Sergio de Nardis

Currency unions and trade: The special case of EMU

In this paper, the impact of the adoption of the euro on the commercial transactions of EMU countries is investigated. It seeks to disentangle the effects of eliminating exchange rate volatility — and those of other policy factors that promote integration — from the influence of the emergence of the European currency union. Since EMU is a relatively new phenomenon, a panel estimation of the gravity equation in a dynamic framework is used in order to capture effects like trade persistence. The main finding is that the adoption of the euro has had a positive but not an exorbitant impact on bilateral trade between European countries (ranging between 9 and 10 per cent). The impact is much lower than that shown in the recent literature on a larger and heterogeneous set of countries. One reason for this divergence seems to be that the euro was adopted after decades of integration policies had already worked through in Europe. JEL no. F4, F15, C230

Regional specialization and shocks in Europe: Some evidence from regional data

Regional Specialization and Shocks in Europe: Some Evidence from Regional Data. —The authors address the issue of the European Monetary Union (EMU), focusing on a comparison between EC countries and EC regions. They identify a number of homogeneous economic regions and show that in the period 1978–1989 asymmetric shocks in Europe have been regional rather than national. This derives from the fact that regional specialization in Europe is strongly diversified. They argue that cross-border regional diversification can cushion the net effects of differentiated sectoral shocks, reducing national instability. In addition, the costs of EMU associated with the loss of the exchange rate are likely to be smaller than usually thought.ZusammenfassungRegionale Spezialisierung und Schocks in Europa. Ei-nige Befunde aus regionalen Daten. —Die Autoren befassen sich mit dem Thema der Europäischen Währungsunion (EWU) und konzentrieren sich dabei auf einen Vergleich zwischen EG-Mitgliedstaaten und EG-Regionen. Sie identifizieren eine Reihe von ho-mogenen Wirtschaftsregionen und zeigen, daß in der Zeit zwischen 1978 und 1989 asymmetrische Schocks in Europa eher regional als national waren. Das kommt daher, daß die regionale Spezialisierung in Europa stark diversifiziert ist. Die Verfasser mei-nen, daß die grenzüberschreitende regionale Diversifizierung die Nettoeffekte der diffe-renzierten sektoralen Schocks abfedern kann und auf diese Weise nationale Instabili-täten reduziert. Außerdem dürften die Kosten der EWU, die mit dem Verlust des Wechselkurses verbunden sind, kleiner sein als üblicherweise angenommen.

Regional inequalities and cohesion policies in the european union

In spite of the huge amount of public aids to poor regions, relative movements in the distribution of income, labor productivity and employment rates across European regions show no positive relation with the distribution of the Structural Funds. Specifically, widening employment gaps and a growing positive correlation between productivity levels and employment rates are brought to light. Furthermore, although the distribution of Funds committed by the Commission appears conform to equity and cohesion principles, once the total cost of projects – which includes the contribution of national authorities - is considered, the image of equity is blurred. This bias in the allocation process may have contributed to the scarce efficiency of EU regional policy carried out during the nineties.

Pricing to Market of Italian Exporting Firms

This article investigates the pricing-to-market (PTM) behaviour of Italian exporting firms, using quarterly survey data by sector and by region over the period 1999q1 to 2005q2. A partial equilibrium imperfect competition model provides the structure according to which the orthogonality of structural shocks is derived. Impulse response analysis shows non-negligible reactions of export-domestic price margins to unanticipated changes in cost competitiveness and in foreign and domestic demand levels, even though these effects appear to be of a transitory nature. For the period 1999 to 2001, a typical PTM behaviour emerges, while, during the most recent years favourable foreign demand conditions allowed firms to increase their export-domestic price margins in face of a strong deterioration of their cost competitiveness. Macroeconomic implications of the observed PTM behaviour are also discussed.

Pricing to market when quality matters

We build a model of price differentiation with firm heterogeneity, which allows for imperfect competition and market segmentation in the presence of flexible exchange rates as well as horizontal and vertical differentiation and different tastes of consumers in destination markets. We empirically assess the main predictions of our theoretical framework by using firm-level data surveyed by ISAE. We document that export-domestic price margins are significantly affected by price and quality competitiveness even controlling for foreign demand conditions, size, export intensity, destination markets and unobservables. Finally, we provide evidence of a strong heterogeneity across firms in their reaction to price and quality competitiveness.