Suchergebnisse

This paper develops a 'structural political economy' approach to two fundamental tensions that emerged as the eurozone crisis unfolded: real exchange rate misalignments and external debt build-up. The approach builds on a classical legacy going back to Francois Quesnay, who conceptualised interdependent sectors as being also socio-political groups. In the context of the European integration process, we analyse the overlapping economic and political dimensions of how sectoral interests evolved within and across countries with regard to real exchange rate adjustments and potential debt write-offs. Central to our analysis is the interplay between sectors' particular interests and their interest in preserving the 'viability' of the systems to which they belong (regional, national, supranational). The sectoral perspective developed in this paper complements, enriches and often questions results usually obtained from country-level political economy analyses. In the last section of the paper we show how sectoral and country-level interests are at play within the institutional set-up of a monetary union, and how this can lead to stances in favour of further integration or disintegration.

This paper reconsiders the theoretical foundations of EU regional policy in economics. It begins with a discussion of the line of thought of its prevalent explanation in equilibrium economics which is focusing on market failures as its key underpinning and which is the major toolkit of economists for policy recommendations in this context. Subsequently, this view is contrasted with a non-equilibrium economics perspective on EU regional policy. Based on this, the existence of market failures and the relevance of equilibrium economics for a realistic understanding of and policy advice for EU regional policy are called into question. That is why, a more substantive politico-economic explanation and different policy conclusions for the regional policy of the EU are offered. The paper particularly focuses on the implications of the latter for the European Economic and Monetary Union in light of the persisting financial crisis and the vast economic disparities existing within it. Finally, the non-equilibrium economics perspective on EU regional policy is also animadverted, since market failure thinking still prevails in this branch of economics undermining its own criticism of equilibrium economics.

This paper investigates the causal relationship between two macroeconomic variables, the gross domestic product (GDP) cycle and unemployment, in Finland. This has been done using the vector autoregressive (VAR) model for the period Q1 1995 to Q2 2011. The goal of this study is to gather further evidence for the relationship between the GDP cycle and total, male and female unemployment individually, with special reference to Finland which is a member state of the EU, and has been part of European monetary union, since 1995. The relationship has been investigated using the Granger-causality test in accordance with Okun's (1962) formula. The empirical facts mostly indicate the existence of a uni-directional causal relationship from the GDP cycle to unemployment. This pattern is not found to be significant when using the model for unemployment in women however. The coefficients of unemployment, total, male and female, are abstracted from the Okun's coefficient and found to be around -4 per cent total, male and female unemployment individually, -5 per cent and -1 per cent respectively. These results also have important implications for determining macroeconomic and labor-market policy.

This article advocates a comprehensive approach to the current crisis in the
Euro Area - and, namely, the joint consideration of the economic and
political issues at stake. The European integration - whose greatest
development is, to present time, the Monetary Union - is a political project:
a matter of will and action. Surely, this political project has a strong and
specific economic component. Still, it is political. Therefore, political
variables are critical. They must be included in any analysis of the
financial and economic circumstances, and they must be considered in any
strategy to overcome the current roadblock. The Euro Area has to cope, not
only with excessive indebtedness, fiscal unbalances and financial markets,
but also with the democratic restrictions to austerity and economic
recession, and with the democratic requirement to respect social rights, to
look for public support and to engage in political dialogue and compromise.
In liberal democracies, as ours, the employment, social protection,
citizenship and the right to believe and hope are full goals for the public
policies, including the economic and fiscal ones.

AbstractIn this paper, we empirically examine if sovereign risk matters for corporate bonds in developed economies. Using a unique panel data sample of 897 corporate bonds from eleven countries within the Economic and Monetary Union (EMU), we investigate sovereign and corporate ratings as well as zero‐volatility spreads (z‐spreads). In the time period from March 2006 to June 2012, we find sovereign risk to be a significant driver of corporate risk. The effect is stronger for companies with domestic revenue structure, for companies that are (partly) owned by the government, and companies active in the utility and transportation sector. Interestingly, the impact of sovereign risk on corporate risk during the acute European sovereign debt crisis period decreases if ratings are examined, but increases if z‐spreads are utilized. Rating agencies seem to take a more differentiated view on individual company risk during the sovereign debt crisis, while institutional investors might want to reduce their exposure to a country in financial distress as a whole, regardless of whether sovereign or corporate bonds are held.

Our research aims to analyze the possible existence of Granger-causal relationships in the behavior of public debt issued by peripheral member countries of the European Economic and Monetary Union (EMU), with special emphasis on the recent episodes of crisis triggered in the eurozone sovereign debt markets since 2009. With this goal in mind, we make use of a database of daily frequency of yields on 10-year government bonds issued by five EMU countries (Greece, Ireland, Italy, Portugal and Spain), covering the entire history of the EMU from its inception on 1 January 1999 until 31 December 2010. In the first step, we explore the pair-wise Granger-causal relationship between yields, both for the whole sample and for changing subsamples of the data, in order to capture the possible time-varying causal relationship. This approach allows us to detect episodes of significant increase in Granger-causality between yields on bonds issued by different countries. In the second step, we study the determinants of these episodes, analyzing the role played by different factors, paying special attention to instruments that capture the total national debt (domestic and foreign) in each country.

Summary
This contribution highlights the complex causes of the European debt crisis and discusses available options for a solution. Relevant causes included are debt incentives which are effective permanently, the lacking optimality of the European currency area and deficient institutional debt brakes. Furthermore, the acute dimension of the crisis as a self-fulfilling crisis of confidence with a highly destructive potential is stressed. All solution strategies face the challenge that a self-fulfilling confidence crisis cannot be contained through an improvement of long-run fundamentals alone. Based on this analysis the crisis management is assessed. One insight is that the often criticized cautious and muddling-through approach towards a permanent solution is adequate. In contrast to that, allegedly courageous solutions like the introduction of eurobonds or the quick exclusion of crisis countries from the euro zone are unconvincing. Links to the economic literature of the early 1990s prove that the risk of a debt crisis has clearly been identified and analyzed as a particular risk of the European Monetary Union well before its start.

Does a multilateral fiscal rule improve market discipline in a monetary union? This paper studies the impact of political events that systematically undermined the Stability and Growth Pact (SGP) on EMU sovereign default risk for the period 2001 to 2005. For various EMU member countries our findings suggest that credit risk did not increase in the SGP's early years in response to the political undermining of the Pact. Due to the existence of systematic volatility effects we conclude that from its beginning the Pact was not perceived as a credible institution by financial markets. Bond markets have not been the watchdogs the proponents of transparency enhancing fiscal rules frequently claim them to be. Investors did not anticipate any serious consequences arriving from political non-ownership of the Pact and corresponding fiscal leeway on national public finances in the euro zone back then. In this context, policymakers working on a reform of Europe's fiscal framework should abstain from enhancing multilateral fiscal rules lacking political ownership, including the reformed SGP and the new 'European Fiscal Compact'.

This paper develops a medium-scale dynamic, stochastic, general equilibrium (DSGE) model for fiscal policy simulations. Relative to existingmodels of this type, our model incorporates a two-country monetary union structure, which makes it well suited to simulate fiscal measures by relatively large countries in a currency area. We also provide a notable degree of disaggregation on the government expenditures side, by explicitly distinguishing between (productivity-enhancing) public investment, public purchases and the public sector wage bill. Finally, we consider a labor market characterized by search and matching frictions, which allows to analyze the response of equilibrium unemployment to fiscal measures. In order to illustrate some of its applications, and motivated by recent policy debate in the Euro Area, we calibrate the model to Spain and the rest of the area and simulate a number of fiscal consolidation scenarios. We find that, in terms of output and employment losses, fiscal consolidation is the least damaging when achieved by reducing the public sector wage bill, whereas it is most damaging when carried out by cutting public investment.

Eight months ago, as the risk of sovereign default in Greece first emerged, the Intereconomics Forum invited a number of contributors to examine the options available to EU policymakers. As the threats to European Monetary Union resurface now, six of the same authors return in this issue's Forum to reassess the situation, in particular with regard to the EU's recent policy responses to the ongoing crisis. Whereas both optimists and pessimists could support their views with strong arguments eight months ago, the EU's current predicament has shifted the prevailing sentiment strongly toward the pessimistic view. From the Irish bailout to the precarious status of Portugal, not to mention the potentially disastrous situation looming in Spain, our contributors are uncertain whether EU policymakers are up to the challenge of defending the euro. As evidence of this, several point to the EU Council's October decision to establish a permanent crisis resolution mechanism to ensure an orderly state insolvency procedure, which did little to calm markets. Nonetheless, most of these economists still see ways for the EU to escape the crisis without being forced to abandon the common currency.

This paper addresses the issue of fiscal policy coordination in the context of the current crisis. It first aims at clarifying the economic rationale for fiscal policy coordination in a monetary union with decentralized fiscal authorities, and at exploring the foundations of the kind of coordination devices chosen, as well as the incentives and constraints on member states' governments arising from the fiscal rules in the Euro Zone, both in tranquil and in stormy economic times. We then proceed with an analysis of the difficulties arising from the heterogeneous nature of the Euro Zone. In Section 3, we explore some of the possible causes of heterogeneity, with an emphasis on the issue of collective action and country size, with the coexistence of large and small countries, facing different incentives and constraints, hence tending to adopt divergent strategies in the occurrence of common macroeconomic shocks. Section 4 addresses the possible evolution in automatic fiscal stabilizers and Section 5 documents the size and structure of national fiscal stimulus packages. The concluding section advocates a better mix of rules and discretionary coordination for fiscal policies in the Euro Zone.

This paper addresses the issue of fiscal policy coordination in the context of the current crisis. It first aims at clarifying the economic rationale for fiscal policy coordination in a monetary union with decentralized fiscal authorities, and at exploring the foundations of the kind of coordination devices chosen, as well as the incentives and constraints on member states' governments arising from the fiscal rules in the Euro Zone, both in tranquil and in stormy economic times. We then proceed with an analysis of the difficulties arising from the heterogeneous nature of the Euro Zone. In Section 3, we explore some of the possible causes of heterogeneity, with an emphasis on the issue of collective action and country size, with the coexistence of large and small countries, facing different incentives and constraints, hence tending to adopt divergent strategies in the occurrence of common macroeconomic shocks. Section 4 addresses the possible evolution in automatic fiscal stabilizers and Section 5 documents the size and structure of national fiscal stimulus packages. The concluding section advocates a better mix of rules and discretionary coordination for fiscal policies in the Euro Zone.

This paper addresses the issue of fiscal policy coordination in the context of the current crisis. It first aims at clarifying the economic rationale for fiscal policy coordination in a monetary union with decentralized fiscal authorities, and at exploring the foundations of the kind of coordination devices chosen, as well as the incentives and constraints on member states' governments arising from the fiscal rules in the Euro Zone, both in tranquil and in stormy economic times. We then proceed with an analysis of the difficulties arising from the heterogeneous nature of the Euro Zone. In Section 3, we explore some of the possible causes of heterogeneity, with an emphasis on the issue of collective action and country size, with the coexistence of large and small countries, facing different incentives and constraints, hence tending to adopt divergent strategies in the occurrence of common macroeconomic shocks. Section 4 addresses the possible evolution in automatic fiscal stabilizers and Section 5 documents the size and structure of national fiscal stimulus packages. The concluding section advocates a better mix of rules and discretionary coordination for fiscal policies in the Euro Zone.

This paper addresses the issue of fiscal policy coordination in the context of the current crisis. It first aims at clarifying the economic rationale for fiscal policy coordination in a monetary union with decentralized fiscal authorities, and at exploring the foundations of the kind of coordination devices chosen, as well as the incentives and constraints on member states' governments arising from the fiscal rules in the Euro Zone, both in tranquil and in stormy economic times. We then proceed with an analysis of the difficulties arising from the heterogeneous nature of the Euro Zone. In Section 3, we explore some of the possible causes of heterogeneity, with an emphasis on the issue of collective action and country size, with the coexistence of large and small countries, facing different incentives and constraints, hence tending to adopt divergent strategies in the occurrence of common macroeconomic shocks. Section 4 addresses the possible evolution in automatic fiscal stabilizers and Section 5 documents the size and structure of national fiscal stimulus packages. The concluding section advocates a better mix of rules and discretionary coordination for fiscal policies in the Euro Zone.