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42. Europe – the global centre for excellent research
- Author:
- Michael Balternsperger
- Publication Date:
- 05-2019
- Content Type:
- Special Report
- Institution:
- Bruegel
- Abstract:
- This report, requested by the European Parliament's Committee on Industry, Research and Energy, analyses the EU’s potential to be a global centre of excellence for research as a driver of its future growth in a complex global S&T landscape, and how EU public resources can contribute to this
- Topic:
- International Political Economy and International Affairs
- Political Geography:
- Europe
43. Estimating the cost of capital for wind energy investments in Turkey
- Author:
- Lynn Fredriksson
- Publication Date:
- 05-2019
- Content Type:
- Special Report
- Institution:
- Bruegel
- Abstract:
- Wind power represents a key component of Turkey’s energy strategy. Increased investment will be required to meet Turkey’s wind power target and, as such, there is a need to understand the viability of wind power projects there. The cost of capital is a crucial element in wind power investment decisions owing to the high capital intensity of wind power plants. A reduction in the cost of capital through support policies can lower overall project costs and increase investment
- Topic:
- International Relations, International Security, and International Affairs
- Political Geography:
- Global Focus
44. State contingent debt as insurance for euro-area sovereigns
- Author:
- Maria Demertzis and Stavros Zenios
- Publication Date:
- 04-2018
- Content Type:
- Working Paper
- Institution:
- Bruegel
- Abstract:
- Since the financial crisis, EU countries' economies have recovered to the point that they are exiting their adjustment programmes. Institutional stability mechanisms have been improved at the European level, with the promotion of the banking union and the establishment of a European Monetary Fund, for instance. However, the authors argue that such crisis contingencies should include markets in their risk-sharing, which would require better coordination with institutions.
- Topic:
- International Political Economy
- Political Geography:
- Europe
45. How not to create zombie banks: lessons for Italy from Japan
- Author:
- Mark Hallerberg and Christopher Gandrud
- Publication Date:
- 03-2017
- Content Type:
- Policy Brief
- Institution:
- Bruegel
- Abstract:
- Japan serves as a cautionary tale for Italy on how to clean up banking-sector problems. A general lesson is the need for policies to forthrightly address non-performing loans (NPLs) in countries with widespread banking problems. This helps address zombie banks and sluggish economic growth. The Japanese experience indicates that three elements are necessary to address NPLs: (a) sufficiently capitalised banks that can take losses from NPL write-downs; (b) an independent regulator that can identify problems and force action; and (c) tools to manage the orderly disposal of NPLs. The problem is not that this combination of policy tools is unknown, but that banks and governments lack incentives to use them in combination. Italy’s December 2016 package providing €20 billion for recapitalisation of banks is a step in the right direction. Similarly, pressure from the European Central Bank on Italian authori- ties and on banks to address NPLs is welcome. However, policy tools to manage and dispose of NPLs and, just as importantly, incentives to use them, are lacking. In January 2017, the European Banking Authority published a set of policy proposals for NPL resolution. Those include national and European-level public asset management companies (AMC), also known as ‘bad banks’. We argue that in Italy, the incentives to use such tools and dispose of NPLs have been weak.
- Topic:
- International Trade and Finance, Political Economy, Economic structure, and Global Political Economy
- Political Geography:
- Japan and Italy
46. Institutional investors and home bias in Europe’s Capital Markets Union
- Author:
- Zsolt Darvas and Dirk Schoenmaker
- Publication Date:
- 03-2017
- Content Type:
- Working Paper
- Institution:
- Bruegel
- Abstract:
- Integrated capital markets facilitate risk sharing across countries. Lower home bias in financial investments is an indicator of risk sharing. We highlight that existing indicators of equity home bias in the literature suffer from incomplete coverage because they consider only listed equities. We also consider unlisted equites and show that equity home bias is much higher than previous studies perceived. We also analyse home bias in debt securities holdings, and euro-area bias. We conclude that European Union membership may foster financial integration and reduce information barriers, which sometimes limit cross-country diversification. We calculate home bias indicators for the aggregate of the euro area as if the euro area was a single country and report remarkable similarity between the euro area and the United States in terms of equity home bias, while there is a higher level of debt home bias in the United States than in the euro area as a whole. We develop a new pension fund foreign investment restrictions index to control for the impact of prudential regulations on the ability of institutional investors to diversify geographically across borders. Our panel regression estimates for 25 advanced and emerging countries in 2001-14 provide strong support for the hypothesis that the larger the assets managed by institutional investors (defined as pension funds, insurance companies and investment funds), the smaller the home bias and thereby the greater the scope for risk sharing.
- Topic:
- International Political Economy, International Trade and Finance, Economic structure, and Europe Union
- Political Geography:
- Europe
47. Brexit and the European financial system
- Author:
- Uuriintuya Batsaikhan, Robert Kalcik, and Dirk Schoenmaker
- Publication Date:
- 02-2017
- Content Type:
- Policy Brief
- Institution:
- Bruegel
- Abstract:
- London is an international financial centre, serving European and global clients. A hard Brexit would lead to a partial migration of financial firms from London to the EU27 (EU minus UK) to ensure they can continue to serve their EU27 clients. Four major cities will host most of the new EU27 wholesale markets: Frankfurt, Paris, Dublin and Amsterdam. These cities have far fewer people employed in finance than London. Moreover, they host the European headquarters of fewer large companies. The partial migra- tion of financial firms will thus have a major impact on these cities and their infrastructures. Banks are the key players in wholesale markets. United States and Swiss investment banks, together with one large German and three large French banks, will make up the core of the new EU27 wholesale markets. Some Dutch, Italian and Spanish banks are in the second tier. The forex, securities and derivatives trading markets are now in London. We map the current, limited market share of the four major cities that might host the EU27 client business. The expected migration of financial trading will lead to a large increase in trading capacity (eg bank trading floors). Clearing is the backbone of modern financial markets. A comparative overview of clearing facilities in the EU27 shows that Germany and France have some clearing capacity, but this will need to be expanded. The ownership of clearing is often intertwined with stock exchanges. Were the planned LSE-Deutsche Börse merger to go ahead, LSE would sell the Paris subsidiary of its clearinghouse. In terms of legal systems, there is an expectation that trading activities will be able to continue under English contract law, also in the EU27. A particular challenge is to develop FinTech (financial technology) in the EU27, as this innovative part of the market is currently based in London. We estimate that some 30,000 jobs might move from London to the EU27. This will put pressure on the facilities (infrastructure, offices, residential housing) in the recipient cities. The more the European Union market for financial services is integrated, the less need there will be for financial firms to move to one location, reducing the pressure for all facilities to be in one city (see Sapir et al, 2017, which is a companion piece to this paper).
- Topic:
- International Political Economy, International Trade and Finance, and Brexit
- Political Geography:
- Britain and Europe
48. Fundamental uncertainty and unconventional monetary policy: an info-gap approach
- Author:
- Yakov Ben-Haim, Maria Demertzis, and Jan Willem Van Den End
- Publication Date:
- 02-2017
- Content Type:
- Working Paper
- Institution:
- Bruegel
- Abstract:
- This paper applies the info-gap approach to the unconventional monetary policy of the Eurosystem and so takes into account the fundamental uncertainty on inflation shocks and the transmission mechanism. The outcomes show that a more demanding monetary strategy, in terms of lower tolerance for output and inflation gaps, entails less robustness against uncertainty, particularly if financial variables are taken into account. Augmenting the Taylor rule with a financial variable leads to a smaller loss of robustness than taking into account the effect of financial imbalances on the economy. However, in some situations, the augmented model is more robust than the baseline model. A conclusion from our framework is that including financial imbalances in the monetary policy objective does not necessarily increase policy robustness, and may even decrease it
- Topic:
- Economics, International Political Economy, and International Trade and Finance
- Political Geography:
- Europe
49. An economic review of the collaborative economy
- Author:
- Georgios Petropoulos
- Publication Date:
- 02-2017
- Content Type:
- Working Paper
- Institution:
- Bruegel
- Abstract:
- This Policy Contribution tackles the definition and benefits of collaborative economy, as well as the distinction between professional and non-professional services, recommendations on safety and transparency for users, and the way to approach regulatory concerns.
- Topic:
- Development and Economics
- Political Geography:
- Global Focus
50. Europe in a new world order
- Author:
- Maria Demertzis, André Sapir, and Guntram Wolff
- Publication Date:
- 02-2017
- Content Type:
- Policy Brief
- Institution:
- Bruegel
- Abstract:
- The United States is the European Union’s most important trade and bilateral investment partner, which has, until now, supported a multilateral trade system and European integration and has provided a security guarantee to the countries of the EU. But like other advanced economies, the US’s relative weight in the global economy has declined. The new US administration seems intent on replacing multilateralism with bilateral deals. In trade, it aims to secure new trade deals in order to reduce bilateral trade deficits and to protect, in particular, the US manufacturing sector. In climate policy, the US commitment to the Paris Agreement is being questioned. In defence, the security umbrella appears less certain than previously. The overall promise behind this change of direction is to put ‘America first’ and deliver better results for US citizens.
- Topic:
- International Political Economy, International Trade and Finance, Bilateral Relations, Multilateral Relatons, and Political stability
- Political Geography:
- Europe and United States of America