Economic Integration and Macroeconomic Convergence in the Euro Area

In this paper I discuss various notions and aspects of integration and macroeconomic convergence, namely economic and monetary integration; real and nominal convergence. The EU has offered a great deal of information about the relation between all these types of integration and macroeconomic convergence. The EU has assumed that monetary integration is a precondition of deep economic integration and it has also assumed that the criteria to be adopted to converge to its own brand of economic and monetary union (EMU) are basically the same needed within the monetary union itself. Judging from the evidence of the first ten years of EMU, the actual relationship between real growth and inflation has turned out to be far from clear; and the paper provides a comparison between statistical evidence and the diverging predictions offered by two standard macroeconomic models.Inflation, stability, euro zone

Inflation and Growth in the Euro Zone

Although euro area-wide inflation was from 1999 to 2005 almost right, i.e. “close to balance, but below 2%”, and although it combined with real growth as predicted by the long-run money demand equation in the euro area, the picture that emerges at country level is more scattered. Inside a monetary union, inflation divergences could be destabilizing and an excessive dispersion could be a problem, thus the scattered performance of the single members in terms of HICP inflation and real growth is an issue that the euro area governance is illprepared to manage. It may be of interest, therefore, to understand whether observed differences come from the money market or from the costs side or from the interaction between supply and demand when agents are forward looking. The paper sets out to ascertain whether the patterns of inflation and growth data observed in the twelve members and Slovenia compare to what is predicted by the long-run money demand equation in the euro area, the Balassa-Samuelson construct or the New Keynesian model.Inflation, stability, euro zone

Growth and Inflation Disparities in Corridor V

The paper offers a brief discussion about the role of transport infrastructure in the current growth strategy followed by the EU. As a corridor is the locus where transport infrastructure and growth should interact more effectively, the central part of Corridor V is considered as an interesting case study. A growth scenario for eight countries is provided to show that wide growth disparities are to be expected during the next decade. The final part of the paper speculates about inflation differentials that are likely to emerge when growth differentials tend to persist inside a monetary union. As the Euro zone will be enlarged to host fast-growers in Corridor V such as Slovenia (maybe as soon as 2007), Hungary and the Slovak Republic, growth differentials and the single monetary policy could make it difficult to deliver a common monetary environment.Growth, money demand; inflation; infrastructure, European Union

Real Interest Rates and the Crisis: Where are the Rates Headed?

This paper examines the likely direction of real interest rates in the Euro area and the United States from April 2009 on. It is argued that the crisis that began in 2007 and the ensuing recession changed the descending trend in real interest rates which started a long time ago. If real interest rates were to rise too much, private and public finances, housing markets and stock markets would suffer particularly in the countries where the past credit binge and the crisis response has made debts mount, thus prolonging the current crisis. Economic theory should help shed light on the likely future direction of long-term real interest rates. In the paper, growth models are briefly discussed and shown to offer disparate predictions about the level of real interest rates in a growing economy and little practical guidance. Monetary theories, i.e. theories explicitly focused on the role of interest rates in balancing supply and demand in the single markets of the economy, make reference to some normal or natural level of real interest rate but obviously suffer from the difficulties of estimating such normal or natural levels both in general and particularly in a unusually dynamic and uncertain situation such as the current one. The more pragmatic approach, consisting in the assessment of the relevant single components of the long-term real nominal interest rate over the cycle, points to the risks of a surge in the risk premium as well as in expected short-term real interest rates and thus to a prolongation of the current economic contraction.Interest rates

Small Lessons from the Recent Euro-Dollar Skirmishes

We investigate in this paper the skirmishes that the US dollar and the euro had from 2007 to 2011 and, in particular, the two distinct sharp falls that the single currency had in 2008 and 2010. We basically consider how impulses coming from domestic money markets impact on the USD/EUR exchange rate through the Eurocurrency market. Our findings show that the cycles in the spreads in the LIBOR rates have a bearing on the direction of change in the spot exchange rate in a way which is different from that predicted by the interest rate parity. The exposure of the value of reserve currencies to the vagaries of the outside circulation in the Eurocurrency and FX markets is only one of the many different policy implications of the current arrangement of the international monetary system. In the final part of the paper we also discuss some of those tied to the very existence of the international money market and to competition among old and emerging global currencies and financial centres.Exchange rates, LIBOR rates, reserve currencies, financial centres.

Productive Efficiency in 16 European Countries

We investigate in this paper differences in productive efficiency across sixteen European countries. In order to assess differences in productive efficiency, we have built a dynamic input-output model and computed for each country the balanced growth rate and the balanced output composition. After that, we investigate how the differences existing between the output composition for balanced growth and the actual one relate to the differences between the rate of balanced growth and the actual one. In the final part of the paper we examine the influence of individual sectors on the rate of balanced growth by looking for growth-sensitive sectors.Productive efficiency, input-output, growth, Europe

Corporate governance, gender and performance: an empirical analysis of italian banks

Banks differ from non-financial institutions, given the nature of their business they can create huge problematics on the financial system in case of failure. This dissertation deepens the theme of governance and its possible effects on the performance of italian banks. It focuses in particular on the effect of gender diversity, employing an empirical analysis to retrieve similarities and differences with the relevant literature.ope

Mixed Estimation of Survey-Based Input-Output Models

This paper is concerned with the estimation problems of national and regional static input-output (I-O) models. It is argued that often what are really needed in I-O analysis are the coefficients of an I-O model and not the flows of the I-O table. An econometric estimate of "columns only" coefficients is suggested as a means of obtaining unbiased estimates and a measure of their reliability. Another important feature of the approach suggested is the attention given to extraneous information and judgment. Different estimators are given for the various situations that may occur. Results of a tentative partial application of this approach to a sector of the I-O model of the Veneto region are given

TENT-T priority projects : where do we stand?

TEN-T is intended to provide the single market with integrated modern transport networks, but infrastructure investment per se has other important effects. Besides reviewing the different reasons that justify public investment in infrastructure capital, the paper focuses the existing obstacles to a full implementation of TEN-T and, in particular, the funding gap, which has always been the most evident obstacle of them. Prospects and possible remedies are also briefly considered.peer-reviewe

The Tuscany Interregional Input-Output Model (TIM): Mathematical Structure and Preliminary Results

Specialization is one of the foremost traits of modern industrial development. Technical and commercial factors have interacted to make large-scale production more profitable than earlier. This process has been concomitant with a regional concentration of production activities according to the prevailing comparative advantages. Even large, and strong, economic regions tend to have an insufficiently differentiated economy. In Tuscany, Italy, it is the leather, footwear, and textile industries that constitute the economic backbone of the region. They are complemented by, and competitive with, the traditional tourist industry. Technical progress and the development of factor costs have entailed a shift in international and interregional comparative advantages. Those industries demanding only low-skilled labor have expanded in low cost countries or regions. How these factors will affect the long-term development is a general problem of strongly specialized regions in industrialized countries. Such questions are also at the core of the case study of systems analysis for regional industrial development undertaken by the Regional Development Group, IIASA, in collaboration with the Regional Institute for Economic Planning of Tuscany (IRPET). A third party in this collaboration is the Institute for Applied Systems Analysis (IASI) of the National Research Council, Rome. In the case study, a system of economic forecasting and policy evaluation models that address the above-mentioned development issues are being built. The models have a stronger emphasis on interregional and international dependencies than earlier regional studies. Moreover, the role of the regional authorities in policy generation and evaluation is more clearly designed here than elsewhere. The aim of the work is to develop a computerized model system for more or less permanent use, with a direct applicability to other urbanized regions of the Tuscany type. The Tuscany interregional input-output model (TIM) described in this paper forms the core of the economic forecasting and policy-evaluation model system. TIM is a linear static recursive system of equations of small dimensions that is intended as a tool for analyzing the trade relations of Tuscany. Tuscany and the Rest-of-Italy are considered as two regions in TIM. Each one is linked to the rest of the world where exports are exogenously determined. Foreign trade is taken into account by distinguishing between national and international flows. Complementarity and competitiveness of imports are considered in this model