Corrado Macchiarelli

Transitions in Labour Market Status in the European Union

This paper presents information on labour market mobility in 23 EU countries, using Eurostat’s Labour Force Survey (LFS) data over the period 1998-2008. More specifically, it discusses alternative measures of labour market churning; including the ease with which individuals can move between employment, unemployment and inactivity over time. The results suggest that the probability of remaining in the same labour market status between two consecutive periods is high for all countries. Nonetheless, transitions from unemployment and inactivity back into the labour market are relatively weak in the euro area and central eastern European EU (CEE EU) countries compared to Denmark and, particularly, Sweden. Moreover, comparisons of transition probabilities over time suggest that – until the onset of the financial crisis – the probability of remaining in unemployment over two consecutive periods decreased in Sweden, the euro area, and, to a lesser extent, Denmark, while it increased in the average CEE EU countries. At the same time, however, successful labour market entries (from outside the labour market) increased in the average CEE EU countries, Denmark and Sweden. On the basis of an index for labour markets turnover used in the paper (Shorrocks, 1987), labour markets in Spain, Luxemburg, the Netherlands, Denmark and Sweden are the most mobile on average, with these results mainly reflecting higher mobility of people below the age of 29, highly educated and female workers. We also find that mobility of all worker groups has generally increased over time in the euro area, Denmark and Sweden. Finally, we ask whether some of the observed changes in mobility can be broadly restraint to some “macro” explanatory factors, including part time and temporary employment, unemployment and structure indicators. The results provide a mixed picture, suggesting that the sense of mobility strongly varies across countries.

Estimating Poland's Potential Output; A Production Function Approach

The paper develops a methodology based on the production-function approach to estimate potential output of the Polish economy. The paper concentrates on obtaining a robust estimate of the labor input by deriving Polands natural rate of unemployment. The estimated unemployment gap is found to track well pressures on resource constraints. Moreover, the overall results show that, prior to the recent global financial crisis, Polands output and employment were both growing above potential. The production function is also used to derive medium-term projections of the output gap. According to our methodology, in the aftermath of the global crisis, Poland is not expected to experience a sizable and persistent negative output gap.

Transitions in labour market status in EU labour markets

We discuss the ease with which individuals can move between employment, unemployment and inactivity over time in the EU. Transitions from unemployment and inactivity back into employment are relatively weak in Central Eastern, Mediterranean and Continental European labour markets compared to Nordic European countries. On the basis of a mobility index used in the paper (Shorrocks, Econometrica, 46:1013-1024, 1978), labour markets in Spain, Luxemburg, the Netherlands, Denmark and Sweden are the most mobile, with these results mainly reflecting mobility of people below the age of 29, highly educated and female workers. Looking at some “macro” explanatory factors, the results suggest a mixed picture.Jel codesJ21, J60, J82, E24

Interaction between Monetary Policy and Bank Regulation: Theory and European Practice

The European Union has pursued a number of initiatives to create a safer and sounder financial sector for the single market. In parallel, bold unconventional monetary policies have been implemented in order to combat low inflation, foster risk taking and, ultimately, reinvigorate growth. But monetary and macro-prudential policies interact with each other and thus may enhance or diminish the effectiveness of the other. Monetary policy affects financial stability by shaping, for instance, leverage and borrowing. Equally, macro-prudential policies constrain borrowing, which in turn have side-effects on output and prices, and therefore on monetary policy. When both monetary and macroprudential functions are housed within the central bank, coordination is improved, but safeguards are needed to counter the risks from dual objectives. Against this background, this paper outlines the theoretical and empirical underpinnings of macro-prudential policy, and discusses the way it interacts with monetary policy. We identify advantages as well as risks from cooperating in the two policy areas, and provide suggestions in terms of institutional design on how to contain those risks. Against this backdrop, we evaluate the recent European practice.

On the Joint Test of the Uncovered Interest Parity and the Ex-ante Purchasing Power Parity

This study revisits the relation between the uncovered interest parity (UIP), the ex-ante purchasing power parity (EXPPP) and the real interest parity (RIP) for the UK and Japanese vs US data. The original contribution is on developing some joint coefficient-based tests, obtained by rewriting the UIP, the EXPPP and the RIP as a set of cross-equation restrictions in a vector autoregression (VAR) framework. Test results point to a “forward premium” bias in both the UIP and the EXPPP. The latter result is novel in the literature and stems from testing the PPP in expectational terms. Moreover, the results suggest a currency-dependent pattern for the UIP, contrarily to the EXPPP equation. Finally, it is shown that conditioning the VAR on M3 growth differential has important explanatory power in resolving the aforementioned biases in both the UIP and EXPPP equations for the UK vs US data. At the same time, variables having a strong forward-looking component (i.e. share prices) help recover a unitary coefficient in the UIP equation.

European Monetary Integration and the EU–UK Relationship

The history of European integration has been characterized by several “stops-and-goes” with considerable support on political grounds. In this chapter, we discuss the role of European integration for the future of the EU–UK relations. Integration, consistent with the idea of “completing” the European Monetary Union (hence, a “Genuine Economic and Monetary Union”—GEMU), will have the obvious consequence of affecting the UK as well and the future of its negotiations with the EU. Provided that European integration worked in the past, the net benefits of staying out of the EU ex ante may be different from the same benefits ex post, particularly in the likely scenario the Union will have to “comprehensively” move towards a GEMU to safeguard its integrity.

Core and Periphery in the European Monetary Union: Bayoumi and Eichengreen 25 Years Later

Bayoumi-Eichengreen (1993) establish a EMU core-periphery pattern using 1963-1988 data. We use same methodology, sample, window length (1989-2015), and a novel over-identifying restriction test to ask whether the EMU strengthened or weakened the core-periphery pattern. Our results suggest the latter.