Empirica Journal of European Economics
Sponsored by the Austrian Economic Association and the Austrian Institute of Economic Research
Empirica publishes empirical and theoretical work on all economic aspects of European Integration. The topics may range from
all challenges concerning the deepening of the European Union (Single Market, Lisbon Agenda, EMU) to enlargement and the external
relations of the EU (globalisation).
Recent issues(824 hits)
This paper investigates the presence of long memory in corporate bond and stock indices of six EU countries from July 1998
to February 2015. We compute the Hurst exponent by means of the DFA method and using a sliding window in order to measure
long range dependence. We detect that Hurst exponents behave differently in the stock and bond markets, being smoother in
the stock indices than in the bond indices. We verify that the level of informational efficiency is time-varying. Moreover
we find an asymmetric impact of the 2008 financial crisis in the fixed income and the stock markets, affecting the former
but not the latter. Similar results are obtained using the R/S method.
Our aim is to propose a pyramid of Okun's coefficient by age and gender in the Italian labour force using a varying-coefficient
model. The unemployment rate by age and gender – useful information for estimating Okun's relationship – is not available
for Italy from official statistics. Therefore, we provide an estimation of the indicator using microdata for the 2005-2014
period from ISTAT, the Italian labour force survey. Okun's law is investigated using two measures of the unemployment rate:
a traditional measure based on a labour force with and without work experience, and a new measure restricted to the labour
force with experience. When Okun's relationship is estimated using the unemployment rate restricted to the labour force with
experience, the young population is less sensitive to business cycles. As the workforce ages, this gap in sensitivity tends
to shrink. We also found that there are no significant differences by gender in the magnitude of Okun's coefficient among
the youngest population when considering the unemployment rate restricted to the labour force with experience.
Motivated by financial liberalisation investors seek for new investment opportunities through international portfolio diversification.
To this end we explore any asymmetric causal relationship between developed European stock markets (Germany, France and UK)
and emerging Baltic markets, namely Estonia, Latvia and Lithuania. Our analysis focuses on the period before and after the
countries' EU accession and pre- and post the global financial crisis. For this purpose, both the standard parametric test
for causality and a novel nonparametric test for causality-in-quantiles are employed. The results of both the parametric and
nonparametric Granger causality test support a causal relationship in mean that runs from all of the major markets to the
Baltic markets across both samples. The results imply the existence of significant nonlinear return and volatility spillovers
from European markets to Baltic markets. Policy implications for international investors are also discussed.
We analyse whether tourism (measured by real tourism receipts) causes growth in an asymmetric fashion in a panel of G-7 countries
over the period of 1995-2014. Our results reveal that the tourism-led growth hypothesis holds for France, Germany, and the
USA, with negative tourism shocks being more important for Germany, Italy, Japan, while positive shocks are more important
in the UK and the USA. Our results imply that policy makers in Germany, Italy and Japan should be more concerned when tourism
Potential output constitutes a central measure to determine compliance of the member countries with the EU fiscal rules. The
EU uses a production function approach to estimate potential output. In a Kalman filter model together with a Bayesian approach
TFP is decomposed into a trend and a cycle. The aim of this paper is to examine the relationship between two widely discussed
issues of the EC estimate of potential output, procyclicality and the extent of revisions. Procyclicality of the TFP trend
depends on the prior assumptions for the residual variance of the TFP cycle equation. Exploiting this, simulations over increasing
values of the priors of the residual variance of the TFP cycle equation are run for eight EU countries, leading to decreasing
procyclicality of TFP trend estimates. Procyclicality of the estimated TFP trend reduces the standard error of revisions for
half of the countries considered, while it implies an increase for the other countries or has no effect. Thus there is a trade-off
between procyclicality of the TFP trend and the revision error, but it is not so clear cut. The standard errors of revisions
of real-time estimates of the TFP trend as a criterion of model selection could improve forecasts additionally to the marginal
likelihood value employed by the EC.
This contribution evaluates determining factors of specific trade concerns (STCs) raised on technical barriers to trade (TBT)
notifications over the period 1995-2011. While multilateral and international agreements bind countries concerning the imposition
of tariffs on imports, TBTs have been used as trade policy instruments, which conceal the true motivations of governments.
The main legitimate reasons behind the imposition of TBTs are to increase environmental qualities and human health, or to
improve market efficiencies. However, in addition to these reasons, governments are also in pursuit of protecting their domestic
industries. In fact, this contribution analyses how trade protectionist motives and legitimate public policy objectives induce
these specific trade measures. Various effective factors of TBT STC notifications are considered in the econometric analysis
using fixed effect Poisson estimation as the main technique, and Poisson GMM as robustness specification. Separate estimations
on the European Union block in this study points at the determining factors of TBTs harmonised by heterogeneous member countries.
Results suggest that bilateral trade and tariffs are one of the forces of TBT STC notifications, acknowledging the protectionist
behaviour of authorities. Moreover, countries with high quality of humans' health-related environmental issues, and low environmental
vitalities, are more likely to impose new TBTs. Overall, this study confirms the complex nature of TBT STCs affected by economic,
technological, institutional, and health and environmental issues.
This paper extends the literature on the implications of offshoring for labour markets by investigating its effect on the
wages of different skill groups in a broad global context. The analysis draws on input-output data from the WIOD project,
and in the panel analysed (13 manufacturing industries, 40 countries, 1995-2009) we account for up to 96 percent of the international
trade in manufacturing inputs. Being particularly interested in the wage effects of offshoring to low-wage countries (LWC),
we use precise LWC classifications (varying across industries and time) to decompose overall offshoring by source country.
We use a decomposition of the conventional offshoring measure in order to capture its pure international component, which
is further instrumented using a gravity-based strategy. According to the estimation results, the negative impact of offshoring
on wages mainly concerns low and medium skilled workers. However, in terms of magnitude, the downward pressure on domestic
wages exhibited by offshoring to LWC is relatively small.
This paper employs panel smooth transition regression models to investigate the nonlinear effects of two monetary policy proxies
(i.e., real exchange rate return and real interest rate differential) on the international reserves – macroeconomic variables
nexus. The panel data set includes the fourteen G-20 countries during the period 1991-2012. Empirical results show that the
marginal effects of the macroeconomic variables (savings, terms of trade, public debt, capital account liberalisation, economic
growth, and trade openness) on international reserves are non-linear and vary with time, the proxies and countries, not linear
and constant derived from traditional linear model. Currency devaluation policy (against the US dollar) can non-linearly enlarge
the positive contribution of trade openness and public debt on international reserves, and non-linearly reduce the negative
impact of terms of trade on international reserves, as the Marshall-Lerner condition holds. Expansionary monetary policy (through
the decrease in domestic interest rates) can strengthen the positive effects of public debt, trade openness, and economic
growth on international reserves. The precautionary and mercantilist views of reserves holdings are partially supported.
This study revisits purchasing power parity (PPP) for the G6 countries (i.e., Canada, Italy, Japan, France, Germany, the UK)
using the smooth time-varying cointegrating approach, proposed by Park and Hahn (Econom Theory 15:664-703, 1999). Using monthly
data over the period January 1971 to December 2013, our empirical results indicate that PPP holds in two out of six countries
(i.e., France and Germany).
Both inflation and inflation expectations declined considerably in the inflation targeting countries during the past two decades.
The questions of whether this decline has actually been an outcome of inflation targeting solely and whether inflation targeting
has been successful in stabilising other macroeconomic variables though remain. This study considers these questions on the
basis of 16 inflation targeting countries and 21 non-targeting ones using a difference-in-difference approach. With regard
to the baseline period of 1996-1999 during which neither of the groups was implementing inflation targeting, a difference-in-difference
approach was employed to assess the effects of inflation targeting on inflation, output growth, real exchange rates, inflation
volatility and real exchange rate volatility during moving 4-year periods between 2007 and 2015. Our estimates suggest that
inflation targeting was superior in terms of harnessing inflation as well as inflation volatility. In terms of economic growth,
however, inflation targeting seems to be neutral and in terms of real exchange rates it seems not to be stabilising, if not
de-stabilising. A hybrid version of inflation targeting, namely the conventional inflation targeting augmented by an improved
capacity to deliver macro-prudence as in the post-Lehman economic climate, can therefore be viewed as the best available policy
alternative for the upcoming decades.