Business Cycles in EU Member States

The paper investigates the business cycle relationships between the EU-15, the EU-11, as well as the EU-core countries for the period 1971 to 1997. Emphasis is put on the question whether there is a synchronization in the national business cycles or not. Using One-way- and Twoway-Anova techniques the results show that country-specific shocks are important to the smaller countries such as Luxembourg, Ireland, Portugal, and Finland. But for most of the EMU-members common shocks are much more important than country-specific shocks. In addition there is no indication of significant differences in the national growth rates, i.e. the European countries do not move along diverging growth paths. Nevertheless, departures over the business cycles are possible because persistence in output growth differs across countries. -- In dem Beitrag wird der konjunkturelle Zusammenhang zwischen den EU-15, den EU-11 und den ?Kern?-EU-Staaten für den Zeitraum von 1971 bis 1997 dahingehend untersucht, ob zwischen den Staaten ein konjunktureller Gleichlauf besteht oder nicht. Eine One-Way- und eine Two-Way-Anova-Analyse zeigt, daß insbesondere für die kleineren Länder länderspezifische Schocks eine beträchtliche Bedeutung haben. Demgegenüber dominieren bei den Kernländern deutlich die ?common shocks?. Da keine länderspezifischen Unterschiede feststellbar waren, kann daraus der Schluß gezogen werden, daß sich die europäischen Staaten entlang eines einheitlichen Wachstumspfades entwickeln. Gleichwohl können kurz- bis mittelfristige Abweichungen eintreten, da die Persistenz im Output für die einzelnen Länder unterschiedlich ist.

Coordinating VATs Between EU Member States

The paper surveys the characteristics of the common European VAT system, proposed by the EU-Commission to overcome the weaknesses of the transitional European VAT system, which was enacted in 1993 and is still in force. We argue that a harmonized VAT rate will generate substantial costs for EU member states to meet national budget requirements and that the revenue sharing mechanisms will generate adverse incentives to national efforts in VAT collection and control. A comparison of the Commission proposal with four alternative VAT regimes favours a modified VIVAT system as an attractive compromise.value-added taxation, tax coordination.

Extreme Coexceedances in New EU Member States' Stock Markets

We analyze the financial integration of the new European Union (EU) member states' stock markets using the negative (positive) coexceedance variable that counts the number of large negative (large positive) returns on a given day across the countries. We use a multinomial logit model to investigate how persistence, asset classes, and volatility are related to the coexceedance variables. We find that the effects differ (a) between negative and positive coexceedance variables (b) between old and new EU member states, and (c) before and after the EU enlargement in 2004 suggesting a closer connection of new EU stock markets to those in Western Europe.Financial market integration, Comovement, Emerging markets, EU enlargement, EU Member States, Extreme returns, New EU Member States, Stock Markets

Twin deficits and the Feldstein-Horioka puzzle: a comparison of the EU member states and candidate countries

The paper’s main objective is to investigate the empirical link between the fiscal balance and the current account (i.e. the twin deficits phenomenon). The paper focuses on the EU member states and candidate countries which are according to their different (e.g. historical, political, economical and geographical) characteristics divided into two major groups, i.e. old EU member states (EU15) and new EU member states and candidate countries (EU12+3) in the 1995-2008 period. Additionally, the importance of the so-called Feldstein-Horioka puzzle in the considered countries is examined in order to draw some conclusions about the regions’ integration with international capital markets. The empirical results suggest that budget deficits in the EU member states and candidate countries have generally signaled relatively high level of substitutability between private and public savings, implying a relatively low correlation between fiscal and external imbalances. Thus, the empirical results in general reject the validity of the twin deficit hypothesis. Finally, the paper provides evidence of a relatively higher level of capital mobility, especially in the EU12+3 region in the second sub-period (2004-2008).twin deficits, Feldstein-Horioka puzzle, capital mobility, EU member states, candidate countries, panel data analysis

Financial integration of new EU Member States

This study assesses the degree of financial integration for a selected number of new EU member states between themselves and with the euro zone. Within the framework of a factor model for market returns, we measure integration as the amount of variance explained by the common factor relative to the local components. We show that this measure of integration coincides with return correlation. Correlations are proxied by comovements, estimated via a regression quantile-based methodology. We find that the largest new member states, the Czech Republic, Hungary and Poland, exhibit strong comovements both between themselves and with the euro area. As for smaller countries, only Estonia and to a less extent Cyprus show increased integration both with the euro zone and the block of large economies. In the bond markets, we document an increase in integration only for the Czech Republic versus Germany and Poland. JEL Classification: C32, F30, G12integration, new EU member states, regression quantile

Interdependence Between Social Values and National Performance Indicators: The Case of the Enlarged European Union

Based on the desk research, the paper provides an empirical insight into correlations between some social values and five selected economic performance indicators for 20 European Union countries. We concentrated on Composite Trust. This is a one-dimensional representation of citizens’ trust on national level and is calculated from three different types of trust that van Oorschot and Arts (2005) derived from the European Values Study (2001). We confirmed correlations between trust and economic performance, but we have also noticed a very different pattern for the old and the new EU member states. The old EU member states show a positive correlation, on the other hand there is no such correlation for the new member states. A plausible hypothesis is that the same level of Composite Trust causes different effects in different societies and economies. We could also assume that social structures in the new EU member states are still distorted and are not in the equilibrium which characterizes EU countries with long democratic and market economy traditions. Economic performance in the new EU member states is based mainly on economic and not on social incentives. On the other hand, correlation between trust and innovativeness is strong in all studied countries. It confirms many studies which see trust as a fundamental social enabler and stimulator for innovativeness.trust, composite trust, social capital, social values, economic performance, innovativeness, European Union, new EU member states

Inflation forecasting in the new EU Member States

To the best of our knowledge, our paper is the first systematic study of the predictive power of monetary aggregates for future inflation for the cross section of New EU Member States. This paper provides stylized facts on monetary versus non-monetary (economic and fiscal) determinants of inflation in these countries as well as formal econometric evidence on the forecast performance of a large set of monetary and nonmonetary indicators. The forecast evaluation results suggest that, as has been found for other countries before, it is difficult to find models that significantly outperform a simple benchmark, especially at short forecast horizons. Nevertheless, monetary indicators are found to contain useful information for predicting inflation at longer (3-year) horizons. JEL Classification: C53, E31, E37, E51, E52, E62, P24Fiscal Policy, Inflation forecasting, information content of money, leading indicators, monetary policy, new EU member states