Occasional papers published in 2015

Communication device to a broad audience

Our Occasional Paper Series (OPS) disseminates work carried out by, as a rule, ECB staff on subjects that relate to the main tasks and functions of the ECB and the ESCB. Occasional Papers (OPs) are addressed to a wide audience, including other policy-makers, financial analysts, academics, the media and the interested general public. Understanding the papers will normally require some prior knowledge of the topic.

No. 166
23 September 2015
The side effects of national financial sector policies: framing the debate on financial protectionism

Abstract

JEL Classification

F36 : International Economics→International Finance→Financial Aspects of Economic Integration

F42 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Policy Coordination and Transmission

F62 : International Economics→Economic Impacts of Globalization→Macroeconomic Impacts

Abstract

The decrease of financial integration both at the global and European level reflects, to a certain extent, a market response to the crisis. It might, however, also be partly driven by policies such as capital flow management measures (CFMs). In addition, several other measures taken by central banks, regulators and governments in response to the crisis may have had less obvious negative side effects on financial integration. Against this backdrop, this paper explores broad definitions of financial protectionism in order to raise awareness of the fact that the range of policies which could negatively affect financial integration may be much wider than residency-based CFMs. At the same time, the paper acknowledges that these measures have mostly been taken for legitimate financial stability purposes and with no protectionist intentions. The paper considers five categories of policy measures which could contribute to financial fragmentation both at the global and at the EU level: currency-based measures directed towards banks, geographic ring fencing, some financial repression policies, crisis resolution policies with a national bias, and some financial sector taxes.

No. 165
28 August 2015
Public debt, population ageing and medium-term growth

Abstract

JEL Classification

E17 : Macroeconomics and Monetary Economics→General Aggregative Models→Forecasting and Simulation: Models and Applications

E23 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Production

E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital

E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy

F47 : International Economics→Macroeconomic Aspects of International Trade and Finance→Forecasting and Simulation: Models and Applications

J1 : Labor and Demographic Economics→Demographic Economics

Abstract

This paper analyses the challenges that high public debt and ageing populations pose to medium-term growth. First, macroeconometric model simulations suggest that medium-term growth can benefit from credible fiscal consolidation, partly through reductions in sovereign risk premia. Second, a disaggregated growth accounting exercise suggests that the impact of population ageing on medium-term growth can be mitigated by structural reforms boosting labour force participation. Finally, general equilibrium models suggest that pay-as-you-go public pension systems will require reforms combining lower benefits, a later retirement age and higher social contributions. These findings suggest several policy recommendations: (a)

No. 164
20 August 2015
Financial stability challenges in EU candidate and potential candidate countries

Abstract

JEL Classification

F31 : International Economics→International Finance→Foreign Exchange

F34 : International Economics→International Finance→International Lending and Debt Problems

F36 : International Economics→International Finance→Financial Aspects of Economic Integration

F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics

G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages

G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation

Abstract

This paper reviews financial stability challenges in countries preparing for EU membership, i.e. Albania, Bosnia and Herzegovina, Kosovo*, Iceland, the former Yugoslav Republic of Macedonia, Montenegro, Serbia and Turkey. The paper has been prepared by an expert group of staff from the European System of Central Banks (ESCB) in which experts from EU candidate and potential candidate country central banks also participated. The paper finds that near-term challenges to financial stability primarily relate to credit risks from the generally weak economic dynamics in combination with already high non-performing loan burdens in many banking systems, especially in the Western Balkans. In the medium-term, challenges to financial stability stem from indirect market risks to banks related to foreign currency lending as well as lingering exposures to funding risks, with Western Balkan economies again appearing as relatively more vulnerable. Looking further ahead, the paper highlights that the magnitude of the challenge to reach a

No. 163
15 July 2015
Compendium on the diagnostic toolkit for competitiveness

Abstract

JEL Classification

F14 : International Economics→Trade→Empirical Studies of Trade

F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics

F60 : International Economics→Economic Impacts of Globalization→General

D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity

E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation

Abstract

This Compendium describes the contribution of CompNet to the improvement of the analytical framework and indicators of competitiveness. It does this by presenting a comprehensive database of novel competitiveness indicators. These are more than 80 novel indicators designed by CompNet members that capture macro, micro and cross-country dimensions, thus providing a comprehensive view of the competitive position of EU countries and their peers. A short description of each innovative indicator

No. 162
10 June 2015
Fiscal multipliers and beyond

Abstract

JEL Classification

H30 : Public Economics→Fiscal Policies and Behavior of Economic Agents→General

H6 : Public Economics→National Budget, Deficit, and Debt

E6 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

Abstract

This paper seeks to link the debate surrounding short-term fiscal multipliers with the

medium and longer-term impact of fiscal consolidation on public debt sustainability.

A literature review and empirical findings for state-dependent multipliers confirm that

there is considerable uncertainty surrounding the size of the short-term multiplier.

Notably, multipliers may be larger in deep recessions or financial crises, but the

negative impact of fiscal consolidation is mitigated when public finances are weak.

Using a stylised framework and a range of plausible values for the fiscal multiplier,

simulations suggest that an increase in the debt ratio following episodes of fiscal

consolidation is likely to be short-lived. Even in a macroeconomic context in which

multipliers are high, a front-loaded fiscal consolidation reduces the total consolidation

effort and implies a faster stabilisation of the debt ratio. In general, back-loading is

subject to higher implementation risks, most notably in the light of political economy

considerations. Overall, when determining the fiscal adjustment path, both the short-term

costs and the longer-term benefits need to be taken into account. Particular

attention should be paid to the composition of consolidation packages, with well-designed

adjustments likely to imply a faster stabilisation of the debt ratio.

No. 161
18 May 2015
Critique of accommodating central bank policies and the 'expropriation of the saver' - A review

Abstract

JEL Classification

E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects

E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy

O40 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→General

Abstract

In parts of the German media, with the support of a number of German economists, the ECB

No. 160
6 February 2015
The four unions "PIE" on the Monetary Union "CHERRY": a new index of European Institutional Integration

Abstract

JEL Classification

F33 : International Economics→International Finance→International Monetary Arrangements and Institutions

F42 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Policy Coordination and Transmission

N24 : Economic History→Financial Markets and Institutions→Europe: 1913?

Abstract

This paper presents a European Index of Regional Institutional Integration (EURII), which maps developments in European integration from 1958 to 2014 on the basis of a monthly dataset. EURII captures what we call: (i) the “Common Market Era”, which lasted from 1958 until 1993; and (ii) the first twenty years of the “Union Era” that started in 1994, but gained new impetus in response to the euro area crisis. The paper complements the economic narratives of the crisis with an institutional approach highlighting the remedies to the flaws in the initial design of Economic and Monetary Union (EMU). In fact, since 2010, EMU’s institutional framework has been substantially reformed. While work on EMU’s new governance is still in progress, the broad contours of a “genuine union” have been outlined in the Four Presidents’ Report of December 2012. The report envisages a more effective economic union, a fiscal union, a financial union, and a commensurate political union. The aim of the EURII index is threefold: (i) to provide a tool to synthesise and monitor the process of European institutional integration since 1958 and, in particular, track institutional reforms since 2010; (ii) to expand a previous integration index by showing that monetary unification – which was initially understood as “the cherry on the Internal Market pie” – implied a major discontinuity in the process and nature of European integration, that is, a new “pie on the cherry”; and (iii) to offer a tool for further research, policy analysis and communication.

No. 159
6 February 2015
Comparisons and contrasts of the impact of the crisis on euro area labour markets

Abstract

JEL Classification

E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital

J08 : Labor and Demographic Economics→General→Labor Economics Policies

J21 : Labor and Demographic Economics→Demand and Supply of Labor→Labor Force and Employment, Size, and Structure

J23 : Labor and Demographic Economics→Demand and Supply of Labor→Labor Demand

J24 : Labor and Demographic Economics→Demand and Supply of Labor→Human Capital, Skills, Occupational Choice, Labor Productivity

J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General

J61 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers→Geographic Labor Mobility, Immigrant Workers

J63 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers→Turnover, Vacancies, Layoffs

J64 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers→Unemployment: Models, Duration, Incidence, and Job Search

Abstract

The global financial and economic crisis

No. 158
30 January 2015
IMF Surveillance in Europe

Abstract

JEL Classification

F42 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Policy Coordination and Transmission

F53 : International Economics→International Relations, National Security, and International Political Economy→International Agreements and Observance, International Organizations

Abstract

The International Monetary Fund has significantly improved its surveillance of the EU and the euro area, along the lines suggested by the Fund

Disclaimer: Please keep in mind that OPs are published in the name of the author(s). Their views do not necessarily reflect those of the ECB.