European Union Economy Research Articles

Fiscal and monetary policy interaction in the period of Europe's sovereign-debt crisis: an open economy DSGE model linking Euro area and China

European debt crisis might produce important influence on China via trades and capital flows since European Union is the largest trading partner of China. Especially, it has attracted more and more attention about the fiscal and monetary policy interactions between the Euro area and China in the period of Europe’s sovereign-debt crisis. In this paper, an open dynamic stochastic general equilibrium (DSGE) model for China and European Union economy is developed to research this issue. The sufficient important shocks are considered in this model for policy simulation. It can be used to analyse the impact of different shocks to the output, the policy interactions between European Union and China and the transmission path of one specific shock. The empirical results showed some contributions of the surplus of China’s foreign trade, the crowd out effect of one country’s government expense and the international effect of exchange rate fluctuations.

Investigating the Recovery Strategies of European Union from the Global Financial Crisis

The global financial crisis has affected almost all countries in the world. The crisis has hit European economies unprecedentedly hard and its effects have occurred in two phases. The first phase is the economic recession following the global economic downturn. The second phase is the so-called sovereign debt crisis which started in Greece firstly and then appeared in Ireland and Portugal. Like many other countries and organizations, European Union (EU) has also developed strategies in order to tackle the challenges of the crisis. This paper attempted to investigate the strategic initiatives of EU for the economic recovery in Europe. The results of this investigation show that EU's recovery strategies have been executed in two ways: the preservation of Member States’ financial stability and the enhancement of economic governance inside EU. Nevertheless the lack of a political union, in particular the supranational governance of economy policy is delaying the recovery of the EU's economy and causing the contagion of sovereign debt problems in Member States of euro.

EU Blue Card Scheme: The Right Step in the Right Direction?

AbstractIn October 2007, the European Commission adopted a controversial proposal on the conditions for entry and residence of third-country nationals for highly qualified employment. The Blue Card scheme is intended to provide Member States and European Union (EU) companies with additional “tools” to recruit, retain and better allocate the workers they require, and so to increase the competitiveness of the EU economy through legal immigration and provide the EU with an advantage to compete with the US Green Card. However, the EU Blue Card scheme has been the subject of much controversy among not only EU Member States but also among less developed countries. This article aims to analyze the Blue Card scheme, which was adopted on 25 May 2009 and gives Member States two years to incorporate the new provisions into their domestic legislation. After providing an overview of the scheme, the second part deals with critics of the scheme and national responses of Member States to the scheme. Finally, the third part of the article seeks to answer the question: is the Blue Card scheme the right step in the right direction?

Default Predictors and Credit Scoring Models for Retail Banking

This paper develops a specification of the credit scoring model with high discriminatory power to analyze data on loans at the retail banking market. Parametric and non- parametric approaches are employed to produce three models using logistic regression (parametric) and one model using Classification and Regression Trees (CART, nonparametric). The models are compared in terms of efficiency and power to discriminate between low and high risk clients by employing data from a new European Union economy. We are able to detect the most important characteristics of default behavior: the amount of resources the client has, the level of education, marital status, the purpose of the loan, and the number of years the client has had an account with the bank. Both methods are robust: they found similar variables as determinants. We therefore show that parametric as well as non-parametric methods can produce successful models. We are able to obtain similar results even when excluding a key financial variable (amount of own resources). The policy conclusion is that socio-demographic variables are important in the process of granting credit and therefore such variables should not be excluded from credit scoring model specification.

The application of an accounting standard for SMEs

Small and medium-sized companies have a very important position in the European Union (EU) economy, mainly in the area of employment. Their activities in the internal market are limited by a great deal of obstacles. The most important obstacles are the different national accounting and tax systems. At present, it is obvious that a certain degree of accounting and tax harmonisation has to take place. International Financial Reporting Standards (IFRS) for Small- and Medium-sized Enterprises (SMEs) is designed to apply to the general-purpose harmonised financial statements of all profit-oriented SMEs. General-purpose financial statements are directed toward the common information needs (an entity's financial position, performance, cash flow) of a wide range of users (shareholders, creditors, employees). Determining taxable income requires special-purpose financial statements designed to comply with the tax laws and regulations in a particular jurisdiction. An entity's taxable income is defined by the laws and regulations of the country or other jurisdictions in which it is domiciled. Tax authorities are also important external users of the financial statements of SMEs. Profit or loss recognised under IFRS for SMEs could be a starting point for determining taxable income.

Training and workforce transformation in the European steel industry: questions for public policy1

The Lisbon process is aimed at laying the foundation for a dynamic, flexible and inclusive European Union (EU) economy. It is within this context, amid wider processes of restructuring and ‘modernization’, that traditional industries, such as steel, are engaged in transforming their skill base and creating a more diverse workforce. In this process, corporate management has a decisive role in reshaping the steel workforce, in the process exploiting the intersections between different aspects of policy. Our contention in this article is that EU policy prescriptions for transformation, aimed at fostering social cohesion and inclusion, are undone by corporate management strategies. In turn, national policy (on vocational education and training, for example) struggles to influence historically entrenched practices that operate at the sector level (such as on training and learning), which leaves some workers vulnerable to industry restructuring processes and at risk of social exclusion. Hence companies are able to restructure on their own terms, with workers’ representatives seemingly unable to intervene in effective ways. The analysis that follows thus focuses on the tensions between national and supra-national policy making in the EU, and, within this context, sector policy and practice and the role of corporate management in shaping work and employment.

The rise of China as an economic power: what impact on the EU economy and labour markets?

This article focuses on China and its impact on the European Union economy, labour markets and workers. It is widely claimed that, faced with competition from countries such as China, Europe needs radical reform of its economic and social institutions in order to remain ‘competitive’. This article presents two main theses. The first is that Europe remains, to a far greater extent than is commonly supposed, ‘master of its own destiny’ and the various actors should tailor their policies accordingly. The second is that one must beware of simply extrapolating from past trends. China's development trajectory is changing and will do so further, opening up opportunities for, as well as posing threats to, Europe.

Income Distribution and Convergence in the Transition Process – A Cross-Country Comparison

The aim of this study is to clarify, whether and where the widespread opinion that systemic change from socialism to capitalism went along with dramatically rising inequality is true and how income distribution does affect the overall growth performance of transition countries. The countries under review are: the Czech Republic, Hungary, Poland and Russia. The findings are analysed against the background of convergence or divergence respectively vis-a-vis the European Union (EU) level of income and income distribution. Here Germany, being the neighbouring country and biggest EU economy, is taken as benchmark. For the Czech Republic, Hungary and Poland it can be shown that income distribution remained relatively stable before and throughout the transition period on the basis of so far unpublished data from the Luxemburg Income Study database. Russia however displays a sharp increase in income distribution. These results are illustrated by Lorenz curves and underpinned by developments in functional income distribution and social transfers. An attempt is made to locate these transition countries on a stylised Kuznets curve and further qualitative factors referring to growth and equality are considered.

Talking about…

Talking about…

The phasing out of EU agricultural export subsidies : Impacts of two management schemes

Résumé The present round of multilateral trade negotiations at the World Trade Organisation is likely to put an end to European export subsidies on agricultural and food products. This paper attempts to evaluate such a policy scenario. Its main contribution is to compare two management schemes for the European Union economy. The first one has confidence in the equilibrium role of market prices while the second one favours a supply management approach. Our empirical results, based on a computable general equilibrium model, show huge effects on the dairy sector and reveal that the choice of a management scheme has a substantial bearing on sectoral welfare effects. JEL Classification : Q11 ; Q18 ; D58.

Inter-modality In The Ports And Sustainability Of The EU Freight Transport

Over the past two decades, the intensive economic growth in the European Union (EU) has been accompanied by a strong increase in the freight transport volumes. Apart from the evident positive impact on competitiveness of the EU economy, the latter really questions sustainability of the EU transport industry, because of more and more expanding adverse transport externalities - sharply increased oil consumption, congestion, accidents and environmental pollution. Some of these externalities are due to subjective factors like inefficient use of resources and poor split amongst transport modes. Generally, it is feasible these factors would be corrected by various technical, market and regulatory means, In this connection, the potential, offered by the inter-modal transport chains with participation of waterborne transport for surmounting of these disadvantages, should be assessed carefully. However, switching of the freight transport demand to inter-modal transport solutions with participation of waterborne transport could be feasible only when the aggregate quality of the inter-modal transport service is higher than the aggregate quality, supplied by other transport alternatives. The key pre-condition for this suggestion is availability of fair rivalry amongst transport modes.

Foreign Direct Investment and 'Less Favoured Regions': Greek FDI in Bulgaria and Romania

During the process of industrialization and afterwards (1960-80), Greek outward investment to Western and developing countries had been marginal, and government policy had only emphasized inward investment. But since the beginning of the nineties the opportunities arising from new investment in Eastern European Countries (EECs) have completely changed the scene. The aim of this article is to shed some light on the foreign direcf investment (FD1) flows from a peripheral European Union (EU) economy such as Greece, to two Less Favoured Regions of Eastern Europe, namely Bulgaria and Romania. In particular, on the basis of the empirical results gathered from a survey carried out in 1995-96, the objective is to analyze key criteria underlying investment choices by Greek firms, in order to help identify their role in the restructuring process and the impact that outward flows might have on the Greek economy.