Euro Zone Research Articles

EUROSCEPTISM AND POPULISM IN ITALY: THE EXAMPLE OF “FIVE STARS” MOVEMENT

Nowadays in Europe there is an increasing number of political forces who call themselves eurosceptics. Italy, as a countryfounder of the EU, is no exception. Today, public opinion polls and the voting results indicate that the Five stars Movement (“MoVimento 5 Stelle”) is the most popular party in Italy. Among other things, the Movement stands on the position of euroscepticism, in particular, it is in favour of holding a referendum on the country’s withdrawal from the Euro zone. The paper examines the place and role of the party “MoVimento 5 Stelle” in the political landscape of Italy, its’ history and general points of party programme.

ВПЛИВ МОНЕТАРНИХ І НЕМОНЕТАРНИХ ФАКТОРІВ НА ЕКОНОМІЧНИЙ РОЗВИТОК КРАЇН БАЛТІЇ

The aim of the paper is to identify the factors affecting economic growth of Baltic countries. Correlation analysis has been exploited to analyze the impact of both monetary and non-monetary factors on gross domestic product dynamics of Estonia, Latvia and Lithuania. The research results show that the most strong relationship in these three countries is observed between GDP dynamics and the following variables: domestic credit provided by financial sector, exports of goods and services including high-technology exports, official exchange rate, household final consumption expenditure, unemployment and real interest rate. The findings of the study indicate that inflation is related to GDP dynamics only in Latvia, foreign direct investments are associated to GDP only in Estonia. Especial role in economic development of these states belongs to export diversification. Companies diversified their product ranges switching to high added value products. Development of new branches and new markets, especially in Euro zone made sufficient impact on economic development of “Baltic Tigers”. Thus, both monetary and non-monetary factors had impact on economic growth of these states.

La construccion monetaria europea y la crisis del euro: la perspectiva de la izquierda radical griega

This paper analysesthe crisis of the euro from the perspective of three authors who played an essential role during the Greek crisis: Yanis Varoufakis, Minister of Finance in the first government of Tsipras; James K. Galbraith, reputed American economist and brilliant adviser of Varoufakis during the Greek crisis; Stuart Holland, important participant and defender of a confederate, social and democratic European project from the beginnings of the European construction. This authors show that the origins of the European crisis are deeper than what European leaders admit; and warn that the Eurozone has not been as successful as it waspromised by European leaders, but instead a pyramid of debts that have suffocated countries like Greece, Ireland, Portugal and Spain. The neoliberal and bureaucratic conception of the euro zone had some driving force behind bank lending, but these did not prevent the crisis from hitting Europe again. Thus, new debts and austerity have eroded the stability of the continent and there have been movements of xenophobia and racism that threaten international stability.

The Euro from a Business Perspective

The euro area has several problems. Nevertheless, there is not only strong political support for it, but also most companies back the euro or at least do not complain. It is worthwhile to analyse which companies do profit from the euro and why most others do not oppose it. Exporting companies in the northern countries of the euro zone profit from the euro and the policies to save the common currency even if their countries and people suffer. Other companies, especially in the southern member countries, suffer themselves but fear a break-up of the euro area even more than its continuance. For small companies it is not worthwhile to lobby for other policies, while the companies worst affected already ceased to exist. All companies have to come to terms with the euro but should also prepare for the possible end of the euro zone. Companies in other European countries reconsider whether they really want their countries to join the euro area.

Adaptations within the financial market in China after global financial crisis

The purpose of this paper is to present the evolutionary changes occurring in the financial market of China, which were catalysed by the turmoil in the global financial market. These changes were the outcome of anti-crisis measures in macroeconomics policy undertaken at the beginning of the crisis; they were also a response to the quantitative easing policy in the USA and in the Euro Zone (i.e. an increased money supply also reaching the financial market in China). With the currently binding system of currency exchange (managed floating exchange rate), China’s policy towards capital movement, on the one hand, is an attempt to maximise the benefits of the inflow of foreign capital , whilst, on the other – to minimise the risk related to the sudden changes in the direction of the flow of capital. The consequence of such an approach is the strategy of gradual liberalisation of capital account, accompanied by the significant involvement of the state in the financial market. Some specific solutions applied to this matter, that are discussed in the paper, point to the specifics of such a strategy. The liberalisation of the national capital market was preceded by the liberalisation of the offshore market (in Hong Kong). Such a strategy allows China to take up measures directed at the internationalisation of their own currency without any significant opening of the capital account. This paper concentrates on a descriptive analysis of the above phenomenon.

Changes in Polish Foreign Trade of Cattle Livestock and Beef

The main objective of the study was to analyse the changes and the conditions of foreign traded beef. The economic and political situation has had an impact on Poland’s foreign trade of agricultural food products. The main factors affecting international trade, and which have significantly decreased the growth rate of exports and imports of animal products, are the following: decreased oil prices and exchange rate fluctuations, uncertainties related to the conflict in Ukraine, restrictions in trade with Russia, destabilisation in the Middle East and concerns about the future of the euro zone.

Greece Crisis: Critical Analysis of Failure of Governance

<em>Greece, which is one of the world’s largest shipping powers, is suffering from financial crisis in Euro Zone. It has impaired the European Economy, besides having an impact on World Economy too. Greece is exposed to huge debt crises owing to IMF, Germany, Spain, Italy, other European Members and European Central Bank. Recently, Greece is trying to strike a deal with its creditors for extension of time for repayment of the loan and have also requested to increase the limit of emergency funding by European Central Bank. The Government has also taken many steps on domestic level to stop the liquidity easing from its financial system and markets. Today, Greece is at cross –road between the Government and the Governance. This Paper dwells on four aspects; first, critical analysis of Greece Economic Structure to know the actual economic condition of Greece. Second, in depth examining the debt portfolio of Greece to know the exposure of the Greece to the European Union Members, European Central Bank, IMF, Private Investors and also critical analysis of Greece Debt Structure along with repayment deadlines. Third, Greece Government’s decisions regarding finding the solutions to counter the financial crisis as to know how governance is more important than growth. And fourt, what would be the repercussions on Greece if it decides/ made to leave Euro Zone. </em>

Clustering in Dynamic Causal Networks as a Measure of Systemic Risk on the Euro Zone

In this paper, we analyze the dynamic relationships between ten stock exchanges of the euro zone using Granger causal networks. Using returns for which we allow the variance to follow a Markov-Switching GARCH or a Changing-Point GARCH, we first show that over different periods, the topology of the network is highly unstable. In particular, over very recent years, dynamic relationships vanish. Then, expanding on this idea, we analyze patterns of information transmission. Using rolling windows to analyze the topologies of the network in terms of clustering, we show that the nodes' state changes continually, and that the system exhibits a high degree of flickering in information transmission. During periods of flickering, the system also exhibits desynchronization in the information transmission process. These periods do precede tipping points or phase transitions on the market, especially before the global financial crisis, and can thus be used as early warnings of phase transitions. To our knowledge, this is the first time that flickering clusters are identified on financial markets, and that flickering is related to phase transitions.

Editor's introduction for the special issue of the Journal of Empirical Finance on “The euro zone in crisis”

Editor's introduction for the special issue of the Journal of Empirical Finance on “The euro zone in crisis”

The normative aspects of the brazilian public debt

The purpose of this paper is to present the normative acts about the public debt, especially the Public Responsibility Law that was issued to institute a surveillance tool over the results, as well as to discipline public planning and expenditure, providing tools to penalize public managers. We aimed to interpret the current legislations about governmental budget and analyzing both regulations. We pointed that Brazil ended 2015 with a debt comprising 66.23% of its GDP. Thus, it requires attention of public managers, once there are legal limits for public indebtedness for Municipalities and States, but not for the Federal Government. The methodology known as indirect documentation was applied for theoretical fundamentation – bibliographic research (documental and bibliography research). For the general review were used secondary data available in books, specialized websites and laws and regulations. In Romania, the indebtedness level represented 39.6% of the GDP in 2014, in Brazil 57.19%. The Treaty of Maastricht in 1992, stipulated the limit of 60% of the GDP for the Euro Zone countries. Nevertheless the debt represented 91.9% of the GDP, especially due to Greece, Italy, Portugal, Spain and France. The Brazilian fiscal responsibility law has been developed from the experience of the tax laws of the United States and New Zealand . It is a reinterpretation of the applicable rules the Brazilian public debt compared with the limits set for the countries of the eurozone.

Currency Wars, Recession Policies and the Overvalued Euro are to be Blamed for the Modern Greek Tragedy

In this paper we argue that, Modern Greek Tragedy is mainly due to the overvalued euro in combination with the strict austerity policies imposed by Berlin. Greece also pays the price of the currency war between the dollar and the euro. The latter puts a heavy burden upon the country’s economic competitiveness as a costume that does not fit the Greek economy, which is mainly based on tourism that requires a labour-intensive production process. The deadlocks of strict monetary and income’s policies, accelerates the upcoming economic thunderstorm, the spiral of recession, the increase in unemployment, the brutal reduction of wages and pensions, the further fall of GDP and the increase of the debt. The always renewed fatal economic forecasts, simply postpone the explosion of the deadlock. Basic economics in theory and in practice are being depreciated. One wonders if there are economists, neoliberals, not to mention, Keynesians and/or radicals that, may support the possibility of an economic recovery under deep recession policies and the existence of a hard currency such as the euro. Trapped under the Berlin’s political prison and the euro zone fetish, Greece continues to follow its tragic road on the grounds that there is no alternative. Yet, in democracies there are no dead ends. If an economic policy is proven to be wrong and catastrophic, the best alternative is to change it.

The debt trap of the Greek economy and the way out

In this paper it is argued that, in an economy with heavy loans such as Greece, structural reforms are not enough to lead the country out of the crisis. Only a Grexit with deep cuts and restructuring of debts, together with efficient state management and development policies may lead to growth. Greece has fallen in a huge debt trap which is perpetually growing by new loans. A little less than half of these loans have been created during the euro zone period and particularly after the 2008 crisis. In accordance with the Eurogroup agreements, Greece is obliged to pay every year to its lenders 15% of its GDP (27 billion euro) up to the year of 2023 and 20% of its GDP (36 billion), between the years 2023 and 2060. No country in the world can survive under such a heavy burden of debt obligations. It is argued that, even a country with heavy loans such as Greece, can succeed growth by imposing structural reforms such as sweeping impediments of labour, goods and service markets, breaking business and union monopoly power, make it easy to fire unwanted employees, removing regulations, red tape and licensing fees, privatizing state assets, increasing taxes and suppressing pensions etc. This is nothing but a totally false hypothesis. It has been illustrated in research that, structural reforms may provide in the long run a yearly growth of a little over 1%. It is also found that, they do not increase output during a crisis and they might have negative effects in the medium run. Thus, in the case of Greece, only deep cuts and restructuring of the debt (as with the German debt in the London 1953 agreement), accompanied with Grexit, development policies, efficient state management and reasonable structural reforms, may lead to the way out of the crisis and to growth.

Awareness and Use of Various Hedging Tools by IT Sector Undertakings in Pune for Effectively Managing the Foreign Exchange Risk

Financial markets across the globe have been in turmoil with currency markets displaying high degree of volatility. The Indian Rupee has witnessed sharp depreciation and increased volatility during the recent past, driven by both global and domestic factors. The event began Post 2008 financial crisis, the advanced economies slipped into recession and faced prolonged slowdown in their growth. Sovereign Debt crisis of Euro Zone countries, which subsequently followed, also hampered the world growth. After the historic downgrade of USA by S&P in August 2011 that triggered heightened risk aversion and a selloff of assets in emerging economies including India by the Foreign Institutional Investors (FIIs). Risk aversion was further heightened on escalating euro-zone concerns, falling global growth and recent apprehensions over the US Federal Reserve tapering its bond purchase programme. While authorities across the globe have taken actions to stabilize the markets and support growth, India has grappled with unique domestic considerations.

Policy Conditionality, Structural Adjustment and the Domestic Policy System. Conceptual Framework and Research Agenda

Policy conditionality has been a frequently used tool in the context of the Euro zone crisis management. By linking the disbursement of loan installments to specific policy requirements the macro-economic adjustment programmes used conditionality as leverage to promote structural reforms. How does conditionality induce policy change? This central question is examined by considering conditionality as a ‘mega’ policy instrument that seeks to guide the domestic policy system and define its reform trajectory. Policy conditionality thus determines the areas of reform and prescribes their direction while also defining the means and timeframe within which they have to be implemented. Conditionality impacts on domestic governance and transforms the policy making system into a compliance and implementation mechanism. The paper argues that the reform potential of conditionality relies on its interaction with the domestic political system and policy process. A public policy lens can help to better understand the dynamics inherent in this process as well as highlight the strengths and limitations of conditionality. Following the conventional stages of public policy, the contribution focuses on the political challenges involved and sketches out a prospective empirical research agenda.

INFLUENCE OF THE MEMBERSHIP OF STATES IN THE EURO ZONE ON BASIC MACROECONOMIC INDICATORS

This article attempts to answer the question whether accession to the euro zone guarantees the improvement of macroeconomic indicators. The study used four indicators: changes in GDP, unemployment rate, changes in exports and wage developments in industry and services.
 To answer the question analyzed the charts of selected variables, mid-term rates of change were counted as well as Czekanowski’s diagrams were deleted.

Growth effects of EU and EZ memberships: Empirical findings from the first 15 years of the Euro

One of the major economic reasons for the creation of the European Union (EU) and of the Euro-zone (EZ) was an expected bonus of economic growth for member countries. Whilst several studies exist on the growth bonus of EU membership, there are none for the EZ, the latest and deepest step of economic integration in Europe. The aim of this article is to investigate whether EU and EZ memberships enhance growth for their members. In order to perform our empirical analysis, we estimate different growth models restricting the time frame to the first 15 years of the Euro - from 1999 to 2013. We find a positive impact of EU membership on economic growth, but no impact of being part of the EZ, except during the financial crisis, when the EZ has a negative impact on growth amongst its members. Considering the heated political debate related to the Brexit referendum, our results favour a “yes” to the EU but a less clear answer when it comes to the EZ.

Volatility and Correlations for Stock Markets in the Emerging Economies of Central and Eastern Europe: Implications for European Investors

This paper examines the implications for European investors of the recent EU expansion to encompass former Eastern block economies. What were the risk and return characteristics of these markets pre- and post-EU? What are the implications for investors within the Euro zone? Should investors diversify outside the CEE? The former Eastern block economies constitute emerging markets which typically offer attractive risk adjusted returns for international investors. In this paper, we explore a number of aspects of this important issue and their implications for CEE based investors culminating in a Markowitz efficient frontier analysis of these markets pre- and post-EU expansion. The results suggest the ‘advanced emerging’ markets of Poland, Hungary, and Czech Republic are less attractive post-EU to a portfolio based investor seeking diversification benefits than the ‘other emerging markets.’

Kryzys w Unii Europejskiej a tożsamość europejska

The aim of this article is to show what impact the crisis in the European Union, along with the crisis in the euro zone at the forefront, had on European identity, interwoven with the identity of the European Union to such an extent that these terms are often handled as equivalent. Developments and crises situations which exert an influence on European identity were presented with respect to areas of particular importance that affect the way the European Union is identified within the community and abroad. Following issues were discussed: implications of the crisis for the European Union’s international identity, for the European social model (welfare state), for transnational identity (in internal relations) and for unity and solidarity in the European Union. In the conclusion, it is stated that the economic, political and social crises had undermined the gradual development of European / European Union identity among citizens and had an impact on its image in international relations.

The joint effect of investor protection, IFRS and earnings quality on cost of capital: An international study

This study tests the impact of earnings quality, investor protection, IFRS adoption and the joint effects of these on cost of capital (measured by cost of equity capital and cost of debt) in publicly listed firms in Euro zone and Asian countries. Using 199.516 firm year observations from 11 Euro zone and 8 Asian countries over the period 2000–2014, the findings confirm all research hypotheses. The results show that the cost of capital is lower in years after the adoption of IFRS as compared to the period before the adoption in Euro zone and Asian countries. A significant negative association has been found between the cost of equity capital and earnings quality in Euro zone and Asian countries. However, earnings quality is negatively correlated with cost of debt only in Euro zone countries. Similarly, the findings indicate that there is a significantly negative relationship between the cost of capital and most investor protection indexes in Euro zone and Asian countries. With regard to the joint effects of investor protection, earnings quality and IFRS adoption on the cost of capital, the results are controversial. In particular, the cost of capital has been found to be lower for firms with (a) strong investor protection and higher earnings quality, (b) higher earnings quality after the FRS adoption, and (c) strong investor protection after the IFRS adoption in Euro zone and Asian countries.

Synchronization and diversity in business cycles: a network analysis of the European Union

ABSTRACTIn this article, we use a correlation matrix and its internal networks to analyse business cycle synchronization across Europe since 2000. This methodology allows us to summarize individual country interactions and co-movements while also capturing the existing heterogeneity of connectivity within the European economic system. Our results indicate that synchronization of the euro zone countries remained stable from 1999 until the current financial crisis, after which co-movements increased sharply and synchronization rose to the highest in the time sample. By endogenously identifying clusters of countries with close connections in their business cycle, we also refute the commonly accepted notion of identifiable core and peripheral euro zone countries.