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on European Economics |
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Issue of 2024‒11‒18
eightteen papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Lukas Berend; Jan Pr\"user |
| Abstract: | We use a FAVAR model with proxy variables and sign restrictions to investigate the role of the euro area common output and inflation cycles in the transmission of monetary policy shocks. We find that common cycles explain most of the variation in output and inflation across member countries, while Southern European economies show larger deviations from the cycles in the aftermath of the financial crisis. Building on this evidence, we show that monetary policy is homogeneously propagated to member countries via the common cycles. In contrast, country-specific transmission channels lead to heterogeneous country responses to monetary policy shocks. Consequently, our empirical results suggest that the divergent effects of ECB monetary policy are due to heterogeneous country-specific exposures to financial markets and not due to dis-synchronized economies of the euro area. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.05741 |
| By: | António Afonso; Daniel Loureiro |
| Abstract: | We compute a GVAR to estimate the fiscal spillovers on output, consumption, investment, employment, and income, from 2002Q1 to 2021Q4, with 16 Euro Area (EA) countries. We found that a budget balance expansionary shock in Germany would generate positive spillovers on output and employment. Negative cross-country effects on consumption were also found. No significant spillovers on investment or income were observed following this shock. Greater and more significant spillovers were found after an EA global shock. There are also positive effects on private investment. However, a global shock still does not generate significant effects on income and increases the magnitude of the negative short-run spillovers on consumption. Greece is one of the countries more affected by short-run negative spillovers. Finally, national and global fiscal shocks put upward pressure on prices and generate negative effects on public debt. From a policy perspective, we recommend the reinforcement of the fiscal coordination framework. |
| Keywords: | Euro Area, fiscal spillovers, policy coordination, GVAR |
| JEL: | C32 E62 F42 F45 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11406 |
| By: | Ilkova, Ivelina; Lebastard, Laura; Serafini, Roberta |
| Abstract: | Based on granular data at the product level, this paper looks at whether and how the euro area and the United States have modified their import sourcing strategies since 2016, the role played by geopolitical tensions and the potential impact on import prices. It considers two different, but not mutually exclusive, changes to sourcing strategies for a given product: (i) increasing the number of sourcing countries and (ii) reducing the import market share of the main supplier country. Data suggest that both regions have, on average, increased the number of sourcing countries, particularly for products that are mostly imported from “geopolitically distant” countries (based on UN General Assembly voting records). Broadening the number of supplier countries has come at a cost; however, it has affected only a small share of total imports, with modest implications for inflation and the terms of trade. At the same time, evidence of a reduction in the import share of the main supplier country is more mixed and is generally associated with a shift towards cheaper – but not necessarily geopolitically closer – countries, suggesting that cost considerations take precedence over supply chain resilience and national security concerns. JEL Classification: F14, F51, F62 |
| Keywords: | diversification, fragmentation, geopolitics, rebalancing |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbops:2024359 |
| By: | Paola Conconi; Florin Cucu; Federico Gallina; Mattia Nardotto |
| Abstract: | The European Union (EU) has long been accused of suffering from a “democratic deficit.” The European Parliament (EP), the only EU institution directly elected by citizens, is seen as having limited powers. Moreover, its members (MEPs) are often portrayed as unresponsive to the interests of their constituents due to the second-order nature of European elections: instead of being shaped by EU policies, they are driven by domestic politics. In this paper, we provide evidence against these Eurosceptic arguments using data on a key policy choice made by MEPs: the approval of free trade agreements. First, we show that MEPs are responsive to the trade policy interests of their electorate, a result that is robust to controlling for a rich set of controls, fixed effects, and employing an instrumental variable strategy. Second, we carry out counterfactual exercises demonstrating that the EP’s power to reject trade deals can help explain why only agreements with broad political support reach the floor. Finally, against the idea that European elections are driven solely by domestic politics, we find that the degree of congruence between MEPs’ trade votes and their electorate’s interests affects their re-election chances. |
| Keywords: | EU democratic deficit, European Parliament, roll-call votes, trade agreements |
| JEL: | F13 D72 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11405 |
| By: | Cândida Ferreira |
| Abstract: | This study uses Data Envelopment Analysis to analyse the evolution of the efficiency of the European Union banking sector with different concepts and measures of bank efficiency, as well as the results provided by the Malmquist index to measure different efficiency changes, and the total productivity changes considering a panel of 784 relevant banks from all the 27 European Union countries, between 2006 and 2021. Banks are assumed to produce three outputs: loans, other earning assets, and non-earning assets using three inputs: interest expenses, non-interest expenses, and equity, overall, the findings of the paper point to the existence of inefficiencies which are mainly justified by non-optimal combinations of the considered inputs and outputs, and not by the scale of the production. The results obtained also reveal that the EU banks included in the sample have room to improve their choices of the combinations of inputs to produce the desired outputs at minimum costs. The values of the computed Malmquist index indicate overall progress, except during the period of the global financial crisis, and to some extent also between the years 2015-2017, corresponding to a turbulent period of the EU banking sector with the advancements of the European Banking Union and two relevant initiatives: the European Banking Supervision and the Single Resolution Mechanism. |
| Keywords: | Data Envelopment Analysis; European Union banking sector; bank efficiency; Malmquist index. |
| JEL: | C33 D53 F36 G21 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:ise:remwps:wp03542024 |
| By: | Bayerlein, Michael |
| Abstract: | The German global health strategy review process offers the opportunity to place a stronger focus on the horizontal integration of Germany's global health efforts with those of European partners. This is urgently needed as the German strategy makes little reference to the European Union (EU) and entirely excludes EU member states. However, Germany's consideration of the strategic priorities of these actors would enable it to proceed in a united, coherent manner and to form new partnerships in specific policy areas. The systematic analysis of the strategies of other EU countries provides starting points for these considerations, as the identification of country-specific strategic priorities can shed light on opportunities for better linkages and coordination with the global health policies of other EU member states. Based on this, the partners that are particularly relevant for Germany in specific fields of action can be determined, and blind spots in German global health policy can be identified. |
| Keywords: | Germany, Global Health Strategy, European Union (EU), EU partner countries, priorities, coordination, World Health Organization (WHO) |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:swpcom:304330 |
| By: | Christl, Michael; De Poli, Silvia; Köppl-Turyna, Monika |
| Abstract: | This paper refines the concept of disposable income by incorporating governmentprovided in-kind benefits for education and health services, as well as imputed VAT payments, following Figari and Paulus (2015). Our analysis reveals that including these elements significantly reduces income inequality, as seen in a decrease in the Gini coefficient across all examined countries. While direct taxes and cash benefits are the main drivers of redistribution, in-kind benefits also play a substantial role, while VAT having a smaller, negative impact. Our study highlights that additionally extending the income concept increases also the targeting of the tax benefit system to low-income households, however to a very different extend across the EU Member States. Our new, broader approach allows for more accurate assessments of redistribution and cross-country comparisons, offering valuable insights for EU-level policy evaluations. |
| Keywords: | tax-benefits model, EUROMOD, welfare state, in-kind benefits, indirect taxes, redistribution |
| JEL: | H23 I38 H24 D31 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1508 |
| By: | ASDRUBALI Pierfederico; CASAS ALJAMA Pablo (European Commission - JRC); CHRISTOU Tryfonas (European Commission - JRC); GARCIA RODRIGUEZ Abian (European Commission - JRC); LAZAROU Nicholas (European Commission - JRC); SALOTTI Simone (European Commission - JRC); WEIERS Georg |
| Abstract: | InvestEU supports the EU's economic, social and environmental objectives, succeeding the European Fund for Strategic Investments. The InvestEU Fund is expected to mobilise more than EUR 372 billion of investment in the EU thanks to the EUR 26.2 billion EU guarantee. This Insight presents the impact of the operations approved by the end of 2023, using the RHOMOLO-EIB model (for a total of almost EUR 205 billion). InvestEU is contributing significantly to economic growth. According to the RHOMOLO-EIB estimates, by 2027, it will create more than 1 million jobs, with a positive change in GDP of +0.80% over the baseline. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc139530 |
| By: | Fabio C. Bagliano; Claudio Morana |
| Abstract: | The paper yields a structural account of economic integration in the Eurozone from its inception to post-pandemic developments by considering a broad range of convergence measures. We introduce a novel FAVAR framework, extracting the structural shocks driving the Eurozone business and financial cycles directly from the cyclical components they generate. Productivity advancements have been the critical trend convergence factor, shaping long swings in real, labor market, and financial dispersion. Subdued cost-push shocks were the key driver of Eurozone nominal and competitiveness convergence throughout 2015 but have become an all-rounded divergence force since then. Fiscal discipline imposed by the Stability and Growth Pact (SGP) increased real and financial divergence during all recessionary episodes, while the ECB expansionary monetary policy was a convergence factor. The SGP suspension during the recent pandemic recession and recovery has partially counteracted divergence pressures. Looking forward, convergence will crucially depend on how productivity dynamics and economic growth will fend off further unfavorable cost-push developments, which might become pervasive in a deglobalization-driven new macroeconomic regime. |
| Keywords: | real, nominal and financial convergence and divergence; Eurozone; economic integration; recessions; financial crises; subprime financial crisis; sovereign debt crisis; pandemic recession; FAVAR models. |
| JEL: | E30 E50 C32 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:mib:wpaper:546 |
| By: | Adam Czerniak; Patrycja Graca-Gelert |
| Abstract: | Goal: To jointly analyse different approaches to housing inequality in search of similarity patterns across various coexisting housing regimes in Europe.Research hypothesis: Each variety of residential capitalism (i.e. housing regime) exhibits its own pattern of housing inequalities.Research method: Using microdata from the newest Household Finance and Consumption Survey (HFCS) wave 2021 [for Poland, data from the wave 2017 was used], we calculated various measures of housing inequality for 20 EU member states. We consider housing space inequality and the size of multiple homeownership, as well as gross and net housing wealth inequality, both for the whole population and for homeowners only. Additionally, we have added Eurostat data on housing cost overburden and housing over- and undercrowding rates. On this data set we performed k-means cluster analysis to search for patterns of similarity between the analysed countries.Main findings: The calculations showed that the k-means cluster composition almost perfectly overlapped with the classifications of housing regimes in Europe. In other words, we have identified that each variety of residential capitalism exhibits its own distinct housing inequality patterns. In statist countries such as Germany, Austria, the Netherlands, and France, there are high housing wealth inequalities but much lower inequalities in housing space and costs. In turn, corporatist countries such as Belgium, Ireland, and Finland exhibit medium wealth inequalities but high housing space and cost inequalities. Mediterranean member states, also denoted as countries with a commodified familial model of residential capitalism, have developed the largest class of homeowners, where, on average, 18% of households own two or more residential estates. This increases housing wealth inequalities, especially when considering mortgage debt, but has no effect on space inequalities which is one of the lowest among all analysed countries. Finally, Central and Eastern European countries, also called super-ownership states, which exhibit a non-commodified familial model of residential capitalism, have the lowest housing wealth inequalities, with 72% of households owning just one residential property, which they occupy, but they have very high space inequalities, with almost a quarter of the population living in overcrowded dwellings and medium to large housing cost inequalities. These results indicate that each housing regime requires a unique housing policy approach to mitigate future housing inequalities. |
| Keywords: | housing inequality; housing regimes; Housing Wealth; varieties of residential capitalism |
| JEL: | R3 |
| Date: | 2024–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:arz:wpaper:eres2024-221 |
| By: | Francesca Ghinami (Gran Sasso Science Institute) |
| Abstract: | This study investigates the spatial heterogeneity that factors misallocation reveals in nine EU-member countries (Germany, France, Austria, Italy, Spain, Portugal, Czech Republic, Slovenia and Poland) during the years 2011-2020. Misallocation, as in the degree of efficiency with which inputs are allocated across firms, is increasingly regarded as one main source of aggregate productivity differences across countries. Nevertheless, its within-country spatial and regional dimensions are still largely overlooked, notwithstanding numerous reasons for allocative efficiency to vary across different administrative units. This article aims at filling this gap by firstly performing an exploratory analysis of allocative efficiencies at different levels of territorial aggregation (NUTS0-3). Secondly, it provides evidence for the across-regions disparities in allocative efficiency to account for large shares of aggregate misallocation for all the examined European countries. Finally, it investigates and finds support for the hypothesis that variations in local institutional quality may help explaining regional differences in allocative efficiencies |
| Keywords: | Total factor productivity, Misallocation, Regional disparities, Institutional Quality |
| JEL: | D24 L25 O47 |
| Date: | 2023–12 |
| URL: | https://d.repec.org/n?u=RePEc:ahy:wpaper:wp43 |
| By: | Becker, Peter; Lippert, Barbara |
| Abstract: | Since 25 June 2024, the 27 member states of the European Union (EU) have been engaging in accession negotiations with Ukraine and Moldova. The EU wants and needs to provide a strategic response to new geopolitical challenges, especially the Russian war of aggression against Ukraine. At the same time, it intends to accelerate already tough negotiations with the countries of the Western Balkans. Indeed, new proposals are aiming to gradually integrate candidate and acceding countries into specific policy areas of the EU. Accession negotiations regularly focus on these countries' integration into the highly regulated European single market, and thus their adoption of the EU's acquis communautaire with regard to the free movement of people, goods, services and capital. Whether the EU's offer of these country's gradual integration into the EU single market sparks momentum depends on how both sides weigh expected costs and benefits, and whether it is possible to develop concrete measures and timetables for implementation. |
| Keywords: | European Union (EU), accession negotiations, Ukraine, Moldova, Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia (WB-6), Russian war of aggression against Ukraine, acquis communautaire, free movement of people, goods, services and capital, Moldova, Georgia, cohesion, prosperity |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:swpcom:304329 |
| By: | Vassilios G. Papavassilioua (University College Dublin and UCD Geary Institute for Public Policy); Fan Dora Xiab (Bank for International Settlements (BIS)) |
| Abstract: | We study the liquidity of the euro-area sovereign bond market during the March 2020 dash for cash. We provide evidence that liquidity was signif- icantly impaired across the three core euro-area countries. We note that the liquidity deterioration was not as severe as that during the euro-area sovereign debt crisis. Spikes in illiquidity are reversed in the period imme- diately following the dash for cash episode. We also document strong com- monalities in liquidity that are reduced after the dash for cash. This result indicates that variation in liquidity exhibits a strong common component highlighting the systemic risk that comes as a result. |
| Keywords: | Liquidity, Sovereign bond markets, COVID-19 outbreak, Common factors |
| JEL: | C5 G01 G10 G15 |
| Date: | 2024–10–21 |
| URL: | https://d.repec.org/n?u=RePEc:ucd:wpaper:202406 |
| By: | Tastan, Kadri |
| Abstract: | The foundation of the European Union-Turkey economic and trade relations lies in the Customs Union and more broadly in the bilateral preferential trade framework, established in December 1995. For over nearly three decades, this partnership has played a pivotal role in integrating Turkish industries into European supply chains, significantly multiplying bilateral trade volumes. However, as the global economic and geopolitical environment has changed and concerns about trade resilience and national security have increased, new trends such as protectionism, offshoring, or friend-shoring are increasingly being discussed. These global developments present new challenges but also opportunities for EU-Turkey relations. |
| Keywords: | Customs Union, single market, European Economic Area, deglobalisation, decarbonisation, re-shoring, friend-shoring, European Chips Act, Critical Raw Materials Act, Carbon Border Adjustment Mechanism, CBAM, Inflation Reduction Act, IRA, Green Deal |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:swpcom:304323 |
| By: | Giulia Iannone (Gran Sasso Science Institute); Andrea Ascani (Gran Sasso Science Institute); Alessandra Faggian (Gran Sasso Science Institute); Alexandra Tsvetkova (OECD Trento Centre for Local Development) |
| Abstract: | There is an increasing need for today’s economies to be both productive and resilient, but the interplay between these two fundamental factors for economic growth has been neglected in the literature. This paper aims at filling this gap by adopting an evolutionary framework for the joint study of productivity and resilience and proposes a regional taxonomy based on characteristics of the industrial structure. Data on European regions at the NUTS2 level are used first to classify regions as productive and/or resilient and then to analyze how certain regional features, in particular related and unrelated variety, relate to a combined measure of productivity and resilience. Results show that the spatial distribution of productive and resilient regions follows a core– periphery pattern and that related and unrelated variety have significant but heterogeneous effects on regions’ economic performance. |
| Keywords: | productivity, regional resilience, industrial structure, relatedness |
| JEL: | B52 O4 R1 |
| Date: | 2023–12 |
| URL: | https://d.repec.org/n?u=RePEc:ahy:wpaper:wp44 |
| By: | Peter Parlasca |
| Abstract: | The upswing of the housing markets started in Europe around 2014 even without being hampered by the Covid crisis. However, from summer 2022, signals for the end of the house price bubbles could be seen in many European countries due to Ukraine war related effects supply shortages, increasing inflation and raising interest rates. The down turn affected first Denmark and Germany. In the third quarter 2023 already 10 countries showed house price levels below the previous year.New statistics at the European level and the availability of house sales figures not only in indices for numbers and volume but in physical numbers and the turnover in national currency allows better analysis in particular an earlier detection of downturns and upswings. The development of house prices differed widely between European countries and will be put into perspective with the development of economic activity within Europe.In contrast to the economic developments, housing markets in a small number of European countries did not yet reach the pre-crisis level until 2023 although the upswing of the housing markets started in Europe around 2014. On the other hand, in a significant number of European countries house prices doubled between 2008 and 2023.The data on quarterly house sales (indices of number of transactions and volume) now complemented by additional information seem to be a promising data source to develop projections of the housing market in many European countries. |
| Keywords: | Data Analysis; House Prices; house sales statistics; Real Estate Statistics |
| JEL: | R3 |
| Date: | 2024–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:arz:wpaper:eres2024-151 |
| By: | Becker, Peter; Lippert, Barbara |
| Abstract: | Seit dem 25. Juni 2024 verhandeln die 27 Mitgliedstaaten mit der Ukraine und Moldau über deren Aufnahme in die Europäische Union (EU). Die EU will und muss eine strategische Antwort auf die neuen geopolitischen Herausforderungen vor allem infolge des russischen Angriffskriegs auf die Ukraine geben. Zugleich sollen die zähen Verhandlungen mit den Ländern des Westbalkans beschleunigt werden. Darauf zielen neue Vorschläge, wie die Kandidaten und Beitrittsländer schrittweise in die EU-Politikbereiche einbezogen werden können. Im Mittelpunkt von Beitrittsverhandlungen steht regelmäßig die Einbindung in den dicht regulierten europäischen Binnenmarkt - und damit die Übernahme des europäischen Rechtsbestandes (acquis communautaire) in Bezug auf den Austausch von Gütern, Dienstleistungen und Kapital sowie die Personenfreizügigkeit. Ob das Angebot der schrittweisen Integration die erhoffte Zugkraft entfalten kann, hängt davon ab, wie beide Seiten die zu erwartenden Kosten und Nutzen abwägen und ob es gelingt, konkrete Maßnahmen und Fahrpläne der Umsetzung zu entwickeln. |
| Keywords: | Europäische Union (EU), EU-Erweiterung, EU-Binnenmarkt, Ukraine, Moldau, Westbalkanländer (WB-6), Acquis communautaire |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:swpakt:304320 |
| By: | MARTINEZ CILLERO Maria (European Commission - JRC); CIANI Andrea (European Commission - JRC); GIANELLE Carlo |
| Abstract: | In order to understand the role of foreign-owned business activity in regional economic development and the relevance of this phenomenon for regional policies, it is necessary, although not exhaustive, to have an appropriate mapping of investment flows that can lead to a regional characterisation of the geography of foreign direct investment (FDI). |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc136533 |