Introduction Of Euro Research Articles

THE EXCHANGE RATE RISK, THE EURO, AND THE PRICNG OF EURO COUNTRY STOCK MARKET RETURNS

ABSTRACT This paper investigates the effect and the pricing of exchange rate risk on Euro country stock market returns before and after the introduction of Euro. The Euro countries are divided into two groups: those that experienced sovereign fiscal and debt crises in recent years and those did not. A two factor asset pricing model that encompasses a market factor and an exchange rate factor is used to describe asset pricing. The pricing model is estimated by using a nonlinear seemingly unrelated regression with parameter restrictions implied from the pricing equations and imposed on the unconstrained two-factor asset return generating equations. It is found that all Euro country stock market returns are significantly affected by the broader European stock market index and by exchange rate risk for the pre-Euro, post-Euro and whole sample periods. However, only the stock markets of countries that encountered sovereign fiscal and debt crises exhibit a significant exchange rate risk premium during the post-euro period. Keywords the Euro, asset pricing, exchange rate risk

Unoffical Euroisation as a Push Factor Towards EMU Membership

Unofficial euroisation is explored in this paper as a push factor towards EMU membership. The paper investigates the presence of foreign currency alongside the domestic currency in the economy and its consequences regarding the conduct of monetary and exchange rate policy. Investigation of the euroisation phenomenon reveals that the level of euroisation in Croatia is the highest of all transition economies in Central and Eastern Europe. In addition, this study demonstrates a strong presence of sectoral currency mismatches in Croatia and warns about the associated exchange rate risks. In this environment the paper establishes a reduced effectiveness of monetary policy and the dangerous balance sheet effects that may arise from the depreciation of the domestic currency. Given the above conclusions the euro introduction in Croatia may be seen as a desirable option.

Do Bank Profits Converge?

This paper examines the determinants and convergence of bank profitability in eight European Union member countries, between 1992 and 2007, using a dynamic panel model. Average profitability is higher for banks that are efficient and diversified, but lower for those that are more highly capitalised. There is evidence of persistence of excess profit from one year to the next. The persistence of profit was lower in 1999–2007 than it was in 1992–98 in all eight countries. This finding is consistent with the hypothesis of an increase in the intensity of bank competition as a result of an increase in the integration of EU financial markets following the introduction of the euro in 1999, and the implementation of the Financial Services Action Plan.

An approach for evaluation of proposed air pollution control strategy to reduce levels of nitrogen oxides in an urban environment

In this study, an atmospheric dispersion model along with a systematic emission inventory was used to explore the possible control strategy to reduce ambient levels of nitrogen oxides (NOx) in Kanpur city, India. A GIS based emission inventory of NOx was developed for the base, 5th and 10th years. It was observed that the 5th and 10th years will experience increased emissions by factors of 1.7 and 2.5 of the base year if no control policy is implemented. Seventeen control options (i.e. introduction of Euro 6 to vehicles, banning of 15-year old private vehicles etc.) were considered for evaluation through the dispersion modelling. A control scenario comprising the following control options (1) implementation of Euro 6 for vehicles, (2) compressed natural gas (CNG) for commercial and public vehicles, etc. was found to be most effective in reducing the ambient NOx levels and attaining a 24-hour average air quality standard.

The Recent Crisis Impact on the Economies of Some Countries of Central and Eastern Europe

Wealth of nations is nowadays something complex depending on democratic processes and debt accumulation. In Europe the EURO introduction provoked even more complexity, as there is no common government to steer the fiscal process, a situation without precedence. New solutions are therefore looked for, based on different schools of thought in order to tackle the problem. The analytical part analyzes the economic behaviour of four recently less studied countries. A comparison between them is based on time series of Real GDP Growth, Consumer Price Inflation, Government Balance.

: 1999 . 2010-- (EU Member States Economies after the Introduction of the Euro: From Euphoria of 1999 to the Debt Crisis of the 2010s)

Russian Abstract: В коллективной монографии Центра европейских исследований ИМЭМО РАН (под ред. А.В. Кузнецова и Е.С. Хесина) по итогам трехлетнего исследования представлен анализ структурных сдвигов в экономике всех ключевых и ряда малых стран ЕС. Исследована специфика современной экономической и социальной политики в государствах-членах ЕС, особенно антикризисные меры. Выявлены причины трудностей перехода экономики Евросоюза на инновационный путь развития. Первый раздел книги посвящен общим проблемам европейской экономической интеграции в начале XXI века и хозяйственному положению в пяти ключевых странах ЕС – Германии, Великобритании, Франции, Италии и Испании. Во втором разделе книги изучается специфика экономики и экономической политики отдельных малых стран – Греции, Ирландии, Швеции, Дании, Финляндии, Чехии, стран Балтии. Наконец, в главах третьего раздела монографии детально исследуются самые актуальные общеевропейские проблемы – денежно-кредитная политика Европейского центрального банка, сдвиги в энергетике, модели антикризисного взаимодействия государства и бизнеса, миграционные потоки. English Abstract: Collective monograph of the Center for European Studies of the IMEMO-Institute (ed. by Alexey Kuznetsov and Efim Khesin) shows results of three-year research project on structural shifts in economy of all large and some small EU member states. Specifics of modern economic and social policy in EU countries and features of anti-crisis measures are studied. Reasons of difficult transformation of the EU economy towards an innovative way of development are explained. The first part of the book deals with problems of economic integration in Europe and specifics of five leading member states – Germany, the UK, France, Italy and Spain. The second part of the book is devoted to economies and economic policies of various small member states – Greece, Ireland, Sweden, Denmark, Finland, the Czech Republic and Baltic states. The most actual EU economic problems (the ECB‘s monetary policy, shifts in the energy sector, anti-crisis government-to-business models and migration flows) are investigated in detail in the third part of the book.

Export behavior of German SMEs in the Eurozone

The paper investigates the export behavior of German small and medium-sized enterprises (SMEs) in response to the introduction of Euro and the subsequent fall in trade costs. Based on a testable prediction derived from Helpman et al. (American Economic Review 94:300–316, 2004) and Helpman (Journal of Economic Literature 44:589–630, 2006), the paper argues that the likelihood of SMEs to become an exporter increases after the monetary union. By using an empirical probit estimation technique, it is found that SMEs, and especially medium-sized enterprises, indeed benefit from cost reductions in entering into export markets. What is more, firms operating in furniture, electrical equipment, plastics, medical instruments, machinery and textiles are more likely to benefit from monetary union. These results are robust to using exchange rate volatility as a proxy for the cost reductions due to monetary union.

Exchange return co-movements and volatility spillovers before and after the introduction of euro

This paper examines return co-movements and volatility spillovers between major exchange rates before and after the introduction of euro. Dynamic correlations and VAR-based spillover index results suggest significant return co-movements and volatility spillovers, however, their extend is, on average, lower in the post-euro period. Co-movements and spillovers are positively associated with extreme episodes and US dollar appreciations. The euro (Deutsche mark) is the dominant net transmitter of volatility, while the British pound the dominant net receiver of volatility in both periods. Nevertheless, cross-market volatility spillovers are bidirectional, and the highest spillovers occur between European markets.

Eurobond: 'Yes, We Can!' (Eurobond: 'Si può fare')

This paper explores a potential new exit strategy from the sovereign debt crisis affecting European countries since 2010. The proposal is based on the securitization of sovereign debt and the transfer of its surer tranche to a bond at the European level with jointly responsibility between country members, the Eurobond. Mixing economic concepts differently from other similar proposals, this (perfectible) exit strategy is convenient, feasible and worthy to be realized. From a financial viewpoint, it would be the greater innovation from the introduction of Euro. From a fiscal viewpoint, it could lead gradually to the political union of Eurozona avoiding the scepticism of more virtuous countries. The idea can be applied also at the national level to debts of local administrations: the mutual monitoring between partners and the threat of exclusion to future issues could inventive virtuous behaviors reducing sovereign debt endogenously.

Perspectives on Euro introduction in the Romanian economy

This paper offers a first quantitative glance at the possible effects of preparing for Euro adoption, as well as at the ex-post effects of actual adoption. Although the complexity of the models considered gradually increases, nevertheless all the simulations provide the same general picture in which (short and sometimes medium term) restrictiveness is revealed. The results show that for Romania, fulfilling the Maastricht criteria implies short-term economic slowdown and restrictiveness, followed by economic recovery and growth in the medium term and especially the long run. Quantitative estimates of these effects are provided. The most important negative evolutions are to be found for the labour market and investment.

Determinanty poparcia społecznego dla polskiego członkostwa w Unii Europejskiej i wprowadzenia w Polsce euro a znaczenie kampanii informacyjnej dotyczącej wspólnej waluty

The present article has a double purpose. Firstly, the author examines the evolution of public support levels for both the Polish EU membership, and euro introduction in Poland; correlations between them are briefly presented. The data is presented chronologically for both datasets, and in the case of EU membership support included the results of own research on re- lationship between partisanship and EU accession support. The author analyses the literature on the subject, indicating the factors thought to influence public consent in both cases, discussing in particular the impact of personal choice of supporting a given political party (and political stance) on the individual's view on EU membership and euro introduction. Furthermore, a more detailed analysis of other factors in- fluencing the acceptance of euro introduction in new countries is shown - once again based on recent literature, with particular attention paid to recent studies carried out in Poland, draw- ing attention to differences with the overall European studies - grouped by type, and supported by results of numerous polls conducted in Poland over the last several years.

Has the Euro Affected the Choice of Invoicing Currency?

We present a new approach to study empirically the effect of the introduction of the euro on currency invoicing. Our approach uses a compositional multinomial logit model, in which currency choice depends on the characteristics of both the currency and the country. We use unique quarterly panel data of Norwegian imports from OECD countries for the 1996-2006 period. One of the key findings is that the eurozone countries in trade with Norway have substantially increased their share of home currency invoicing after the introduction of the euro. In addition, the euro as a vehicle currency has overtaken the role of the US dollar in Norwegian imports. The econometric analysis shows a significant effect of euro introduction above and beyond the determinants of currency invoicing (i.e., inflation rate, inflation volatility, foreign exchange market size, and product composition). However, the rise in producer currency invoicing by eurozone countries is primarily caused by a drop in inflation volatility.

Measuring a Bank’s Financial Health: A Case Study for the Greek Banking Sector

1. Introduction After the recent financial crisis a new round of market turmoil on the occasion of the financial indebtedness of the Greek public sector has began. The rating agencies failed to provide helpful insights on the main causes of the crisis in an efficient way. On the contrary, they negatively reassessed their reviews (rating levels) regarding governments' debt and banks' financial strength. This article starting from the above necessity constructs a framework for a new rating approach of the banking industry based on transparency and responsibility. The work is organized as follows: First, in Section I the major items for European Monetary Union, European legislation for the banking sector and the main financial figures of European banking industry are presented. European Banking Institutions operate in this financial, monetary, and economic environment since 2002, following the introduction of Euro. Then the construction of the framework for banks' rating follows according to the work by Alnoor Bhimani and Kazbi Soonwalla (2005) for corporate responsibilities continuum by changing and adding components suitable for the banking industry. Section II presents the Corporate Financial Reporting (CFR) standards that banks follow globally. Section III presents the Risk Management Procedures (RMP) followed by banks focusing on solvency ratios according to Capital Adequacy (CAD), Basel I and Basel II procedures. Section IV analyses Corporate Governance procedures, especially the index that presents the level of the Corporate Governance within a Bank (GOV-Index). Section V discusses issues of Corporate Social Responsibility (CSR) and Sustainable Development (SD) of a bank in order to incorporate these items into the proposed framework as rating components. Section VI examines Stockholders' Value Creation (SVC), mainly with Value Based Management (VBM) indexes. Section VII presents the global rating system and the rating agencies. Section VIII chooses from Macroeconomic and Monetary environment indexes that have an impact on the ratings of banks in order to integrate some external economic environment indexes in the banks' rating system. Section IX presents the proposed framework for rating of the banking industry, while Section X presents a simple model for measuring banks' financial health by using data of the Greek Banking Industry. Finally, Section XI presents the conclusions and recommendations for the construction of a holistic--multivariate Rating System for the Banking Industry. 2. European Legislation for the European Banking Industry Based on the works of John H. Rogers (2007), John Goddard, et al (2007) and by collecting data from various reports from the European Central Bank and the Central Bank of Greece the present study describes the environment established in the European Monetary Union (EMU). Then the legislation and directives that regulate the banking industry in EMU as well as the main accounting and other quantitative figures of the banking sector of EU as follows: 1. European Monetary Union European Monetary Union starts form 1957 and till has followed a certain economic integration timeline: * 1957 Treaty of Rome Established customs unions * 1970s Informal joint float of several European currencies versus dollar, which called The snake * 1979 European Monetary System Formal network of mutually pegged exchange rates (France, Germany, Italy, Denmark, Ireland, Luxemburg, Netherlands) * 1986 The Single European Act (Europe 1992) Enabled eventual completion of the internal market; remove internal barriers to trade, capital, and labor * 1991 Maastricht Treaty meeting Envisioned economic and monetary union (EMU) to begin * 1991 Specified convergence criteria for EMU admission; call for harmonization of social policy stage 2 to begin1/94 * 1989-92 EMS developments Spain ('89), Britain ('90), Portugal ('92) added; Italy and Britain leave after 9/92 crisis harmonization of the value-added tax (VAT); the internal market is realized * 1997 Stability & growth pact Specifies medium-term budgetary objectives for EMU * 1998 EMU members decided Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxemburg, Netherlands, Portugal, Spain * 1999 Euro launched single monetary policy for all EMU, set by ECB; all monetary policy actions and most large-denomination private payments conducted in euros; national currencies irrevocably fixed, continue to circulate for 3-year transition period * 2001 Expansion of EMU Greece joins (1/01); possible next-round entrants identified * 2002 Euro circulates national currencies removed from circulation 2. …

Recent evidence concerning higher NO emissions from passenger cars and light duty vehicles

Abstract Ambient trends in nitrogen oxides (NO x ) and nitrogen dioxide (NO 2 ) for many air pollution monitoring sites in European cities have stabilised in recent years. The lack of a decrease in the concentration of NO x and in particular NO 2 is of concern given European air quality standards are set in law. The lack of decrease in the concentration of NO x and NO 2 is also in clear disagreement with emission inventory estimates and projections. This work undertakes a comprehensive analysis of recent vehicle emissions remote sensing data from seven urban locations across the UK. The large sample size of 84,269 vehicles was carefully cross-referenced to a detailed and comprehensive database of vehicle information. We find that there are significant discrepancies between current UK/European estimates of NO x emissions and those derived from the remote sensing data for several important classes of vehicle. In the case of light duty diesel vehicles it is found that NO x emissions have changed little over 20 years or so over a period when the proportion of directly emitted NO 2 has increased substantially. For diesel cars it is found that absolute emissions of NO x are higher across all legislative classes than suggested by UK and other European emission inventories. Moreover, the analysis shows that more recent technology diesel cars (Euro 3–5) have clear increasing NO x emissions as a function of Vehicle Specific Power, which is absent for older technology vehicles. Under higher engine loads, these newer model diesel cars have a NO x /CO 2 ratio twice that of older model cars, which may be related to the increased use of turbo-charging. Current emissions of NO x from early technology catalyst-equipped petrol cars (Euro 1/2) were also found to be higher than emission inventory estimates – and comparable with NO x emissions from diesel cars. For heavy duty vehicles, it is found that NO x emissions were relatively stable until the introduction of Euro IV technology when emissions decreased by about 30%. The more limited data available for urban buses shows that there has been little change in NO x emissions from Euro I to Euro IV. There is general much better consistency across the different estimates of heavy duty vehicle NO x emissions than for light duty vehicles.

Patterns and Determinants of Price Changes: Analysing Individual Consumer Prices in Austria

Abstract We provide empirical evidence on the degree and characteristics of price stickiness in Austria by estimating the average frequency of price changes and the duration of price spells from a large dataset of individual price records collected for the computation of the Austrian consumer price index. The mean (median) duration of price spells in Austria amounts to 14 (11) months, but there is considerable heterogeneity across sectors and products. We find that price increases occur only slightly more often than price decreases. For both directions, the average magnitude of price changes is quite large (11% and 14%, respectively). The introduction of the euro cash in January 2002 led to more frequent but, on average, smaller price adjustments than usual. Estimating the probability of a price change in a panel probit model, we find a small but positive effect of the price spell duration on the incidence of price changes. Furthermore, product-specific inflation, the size and the sign of the last price change and the period of the euro introduction significantly affect the probability of a price change.

Interest rate sensitivity of the European stock markets before and after the euro introduction

Introduction of the euro altered corporate financing markets for the euro zone firms in an unprecedented way. Since 1999, firms from the euro zone countries are able to raise funds in their home currency in the large common currency market. I find that while stock returns in most countries in the Western Europe were negatively correlated with interest rate changes prior to the euro, that correlation has disappeared since 1999. My results reveal that recent growth in European corporate bond markets has played an important role in enabling firms to better manage their interest rate risk.

Determinants of European stock market integration

We analyse the determinants of stock market integration among EU member states for the period 1999–2007. First, we apply bivariate DCC-MGARCH models to extract dynamic conditional correlations between European stock markets, which are then explained by interest rate spreads, exchange rate risk, market capitalisation, and business cycle synchronisation in a pooled OLS model. By grouping the countries into euro area countries, “old” EU member states outside the euro area, and new EU member states, we also evaluate the impact of euro introduction and the European unification process on stock market integration. We find a significant trend toward more stock market integration, which is enhanced by the size of relative and absolute market capitalisation and hindered by foreign exchange risk between old member states and the euro area. Interest rate spreads and business cycle synchronisation are also significant factors in explaining equity market integration.

Determinants of European Stock Market Integration

We analyse the determinants of stock market integration among EU member states for the period 1999–2007. First, we apply bivariate DCC-MGARCH models to extract dynamic conditional correlations between European stock markets, which are then explained by interest rate spreads, exchange rate risk, market capitalisation, and business cycle synchronisation in a pooled OLS model. By grouping the countries into euro area countries, 'old' EU member states outside the euro area, and new EU member states, we also evaluate the impact of euro introduction and the European unification process on stock market integration. We find a significant trend toward more stock market integration, which is enhanced by the size of relative and absolute market capitalisation and hindered by foreign exchange risk between old member states and the euro area. Interest rate spreads and business cycle synchronisation do not appear to play an important role in explaining equity market integration.

Modeling Asymmetric Dependence of Financial Returns with Multivariate Dynamic Copulas

We propose a multidimensional extension for Patton’s (2006) bi-variate Dynamic Copulas. We also introduce a Dynamic Mixture Copula whose parameters and weights follow well defined dynamic processes. Both approaches improve the Copulas’ flexibilities and their adaptabilities to financial data. We utilize one G7 Stocks and one Multi-Asset Classes dataset to demonstrate the advantages of the proposed Dynamic Copulas. The object of interest are the accuracies of out-of-sample one-week portfolio Value-at-Risk (VaR) and Conditional-Value-at-Risk (CVaR) predictions and the time-instability of financial market correlations. From our empirical analyses we report three main findings. First, Dynamic Copulas which explicitly account for left tail dependence tremendously improve the portfolio VaR and CVaR forecasts for both datasets. Second, severe negative Stock market returns occur jointly with intensifying volatility levels and tightening dependencies what eliminates diversification effects when they are needed the most. Diversification among multiple asset classes significantly reduces the risk of correlation meltdowns and hence the probability of joint price drops. Third, the Euro introduction increased the correlations of the German, the Italian and the French Stock markets to about 0.9.

Does Corruption Matter? The Impact of Corruption in Share Returns of Listed Industrial Companies in Euro Area

Corporate finance literature has devoted much effort in analysing stock returns and in developing models in order to precisely forecast their yields on the market, because of the different useful purposes of these forecasts that animate economic life of countries and corporations. Following a new approach (Bellavite Pellegrini, 2008) in order to measure the relevance of impact of control variables on returns of European stocks since the introduction of Euro and sharing the sample in different portfolios according to different capitalization, this research develops the issues underlined contributing to the identification of a further control variable affecting stock performances: corruption. The goal of this study is an enquiry about the connections between European industrial stock returns and a macroeconomic index of corruption in order to assess the impact of corruption in the performances of listed European industrial companies. This paper is organized as follows: the first paragraph is a brief introduction with an outline of surveys in the Law and Economics literature, paragraph two focuses its attention on data and methodology and paragraph three implements an empirical analysis in order to verify the importance of the above mentioned control variable of corruption in industrial listed companies of European countries. Concluding remarks and some suggestions in order to develop this issue will follow in the last paragraph.