nep-tra New Economics Papers
on Transition Economics
Issue of 2007‒04‒28
eight papers chosen by
J. David Brown
Heriot-Watt University

  1. Determinants of growth in the central and eastern European EU member states - a production function approach. By Olga Arratibel; Frigyes Ferdinand Heinz; Reiner Martin; Marcin Przybyla; Lucasz Rawdanowicz; Roberta Serafini; Tina Zumer
  2. Does " good government " draw foreign capital ? Explaining China ' s exceptional foreign direct investment inflow By Yeung, Bernard; Lixin Colin Xu; Morck, Randall; Fan, Joseph P. H.
  3. Foreign Investment in Chinese Joint Stock Banks: 1996-2006 By Abotsi, Kodjo
  4. Nonmonetary Determinants of Inflation in Romania: A Decomposition By Felix Hammermann
  5. Diagnosing Dutch disease: Does Russia have the symptoms? By Oomes , Nienke; Kalcheva, Katerina
  6. Formal finance and trade credit during China ' s transition By Tian Zhu; Lixin Colin Xu; Cull, Robert
  7. Transition of nuptiality and fertility onset in the Czech Republic since the 1990s – the role of women’s education and its expansion By Kryštof Zeman
  8. Testing the Purchasing Power Parity: Evidence from the New EU Countries By Minoas Koukouritakis

  1. By: Olga Arratibel (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Frigyes Ferdinand Heinz (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Reiner Martin (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Marcin Przybyla (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Lucasz Rawdanowicz (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Roberta Serafini (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Tina Zumer (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: Overall, the prospects for a continued and reasonably fast real convergence process between the EU8 countries and the euro area are good. However, the continuation of the rapid progress made by many EU8 countries in the past cannot be taken for granted. In fact, in order to ensure that fast economic growth in the EU8 countries remains sustainable, it is crucial for these economies to take appropriate policy action. First it is important to recall that sound macroeconomic policies including credible monetary policy and appropriate fiscal policy are essential to ensure the appropriate framework conditions for further growth and convergence. Second, they need to address structural labour market problems, in particular by reducing regional and skill mismatches. Third, they must make further efforts to improve the business environment, in order to ensure that the capital accumulation process continues and R&D investments increase. Many of the above-mentioned facets of growth-enhancing policy will also help to ensure a continued inflow of foreign direct investment (FDI), which in turn is expected to help accelerate the convergence process.
    Date: 2007–04
  2. By: Yeung, Bernard; Lixin Colin Xu; Morck, Randall; Fan, Joseph P. H.
    Abstract: China is now the world ' s largest destination of foreign direct investment (FDI), despite assessments highlighting its institutional deficiencies. But this FDI inflow corresponds closely to predicted FDI flows into China from a model that predicts FDI inflow based on government quality indicators and controls and is estimated across a sample of other weak-institution countr ies. The only real discrepancy is that, if government quality is measured by constraints on executive power, China receives somewhat more FDI than the model predicts. This might reflect an underestimation of the strength of these constraints in China, a unique institutional setting for FDI operations, FDI based on expected future institutional improvements, or a unique Chinese model of development. The authors conclude that Ockham ' s razor disfavors the last. They also note that FDI may be elevated because Chinese institutions protect foreign firms better than domestic ones.
    Keywords: Foreign Direct Investment,Economic Theory & Research,Legal Products,Investment and Investment Climate,Parliamentary Government
    Date: 2007–04–01
  3. By: Abotsi, Kodjo
    Abstract: This article reviews the foreign investment in China joint stock banks and analyze the motivations behind these investments. We will start by reviewing the comparative advantage of local joint stock banks as foreign investment recipients, as compared to larger state-owned commercial banks or smaller cities banks; we will then study the effects on efficiency and overall performance of minority foreign investment in joint stock banks in China. Finally, we will try to identify the opportunities that will beneficiate joint stock banks in China after liberalization in 2007, and how foreign banks can make the most of it.
    Keywords: china banking; china finance; investment in china; foreign banks in china; joint stock banks in china
    JEL: G0 F3
    Date: 2007–03
  4. By: Felix Hammermann
    Abstract: Why is inflation, 15 years after transition started, still considerably higher in Romania than in the eight EU member states (EU-8) that joined in May 2004? Panel estimation based on ten central and eastern European countries allows us to decompose the inflation differential between Romania and the EU-8. The decomposition suggests that neither the revenue, nor the balance of payments, nor the financial stability motive are driving inflation; rather structural differences are at play. The employment motive, together with indicators reflecting the prolonged structural change, explain most of the inflation gap vis-à-vis the EU-8.
    Keywords: inflation, panel data, transition economics
    JEL: E58
    Date: 2007–03
  5. By: Oomes , Nienke (BOFIT); Kalcheva, Katerina (BOFIT)
    Abstract: In this paper, we assess whether recent economic developments in Russia are symptomatic of Dutch Disease. We first provide a brief review of the literature on Dutch Disease and the natural resource curse. We then discuss the symptoms of Dutch Disease, which include (1) real exchange rate appreciation; (2) slower manufacturing growth; (3) faster service sector growth; and (4) higher overall wages. We test these predictions for Russia while carefully controlling for other factors that could have led to similar symptoms. We con-clude that, while Russia has all of the symptoms, the diagnosis of Dutch Disease remains to be confirmed.
    Keywords: Dutch disease; real exchange rate; resource curse; Russia; oil; transition
    JEL: F30 P28 Q30
    Date: 2007–04–20
  6. By: Tian Zhu; Lixin Colin Xu; Cull, Robert
    Abstract: Using a large panel dataset of Chinese industrial firms, the authors examine the determinants of access to loans from formal financial intermediaries and extension of trade credit. Poorly performing state-owned enterprises were more likely to redistribute credit to firms with less privileged access to loans through trade credit, a pattern consistent with some of the extension of trade credit being involuntary. By contrast, profitable private domestic firms were more likely to extend trade credit than unprofitable ones. Trade credit likely provided a substitute for loans for these private firms ' customers that were shut out of formal credit markets. As biases in lending became less severe, the amount of trade credit extended by private firms declined.
    Keywords: Investment and Investment Climate,Economic Theory & Research,Banks & Banking Reform,Financial Crisis Management & Restructuring,Financial Intermediation
    Date: 2007–04–01
  7. By: Kryštof Zeman (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: In this article we argue that social and economic changes in the past fifteen years have influenced distinct socio-economic categories of women differently. We show that the transition of family formation behaviours was not uniform but rather dependent on the educational level of women. We found wide differences between educational categories in terms of the changes in level, timing and sequencing of first birth and first marriage, using the techniques of nuptiality and fertility life tables and the hazard modelling of first marriage and first conception. Two different types of “trendsetters” were identified in Czech society. The trendsetters of non-marital fertility are women with primary education, who tend to be lone mothers or to cohabit even after childbirth. The second group of trendsetters are more highly educated women, who postpone their fertility onset until their 30s, but who still place their first childbirth traditionally inside marriage. The number of possible reasons for the family formation transition is manifold, ranging from the changing economic roles of women through actual setting of family policy to the post-modern value change, all further reinforced by educational expansion since the 1990s. There is no general explanation of the transitional behaviour, as women of different education levels are reacting differently to the social and economic changes.
    JEL: J1 Z0
    Date: 2007–04
  8. By: Minoas Koukouritakis (Department of Economics, University of Crete, Greece)
    Abstract: This paper examines the validity of the purchasing power parity between each of the twelve new EU countries vis-à-vis the Eurozone. Using the Johansen cointegration methodology for a period that begins from the mid-1990s and allowing for a structural break for the countries that joined the EU on May 2004, it is found that there is a long-run equilibrium relationship among the nominal exchange rate, the domestic prices and the foreign prices, for all the new EU countries. The evidence also suggests that the PPP vector enters the cointegration space for Bulgaria, Cyprus, Romania and Slovenia, which means that only for these countries the long-run PPP vis-à-vis the Eurozone is verified. For the rest of the new EU countries the long-run PPP is violated, may due to the fact that the currencies of these countries have been pegged to the euro and cannot reflect the inflation differences vis-à-vis the Eurozone.
    Keywords: Purchasing Power Parity, EU Enlargement, Cointegration, Structural Break, Symmetry and Proportionality.
    JEL: F15 F42
    Date: 2007–04–17

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