This paper contains an analysis of factors affecting the variances of national European bond returns as well as the variances of national European stock returns. We apply the so-called volatility-spillover framework. The variance of the unexpected return of e.g. the German bond market is divided into a part caused by idiosyncratic US (global) bond effects, US stock effects, European (regional) bond effects, European stock effects, and pure German (local) bond effects. Equivalently, the variance of the unexpected German stock return is divided into the same five effects in addition to pure German stock effects. Bond and stock markets are investigated simultaneously, which - we believe - is new to the volatility-spillover literature. Moreover, to the best of our knowledge, we contribute methodologically to the literature by generalizing the volatility-spillover model.
The empirical analysis brings some light on the integration of the European financial markets. Local effects should be weaker, the more integrated the European financial markets are. Financial integration appears to be a major concern of the policy makers in the European Union (EU) as the EU has launched several policy initiatives to obtain financial integration, cf. Hartmann, Maddaloni and Manganelli (2003). Presumably, the introduction of the euro has worked in favor of financial integration. The observed home bias in Europe has decreased in the previous years, cf. e.g. Baele, Ferrando, Hördahl, Krylova and Monnet (2004). This might indicate that the European financial markets have become more integrated. When the importance of country specific effects are low, the potential benefits of diversification are also small. It is believed that stock and bond volatilities are linked via information spillover, cf Fleming, Kirby and Ostdiek (1998) for a model and analysis of US stock, bond, and money markets. Fleischer (2004) extends this model to also include the equivalent Australian markets. Here we investigate the European bond and stock market volatility linkages. Finally, we examine how important global and regional effects are for the European bond and equity volatility.
Germany is one of the few OECD countries where no general legal minimum wage currently exists (see Immervoll, 2007). However, in view of rising wage inequality, the introduction of a legal minimum wage has become an important policy issue in Germany. One argument for the introduction of a minimum wage is that the existing wage bargaining system no longer prevents ‘excessive’ downward wage flexibility. This is said to be related to the significant decline of union coverage in the economy and an expanding low wage sector partly as a result of recent labor market reforms in Germany.
In this regard, a minimum wage prevents ‘unfair’ competition as a result of wage subsidies aimed at increasing employment in the low-wage sector. Another argument is that earnings of people working full-time should be sufficient to cover at least the means-tested social minimum. In that respect, a minimum wage is a means to prevent the emergence of the so-called ‘working poor’.
The Lisbon Summit in Spring 2000 engaged a new challenge for the European Union: to become the most competitive knowledge-based economy in the world by the year 2010. One emerging Information Society Technology that presents an opportunity for the EU to achieve this ambitious goal is the “Grid”.
Within the Sixth Framework Programme for Research, Technological Development and Demonstration Activities 2002-2006 (FP6), the Council and the European Parliament identified the “Grid”concept as a key area for research within Information Society Technologies (IST) activities. Furthermore, in March 2003 the EU’s Competitiveness Council identified Grids and Infrastructures as frontier and leading-edge technologies to be given high priority and pursued by the European Commission and Member States.
