Economics and Business Letters

How does inflation propagate among CPI components? Evidence from the euro area

Tiago Trancoso — 2024-05-22

This study employs a time-varying parameter vector autoregressive (TVP-VAR) model to investigate infla- tion propagation and spillovers among twelve major Consumer Price Index (CPI) components across eleven euro area countries from 1999 to 2023. We uncover empirical regularities in the transmission channels of inflation, noting Transport and Clothing and Footwear as primary shock transmitters, whereas Communi- cation, Alcohol and Tobacco consistently absorb shocks. These insights, consistent across various contexts and countries, contribute to understanding inflation persistence and households’ inflation experiences in the Euro area.

Redistribution and human development: evidence from Europe

Oscar Claveria — 2024-05-22

This study examines the relationship between human development and the redistributive effect of taxes and government transfers in 30 European over the period 1990-2021 by means of a fixed-effects panel model. Overall, the analysis suggests that increases in redistribution lead to an increase of development. The coefficient for a one-period lag is also found to be positive and significant, suggesting that the effects of redistributive policies show some persistence. When replicating the experiment for different European regions, the greatest impact of redistributive measures is found in Northern Europe, as opposed to Southern Europe, where the impact on development is not found to be significant.

The impact of the Economic Adjustment Programme for Ireland: a synthetic control approach

Daniel de Abreu Pereira Uhr — 2024-05-22

We examine the effect of the Economic Adjustment Programme for Ireland on the country’s per capita income. We are the first to provide empirical analysis on the importance of the program to Irish economic recovery post-financial crisis. We employ the synthetic control approach with bias correction with World Bank Opendata and Irish Central Statistics Office data from 2000 to 2019. Our results indicate that the EAP had a positive and statistically significant impact on Ireland’s per capita income, with an average effect of 5,626.27 US$. These conclusions are robust to a placebo test and the Synthetic Difference in Difference estimator.

The world’s productivity distribution and optimal knowledge absorption

Orlando Gomes — 2024-05-22

An optimal growth model is devised and subject to dynamic analysis. The model is a standard intertemporal utility maximization framework, with a one-dimensional constraint characterizing the pace of productivity growth. In this setting, knowledge acquisition depends not only on the investment in the adoption of existing technologies, but also on the pre-determined shape of the world’s productivity distribution. The configuration of the distribution will determine the probability of successful imitation and, therefore, the extent in which the economy might approach the world’s technology frontier. The dynamic analysis points to the formation of a saddle-path stable equilibrium. The type of distribution is decisive in defining the exact location of the stable trajectory and of the equilibrium point.

The impact of finance on income inequality: a threshold analysis

John Thornton — 2024-05-22

We identify the optimal level of financial development for income inequality in a panel of countries employing a non-linear panel Generalized Method of Moments approach. The impact of financial development is statistically significant above and below the optimal level, but its impact on income inequality is not asymmetric, with the costs of financial ‘under-development’ being greater than those for ‘over-development’.