This paper examines whether the credit risk of banking financial intermediaries can influence the effectiveness of the monetary policy transmission mechanism. The effects are transmitted via the Euribor – Overnight Index Swap (OIS) spread. The Euribor-OIS spread is mainly explained by the credit risk and the probability of default of the panel banks participating in the Euribor. The DCC-MGARCH model confirms a significant relationship between the credit risk of the ten largest Euribor panel banks and the Euribor-OIS spread with an impact on the financing costs of the real sector. The study is based on daily data (1 June 2020 – 30 June 2023). The results of the DCC-MGARCH model are confirmed bya continuous wavelet-based analysis. The research model reveals inefficiencies in the interest rate pass-through mechanism, which calls for a continuous assessment of the Euribor reference rate mechanism, not only with regard to the transparency of interbank transactions, but also to the assessment of the credit risk of Euribor panel banks.
The goal of this paper is to contribute to the ongoing debate on the importance of trade openness for economic development. Our approach is to work within the framework of Schumpeterian growth models, emphasizing the importance of knowledge spillovers through the import channel (enabled by trade openness) and entrepreneurial activity for technological advancement. Using a fixed-effects panel model for modeling the impact of trade openness on economic growth for seven countries, we also test whether there is an impact of R&D investments on growth. Our results indicate a somewhat ambiguous positive effect of openness on growth. While one openness indicator supports the expected positive impact on growth, the other two indicators are statistically insignificant. Additionally, we observe an unexpected negative effect of changes in openness on growth, which may be attributed to short-term adjustment costs, and a significant positive impact of research intensity (spurred by entrepreneurial activity) on economic growth, in line with the Schumpeterian model assumptions. Interestingly, variables related to R&D did not show significance within the model, opening up space for further research and interpretations of the role of R&D in economic growth.
This study examines the impact of school starting age on educational attainment and labour market outcomes in Croatia, a key issue in policy discussions on human capital formation. While starting school at an older age can enhance academic performance due to greater relative and absolute maturity, it leads to delayed entry into the labour market, thus postponing potential economic benefits. Conversely, younger students may face challenges such as negative peer effects and lower self-esteem, which can impact academic success. However, they benefit from earlier workforce entry and potentially different educational trajectories. Using Croatia's school-starting rules from 19501975 as a quasi-natural experiment, we analyse the effects of starting age on the outcomes for individuals born from January to December. In this period, children started school in the year they turned seven, creating a sharp month-of-birth cutoff: children born in December were nearly a year younger than their January-born peers within the same cohort. This policy allows us to address the endogeneity of starting age and isolate its effects on later outcomes. Our analysis leverages pooled data from the Croatian Labour Force Survey (2007-2018) and employs both intent-to-treat and instrumental variable regressions to estimate the causal effects of school starting age on educational and labour market outcomes. The results indicate that younger students have a slight advantage in educational attainment, showing slightly higher years of schooling, particularly among women, likely due to lower opportunity costs of continued education. This finding contrasts with much of the existing literature, which often suggests academic benefits for older starters; however, it aligns with research showing that younger students may ultimately complete more schooling (e.g., Dobkin and Ferreira, 2009). Regarding labour market outcomes, younger students exhibit higher employment rates during the survey period. This may stem from their educational advantage or earlier workforce entry. The gender-specific results suggest that women, in particular, in educational terms gain more from starting younger, which may reflect societal and economic incentives influencing career decisions. These findings underscore the importance of considering both the gender and the trade-offs between academic and economic outcomes when setting policies around school starting age.
Following the shift in the European Central Bank's (ECB) monetary policy in mid 2022, the interest income of euro area banks rose markedly, boosting their overall profitability. This paper shows that the positive impact of higher interest rates bank profitability was amplified by the existence of abundant excess liquidity. particular, since euro area banks held large stocks of excess liquidity, they were able to earn substantial risk-free interest income by simply putting their liquidity into the ECBs'deposit facility. In addition, due to the prolonged period of monetary expansion and zero interest rates on time deposits, the share of overnight deposits in total bank liabilities had increased significantly by the time the ECB tightened its policy. Since overnight deposits typically respond slowly to policy rate changes, such structure offunding enabled euro area banks to enjoy comfortable net interest margins for some time.
