On the Twin Deficits Hypothesis and the Import Intensity in Transition Countries
Hubert Gabrisch
International Economics and Economic Policy,
Nr. 2,
2015
Abstract
This article aims to explain the increasing deficits in the trade and current account balances of three post-transition countries–Czech Republic, Hungary, and Poland–by testing two hypotheses: the twin deficit hypothesis and increasing import intensity of export production. The method uses co-integration and related techniques to test for a long-run causal relationship between the fiscal and external deficits of three post-transition countries in Central and Eastern Europe. In addition, an import intensity model is tested by applying OLS and GMM. All the results reject the Twin Deficits Hypothesis. Instead, the results demonstrate that specific transition factors such as net capital flows and, probably, a high import intensity of exports affect the trade balance.
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The Euro Plus Pact: Competitiveness and External Capital Flows in the EU Countries
Hubert Gabrisch, K. Staehr
Journal of Common Market Studies,
Nr. 3,
2015
Abstract
The Euro Plus Pact was approved by the European Union countries in March 2011. The pact stipulates various measures to strengthen competitiveness with the ultimate aim of preventing accumulation of unsustainable external imbalances. This article uses Granger causality tests to assess the short-term linkages between changes in relative unit labour costs and changes in the current account balance for the period 1995–2011. The main finding is that changes in the current account balance precede changes in relative unit labour costs, while there is no discernible effect in the opposite direction. This suggests that capital flows from the European core to the periphery contributed to the divergence in unit labour costs across Europe prior to the global financial crisis. The results also suggest that the measures to restrain unit labour costs may have only limited effect on the current account balance in the short term.
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The Euro Plus Pact: Cost Competitiveness and External Capital Flows in the EU Countries
Hubert Gabrisch, K. Staehr
Abstract
The Euro Plus Pact was approved by 23 EU countries in March 2011 and came into force shortly afterwards. The Pact stipulates a range of quantitative targets meant to strengthen cost competitiveness with the aim of preventing the accumulation of external financial imbalances. This paper uses Granger causality tests and vector autoregressive models to assess the short-term linkages between changes in the relative unit labour cost and changes in the current account balance. The sample consists of annual data for 27 EU countries for the period 1995-2012. The main finding is that changes in the current account balance precedes changes in relative unit labour costs, while there is no discernible effect in the opposite direction. The divergence in unit labour costs between the countries in Northern Europe and the countries in Southern and Eastern Europe may thus partly be the result of capital flows from the core of Europe to the periphery prior to the global financial crisis. The results also suggest that the measures in the Euro Plus Pact to restrain the growth of unit labour costs may not affect the current account balance in the short term.
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Human Capital Mobility and Convergence – A Spatial Dynamic Panel Model of the German Regions
Alexander Kubis, Lutz Schneider
Abstract
Since the fall of the iron curtain in 1989, the migration deficit of the Eastern part of Germany has accumulated to 1.8 million people, which is over ten percent of its initial population. Depending on their human capital endowment, these migrants might either – in the case of low-skilled migration – accelerate or – in high-skilled case – impede convergence. Due to the availability of detailed data on regional human capital, migration and productivity growth, we are able to test how geographic mobility affects convergence via the human capital selectivity of migration. With regard to the endogeneity of the migration flows and human capital, we apply a dynamic panel data model within the framework of β-convergence and account for spatial dependence. The regressions indicate a positive, robust, but modest effect of a migration surplus on regional productivity growth. After controlling for human capital, the effect of migration decreases; this decrease indicates that skill selectivity is one way that migration impacts growth.
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Human Capital Mobility and Convergence. A Spatial Dynamic Panel Model of the German Regions
Alexander Kubis, Lutz Schneider
Abstract
Since the fall of the iron curtain in 1989, the migration deficit of the Eastern part of Germany has accumulated to 1.8 million people, which is over 10 percent of its ini-tial population. Depending on their human capital endowment, these migrants might either – in the case of low-skilled migration – accelerate or – in high-skilled case– impede convergence. Due to the availability of detailed data on regional human capital, migration and productivity growth, we are able to test how geographic mobil-ity affects convergence via the human capital selectivity of migration. With regard to the endogeneity of the migration flows and human capital, we apply a dynamic panel data model within the framework of β-convergence and account for spatial depend-ence. The regressions indicate a positive, robust, but modest effect of a migration surplus on regional productivity growth. After controlling for human capital, the effect of migration decreases; this decrease indicates that skill selectivity is one way that migration impacts growth.
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The Determinants of Inward Foreign Direct Investment in Business Services Across European Regions
Davide Castellani
Finanza e Statistica 104/2012,
2012
Abstract
The paper accounts for the determinants of inward foreign direct investment in business services across the EU-27 regions. Together with the traditional variables considered in the literature (market size, market quality, agglomeration economies, labour cost, technology, human capital), we focus on the role of forward linkages with manufacturing sectors and other service sectors as
attractors of business services FDI at the regional level. This hypothesis is based on the evidence that the growth of business services is mostly due to increasing intermediate demand by other services industries and by manufacturing industries and on the importance of geographical proximity for forward linkages in services.
To our knowledge, there are no studies investigating the role of forward linkages for the location of FDI. This paper aims therefore to fill this gap and add to the FDI literature by providing a picture of the specificities of the determinants of FDI in business services at the regional level. The empirical analysis draws upon the database fDi Markets, from which we selected projects having as a destination NUTS 2 European regions in the sectors of Business services over the period 2003-2008. Data on FDI have been matched with data drawn from the Eurostat Regio
database. Forward linkages have been constructed using the OECD Input/Output database. By estimating a negative binomial model, we find that regions specialised in those (manufacturing) sectors that are high potential users of business services attract more FDI than other regions. This confirms the role of forward linkages for the localisation of business service FDI, particularly in the case of manufacturing.
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A Macroeconomist’s View on EU Governance Reform: Why and How to Establish Policy Coordination?
Hubert Gabrisch
Economic Annals,
Nr. 191,
2011
Abstract
This paper discusses the need for macroeconomic policy coordination in the E(M)U. Coordination of national policies with cross-border effects does not exist at the macroeconomic level, although requested by the EU Treaty. The need for coordination stems from current account imbalances, which origin in market-induced capital flows, destabilizing the real exchange rates between low and high wage countries. The recent attempts of the Commission and the European Council to reform E(M)U governance do not address this problem and thus remain incapable to protect against future instability.
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The Role of Investment Banking for the German Economy: Final Report for Deutsche Bank AG, Frankfurt/Main
Michael Schröder, M. Borell, Reint E. Gropp, Z. Iliewa, L. Jaroszek, G. Lang, S. Schmidt, K. Trela
ZEW-Dokumentationen, Nr. 12-01,
Nr. 1,
2011
Abstract
The aim of this study is to assess the contributions of investment banking to the economy with a particular focus on the German economy. To this end we analyse both the economic benefits and the costs stemming from investment banking.
The study focuses on investment banks as this part of banking is particularly relevant for financing companies as well as the development and use of specific products to support the needs of private and professional clients. The assessment of benefits and costs of investment banking has been conducted from a European perspective. Nevertheless there is a focus on the German economy to allow a more detailed analysis of certain aspects as for example the use of derivatives by German companies, the success of M&As in Germany or the effect of securitization on loan supply and GDP in Germany. For comparison purposes other European countries and also the U.S. have been taken into account.
The last financial crisis has shown the negative impacts of banks on the financial system and the whole economy. In a study on the contribution of investment banks to systemic risk we quantify the negative side of the investment banking business.
In the last part of the study we assess how the effects of regulatory changes on investment banking. All important changes in banking and capital market regulation are taken into account such as Basel III, additional capital requirements for systemically important financial institutions, regulation of OTC derivatives and specific taxes.
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Potential Effects of Basel II on the Transmission from Currency Crises to Banking Crises – The Case of South Korea
Tobias Knedlik, Johannes Ströbel
Journal of Money,
Nr. 13,
2010
Abstract
In this paper we evaluate potential effects of the Basel II accord on preventing the transmission from currency crises to banking crises by analyzing the South Korean crisis of 1997. We show that regulatory capital reserves under Basel II would have been lower than those under Basel I, and that therefore Basel II would have had adverse effects on the development of the crisis. Furthermore we investigate whether the behavior of rating agencies has changed since the East Asian crisis. We find no evidence that rating agencies have started to take micro-mismatches into account. Thus, we have reservations concerning the effectiveness of Basel II.
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