Search

A eurozone exit or breakup exposes bondholders to currency redenomination risk. I quantify redenomination risk since the sovereign debt crisis: It contributes substantially to credit spreads around changes in government in France and Italy. Bond prices suggest that markets have priced a potential Italian exit as isolated, and a French one as a breakup. Unlike conventional default risk, redenomination risk can be negative depending on the strength of the national "shadow" currency. Countries with strong shadow currencies earn breakup-insurance premia from the eurozone analog of "exorbitant privilege." Yield effects are quantitatively large for implied exit probabilities as low as 1%. [ABSTRACT FROM AUTHOR]

This paper provides a comprehensive empirical analysis of the role of discretionary fiscal policy for inflation differentials across the 19 euro area countries over the period 1999–2019. The results confirm existing (older) literature that it is difficult to find robust evidence of the fiscal policy stance or impulse impacting directly on inflation differentials. We do find, however, support for an indirect effect of discretionary fiscal policy on inflation differentials working through the output gap channel. There is also some evidence that fiscal policy may be especially potent in influencing inflation differentials—with fiscal tightening cooling (and fiscal expansion increasing) inflation pressures—when the economy is above its potential. Finally, going from the overall fiscal stance or impulse to individual fiscal instruments, we find that value added tax rate changes and public wage growth are statistically significant determinants of inflation differentials in our sample. [ABSTRACT FROM AUTHOR]

The global economy faces a new complexity with slowing growth and persistent inflation, exacerbated by the pandemic, geopolitical disputes, and underlying structural factors. This paper first analyzes the economic development of the United States and the Eurozone. It then shifts its focus to China, discussing the current dynamics of its economic development landscape. The paper further analyses the Chinese economy's development challenges brought about by deglobalization trends, intellectual property litigation risks, and problems in industrial upgrading. Finally, the paper provides strategic policy recommendations to navigate these complexities. It emphasizes that China should actively engage in international cooperation, strengthen the development of market infrastructure, and enhance the legal protection for intellectual property rights. [ABSTRACT FROM AUTHOR]

In the recent years many countries were hit by a series of macroeconomic shocks, most notably as a consequence of the COVID-19 pandemic and Russia's invasion in Ukraine, raising inflation rates to multi-decade highs and suspending well-documented macroeconomic relationships. To capture these tail events, we propose a mixed-frequency Bayesian vector autoregressive (BVAR) model with Student t-distributed innovations or with stochastic volatility. Whereas inflation, industrial production, as well as oil and gas prices are available at monthly frequencies, real gross domestic product (GDP) is observed at a quarterly frequency. Thus, we apply a mixed-frequency setup using the forward-filtering–backward-sampling algorithm to generate monthly real GDP growth rates. We forecast inflation in those euro area countries that extensively import energy from Russia and therefore have been heavily exposed to the recent oil and gas price shocks. To measure the forecast performance of the mixed-frequency BVAR model, we compare our inflation forecasts with those generated by a battery of competing inflation forecasting models. The proposed BVAR models dominate the competition for all countries in terms of the log predictive density score. [ABSTRACT FROM AUTHOR]

The creation of a common European currency has been scrutinized in the context of optimum currency area theory since its origin in Mundell (1961). The debate gained particular prominence in light of the endogeneity hypothesis (Frankel and Rose 1998), which argues that once two countries establish a common currency, their economic structures and cycles increasingly align due to strengthening intra-industry trade. By contrast, the specialization hypothesis (Eichengreen 1992; Krugman and Venables 1996) argues that the creation of a currency union will predominantly increase inter-industry trade, ultimately lowering business cycle correlation. To test these views, we establish several indices of bilateral trade intensity across EU members using input–output data, measuring gross and so-called value-added trade, which also considers the contribution of intermediary goods in the production of final exports. The results of the fixed effect panel data framework indicate a strong and robust empirical relationship between growth correlations and intra-industry trade, much in line with both Mundell's and Frankel and Rose's theories. However, we cannot establish a similarly robust relationship between total trade intensity and growth correlations. We reconcile these results by identifying a statistically significant relationship between economic alignment and trade when only considering industrial production, highlighting the importance of pan-European industrial supply chains for European economic integration. Rerunning our regression framework on the subsample of the eurozone indicates that the common currency area displayed even stronger properties of an optimum currency area than the entire European Union. [ABSTRACT FROM AUTHOR]

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]

We analyse the introductory statements of the ECB president and derive new sentiment indicators for the euro area based on a novel approach. To evaluate sentiment, we utilize a Large Language Model, namely FinBERT, which classifies the verbal sentiment of economics and finance‐related textual data. We find that the ECB's conveyed sentiment about monetary policy, which is influenced by the economic outlook and the state of the euro area macroeconomy as expressed in speeches, plays a significant role in shaping the content of press conferences following a governing council decision. In contrast, speech sentiment regarding financial stability does not significantly influence introductory statements. [ABSTRACT FROM AUTHOR]

Using a dataset of bank‐ and regional‐level data, we study the effectiveness and heterogeneity of the transmission mechanism of the ECB's large scale asset purchases (LSAPs) to the real economy. Our results indicate that banks more exposed to government debt securities had higher growth of loans and loans relative to total assets than less exposed banks after the asset purchase programme (APP), but not after the pandemic emergency purchase programme (PEPP). Furthermore, our results demonstrate that regions where banks are more exposed to government securities exhibit more favorable outcomes after the APP in GDP, fixed capital formation, unemployment, and compensation of employees than regions with less exposed banks, via the bank lending channel. We argue that banks' exposure to LSAPs targeted assets and their geographical location is an important factor determining the magnitude and heterogeneity of the portfolio rebalancing transmission mechanism to the real economy. [ABSTRACT FROM AUTHOR]

The global financial crisis in 2007 and, more recently, the Covid‐19 pandemic renewed interest in capitalist divergence and the evolution of growth models in the Eurozone. The varieties of capitalism (VoC) approach and more recently post‐Keynesian research, especially the growth model (GM) perspective, have made important contributions to comparative political economy. However, the focus on either the 'supply‐side' or 'demand‐side' aspects of modern models of capitalism has offered a limited framework to explain capitalist diversity in the global economy. This article brings insights from both the VoC and GM perspectives and provides a more comprehensive understanding of the evolution of the growth models in Greece and Portugal. The argument is that although both countries implemented internal devaluation and contractionary policies to curtail domestic demand and transform their economies into export‐led ones, they have been stuck in a suppressed demand‐led growth model since the global financial crisis. [ABSTRACT FROM AUTHOR]

Since the global financial crisis central banks expanded their roles and responsibilities and their impact on the economy and society grew significantly. Thus, during the euro-area crisis, the European Central Bank (ECB) engaged in decisions with profound human and societal implications while turning a blind eye towards them. The Bank's dismissive approach is remarkable given EU institutions duty to respect fundamental rights, and EU's identity as a human rights protector. Building on literature and interviews with ECB officials, this work suggests that organizational cultural features, i.e. mainstream economic thinking and narrow mandate interpretation steered the Bank towards overlooking the impact of its policies on EU citizens' rights. While much has been written about central banks and organizational culture, the two spheres have rarely been connected in research. This research addresses the intersection between the two and calls for broader perspective to consider a wider range of factors influencing economic policies. [ABSTRACT FROM AUTHOR]

• The ratio between Italian public debt and GDP is the second largest in the Monetary Union. • The ratio remained within acceptable limits until the beginning of 1980s, but kept raising faster after the new policy of debt financing. • This paper aims to understand if the overall debt increase is related to dynamics of interest or that of social expenditure, as argued by many scholars. • The causal relationships were analysed by testing Granger-causality on long time series of data starting from 1960. • Welfare Granger-caused the debt just until the early 1980s, after which debt (or, rather, debt reduction policies) influenced the reduction of welfare expenditures. • The empirical results generally confirm that interest payment was the main driver of debt increase before the European monetary union was established. The Italian public debt is one of the largest in the European Monetary Union and its ratio debt/GDP is the second highest among the Monetary Union countries. A legitimate question is: why Italy has got the most important debt in the euro area? Until the beginning of 1980s the debt to GDP ratio remained within acceptable limits. The Italian debt trend shows a sharp increase in the beginning of 1980s in connection with a new policy of debt financing agreed between the Bank of Italy Governor and the Ministry of Finance in 1981 (the so called "divorce") and fully implemented in the following 2-3 years. This paper aims to understand if the overall debt increase is related to the dynamics of interest or that of social expenditure, as argued by many scholars. The causal relationships were analysed by testing Granger-causality on long time series of data starting from 1960. A sample including series coming from National Accounts is utilised in estimating our models. The empirical results generally confirm that interest payment was the main driver of debt increase before the European monetary union was established, even assuming that interest policy responded to exchange rates and inflation. [ABSTRACT FROM AUTHOR]

In 2023, Croatia joined both the euro and the Schengen area, thus completing full EU integration. No elections were held, and the Parliament experienced some minor cases of floor crossing while the government, although maintaining its party composition, reshuffled four ministers. The opposition criticized the government over political corruption and infringements upon media freedom. [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]

In this paper, we provide an assessment of the evolution of markups in Italy in the last twenty years. To this aim, we resort to both macro- and micro-data and estimation techniques, namely reduced forms accounting measures (price–cost margins) and production function model-based indicators. When using aggregate data, we present a comparative study with respect to the other main Euro area countries, whereas the micro-level analysis focuses on the markup dynamics across and within Italian firms. According to our findings, (i) aggregate markups show flat/slightly decreasing dynamics across EU countries, settling to a 1.1 level on average; (ii) the aggregate dynamics hide substantial cross-sector and cross-firm heterogeneity; (iii) the within-firm component is the most relevant driver of markup dynamics; and (iv) no superstars-driven dynamics emerge: although firms with higher markups show slightly more variation over time, there is no evidence of an increasing trend. Finally, we compare our results with those obtained by De Loecker and Eeckhout (Global market power, National Bureau of Economic Research, Cambridge, 2018) and show that they differ mainly because our sample, including non-listed firms, is more representative of the EU corporate sectors. Our study has important policy implications: it warns against blindly extending the conclusions valid for specific contexts to others with different characteristics, while inviting a careful assessment of the actual competitive landscape, based on representative datasets and robust analyses. [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]

We study euro area investors' portfolio adjustment since the Brexit referendum in terms of securities issued in the UK or denominated in pound sterling, in the context of heightened policy uncertainty surrounding the exit process of the UK from the EU. Our sector‐level analysis 'looks‐through' holdings of investment fund shares to gauge euro area sectors' full exposures. Our key finding is the absence of a negative 'Brexit‐effect', rendering UK‐issued and pound‐denominated securities less attractive. Instead, we observe that all euro area sectors increased their absolute and relative exposures to UK‐issued and pound‐denominated debt securities since the Brexit referendum, as well as to listed shares issued by UK nonfinancial corporations, while the exposures to shares issued by UK banks declined. These findings should be seen against the backdrop of low yields on euro area debt securities and a strong recovery in UK share prices since the Brexit referendum. [ABSTRACT FROM AUTHOR]

We estimate government spending multipliers in demand‐ and supply‐driven recessions for the Euro Area. Multipliers in a moderately demand‐driven recession are two to three times larger than in a moderately supply‐driven recession, with the difference between multipliers being non‐zero with very high probability. More generally, multipliers are inversely correlated with the deviation of inflation from its trend, implying that the more demand‐driven a recession, the higher the multiplier. Multipliers range from −$$ - $$0.5 in supply‐driven recessions to about 2 in demand‐driven recessions. The econometric approach leverages a factor‐augmented interacted vector‐autoregression model purified of expectations (FAIPVAR‐X). The model captures the time‐varying state of the business‐cycle including strongly and moderately demand‐ and supply‐driven recessions, by taking the whole distribution of inflation deviations from trend into account. [ABSTRACT FROM AUTHOR]

Copyright of Scientific Annals of the 'Al. I. Cuza' University, Iasi. Sociology & Social Work / Analele Stiintifice ale Universitatii 'Al. I. Cuza' Iasi Sociologie si Asistenta Sociala is the property of Alexandru Ioan Cuza University 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 euro area, like other advanced economies, faced high inflation over the past years. We analyse empirically the impact of inflation on public finances in the euro area, focusing on the question of whether at such high levels, inflation could have a different impact on the primary budget balance. To this end, we estimate a fiscal reaction function for euro area countries and find evidence of non-linear short-term effects of HICP inflation on the primary balance. Over the period 1999–2022, we unveil an inverse U-turn relationship and an inflation turning point – beyond which its short-term (contemporaneous) impact on the primary balance starts being negative. These results reflect primarily the most recent high inflation episode and indicate that in such conditions inflation can be costly for public finance flows even in the shorter run. [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.

This study analyzes explanations identified in the literature for the subpar economic performance of the so-called peripheral member states of the Euro Area since the mid-1990s, comparing it to those of the core, catch-up, and financial hub member states. It argues that a key factor in the peripherals’ malaise was a financial Dutch disease-like mechanism, as the adoption of the euro led to large and sustained capital inflows. This resulted in a structural shift in the productive structure of peripheral economies away from technologically advanced manufactured goods, which are characterized by higher productivity growth. Consequently, peripheral member states specialized in non-tradable sectors, and in low-technology and labor-intensive tradable goods and services sectors, which largely explains the peripherals’ low economic growth, low productivity growth, and growing macroeconomic imbalances. Furthermore, this study argues that the economic underperformance of catch-up member states can also be explained by a financial Dutch disease mechanism. [ABSTRACT FROM AUTHOR]

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]

The objective of this paper is to ascertain the presence of a crucial connection between euro area fiscal stance and ECB monetary policy. To achieve this, we employ the thick modelling approach for the Generalised method of moments to estimate ECB reaction functions with and without a projected fiscal deficit indicator from 2001 until 2022. The results reveal that the actions of the ECB have exhibited desirable effects of stabilising monetary policy, while the projected fiscal deficit was usually not statistically significant in explaining the ECB's monetary policy stance. However, the sign of fiscal deficit coefficient was positive, implying a counter-cyclical nature of monetary policy with respect to the fiscal stance. This effect has become more evident since 2012, suggesting that the ECB might be taking into account euro area fiscal deficits as providing some indications for potential inflationary risks. Overall, these findings speak against the fiscal dominance or repression regime being prevalent in the euro area. [ABSTRACT FROM AUTHOR]

This article proposes a methodology for measuring the macroprudential policy stance based on a forward‐looking distance‐to‐tail metric derived from a large‐scale semi‐structural model. The model reflects the dynamics of 89 significant euro area banks and 19 euro area economies and two endogenous amplification mechanisms: the real economy banking sector and solvency funding feedback loops. Our results reveal a slight tightening of the macroprudential policy stance from 2017 to the end of 2019 that partially stemmed from adjusting macroprudential capital buffers and the phase‐in of other systemwide banking sector policies reflecting macroprudential intentions. This trend is abruptly interrupted at the onset of the Covid‐19 pandemic, when pronounced macrofinancial uncertainty led to a substantial increase in tail risks and reappears in 2021. Our assessment also reveals a high degree of co‐movement in macroprudential stances across the euro area countries. [ABSTRACT FROM AUTHOR]

Borrower‐based macroprudential policies—such as caps on loan‐to‐value (LTV) ratios and debt‐service‐to‐income (DSTI) limits—contain the build‐up of systemic risk by reducing the probability and conditional impact of a crisis. While LTV/DSTI limits can increase inequality at introduction, they can dampen the increase in inequality under adverse macroeconomic conditions. The relative size of these opposing effects is an empirical question. We conduct counterfactual simulations under different macroeconomic and macroprudential policy scenarios using granular income and wealth data from the Households Finance and Consumption Survey for Ireland, Italy, Netherlands and Portugal. Simulation results show that borrower‐based measures are associated with a moderate increase in wealth inequality, while the impact on income inequality is negligible. [ABSTRACT FROM AUTHOR]

Using daily data over the period August 5, 2013 – September 27, 2019, this study investigates the dynamic spillovers between international monetary policies across four major economies (i.e. Eurozone, Japan, UK and US) and three key cryptocurrencies (i.e. Bitcoin, Litecoin and Ripple). In doing so, we apply a Time-Varying Parameter Vector Auto-Regression (TVP-VAR) model, a dynamic connectedness approach and network analysis. The empirical results indicate that cryptocurrency returns and monetary policy spillovers were particularly large when shadow policy rates became negative, moderated during the Fed's 'tapering process', and sharpened again more recently as cryptocurrency buoyancy returned. Gross directional spillovers suggest that shadow policy rates have more 'to give than to receive', while those from and to cryptocurrency returns are naturally volatile. There is also strong interconnectedness between monetary policy in either the US or the Eurozone and the UK, and between Bitcoin and Litecoin. However, the spillovers across monetary policy and cryptocurrencies tend to be muted. Finally, spillovers were only slightly larger during the Fed's 'unconventional' policy compared to the 'standard' era, but their composition qualitatively changed over time. [ABSTRACT FROM AUTHOR]

This paper applies a recently developed method (Inoue and Rossi, 2021) to estimate functional inflation expectations and ex-ante real interest rate shocks, and then examines their macroeconomic effects in the context of a Functional Vector Autoregressive model with exogenous variables (Functional VARX). Monthly data from January 1998 to May 2023 for the US, the UK and the euro area are used for the analysis. The estimated impulse responses show significant effects of the functional shocks on both inflation and output. In addition, threshold functional local projections indicate that the effects are nonlinear and depend on central bank credibility. Further, inflation expectations shocks have similar effects to supply (demand) ones when they are driven by long-term (short-term) changes. In the presence of an inverted (steepening) real interest rate term structure, the effects are inflationary (deflationary) and expansionary (recessionary). Finally, the responses of inflation, output and the policy rate are driven primarily by the slope and curvature factors of the term structure shocks, which contain important information not captured by traditional scalar shocks. [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]

This paper investigates the drivers of international fiscal spillovers across 62 countries for the period covering 1970–2021. Using the local projections method at the country‐pair level, fiscal spillovers are estimated as the cumulative response of the real gross domestic product (GDP) growth in spillover destination countries to a unit shock in the real government spending growth in spillover source countries. Pairwise estimation results (for 3782 country pairs) suggest that there are statistically significant fiscal spillovers for 36% of country pairs, whereas this ratio is 49% for country pairs within the euro area. For the median country pair, a unit shock of real government spending growth in the spillover source country results in about 0.09% of the increase in the real GDP growth of the spillover destination country, whereas this fiscal‐spillover estimate goes up to 0.42% when the spillover source is in the euro area, and the spillover destination is an oil producing country. A secondary investigation based on the Heckman selection model is used to identify the drivers of fiscal spillovers across country pairs, where the existence of statistically significant fiscal spillovers is shown to be connected to the proximity between countries. The size of fiscal spillovers is further shown to increase with the initial (as of 1970) country size, trade openness, and government size of the spillover source country, whereas it decreases with the initial country size and trade openness of the spillover destination country. Important policy suggestions follow. [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]

Copyright of Europarecht (05312485) is the property of Nomos Verlagsgesellschaft mbH & Co. KG 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.)

Most studies have found that the Covid‐19 pandemic did not negatively impact the euro area banking industry's performance at an aggregate level. This study explores whether this finding still holds using the return on assets of 16 banking groups operating in the euro area and considering bank‐specific factors, idiosyncrasies related to different exposures of their portfolios to the business cycle and weaknesses stemming from underlying structural vulnerabilities. The banking groups are classified into clusters using unsupervised learning techniques. This research contributes to the empirical literature on the determinants of banks' performance by highlighting the importance of banks' heterogeneity, notably controlling for differential performance due to asset quality, solvency and business model. In addition, this paper shows that the magnitude of return on assets' exposure to the business cycle varies across banks and that inflation in the euro area matters only for a subset of them. Importantly, the study sheds some light on the possible reasons for the mixed results in the literature regarding the role of non‐interest income, the T1 capital ratio and inflation. Finally, no significant effects of the Covid‐19 variables on banks' return on assets are found during the first seven quarters of the pandemic. [ABSTRACT FROM AUTHOR]

"European Disunion: Democracy, Sovereignty and the Politics of Emergency" by Stefan Auer explores the challenges facing the European Union (EU) through a neo-nationalist perspective. Auer argues that disunion within the EU is inevitable due to conflicts between centralization efforts and national sovereignty. The book delves into the 'no-demos thesis' which posits that democracy requires a cohesive national identity, challenging the EU's ability to acquire sovereign powers. Auer's analysis also touches on the link between identity, sovereignty, and populism, highlighting the complexities of European integration and the rise of nationalist movements. [Extracted from the article]

Focusing on a sample of euro area commercial banks, we investigate the evolution of the asset‐liability dependency over the years 2013–2021, characterized by the introduction of monetary, supervisory and institutional policy measures that shaped a business environment never experienced before. We find that large banks show a stronger asset‐liability dependency than small banks, and that the linkages between the two sides of the balance sheet experience a general upward trend over time for both groups of intermediaries. We report evidence of the presence of two transmission channels of the unconventional monetary policy, namely, the direct pass‐through and the portfolio rebalancing. [ABSTRACT FROM AUTHOR]

Following the end of the coronavirus pandemic, the European Central Bank (ECB) was confronted with an unprecedented increase in energy prices. This led to consumer price inflation in the euro area far beyond the ECB's inflation target of two percent, at times up to 10 percent. At the same time, the euro area economy was threatened by a recession, which resulted in the ECB facing conflicting objectives of stabilizing the economy and combating inflation. Estimates show that while the ECB's policy strategy of maintaining a low level of interest rates did improve the economy, it also exacerbated the rise in energy prices. The empirical analysis demonstrates that an interest rate hike at the beginning of the energy crisis would have stabilized inflation more effectively. Tightening monetary policy would have curbed energy demand and caused the euro to appreciate, which would have led to a more rapid decline in energy prices. In this counterfactual scenario, the euro area would have had to endure a brief recession, but the overall economic situation would have stabilized by the fourth quarter of 2023. The ECB would likely have been better able to follow its price stability mandate if a capital markets and fiscal union existed in the euro area. [ABSTRACT FROM AUTHOR]

In 2021 and 2022, inflation expectations of households in the euro area rose dramatically. Based on a time-series investigation from 1995 to 2022, I find that inflation expectations are driven by current price developments of three consumption product categories and house prices (which are not included in the consumer price index). About half of the recent rise was fuelled by energy prices, 20% by food prices, over 10% by transportation costs and almost 20% by house prices. On a macro-level, controlling for a standard set of spending determinants, a regression analysis suggests that accelerating inflation expectations in general will slow down growth of area wide real private consumption, but under circumstances of low nominal interest rates helped to cushion the negative shock of the covid pandemic and the energy crisis. [ABSTRACT FROM AUTHOR]

We introduce a novel multinomial logistic model for detecting and forecasting concurrent recessions and bear markets across multiple countries. Our framework leverages cross-country panel features and provides additional information for robust analysis. Through a comprehensive simulation study, we demonstrate the computational efficiency and accuracy of our model, even when handling multiple binary indicators. Applying our framework to empirical data from the United States, the UK, and Euro Area, we find that the multinomial logistic model produces superior medium-term forecasting of concurrent recession and bear market events across countries compared to multiple independent single logistic models. Additionally, our counterfactual analysis reveals that specific events, such as a recession and bear market in the United States, along with the tightening of financial conditions and a negative interest rate spread in the United States, increase the probability of concurrent and individual recession and bear market occurrences in the UK and Euro Area. [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]

The aftermath of the pandemic crisis and the war in Ukraine have revived the debate on the causes and consequences of inflation, as well as the policies needed to combat its effects. Despite the obvious absence of a role for monetary policy in triggering price rises, the response of monetary authorities, especially in the Eurozone, has been conventional: raising interest rates, with negative consequences for activity levels. In this paper we argue that the inflation episode we are witnessing is a consequence of the attempt by profit-makers to maintain the same (if not higher) levels of profitability as before. It is, therefore, a case of conflict inflation. The policies needed to avoid severe consequences for the weakest sections of the population should be aimed at compensating workers against the loss of purchasing power. In this context, Italy is a case study. It is one of the few advanced countries where there is no statutory minimum wage. Considering data from the main studies on the conditions of Italian workers and building our argument on the most recent economic theory, we stress the need for the introduction of a legal minimum wage in Italy and, in general, for upstream redistribution policies. [ABSTRACT FROM AUTHOR]

After the euro crisis, politicization patterns led the institutions of the European Union to gradually redirect the bloc's socioeconomic governance away from austerity. It is less clear whether the erosion of austerity was mirrored in national economic discourses. To fill this gap, this article provides a quantitative and qualitative analysis of parliamentary budget debates in four country cases: France, Germany, the Netherlands, and Portugal, from 2014 to 2020. The results show contrasting patterns of "fiscal discipline" frame resilience in national economic discourse in ways consistent with intergovernmental bargaining around the pandemic recovery agenda. Moreover, shared preoccupations relating to investment in the economy, social inequality, and climate change emerge as major threads shaping budget making. These findings suggest an increasingly integrated multi‐level system of economic governance and call for further investigation into the links between ideas shaping EU economic governance and economic discourses in member states. Related Articles: Pi Ferrer, Laia, and Pertti Alasuutari. 2019. "The Spread and Domestication of the Term 'Austerity:' Evidence from the Portuguese and Spanish Parliaments." Politics & Policy 47(6): 1039–65. https://doi.org/10.1111/polp.12331. Zamponi, Lorenzo, and Lorenzo Bosi. 2016. "Which Crisis? European Crisis and National Contexts in Public Discourse." Politics & Policy 44(3): 400–26. https://doi.org/10.1111/polp.12156. [ABSTRACT FROM AUTHOR]

Copyright of Omer Halisdemir Universitesi Iktisadi ve Idari Bilimler Fakültesi Dergisi is the property of Omer Halisdemir University, Faculty of Economics & Admistrative Sciene 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 examines whether Euro Area countries would have faced a more favorable inflation output variability tradeoff without the Euro. We provide evidence supporting this claim for the periods of the Great Recession and the Sovereign Debt Crisis. The deterioration of the tradeoff becomes insignificant only after Draghi's 'whatever it takes' announcement. Results show that the detrimental effect of the Euro is more severe for peripheral countries. We base our results on a novel empirical strategy that, consistent with monetary theory, models the joint determination of the variability of inflation and output conditional on structural supply and demand shocks. [ABSTRACT FROM AUTHOR]

Boom‐and‐bust cycles in the housing market pose a threat to macroeconomic and financial stability, thus calling for a timely assessment of imbalances. This work sheds light on the drivers of house price dynamics in some euro area economies, investigating the risks of overheating. We show that an Error‐Correction‐Model (ECM) featuring a long‐run relationship between house prices and income and short‐run effects of interest rates and housing supply fits the data well in most cases. We then propose a novel model‐based misalignment indicator and find that extrapolative house price expectations play an important role in the build‐up of speculative bubbles. [ABSTRACT FROM AUTHOR]