Focus on European Economic Integration Q2/16

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• Focus on European Economic Integration Q2/16 (PDF, 2.5 MB) June 2016.

Studies and Analyses

• Call for entries: Olga Radzyner Award 2016 (PDF, 52 kB) Focus on European Economic Integration Q2/16 Jun 8, 2016, 12:00:00 AM

• Call for applications: Visiting Research Program (PDF, 55 kB) Focus on European Economic Integration Q2/16 Jun 8, 2016, 12:00:00 AM

• Developments in selected CESEE countries: Dynamic, domestic demand-driven growth in an adverse international environment (PDF, 841 kB) Schreiner – Focus on European Economic Integration Q2/16 Jun 8, 2016, 12:00:00 AM

• Outlook for selected CESEE countries: Solid growth in CESEE-6 but no bright spots in Russia (PDF, 212 kB) Hildebrandt – Focus on European Economic Integration Q1/16 Jun 8, 2016, 12:00:00 AM

• The influence of sovereign bond yields on bank lending rates: the pass-through in Europe (PDF, 737 kB) Eller, Reininger. Markus Eller, Thomas Reininger In the wake of the recent crises, the question arose how to ensure the transmission of monetary policy to the lending rates for loans to private nonbanks, in particular against the background of divergent government bond yield changes. This paper investigates which variables help explain changes of long-term fixed-rate bank lending rates on loans to the private nonfinancial sector in 21 EU countries. We conduct a cross-country panel study and analyze vector error correction models for each country. We find that long-term sovereign bond yields have a significant positive and economically substantial impact on long-term lending rates in most euro area and some non-euro area countries. Our findings lend support to the view that unconventional monetary policy can influence long-term lending rates via its impact on government bond yields. Furthermore, our insights suggest adopting a cautious approach when designing changes to the regulatory treatment of sovereign exposures. To the extent that such changes cause a sustained widening of sovereign yield spreads, the impact on long-term lending rates could entrench real economic divergences between EU countries and in particular within the euro area. en sovereign debt crisis, sovereign spread, sovereign credit risk, sovereign yield, government bond yield, bank interest rates, bank lending, lending conditions, long-term financing, bank funding, transmission, interest rate pass-through C32, C33, E43, E52, G21 Jun 8, 2016, 12:00:00 AM

• Understanding the drivers of capital flows into the CESEE countries (PDF, 1002 kB) Eller, Huber, Schuberth. Eller, Huber, Schuberth – Focus on European Economic Integration Q2/16 We analyze the relationship between global factors and country-specific capital flow dynamics in a sample of 12 Central, Eastern and Southeastern European (CESEE) countries from 1994 until 2014. We detect a pronounced time-varying pattern of capital flow volatility that mirrors well-known crisis episodes in several instances. We show that the global co-movement of macroeconomic, financial and capital flow variables is able to explain the lion’s share of volatility of gross capital inflows into CESEE economies and that it became even more important after the 2008/09 global financial crisis. In particular, global financial factors that approximate the global financial cycle explain by far the largest share of capital flow volatility, followed by the global real business cycle component. If common global factors are dominant in explaining the volatility of gross capital inflows, a combination of better international coordination of economic policies, macroprudential measures or capital flow management instruments is advisable to smooth the capital flow cycle. We also show that gross capital inflows were so sizeable in some countries between 2003 and 2008 that common global (financial) factors like the buildup of global leverage were not as dominant as in other periods – a result that could partly be the outcome of the strategic positioning of foreign banks in the region. en volatility of capital flows, factor stochastic volatility model, global co-movement, global real business cycle, global financial cycle, CESEE C38, F32, F41, F42, F44 Jun 8, 2016, 12:00:00 AM

• CESEE-related abstracts from other OeNB publications (PDF, 83 kB) Focus on European Economic Integration Q2/16 en Jun 8, 2016, 12:00:00 AM

• EBRD Transition Report 2015-16: Rebalancing Finance (PDF, 90 kB) Hildebrandt – Focus on European Economic Integration Q2/16 en Jun 8, 2016, 12:00:00 AM

• 78th East Jour Fixe: Ukraine – Progress of reforms and challenges ahead (PDF, 89 kB) Barisitz, Hake, Wörz – Focus on European Economic Integration Q2/16 en Jun 8, 2016, 12:00:00 AM

• Statistical annex (PDF, 123 kB) en Jun 8, 2016, 12:00:00 AM

• Notes (PDF, 130 kB) en Jun 8, 2016, 12:00:00 AM