The Eurozone Crisis: Muddling through on the Way to a More Perfect Euro Union?

Aizenman, Joshua

doi:10.3390/socsci2040221

Cited by 9 publications

(7 citation statements)

References 14 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…This is the case because the forecasters have to provide their predictions at the beginning of the months (e.g., a prediction for the three month EURIBOR at the end of March 2013 had to be provided already in December 2012). The evaluated sample ranges from December 1998 to March 2013 and because of that covers both the subprime crisis in 2007/08 and the following financial turmoil resulting in the European sovereign debt crisis (e.g., Aizenman, 2013;Basse et al, 2013). As a matter of fact the data in the first part of the series implies that there should be no structural breaks due to the common European currency area starting 1999.…”

Section: Methodsmentioning

confidence: 99%

Interest rate forecasting and the financial crisis: a turning point in more than just one way

Kunze¹,

Gruppe²,

Wendler

2015

IJFERM

View full text Add to dashboard Cite

Investors frequently rely on forecasts published by professional analysts. During the financial crisis uncertainty has substantially risen. Not surprisingly experts' predictions should be more than welcome for decision makers. After modelling the long-term relationship between the three month EURIBOR and the Consensus Economic forecast by using co-integration analysis this paper tests for changes in the accuracy of forecasts for the three month EURIBOR. We use traditional evaluation methods like sign accuracy tests, turning point analysis and the root mean square error (RMSE). We find evidence for a crisis related structural break. Checking for quality changes it can be stated that the forecasters' accuracy after the first months of the crisis is not much better in general. Furthermore, neither before nor after the structural break the analysts' forecasts did outperform a random prediction. But it can at least be stated that there is a significant improvement in the turning point prediction.

show abstract

Section: Methodsmentioning

confidence: 99%

Interest rate forecasting and the financial crisis: a turning point in more than just one way

Kunze¹,

Gruppe²,

Wendler

2015

IJFERM

View full text Add to dashboard Cite

show abstract

“…Javer et al (2014) suggested that the migration response to the crisis has been considerable in Europe, as suggested in the OCA and compared to the USA, where the crisis and sluggish recovery were not accompanied by interregional labour mobility in reaction to labour market shocks. Conversely, Aizenman (2014) suggested that all estimated labour migration (upper bound) can be absorbed up a quarter of the asymmetric labour market shock, although thirdcountry migrants and lower mobility of the capital market are suggested as alternative solutions. This can be maintained until effective financial and labour institutions are enlarged throughout the euro area, which is supported in this study.…”

Section: European Monetary Unionmentioning

confidence: 99%

“…However, in a given scenario, Polish workers may move to Germany, but because of the rigidity of the labour market and qualification differences between workers, the interregional integration of member countries is reduced, and this reduces the absorption of asymmetric shocks. Aizenman (2014) JEAS 37,1 suggested that all estimated labour migration up to about a quarter of the asymmetric labour market shock would be absorbed. While this may appear unreasonable based on the conventional wisdom that inflation usually affects the economy in a negative way, except for the short-run application, in Poland, inflation and devaluation are considered as a model for developing the economy.…”

Section: Interpretation Of Estimated Data For Polandmentioning

confidence: 99%

Effective European monetary union in the light of the optimum currency area; model countries: Germany and Poland

Akalpler¹

2020

JEAS

View full text Add to dashboard Cite

PurposeThis study aims to research the effects of unemployment wages current account and consumer price index (CPI) on the real gross domestic product (RGDP), which, in the optimum currency area (OCA) theory, supposes that countries with higher factor mobility can significantly profit from the currency area. However, in this study, it is shown that the considered optimum currency crisis (OCC) model is affected by mobility factors, as the defined theory has not been perfectly realised in the Eurozone.Design/methodology/approachIn this study, Breusch–Pagan–Godfrey and Lagrange multiplier (LM) tests are used for supporting the survey for better estimation of the panel cointegration tests, where Pedroni's (1995, 1997) technique is used. The unit root tests are employed, of which the Phillip–Perron and augmented Dickey–Fuller tests (unit root test, Dickey, D. and W. Fuller, 1979) are considered.FindingsIt can be concluded that demand shocks will tend to be more asymmetric instead of being symmetric, even though they are in the customs union (CU). However, Polish workers in a given scenario may move to Germany, but because of the rigidity of the labour market and qualification differences between workers, the interregional integration of member countries is reduced, and this reduces the absorption of asymmetric shocks. In Germany, where strong employment protection and rigidity are observed in comparison to Poland, although there has been historical migration and economical collaboration, unfortunately, the integration of the two countries’ economies has not been realised.Research limitations/implicationsQuantitative research on fiscal union and the estimation of its effects is not possible because there is no practical experience of fiscal union throughout the European Union (EU). However, quantitative research is used for estimating the effects of OCA in the Eurozone. Quantitative investigation is particularly focused on the monetary union and single currency and its impact on growth rate. In this study, the ordinary least squares (OLS) method and panel cointegration test are employed for estimating the effects of the considered variables.Practical implicationsThe Eurozone and the application of a single currency throughout the EU was a considerably difficult task. In addition, the adoption of a single currency was not easy for those member countries that fulfilled the “convergence criteria” (or “Maastricht criteria”) and who joined the Eurozone, because only adoption is not enough; maintenance of those criteria is also required. This study analysed the application of the Eurozone in the light of the OCA of Mundel's theory.Social implicationsThe OCA is important for member countries’ economic relations. However, the application of a single currency is not easy and needs to be controlled and regulated to ensure best practises throughout the Eurozone. Monetary integration is not a simple process, and Eurozone countries’ financial difficulties affect each other’s markets’ indifferent aspects. Particularly in any market recession, demand shocks tend to have different effects. Furthermore, in comparison to the monetary union, the CU has a considerable impact on trade enlargement.Originality/valueIn this study, the effects of the independent variables “wages, unemployment, CPI and capital flow” on the dependent variable “RGDP” is considered, which, in the OCA theory, supposes that countries with higher factor mobility can significantly profit from the currency area. In application, it was turned into crisis because of inadequate monetary and fiscal application. In this paper OCA is questioned in the light of the Eurozone for bringing better understanding to these difficulties. The considered model and estimations are used for evaluating to create sustainable monetary integration for economic growth.

show abstract

“…In the past, SCR was mainly a problem for less-developed countries, although recently it has also become an issue for EMU member countries (Aizenman, 2013; Moro, 2014). Meanwhile, oil-producing countries also have to cope with this problem, as stated by Wegener et al (2016).…”

Section: Literature Overview and History Of The Euro Crisismentioning

confidence: 99%

Asset liability management and the euro crisis

Gonzalez

Kunze²,

Schwarzbach³

et al. 2017

JRF

View full text Add to dashboard Cite

Purpose This paper aims to investigate the long-term relationships of long-term European Monetary Union (EMU) government bond yields. From an asset managers’ or risk managers’ perspective during the euro crisis, the relevance of sovereign credit and redenomination risk became a major issue. Furthermore, it has to be differentiated between core and non-core EMU member countries. Design/methodology/approach Methods of applied time series analysis are used to investigate EMU government bond yields and EMU government bond yield spreads for Spain, Italy, The Netherlands, Austria and Germany. Both standard unit root testing procedures and breakpoint unit root tests are used to examine cointegrating relationships and structural changes in these relationships. Findings The empirical results deliver clear evidence for structural shifts in the long-term relationship between German and the two non-core EMU countries (Italy and Spain). The timing of the breaks coincides with the timing of the euro crisis. On the contrary, the results for Austria and The Netherlands are different from the findings for the two non-core countries. Research limitations/implications One major limitation of the study is the limited availability of data regarding to the reaction of asset managers or risk managers to the euro crisis. Especially in the context of the discussion with regard to the relevant risk-free rate for investors, this strand of research is relatively new. Practical implications A deeper understanding of changes in the long-term relationship between government bond yields and the re-emergence of redenomination risk is important for asset managers and risk managers in the financial services industry. This is especially true for German life insurers. Originality/value The study provides various empirical contributions to the literature on the euro crisis and sovereign credit risk. First, previous results with regard to the structural changes in the long-term relationship between German and Spanish, German and Italian, German and Austrian as well as Germany and Dutch government bond yields are confirmed using unit root breakpoint tests. Second, investigating the autoregressive coefficient and the timing of the breaks delivers evidence that non-core countries have been more exposed to the fear of redenomination risk. Third, we raise the question which risk free interest rate is relevant for the affected countries.

show abstract

The Eurozone Crisis: Muddling through on the Way to a More Perfect Euro Union?

Cited by 9 publications

References 14 publications

Interest rate forecasting and the financial crisis: a turning point in more than just one way

Interest rate forecasting and the financial crisis: a turning point in more than just one way

Effective European monetary union in the light of the optimum currency area; model countries: Germany and Poland

Asset liability management and the euro crisis

Contact Info

Product

Resources

About