Search

Summary: Expansionary monetary policy combined with unconventional measures led to a decline in the profitability of U.S. and European banks. This paper studies whether such measures also affect the asset concentration in the European banking sector. The findings of this research add value to previous research, taking a step deeper into examining the consequences of expansionary monetary policy. It is found that reductions in the European central bank’s (ECB’s) key policy rate can predominantly explain the concentration growth in the eurozone countries. Furthermore, the ECB’s monetary policy had a more substantial influence on the growth of the concentration of banks outside the eurozone than those countries’ own monetary policies. Thus, the expansionary monetary policy poses specific challenges to financial stability in Europe. [ABSTRACT FROM AUTHOR]

I study the spillover effects of legislated discretionary tax changes in the USA, Germany, and the UK to a panel of eleven Eurozone countries for the period 1980Q1–2018Q4 employing Local Projections. When considering aggregated tax shocks, I find little evidence for significant spillovers. When allowing for state-dependent effects, I find no effects of German or US tax cuts regardless of the state of the business cycle. When allowing for asymmetric effects, there is, in general, evidence for negative (positive) spillovers from US, German, and UK tax hikes (UK tax cuts). US tax hikes always cause adverse spillovers, whereas the effects for Germany and the UK are state dependent. When considering country-specific effects, the effects turn out as heterogeneous across the Eurozone countries. UK tax cuts are generally expansionary, whereas US (German) tax cuts cause positive spillovers mainly during recessionary (non-recessionary) times. [ABSTRACT FROM AUTHOR]

This study examines the impact of the introduction of the euro on firm performance of non-financial firms listed on the Croatian capital market. Croatia adopted the euro as its sole legal tender on January 1, 2023, becoming the 20th member of the euro area. While the macroeconomic effects of euro adoption have been widely studied, its microeconomic implications, particularly on firm performance, remain underexplored. This research fills this gap by analyzing firm-specific determinants and their performance before and after euro adoption over 2019-2023. Using a sample of 25 non-financial companies listed on the Zagreb Stock Exchange, we employ panel data estimation techniques to evaluate the influence of euro adoption on corporate performance, incorporating variables such as firm size, leverage, firm openness or international sales, liquidity, and euro dummy variable. The results reveal that introducing the euro had a significant positive impact on firm performance, with implications for investment strategies and international competitiveness. This study is the first to investigate the euro's effect on firm performance in Croatia, offering valuable insights for policymakers and contributing to the broader literature on currency adoption and firm dynamics. [ABSTRACT FROM AUTHOR]

Motivation: Legislation in payment services domain is broad, exhaustive, and detailed. Fostering Innovation is one of several primary goals of the legislation. The impact of a series of regulations on the payments market, particularly the Second Payment Services Directive (PSD2), requires a comprehensive assessment of their effects on legislative efficiency and the development of European payment service providers. Aim: The paper aims to explore the vectors and strength of the impact of EU payments legislation on the market for payment services with a focus on innovation. Results: The major impact vector of the payment legislation is stimulating the supply of payment services. An important instrument in this domain is standardization and interoperability with legislation on open banking (PSD) and Single Euro Payment Area being flagship use - cases of such instrument. Open banking legislation (standardization) resulted in the development of a new class of services unlocking new value for demand side. SEPA legislation (interoperability) resulted in availability of significantly more efficient and productive flows of funds within the EU. In both use - cases the impact vectors demonstrate strong feedback and positive reinforcement. Instant payments developed on the building blocks of SEPA enable open banking account - to - account payments to compete with payment cards and similar instruments with acquirers being able to narrow down substantially the risks they are exposed to when engaging in traditional merchant payments. Open banking payments in turn stimulate SEPA payments. Altogether the use case of EU SEPA and open banking legislation proves that legislation addressing interoperability and standardization is paramount to steer payment market towards mutually reinforced innovation. Careful consideration and selection of policy mix in this domain results in highly efficient transmission mechanism. [ABSTRACT FROM AUTHOR]

The purpose of this study is to find symmetries and asymmetries in the exchange rate and macroeconomic fundamentals of advanced European markets, namely Denmark, the Euro Area, and United Kingdom, for the period of 2011 to 2022 via application of the NARDL technique. The findings reveal that interest rate affects DKK exchange rate asymmetrically in the long and short run, whereas money supply affects it in the short run. Foreign reserves are found to be helpful for all three currencies in stabilizing the exchange rate. A decline in gold price weakens GBP, DKK, and EUR in the long run. Previous studies suggest that the existence of asymmetrical relationships justifies the selection of NARDL for empirical analysis. This study makes a contribution to the existing literature, as it proves that forecasting via NARDL is also robust for analysis. The findings have significant policy implications for financial applications. [ABSTRACT FROM AUTHOR]

In the 1950s, many economists were discussing a Greek economic miracle, second only to Japan. The 1950s followed a catastrophic decade (the 1940s) with four years of the Second World War (1940-1944) and another five of civil war (1944-1949). The 2010s were also a catastrophic decade, but this time the initiator was not a foreign army but a foreign economic crisis termed the Great Recession. As was the case in the 1940s, the end of the foreign economic invasion was followed by a civil war on how to better manage the economy. The civil war of the 1940s was between communists and non-communists, and in the 2010s, it was between Europeanists and non-Europeanists. This second civil war ended in 2019 with a victory for Europeanists. The question is whether the end of this civil war will spark another economic miracle in the 2020s similar to that of the 1950s. This issue is addressed in this paper.

The issue of non-performing loans (NPLs) in a bank's portfolio is important for a bank's stability and sustainability. Their increased presence indicates a potential worsening of the economy and a lower quality of the bank's assets. We estimated determinants of non-performing loans in the Eurozone for quarterly data 2015–2020. The results confirmed spatial spillover effects within Eurozone countries, which means that when a shock happens in one country in the Eurozone, it will also affect the other economies of the Eurozone area. Based on the Hausman test, a fixed-effects model was chosen as appropriate and showed that bank-specific and macroeconomic determinants significantly affect NPLs in these economies. In relation to previous studies that dealt with this issue, a co-integration analysis was introduced. A significant impact of return on assets, return on equity, and the loan-to-deposit ratio, as well as the gross domestic product, inflation, and exchange rate on NPLs in the short run and long run, was confirmed using a Pooled Mean Group (PMG) estimator. Bank management should customize credit policy based on both internal and external conditions to improve their performance, focusing on enhancing profitability and maintaining a lower loan-to-deposit ratio to reduce NPLs. The research suggests that a higher gross domestic product (GDP) growth rate is associated with fewer NPLs, while inflation uncertainty and a volatile exchange rate can increase NPLs, highlighting the importance of adjusting strategies to the macroeconomic landscape. [ABSTRACT FROM AUTHOR]

This paper examines key driving forces of inflationary pressures, taking into account supply and demand side determinants and actions of policy makers, during the pandemic and geopolitical crises in the Eurozone. Using heterogeneous nonstationary macro-panel models, especially the Mean Group (MG) and Pooled Mean Group (PMG) methods in the period 2020q1–2024q4, it is concluded that the dominant determination of inflationary pressures comes from the supply side. There is a long-run positive equilibrium relationship between the growth of energy prices and the growth of the consumer price index (CPI), and between the index representing supply bottlenecks (SBI) and the growth of CPI, while the relationship with the unemployment rate is insignificant. Also, the existence of a long-run equilibrium between the interest rate and CPI is homogeneous due to the unique monetary policy on a sample, and negative, indicating the efficiency of that policy. However, the speed of adjustment of individual economies is heterogeneous, and in the case of Greece and Ireland, insignificant. The heterogeneous or insignificant response of Eurozone member states, especially related to core-periphery asymmetry, refers to the vulnerability and structural weakness of the Eurozone economies, and the need for deeper integration. [ABSTRACT FROM AUTHOR]

This article provides a framework for understanding the economic role of central banks and their democratic legitimacy. I argue that thinking about the democratic challenges of central banking requires considering central banks' insurance role and how their actions are part of credit policy. The contract between the central bank and the sovereign is incomplete because it cannot integrate all unforeseen contingencies, distributive consequences and interactions with other policies. This opens the door to viewing the legitimacy of central bank decisions through a process of deliberation, coordination and reflexivity, rather than only a delegation of power. I discuss a proposal for a European Credit Council, which would be a deliberative body aimed at strengthening Parliamentary power on monetary and credit policies, the democratic legitimacy of central bank policy in the Euro Area as well as its coordination with other European policies. More coordination, Parliamentary power and deliberation are consistent with central bank independence and aim to delimit more precisely the action of central banks within the macroeconomic and credit policies of the State. [ABSTRACT FROM AUTHOR]

In recent years, fiscal policy in the Eurozone (EZ) has faced challenges posed by the strong and rapid increase in inflation as a consequence of the COVID-19 pandemic and other geo-political crises. Due to the fear of "fiscal inflation" present during episodes of fiscal stimulus during the pandemic crisis, this paper assesses the relationship between discretionary fiscal policy and inflation in developed EZ economies, taking into consideration the rise in energy prices as a control variable. This study considers the econometric framework of heterogeneous, non-stationary panels (Pooled Mean Group (PMG) and Common Correlated Effects Mean Group (CCEMG) estimators). Using quarterly panel data for the period 2015q1–2024q1, the results show that, in the long run, the effects of fiscal policy on inflation are insignificant. However, covering only the pandemic and other geo-political crises (2020q1–2024q1), research shows a significant negative long-run relationship between fiscal expenditure and inflation and heterogeneous short-run fiscal adjustments due to the lack of a fiscal union in the EU economies. Hence, accompanied by monetary policy, the discretionary response of fiscal policy to inflationary shock was oriented in the same direction—the reduction in inflationary pressures during a geo-political crisis. Fiscal policy mitigated inflationary pressures in these recent crises, while in the long run, it did not affect nominal variables, indicating that there is no evidence of fiscal inflation in the sample of EZ economies during a stabilization period or under crisis conditions. [ABSTRACT FROM AUTHOR]

The article "World Economic Prospects Monthly | Global" examines the impact of heightened tensions in the Middle East on global growth forecasts. The US has seen positive data surprises, leading to an increase in GDP growth forecasts, while China's economic slowdown has prompted bold policy support with uncertain effectiveness. The oil price surge from Middle East tensions poses short-term risks, but the long-term outlook remains stable. The text also delves into economic forecasts for various regions, including the Eurozone, Japan, the UK, Emerging Markets, India, Latin America, Central Eastern Europe, and Romania, highlighting key changes and policy outlooks. [Extracted from the article]

We use cointegration-based techniques to investigate the relationship between oil prices and the euro effective exchange rate taking also into account the influence of interest rates and stock prices. We find that higher oil prices cause a depreciation in the euro exchange rate (either nominal or real) in the short run. This suggests that during episodes of higher energy prices, the euro area consumer is faced with additional price pressures, as a depreciated euro causes import prices to further rise. Our study also indicates that as stock prices rise in the short and long term, the euro appreciates, while higher oil prices will likely result in overall higher policy rates and lower stock prices. [ABSTRACT FROM AUTHOR]

The article discusses the recent outperformance of the US economy in terms of productivity compared to other advanced economies (AEs). It highlights factors such as high rates of investment, R&D, a favorable regulatory environment, and dominance in the tech sector contributing to the US's structural outperformance. The text also mentions potential challenges such as slow technological transfer and the impact of government policies on productivity. Overall, the US is expected to continue to outperform most AEs in terms of per capita growth, but the sustainability of this productivity growth remains uncertain. [Extracted from the article]

This paper uses dynamic panel data estimations based on annual data from 26 European Union countries to evaluate the driving factors of household savings dynamics. Alongside conventional determinants, such as household income and age dependency, the study also includes a less traditional variable, consumer con- fidence, which is often neglected in existing findings. This research extends previous empirical studies in three dimensions. First, it conducts sensitivity analysis using several estimation techniques to support the robustness of baseline results. Second, the investigation is expanded by including an extended set of potential savings drivers. Lastly, it explores variations in saving behaviour among different country groups (Euro Area, Central and Eastern European countries, and Croatia) as well as the crisis periods (Global Financial Crisis and Covid-19 pandemic). The findings highlight the importance of overlooked determinants, shed light on the ambiguous effect of classic variables, and partially confirm earlier research. [ABSTRACT FROM AUTHOR]

In January 2015, Greece witnessed a political earthquake with the election of the populist anti-austerity/EU bailout coalition of the left-wing party SYRIZA and the far-right party ANEL. It is argued that during January--July 2015, the SYRIZA--ANEL coalition engaged in a protracted process of renegotiation of Greece's bailout terms that were agreed between previous Greek governments and the so-called Troika (European Commission, European Central Bank, and International Monetary Fund) adopting a behaviour ruled by "unpolitics." First, the SYRIZA--ANEL government immediately rejected formal and informal rules of EU decision-making. Second, the SYRIZA--ANEL government rejected traditional means of compromise, such as package deals and side payments. Third, when Greece's creditors presented their last-minute bailout offer in June 2015 to avoid Greece leaving the eurozone (Grexit), the SYRIZA--ANEL government rejected the suggested solution and tried to exploit the ensuing deadlock by calling a rashly organised referendum asking Greeks to vote against the suggested deal. This period of "unpolitics" ended almost immediately after the referendum when, in a sudden and unexpected volte-face, Tsipras interpreted the referendum result as a call for compromise with the Troika and accepted the previously intolerable bailout deal. [ABSTRACT FROM AUTHOR]

Post-crisis accounts of economic governance in Europe have often analysed the monetary policy decisions of the supranational European Central Bank and the fiscal policy coordination of the intergovernmental Council and Eurogroup separately. This is unfortunate since both policy fields are closely linked and increasingly interdependent. We put forward a theory of monetary-fiscal interactions in the Economic and Monetary Union based on the notion of de-commitment and re-commitment. In juxtaposition to the grand theories of neo-functionalism and liberal intergovernmentalism, we argue that EU institutions serve not only to tie the member states to policy commitments but also to untie them from previous policy commitments that have become outdated and harmful. The European Central Bank’s main contribution to safeguarding the Eurozone in 2012 and 2020 has not been to enforce but to relax the monetary financing prohibition of the Treaty, and the Council’s main contribution in 2020 was not to double down on the no bail-out clause but to re-commit to risk-sharing and burden-sharing through the NextGenerationEU programme. We argue and show that economic governance in Europe has progressed through three stages of commitment. Whereas monetary-fiscal interactions followed a commitment logic during the first decade of the Economic and Monetary Union (the “old normal”), the defining feature of the second decade has been de-commitment (the “new normal”). In the Covid-19 crisis, economic governance finally entered a phase of re-commitment (taking the Economic and Monetary Union “back to the future”). The analysis has implications for our understanding of the purpose and power of supranational institutions in overcoming the problem of outdated commitments post-crisis.

AbstractThis article evaluates the asymmetric impact of exchange rate volatility on the exports of nine ECOWAS countries to the Eurozone. By comparing Autoregressive Distributed Lag (ARDL) and Nonlinear ARDL (NARDL) models, the study concludes that the effect of volatility on ECOWAS-Eurozone exports (EEE) is asymmetric. The study also investigates the impact of foreign income and prices on the EEE and categorises the goods and services that make up the EEE for each country based on their coefficients. The results show that exchange rate volatility has an asymmetric effect on the EEE, which comprise both substitute and inferior goods. The study recommends that ECOWAS authorities avoid using proportional policies to address increased and decreased volatility, as their impact on trade is asymmetric. The long-run coefficients of income for Nigeria, Togo, and Benin are -1.29, -4.67, and -2.64 respectively, indicating that their exports are dominated by inferior goods. The long-run coefficients of foreign price for Nigeria, Niger, and Burkina Faso are 5.32, 7.87, and 1.91 respectively, suggesting that their exports are mainly substitute goods. The authors confirm long-run asymmetry for three out of nine countries and short-run asymmetry for five countries. Only three countries have an asymmetric trade-volatility relationship in both the short and long run. The study suggests that Nigeria, Togo, and Benin diversify their economies, as their exports to the Eurozone are dominated by inferior goods and services. Additionally, the study recommends that the governments of Nigeria, Niger, and Burkina Faso provide support, as their goods and services are substitutes.

Research on small and medium-sized enterprises (SMEs) access to bank finance is vital for the euro area economy. SMEs heavily represent the European business sector, employing around 100 million people and accounting for more than half of the Gross Domestic Product. Research studies in the field often rely on the ECB/EC Survey on the Access to Finance of Enterprises (SAFE). Many studies employ probit or logit models with categorical dependent variables derived from SAFE. The research findings show that hardly any study employs the simpler linear probability model (LPM), with a dominant lack of research providing evidence that justifies the model selection process and suitability. However, it is well known that different econometrics models can lack consistency and frequently yield different results. Yet, the literature has no consensus on the best econometric approach. In addition, there is a lack of robustness tests in the literature to ensure model validity, underlining the need for a comprehensive review of the methodological framework that dominates SAFE data use. This paper addresses the identified research gap by introducing a robust methodological framework that helps researchers identify and choose an appropriate categorical model when using SAFE data. The study adds significant value to the extant literature by identifying four criteria that need to be considered when selecting the appropriate model among three common binary dependent models: LPM, probit and logit models. The findings show that the probit model was appropriate is all cases but that the LPM should not be disregarded, as it can be used in two cases: when considering the interaction between monetary policy and debt to assets and monetary policy and innovation. The use of the LPM is justified as a less complex econometric model, allowing for clearer communication of the results. This innovative, robust approach to choosing the appropriate econometric categorical dependent model when employing SAFE data contributes to support policy effectively. [ABSTRACT FROM AUTHOR]

Climate change has become relevant for central banks worldwide, but they are adopting their instruments at different speeds. This article compares the reactions of the Eurosystem with those of the other EU central banks. Do these central banks differ in their efforts to make their own policies "greener"? The article argues that the options and constraints to react to climate change diverge between central banks. [ABSTRACT FROM AUTHOR]

Motivated by the successful usage of machine learning around computer science and its wide acceptance from the finance literature, we utilize monthly data spanning the period 2008–2018 for the Euro area peripheral countries, in order to embark on a two-fold mission. First, to construct short-term prediction models for bank deposit flows in the Euro area peripheral countries, employing machine learning techniques. Second, to examine whether textual features enhance the predictive ability of our models. From the variety of models tested, we find that Random Forest models including both textual features and macroeconomic variables outperform models including only macro factors or textual features. Monetary policy authorities or macroprudential regulators could adopt our approach to timely predict potential excessive bank deposit outflows and assess the resilience of the whole banking sector in the Euro area peripheral countries. [ABSTRACT FROM AUTHOR]

The fractional generalized cumulative residual entropy, a broader version of the cumulative residual entropy, holds significance in assessing the uncertainty model of random variables and maintains straightforward connections with reliability models and crucial information. This article represents and modifies some novel features of the fractional generalized cumulative residual entropy and discusses the weak convergence. Additionally, the measure is utilized to assess uniformity, involving the derivation of the limit distribution and an approximation of the test statistic’s distribution. Furthermore, the concept of stability is addressed. Moreover, the presentation includes the critical points and power analysis against alternative distributions of this test statistic. Furthermore, a simulation study is carried out to compare the power value of the proposed test with that of other tests of uniformity. Moreover, the uniformity test utilizes real data on daily smokers in the countries of the Euro Area. Finally, our model’s exponential distribution is applied to our model’s empirical form. [ABSTRACT FROM AUTHOR]

In recent years, the global economy has been hit by a sequence of severe shocks that affected the two largest economies, the USA and the Euro Area, severely. Uncertainties about the future abound. While the challenges are similar for both economies and the policy tools resemble each other, they apply to different economic landscapes. What can they learn from each other? This paper looks at the basic structural facts, the nature of uncertainty shocks, and the efficiency of policy tools in the two economies. The key to understanding recent developments is uncertainty. This paper argues that the channel through which uncertainty influences inflation, wage cost, and unemployment is the markup firms charge to cover their cost of capital. While the measurements of uncertainty are uncertain, adding a proxy for uncertainty can improve the estimates of the basic New Keynesian model. The Federal Reserve Bank has been more successful because it operates in a more integrated capital market. In the Euro Area, uncertainty is higher than in the US and this could make disinflation in Europe more painful in terms of unemployment. [ABSTRACT FROM AUTHOR]

Copyright of Max-Planck-Institut für Gesellschaftsforschung Discussion Papers is the property of Max Planck Institute for the Study of Societies and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Polish Journal of Economics / Gospodarka Narodowa is the property of SGH Warsaw School of Economics and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper explores the relationship between working capital management (WCM) strategies and business performance during the COVID-19 crisis. Data from 1,067 non-financial European firms from 33 countries distributed across 6 economic sectors in the period from 2015 to 2021, feed Ordinary Least Squares model (OLS), robust and quantile pooled regression. COVID-19 crisis seems to have negatively influenced only median-low-range performance firms in Europe, showing that crisis coming from productive capacity hibernation do not impact nor impose tough slow recovery, transversal to all firms, as occurred on other financial crises. As for WCM, only median-top-range performance firms had significant statistical evidence for negative impact, that become positive for median-range performance firms during COVID-19. For Eurozone firms, there was an additional positive influence of the WCM on performance during COVID-19. Median-range performance firms seems to benefit from conservative WCM strategies mitigating firms' performance negative effect raised by COVID-19 crisis. Relation between COVID-19 and WCM seems to be sensitive to different levels of firms' performance and to different business' economic sector. Contrary to knowledge on WCM, performance and financial crises in Europe, for COVID-19 alike crises, performance benefits from higher cash conversion cycles and thus encourage conservative WCM strategies. Liquidity should not be pushed by adopting aggressive WCM strategies. [ABSTRACT FROM AUTHOR]

In this paper we investigate whether the banks which fall under direct supervision by the European Central Bank (ECB) are more likely to be considered more stable and trustworthy by the depositors due to the stricter supervisory activities performed since the implementation of the Single Supervisory Mechanism (SSM). Under the SSM, significant banks switched from national supervisors to ECB, whereas the remaining banks remained under national supervisory authorities (NSAs). Using the difference-in-difference (DID) method, we have found evidence of increased depositors' trust in significant banks after the SSM implementation. Additionally, in anticipation of the SSM launch and the comprehensive assessment, we have found evidence of increased depositors' trust in the banks which were expected to be supervised by the ECB. [ABSTRACT FROM AUTHOR]

This study investigates the impact of central bank digital currencies (CBDCs) on monetary policy flexibility, the effective lower bound (ELB), and negative interest rate policies (NIRPs), specifically in the case of the digital euro (DE). Through a combination of theoretical modeling and empirical analysis, including two extensive surveys among EU participants, we explore whether CBDCs can change the ELB and affect consumer preferences in favor of the digital euro over physical cash. Our findings indicate that the introduction of the DE could potentially move the ELB from its current value of around −1.30% by approximately 0.25%. If agents had the possibility to move their deposits into both cash and DE, they would convert approximately 52% of the converted amount into cash and the rest into CBDCs. However, over a 10 year period, the situation would shift in favor of the DE, with a share of 63%. Both findings show that NIRPs will be more limited in the case of the introduction of CBDCs (DE). These facts must be considered both when deciding whether to introduce a CBDC (DE) and after its eventual introduction in the case of NIRP application. [ABSTRACT FROM AUTHOR]

Two years after the COVID-19 pandemic, the Greek economy seems to have overcome the turmoil of the pandemic crisis as well as that of the following energy crisis. Nevertheless, it would be wrong to assume that the Greek economy has returned to a sound state, since this was not really the case even before the pandemic. Furthermore, the anemic growth rates of the pre-pandemic period were followed by an equally weak average growth rate (including the impact of the pandemic), as some of the significant fundamental weaknesses of the Greek economy, which had accumulated over time and constituted the real origin of the Greek crisis, have not been properly addressed yet. This paper attempts a complete mapping of the current state of the Greek economy, offering an insight into the external and internal determinants affecting it. [ABSTRACT FROM AUTHOR]

The aim of this study is to delve into the intricate the mechanism through which alterations in currency exchange rates give rise to shifts in inflation rates, while taking into careful consideration the country's economic cycle. In order to accomplish this objective, we used a dataset that spanned from 1 January 1999 to 1 July 2023, focusing our analytical lens on three specific geographic areas, namely the Eurozone, the United Kingdom, and Canada. In our pursuit of understanding this complex relationship, we employed the Markov Switching Vector Autoregressive model. Our research outcomes can be succinctly encapsulated as follows: in the initial stages, particularly during phases characterized by robust economic growth, the transmission of exchange rate effects onto inflation levels appeared to exhibit a partial impact across all geographic areas under examination. However, during periods marked by economic downturns, both the United Kingdom and Canada displayed a distinctly more comprehensive transmission of these effects. Moreover, the prevailing projections for the forthcoming time horizon, across all the countries encompassed by our study, strongly indicate the onset of an expansionary phase that is projected to extend over a span of 25 months. Lastly, concerning the implications of unexpected disturbances or shocks, it is noteworthy that the response of exchange rates to inflation induced shocks was neither immediate nor as pronounced as the corresponding reaction of inflation to sudden shifts in exchange rates. [ABSTRACT FROM AUTHOR]

The importance of assessing and estimating the impact of the COVID-19 pandemic on financial markets and economic activity has attracted the interest of researchers and practitioners in recent years. The proposed study aims to explore the pandemic's impact on the economic activity of six Euro area economies. A class of dynamic panel data models and their corresponding Seemingly Unrelated Regression (SUR) models are developed and applied to model the economic activity of six Eurozone countries. This class of models allows for common and country-specific covariates to affect the real growth, as well as for cross-sectional dependence in the error processes. Estimation and inference for this class of panel models are based on both Bayesian and classical techniques. Our findings reveal that significant heterogeneity exists among the different economies with respect to the explanatory/predictive factors. The impact of the COVID-19 pandemic varied across the Euro area economies under study. Nonetheless, the outbreak of the COVID-19 pandemic profoundly affected real economic activity across all regions and countries. As an exogenous shock of such magnitude, it caused a sharp increase in overall uncertainty that spread quickly across all sectors of the global economy. [ABSTRACT FROM AUTHOR]

In January 2015, Greece witnessed a political earthquake with the election of the populist anti-austerity/EU bailout coalition of the left-wing party SYRIZA and the far-right party ANEL. It is argued that during January–July 2015, the SYRIZA–ANEL coalition engaged in a protracted process of renegotiation of Greece’s bailout terms that were agreed between previous Greek governments and the so-called Troika (European Commission, European Central Bank, and International Monetary Fund) adopting a behaviour ruled by “unpolitics.” First, the SYRIZA–ANEL government immediately rejected formal and informal rules of EU decision-making. Second, the SYRIZA–ANEL government rejected traditional means of compromise, such as package deals and side payments. Third, when Greece’s creditors presented their last-minute bailout offer in June 2015 to avoid Greece leaving the eurozone (Grexit), the SYRIZA–ANEL government rejected the suggested solution and tried to exploit the ensuing deadlock by calling a rashly organised referendum asking Greeks to vote against the suggested deal. This period of “unpolitics” ended almost immediately after the referendum when, in a sudden and unexpected volte-face, Tsipras interpreted the referendum result as a call for compromise with the Troika and accepted the previously intolerable bailout deal.

This paper explores the relationship between working capital management (WCM) strategies and business performance during the COVID-19 crisis. Data from 1,067 non-financial European firms from 33 countries distributed across 6 economic sectors in the period from 2015 to 2021, feed Ordinary Least Squares model (OLS), robust and quantile pooled regression. COVID-19 crisis seems to have negatively influenced only median-low-range performance firms in Europe, showing that crisis coming from productive capacity hibernation do not impact nor impose tough slow recovery, transversal to all firms, as occurred on other financial crises. As for WCM, only median-top-range performance firms had significant statistical evidence for negative impact, that become positive for median-range performance firms during COVID-19. For Eurozone firms, there was an additional positive influence of the WCM on performance during COVID-19. Median-range performance firms seems to benefit from conservative WCM strategies mitigating firms’ performance negative effect raised by COVID-19 crisis. Relation between COVID-19 and WCM seems to be sensitive to different levels of firms’ performance and to different business’ economic sector. Contrary to knowledge on WCM, performance and financial crises in Europe, for COVID-19 alike crises, performance benefits from higher cash conversion cycles and thus encourage conservative WCM strategies. Liquidity should not be pushed by adopting aggressive WCM strategies.

The article "Eurozone: We expect a quicker pace of rate cuts by the ECB" discusses the economic outlook for the Eurozone, forecasting a GDP growth of 0.8% in 2024 and 1.2% in 2025. Inflation is expected to average 2.3% in 2024 and drop to 1.5% in 2025, below the European Central Bank's target. The European Central Bank is anticipated to implement a series of rate cuts over the coming quarters, with the deposit rate projected to reach 1.75% by the end of Q3 2025. [Extracted from the article]

Central Banks in major industrialized economies have struggled to keep inflation within their target ranges since the global financial crisis. The periods of missing inflation and deflation experienced in the post-crisis era have led to doubts about the traditional Fisher effect as a crucial component of the policy reaction function. We explore the NeoFisherian theory, which suggests an alternative causal relationship between the policy rate and inflation. We focus on the USA, UK, and EU and apply wavelet coherence analysis to examine the time–frequency lead–lag comovements on data spanning from January 2007 to March 2023. Our findings indicate increasing NeoFisherian dynamics, notably post-2013 taper tantrum, implying that Central Banks in industrialized economies have misunderstood monetary policy dynamics. [ABSTRACT FROM AUTHOR]

The aim of this paper is to examine the impact of a country's entry into the monetary union on its economic variables growth rate of real GDP as well as on GDP per capita growth for the period from 2010 to 2020. The clustering method and the ANFIS method were used in the data analysis. A total of two cluster analyses were performed. The first cluster includes countries that joined the EU in 2004 and became EZ members by 2010. The second cluster refers to those countries that joined the EU in 2004 but are not yet members of the EZ. For the first individual cluster analysis two models were analysed and for the second individual cluster three models were analysed using the ANFIS method. As expected, the results showed that GDP growth is connected with trade, inflation and gross investments in fixed capital in the observed countries, while GDP per capita is connected with unemployment, interest rates and public debt. With regard to GDP growth, the difference between countries that are in the eurozone and those that are not is not significant, which is in line with other studies. [ABSTRACT FROM AUTHOR]

This study deals with the evolution of fuels' prices over time in the EU. The central research inquiry revolves around whether there exists any correlation among the trajectories followed by national prices in the gasoline and diesel markets. The EU, and more specifically the Euro-Area, by its construction, is treated as an OCA (Optimum Currency Area). In an OCA, certain conditions are met to ensure the smooth functioning of a common currency. The fuel price synchronization is essential because it contributes to the effective implementation of policies and promotes stability across the entire macroeconomy. The study covers the period of 2017–2022. For each type of fuel and year, we construct an individual network where network nodes represent the EU member states while the edges connecting these nodes represent strong temporal fuel price correlations among the member states. The properties of the resulting networks are analyzed within a Complex Network framework. Our goal is twofold: first, to detect any potential convergence or divergence in the trajectories of the prices, and second, to investigate the impact of tax and duty implementation on the co-movements of the prices. The empirical findings show that diesel markets have a more pronounced pattern of price co-movements compared to the gasoline markets. Moreover, the application of fuel taxation policies seems to adversely affect the co-movements of prices. [ABSTRACT FROM AUTHOR]

The process of financialisation has been extensively studied and several stylised facts identified. Short-termism is one of these. This article analyses the role that changes in accounting rules have played in increasing short-termism in company management. Our study considers the adoption of the International Financial Reporting Standards in the European Union (EU), showing that the new accounting standards have altered companies' sensitivity to investment opportunities, leading to underinvestment in the real economy. In doing so, our article highlights the public-policy profile of accounting standards setting and possible tensions with EU societal objectives. To the best of our knowledge, this is the first study empirically analysing the role of accounting rules in the financialisation of economy. [ABSTRACT FROM AUTHOR]

We study the effect of euro adoption on various property crimes for a group of Eurozone countries with data from 1993 to 2019. We hypothesize euro adoption has a positive association with home burglaries and robberies as the euro is relatively more valuable and mobile than pre-euro currencies. We offer a simple theoretical model to motivate the hypothesis. A dynamic panel data model is estimated by generalized method of moments (GMM) to account for endogeneity, measurement error, heteroskedasticity, and serial correlation. Our results indicate some evidence of a positive relationship between euro adoption and property crimes. Other countries considering euro adoption may find the results of our study informative. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to examine potential diversification benefits between Eurozone (i.e. EURO STOXX 50) and key Asia markets: HSI (Hong Kong), KOSPI (South Korea), NIKKEI 225 (Japan) and TSEC (Taiwan). The sample covers the period from 04-01-2008 to 19-10-2023 in daily frequency. Design/methodology/approach: The empirical investigation is based on the wavelet coherence analysis, which is a localized correlation coefficient in the time and frequency domain. Findings: The results provide evidence that long-term diversification benefits exist between EURO STOXX and NIKKEI, EURO STOXX and KOSPI (after 2015) and there are signs for the pair and EURO STOXX-TSEC (after 2014). During the short term, there are signs of diversification benefits during the sample period. However, during the medium term, the diversification benefits seem to diminish. Originality/value: These results have crucial implications for investors regarding the benefits of international portfolio diversification. [ABSTRACT FROM AUTHOR]

The article examines financial hardship (FH) that appears as one of the essential socio-economic-financial categories reflecting a financial burden on society and therefore having a significant impact on the social and economic development of the country. The purpose of this article is to propose and approve a methodology for the complex quantitative assessment of financial difficulty, which allows comparing countries one another. The novelty of the conducted research is manifested by the formed financial hardship adequately exposing a system of indicators and suggesting the transformation of incomparable indicators into the comparable ones. The paper proposes a methodology for the integrated assessment of financial hardship based on multi-criteria methods, which contributes to solving the problems of the social sustainability and economic development of the countries employing different research methods. The proposed methodology provides a possibility of moving to a higher level of research comparing the countries as a whole, in line to the current status of FH. The actual benefits of the carried out research arise from the opportunity to envisage targeted measures for increasing social sustainability subject to the specific situation of the financial hardship of the countries thus removing the burdens of further economic development. [ABSTRACT FROM AUTHOR]

The primary objectives of this research are to compare the economic performance of the Member States (MS) in the Euro Area 12 (EA-12) of the European Union (EU) that served as net contributors and net recipients of its budget during the period 1998–2022. The comparison focuses on aspects related to economic growth and the business cycle, exploring the presence of hysteresis. To achieve these objectives, a novel approach is employed, which integrates the analysis of both growth and cycles. This approach involves using the Seemingly Unrelated Regression Equations (SURE) model to estimate a translog production frontier and assess the impact of lagging output gaps on the potential output or capacity for each of the MS considered. The data used to estimate each frontier and analyze growth decomposition consist of quarterly data filtered using the Kalman filter. The results reveal that lagging output gaps, occurring one or two quarters prior, significantly affect the potential output or capacity of the EA-12 MS, thereby supporting the existence of hysteresis. However, the impacts appear to be minimal. Furthermore, the research concludes that changes in total factor productivity (TFP), mainly due to technical change, play a more crucial role in the growth of MS that are net contributors to the EU budget. Conversely, total factor accumulation (TFA), mainly physical capital accumulation, has a more pronounced impact on the growth of MS net recipients from the EU budget. Interestingly, the heterogeneity observed among the EA-12 MS extends beyond the simple division between net contributors and net recipients of the EU budget. This heterogeneity raises questions about the European Central Bank's (ECB) ability to stabilize the economies of these various MS solely through conventional monetary policy. [ABSTRACT FROM AUTHOR]

This study examines the relationships between Greek macroeconomic variables, examining before and after the euro's introduction as a currency. We conducted an extensive analysis from 1980 to 2019, examining various economic indicators such as government expenditure, unemployment rates, taxation, inflation, and national debt, employing causal and correlation analysis and econometric modeling with and without time-varying effects. The results revealed a significant correlation between the introduction of the euro and a tighter relationship between government spending and unemployment levels, while one more remarkable point was that higher government spending or debt reduction initiatives appeared to positively impact joblessness, particularly in the context of the euro. Our research underscored the correlation between national debt and government spending as increased debt led to reduced government expenditure and vice versa. Unemployment cited an increased impact on government spending right after the euro adoption, and on the other hand, the effect of unemployment on government spending decreased. The debt–government spending nexus was decreasing for many years before the euro adoption, while just before the euro adoption, the relationship between debt and government spending was rather stable. Finally, during the euro adoption, the effect of inflation on tax increased, while the corresponding inflation tax remained stable. Our findings have significant implications for policymakers shaping the economic strategies in Greece as they point out the necessity for stable and balanced approaches that manage government spending and debt to address unemployment effectively. [ABSTRACT FROM AUTHOR]

The carbon–financial nexus helps firms evaluate susceptibility to carbon risk more effectively. This is the first research article to model the short- and long-run co-integrating association between European financial markets, the CBOE oil price volatility index (OVZ) and the European carbon emission trading system (EU-ETS) by using the daily returns from 1 October 2013 to 1 October 2023. We utilize co-integration test followed by the ARDL framework with an error correction mechanism (ECM). Moreover, we utilize the DCC-GARCH-t copula framework to estimate the hedge ratio and to select an optimal portfolio weight for carbon risk hedging. Overall, the findings suggested that EU-ETS (OVZ) has a consistent positive (negative) short-term influence on all the equity returns of Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Spain and the stock indices of the whole Eurozone. However, in the long term, EU-ETS has a positive (negative) effect on the stock returns of France and the Eurozone (Belgium and Spain). Belgian and Spanish companies could implement long-term carbon reduction policies. Belgian and Spanish firms should focus on the utilization of green energy resources and the internalization of carbon emission-free mechanical processes as this may offer a safeguard against the additional pressure arising from escalating carbon prices. Finally, an optimal portfolio weight selection strategy based upon the DCC-GARCH-t copula approach aims for higher hedging effectiveness (HE) than the hedge ratio strategy when adopting short-term positions in Italian and Danish equity markets to reduce the risk of long-term EU-ETS volatility. [ABSTRACT FROM AUTHOR]

Copyright of Mexican Journal of Economics & Finance / Revista Mexicana de Economia y Finanzas is the property of Instituto Mexicano de Ejecutivos de Finanzas and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The article discusses three key lessons about inflation that have been learned from the experiences of the past few years. The first lesson is that central bank credibility in managing inflation has its limits, as inflation outturns have been more influential than policymakers' words and actions. The second lesson is that inflation expectations have reset to favorable levels, with long-term expectations in the eurozone and the US returning to pre-pandemic norms. The third lesson is that second-round inflation effects, where firms pass on higher costs to customers, have made a comeback and may persist, especially in a world with more supply shocks. Overall, the article suggests that while inflation has surged in recent years, the likelihood of entering a new era of substantially higher average inflation remains low. [Extracted from the article]

This study aims to determine and compare the impact of four different types of European Central Bank (ECB) monetary policy communication events on euro area sovereign yields on an intraday basis since 2014. Our paper distinguishes it from similar studies in that we analyze a broad range of ECB communication types. The results reveal that ECB decisions and press conferences have the most substantial intraday impact on normalized sovereign yields while the impact of speeches and accounts appears to be much weaker. Countries with the highest debt levels (such as Italy, Spain, and France) experienced the most robust changes in fiscal costs, while the period encompassing the economic shock induced by the Covid‐19 pandemic shows weaker effects. [ABSTRACT FROM AUTHOR]

The aim of this study is to analyze which factors affect the profitability of banks in the eurozone and to make recommendations for supporting them to achieve higher levels of profitability in particular eurozone countries. The banks operating in the eurozone are specific that they are under one monetary policy. The main purpose of the banks' profitability analysis is to identify main bank-specific and macroeconomic determinants and help bank management to more fully comprehend their importance of bank-specific determinants and macroeconomic determinants' influence when measuring and evaluating bank profitability. For the purpose of this research, we analyze the impact of bank-specific determinants (NPL, CIR, NIM, NIF and NIT) and macroeconomic determinants (GDP, INF, UNM and DEBT) on bank profitability in the eurozone for the period of 2015–2020 using a random effects model, fixed effects model, and the general method of moments (GMM). This empirical research analyzed quarterly data series from Eurostat for eighteen countries in the eurozone. We came to the results that on the eurozone-level NPL, the cost-to-income ratio has a negative impact on the banks' profitability, while the net interest income to the operating income, the net income for trading assets to the operating income and the net fee and commission income to the operating income have a positive impact on the banks' profitability. Considering the macroeconomic variables, we found a positive impact only in the case of GDP, while the inflation rate, unemployment rate and gross government debt have shown a negative impact on the banks' profitability. The main contribution of this study implies different panel techniques with two uncommonly used macroeconomic variables such as the unemployment rate and debt ratio. The results on the country level differ from country to country and these findings can give a lead to policy makers on the national level on how to enhance the banks' profitability levels. [ABSTRACT FROM AUTHOR]

This article examines the relationship between macroeconomic variables and the share of renewable energy in Eurozone countries from 2006 to 2020. Using the Fully Modified Ordinary Least Squares (FMOLS) method, we analyze the impact of Gross Domestic Product (GDP) per capita, unemployment rate, Financial Development Index (FDI), inflation, government efficiency, and corruption control on the proportion of renewable energy. Focused on the Eurozone, our study fills a gap in existing research. We compile diverse findings from the literature review on this topic. Our analysis reveals that higher GDP per capita positively influences the proportion of renewable energy, while unemployment, lower financial development, higher inflation, inefficient governance, and corruption negatively impact renewable energy adoption. These findings underscore the importance of addressing economic development alongside sustainable energy initiatives. Policymakers should prioritize improving GDP per capita, and addressing barriers such as unemployment and corruption to facilitate the transition to a more sustainable energy landscape in the Eurozone. [ABSTRACT FROM AUTHOR]

This paper aims to shed some light on the issue of euro-induced inflation in the case of the Croatian euro changeover. Applying the synthetic control method, we were unable to find unambiguous and robust evidence of such an impact on the aggregate level. Focusing on a wide array of products and services, we found no impact of the euro on most price subcategories except those related to food, clothes and restaurant prices. The findings for the latter two categories seem particularly robust, surviving a battery of alternative specifications such as the generalized synthetic control and matrix completion method. Placebo tests reveal considerable ambiguity vis-à-vis the exact timing of the euro effect on prices, probably reflecting the fact that Croatia had been a highly euroized economy years before the de iure changeover. [ABSTRACT FROM AUTHOR]

The present paper aims to identify how economic evolutions related to health conditions during the Covid-19 pandemic. The research includes an analysis on the evolutions of the health and economic conditions during the Covid-19 health crisis and also on they way they are linked to each other. The investigation is conducted at country level and is exemplified on two European countries, namely Italy and Greece. The methodology employed was based on three types of analyses: descriptive, correlation and comparative analyses that used secondary data from international organizations. Results illustrate that the economic life was affected by the Covid-19 conditions (Covid-19 incidence and the associated restrictions), with inflation being the most affected in both countries. At the same time, international trade was affected differently in the two countries, with Italy being negatively and more intensively affected than Greece, for which the association was positive and rather weak. [ABSTRACT FROM AUTHOR]