Globalisation: Recent traits and challenges

This special issue gathers together twelve papers that revisit a range of core topics in the field of international economics. These papers were presented at the XIX Conference on International Economics (CIE) held in Vila‐Real (Spain) on 28th–29th June 2018. The Conference was co‐organized by researchers from the Spanish Association of International Economics and Finance (AEEFI) and the Institute of International Economics (IEI). The selected papers are stimulating pieces that shed new light on recent trends in globalization as well as some of the main challenges that need to be faced in the presence of the multiple yield curves that emerged after the credit crunch. The CIE also included two keynote lectures by Laura Alfaro (Harvard Business School) and Gabriel Quirós (IMF) as well as 64 selected contributions

Re-examining inequality persistence

Although it is not a new phenomenon, in recent years inequality has moved to the top of the political agenda given the concern that will result in political instability and social resentment. Persistence in inequality can further undermine economic growth and development by hindering educational opportunities, human capital formation, and intergenerational mobility. The persistent nature of inequality stands as one of the most serious challenges for the global economy. This paper analyses inequality persistence for a sample of 60 countries from 1984 to 2015. The authors conclude that inequality is persistent and government redistribution polices through taxes and transfers did not significantly reduce inequality persistence

Nonlinear adjustment in the real dollar-euro exchange rate: The role of the productivity differential as a fundamental

In this paper we analyze the influence of productivity differentials in the dynamics of the real dollar–euro exchange rate. Using nonlinear procedures for the estimation and testing of ESTAR models during the period 1970–2009 we find that the dollar–euro real exchange rate shows nonlinear mean reversion towards the fundamentals represented by the productivity differential. In addition, we provide evidence about the ability of this variable to capture the overvaluation and undervaluation of the dollar against the euro

Unemployment and common smooth transition trends in central and eastern european countries

In this paper we analyse whether the apparent comovement of unemployment rates for some of the Central and Eastern EU new members can be explained by a common force, possibly linked to the process of economic integration. For this purpose we test for nonlinear unit roots as a first step to testing for common nonlinearities. Our results show that for five countries, out of eight, unemployment dynamics appear to be well described as a stationary process around highly persistent structural changes. Furthermore, we find evidence of a common nonlinear component driving the unemployment rates

Oil prices and unemployment in the UK before and after the crisis: A Bayesian VAR approach. A note.

The aim of this paper is to analyse the role of oil price movements in the evolution of unemployment in the UK, accounting for asymmetric effects. Distinguishing between positive and negative innovations in oil prices allows us to provide policy insights. Estimating Bayesian SVARs, we find that the relationship between oil prices and unemployment in the UK differs before and after the beginning of the Great Recession. We also find that negative oil price innovations have contributed positively to preventing further rises in unemployment after the start of the crisis in 2008

Social Exclusion and Convergence in the EU: An Assessment of the Europe 2020 Strategy

Economic convergence has long been a declared objective of the EU and considered the fundamental mechanism for achieving socioeconomic cohesion. The recent economic crisis had an uneven impact across EU countries and brought a halt to the process of economic and social convergence. In response to this situation, the Europe 2020 strategy, launched in 2010, aimed to deliver social and territorial cohesion in the Member States. In this paper we evaluate the poverty and social exclusion pillar of the Europe 2020 strategy by analysing whether it has promoted convergence across the EU countries in the indicators devised to capture risk of poverty, severe material deprivation, and the number of persons living in households with very low work intensity. Our results for all three rates indicate that convergence occurs in heterogeneous clubs that do not follow a geographic east‒west or south‒north pattern. Convergence within each club, especially for the severe deprivation rate, takes place by means of a catching-up process, with Eastern European levels converging on the Western levels. Finally, not only is there club convergence, but there is no tendency for the clubs to convergence. Poverty and social cohesion indicators show a multi-speed Europe, casting doubt on the sustainability of the overall convergence process in the EU

The expectations hypothesis of the term structure in the Euro area

This paper tries to ascertain whether the expectations hypothesis of the term structure of interest rates was fulfilled for the EMU countries in the period previous to its launching. To this end, we employ individual country data for the Euro area. Using pooled and panel cointegration techniques we conclude that there is an equilibrium relationship linking the long and the short-run interest rates for both the individual countries and the panel as a whole. Due to the homogeneity found in the short-long term interest rates relationship across countries, the fears raised about the use of area-wide aggregates by the ECB if not discarded need to be, at least, qualifie

The effect of the EMU on short and long-run stock market dynamics: New evidence on financial integration

This paper deals with the time evolution of stock market integra- tion around the introduction of the euro. In particular we test whether the degree of integration between the main eurozone countries increased after European monetary union. The contribution of the paper to the extant literature is twofold: a) first, we take into account the poten- tial long-run equilibrium relationship between stock indices allowing for structural changes in the cointegration space that might capture the ef- fect of the introduction of the euro, and b)we formally test the existence of greater financial integration after European monetary union across the main member countries and between these members and the UK. Empirical evidence reveal the existence of long-run equilibrium relation- ships between European stock markets even before the introduction of the euro. Our empirical findings suggest that financial integration is not the direct consequence of the removal of exchange rate risk due to currency unification. Rather, it arises as a result of macroeconomic con- vergence. This aspect is corroborated by the nature of the principal component structure of estimated conditional correlations

External macroeconomic factors and the link between short- and long-run European interest rates: a note

This article analyzes the long-run relationships linking long- and short-run interest rates for the Euro-wide aggregated variables. To this end, we extend the set of variables traditionally involved in the Campbell and Shiller (1987) framework for the term structure to add external macro variables (the exchange rate, U.S. inflation, and U.S. short-run interest rates). Our results support the expectations hypothesis and also stress the importance of accounting for foreign economy influences on European monetary policy, namely, the real exchange rate of the American dollar as well as real interest rate