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  • Author: Daniel Gros
  • Publication Date: 07-2012
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This paper presents a simple model that incorporates two types of sovereign default cost: first, a lump-sum cost due to the fact that the country does not service its debt fully and is recognised as being in default status, by ratings agencies, for example. Second, a cost that increases with the size of the losses (or haircut) imposed on creditors whose resistance to a haircut increases with the proportional loss inflicted upon them.
  • Topic: Debt, Economics, International Trade and Finance, Markets, Financial Crisis
  • Political Geography: Europe
  • Author: Andrea Renda, Fabrizio Cafaggi
  • Publication Date: 10-2012
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: Private governance is currently being evoked as a viable solution to many public policy goals. However, in some circumstances it has shown to produce more harm than good, and even disastrous consequences as in the case of the financial crisis that is raging in most advanced economies. Although the current track record of private regulatory schemes is mixed, policy guidance documents around the world still require that policy-makers give priority to self-and co-regulation, with little or no additional guidance being given to policymakers to devise when, and under what circumstances, these solutions can prove viable from a public policy perspective. With an array of examples from several policy fields, this paper approaches regulation as a public-private collaborative form and attempts to identify possible policy tools to be applied by public policy-makers to efficiently and effectively approach private governance as a solution, rather than a problem. We propose a six-step theoretical framework and argue that IA techniques should: i) define an integrated framework including both the possibility that private regulation can be used as an alternative or as a complement to public legislation; ii) involve private parties in public IAs in order to define the best strategy or strategies that would ensure achievement of the regulatory objectives; and iii) contemplate the deployment of indicators related to governance and activities of the regulators and their ability to coordinate and solve disputes with other regulators.
  • Topic: Economics, International Trade and Finance, Markets, Regional Cooperation
  • Political Geography: Europe
  • Author: Consuelo Pacchioli
  • Publication Date: 05-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: As an alternative to measuring the extent of market integration, 'home-bias' indicates the degree to which economic agents 'over-prefer' to transact with domestic agents rather than agents from other EU countries. Such an exclusive preference is measured against a benchmark of (ideal) market integration and is called 'home-bias'.
  • Topic: International Trade and Finance, Markets, Regional Cooperation
  • Political Geography: Europe
  • Author: David Kleimann
  • Publication Date: 04-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: The first 16 months of the EU's common commercial policy (CCP) in the post-Lisbon period provide indicative insights into how the European Parliament, the European Commission and the Council of Ministers interpret their respective roles under the new legal framework introduced by the Lisbon Treaty. This paper analyses the amendments, the institutional capacities to respond to the reform challenges and the evolving institutional balance applying to Lisbon-era common commercial policy. Against this backdrop, the paper gives an overview of the changing dynamics of EU trade and investment policy in a context of enhanced politicization resulting from the European Parliament's involvement in the decision-making process. Particular importance is given to the question whether enhanced EP involvement in decision-making has the potential to lead to a scenario resembling the policy process in the United States, where congressional responsibility for trade and investment policy has resulted in the capture of the policy agenda by special interest groups and snail-paced policy progress (if any) in recent years. Accordingly, the paper scrutinizes the political preferences that the European Parliament is introducing into current European trade policy debates as well as the framework legislation and trade agreements. Finally, it is argued that parliamentary involvement in making common commercial policy has the potential to narrow the gap between European public political preferences and perceptions, on the one hand, and actual EU trade policies on the other, and to place EU trade and investment policies on a foundation of renewed public political support. In the author's view, however, it is imperative that such an achievement is based on well-informed, responsible, sustainable and clearly communicated policy proposals from the MEPs, who respond to and seek to balance the multiplicity of interests of CCP stakeholders in European civil society and respect the Union's international obligations.
  • Topic: Economics, International Trade and Finance, Treaties and Agreements
  • Political Geography: Europe
  • Author: Claudio Vicarelli, Marco Fioramanti
  • Publication Date: 03-2011
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: The recent economic and financial crises have shown the weakness of EU economic governance. A process of strengthening macroeconomic and fiscal surveillance started in the course of 2010; among other proposals, the European Commission suggested a new binding criterion of debt reduction: debt-to-GDP ratio is to be considered sufficiently diminishing if its distance with respect to the 60% of GDP reference value has reduced over the previous three years at a rate of the order of one-twentieth per year.
  • Topic: Debt, Economics, International Trade and Finance, Financial Crisis, Governance
  • Political Geography: Europe
  • Author: Diego Valiante
  • Publication Date: 02-2010
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: Investors have a longer memory than the sell‐side of the market. To regain their trust, intensive work needs to be done in the coming years. The new European Commissioner of the Internal Market, Michel Barnier, will play a pivotal role here. In the area of capital markets, he will need the support of a determined European Parliament, a strong commitment from the Council and Member States, as well as active contributions from the CESR/ESMA , other Level 3 Committees/Authorities and national supervisors. We believe that participants in capital markets share the same goal: to make them as efficient and effective as possible. The ability to collect savings and allocate them to investment, and to allow all participants to defray risk, is at the heart of any successful modern economy. This requires effective regulation that not only mandates common standards, but also promotes accountability, responsibility and transparency, while at the same time encouraging innovation. Effective regulation must not impose undue costs, if markets are to remain efficient and effective. However, we should be conscious that the crisis has been so deep that there is a collective need to go back to the basic principles of financial regulation and supervision.
  • Topic: Economics, International Trade and Finance, Financial Crisis
  • Political Geography: Europe
  • Author: Caterina Giannetti, Nicola Jentzsch, Giancarlo Spagnolo
  • Publication Date: 02-2010
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: Asymmetries can severely limit the cross-border border expansion of banks, if entering banks can only obtain incomplete information about potential new clients. Such asymmetries are reduced by credit registers, which distribute financial data on bank clients. Asymmetrically distributed information and adversely selected pools of borrowers constitute severe barriers for foreign banks when they enter new markets. In many instances, these problems force banks to either form 'alliances with incumbents' or simply enter through mergers and acquisitions (M). Yet such entry modes do not automatically lead to intensified competition as they may leave the number of competitors unchanged. Thus, institutions that reduce information asymmetries in credit markets (thereby encouraging entry through branches) may be very important if the objective is strengthening competition in addition to market integration. Recently, these institutions – credit registers – have received greater attention among academics and policy-makers in Europe, although there is still a remarkable lack of understanding of their empirical impact on banking.
  • Topic: Economics, International Trade and Finance, Markets, Monetary Policy
  • Political Geography: Europe
  • Author: Ilaria Maselli
  • Publication Date: 05-2010
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: 'Flexicurity' might be defined as a mix of flexible contractual arrangements, income support measures, active labour market policies and lifelong learning. The successful shift in approach of the Danish and Dutch labour markets from passive to active labour market policies, and to flexicurity, has attracted considerable attention among academics and policy-makers. The objective of this Working Document is to contribute to the debate with the creation of a composite indicator to measure flexicurity, based on the definition provided in the European Commission's Communication on Flexicurity (COM(2007)359). Our indicator confirms that preferences in the balance of flexibility and security are highly heterogeneous among countries; a finding that supports the 'pathway' approach as proposed by the European Commission. A second important conclusion is that the idea of flexibility being in favour of employers and security being in favour of employees needs to be overcome. Flexicurity is 'both for both', although it does not apply uniformly to all age groups but is two and three times greater for older and younger workers respectively.
  • Topic: Economics, International Trade and Finance, Labor Issues
  • Political Geography: Europe
  • Author: Felix Roth, Anna-Elisabeth Thum
  • Publication Date: 09-2010
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: Using new international comparable data on intangible capital investment by business within a panel analysis from 1995-2005 in an EU-15 country sample, we detect a positive and significant relationship between intangible capital investment by business and labour productivity growth. This relationship is cross-sectional in nature and proves to be robust to a range of alterations. Our empirical analysis confirms previous findings that the inclusion of business intangible capital investment into the asset boundary of the national accounting framework increases the rate of change of output per worker more rapidly. In addition, intangible capital is able to explain a significant portion of the unexplained international variance in labour productivity growth and when incorporating business intangibles, capital deepening becomes an even more significant source of growth. The relationship is slightly stronger in the time period 1995-2000 and seems to be driven by the coordinated countries within the EU-15.
  • Topic: Economics, International Trade and Finance, Regional Cooperation, Monetary Policy, Financial Crisis
  • Political Geography: Europe
  • Author: Selen Sarisoy Guerin
  • Publication Date: 07-2010
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: Several policy-relevant issues regarding the EU's bilateral investment treaties (BITS) are addressed in this paper. First and foremost, we explore the question of whether EU's BITs have a significantly positive impact on outflows or not. Second, we ask the question which member states and which BIT partners have had a significant experience after the implementation of the BIT. In our sample we find that both OECD BITs and EU BITs have a statistically significant and positive impact on FDI outflows. This result is robust to the inclusion of variables such as privatisation proceeds that control for the level of economic reform, the level of trade linkages, the level of democratic freedom and a measure of risk of expropriation among other standard controls. We control for endogeneity in our estimations by using the fixed-effects estimator as our preferred estimator on a large panel dataset. We also test the strict exogeneity of our results by using a method suggested by Baier and Bergstrand (2007) and we find no feedback effect in our sample.
  • Topic: Economics, International Trade and Finance, Monetary Policy, Financial Crisis
  • Political Geography: Europe