82005 - Economics of the EU

Learning outcomes

The course is an introduction to the ECONOMICS and POLITICAL ECONOMY of the European Union. Special importance is given to the economic, political and institutional prerequisites of EU integration and enlargement – and to the consequences that integration and enlargement have on member states. Hence, students will become familiar with concepts and models of economics and political economy that are especially useful for understanding and evaluating these processes and the policies that accompany them. One third of the course is dedicated to the institutional and policies innovations adopted since 2008, during the Great Recession.

Course contents

The course is taught in the second semester, in the Campus of Forlì.

0. Presentation: Objectives and Organization

1. Overview: What is the EU? Why is it this way? What has the EU achieved?

1. A project with no strategy: Main steps in the integration process
2. EU institutions and their powers
3. The role of Member States
4. The Internal Market. Principles and Rules
5. Enlargement
6. EMU
7. The EU in the XXI Century (so far): Divergence, Crises, Adaptation, Challenges.

2. The Internal Market and market integration

1. The IM for goods. Steps towards integration
2. Political economy of the IM
3. Measuring integration
4. Measuring productivity
5. Why is productivity lagging?
6. The IM for services. Why different?
7. Factor markets integration
8. Financial markets integration in a MU.

3. Complements to the IM

1. Taxation. Would more tax harmonization be desirable?
2. Trade. The new geopolitics of trade
3. MFF and the Budget
4. Regional policy and Structural Funds
5. Social Europe

4. EMU: Setting up and the first years

1. Why a monetary union? Why an incomplete union? Why no fiscal union?
2. Initial design: independence, mandate, convergence criteria. Monetary policy: objectives and rules.
3. Fiscal policy:
   • Purposes and objectives.
   • Understanding sustainability.
   • Rules for decentralized fiscal policy in a MU.
4. Political economy of an incomplete MU
5. Monetary Policy in practice: The years of the Great Moderation
6. Fiscal Policy and the SGP
7. Building up of real divergences.

5. EMU After 2008: Recession and Crises

1. Financial crisis. Why? How? What have we learned?
2. Great Recession
3. Sovereign debt crises
4. Policy responses
5. Why the EA has been so less effective than the USA?
6. Austerity: good or bad?
7. New (non-standard) MP: tools and methods. Also new goals?
8. Economics and PE of the ECB's bond purchasing programs
9. Challenges of normalization 1: fighting inflation and how to get back to "normal" real interest rates
10. Challenges of normalization 2: new fiscal rules?

6. Forged by (how many?) crises

1. The Five Presidents’ Report and institutional reforms.
2. The Covid-19 recession and lessons learned: Risk-sharing.
3. The provision of European public/common goods: Institutional and policy implications.
4. Economic implications of Russia's invasion and of sanctions against Russia.
5. The Green Deal and the Energy Transition.

Readings/Bibliography

Lecture notes, required readings and documents are available through "Virtuale".

All students will also benefit from reading some chapters in these two books. They are not compulsory but may ease your understanding of what will be discussed in class (and provide many more insights as well):

• Baldwin, Richard and Wyplosz, Charles (2019) The Economics of European Integration. McGraw Hill, 6th ed.
• De Grauwe, Paul (2020) Economics of Monetary Union. Oxford UP, 13th ed.

Teaching methods

• Lectures will be delivered in presence and will be supported by PC-based presentations.
• Students must download and read these presentations (and possibly the related readings) before lectures.
• Students are encouraged to take an active part in class discussions and are expected to interact with the teacher (and with each other) during classes.
• Students will be taught and encouraged to search for and obtain relevant information (data; official documents; academic literature; policy analyses) through the Internet, and to evaluate and discuss them critically.

Assessment methods

Attendance to classes is required, except for Erasmus outgoing students.

All students are required to pass a Fitness Test (no marks, see below). The purpose of this test is to verify their ability to search and download data from appropriate Internet sources and to produce simple data presentations.

There are two ways to take the exam:

Mode A) Full participation: Students take two written tests and will deliver an essay on a chosen topic.

Mode B) Long test: Students will take a longer, single written test, with no essay, in a regular exam session.

Students may switch at any time from Mode A to Mode B (not viceversa).

The structure of the exams is described below in more detail.

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FT: The Fitness Test ("Idoneità")

All students must pass a fitness test (FT), under the guidance of the instructor.

The test (which does not contribute to the final mark) requires to:

a) identify a EU economic topic with a relevant quantitative dimension;

b) download relevant data from a reputable source (Eurostat, ECB, OECD, IMF, National Statistical Services or Central Bank, etc...);

c) perform simple operations on those data in an Excel file;

d) prepare a "user friendly" table and graph to summarize the main characteristics of the data examined;

e) write a short comment (250 words) describing the main stylized facts that can be observed by the data;

f) assemble the comment, the main graph or table(s) and the source data in a .pdf file.

The .pdf file of the FT must be sent to the instructor before taking any intermediate or final exam.

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A) Exams for Mode A students (Full participation):

For Mode A students, the final mark is equal to the sum of the points obtained from three evaluations:

• Intermediate written test (prova intermedia - max 11 points)
• Final written test (prova finale - max 11 points)
• Essay (max 11 points).

If points are equal to 31 or more, the final mark is 30 cum laude.

Intermediate and Final written tests:

• Answers (max. 250 words) to 3 open questions (out of 5).
• Exams take place at Labic; exam questions will be delivered through EOL.
• One exam may be missed exclusively for grave reasons (to be authorized explicitly), in which case it will have to be taken within the summer session.

Essay: no more than 5000 words long (= max 10 pages with font calibri 12, single spaced)

• Must address a single, well identified and relevant economic policy issue. The topic should be chosen with the guidance of the instructor.
• Must be written in (reasonably good) English.
• Must be delivered by e-mail as a .pdf file at least 7 days before the last “appello d’esami” in the summer session.

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B) Exams for Mode B students (Long test):

Mode B students (and also Erasmus outgoing students) must take a single written exam, identified on EOL as "Economics of the EU - TOTAL Exam (for students that have not taken the Intermediate Test)", during one regular exam session.

• The exam will require answers (max 250 words) to 6 (out of 8) open questions. Each question is valued up to 5,5 pts.
• Topics and readings are the same as for attending students.
• No essay required.

***

For all students, a positive grade (greater than or equal to 18/30) may be refused only once.

A new exam must then be taken in the next exam session, as a "Mode B" student.

Teaching tools

Detailed lecture notes cover all topics included in the course.

They are available in Virtuale (some files may become available later on, during term)

They provide the basis for the lectures delivered in class, and for the ensuing discussions.

Students must download and read these presentations (and possibly the related readings) before lectures.

Office hours

See the website of Riccardo Rovelli