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Frigyes Ferdinand Heinz
- 1 December 2017
- OCCASIONAL PAPER SERIES - No. 203Details
- Abstract
- In the euro area, there is mixed evidence that the GDP per capita of lower-income economies has been catching up with that of higher-income economies since the start of monetary union. The significant real convergence performance of some of the most recent members contrasts with that of the economies of southern Europe, which have not met expectations. However, attributing all the blame for this outcome to the introduction of the single currency simply misses the point. By taking a “long view” and reviewing the evidence since the 1960s, this paper shows that certain member countries began to face a “non-convergence trap” long before the euro years. We also provide stylised facts on: (i) the central role of total factor productivity in driving real convergence in the euro area over time, alongside other factors; and (ii) the crucial interaction of real convergence with “Maastricht convergence” and institutional quality, the other two key components of sustainable economic convergence. We conclude that it is critical that the euro area countries facing convergence challenges enhance the resilience of their economic structures by improving the relevant institutions and governance.
- JEL Code
- E01 : Macroeconomics and Monetary Economics→General→Measurement and Data on National Income and Product Accounts and Wealth, Environmental Accounts
F15 : International Economics→Trade→Economic Integration
J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
O11 : Economic Development, Technological Change, and Growth→Economic Development→Macroeconomic Analyses of Economic Development
O43 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Institutions and Growth
O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence
O52 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Europe
O57 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Comparative Studies of Countries
- 25 June 2015
- WORKING PAPER SERIES - No. 1818Details
- Abstract
- Using extreme value theory tools, we demonstrate that the distributions of the exchange market pressure (EMP) series for most of twelve emerging Europe countries have heavy tails, and disregarding their tail properties may lead to substantial underestimation of the probability of tail events. Using an extreme-value-based EMP crisis definition leads to a different set of crisis determinants compared to a definition based on standard errors. The probability of extreme EMP periods in our sample is affected by global risk aversion, regional contagion, the level of international reserves, foreign direct investment, history of past crises and accumulated domestic credit and real exchange rate related imbalances.
- JEL Code
- C10 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→General
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
F37 : International Economics→International Finance→International Finance Forecasting and Simulation: Models and Applications
F32 : International Economics→International Finance→Current Account Adjustment, Short-Term Capital Movements
G01 : Financial Economics→General→Financial Crises
- 12 July 2011
- WORKING PAPER SERIES - No. 1360Details
- Abstract
- In this paper we estimate the degree of real wage flexibility in 19 EU countries in a wage Phillips curve panel framework. We find evidence for a reaction of wage growth to unemployment and productivity growth. However, due to unemployment persistence, over time the real wage response weakens substantially. Our results suggest that the degree of real wage flexibility tends to be larger in the central and eastern European (CEE) countries than in the euro area; weaker in downturns than during upswings. Moreover, there exists an inflation threshold, below which real wage flexibility seems to decrease. Finally, we find that part of the heterogeneity in real wage flexibility and unemployment might be related to differences in the wage bargaining institutions and more specifically the extent of labour market regulation in different country groups within the EU.
- JEL Code
- J31 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Wage Level and Structure, Wage Differentials
J38 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Public Policy
P5 : Economic Systems→Comparative Economic Systems
- 18 April 2007
- OCCASIONAL PAPER SERIES - No. 61Details
- Abstract
- Overall, the prospects for a continued and reasonably fast real convergence process between the EU 8 countries and the euro area are good. However, the continuation of the rapid progress made by many EU 8 countries in the past cannot be taken for granted. In fact, in order to ensure that fast economic growth in the EU 8 countries remains sustainable, it is crucial for these economies to take appropriate policy action. First it is important to recall that sound macroeconomic policies including credible monetary policy and appropriate fiscal policy are essential to ensure the appropriate framework conditions for further growth and convergence. Second, they need to address structural labour market problems, in particular by reducing regional and skill mismatches. Third, they must make further efforts to improve the business environment, in order to ensure that the capital accumulation process continues and R&D investments increase. Many of the above-mentioned facets of growth-enhancing policy will also help to ensure a continued inflow of foreign direct investment (FDI), which in turn is expected to help accelerate the convergence process.
- 26 October 2006
- OCCASIONAL PAPER SERIES - No. 52Details
- Abstract
- This paper examines the potential for increased cross-border labour mobility within the EU-25 and considers the costs and benefits of any increase in labour mobility to both sending and receiving countries in the medium to long run. Evidence from previous EU enlargement experiences, academic studies, the existence of barriers to mobility within the EU and the economic determinants of migration all indicate a moderate potential for increased migrant flows. The magnitude of cross-border labour flow in the medium to long run will most likely be largely a function of the demand for migrants and the speed at which the EU-8 catches up economically with the EU-15. In addition, faster population ageing in the EU-8 tends towards dampening migration flow from the new Member States in the medium term. In terms of costs and benefits, for the EU-8 countries labour migration, especially in the short run, may present a number of challenges. Emigration may tend to weigh disproportionally on the pool of young and educated workers, aggravating labour market bottlenecks. For the EU-25 as a whole, cross-border labour mobility is likely to offer a number of advantages, by allowing a more efficient matching of workers' skills with job vacancies and facilitating the general upskilling of European workforces. The current restrictions on labour mobility from the EU-8 countries to the other EU member countries stand in contrast with one of the central principles of the EU - the free movement of labour. Furthermore, these restrictions hamper an important adjustment mechanism within EMU. Delaying the removal of these barriers may be costly for the EU-25 at a time when leaders are concerned about Europe's international competitiveness. Finally, it would not be beneficial for Europe to loose a significant part of the most agile and talented individuals from the new Member States to more traditional migration centres.