Browsing by Subject "KIE"

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  • Fidrmuc, Jarko; Korhonen, Iikka (2004)
    BOFIT Discussion Papers 20/2004
    Published in Journal of Comparative Economics, Vol.34, No.3 (2006), pp. 518-537
    We review the literature on business-cycle correlation between the euro area and Central and Eastern European countries (CEECs), a topic that has gained attention in recent years as new EU entrants prepare for participation in the monetary union.Our meta-analysis suggests several CEECs already have comparably high correlation with the euro area business cycle.We also find that estimation methodologies can have a significant effect on correlation coefficients.While central bankers are more conservative in their estimates, we find no evidence of a geographical bias in the studies.JEL-Numbers: C42, E32, F15, F31.Key words: monetary union, optimum currency area, business cycles, meta- analysis.
  • Korhonen, Iikka; Wachtel, Paul (2005)
    BOFIT Discussion Papers 2/2005
    Published in Research in International Business and Finance Vol. 20, No. 2 (2006), pp. 215-226
    We assess the extent and speed of exchange rate pass-through in the countries of the Commonwealth of Independent States (CIS).We do this in the framework of vector autoregressive regressions, utilising impulse functions and variance decompositions with monthly data that starts in 1999 in order to avoid periods of very high inflation and the Russian crisis.We find that exchange rate movements have a clear impact on price developments in the CIS countries.The speed of the pass-through is also fairly high: in most cases the full effect is transmitted into domestic prices in less than 12 months.Unlike in many other emerging market economies, an additional effect from US prices on to domestic prices is not significant.The extent of the exchange rate pass-through is usually much higher than in our benchmark group of emerging market countries.Variance decomposition shows that the relative share of exchange rates in explaining changes in domestic prices is higher in the CIS countries than in the benchmark group. Our results indicate that policy-makers in the CIS countries need to pay more attention to exchange rate movements than in many other emerging market countries.Key words: exchange rate pass-through, inflation, exchange rate regime, transition countries JEL: E31, E42, F31, F42
  • Kaitila, Ville (2001)
    BOFIT Discussion Papers 3/2001
    We analyse trade between Central and Eastern European (CEE) countries and the European Union during 1993-1998 using three methods.First, we calculate the share of intra-industry trade to determine the extent to which two countries trade in similar products.Second, we calculate similarity indices to determine the extent to which the structure of the exports of two countries is similar to a third country.Third, we calculate the revealed comparative advantage of CEE countries in the EU internal market and analyse the results in a two-dimensional space showing relative labour-skills and capital-intensity.We also depict how the factor intensity of comparative advantage has changed since 1993.With this last approach, we find that the comparative advantage of various CEE countries have developed in quite different directions. Some countries have evolved comparative advantage in industries requiring much skilled labour, while others have moved in the opposite direction.This differentiation is also reflected in degrees of capital intensity.A few CEE countries have not shifted in this two-dimensional space. Key words: EU, eastern enlargement, comparative advantage, factor intensity
  • Korhonen, Iikka; Randveer, Mare (2000)
    BOFIT Online 1/2000
    This paper assesses the impacts of Economic and Monetary Union and the euro on developments within the eight most advanced accession candidates in Central and Eastern Europe.The single currency completes the project for a single market in Europe, and overall, clear efficiency gains for participating countries are expected. This should spur foreign trade with e.g. the accession countries. Accession candidates may use a variety of foreign exchange rate regimes before they join the EU, but ultimately their economic policies become a matter of common interest.Pressure to peg to the euro obviously increases as membership approaches, but there is compelling evidence that countries should hold back on pegging to the euro until they have achieved sufficient convergence to attain credibility for a policy of fixed exchange rates. Keywords: Economic and Monetary Union, Central and Eastern Europe, exchange rate policy, integration
  • Korhonen, Iikka; Kuus, Toivo; Zirnask, Villu (2000)
    BOFIT Online 2000/5
    Securities markets are important for economic growth, providing a channel for savings flows from sectors of the economy with surpluses to sectors where the investment opportunities exceed current resources.This study describes the emergence and evolution of securities markets in three small transition economies: Estonia, Latvia, and Lithuania.While these markets are still in early stages of development, much of the requisite institutional and regulatory framework are already in place.The equity market has developed most rapidly in Estonia.In Latvia and Lithuania, the financing needs of the central government have prompted development of treasury-bill markets.Work on integrating the equity markets is underway, part of a general trend toward integration of the securities markets in the three Baltic states.
  • Fang, Yiwei; Hasan, Iftekhar; Marton, Katherin (2011)
    Bank of Finland Research Discussion Papers 5/2011
    Published in Economics of Transition, Volume 19, Issue 3, July 2011: 495-520
    This study examines the cost and profit efficiency of banking sectors in six transition countries of South-Eastern Europe over the period 1998 2008. Using the stochastic frontier approach, our analysis reveals that the average cost efficiency of SEE banks is 68.59% and the average profit efficiency is 53.87%. The second-stage regressions on the determinants of bank efficiency further show that foreign banks are associated with higher profit efficiency but moderately lower cost efficiency. Government banks are associated with lower profit efficiency. The efficiency gap between foreign banks, domestic private banks and government banks, however, has narrowed over time. We also find that the degree of individual banks competitiveness has a positive association with both cost and profit efficiency. Finally, institutional development, proxied by progress in banking reforms, privatization and corporate governance restructuring, also has a positive impact on bank efficiency.
  • Niinimäki, Juha-Pekka (2002)
    BOFIT Discussion Papers 2/2002
    Published in Journal of Institutional and Theoretical Economics, vol 159 no 3 (2003), pp. 511-522 as "Maturity transformation without maturity mismatch and bank panics"
    This paper discusses recent bank runs in seven transition economies (Russia, Bulgaria, Estonia, Hungary, Latvia, Lithuania and Romania), comparing them against the older US experience and theoretical research.Bank runs seem to usually be information based.For example, improvements in bank transparency such as new accounting rules can reveal a bank s insolvency and trigger a run. However, bank runs, as seen a few years ago in East Asia, Bulgaria and Russia, may also be accompanied by runs on national currencies. We include a bank run model that shows a bank may issue liquid demand deposits and avoid runs without deposit insurance as long as it also issues less liquid time deposits.Self-fulfilling runs are prevented through elimination of the maturity mismatch.The well-known Diamond & Dybvig (1983) model is modified to account for depositors risk af-finities, whereby high-risk depositors hold their savings as demand deposits and low-risk depositors prefer time deposits.These deposit choices transfer liquidity optimally from low-risk to high-risk depositors who value liquidity.By exploiting these choices, a bank can improve its intertemporal risk-sharing by issuing deposits of varying degrees of liquid-ity. This maturity transformation does not necessarily raise the economy s total liquidity. Key words: transition economies, bank panics, bank regulation, financial crises
  • Gächter, Simon; Riedl, Alesandra; Ritzberger-Grünwald, Doris (2013)
    BOFIT Discussion Papers 3/2013
    We analyze business cycle convergence in the EU by focusing on the decoupling vs. convergence hypothesis for central, eastern and south eastern Europe (CESEE). In a nutshell, we find that business cycles in CESEE have decoupled considerably from the euro area (EA) during the financial crisis in terms of both cyclical dispersion (i.e. the deviation of output gaps) and cyclical correlation. The results are mainly driven by smaller countries, which can be explained by the fact that small economies seem to have larger cyclical swings as they are more dependent on external demand, which causes a decoupling in terms of higher output gap deviations from the EA cycle in times of economic crises. At the same time, this does not necessarily affect business cycle synchronization as measured by cyclical correlations, where the strength of the linear relationship of two cycles is measured. However, despite the recent declines in the co-movement, we generally observe high correlation levels of CESEE countries with the EA after their EU accession in 2004. Finally, we find a significant decoupling of trend growth rates between EA and CESEE until the onset of the financial crises. Since the beginning of the crisis, trend growth rates have declined both in CESEE and the EA with the trend growth differential decreasing significantly from about three to below two percentage points in 2011. JEL classification: E32, E52, F15, F33, F44; Keywords: Business cycles, EMU, CESEE, optimum currency areas
  • Fung, K.C.; Korhonen, Iikka; Li, Ke; Ng, Francis (2008)
    BOFIT Discussion Papers 9/2008
    Published in Journal of Economic Integration, September 2009, v. 24, iss. 3, pp. 476–504
    China has emerged as one of the world's leading recipients of foreign direct investment (FDI). Meanwhile, the successful transition experience of many Central and Eastern Euro-pean countries (CEECs) also enables them to attract an increasing share of global foreign investment, particularly from the European Union (EU). What is the relationship between inward FDI of China and the CEECs? We conceptualize the relationship according to three alternative paradigms: 1) China and the CEECs each exist in its own regional pro-duction network, with no linkage between FDI flows into China and into CEECs; 2) China and the CEECs together comprise a global production network, so that FDI into China is positively related to FDI into CEECs; and 3) FDI into China is a substitute for FDI into the CEECs, so that the correlation between them is negative. In this paper, we employ pan-el data to study this issue in detail. Specifically, we compare empirical estimates for 15 CEECs over the 15-year period 1990-2004 using four different econometric approaches: FGLS with Random effects, FGLS with fixed effects, EC2SLS and GMM. The result supports the conclusion that China's inward FDI does not crowd out CEECs' inward FDI. In fact, it shows that in some circumstances FDI flows in these two regions are moderately complementary. In addition, our analysis confirms the importance for FDI flows of recipient-country characteristics such as market size, degree of trade liberalization and labor quality, as well as a healthy global capital market. JEL classification numbers: F20, F21, F43 Keywords: Foreign Direct Investment (FDI), Regional Networks, Global Supply Chain, China's FDI, Central and Eastern European Countries' FDI
  • Jokipii, Terhi; Lucey, Brian (2006)
    Bank of Finland Research Discussion Papers 15/2006
    Published in Economic Systems, 31,1, 2007: 71-96
    Making use of ten years of daily data, this paper examines whether banking sector co-movements between the three largest Central and Eastern European Countries (CEECs) can be attributed to contagion or to interdependence. Our tests based on simple unadjusted correlation analysis uncover evidence of contagion between all pairs of countries. Adjusting for market volatility during turmoil, however, produces different results. We then find contagion from the Czech Republic to Hungary during this time, but all other cross-market co-movements are rather attributable rather to strong cross-market linkages. In addition, we construct a set of dummy variables to try to capture the impact of macroeconomic news on these markets. Controlling for own-country fundamentals, we discover that the correlations diminish between the Czech Republic and Poland, but that coefficients for all pairs remain substantial and significant. Finally, we address the problem of simultaneous equations, omitted variables and heteroskedasticity, and adjust our data accordingly. We confirm our previous findings. Our tests provide evidence in favour of parameter instability, again signifying the existence of contagion arising from problems in the Czech Republic affecting Hungary during much of 1996.
  • Sarajevs, Vadims (2001)
    BOFIT Discussion Papers 13/2001
    This is an empirical study of the real income convergence among the fifteen European Union members and the eleven transition economies of Central and Eastern Europe.Debates and research on EU enlargement tends to concentrate on normative issues, so empirical studies constitute a small share of published work on the subject. This empirical investigation relies on available data on transition, and employs several econometric techniques including graphic analysis, classical cross-section regression and dynamic panel data estimations.Most estimation methods find positive convergence, but estimated rates of convergence vary considerably.
  • Égert, Balázs; Halpern, László (2005)
    BOFIT Discussion Papers 4/2005
    Published in Journal of Banking & Finance 30 (2006), pp. 1359-1374
    This paper analyses the ever-growing literature on equilibrium exchange rates in the new EU member states of Central and Eastern Europe in a quantitative manner using meta-regression analysis.The results indicate that the real misalignments reported in the literature are systematically influenced, inter alia, by the underlying theoretical concepts (Balassa-Samuelson effect, Behavioural Equilibrium Exchange Rate, Fundamental Equilibrium Exchange Rate) and by the econometric estimation methods.The important implication of these findings is that a systematic analysis is needed in terms of both alternative economic and econometric specifications to assess equilibrium exchange rates. JEL: C15, E31, F31, O11, P17. Keywords: equilibrium exchange rate, Balassa-Samuelson effect, meta-analysis
  • Égert, Balázs; Lommatzsch, Kirsten (2004)
    BOFIT Discussion Papers 9/2004
    This paper sets out to estimate equilibrium real exchange rates for the Czech Republic, Hungary, Po-land, Slovakia and Slovenia.A theoretical model is developed that provides an explanation for the ap-preciation of the real exchange rate based on tradable prices in the acceding countries.Our model can be considered as a competing but also completing framework to the traditional Balassa-Samuelson model.With this as a background, alternative cointegration methods are applied to time series (Engle-Granger, DOLS, ARDL and Johansen) and to three small-size panels (pooled and fixed effect OLS, DOLS, PMGE and MGE), which leaves us with around 5,000 estimated regressions.This enables us to examine the uncertainty surrounding estimates of equilibrium real exchange rates and the size of the underlying real misalignments. Keywords: Real exchange rate, equilibrium exchange rate, tradable prices, transition, cointegration JEL: F31
  • Evstigneev, Vladimir (1998)
    The paper presents a hierarchy of the rational investor's counterfactual portfolios that consist of treasury bills of the three largest CIS countries - Russia, Ukraine, and Kazakhstan, in case some degree of at least negative integration is achieved there.The author performs an adjustment of the measure of relative attractiveness of various counterfactual two-country and three-country portfolios for the estimated opening-up shock (that consists in a dramatic re-allocation of funds, given the optimal portfolio composition).It has been found out that there is only one counterfactual optimal portfolio that is realistically feasible.This would comprise the government-issued papers from all the three countries considered and would imply the international rational investor's following a mildly risk-averse investment strategy.Importantly, an overhaul of exchange-rate and monetary policy is unnecessary, which fact augments the incentives for the countries involved, even despite their political resentment. In the Annex, the author undertakes an attempt to demonstrate that the recent collapse of the Russian treasury bills market can be explained in terms of the derivatives market analysis. Keywords: optimal investment portfolio; financial integration; economy in transition; government bonds market; derivative instruments; Russian treasury bills
  • (2000)
    Euroopan keskuspankki. Kuukausikatsaus Helmikuu
  • (2002)
    Euroopan keskuspankki. Kuukausikatsaus 7 ; Heinäkuu
    Euroopan unionin (EU) laajentuminen on ensimmäisen hakijamaajoukon osalta viimeisessä vaiheessa.Neuvottelujen odotetaan päättyvän tämän vuoden loppuun mennessä.Nykyisten suunnitelmien mukaan nämä maat voivat liittyä Euroopan unioniin liittymissopimusten ratifioinnin jälkeen vuonna 2004.EU:hun liittyessään nämä maat liittyvät myös talous- ja rahaliittoon euroalueen ulkopuolisina maina, ja niiden keskuspankit tulevat osaksi Euroopan keskuspankkijärjestelmää (EKPJ).Sen jälkeen kun nämä maat ovat saavuttaneet Maastrichtin sopimuksen kriteerien mukaisen kestävän lähentymisen, ne ottavat euron käyttöön ja niiden keskuspankit tulevat osaksi eurojärjestelmää. Eurojärjestelmä osallistuu EU:n laajentumisprosessiin omaan toimivaltaansa eli keskuspankkitoimintaan kuuluvilla aloilla. Osallistumismuotona on jatkuva vuoropuhelu, jota käydään sekä poliittisesta että teknisestä näkökulmasta.Vuoropuhelun tavoitteena on uusien keskuspankkien integroiminen EKPJ:hin ja myöhemmin eurojärjestelmään.Vuoropuheluun kuuluvia asioita ovat keskuspankkien kannalta tärkeät politiikan osaalueet, kuten makrotalouden kehitys, raha- ja valuuttapolitiikan strategiat, rahoitusmarkkinoiden rakenne ja keskuspankkien riippumattomuus. Lisäksi siihen kuuluu tekninen yhteistyö hakijamaiden keskuspankkien kanssa useilla aloilla, kuten maksujärjestelmät, oikeudelliset asiat ja tilastot. Tässä artikkelissa kuvataan eurojärjestelmän ja hakijamaiden keskuspankkien välisen vuoropuhelun rakennetta ja sisältöä. Artikkelista käy ilmi, että hakijamaat ovat edistyneet huomattavasti matkallaan kohti EU:n ja myöhemmin euroalueen jäsenyyttä.Artikkelissa esitetään myös joitakin jäljellä olevia poliittisia haasteita.
  • Mehrotra, Aaron; Slacik, Tomás (2009)
    BOFIT Discussion Papers 18/2009
    We evaluate the monetary determinants of inflation in the Czech Republic, Hungary, Poland and Slovakia by using the McCallum rule for money supply. The deviation of actual money growth from the rule is included in the estimation of Phillips curves for the four economies by Bayesian model averaging. We find that money provides information about price developments over a horizon of ten quarters ahead, albeit the estimates are in most cases rather imprecise. Moreover, the effect of excessive monetary growth on inflation is mixed: It is positive for Poland and Slovakia, but negative for the Czech Republic and Hungary. Nevertheless, these results suggest that money does provide information about future inflation and that a McCallum rule could potentially be used in the future as an additional indicator of the monetary policy stance once the precision of the estimation improves with more data available.
  • Järvinen, Marketta (2002)
    BOFIT Discussion Papers 4/2002
    This paper examines, in the context of future EMU membership of the Central and Eastern European countries (CEECs), the interaction between fiscal policy and the price level in different exchange rate regimes.The theoretical framework is based on the Fiscal Theory of the Price Level (FTPL).The results show that a credibly fixed exchange rate is inconsistent with fiscal irresponsibility, while adopting the common currency enables the conduct of irresponsible policies with the result that a rise in the level of debt by one member country raises the common price level of the whole union. Key words: exchange rate regimes, inflation, fiscal theory of the price level, transition economies
  • Égert, Balázs; Morales-Zumaquero, Amalia (2005)
    BOFIT Discussion Papers 8/2005
    This paper attempts to analyze the direct impact of exchange rate volatility on the export performance of ten Central and Eastern European transition economies as well as its indirect impact via changes in exchange rate regimes.Not only aggregate but also bilateral and sectoral export flows are studied.To this end, we first analyze shifts in exchange rate volatility linked to changes in the exchange rate regimes and second, use these changes to construct dummy variables we include in our export function.The results suggest that the size and the direction of the impact of forex volatility and of regime changes on exports vary considerably across sectors and countries and that they may be related to specific periods. JEL: F31 Keywords: exchange rate volatility, export, trade, transition, structural breaks
  • Funke, Michael; Ruhwedel, Ralf (2003)
    BOFIT Discussion Papers 8/2003
    Published in Economics of Transition vol 13, no 1 (2005), pp. 25-50
    Utilising panel data for 14 East European transition economies, we find support for the hypothesis that a greater degree of export variety relative to the U.S. helps to explain relative per capita GDP levels.The empirical work relies upon some direct measures of product variety calculated from 5-digit OECD trade data.Although the issue is far from settled, the emerging view is that the index of relative export variety across countries correlates significantly with relative per capita income levels. Keywords: Product Variety, Transition Economies, Eastern Europe, Economic Growth, Panel Data JEL classification: C33, F43, O31, O33, O52.