nep-cwa New Economics Papers
on Central and Western Asia
Issue of 2015‒12‒08
two papers chosen by
Christian Zimmermann
Federal Reserve Bank of St. Louis

  1. Military Spending and economic growth in Greece and the Arms Race between Greece and Turkey By Dimitrios Paparas; Christian Richter
  2. Exchange Rate Bands of Inaction and Play-Hysteresis in Greek exports to the Euro Area, the US and Turkey – Sectoral Evidence By Ansgar Belke; Dominik Kronen

  1. By: Dimitrios Paparas (Land, Farm and Agribusiness Management Department, Harper Adams University); Christian Richter (Faculty of Management Technology, The German University in Cairo)
    Abstract: In this paper we empirically test the relationship between military spending and economic growth for Greece and Turkey during 1957-2013, and examine the validity of arms race hypothesis between the two countries.
    Keywords: National Government Expenditures, National Security and War, Arms race, Greece, Turkey, Economic Growth, ADF, VAR
    JEL: H5 H56 O40 E62
    Date: 2015–10
    URL: http://d.repec.org/n?u=RePEc:guc:wpaper:38&r=cwa
  2. By: Ansgar Belke; Dominik Kronen
    Abstract: In this paper a non-linear model is applied, where suddenly strong spurts of exports occur when changes of the exchange rate go beyond a zone of inaction, which we call “play” area – analogous to mechanical play. We implement an algorithm describing path-dependent play-hysteresis into a regression framework. The hysteretic impact of real exchange rates on Greek exports is estimated based on the period from 1995Q1 to 2014Q4. Looking at some of the main export partners of Greece, the euro area, Turkey and the US, and some of its most im-portant tradeable sectors we identify significant hysteretic effects for a part of the Greek ex-ports. We find that Greek export activity is characterized by “bands of inaction” with respect to changes in the real exchange rate and calculate the further real depreciation needed to trig-ger a spurt in Greek exports. To check for robustness we (a) estimate Greek export equations for a limited sample excluding the recent financial crisis, (b) use export weight instead of de-flated nominal exports as the dependent variable, (c) employ a political uncertainty variable as a determinant of the width of the area of weak reaction. Overall, we find that those specifica-tions which take uncertainty into account display the best goodness of fit. In other words: the option value of waiting dominates the real exchange rate effect on Greek exports.
    Keywords: real depreciation; Greece; play-hysteresis; modelling techniques; switching/spline regression; export demand
    JEL: F14 C51
    Date: 2015–09
    URL: http://d.repec.org/n?u=RePEc:rmn:wpaper:201505&r=cwa

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