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33821. Estimating the Effects of Fiscal Policy in OECD Countries

Author:
Roberto Perotti
Publication Date:
10-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
This paper studies the effects of fiscal policy on GDP, prices and interest rates in 5 OECD countries, using a structural Vector Autoregression approach. Its main results can be summarized as follows:1 ) The estimated effects of fiscal policy on GDP tend to be small: positive government spending multipliers larger than 1 tend to be the exception; 2) The effects of fiscal policy on GDP and its components have become substantially weaker over time; 3) Under plausible values of the price elasticity, government spending has positive effects on the price level, although usually small; 4) Government spending shocks have significant effects on the nominal and real short interest rate, but of varying signs; 5) In the post-1980 period, net tax shocks have positive short run effects on the nominal interest rate, and typically negative or zero effects on prices; 6) The US is an outlier in many dimensions; responses to fiscal shocks estimated on US data are often not representative of the average OECD country included in this sample.
Topic:
Economics and Government
Political Geography:
United States and Europe

33822. Improving the Governance of European Foreign Aid: Development Co-Operation as an Element of Foreign Policy

Author:
Carlos Santiso
Publication Date:
10-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
Should European Union (EU) member states 're-nationalise' foreign aid? Considering the dismal record of the aid managed by the European Commission, this is a legitimate question that European leaders nevertheless seem unwilling to address seriously. Like in America, there is heightened debate across Europe on the purpose of the aid it provides to developing countries. The current debates on poverty reduction, debt relief and, more broadly, the effectiveness of development assistance have brought renewed light on foreign aid.
Topic:
Foreign Policy, Development, and Economics
Political Geography:
America and Europe

33823. The Economic Impact of Enlargement on the European Economy: Problems and Perspectives

Author:
Paul Brenton
Publication Date:
10-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
Much of the attention on the economic aspects of the forthcoming enlargement of the EU have concentrated upon the high-profile issues which are linked to the level of relative economic development in the acceding countries; the perceived threat of large-scale migration and the budgetary costs arising from implementation of EU agricultural and regional policies. This paper briefly discusses that these are not insurmountable problems and stresses that the main difficulties from the next enlargement may arise from the effective inclusion of the acceding countries into the Single Market, the microeconomic hub of the EU. We discuss that the process of regulatory harmonisation will become more difficult in an EU of 25 or more members, which entails greater emphasis on the principle of mutual recognition as the main tool for ensuring freedom of movement of goods and services. However, mutual recognition has its limits and is likely to be less effective the more diverse the countries involved.
Topic:
Economics and International Trade and Finance
Political Geography:
Europe

33824. Outsourcing and Inequality

Author:
Paul Brenton, Bob Anderton, and Eva Oscarsson
Publication Date:
10-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
This paper brings together and analyses the results of empirical analyses which, in contrast to most other studies, find that trade has been a significant cause of labour market inequality in various industrialised countries. The approach is based upon the concept of outsourcing – whereby the low-skill parts of the production chain are 'outsourced' to low-wage countries. A distinguishing feature of the empirical work is the use of highly detailed trade data, which allow imports from high- and low-wage countries to be separately identified at the industry level. Using cost minimisation framework, we show that imports from low-wage countries have made a significant contribution to the decline in the wage-bill share and/or relative employment of less-skilled workers in the UK, the USA, Sweden and Italy. We also show how the country-specific characteristics of outsourcing can lead to quite different inequality outcomes in different countries. In line with other studies, we also find that technology has played an important role in causing the increase in inequality in many countries. However, there is also some evidence that some of the rapid increase in the application of new technologies in recent decades has been trade-induced through mechanisms such as 'defensive innovation'.
Topic:
Economics, Industrial Policy, International Trade and Finance, and Science and Technology
Political Geography:
United States and United Kingdom

33825. Who Needs Foreign Banks?

Author:
Daniel Gros
Publication Date:
09-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
This paper shows that countries with weak banking system and fiscal institutions, might benefit from the presence of foreign banks, which can constitute a commitment and transparency device. Foreign banks can also reduce the probability of self-fulfilling speculative attacks. A strong presence of foreign banks can make a currency peg feasible in the first place by rendering it more resistant to speculative attacks. The European experience is instructive in this respect. In all of the candidate countries from Central and Eastern Europe (CEEC) the banking system is now dominated by foreign banks. This is now taken for granted, but it is unusual if one looks at the existing EU-15 members, where foreign banks play a marginal role in even the smallest economies.
Topic:
Economics and International Trade and Finance
Political Geography:
Europe

33826. Interdependent Growth in the EU: The Role of Trade

Author:
María Garcia-Vega and José A. Herce
Publication Date:
08-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
After properly modelling growth externalities and using spatial econometric techniques we investigate whether economic integration promotes interdependent growth among countries. We conclude that this has been indeed the case for advanced OECD countries and that, for those countries belonging to the EU, through successive enlargements, the effect has been even stronger. More precisely, if every (trade) partner of a given country experiences an extra growth of 1 percentage point, this economy will profit from an extra 0.5 point, and if this country belongs to the EU it will have an additional increase of its rate of growth of 0.2 points. Both figures can be interpreted as growth externalities with the latter suggesting that an integration process like the one followed by the EU has an (positive) effect on growth.
Topic:
Economics and International Trade and Finance
Political Geography:
Europe

33827. Making EU Trade Agreements Work: The Role of Rules of Origin

Author:
Paul Brenton and Miriam Manchin
Publication Date:
03-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
A key element of the EU's free trade and preferential trade agreements is the extent to which they deliver improved market access and so contribute to the EUs foreign policy objectives towards developing countries and neighbouring countries in Europe, including the countries of the Balkans. Previous preferential trade schemes have been ineffective in delivering improved access to the EU market. The main reason for this is probably the very restrictive rules of origin that the EU imposes, coupled with the costs of proving consistency with these rules. If the EU wants the 'Everything but Arms' agreement and free trade agreements with countries in the Balkans to generate substantial improvements in access to the EU market for products from these countries then it will have to reconsider the current rules of origin and implement less restrictive rules backed upon by a careful safeguards policy.
Topic:
Foreign Policy, Economics, Government, Human Rights, International Trade and Finance, Migration, and Political Economy
Political Geography:
Europe and Balkans

33828. The Reform of EU Development Policy

Author:
Carlos Santiso
Publication Date:
03-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
Improving external relations and the management of development aid is a key component of the current reform of the European Union (EU). In the course of the 1990s, the promotion of democracy, the strengthening of good governance and enhancing the rule of law progressively became both an objective and a condition for the EU development assistance with developing countries. Achieving these sometimes-contradictory goals in practice is a permanent challenge. This paper reviews the EU's policies and strategies aimed at preventing conflict and responding to the crises of governance. It explores the difficult combination of democracy assistance and governance conditionality and its applicability to the prevention of democratic erosion in developing countries. While the EU mainly relies on a positive approach of support and inducement, it has also introduced, since 1995, provisions to suspend aid in the event of a sudden and persistent interruption of the democratisation process. The suspension mechanism enshrined in the cooperation agreement between the EU and ACP countries has made political dialogue the main strategic tool for achieving these varied purposes. Mainstreaming political dialogue into the cooperation forces the EC to focus more explicitly and more rigorously on issues of power, politics and democracy than it has done in the past.
Topic:
Democratization
Political Geography:
Europe and North America

33829. Russia's Security Policy EU-Russian Relations

Author:
Angela Stent, Dmitri V. Trenin, Stephan de Spiegeleire, and François Heisbourg
Publication Date:
03-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
At the beginning of the 21st century, the central issue of European security is how, not whether, to integrate Russia within Euro-Atlantic institutions. The conditions are now right to move ahead towards that ambitious goal.
Topic:
Security, Defense Policy, NATO, and Terrorism
Political Geography:
Russia and Europe

33830. Kyoto Flexible Mechanisms: Opportunities and Barriers for Industry and Financial Institutions

Author:
Josef Janssen
Publication Date:
03-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
The Kyoto Protocol established global markets for greenhouse gas emissions reductions and permits. Such emerging markets will offer challenging opportunities to a wide variety of different players in industry and commerce. By means of the market-based Flexible Mechanisms Joint Implementation, Clean Development Mechanism and International Emissions Trading it will be possible to trade emissions permits globally. This chapter explores opportunities of the Flexible Mechanisms for industry, including the financial sector. Moreover, it identifies possible barriers to their realisation. This analysis is preceded by a discussion of the possible seize of global markets for emissions permits. In addition, this chapter examines key features of the Flexible Mechanisms that are relevant from an industry perspective.
Topic:
Environment and Industrial Policy
Political Geography:
Europe