups have a hump-shaped effect on it. Specifically, moderate increases in product markups initially lead to a rise in the labor share. However, as markups reach higher levels, firms with significant pricing power increasingly exercise monopsony power over their workers, amplifying markdowns and suppressing labor costs. Additionally, the analysis uncovers substantial cross-country heterogeneity in the relationship between markups, markdowns, and the labor share. |
| Keywords: | product markup, labor markdown, firms’ labor share. |
| JEL: | D21 D22 J31 L12 |
| Date: | 2025–01–24 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123442 |
| By: | Bruno Merlevede (-) |
| Abstract: | This paper builds a large pan-European panel dataset of firm-level senior management gender composition. We focus the dataset on firms in the business economy that file unconsolidated accounts and report both total assets and strict positive employment throughout their existence. We have management information for 9 million firms for the period 2005-2020 resulting in 60 million firm-year observations. Overall 40% of observations concerns firms with at least one female manager and 60% are led only by male managers. For (predominantly micro) firms with a single manager that account for 53.5% of observations, we find that only 23% are female-managed. 59.5% of firms with two or more managers have at least one female manager. Across countries between 14% and 66% of observations refer to firms where at least half of the managers are female, across industries variation is more limited and ranges between 20% and 53%. We find that within tight countryindustry- year cells women-led SMEs are smaller and less productive and show lower leverage. Real performance differences are sustained in an event study analysis of switching firms, financial performance differences are not. Female-managed firms show lower short and medium-run growth rates. These effects are small and remain unchanged (also in magnitude) when controlling for leverage. Female-managed firms do not differ in terms of exporting behaviour and responses to import shocks. We find indications that female-managed firms show lower future growth in very uncertain environments, but higher growth in environments characterized by low uncertainty. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:rug:rugwps:25/1110 |
| By: | Hiau Looi Kee; Enze Xie |
| Abstract: | This paper studies the factors affecting governments’ mixed use of tariffs and non-tariff measures (NTMs) as trade and industrial policies. Results based on detailed bilateral-product-level ad valorem equivalent estimates for a wide range of countries show that restrictive NTMs coexist with lower tariffs, particularly for high-income importing countries, low-income exporting countries, country pairs with deep trade agreements, and products with consumption externalities. A terms-of-trade model with externalities rationalizes the results. The model is further used to shed light on the recent Sino-EU battery electric vehicle (BEV) disputes, whereby the EU imposed NTMs on top of the tariffs on China’s BEVs. |
| Date: | 2024–07–17 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10855 |
| By: | Santiapichi, Giulio; Akcija, Zelena |
| Abstract: | This paper examines the dynamics of EU Environmental policy enforcement and the issue of ensuring compliance from foreign companies operating in the EU's waste management sector. The analysis will discuss the impact of China's 2017 ban on importing plastic waste for the EU, particularly looking at its implications for the EU waste management sector. The paper will suggest that China's ban ultimately dismantled the EU waste management framework, forcing it to begin treating low-quality plastics domestically. Through highlighting inconsistencies in the EU's environmental regulations, the study will suggest that the current domestic treatment of low-quality plastics in the EU has triggered instances of environmental and health damage to vulnerable local communities. The case study of Phaten Plastic recycling will underscore a critical instance of non-compliance to EU Environmental standards, yet this will serve to outline regulatory issues with ensuring that waste management companies comply with the EU’s environmental regulations. The paper will ultimately advocate for the need of a more robust EU accountability framework, in order to deter waste management companies from causing environmental damage to local environments and communities and adhere to Eu environmental standards. |
| Date: | 2024–11–29 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:x8jyz_v1 |