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Book part
Publication date: 23 October 2017

Daniele Schilirò

This chapter analyzes the rules and institutions that have characterized the European Monetary Union (EMU) during its prolonged crisis, stressing the limits of the strategy…

Abstract

This chapter analyzes the rules and institutions that have characterized the European Monetary Union (EMU) during its prolonged crisis, stressing the limits of the strategy pursued by the European authorities. It also examines the issues of current account imbalances, economic growth and the problem of debt, and their interconnections. The main purpose of this chapter is to indicate feasible economic solutions and political arrangements in order to complete the institutional system of the EMU. This requires appropriate reforms of its institutional architecture. But such reforms demand changes in the treaties in order to make the Eurosystem more consistent and endowed of democratic legitimacy, so to have appropriate tools, resources and policies that can contribute to the stability, cohesion and development of the Eurozone.

Details

Economic Imbalances and Institutional Changes to the Euro and the European Union
Type: Book
ISBN: 978-1-78714-510-8

Keywords

Book part
Publication date: 23 October 2017

Yaya Sissoko and Brian W. Sloboda

The objective of this chapter is to examine the recent experiences of capital flows and the associated fiscal imbalances since the inception of the Eurozone. We show that the…

Abstract

The objective of this chapter is to examine the recent experiences of capital flows and the associated fiscal imbalances since the inception of the Eurozone. We show that the standard explanation for understanding these fiscal imbalances and capital flows is viable, but is not complete given the unique circumstances surrounding these fiscal imbalances within the Eurozone. That is, the creation of the Eurozone provided some fiscal and monetary stability up until the shock of the 2008 Financial Crisis. After the 2008 Financial Crisis, the interaction between the current account and fiscal imbalances started to spread throughout the Eurozone members and many of these Eurozone members began to engage in policies in an attempt to restore stability and to stem capital outflows by implementing fiscal reforms. In fact, some of the Eurozone members attempted to restore their fiscal viability in response to the 2008 Financial Crisis, but not with much success. Thus, the Eurozone members, collectively, need to reexamine best practices to implement fiscal policies that are resistant to intense financial shocks. Empirically, we examined the following two hypotheses in this chapter via the Wald test statistic. The first hypothesis examined the effect of the own country fiscal imbalances within own country is uniform across all the Eurozone members. Then, the second hypothesis examined the fiscal imbalances of one Eurozone member do not have on other Eurozone members. The Wald test statistic rejected both hypotheses.

Details

Economic Imbalances and Institutional Changes to the Euro and the European Union
Type: Book
ISBN: 978-1-78714-510-8

Keywords

Open Access
Article
Publication date: 30 November 2021

Dimitra Loukia Kolia and Simeon Papadopoulos

This paper investigates the development of efficiency and the progress of banking integration in the European Union by checking for convergence among banks of European and Eurozone

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Abstract

Purpose

This paper investigates the development of efficiency and the progress of banking integration in the European Union by checking for convergence among banks of European and Eurozone countries as well as contrasting the results with those of United States banks.

Design/methodology/approach

Initially, we employ the two-stage semi-parametric double bootstrap DEA method, which absorbs the effects of possible integration barriers in the measurement of efficiency. Afterwards, we apply a panel data model, in order to investigate the process of banking integration by testing for convergence and for convergent clusters in banking efficiency.

Findings

Our main findings show that the bank efficiency of the US is considerably higher than that of the Eurozone and the European Union. Although there is no evidence of convergence across the banking groups, our results indicate the presence of club convergence. We also conclude that the US banking system is closer to convergence than the Eurozone and the European Union banks. Nevertheless, this outcome is subject to change in the future due to the fact that Eurozone and European Union banks' speed of convergence is higher than that of US banks.

Originality/value

Our survey is unique in trying to check for convergence while controlling for country-specific and bank-specific factors that affect the efficiency of European and Eurozone banks. Moreover, recent literature does not compare the convergence of efficiency of Eurozone, European and US banking. Finally, in our paper special consideration was given to the comparison of commercial, cooperative and savings banks, as subsets of our banking groups.

Details

Journal of Capital Markets Studies, vol. 6 no. 1
Type: Research Article
ISSN: 2514-4774

Keywords

Article
Publication date: 29 July 2014

Wasim Ahmad, N.R. Bhanumurthy and Sanjay Sehgal

This paper aims to examine the contagion effects of Greece, Ireland, Portugal, Spain and Italy (GIPSI) and US stock markets on seven Eurozone and six non-Eurozone stock markets…

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Abstract

Purpose

This paper aims to examine the contagion effects of Greece, Ireland, Portugal, Spain and Italy (GIPSI) and US stock markets on seven Eurozone and six non-Eurozone stock markets.

Design/methodology/approach

In this paper, a dynamic conditional correlation (DCC) model popularly known as DCC-GARCH (Generalized Autoregressive Conditional Heteroscedasticity) model given by Engle (2002) is applied to estimate the DCCs across sample markets.

Findings

Analyzing the Eurozone crisis period, the empirical results suggest that among GIPSI stock markets, Spain, Italy, Portugal and Ireland appear to be most contagious for Eurozone and non-Eurozone markets. The study finds that France, Belgium, Austria and Germany in Eurozone and UK, Sweden and Denmark in non-Eurozone are strongly hit by the contagion shock.

Practical implications

The findings of the study have significant implications for the concerned regulatory authorities, as it may provide an important direction for further policy research with regard to financial integration in the European Union (EU). From global investors’ perspective, the EU-based diversification strategies seem to be inefficient especially during Eurozone crisis.

Originality/value

To the best of the authors’ knowledge, this is the first study that examines the issue of financial contagion of Eurozone crisis for a large basket of stock markets of European countries comprising seven Eurozone and six non-Eurozone markets for the period 2009-2012. The study uses the Markov regime switching model to identify crisis period and utilizes the DCC estimates of DCC-GARCH to examine the patterns of financial contagion. The finding of this study is quite interesting and is different in several ways than existing studies in the literature.

Details

Studies in Economics and Finance, vol. 31 no. 3
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 15 January 2020

Vighneswara Swamy

The significant economic weight of the Eurozone in the globe caused the contagion of the Eurozone debt crisis on the emerging markets. The Eurozone debt crisis caused the sudden…

Abstract

Purpose

The significant economic weight of the Eurozone in the globe caused the contagion of the Eurozone debt crisis on the emerging markets. The Eurozone debt crisis caused the sudden plummeting of the cross-border bank credit (BC) to India causing a significant impact on bank lending in India. Essentially, the purpose of this study is to find an answer to the question: Did the decline in cross-border cross-credit from Eurozone had an impact on domestic BC in India?

Design/methodology/approach

Using the data for the period from 2000 to 2013 sourced from Bank for International Settlements international banking statistics consolidated data sets, the novel specification of the study captures the impact of Eurozone cross-border credit on India by developing two regression frameworks that capture the pre-Euro debt crisis period scenario and post-Euro debt crisis period scenario.

Findings

The results offer a very interesting analogy of the behavior of BC and cross-border credit during the pre and post-Eurozone crisis scenarios of analysis. During the pre-Eurozone crisis period, cross-border credit displayed a significant negative relationship with BC indicating that cross-border credit to the Indian firms indirectly benefitted the banks by creating increased demand for domestic BC. The post-Eurozone crisis period witnessed a nexus between cross-border credit and BC during the pre-Eurozone crisis period, which gradually disappeared largely because of the onset of the Eurozone crisis.

Originality/value

This study is a first of its kind in investigating the impact of the Eurozone crisis on an emerging economy like India. This study supports the hypothesis of the existence of the transmission of financial shocks through the balance sheets of international banks. The findings conform to the policy concerns of most of the emerging economies that international banks transmit financial shocks from their home countries. The implication for India and other emerging economies is that international credit growth deserves careful monitoring.

Details

Journal of Financial Economic Policy, vol. 12 no. 4
Type: Research Article
ISSN: 1757-6385

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Article
Publication date: 10 May 2013

Paraschos Maniatis

This study aims to statistically investigate the place of the eurozone countries in the framework of the international economy and particularly within the most advanced non…

Abstract

Purpose

This study aims to statistically investigate the place of the eurozone countries in the framework of the international economy and particularly within the most advanced non Euro‐currency countries; second it attempts to explain the eventual discrepancies in the performing of the eurozone from the most advanced non‐eurozone countries by the weaknesses of some eurozone members. The discriminant analysis as an investigation tool has been chosen as an as unbiased as possible investigation technique. Of course, every discriminant analysis requires classification criteria. The criteria adopted in this study result to more or less the same conclusions.

Design/methodology/approach

Most econometric studies prefer the popular econometric techniques employing classical regression techniques, while methods of multivariate statistics and non‐linear regressions occupy a minor place as statistical tools. Numerous and multivariate data call for multivariate techniques, which at the cost of losing information and details allow for better a perception of the data structure. Therefore, a great part of the statistical analysis focuses on multivariate techniques and non‐linear regression.

Findings

The study concludes that despite the present budget and debt crisis hitting some major and minor eurozone members the “real” economy of the eurozone posseses a first class place in the World economy – both in relative and absolute terms. During the course of the study effort was paid to balancing the tools of investigation and the fertility of the results, in particular to approach questions such as: what is present condition of the eurozone? How solid are the predictions for a hanging collapse of the euro currency and the eurozone? At the end of the study is given an apercu on the transition of the member countries to the eurozone and their economic status by the end of 2011 tries to soften the fears for the eurozone future.

Originality/value

This study tries to analyze the position of the eurozone countries from an arithmetic/objective perspective, ignoring as much as possible the (geo) political and national interests of the principal countries involved as an effort to check the solidity of the fears. Not all parameters of the economy can enter the study. The author has chosen a few variables, which to their opinion reflect the overall performance of an economy. Parameters relating to financial aspects have nowadays in great degree become autonomous and call for special inquiry. The study seeks to add to econometric studies carried out by national and international institutions and Universities. It mainly concerns the statistical techniques and to treat eurozone as a whole entity vs the rest of the developed non‐eurozone world. Indeed, the study tries to defend the eurozone using objective data against a multitude of gloomy predictions, raised by several world partners, for the performance and the future of the eurozone.

Article
Publication date: 14 September 2015

Nurul Mozumder, Glauco De Vita, Charles Larkin and Khine S. Kyaw

The purpose of this paper is to investigate the sensitivity of firm value to exchange rate (ER) movements, and the determinants of such exposure for 100 European blue chip…

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Abstract

Purpose

The purpose of this paper is to investigate the sensitivity of firm value to exchange rate (ER) movements, and the determinants of such exposure for 100 European blue chip companies over 2001-2012.

Design/methodology/approach

The authors adopt a disaggregated framework that distinguishes between Eurozone and non-Eurozone firms, and between financial and non-financial firms across the pre-crisis, crisis and post-crisis periods of the recent financial crisis.

Findings

The authors find no significant difference between Eurozone and non-Eurozone, and financial and non-financial firms. Exposure is found to be higher during the financial crisis, across all sub-samples of firms. In the majority of cases the exposure coefficient is significantly positive, indicating that European firms’ stock returns are positively (negatively) affected by depreciation (appreciation) of ERs (indirect quotation).

Practical implications

It is recommended that firms’ financial plans budget for higher liquidity levels in order to build up, during “good times”, a natural hedge for the higher exposure likely to be faced during periods characterized by greater financial distress.

Originality/value

The main novelty lies in the adoption of a disaggregated framework that discriminates between pre-crisis, crisis and post-crisis periods in order to ascertain the extent to which the recent financial crisis affected the relationship in question.

Details

Journal of Economic Studies, vol. 42 no. 4
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 17 August 2015

Sandra Cohen, María-Dolores Guillamón, Irvine Lapsley and Geraldine Robbins

The purpose of this paper is to examine the impact of the Eurozone financial crisis by discussing the experiences of Greece, Ireland and Spain. It particularly examines the…

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Abstract

Purpose

The purpose of this paper is to examine the impact of the Eurozone financial crisis by discussing the experiences of Greece, Ireland and Spain. It particularly examines the influence and actions of the Troika in the management of the sovereign debt crisis in the Eurozone.

Design/methodology/approach

The primary source of information for this study has been the documents of the Greek, Irish and Spanish Governments (often only available in their native language) and the reports of EU bodies and the IMF, supplemented by media coverage, as deemed appropriate. This has been analysed on a comparative basis to contrast the experiences of these three countries.

Findings

This study reveals how the Eurozone crisis has impacted on financially weak countries in this currency union. The fiscal conservatism of the Troika (the IMF, the EU and the European Central Bank) has had profound consequences for these economies, which have experienced dramatic cuts in public services.

Research limitations/implications

This study has focused on the experiences of three countries in the Eurozone. There is a case for extending this analysis to other Eurozone countries.

Practical implications

There are two approaches to recession – governments can stimulate demand by infrastructure spending or take the financial conservatism route of reducing public expenditure and public sector borrowing. However, the severity of the crisis undermines the first approach and there are uncertain outcomes with the second approach. This paper shows the effects of adopting financial conservatism as a strategy in this crisis.

Social implications

The austerity programmes pursued by the governments in this study have led to unemployment, migration of skilled workers, collapse in property markets, failing banks and social unrest.

Originality/value

This study takes an accounting perspective on the Eurozone crisis. This offers a distinctive interpretation of events. This study examines the merits of widely used theories in studies of public sector change namely legitimation and resource dependency theory intertwined with power and offers insights into how meaningful they are in explaining the dramatic influence of austerity programmes in the Eurozone.

Details

Accounting, Auditing & Accountability Journal, vol. 28 no. 6
Type: Research Article
ISSN: 0951-3574

Keywords

Article
Publication date: 14 May 2021

Ioannis Katsampoxakis

The paper examines the impact of the deteriorating fiscal conditions of Eurozone countries on spillover effects on bank credit margins. It is investigated whether these effects…

Abstract

Purpose

The paper examines the impact of the deteriorating fiscal conditions of Eurozone countries on spillover effects on bank credit margins. It is investigated whether these effects have been reduced after European Central Bank’s (ECB) signaling of pursuing an expansionary, unconventional, monetary policy to address the debt crisis in Eurozone.

Design/methodology/approach

A general econometric panel model is applied to investigate spillover effects between Eurozone countries and bank credit margins. In total, three periods are examined: the period before the peak of the global financial crisis and the beginning of the Irish banking crisis, the period during the debt and bank crisis in Eurozone and the period after ECB's signaling of extremely aggressive monetary easing.

Findings

According to empirical results, before the peak of the global financial crisis there was no substantial credit risk transfer from Eurozone sovereigns to banks. During the period of debt and bank crisis in Eurozone, the deterioration of the fiscal situation of Eurozone countries had a significant impact on bank Credit Default Swap (CDS) spreads. After ECB's signaling of extremely aggressive monetary easing, it does not seem to be any significant relationship between Eurozone sovereigns and bank CDS spreads. These findings reinforce the assessment that ECB's measures were effective, achieving the key objective of normalizing economic conditions and ensuring financial stability in Eurozone.

Research limitations/implications

A question is whether effects can change when the corresponding contraction will lead to a reinstatement of “normal” conditions. Would there be a reversal of risk premium trends in bond markets? Although the answer from casual observations seems to be negative, it is a valid research question to be examined. An interesting issue concerning the unconventional monetary policy measures implemented by ECB concerns the issues of moral hazard that they incorporate, something that could not be addressed. Another research perspective could be the use of the beta coefficient to measure the systematic and unsystematic risk of banking sector shares.

Practical implications

The results have strong implications for ECB and European banking regulation. Regulators should mainly pay more attention to the amount and concentration of sovereign debt held by banks. Eurozone financial system could be less vulnerable to the sovereign credit risk. It raised the critical question of whether a more strict regulation is needed. Regulators should not intervene if not necessary, but they must prevent the transmission of crises between markets. This will likely bring trust to the developed countries' sovereign debt and the portfolios of the financial institutions, which hold most of this debt will be considered safe as well.

Social implications

The conclusions provide a safe counterweight in various respects. First, the negative effects and the need to rapidly cease or limit such policies. Second, the financial stability aimed by ECB. Such policies contain the possibility of a subsequent moral hazard related to Member State and bank behavior. However, these contingencies need to be assessed with the benefits resulting from the restoration of financial markets and the disconnection between banking and sovereign credit risk. This leads Eurozone's financial system to become less vulnerable to the sovereign credit risk and therefore more safe, helping to restore confidence in the real economy.

Originality/value

Contribution in terms of methodology and conclusions. It offers important conclusions regarding the limitations of yields and volatility of CDS spreads. It examines the spillover effects of the fiscal situation of Eurozone countries on banking institutions by extending the existing methodology and introducing new questions focusing on the reaction of CDS market to the ECB monetary policy, the reduction of risk premiums at sovereign and banking level and the gradual reduction of interdependence between them.

Details

EuroMed Journal of Business, vol. 17 no. 2
Type: Research Article
ISSN: 1450-2194

Keywords

Book part
Publication date: 13 May 2019

Rosaria Rita Canale and Rajmund Mirdala

The role of money and monetary policy of the central bank in pursuing macroeconomic stability has significantly changed over the period since the end of World War II…

Abstract

The role of money and monetary policy of the central bank in pursuing macroeconomic stability has significantly changed over the period since the end of World War II. Globalization, liberalization, integration, and transition processes generally shaped the crucial milestones of the macroeconomic development and substantial features of economic policy and its framework in Europe. Policy-driven changes together with variety of exogenous shocks significantly affected the key features of macroeconomic environment on the European continent that fashioned the framework and design of monetary policies.

This chapter examines the key basis of the central bank’s monetary policy on its way to pursue and preserve the internal and external stability of the purchasing power of money. Substantial elements of the monetary policy like objectives and strategies are not only generally introduced but also critically discussed according to their accuracy, suitability, and reliability in the changing macroeconomic conditions. Brief overview of the Eurozone common monetary policy milestones and the past Eastern bloc countries’ experience with a variety of exchange rate regimes provides interesting empirical evidence on origins and implications of vital changes in the monetary policy conduction in Europe and the Eurozone.

Details

Fiscal and Monetary Policy in the Eurozone: Theoretical Concepts and Empirical Evidence
Type: Book
ISBN: 978-1-78743-793-7

Keywords

1 – 10 of over 1000