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Improving the air connectivity of hub airports : an instrument to boost the economic performance of EU countries?

Publication . Castro, Maria Inês; Fontoura, Maria Paula

This study discusses the importance of hub airports’ air connectivity in improving the economic performance of the European Union countries during the period of 2008-2019. For this purpose, we use two different measurements of air connectivity - airport and hub connectivity, which are calculated using the Nestcan Model, and then, as a first step, we analyse the degree of linear association of each one of them with gross domestic product (GDP) and with a set of economic variables (hereafter designated as EVs) which, according to the literature, are expected to be positively determined by air connectivity and will boost a country´s economic performance, namely: inflows and outflows of foreign direct investment (FDI), imports, exports, and international tourism expenditures. We conclude that the type of air connectivity adopted matters. The results show that hub connectivity has a higher correlation with key variables for economic growth and is increasingly correlated with GDP during the period analysed, while a downward tendency over the more recent years was observed with regards airport connectivity. Next, we test the strength and direction of the quantitative relationship between hub connectivity and GDP/each EV for a sample of EU countries with a hub connectivity level of at least 5% of the TOP hub-connected EU country (Germany). Finally, we extract conclusions for individual countries, with the help of the scatter diagrams and regression lines. The results provide policy guidance regarding the role of hub connectivity in increasing the economic performance of a country, especially for those countries that are highly dependent on FDI, trade, and tourism for economic growth, as we illustrate for the case of Portugal.

2021-10Working paper

Open access

Matrix representations of the national accounts’ transaction values

Publication . Santos, Susana

The values of economic flows measured by the national accounts, associated to transactions of goods, services, and assets, as well as transfers, represent interactions between institutional units, to whom legal responsibility for their actions and the fulfilment of specific economic functions is recognized. These flows are defined by the underlying system - System of National Accounts (SNA) as transactions. When represented in the matrix form, depending on the classification and organization of the institutional units, in the origin and the destination of the corresponding flows, the “from-whom-towhom” transactions can be measured and modelled, benefiting from the underlying network of linkages. By adopting the nomenclatures and rules of the current version of the above-mentioned system (SNA 2008), this study uses a top-down methodology to introduce two matrix representations of the national accounts’ transaction values. In these representations, the transactions are the same and the difference is in the form of classification and organization of the institutional units, in the origin and the destination of the corresponding flows, that is in the way how the rows and the columns of the matrices are represented. In one of these forms, the so-called National Accounting Matrix (NAM), the mentioned institutional units are only organized by institutional sectors, following the sequence of accounts defined by the SNA. In the other form, the so-called Social Accounting Matrix (SAM), only a part is organized in the same way as the previous, being given a different emphasis to the process of production in which these units are involved, namely, to the factors of production, activities (or industries) and products (or goods and services). The correspondence and the differences between both are identified and a SAM-based approach is developed. Thus, inspired in the Transaction Value (TV) Approach presented in Drud et al. 1986, empirical and theoretical descriptions of the economic activity of a country, allowed by numerical and algebraic versions of the SAM, are adopted to approach the multiplier effects and the corresponding economic adjustments of fiscal policy measures associated to the production of real estate activities. An application to Portugal follows the various aspects of the description.

2021-09Working paper

Open access

60%, -4% and 6%, a tale of thresholds for EU fiscal and current account developments

Publication . Afonso, António; Coelho, José Carlos

We study the relationship between the budget balance and the current account balance for European Union (EU) countries, using quarterly data from 1995 to 2020. Through the use of panel Granger causality tests and a panel SUR model, we conclude that the relationship is bi-directional for the EU panel as a whole. Furthermore, we find that in Eurozone countries, before 2010, for those countries with an average current account balance-to- GDP ratio outside the range of -4 to 6%, and also in countries whose average debt-to- GDP ratio is greater than 60%, the impact of the budget balance on the current account balance is greater. Conversely, in non-Eurozone countries, after 2010, in countries with a current account balance-to-GDP ratio of -4 to 6%, and also in countries with an average debt-to-GDP ratio of less than 60%, the impact of the fiscal balance on the current account balance is less relevant.

2021-09Working paper

Open access