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41. Do the European Union's bilateral investment treaties matter?

Author:
Selen Sarisoy Guerin
Publication Date:
07-2010
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
Several policy-relevant issues regarding the EU's bilateral investment treaties (BITS) are addressed in this paper. First and foremost, we explore the question of whether EU's BITs have a significantly positive impact on outflows or not. Second, we ask the question which member states and which BIT partners have had a significant experience after the implementation of the BIT. In our sample we find that both OECD BITs and EU BITs have a statistically significant and positive impact on FDI outflows. This result is robust to the inclusion of variables such as privatisation proceeds that control for the level of economic reform, the level of trade linkages, the level of democratic freedom and a measure of risk of expropriation among other standard controls. We control for endogeneity in our estimations by using the fixed-effects estimator as our preferred estimator on a large panel dataset. We also test the strict exogeneity of our results by using a method suggested by Baier and Bergstrand (2007) and we find no feedback effect in our sample.
Topic:
Economics, International Trade and Finance, Monetary Policy, and Financial Crisis
Political Geography:
Europe

42. The financial crisis and citizen trust in the European Central Bank

Author:
Daniel Gros and Felix Roth
Publication Date:
07-2010
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
Trust in the ECB, as measured by the standard Eurobarometer (and other) surveys has fallen to an unprecedented low – especially in the larger euro area countries. The authors find that up to the start of the recession in 2008, trust in the ECB was little affected by business cycle variables such as growth and inflation. This changed radically with the recession, with trust in the ECB becoming correlated quite closely with growth. However, even the recovery of growth in 2009 was not sufficient to restore trust in the ECB to previous levels. This finding implies that European citizens seem to have placed a heavy share of the blame on the European Central Bank for the real economic downturn caused by the financial crisis.
Topic:
Economics, International Trade and Finance, and Monetary Policy
Political Geography:
Europe

43. Adjustment Difficulties in the GIPSY Club

Author:
Daniel Gros
Publication Date:
03-2010
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
This paper describes the key economic variables and mechanisms that will determine the adjustment process in those euro area countries now under financial market pressure. (Greece, Ireland, Portugal, Spain and Italy = GIPSY) The key finding is that the adjustment will be particularly difficult for Greece (and Portugal) because these are two relatively closed economies with low savings rates. Both of these countries are facing a solvency problem because they combine high debt levels with low growth and high interest rates. Fiscal and external adjustment is thus required for sustainability, not just to satisfy the Stability Pact. By contrast, Ireland and Spain face more of a liquidity than a solvency problem. Italy seems to have a much better starting position on all accounts. Fiscal adjustment alone will not be sufficient to ensure sustainability. Without significant reductions in labour costs, these economies will face years of stagnation at best. Especially in the case of Greece, it is imperative that the cuts in public sector wages are transmitted to the entire economy in order to restore competitiveness, and thus ensure that export growth can become a vital safety valve. Without an adjustment of wages in the private sector, the adjustment will become so difficult that failure cannot be excluded.
Topic:
Debt, Economics, Monetary Policy, and Financial Crisis
Political Geography:
Europe, Greece, Spain, Italy, Portugal, and Ireland

44. Information Sharing and Cross-Border Entry in European Banking

Author:
Caterina Giannetti, Nicola Jentzsch, and Giancarlo Spagnolo
Publication Date:
02-2010
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
Asymmetries can severely limit the cross-border border expansion of banks, if entering banks can only obtain incomplete information about potential new clients. Such asymmetries are reduced by credit registers, which distribute financial data on bank clients. Asymmetrically distributed information and adversely selected pools of borrowers constitute severe barriers for foreign banks when they enter new markets. In many instances, these problems force banks to either form 'alliances with incumbents' or simply enter through mergers and acquisitions (M). Yet such entry modes do not automatically lead to intensified competition as they may leave the number of competitors unchanged. Thus, institutions that reduce information asymmetries in credit markets (thereby encouraging entry through branches) may be very important if the objective is strengthening competition in addition to market integration. Recently, these institutions – credit registers – have received greater attention among academics and policy-makers in Europe, although there is still a remarkable lack of understanding of their empirical impact on banking.
Topic:
Economics, International Trade and Finance, Markets, and Monetary Policy
Political Geography:
Europe

45. Towards a Euro(pean) Monetary Fund

Author:
Daniel Gros and Thomas Mayer
Publication Date:
02-2010
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
Despite cobbling together an impressive $1 trillion rescue package for countries with potential funding problems, the threat of a disorderly default still looms over the eurozone, creating systemic financial instability at the EU and possibly global level. Against this background, Daniel Gros and Thomas Mayer renew their call for the creation of a European Monetary Fund (EMF) in an update to their Policy Brief issued in February.
Topic:
Economics, Monetary Policy, and Financial Crisis
Political Geography:
Europe and Greece

46. The Taxation of Multinational Enterprises in the European Union

Author:
Stefano Micossi and Paola Parascandolo
Publication Date:
02-2010
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
As a rule, multinational enterprises (MNEs) are taxed separately by the countries in which they operate on the basis of the income produced in each jurisdiction ('source' taxation). To this end, they must keep separate accounts for business units in each country (“separate accounting”, SA) ascribing each item of expenditure and income to each business unit on the basis – by universally accepted convention – of 'arm's-length' pricing (ALP), that is, of comparable or estimated prices for similar market transactions between unrelated companies.
Topic:
Economics, Globalization, International Trade and Finance, Monetary Policy, and Financial Crisis
Political Geography:
Europe

47. Comparing EU and US Responses to the Financial Crisis

Author:
Karel Lannoo
Publication Date:
01-2010
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
Since 2003, the EU and the US have conducted a vibrant regulatory dialogue on financial regulation, but domestic priorities seem to have taken precedence in response to the financial crisis. This paper compares the institutional and regulatory changes occurring on both sides of the Atlantic. On the institutional side, it compares macro- and micro-prudential reforms. On the regulatory side, it compares four key areas: bank capital requirements, reform of the OTC derivative markets, and the regulation of credit ratings agencies and hedge funds. It concludes by highlighting certain implications for the regulatory dialogue.
Topic:
Economics, Monetary Policy, and Financial Crisis
Political Geography:
United States and Europe

48. Lessons from the Asian Monetary Fund for the European Monetary Fund

Author:
Yonghyup Oh
Publication Date:
04-2010
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
The euro area is facing a challenge with Greece in danger of falling into sovereign default and some of its other members, the so-called 'GIPSY' nations, finding themselves in serious financial distress. Creation of a European Monetary Fund to deal more effectively with this type of situation is gaining support. This paper draws lessons from the Asian experience that might be applied to the current European development.
Topic:
Debt, Economics, International Trade and Finance, and Monetary Policy
Political Geography:
Europe

49. Towards a Euro(pean) Monetary Fund

Author:
Daniel Gros and Thomas Mayer
Publication Date:
05-2010
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
The case of Greece has ushered in the second phase of the financial crisis, namely that of sovereign default. Members of the euro area were supposed to be shielded from a financial market meltdown. But, after excess spending during the period of easy credit, several euro area members are now grappling with the implosion of credit-financed construction and consumption booms. Greece is the weakest of the weak links, given its high public debt (around 120% of GDP), compounded by a government budget deficit of almost 13% of GDP, a huge external deficit of 11% of GDP and the loss of credibility from its repeated cheating on budget reports.
Topic:
Economics, Monetary Policy, and Financial Crisis
Political Geography:
Europe

50. Regulatory Challenges for the EU Asset Management Industry

Author:
Karel Lannoo
Publication Date:
04-2010
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
The European asset management industry is feeling squeezed from all sides, as a result of growing prudential, product and conduct regulation. A new Directive, UCITS IV, has only just been enacted, and already new challenges are emerging in the regulation of hedge and venture capital funds, the review of the regulatory regime for depositaries (or financial custodians) and amendments to the MiFID Directive.2 In addition, a new European supervisory framework is in the making, which implies much stricter controls on enforcement. These changes are taking place in the context of one of the largest declines suffered by the industry in the last two decades, from which many fund managers have not yet recovered. The era of light regulation is thus definitely over.
Topic:
Markets, Monetary Policy, and Financial Crisis
Political Geography:
Europe