Exploring the Economic Convergence in the EU New Member States by Using Nonparametric Models
Monica Raileanu Szeles
IWH Discussion Papers,
Nr. 2,
2011
Abstract
This paper analyzes the process of real economic convergence in the New Member States (NMS) bein g formerly centrally planned economies, using nonparametric methods instead of conventional parametric measurement tools like beta and sigma models. This methodological framework allows the examining of the relative income distribution in different periods of time, the number of modes of the density distribution, the existence of “convergence clubs” in the distribution and the hypothesis of convergence at a single point in time. The modality tests (e.g. the ASH-WARPing procedure) and stochastic kernel are nonparametric techniques used in the empirical part of the study to examine the income distribution in the NMS area. Additionally, random effects panel regressions are used, but only for comparison reasons. The main findings of the paper are the bimodality of the income density distribution over time and across countries, and the presence of convergence clubs in the income distribution from 1995 to 2008. The findings suggest a lack of absolute convergence in the long term (1995-2008) and also when looking only from 2003 onwards. The paper concludes that, in comparison with the parametrical approach, the nonparametric one gives a deeper, real and richer perspective on the process of real convergence in the NMS area.
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Macroeconomic Challenges in the Euro Area and the Acceding Countries
Katja Drechsel
Dissertation, Fachbereich Wirtschaftswissenschaften der Universität Osnabrück,
2010
Abstract
deutscher Titel: Makroökonomische Herausforderungen für die Eurozone und die Beitrittskandidaten
Abstract: The conduct of effective economic policy faces a multiplicity of macroeconomic challenges, which requires a wide scope of theoretical and empirical analyses. With a focus on the European Union, this doctoral dissertation consists of two parts which make empirical and methodological contributions to the literature on forecasting real economic activity and on the analysis of business cycles in a boom-bust framework in the light of the EMU enlargement. In the first part, we tackle the problem of publication lags and analyse the role of the information flow in computing short-term forecasts up to one quarter ahead for the euro area GDP and its main components. A huge dataset of monthly indicators is used to estimate simple bridge equations. The individual forecasts are then pooled, using different weighting schemes. To take into consideration the release calendar of each indicator, six forecasts are compiled successively during the quarter. We find that the sequencing of information determines the weight allocated to each block of indicators, especially when the first month of hard data becomes available. This conclusion extends the findings of the recent literature. Moreover, when combining forecasts, two weighting schemes are found to outperform the equal weighting scheme in almost all cases. In the second part, we focus on the potential accession of the new EU Member States in Central and Eastern Europe to the euro area. In contrast to the discussion of Optimum Currency Areas, we follow a non-standard approach for the discussion on abandonment of national currencies the boom-bust theory. We analyse whether evidence for boom-bust cycles is given and draw conclusions whether these countries should join the EMU in the near future. Using a broad range of data sets and empirical methods we document credit market imperfections, comprising asymmetric financing opportunities across sectors, excess foreign currency liabilities and contract enforceability problems both at macro and micro level. Furthermore, we depart from the standard analysis of comovements of business cycles among countries and rather consider long-run and short-run comovements across sectors. While the results differ across countries, we find evidence for credit market imperfections in Central and Eastern Europe and different sectoral reactions to shocks. This gives favour for the assessment of the potential euro accession using this supplementary, non-standard approach.
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State Aid in the Enlarged European Union. An Overview
Jens Hölscher, Nicole Nulsch, Johannes Stephan
Abstract
In the early phase of transition that started with the 1990s, Central and Eastern European Countries pursued economic restructuring of the enterprise sector that involved massive injections of state support. Also foreign investment from the West and facilitation of the development of a market economy involved massive injections of state support. With their accession to the European Union (EU), levels and forms of state aid came under critical review by the European Commission. This inquiry investigates whether the integration of the new member states operates on a level playing field with respect to state aid. Quantitative and qualitative analysis is relied upon to answer this key, as well as other, related questions. Findings suggest that in recent years a level playing field across the EU has indeed emerged. State aid in the new EU member countries is rather handled more strictly than laxer compared to the ‘old’ EU countries.
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Interest Rate Convergence in the Euro-Candidate Countries: Volatility Dynamics of Sovereign Bond Yields
Hubert Gabrisch, Lucjan T. Orlowski
Emerging Markets Finance and Trade,
2010
Abstract
We argue that a “static“ specification of the Maastricht criterion for long-term bond yields is not conducive to assessing stability of financial systems in euro-candidate countries. Instead, we advocate a dynamic approach to assessing interest rate convergence to a common currency that is based on the analysis of financial system stability. Accordingly, we empirically test volatility dynamics of the ten-year sovereign bond yields of the 2004 EU accession countries in relation to the eurozone yields during the January 2, 2001-January 22, 2009, sample period. Our results show a varied degree of the relationship between domestic and eurozone sovereign bond yields, the most pronounced for the Czech Republic, Slovenia, and Poland, and weaker for Hungary and Slovakia. We find some divergence of relative bond yields since the EU accession.
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Technology Clubs, R&D and Growth Patterns: Evidence from EU Manufacturing
Claire Economidou, J. W. B. Bos, Michael Koetter
European Economic Review,
Nr. 1,
2010
Abstract
This paper investigates the forces driving output change in a panel of EU manufacturing industries. A flexible modeling strategy is adopted that accounts for: (i) inefficient use of resources and (ii) differences in the production technology across industries. With our model we are able to identify technical, efficiency, and input growth for endogenously determined technology clubs. Technology club membership is modeled as a function of R&D intensity. This framework allows us to explore the components of output growth in each club, technology spillovers and catch-up issues across industries and countries.
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A Dynamic Approach to Interest Rate Convergence in Selected Euro-candidate Countries
Hubert Gabrisch, Lucjan T. Orlowski
IWH Discussion Papers,
Nr. 10,
2009
Abstract
We advocate a dynamic approach to monetary convergence to a common currency that is based on the analysis of financial system stability. Accordingly, we empirically test volatility dynamics of the ten-year sovereign bond yields of the 2004 EU accession countries in relation to the eurozone yields during the January 2, 2001 untill January 22, 2009 sample period. Our results show a varied degree of bond yield co-movements, the most pronounced for the Czech Republic, Slovenia and Poland, and weaker for Hungary and Slovakia. However, since the EU accession, we find some divergence of relative bond yields. We argue that a ‘static’ specification of the Maastricht criterion for long-term bond yields is not fully conducive for advancing stability of financial systems in the euro-candidate countries.
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The Role of the Intellectual Property Rights Regime for Foreign Investors in Post-Socialist Economies
Benedikt Schnellbächer, Johannes Stephan
IWH Discussion Papers,
Nr. 4,
2009
Abstract
We integrate international business theory on foreign direct investment (FDI) with institutional theory on intellectual property rights (IPR) to explain characteristics and behaviour of foreign investment subsidiaries in Central East Europe, a region with an IPR regime-gap vis-à-vis West European countries. We start from the premise that FDI may play a crucial role for technological catch-up development in Central East Europe via technology and knowledge transfer. By use of a unique dataset generated at the IWH in collaboration with a European consortium in the framework of an EU-project, we assess the role played by the IPR regimes in a selection of CEE countries as a factor for corporate governance and control of foreign invested subsidiaries, for their own technological activity, their trade relationships, and networking partners for technological activity. As a specific novelty to the literature, we assess the in influence of the strength of IPR regimes on corporate control of subsidiaries and conclude that IPR-sensitive foreign investments tend to have lower functional autonomy, tend to cooperate more intensively within their transnational network and yet are still technologically more active than less IPR-sensitive subsidiaries. In terms of economic policy, this leads to the conclusion that the FDI will have a larger developmental impact if the IPR regime in the host economy is sufficiently strict.
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Deeper, Wider and More Competitive? Monetary Integration, Eastern Enlargement and Competitiveness in the European Union
Gianmarco Ottaviano, Daria Taglioni, Filippo di Mauro
ECB Working Paper,
Nr. 847,
2008
Abstract
What determines a country’s ability to compete in international markets? What fosters the global competitiveness of its firms? And in the European context, have key elements of the EU strategy such as EMU and enlargement helped or hindered domestic firms’ competitiveness in local and global markets? We address these questions by calibrating and simulating a conceptual framework that, based on Melitz and Ottaviano (2005), predicts that tougher and more transparent international competition forces less productive firms out the market, thereby increasing average productivity as well as reducing average prices and mark-ups. The model also predicts a parallel reduction of price dispersion within sectors. Our conceptual framework allows us to disentangle the effects of technology and freeness of entry from those of accessibility. On the one hand, by controlling for the impact of trade frictions, we are able to construct an index of ‘revealed competitiveness’, which would drive the relative performance of countries in an ideal world in which all faced the same barriers to international transactions. On the other hand, by focusing on the role of accessibility while keeping ‘revealed competitiveness’ as given, we are able to evaluate the impacts of EMU and enlargement on the competitiveness of European firms. We find that EMU positively affects the competitiveness of firms located in participating economies. Enlargement has, instead, two contrasting effects. It improves the accessibility of EU members but it also increases substantially the relative importance of unproductive competitors from Eastern Europe. JEL Classification: F12, R13.
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