In current economic conditions, financial stability is paramount to the proper functioning of open markets. Financial stability must be balanced with financial flexibility. This relationship is deeply affected by financial fragmentation. This is why Central Banks have focused on these issues in the last decade in particular. Both financial stability and financial fragmentation have unintended consequences on optimal currency areas. In this paper, we survey the original optimal currency areas literature and relate it with the new literature on financial stability and financial fragmentation. We highlight the importance of new macroprudential policies both at the national and regional levels.
This article investigates the impact of European Central Bank policies on credits considering financial and banking fragmentation. Using European data from the past decade, we estimate SVAR models to analyze the regional impact of conventional and unconventional measures on price and volume indicators of fragmentation. The risk-taking channel is studied using GVAR models to document the national consequences of this fragmentation. We find that unconventional measures increase credit in peripheral countries. Monetary policies alleviate fragmentation, but mostly in terms of price dispersion rather than credit volume. Finally, unconventional measures imply a rebalancing of European bank assets in favor of foreign currency denominated-assets.
This paper estimates, using Bayesian and global VARs, the spillover effects of unconventional fiscal and monetary policies implemented in the United States and in the Eurozone during the last decade. Consumer confidence and investor sentiment indicators are introduced in the models in order to highlight the signalling channel in the responses to economic policy innovations in times of crisis. Our results reveal that consumer and investor perceptions of innovative economic measures are relevant to study the pass-through of economic policies to the real sector in times of crisis and zero lower bound interest rates. In particular, the signalling channel plays an important role in successful unconventional economic policies. Moreover, if unconventional economic policies have an impact abroad, the effects are similar to those measured in the domestic country/region. Consequently, coordination and transparency are a prerequisite for ensuring short-term growth after a global financial crisis.
This paper sheds light on the macroeconomic impact of financialization in the banking sector. We develop a new stock-flow consistent model, which reveals that excessive leverage increases financial fragility, lowers wages, and slows down real sector investment and GDP growth. Using a panel of 29 high income countries, we then construct indicators of banking financialization and investigate the impact of the latter on the wage share, gross capital formation and GDP growth, using a Bayesian structural VAR framework, as well as a set of fixed effect regressions. Our results highlight that financialization has had a detrimental impact on real sector growth. Finally, we discuss the implications of our results to propose reforms to the international financial system.
Despite the large literature on the link between climate evolution and country economic performance, the specific question of the effects of climatic changes via the agricultural sector broken down by annual seasons in the Euro-Mediterranean region, which is considered as a hotspot of climate change, remains largely understudied. This paper investigates both the incidences of seasonal rainfall and temperature variations on GDP from an historical perspective and the impact of climate anomalies on cereal output. Our results point to the fact that climate shocks affect significantly the GDP of Euro-Mediterranean countries specialized in the agricultural production, in particular during winter and spring. In these seasons, the impacts of climate anomalies are strong on cereal output in southern and eastern Mediterranean countries. These results underline the fact that agriculture is one of the main channels of the influence of climate change on GDP in this region. Crop diversification could be part of the response for enhancing resilience of the entire economy while preserving food security objectives.
The article studies the main determinants of European football clubs’ stock returns and volatility. A panel-data analysis of a sample of 24 European football clubs was conducted to test the influence of several variables, based on a matrix of internal/external and real/financial dimensions, on both stock returns and their volatility. The results show that clubs’ stock returns are influenced by the real and financial context and by a set of internal variables such as profit considered as a reflection of accounting discipline, capitalization as an indicator of size and stadium attendance as a proxy indicator of reputation. The volatility of stock returns seems particularly vulnerable to the overall instability on stock markets and dependent on clubs’ profit and net players’ transfers and, to a lesser extent, on sporting outcomes.
One of the most striking consequences of the recent episode of sovereign debt market stress in the Eurozone has been the increase in the share of public debt held by the domestic sector in fragile economies. However, the causes and potential consequences of this increase were only given scarce attention in the literature on the Euro area sovereign debt crisis. In order to fill this gap, we first determine the shocks that impact the variation in the share of sovereign debt held at home in an SVAR model on a sample of Eurozone countries between 2002 and 2014, distinguishing between external and domestic shocks. Thanks to several alternative tests, we show that home bias in sovereign debt responds positively to country-specific fundamentals and expectation shocks but we find no evidence that the increase in home bias is destabilizing per se in the short-run. Second, a stylized theoretical model backed by the empirical results predicts that the consequences for sovereign debt crisis depend on the relative impact of domestic initial destabilizing shocks and increased home bias. The analysis suggests that an increase in home bias in times of sovereign debt stress, despite reflecting deteriorating fiscal conditions, may make default less likely.
Pour les économies émergentes, le retour annoncé à des politiques monétaires conventionnelles aux États-Unis, qui se traduira par une remontée des taux directeurs américains et une réduction de la liquidité globale, pose la question du régime monétaire qu’adopteront ces pays pour assurer une croissance stable sans instabilité financière dans la période d’après-crise. Par régime monétaire, on entend la combinaison des règles de politique monétaire, des objectifs de stabilité financière et du choix d’un régime de change. Après avoir examiné le régime monétaire des émergents face aux politiques monétaires non conventionnelles depuis la crise, on s’intéresse aux spillovers internationaux provoqués par la politique monétaire américaine, avant d’analyser les divers dilemmes ou trilemmes entre lesquels devront arbitrer les banquiers centraux des pays émergents pour définir leur régime monétaire après la normalisation.Classification JEL : E58, F31, F33, F38, O16.