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on Transition Economics |
| By: | Arnaud Mehl (European Central Bank - ECB); Julien Reynaud (European Central Bank - ECB, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | This paper explains why public domestic debt composition in emerging economies can be risky, namely in foreign currency, with a short maturity or indexed. It analyses empirically the determinants of these risk sources separately, developing a new large dataset compiled from national sources for 33 emerging economies over 1994-2006. The paper finds that economic size, the breadth of the domestic investor base, inflation and fiscal soundness are all associated with risky public domestic debt compositions, yet to an extent that varies considerably in terms of magnitude and significance across sources of risk. Only inflation impacts all types of risky debt, underscoring the overarching importance of monetary credibility to make domestic debt compositions in emerging economies safer. Given local bond markets' rapid development, monitoring risky public domestic debt compositions in emerging economies becomes increasingly relevant to global financial stability. |
| Keywords: | Public domestic debt, composition, risk, emerging economies. |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00332049_v1&r=tra |
| By: | Ramón María-Dolores (Banco de España) |
| Abstract: | This paper studies the pass-through of exchange rate changes into the prices of imports that originated inside the euro area made by some New Member States (NMSs) of the European Union and one candidate country (Turkey). I use data on import unit values for nine different product categories and bilateral imports from the euro area for each country and I estimate industry-specific rates of pass-through across and within countries using two different methodological approaches. The first one is based on Campa and González-Mínguez (2006) which estimates the short- and long-run pass through elasticities, where long-run elasticities are defined as the sum of the pass-through coefficients for the contemporaneous exchange rate and its first four lags. The second one is employed by de Bandt, Banerjee and Kozluk (2007) which suggests a long-run Engle and Granger (1987) cointegrating relationship and the possibility of structural breaks to restore the long-run in the estimation. I did not find evidence either in favour of the hypothesis of Local Currency Pricing (zero pass-through) or the hypothesis of Producer Currency Pricing (complete pass-through) for all the countries except Slovenia and Cyprus in the latter. The exchange rate pass-through ranged from 0.090 to 2.916 in the short-run and from 0.102 to 2.242 in the long-run. With reference to the results by industry the lowest values for exchange rate pass-through are in Manufacturing sectors. However, I did observe a exchange rate pass-through decline through the pricing chain and a large dependence of their economies on imported inputs. |
| Keywords: | exchange rates, pass-through, monetary union, panel cointegration |
| JEL: | F31 F36 F42 C23 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:0822&r=tra |
| By: | Sabarwal, Shwetlena (World Bank); Terrell, Katherine (University of Michigan) |
| Abstract: | Using 2005 firm level data for 26 ECA countries, this paper estimates performance gaps between male- and female-owned businesses, while controlling for their location by industry and country. We find that female entrepreneurs have significantly smaller scale of operations (as measured by sales revenues) and are less efficient in terms of Total Factor Productivity (TFP), although this difference is very small. However, they generate the same amount of profit per unit of revenue as men. We find that while both male and female entrepreneurs in ECA are sub-optimally small, women's returns to scale are significantly larger than men's implying that they would gain more from increasing their scale. We argue that the main reasons for the sub-optimal size of female-owned firms are that they are both capital constrained and concentrated in industries with small firms. |
| Keywords: | entrepreneurship, finance, gender, Eastern Europe, Central Asia |
| JEL: | D24 M21 O12 O16 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3758&r=tra |
| By: | Barry Eichengreen; Katharina Steiner |
| Abstract: | We ask whether Poland is at risk of the boom-bust problem that has afflicted economies around the time of euro adoption. Our answer, inevitably, is mixed. On the one hand the fact that Poland is an outlier, credit-growth wise, accentuates the danger of a boom if one believes in mean reversion. Our econometrics indicate that the fall in interest rates that will flow from expectations of euro adoption will further feed that boom. On the other hand the fact that interest rates have already converged part way to euro-area levels (and more extensively than in earlier adopters that experienced a sharp fall in rates and a pronounced credit boom), especially in the case of lending to firms, suggests that this shock may be less intense in Poland. And it is certainly conceivable that the same policies and country characteristics (not always visible to the econometrician) that have restrained credit growth in the past may continue to do so in the future. The broader literature also points to two set of factors, the first of which makes the danger of an unsustainable credit boom more immediate, the second of which makes it more remote. In the first category are the continuing limitations of the supervisory framework and the weakness of the finance minister in the budget-making process. In the second are a record of rigorous prudential supervision and the existence of relatively competitive labor markets. |
| JEL: | F0 F15 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14438&r=tra |
| By: | Eduard Hochreiter; Þorvaldur Gylfason |
| Abstract: | We compare and contrast the economic growth performance of Estonia and Georgia since the collapse of the Soviet Union in 1991 in an attempt to understand better the extent to which the growth differential between the two countries can be traced to increased efficiency in the use of capital and other resources (intensive growth) as opposed to brute accumulation of capital (extensive growth). On the basis of a simple growth accounting exercise, we infer that advances in education at all levels, good governance, and institutional reforms have played a more significant role in raising economic output and efficiency in Estonia than in Georgia which remains marred by various problems related to weak governance in the public and private spheres. |
| Keywords: | Economic growth , Estonia , Georgia , Governance , Transition economies , Education , Economic reforms , Exports , Inflation , Labor markets , |
| Date: | 2008–10–06 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:08/235&r=tra |
| By: | Silasi, Grigore; Simina, Ovidiu Laurian |
| Abstract: | The paper is a contribution at the scientific debate of migration and mobility issues in the context of an enlarged European Union (EU-27). We consider that Romania, a country with a labour market that faces distortions, will benefit from migration on short term, but will need to import labour force in order to maintain the development trend. Remittances, as result of Romanians emigration after 2002, helped the economic development of the country in the last years (remittances’ inflow doubled the FDI). As a response to the media debate regarding Romania’s emigration, we consider that the fear of mass migration from Romania following the year 2007 is not justified. While the European (and mostly British) media cries on the threat of Bulgarians and Romanians’ emigration, as following to the 2007 accession, the scientific reports say that the A8 countries’ migration benefits to economy of the EU15 countries. In the same time, the Romanian media and the Romanian entrepreneurs announce the ‘Chinese invasion’ and the lack of labour in construction, industry and even agriculture. We see labour as goods: the economic theory say that goods are moving with the prices, the highest price attracts (more) goods. Romania is not only a gateway for the East-West international migration (like Portugal, Spain, Italy and Greece for the South-North direction), but a labour market in need of workers. While a big part of the labour force is already migrated, mostly to the SE Europe (some 2.5m workers are cited to be abroad, with both legal and illegal/irregular status), the Romanian companies could not find local workers to use them in order to benefit from the money inflow targeting Romania in the light of its new membership to the European Union (foreign investments and European post accession funds). Instead of increasing the salaries, the local employers rather prefer to ‘import’ workers from poorer countries (Chinese, Moldavians, Ukrainians, who still accept a lower wage as compared to the medium wage in Romania, but bigger enough as compared to those from their country of origin). The paper concludes with the case of the Banat region, considered the ‘Western Europe’ from Romania, as a small scale model for the labour market relations within the whole EU. |
| Keywords: | labour migration; labour market distortions; South-Eastern Europe Syndrome; network effect; decision making; motivation; need for esteem; Banat region |
| JEL: | F22 J61 R23 |
| Date: | 2007–10–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:11184&r=tra |
| By: | Manuela Goretti |
| Abstract: | This paper analyzes wage- and price-setting relations in new EU member countries. Panel estimates indicate a strong and significant relationship between real wages and labor productivity, as well as evidence of wage pass-through to inflation. Terms of trade shocks do not feed through to real wages. Country-specific wage developments, beyond differences in labor productivity growth, are mostly explained by real wage catch-up from different initial levels and different labor market conditions. Qualitative evidence also suggests that public sector wage demonstration effects and institutional factors may play a role in wage determination. |
| Keywords: | Wage policy , Pricing policy , European Union , Europe , Public sector wages , Labor markets , Labor productivity , External shocks , Inflation , |
| Date: | 2008–10–07 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:08/243&r=tra |
| By: | Katerina SmÃdková; Viktor Kotlán; David Navrátil; Ales Bulir |
| Abstract: | Inflation-targeting central banks have a respectable track record at explaining their policy actions and corresponding inflation outturns. Using a simple forward-looking policy rule and an assessment of inflation reports, we provide a new methodology for the empirical evaluation of consistency in central bank communication. We find that the three communication tools-inflation targets, inflation forecasts, and verbal assessments of inflation factors contained in quarterly inflation reports-provided a consistent message in five out of six observations in our 2000-05 sample of Chile, the Czech Republic, Hungary, Poland, Thailand, and Sweden. |
| Keywords: | Inflation targeting , Central banks , Economic forecasting , Monetary policy , Transparency , Emerging markets , Chile , Czech Republic , Hungary , Poland , Thailand , Sweden , |
| Date: | 2008–10–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:08/234&r=tra |
| By: | d'Artis Kancs; Pavel Ciaian; Jan Pokrivcak |
| Abstract: | The present study examines factor content of the CEE transition country agricultural trade. We examine the relative country abundance for labour, capital and land, and test the Heckscher-Ohlin-Vanek (HOV) hypothesis. Our empirical findings suggest that the factor content of agricultural exports and imports is rather similar in CEE and most of the agricultural trade flows do not satisfy the HOV prediction. In order to explain the general lack of agricultural specialisation and the observed paradox in the CEE's agricultural trade, we examine the role of transaction costs and market imperfections. We find that transaction costs and market imperfections distort farm specialisation and hence factor content of agricultural trade. |
| Keywords: | Factor Content, Agricultural Trade, Comparative Advantages, Transaction Costs |
| JEL: | F12 F14 D23 Q12 Q17 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2008_03&r=tra |
| By: | Mayra Zermeño |
| Abstract: | This paper analyzes developments in non-oil tax policy, administration, and revenues in Azerbaijan, and suggests measures for further improvement. The main finding is that Azerbaijan's non-oil tax revenues increased significantly as a share of non-oil GDP in the last five years, but remain below potential. The non-oil tax revenue shortfall is mainly due to widespread exemptions, but there is scope for strengthening tax and customs administration. In the short term, expanding the tax base and better tax and customs administration will yield more revenues. In the medium term, more far-reaching reforms including reducing some direct tax rates, should be considered. The overall reform package could be made broadly revenue neutral by improving taxpayers' compliance and reducing exemptions. |
| Keywords: | Tax systems , Azerbaijan , Nonoil sector , Tax policy , Tax revenues , Customs administration , Tax reforms , Value added tax , Working Paper , |
| Date: | 2008–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:08/225&r=tra |
| By: | Yu-Fu Chen; Michael Funke |
| Abstract: | In January 2008, China imposed a new labour contract law. This new law is the most significant reform to the law of employment relations in mainland China in more than a decade. The paper provides a theoretical framework on the inter-linkages between labour market regulation, option value and the choice and timing of employment. All in all, the paper demonstrates that the Labour Contract Law in it´s own right will have only small impacts upon employment in the fast-growing Chinese economy. On the contrary, induced increasing unit labour costs represent the real issue and may reduce employment. |
| Keywords: | China, Labour Contract Law, Real Options, Employment |
| JEL: | C61 D81 D92 J23 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:dun:dpaper:220&r=tra |
| By: | Céline Allard; Nada Choueiri; Susan Schadler; Rachel van Elkan |
| Abstract: | Large inflows from the European Union to the New Member States are likely to significantlyimpact macroeconomic outcomes. In this paper, we use the IMF's Global Integrated Monetaryand Fiscal model (GIMF) to analyze the impact of the transfers and show the conditionsunder which they would help speed up convergence. We find that the EU funds need to bedirected predominantly to investment rather than to income support and that to bestaccompany the EU fund inflows, the policy-mix would need to combine counter-cyclicalpolicy with a strong commitment to the existing monetary regime. |
| Keywords: | European Economic and Monetary Union , Capital flows , Monetary policy , Investment policy , Capital inflows , Economic integration , Exchange rate regimes , Working Paper , |
| Date: | 2008–09–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:08/223&r=tra |
| By: | Deniz Igan; Natalia T. Tamirisa |
| Abstract: | This paper examines the behavior of bank soundness indicators during episodes of brisk loan growth, using bank-level data for central and eastern Europe and controlling for the feedback effect of credit growth on bank soundness. No evidence is found that rapid loan expansion has weakened banks during the last decade, but over time weaker banks seem to have started to expand at least as fast as, and in some markets faster than, stronger banks. These findings suggest that during credit booms supervisors need to carefully monitor the soundness of rapidly expanding banks and stand ready to take action to limit the expansion of weak banks. |
| Keywords: | Banking sector , Bank soundness , Credit expansion , Europe , Emerging markets , Bank credit , Risk management , Working Paper , |
| Date: | 2008–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:08/219&r=tra |
| By: | Natalia Zugravu (CES - Université Paris-I Panthéon Sorbonne); Sonia Ben Kheder (CES - Université Paris-I Panthéon Sorbonne) |
| Abstract: | Although based on theoretical foundations, the pollution haven hypothesis has never been clearly proven empirically. In this study, we re-examine this hypothesis by a fresh take on both its theoretical and empirical aspects. While applying a geographic economy model on French firm-level data, we confirm the hypothesis for the global sample. Through sensitivity analysis, we validate it for Central and Eastern European countries, emerging and high-income OECD countries, but not for the major part of the Commonwealth of Independent States countries. Finally, we show that the pollution haven hypothesis is confirmed in the strongest manner for emerging economies. |
| Keywords: | FDI, Environmental Regulation, Economic Geography, Pollution Haven Hypothesis |
| JEL: | F12 F18 Q28 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2008.73&r=tra |
| By: | Hiroshi Sato; Li Shi |
| Abstract: | This paper examines the intergenerational correlation of education in rural China. The focus is on the influence of family class origin (jiating chengfen), the political label hung on every family throughout the Maoist era. A nationally representative cross-sectional household survey for 2002 is used. It is shown that the effects of family class origin on family members' educational attainment varies across historical periods. Regarding the educational level of male heads of household with landlord/rich peasant background, we found a drop caused by the class-based discrimination in the Maoist era and a rebound in the postreform era. It was also found that family class origin remains significant for the educational achievement of the current younger generation. Children aged 16-18 who are of landlord/rich peasant and middle peasant origins are more likely to achieve higher educational attainment. We conclude that a class-specific, education-oriented family culture has been shaped first as a mixture of family cultural capital inherited from the pre-Maoist era and surfacing again in the postreform era, and, second, as intergenerational cultural reaction against class-based discrimination during the Maoist era. |
| Keywords: | education, intergenerational correlation, class origin, family culture, social discrimination |
| JEL: | D31 J24 N35 O15 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:hst:ghsdps:gd08-007&r=tra |
| By: | Pavel Ciaian; d'Artis Kancs |
| Abstract: | This paper analyses how rising agricultural prices affect heterogenous farm production and access to inputs under credit market imperfections in the CEE transition countries. Using the FADN farm level panel data, which contains 37416 observations for 2004 and 2005, we estimate a farm credit constraint equation and find that small individual farms (IF) are more credit constrained that large corporate farms (CF). Using the estimated parameters we simulate the effect of rising input and output prices on production and input use of IF and CF farms. Our results suggest that in the presence of credit market imperfections, the relatively less credit constrained CF tend to benefit more from higher output prices than IF. Given that farms in transition and developing countries are more credit constrained than farms in developed market economies, raising food prices may actually reduce their profits and income compared to the latter. Hence, not only consumers but also agricultural producers in the developing world may loose from the increasing food prices. |
| Keywords: | Credit constraint, food prices, firm level heterogeneity |
| JEL: | Q11 Q12 P23 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2008_02&r=tra |
| By: | Zhao Chen; Shiqing Jiang; Ming Lu; Hiroshi Sato |
| Abstract: | In this paper, we use the "2002 Chinese Household Income Project Survey" (CHIP2002) data to examine how heterogeneous social interactions affect the peer effect in the rural-urban migration decision in China. We find that the peer effect, measured by the village migration ratio, significantly increases the individual probability of outward migration. We also find that the magnitude of the peer effect is nonlinear, depending on the strength and type of social interactions with other villagers. Interactions in information sharing can increase the magnitude of the peer effect, while interactions in mutual help in labor activities, such as help in housing construction, nursing and farm work in busy seasons, will impede the positive role of the peer effect. Being aware of the simultaneity bias caused by the two-way causality between social interaction strengths and migration, we utilize "historical family political identity in land reform" as an instrumental variable for social interactions. However, the hypothesis that probit and instrumental-variable probit results are not significantly different is not rejected. The existence of a nonlinear peer effect has rich policy implications. For policy makers to encourage rural-urban migration, it is feasible to increase education investment in rural areas or increase information sharing among rural residents. However, only an increase in the constant term in the regression, i.e., a "big push" in improving institutions for migration, can help rural Chinese residents escape the low equilibrium in migration. |
| Keywords: | labor migration, urbanization, peer effect, social interaction, social multiplier |
| JEL: | J61 O15 R23 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:hst:ghsdps:gd08-008&r=tra |