nep-tra New Economics Papers
on Transition Economics
Issue of 2006‒12‒01
thirteen papers chosen by
Tono Sanchez
Universitat de Valencia

  1. Reform Redux: Measurement, Determinants and Reversals By Nauro F. Campos; Roman Horváth
  2. Evaluating China’s integration in world trade with a gravity model based benchmark By Matthieu Bussière; Bernd Schnatz
  3. Chinese Trade Expansion and Development and Growth in Today's World By Henry Wan Jr.
  4. Hot Money Inflows in China : How the People's Bank of China Took up the Challenge By Vincent Bouvatier
  5. Credibility of Exchange Rate Policies in Selected EU New Members: Evidence from High Frequency Data By Jarko Fidrmuc; Roman Horváth
  6. Bridging the Technology-Gap in Economic Transition, the J-curve of Growth and Unemployment By Pascal Hetze
  7. Modelling Central Bank Intervention Activity under Inflation Targeting By Horvath, Roman
  8. Judging the Sustainability of Czech Public Finances By Jan Zápal
  9. The determinants of corporate debt maturity structure: evidence from Czech firms By Pavel Körner
  10. The Quantitative and Qualitative Analysis of the Budget Cost of the Czech Supporting and Guarantee Agricultural and Forestry Fund By Karel Janda
  11. A pilot study on the Vietnamese labour market and its social and economic context By Blien, Uwe; Phan, thi Hong Van
  12. Where is the Cuban economy heading ? By Rémy Herrera
  13. Development under Regulation : The Way of the Ukrainian Insurance Market By Oleg Badunenko; Bogdana Grechanyuk; Oleksandr Talavera

  1. By: Nauro F. Campos (Brunel University); Roman Horváth (Czech National Bank, Prague, Czech Republic; Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: We construct objective measures of privatization, internal and external liberalization reform efforts, across countries over time, and investigate their determinants, reversals and macroeconomic impacts. We find that GDP growth determines external liberalization and privatization, concentration of political power drives internal liberalization, and democracy underpins all three. We find that FDI inflows reduce the probability of privatization reversals, labour strikes increase that of internal liberalization reversals, and terms of trade shocks increase that of external liberalization reversals. We replicate previous studies and find that the macroeconomic effects of reform (when measured objectively) tend to be larger and more precisely estimated.
    Keywords: reform; liberalization; privatization; political economy; transition
    JEL: E23 D72 H26 O17
    Date: 2006–04
  2. By: Matthieu Bussière (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany); Bernd Schnatz (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany)
    Abstract: The rapid transition of China from a closed agricultural society to an industrial powerhouse has been associated with a rapid increase in the share of China in world trade. As the world is taking the full measure of this phenomenon, tensions have been arising ranging from holding China partly responsible for global imbalances to complaints about the “excessive” competitiveness of Chinese products. Without a quantifiable benchmark, however, such claims are difficult to judge. This paper therefore provides an assessment of China’s “natural” place in the world economy based on a new set of trade integration indicators. These indicators are used as a benchmark in order to examine whether China’s share in international trade is consistent with fundamentals such as economic size, location and other relevant factors. They constitute a better measure of trade integration that incorporates many more factors than traditional openness ratios. Results show that the model tracks international trade well and confirm that China is already well integrated in world markets, particularly with North America, several Latin American and East Asian emerging markets and most euro area countries. JEL Classification: C23, F15, F14.
    Keywords: Gravity Model, Panel Data, Trade, China.
    Date: 2006–11
  3. By: Henry Wan Jr.
    Abstract: The current Chinese trade expansion brings benefit to many parties, both outside and inside the Chinese Mainland. It also poses huge challenges to others, in foreign countries, also in China. The event is important for its own sake, but also what it implies when rapid growth happens to countries large in population and size (including India, Russia, Brazil). It has to be understood in context. Conventional wisdom in economics and popular explanations cannot explain Chinese growth, let alone its implications. Only with suitable adaptations of what the economic discipline has to offer, can one assess the nature of what we observe and the policy measures needed for today. Like other episodes after Industrial Revolution, the late industrialization in China also relies on outside technology, often gained through trade and foreign investment. Because of the de-colonization after 1945, such growth can succeed even with scanty domestic resource. Like other East Asian economies, participation in cross border supply chains along its neighbors offers China an effective entrée. What makes China different from the other East Asian economies is size. The presence of a huge labor reserve keeps wage down, profit up, attracts foreign investment coming with technology, but may also lead to deteriorated terms of trade and income inequality at home, de-industrialization and the loss of development opportunities abroad, also resource shortage and environment damage, some of these are irreversible in nature. Over all, the development is the result of efficiency gain, which is basically desirable. It takes international cooperation to steer such development toward mutually beneficial paths. It is also desirable for China to accelerate job creation at home and avoid irreversible environment harm. These are well recognized by Chinese decision makers. More can be done.
    Date: 2005–06
  4. By: Vincent Bouvatier (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I])
    Abstract: This paper investigates hot money inflows in China. The financial liberalization comes into effect and the effectiveness of capital controls tends to diminish over time. As a result, China is fuelled by hot money inflows. The US interest rate cut since 2001 and expectations of exchange rate adjustments are the main factors explaining these capital inflows. This study use the Bernanke and Blinder (1988) model extended to an open economy to examine implications of hot money inflows for the Chinese economy. A Vector Error Correction Model (VECM) on monthly data from March 1995 to March 2005 is estimated to investigate the recent upsurge in foreign reserves and shows that the interaction between domestic credit and foreign reserves was stable and consistent with monetary stability. Granger causality tests are implemented to show how the People's Bank of China (PBC) achieved this result.
    Keywords: Hot money inflows, domestic credit, VECM, Granger causality.
    Date: 2006–11–03
  5. By: Jarko Fidrmuc (Department of Economics, University of Munich; CESifo; Faculty of Mathematics, Physics and Informatics, Comenius University Bratislava); Roman Horváth (Czech National Bank, Prague, Czech Republic; Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: We examine the daily exchange rate dynamics in selected EU new member states (Czech Republic, Poland, Romania, and Slovakia) using GARCH and TARCH models between 1999 and 2004. We show that these countries tried to reduce volatility of the spot exchange rate despite their official policy of free floating and inflation targeting. However, we find that the low credibility of exchange rate policy implied higher volatility of exchange rates when it substantially deviated from the implicit target rates for all countries. Finally, we find significant asymmetric effects of the volatility of exchange rates in all new member states.
    Keywords: Exchange rates; target zones; ERM II; inflation targeting; GARCH
    JEL: F31 C22 C23
    Date: 2006–10
  6. By: Pascal Hetze (University of Rostock and Max Planck Institute for Demographic Research)
    Abstract: The macroeconomic experience has been somewhat ambiguous during the historic experiment of economic transition in the former centrally-planed countries in Central and East Europe (CEE). The economic restructuring produced a notable catching-up in terms of productivity but also a J-curve shape of output growth accompanied by an increase in unemployment on a large scale. This paper models the transformation progress which leads to these contradictory outcomes. Before transition initiated catching-up, the economies suffered from two limits to growth: a gap of usable capital and a gap of technologies. Accordingly, a rapid technology transfer from the advanced Western economies led to a significant technological and structural change combined with high rates of labor reallocation. If we include frictions in the consequent matching between job seekers and jobs, the model reproduces the pattern of productivity, growth and unemployment that we find in the CEE countries.
    Keywords: catching-up, growth, unemployment, technological change, transition economies
    JEL: E24 O33 P20
    Date: 2006
  7. By: Horvath, Roman
    Abstract: Using daily data from the Czech Republic in 1/1/1998-31/12/2002, we find that foreign exchange intervention activity is determined by the degree of exchange rate misalignment and lagged intervention. Additionally, inflation targeting regime is a binding constraint of intervention activity.
    Keywords: Foreign exchange intervention; central bank; inflation targeting
    JEL: E58 E52 F31 F33
    Date: 2006–05–10
  8. By: Jan Zápal (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: The position of Czech public finances has been pronounced unsustainable by economists, while politicians claim more or less the opposite. Correct judgment is complicated by the purposeful use of arguments by the two groups in disagreement, by use of different methodology to collect the data and above all, by the fact that there is no precise benchmark for measuring the sustainability. My work attempts to surpass those complications. It attempts to shed more light on Czech public finances sustainability and to present further arguments, presenting Czech public finances in widest international context possible and using comparable, samemethodology based data, as well as different approaches and angles public sector can be looked upon. The analysis suggests that concerns of economists about the future development of Czech public finances are legitimate.
    Keywords: Public Finances; Sustainability index; Budget process; Fiscal illusion; Deficit bias; Factor analysis; Open-ended expenditures
    JEL: C10 D70 E62 H11 H61 H62
    Date: 2005
  9. By: Pavel Körner (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: This paper investigates the determinants of the corporate debt maturity structure of Czech firms. The theoretical section provides an overview of contemporary theories on corporate debt maturity structure. The regression section describes an econometric model showing that the long-term debt increases with Firm size, Leverage and Asset maturity. The impact of Growth options, Collateralizable assets, Firm tax rate, and Firm level volatility has been found out as statistically insignificant. The portfolio analyses section of this paper shows the bank-based system pattern of financing of Czech firms, increasing importance of intra-group financing and increasing presence of Maturity matching principle. Finally, the paper discusses the limitations of the results in the field of data, variables, and determinants.
    Keywords: corporate debt maturity structure; bank debt; bond debt; short-term debt; long-term debt; transition economy
    JEL: G31 G32
    Date: 2006–10
  10. By: Karel Janda (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic; University of Economics, Department of Banking and Insurance, Prague, Czech Republic)
    Abstract: The paper analyzes the government budget cost of credit guarantees and subsidies. The analysis is done both in a general qualitative manner and quantitatively for the case of Czech Supporting and Guarantee Agricultural and Forestry Fund (SGAFF). In the quantitative part of the paper we show that the portfolio of the SGAFF has a sufficient value to cover expected costs of credit guarantees and subsidies provided by the SGAFF. The qualitative theoretical model is dealing with government interventions designed to decrease the credit rationing of good farmers. The theoretical model shows that with uniform non-targeted supports the budget cost minimizing government unambiguously prefers lump-sum guarantees to interest rate subsidies. With supports targeted fully to disadvantaged farmers the government is indifferent between lump-sum guarantees, proportional guarantees and interest rates subsidies as far as the government budget costs are concerned.
    Keywords: Transition; Credit; Subsidies; Guarantees
    JEL: D82 G28 P31
    Date: 2005
  11. By: Blien, Uwe (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Phan, thi Hong Van
    Abstract: "This paper presents a regional case study of the labour market and its surrounding of Vinh City in central Vietnam, based on surveys conducted in 1999 and 2005. By including the time dimension and surveying samples with over 6000 individuals respectively it is possible to identify precisely the changes that have taken place within six years. The results reflect an enormous development process. Incomes increased fast and many structural parameters of the economy adapted to the new institutional setting of a market economy. The absolute level of income and of the standard of living is still low, however. A key finding of the analyses is that vocational training is meeting with large demand in private enterprises and is therefore of considerable importance for Vietnam's development process. Another important finding is that educational investments pay more in private enterprises." (author's abstract, IAB-Doku) ((en))
    JEL: J31 J42 J65
    Date: 2006–11–27
  12. By: Rémy Herrera (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I])
    Abstract: This article is the introduction of an issue (to be published) of the U.S. review International Journal of Political Economy on the Cuban economy, and coordinated by Rémy Herrera. It deals with the progresses, but also with the deficiencies, of the Cuban revolution in the economic field, until the recent de-dollarization. It underlines its economic challenges at the beginning of the XXIst century, as well as its internal forces and its external opportunities facing these challenges.
    Keywords: Development, socialism, revolution, growth, de-dollarization, social expenditure.
    Date: 2006–11–13
  13. By: Oleg Badunenko; Bogdana Grechanyuk; Oleksandr Talavera
    Abstract: This study is intended to assess the introduction of increased capitalization requirements for Ukrainian insurance firms. To do so, we employ up-to-date frontier efficiency analysis. The analysis suggests that an increase in size occurs not only because of the regulator's requirements, but also because all scale inefficient firms have been persistently operating under increasing returns to scale. Additionally, we show that the Ukrainian insurance industry experiences significant increases in technical efficiency. Our analysis identifies winners and losers among small, medium and large companies. The findings are consistent with the hypothesis that regulation forces firms to concentrate on efficiency.
    Keywords: insurance industry, efficiency and productivity analysis, returns to scale, bootstrap, Ukraine
    JEL: G22 G28 C15
    Date: 2006

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