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Book part
Publication date: 23 October 2017

Tiago Cardao-Pito

In the euro’s initial years, Greece, Ireland, Italy, Portugal and Spain observed capital flow bonanzas and credit-booms, two cycles known to precede banking crises…

Abstract

In the euro’s initial years, Greece, Ireland, Italy, Portugal and Spain observed capital flow bonanzas and credit-booms, two cycles known to precede banking crises. Domestic banks fuelled those cycles via funding obtained from foreign financial institutions. Yet, these countries’ banking and financial crises have unfolded in different modes. In Ireland and Spain, credit-booms propelled real-estate bubbles, which dragged banks into crises, with governments’ accounts later being affected when rescuing banks (Spanish regional banks, and all Irish major banks). In Greece and Italy, extra monetary means perpetuated government imbalances (e.g. debt levels above 100% of GDP, large yearly deficits). More severely in Greece, banks were brought into crises by sovereign crises. In Portugal, a mixture of private and public sector–led crises have occurred. Our comparative study finds that these crises: (1) are connected to shocks and imbalances caused by dangerous banking sector cycles during the monetary integration process; (2) were not mere expansions of the US subprime crisis; (3) were not only caused by country-specific features and institutions; and (4) followed distinct paths, therefore, a uniform model encompassing all post-euro crises cannot exist.

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

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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…

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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.

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

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Article
Publication date: 22 December 2020

Kjell Hausken and Jonathan W. Welburn

The article develops a model to interpret the 2010–2018 financial crisis in Greece, Portugal, Ireland, Spain and Cyprus, and the loan programs from the IL (International…

Abstract

Purpose

The article develops a model to interpret the 2010–2018 financial crisis in Greece, Portugal, Ireland, Spain and Cyprus, and the loan programs from the IL (International Lender; i.e. the European Union, the European Commission, and the International Monetary Fund).

Design/methodology/approach

For each country, an isoelastic utility with constant relative risk aversion is assumed. For the IL a Cobb Douglas utility is assumed with consumption, the GDP (Gross Domestic Product) to debt ratio, and market stability as inputs, accounting for time discounting. This article applies two methods to assess the empirics. The first method considers the IL's strategy as a whole over the 2010–2018 period. The second method assumes that the IL maximizes its utility in one period to determine its optimal loan, accounting for the empirics in that period, and the debt in the previous period.

Findings

For the first method, when the output elasticity in the IL's Cobb Douglas utility is high favoring consumption, the IL prefers offering a higher loan than its actual loan. Otherwise the IL prefers to offer no loan. The output elasticity at which the IL prefers to offer a loan is lowest for Greece, second lowest for Cyprus, third lowest for Portugal, and highest for Ireland and Spain. A high loan to Greece over a larger range of the output elasticity for Greece's consumption is supported by Greece being prioritized through the loan program. For the second method, the IL prefers to offer no loan to Greece which is too burdened with debt. Thus, the first method seems preferable, considering the entire duration of the crisis holistically.

Originality/value

The article offers a novel perspective of how to assess debt crises, enabling the IL to weigh various factors such as consumption, GDP, loan offered, and each country's debt to credit markets.

Details

Journal of Economic Studies, vol. 49 no. 1
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 3 May 2016

Philipp Klotz, Tsoyu Calvin Lin and Shih-Hsun Hsu

Greece, Ireland, Portugal and Spain have been in the spotlight of the recent economic crisis in Europe. With their economy strongly reliant on the construction industry…

Abstract

Purpose

Greece, Ireland, Portugal and Spain have been in the spotlight of the recent economic crisis in Europe. With their economy strongly reliant on the construction industry, these countries have become widely exposed to the downturn in the property sector. This paper aims to examine residential property bubble dynamics in the period from 2003 to 2014 and investigate the role of financing conditions in the formation of these bubbles.

Design/methodology/approach

Building on the present value model in conjunction with the rational bubble assumption, the study applies the discounted cash flow (DCF) approach and applies weighted average cost of capital (WACC) to capture real estate bubble dynamics in the four countries. Reduced form vector autoregression models are used to examine the relationship between financing conditions and the bubble indicator.

Findings

The bubble indicator suggests that Spain and Ireland experienced a large rise in the bubble relative to moderate increases in Portugal and Greece in the period from 2003 up to the collapse in 2008. Our findings from the empirical analysis indicate that central bank policy shifts that impact interest rates and lending volumes on the domestic level have a significant and leading effect on the formation of residential property bubbles.

Originality/value

Only little research on real estate bubbles takes financial leverage into account. This paper bridges this gap by applying the WACC in the DCF model to identify real estate bubbles. While using a distinct bubble indicator, this analysis provides new insights into the linkage between financing conditions and real estate bubbles.

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Journal of European Real Estate Research, vol. 9 no. 1
Type: Research Article
ISSN: 1753-9269

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Article
Publication date: 1 February 1997

Eoin O’Leary

Uses a specially constructed data set to present new evidence on the convergence performance of Ireland among European Union (EU) countries at the aggregate, sectoral and

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Abstract

Uses a specially constructed data set to present new evidence on the convergence performance of Ireland among European Union (EU) countries at the aggregate, sectoral and industry levels for the period 1960 to 1990. Overall, aggregate convergence occurred among the EU 12 over the period. Ireland did exhibit catch‐up on the EU average. However, Ireland’s convergence performance becomes distinctly less favourable if adjustments are made for the increase in net factor outflows during the late 1980s. This is especially the case when gross national product is used instead of gross domestic product (GDP) to measure Irish living standards as this results in a divergent trend emerging. For labour productivity the adjustment of Irish GDP to take account of transfer pricing by multinationals leads to the finding that labour productivity convergence performance in Irish manufacturing is substantially overstated if “official” GDP estimates are used. This translates into more muted convergence performance at the aggregate level if the adjustments are made.

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Journal of Economic Studies, vol. 24 no. 1/2
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 18 June 2020

Canh Phuc Nguyen, Thanh Dinh Su, Udomsak Wongchoti and Christophe Schinckus

This study aims to examine the spillover effects of trans-Atlantic macroeconomic uncertainties on the local stock market returns in the USA and eight selected European…

Abstract

Purpose

This study aims to examine the spillover effects of trans-Atlantic macroeconomic uncertainties on the local stock market returns in the USA and eight selected European countries, namely, Germany, France, Spain, Italy, Greece, Ireland, Sweden and the UK, during the 2000-2019 period.

Design/methodology/approach

This paper applies the dynamic conditional correlation multivariate GARCH model (i.e. multivariate generalized autoregressive conditional heteroskedasticity model or DCC MGARCH) to examine the potential existence of the spillover from the uncertainty of the USA to EU stock markets and vice versa. To capture different dynamic relationships between multiple time-series variables following different regimes, this paper applies the Markov switching model to the stock returns of both the USA and the eight major stock markets.

Findings

The increases in US uncertainty have significant negative impacts on all EU stock returns, whereas only the increases in the uncertainties of Spain, Ireland, Sweden and the UK have significant negative impacts on US stock returns. Notably, the economic policy uncertainty (EPU) in the USA has a dynamic effect on the European stock markets. In a bear market (State 1), the increases in the EPU of the USA and EU have significant negative impacts on EU stock returns in most cases. However, only the increase in US EPU has significant negative impacts on EU stock returns in bull markets (State 2). Reciprocally, the increases in the EU EPUs of Germany, Spain and the UK have significant impacts on US stock returns in bear market.

Originality/value

The observations challenge the conventional wisdom according to which only larger economies can lead the smaller counterparts. The findings also highlight the stronger dependence of the US stock market on international macroeconomic uncertainty.

Details

Studies in Economics and Finance, vol. 37 no. 3
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 1 September 1999

Jacqueline Scott

Uses data from 1994 International Social Survey Programme to examine how attitudes to maternal employment at different stages of child rearing vary across and within eight…

Abstract

Uses data from 1994 International Social Survey Programme to examine how attitudes to maternal employment at different stages of child rearing vary across and within eight nations in the European Union, UK, Germany, Austria, the Netherlands, Sweden, Ireland, Italy and Spain. Considers whether a mismatch exists between belief in a women’s right to work and the “traditional” family ideology. Highlights a north/south divide in attitude and differing welfare policies and gender‐role beliefs.

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International Journal of Sociology and Social Policy, vol. 19 no. 9/10/11
Type: Research Article
ISSN: 0144-333X

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Article
Publication date: 23 October 2007

Síle O'Dorchai, Robert Plasman and François Rycx

This paper aims to measure and analyse the wage gap between male part‐ and full‐timers in the private sector of six European countries, i.e. Belgium, Denmark, Ireland

Abstract

Purpose

This paper aims to measure and analyse the wage gap between male part‐ and full‐timers in the private sector of six European countries, i.e. Belgium, Denmark, Ireland, Italy, Spain, and the UK.

Design/methodology/approach

Using a unique matched employer‐employee data set providing harmonised information on six European countries (the 1995 European Structure of Earnings Survey), the empirical strategy is based on the estimation of standard Mincer wage equations and the Oaxaca and Ransom wage gap decomposition technique. First, individual gross hourly wages are regressed on a set of human capital variables only and second, a wider range of control variables related to e.g. occupation, sector of activity, firm size, and level of wage bargaining is inserted.

Findings

The study finds that the raw gap in hourly gross pay amounts to 16 per cent of a male part‐timer's wage in Spain, to 24 per cent in Belgium, to 28 per cent in Denmark and Italy, to 67 per cent in the UK and to 149 per cent in Ireland. Human capital differences explain between 31 per cent of the observed wage gap in the UK and 71 per cent in Denmark. When the whole set of explanatory variables is included in the wage regressions, a much larger part of the gap is explained by differences in observed characteristics (except in Italy).

Research limitation/implications

Unfortunately, the paper is not able to correct for workers' potential self‐selection into part‐time and full‐time employment. Results suggest that policy initiatives to promote lifelong learning and training are of great importance to help part‐timers catch up with full‐timers in terms of human capital. Moreover, except for Italy, they point to a persisting problem of occupational and sectoral segregation between men working part‐time and full‐time which requires renewed policy attention.

Originality/value

Economic theory advances a number of reasons for the existence of a wage gap between part‐time and full‐time workers. Empirical work has concentrated on the wage effects of part‐time work for women. For men, much less empirical evidence exists, mainly because of lacking data. This paper therefore makes a valuable contribution. The more so given that (to the best of our knowledge) there exists no cross‐national evidence with respect to men's part‐time wage penalty.

Details

International Journal of Manpower, vol. 28 no. 7
Type: Research Article
ISSN: 0143-7720

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Book part
Publication date: 21 November 2011

Constantin Gurdgiev

Although the trigger for the European economic and financial crisis was the subprime and subsequently banking crisis in the USA, the true roots of theEuropean malaise are…

Abstract

Although the trigger for the European economic and financial crisis was the subprime and subsequently banking crisis in the USA, the true roots of theEuropean malaise are to be found in the structural weaknesses of the European growth and Euro area development model based on debt financing of public and private expenditure and investment. These drivers were amplified by the lack of effective economic policy mechanisms from both the monetary and fiscal sides of macro-economic management. The global financial crisis of 2007–2009 did not cause the underlying imbalances that are currently acting to tear apart the Euro area monetary and fiscal systems. Instead, it crystallised markets and public attention on the underlying core cause of the overall Euro crisis – the insolvency of the public financing system of the European Union (EU) member states.

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Sustainable Politics and the Crisis of the Peripheries: Ireland and Greece
Type: Book
ISBN: 978-0-85724-762-9

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Book part
Publication date: 1 July 2015

Nidhaleddine Ben Cheikh and Waël Louhichi

This chapter analyzes the exchange rate pass-through (ERPT) into different prices for 12 euro area (EA) countries. We provide new up-to-date estimates of ERPT by paying…

Abstract

This chapter analyzes the exchange rate pass-through (ERPT) into different prices for 12 euro area (EA) countries. We provide new up-to-date estimates of ERPT by paying attention to either the time-series properties of data and variables endogeneity. Using VECM framework, we examine the pass-through at different stages along the distribution chain, that is, import prices, producer prices, and consumer prices. When carrying out impulse response functions analysis, we find a higher pass-through to import prices with a complete pass-through (after one year) detected for roughly half of EA countries. These estimates are relatively large compared to single-equation literature. We denote that the magnitude of the pass-through of exchange rate shocks declines along the distribution chain of pricing, with the modest effect recorded for consumer prices. When assessing for the determinant of cross-country differences in the ERPT, we find that inflation level, inflation volatility, and exchange rate persistence are the main macroeconomic factors influencing the pass-through almost along the pricing chain. Thereafter, we have tested for the decline of the response of consumer prices across EA countries. According to multivariate time-series Chow test, the stability of ERPT coefficients was rejected, and the impulse responses of consumer prices over 1990–2010 provide an evidence of general decline in rates of pass-through in most of the EA countries. Finally, using the historical decompositions, our results reveal that external factors, that is, exchange rate and import prices shocks, have had important inflationary impacts on inflation since 1999 compared to the pre-EMU period.

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Monetary Policy in the Context of the Financial Crisis: New Challenges and Lessons
Type: Book
ISBN: 978-1-78441-779-6

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