Inside the EU, the commercial integration of the CEE countries has gained remarkable momentum before the crisis appearance, but it has slightly slowed down afterwards. Consequently, the interest in identifying the factors supporting the commercial integration process is high. Recent findings in the new trade theory suggest that FDI influence the trade intensity but the studies approaching this relationship for the CEE countries present mixed evidence, and investigate the commercial integration of CEE countries with the old EU members. Against this background, the purpose of this paper is to assess the CEE countries’ intra-integration, focusing on the Czech Republic, Hungary, Poland and the Slovak Republic. For each country we employ a panel gravitational model for the bilateral trade and FDI, considering its interactions with the other three countries in the sample on the one hand, and with the three EU main commercial partners on the other hand. We investigate different facets of the trade – FDI nexus, resorting to a fixed effects model, a random effects model, as well as to an instrumental variable estimator, over the period 2000–2013. Our results suggest that outward FDI sustains the CEE countries’ commercial integration, while inward FDI has no significant effect. In all the cases a complementarity effect between trade and FDI is documented, which is stronger for the CEE countries’ historical trade partners. Consequently, these findings show that CEE countries’ policymakers are interested in encouraging the outward FDI toward their neighbour countries to increase the commercial integration.

This article examines the effects of diversification on systemic risk, and its implications for regulatory capital from a macro-prudential perspective. The systemic risk studied is that resulting from a common exposure of banking institutions: when the latter diversify their activities, the compositions of their assets converge, making them therefore susceptible to the same shocks. In this context, the contribution of this article is threefold: firstly, it analyzes the evolution of capital that would compensate for the increased risk of a generalized crisis; secondly, it assumes that the return on banking asset follows a Gumbel distribution, allowing for better modeling of extreme risks (especially on the left tail) than does a gaussian distribution; thirdly, it analyzes arbitrage in terms of regulatory capital for individual risk vs. systemic risk resulting from diversification. We point out that, in this context, the regulator cannot manage individual and systemic risks with a single instrument. Indeed, diversification allows a bank to reduce its individual risk and therefore, from a micro-prudential perspective, to reduce its level of regulatory capital. However, as this strategy leads to an increase in systemic risk, under the macro-prudential regulation, it should hold more. The prudential micro and macro objectives may thus diverge, and thus require two instruments of regulation.

Cet article s’intéresse aux effets de la diversification sur le risque systémique, ainsi qu’à ses implications en termes de fonds propres réglementaires dans une optique macroprudentielle. Le risque systémique étudié est celui qui découle d’une exposition commune des établissements bancaires : lorsque ces derniers diversifient leurs activités, les compositions de leur actif convergent, ce qui les rend donc sensibles aux mêmes chocs. Dans ce cadre, l’apport de cet article est triple : premièrement, il analyse l’évolution des fonds propres qui permettrait de compenser l’augmentation du risque d’une crise généralisée ; deuxièmement, il suppose que le rendement de l’actif bancaire suit une loi de Gumbel, ce qui permet de mieux modéliser les risques extrêmes (en particulier sur la queue de distribution gauche) que ne le fait la loi normale ; troisièmement, il analyse l’arbitrage en termes de fonds propres pour risque individuel vs risque systémique résultant de la diversification. Nous pointons ainsi le fait que, dans ce cadre, le régulateur ne peut gérer avec un seul instrument les risques individuel et systémique. En effet, la diversification permet à un établissement bancaire de diminuer son risque individuel et donc, dans une optique microprudentielle, de diminuer son niveau de fonds propres réglementaires. Mais, comme cette stratégie conduit dans le même temps à une augmentation du risque systémique, en vertu de la réglementation macroprudentielle, il devrait en détenir davantage. Les objectifs micro et macroprudentiels peuvent ainsi diverger, et nécessiteraient donc deux instruments de régulation. Classification JEL : G11, G21, G28.

In this paper, we explore the co-movements and contagion between six international stock index futures markets. In contrast to the empirical studies which dominate the literature and focus on the case of spot markets, relatively little is known about the returns and the volatility dynamics of the futures markets. To address this deficiency, we employ a time–frequency approach and discover that the co-movements between the international markets manifest especially in the long run. Nevertheless, the contagion phenomenon associated with the very short-run horizon is present in particular in the case of the European markets, due to their higher level of integration. The rolling wavelet correlation increases after severe turbulence episodes, but fluctuates over time and across frequencies. Our findings can guide the international investors in stock index futures markets to accurately diversify their portfolio in crisis periods.

We test for the long-run relationship between stock prices, inflation and its uncertainty for different U.S. sector stock indexes, over the period 2002M7 to 2015M10. For this purpose we use a cointegration analysis with one structural break to capture the crisis effect, and we assess the inflation uncertainty based on a time-varying unobserved component model. In line with recent empirical studies we discover that in the long-run, the inflation and its uncertainty negatively impact the stock prices, opposed to the well-known Fisher effect. In addition we show that for several sector stock indexes the negative effect of inflation and its uncertainty vanishes after the crisis setup. However, in the short-run the results provide evidence in the favor of a negative impact of uncertainty, while the inflation has no significant influence on stock prices, except for the consumption indexes. The consideration of business cycle effects confirms our findings, which proves that the results are robust, both for the long-and the short-run relationships.

Research question: This article investigates the determinants of attendance at French football Ligue 1 matches over the 2008-2011 period, with a focus on the effect of competitive intensity. This is measured by dummies that are functions of the point difference for the home team in relation to the different sporting prizes: title, qualification in UEFA (Union of European Football Associations) club competitions, relegation. The objective is to answer the following question: do all sporting prizes have a significant positive impact on attendance? Research methods: We specified and estimated a standard attendance equation including 35 explanatory variables of which 9 are related to sporting prizes. The estimations are based on a Tobit model with individual cut-off points to allow for truncation of attendance at the upper bound given by stadia capacity (i.e. sold-out games). 1135 observations are included. Results and findings: Our results show that all sporting prizes have a significant positive impact on attendance. In particular, there is a significant impact of prizes for potential qualification in the UEFA Europa League which are dependent on the outcome of domestic cups (known only in the last part of season). Implications: This research contributes to the optimisation of competition format and knowledge on competitive intensity and determinants of attendance. It provides an argument in favour of current sporting prizes for managers in the main European national football leagues.

Cet article s’interroge sur l’intérêt et la cohérence des informations contenues dans l’enquête trimestrielle effectuée par la BCE auprès de prévisionnistes professionnels. Il confirme tout d’abord que la politique monétaire réagit davantage aux perspectives d’inflation et de chômage qu’à leur réalisation. Il montre ensuite que, d’une part, les prévisions d’experts prennent en compte une efficacité de la politique monétaire sur l’inflation et la croissance et que, d’autre part, les prévisionnistes attendent une réaction significative de la politique monétaire aux mouvements anticipés de l’inflation et du chômage. L’ensemble de ces conclusions conforte l’idée d’une cohérence globale des prévisions des experts interrogés et atteste d’une transparence, en termes de prévisibilité des choix de la BCE.

We investigate the role of money in explaining the long run inflation in 12 CEE countries, using monthly data for the period 2004-2013. We use a panel cointegration approach and recently developed empirical techniques as the panel fully modified and the panel dynamic regression procedures. Beside the role of interest rate and economic growth rate in explaining inflation, our cointegration equation explores the role of broad money (M2) growth. We also look to the M2 components, namely M1 and the difference between M2 and M1. We find no cointegration relationship either for the broad money or for the narrow money. However, money created by the banking sector explains the inflation in CEE countries in the long run. This last finding characterizes the entire panel, the panel of the seven CEE countries candidates to the Euro area, but not the panel of Euro area members. The findings are robust regarding the consideration of the income velocity's impact on the money in circulation.

In this paper, we examine the financial contagion and dynamic correlation between three European stock index futures, namely FTSE 100, DAX 30 and CAC 40. For this purpose we resort to a continuous wavelet transform framework and we cover the aftermath of the sovereign debt crisis period. More precisely, we analyze the power spectrum of the series, the wavelet coherency and the average dynamic correlation before and after turbulence episodes occurred after the outburst of the sovereign debt crisis. Our results show that the stock index futures are highly correlated and this correlation increases around financial distress episodes. The contagion phenomenon, associated with a high-frequency correlation, manifested especially after the additional rescue package awarded to Greece. All in all, the dynamic correlation is influenced by the frequency decomposition level and fluctuates considerably in the very long-run.

This special issue of the Brussels Economic Review is dedicated to a selection ofpapers presented at the 2013 annual meeting of the European research group,GDRE (Groupement De Recherche Europeen) Money, Banking and Finance. Thisinternational network, part of the CNRS (Centre National de la RechercheScientifique) in France, aims at enhancing collaborations between researchers in thefields of money, banking and finance from many universities and other institutionsin France and abroad2. The Departement d’Economie Appliquee (Dulbea),Universite Libre de Bruxelles, which edits the Brussels Economic Review, is one ofthe European partners of the network; this is the third time that the review hasdevoted a special issue to the GDRE’s symposium. The directors of GDRE Money,Banking and Finance are Jean-Bernard Chatelain (Centre d’Economie de laSorbonne (CES), University Paris I Pantheon Sorbonne), Raphaelle Bellando andAlexis Direr (Laboratoire d’Economie d’Orleans (LEO), University of Orleans).They are in charge of coordinating the program committee of the annualconference, among other scientific and administrative matters.

After the financial crisis burst out, a large number of European countries, especially the new members, focused on the EU funds absorption in order to restore their economic growth. The EU funds are considered an attractive tool for financing investment opportunities, in particular in times of crisis, when the private investments decrease. Nevertheless, little was done to empirically document their role in supporting economic growth on short-term, at macroeconomic level. Therefore, we perform a data panel analysis for the EU countries and we apply a system GMM estimator, in order to see to what extent the EU funds absorption rate impacts upon the short-term economic growth rate in the EU member states. We find that the absorption rate, either for the cohesion funds for growth and employment, or for the rural development funds, has no effect on the short-term economic growth rate. In addition, for both categories of funds, the impact of the absorption rate in the case of the net beneficiaries group is negative. However, these results lack in robustness as they are not confirmed for the new member states group.

ABSTRACT:The present paper analyses the relationship between the volume of transactions with futuresequity index products and the return volatility of their underlying assets. The study addressesthe case of five stock markets, members of the Euronext.liffe. We employ a frequency domainanalysis to identify the direction of the causality. In addition, we test the relationship betweenthe volume of futures contracts and both negative and positive shocks in terms of the historicalvolatility of index returns. Our results indicate the frequency causality only in the case ofBrussels financial market. For Lisbon, the causality is present, but it is not validated by theconfidence level tests, while for London, Paris and Amsterdam, no causality can be observed. Inthe case of Brussels, the causality is bidirectional, both in the short and long run frequencies.The futures equity index volume Granger-causes the positive shocks in terms of volatility in thelong run and the negative shocks in the short run.

This paper proposes an assessment of the monetary policy performed by the European Central Bank (ECB) and, more specifically this paper investigates to what extent the ECB monetary policy decisions were guided by financial instability signals. Our assessment is achieved by estimating a Taylor's rule, augmented by financial instability aggregate indicators. This estimate enables us, on the one hand, to compare the fitted model predictions against the observed interest rate and, on the other hand, to decompose the setup of the key rate based on these different determinants. Using a sample of data related to the Euro area, we show that financial and banking instability impact on the key interest rate setup. Consideration of instability indicators brings forward a clear improvement of the Taylor's rule, mainly for the second period of the sample. This is because, at the beginning of the ECB, instability counted for one third of the explanation of the interest rate rule, and over the recent period (starting with the last quarter of 2005, up to 2009), for more than 54%.

A new metrics of competitive intensity is developed, measured by dummy variables. Application to the French football league.

The aim of this article is to investigate the determinants of attendance at French football Ligue 1 matches over the period 20082011 with an emphasis on examining the effects of both competitive balance and intensity before a match. Competitive balance is measured by the point difference between the two teams concerned by a match in the championship. Competitive intensity is measured by the point difference for the home team in relation to ranks with sporting stakes. Results show that competitive balance has an insignificant impact whereas competitive intensity has a significantly positive impact. Implications are drawn.

This paper presents an alternative approach in measuring time variation in market risk. Using equity returns in the Philippines, we employ a Markov-switching model to estimate market risk that varies with occasional and discrete shifts in states. Results show that the technique is a productive alternative in evaluating the market risk of firms in the Philippines. Shifts in the market risk seem to be related to market developments, which can have a permanent or transient change in the volatilities of security returns relative to that of the market.

This paper studies the dynamics of the relationship between the volume of transactions with de- rivative products and prices volatility of their underlying asset. This relation was widely approached, but mainly from the perspective of the impact of derivative products on the volatility of their underly- ing assets. The fact that hedging as well as speculative operations with derivative products are based on the price volatility of their underlying asset leaves a priori room to the idea according to which the volume of activity related to derivative products has to follow in a unidirectional manner the price volatility of the underlying assets. However, more recently, the possibility of a bidirectional relation- ship was put forward, supported by a certain markets imperfection and by an informational asymmetry between the traders. We look into this causality relationship considering the equity index products (fu- tures and options) and the stock exchange markets which are members of the Euronext.liffe, except for the Lisbon. We compute a VAR and we perform causality tests in the sense of Granger. In general, it seems difficult to formulate a firm conclusion on the informational content of the derivative markets and on the object (hedging or speculation) of the dominant operations, in the context in which the cau- sality relationships which occur differ considerably between one product and another and between one country and another.

In this paper, we attempt to determine if international liquidity affects asset prices in three particular markets, namely: the United States (U.S.), the Euro area and the ASEAN (5 countries) region. Our study attempts to test whether there are monetary spillovers from one market to another that affect asset prices using quarterly data covering these markets from 1995 to 2005. We begin by finding an appropriate measure and definition for international liquidity. This definition is used to determine an appropriate variable that is combined with other control variables to form a regression equation for the real asset returns of the three particular markets. Based on our results, there is evidence that excess liquidity in the US and Euro area has a push effect on asset prices of both markets. We find that asset prices in the ASEAN 5 region are unaffected by international liquidity.