The Appropriateness of the Macroeconomic Imbalance Procedure for Central and Eastern European Countries
Martina Kämpfe, Tobias Knedlik
IWH Discussion Papers,
Nr. 16,
2017
Abstract
The experience of Central and Eastern European countries (CEEC) during the global financial crisis and in the resulting European debt crises has been largely different from that of other European countries. This paper looks at the specifics of the CEEC in recent history and focuses in particular on the appropriateness of the Macroeconomic Imbalances Procedure for this group of countries. In doing so, the macroeconomic situation in the CEEC is highlighted and macroeconomic problems faced by these countries are extracted. The findings are compared to the results of the Macroeconomic Imbalances Procedure of the European Commission. It is shown that while the Macroeconomic Imbalances Procedure correctly identifies some of the problems, it understates or overstates other problems. This is due to the specific construction of the broadened surveillance procedure, which largely disregarded the specifics of catching-up economies.
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Decision-making Power in Foreign Subsidiaries and Its Effect on Financial Constraints: An Analysis for Selected European Transition Economies on the Basis of the IWH FDI Micro Database 2013
Andrea Gauselmann, Felix Noth
Eastern European Economics,
Nr. 6,
2016
Abstract
This article analyzes whether the distribution of decision-making power between the headquarters and foreign subsidiaries of multinational enterprises (MNEs) affects the foreign affiliates’ financial constraints. The findings show that not much decision-making power has as yet been moved from headquarters to foreign subsidiaries in European post-transition economies. The high concentration of decision-making power within the MNE’s subsidiary points toward higher financial constraints. However, a nonlinear effect is found, which suggests that financial constraints within the subsidiary only increase with more decision-making power when the power granted to the subsidiary is at a low level. For subsidiaries that already have autonomy in decision-making, granting more power in this regard has no effect on financial constraints.
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FDI, Human Capital and Income Convergence — Evidence for European Regions
Björn Jindra, Philipp Marek, Dominik Völlmecke
Economic Systems,
Nr. 2,
2016
Abstract
This study examines income convergence in regional GDP per capita for a sample of 269 regions within the European Union (EU) between 2003 and 2010. We use an endogenous broad capital model based on foreign direct investment (FDI) induced agglomeration economies and human capital. By applying a Markov chain approach to a new dataset that exploits micro-aggregated sub-national FDI statistics, the analysis provides insights into regional income growth dynamics within the EU. Our results indicate a weak process of overall income convergence across EU regions. This does not apply to the dynamics within Central and East European countries (CEECs), where we find indications of a poverty trap. In contrast to FDI, regional human capital seems to be associated with higher income levels. However, we identify a positive interaction of FDI and human capital in their relation with income growth dynamics.
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Real Effective Exchange Rate Misalignment in the Euro Area: A Counterfactual Analysis
Makram El-Shagi, Axel Lindner, Gregor von Schweinitz
Review of International Economics,
Nr. 1,
2016
Abstract
The European debt crisis has revealed severe imbalances within the Euro area, sparking a debate about the magnitude of those imbalances, in particular concerning real effective exchange rate misalignments. We use synthetic matching to construct a counterfactual economy for each member state in order to identify the degree of these misalignments. We find that crisis countries are best described as a combination of advanced and emerging economies. Comparing the actual real effective exchange rate with those of the counterfactuals gives evidence of misalignments before the outbreak of the crisis: all peripheral countries appear strongly and significantly overvalued.
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Does Country Context Distance Determine Subsidiary Decision-making Autonomy? Theory and Evidence from European Transition Economies
Gjalt de Jong, Vo. van Dut, Björn Jindra, Philipp Marek
International Business Review,
Nr. 5,
2015
Abstract
We studied an underrepresented area in the international business (IB) literature: the effect of country context distance on the distribution of decision-making autonomy across headquarters and foreign affiliates. Foreign affiliates directly contribute to the competitive advantages of multinational enterprises, highlighting the importance of such intra-firm collaboration. The division of decision-making autonomy is a core issue in the management of headquarters–subsidiary relationships. The main contribution of our paper is that we confront two valid theoretical frameworks – business network theory and agency theory – that offer contradictory hypotheses with respect to the division of decision-making autonomy. Our study is among the first to examine this dilemma with a unique dataset from five Central and Eastern European transition countries. The empirical results provide convincing support for our approach to the study of subsidiary decision-making autonomy.
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Does Country Context Distance Determine Subsidiary Decision-making Autonomy? Theory and Evidence from European Transition Economies
Gjalt de Jong, Vo. van Dut, Björn Jindra, Philipp Marek
International Business Review,
2015
Abstract
We studied an underrepresented area in the international business (IB) literature: the effect of country context distance on the distribution of decision-making autonomy across headquarters and foreign affiliates. Foreign affiliates directly contribute to the competitive advantages of multinational enterprises, highlighting the importance of such intra-firm collaboration. The division of decision-making autonomy is a core issue in the management of headquarters–subsidiary relationships. The main contribution of our paper is that we confront two valid theoretical frameworks – business network theory and agency theory – that offer contradictory hypotheses with respect to the division of decision-making autonomy. Our study is among the first to examine this dilemma with a unique dataset from five Central and Eastern European transition countries. The empirical results provide convincing support for our approach to the study of subsidiary decision-making autonomy.
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