The dynamics of core and periphery in the European monetary union: A new approach

Despite numerous studies about core-periphery in monetary unions, few focus on their dynamics. This paper (i) presents new theory-based, continuous and dynamic measures of the probability of a country being classified as core or periphery; (ii) estimates the determinants of the changes in this probability over time and across countries; and (iii) uses the Phillips-Sul convergence panel framework to investigate the behaviour of core and periphery groups over time. Our main results indicate that the post-EMU decrease of the core-periphery gap that we document was mainly driven by the adoption of the euro and by increasing competition (lower mark-ups)

Post-crisis Excess Liquidity and Bank Lending

This document was requested by the European Parliament's Committee on Economic and Monetary Affairs.With the Asset Purchase Program, the European Central Bank has supplied significant amounts of liquidity into the financial system starting from 2015, resulting yet into a new upswing in excess liquidity. The expanded asset purchase programme (APP) program broadly coincided with further cuts in the ECB’s deposit facility rate, which currently stands at -0.4%. Against this background, this note assesses the ECB policy of negative rate on the deposit facility and discusses the associated risks in the context of an excess liquidity overhang for the euro area, including risk-appetite for banks.European Parliament. Committee on Economic and Monetary Affairs

A VAR analysis for the uncovered interest parity and the ex-ante purchasing power parity: the role of macroeconomic and financial information

This study revisits the relation between the uncovered interest parity (UIP), the ex ante purchasing power parity (EXPPP) and the real interest parity (RIP) using a VAR approach for the US dollar, the British sterling and the Japanese yen interest rates, exchange rates and changes in prices. The original contribution is on developing some joint coefficient-based tests for the three parities conditions at a long horizon. Particularly, test results are derived by rewriting the UIP, the EXPPP and the RIP as a set of cross-equation restrictions in the VAR (see also Campbell and Shiller, 1987; Bekaert and Hodrick, 2001; and Bekaert et al., 2007; King and Kurmann, 2002). Consistent with the idea of some form of proportionality among the above three parities, we find a ”forward premium” bias in both the UIP - as it is normally found in empirical analysis (e.g. Fama, 1987) - and the ex ante PPP. The latter result is new in the literature and stems from testing the PPP in expectational terms, thus assuming agents to bear on the uncertainty of future exchange rate changes and inflation dynamics. The overall results confirm the UIP to be currency-based (see also Bekaert et al., 2007) and the EXPPP to be horizon-dependent (see also Lothian and Taylor, 1996; Taylor, 2002). Moreover, we find (weak) evidence that conditioning the VAR on variables having a strong forward-looking component (i.e. share prices) helps recover a unitary coefficient in the UIP equation. JEL Classification: E31, E43, E44, F31, C5

Symmetry and Convergence in Monetary Unions

This paper has three main objectives, namely to (a) propose a new framework that can support placing countries along a core-periphery continuum (beyond the more common binary treatment as either core or periphery), (b) to construct a continuous dynamic theory-based measure (the first, to the best of our knowledge) illustrating the use of this framework for a set of European countries using yearly data from 1960 to 2015, and (c) provide a first preliminary assessment, based on endogenous Optimal Currency Area (OCA) theory, of the main potential explanatory factors of the dynamics of this measure over time and across countries. Our main finding is that this new measure allows us to identify sets of countries on the basis of not only its level but also in terms of its dynamic behaviour. Using the Phillips-Sul procedure, we show the emergence a newer set of core countries (composed by Austria, Belgium, Germany, France, Italy and Netherlands), a mixed set of countries (namely Denmark, Sweden, Greece, Spain and the UK), and a set of deep-rooted periphery countries (Finland, Ireland, Norway, Portugal, and Switzerland). There are valuable lessons from the dynamics of this measure. It increases for core countries (which confirms endogenous OCA predictions), remains worrisomely constant for a periphery, and varies substantially for the intermediate set of countries. Spain (Sweden and Greece) becomes consistently more (less) core over time, Denmark’s remains constant and the UK moves in and out of the core over time. Our panel estimates on a specification suggested by endogenous OCA theory imply that euro membership and more flexible product market regulations (or trade openness) make countries more likely to be in the core

The Impact of Income and Health on the Economic Decision to Retire (Early)

The economic decision to cease working is traditionally based on standard life-cycle models, where individuals trade-off between market work versus home production or leisure. In this paper, we study such transitions out of work for 26 EU countries over the period 2004-2011 in order to investigate the determinants of retirement: income and health, in particular. Control- ling for these factors, we do not find any significant differences in the retire- ment pattern between the average euro area and EU non-euro area countries. Moreover, we find that shifts into retirement have increased during the onset of the 2008-09 economic and financial crisis. Income, together with flexible working arrangements, as well as private pension plans, are found to be im- portant as regards early retirement decisions, compared to retiring on (or beyond) the legal retirement age. Concerning health measures, we show that institutional factors (such as, state / health benefits, minimum retirement age) could not be sufficient alone if individuals withdraw earlier from the la- bor market due to a weakening of their health. Especially, these latter results can be of importance for structural and macroeconomic policy, for instance, in increasing the employment of both people and hours worked against the background of population aging

Core and Periphery in the European Monetary Union: Bayoumi and Eichengreen 25 Years Later

Bayoumi-Eichengreen (1993) establish a EMU core-periphery pattern using 1963-1988 data. We use same methodology, sample, window length (1989-2015), and a novel over-identifying restriction test to ask whether the EMU strengthened or weakened the core-periphery pattern. Our results suggest the latter

The United Kingdom and the Stability of the Euro Area: From Maastricht to Brexit

© 2020 The Authors. The two key events expected to mark the year 2019 were the 20th anniversary of the euro and Brexit. This paper examines the role of the United Kingdom on the stability of the euro area. We study stability from the perspective of synchronisation of economic activity in a core and periphery framework. We show the UK, since 1990, has become significantly more integrated with the EU economy. The UK moved from the periphery before 1990 to the core afterwards. We also find that the level of synchronisation of the UK economy has had the highest variability over time among all countries

Interaction between monetary policy and bank regulation: Theory and European practice

The European Union has pursued a number of initiatives to create a safer and sounder financial sector for the single market. In parallel, bold unconventional monetary policies have been implemented in order to combat low inflation, foster risk taking and, ultimately, reinvigorate growth. But monetary and macro-prudential policies interact with each other and thus may enhance or diminish the effectiveness of the other. Monetary policy affects financial stability by shaping, for instance, leverage and borrowing. Equally, macro-prudential policies constrain borrowing, which in turn have side-effects on output and prices, and therefore on monetary policy. When both monetary and macro- prudential functions are housed within the central bank, coordination is improved, but safeguards are needed to counter the risks from dual objectives. Against this background, this paper outlines the theoretical and empirical underpinnings of macro-prudential policy, and discusses the way it interacts with monetary policy. We identify advantages as well as risks from cooperating in the two policy areas, and provide suggestions in terms of institutional design on how to contain those risks. Against this backdrop, we evaluate the recent European practice

Assessing ECB Quantitative Easing: One Year On: In depth analysis

"This policy contribution was prepared on request of the ECON Committee of the European Parliament for the Monetary Dialogue with the President of the European Central Bank on 02/06/2016 (http://www.europarl.europa.eu/committees/en/econ/monetary-dialogue.html). Copyright remains with the European Parliament at all times". © 2016 European UnionDISCLAIMER The opinions expressed in this document are the sole responsibility of the authors and do not necessarily represent the official position of the European Parliament. Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is given prior notice and sent a copy."More than one year after the first implementation of the ECB programme of asset purchases, it is appropriate to assess its effectiveness and discuss pros and cons of potential further expansions. An in-depth analysis by key monetary experts is provided in this compilation. The notes have been requested by the Committee on Economic and Monetary Affairs as an input for the June 2016 session of the Monetary Dialogue."The ECB’s expanded asset purchase programme (EAPP) adds the purchase programme for public sector securities to the existing private sector asset purchase programmes to address the risks of a too prolonged period of low inflation. It now consists of a covered bond purchase programme (CBPP3), asset- backed securities purchase programme (ABSPP) and public sector purchase programme (PSPP). However, as the transmission mechanisms of monetary policy remains characterized by long, variable and uncertain time lags, the impact of asset purchases on the real economy continues to be a matter of discussion as confirmed by the slow recovery in bank lending. Some economists even argue that the most effective transmission channel of unconventional monetary policy is the exchange rate. Against this backdrop, the note assesses the effectiveness of the ECB programme of asset purchases one year after its first implementation.European Parliament - Monetary Policy Dialogu

Freeze/thaw stress induces organelle remodeling and membrane recycling in cryopreserved human mature oocytes

Purpose: Our aim was to evaluate the ultrastructure of human metaphase II oocytes subjected to slow freezing and fixed after thawing at different intervals during post-thaw rehydration. Methods: Samples were studied by light and transmission electron microscopy. Results: We found that vacuolization was present in all cryopreserved oocytes, reaching a maximum in the intermediate stage of rehydration. Mitochondria-smooth endoplasmic reticulum (M-SER) aggregates decreased following thawing, particularly in the first and intermediate stages of rehydration, whereas mitochondria-vesicle (MV) complexes augmented in the same stages. At the end of rehydration, vacuoles and MV complexes both diminished and M-SER aggregates increased again. Cortical granules (CGs) were scarce in all cryopreserved oocytes, gradually diminishing as rehydration progressed. Conclusions: This study also shows that such a membrane remodeling is mainly represented by a dynamic process of transition between M-SER aggregates and MV complexes, both able of transforming into each other. Vacuoles and CG membranes may take part in the membrane recycling mechanism