nep-tra New Economics Papers
on Transition Economics
Issue of 2007‒06‒23
ten papers chosen by
J. David Brown
Heriot-Watt University

  1. Organized Business, Political Regimes and Property Rights across the Russian Federation By William Pyle
  2. Ownership, Performance and Executive Turnover By Chi, Wei; Wang, Yijiang
  3. How transition led to internationalization? By Cédric Durand
  4. An "Almost-Too-Late" Warning Mechanism For Currency Crises By Jesus Crespo Cuaresma; Tomas Slacik
  5. Bank Efficiency and Market Structure: What Determines Banking Spreads in Armenia? By Holger Floerkemeier; Era Dabla-Norris
  6. The Convergence Dynamics of a Transition Economy: The Case of the Czech Republic By Jan Bruha; Jiri Podpiera; Stanislav Polak
  7. Pension Reform in China: The Need for a New Approach By Vivek B. Arora; Steven Vincent Dunaway
  8. Modalities of Moving to Inflation Targeting in Armenia and Georgia By Andreas Billmeier; Daehaeng Kim; Era Dabla-Norris; V. Kramarenko; Mayra Rebecca Zermeno Livas
  9. Analysis of Place and Role of SME’s in the new Member States of the European Union By Anghel, Laurentiu-Dan; Filip, Alina
  10. Budget Rigidity and Expenditure Efficiency in Slovenia By Todd D. Mattina; Victoria Gunnarsson

  1. By: William Pyle
    Abstract: This article explores the inter-relationship of collective action within the business community, the nature of the political regime and the security of firms’ property rights. Drawing on a pair of surveys recently administered in Russia, we present evidence that post-communist business associations have begun to coordinate business influence over state actors in a manner that is sensitive to regional politics. A firm’s ability to defend itself from government predation and to shape its institutional environment as well as its propensity to invest in physical capital are strongly related to both its membership in a business association and the level of democratization in its region. Of particular note, the positive effect of association membership on securing property rights increases in less democratic regions. The evidence, that is, suggests that collective action in the business community substitutes for democratic pressure in constraining public officials.
    Date: 2007–03
  2. By: Chi, Wei; Wang, Yijiang
    Abstract: To more thoroughly study the effect of ownership on management turnover, firms are classified by ownership simultaneously along two dimensions: types of owners and concentration of ownership. Under this new framework, a unique data set is used to study the sensitivity of management turnover to a company’s performance. The study confirms some of the results from previous studies. It also obtained interesting and important new results. It finds evidence that the sensitivity of management turnover to performance is curvilinear in ownership concentration, but in opposite directions under state and private ownership. It also provides evidence allowing us to rank firms in different categories of ownership by their sensitivity of management turnover to performance: Concentrated private ownership has the highest sensitivity, concentrated state ownership the lowest, and the two categories of dispersed ownership, one with a private investor and the other with the state as the largest shareholder, in between. Important policy implications of these findings are discussed.
    Keywords: state ownership; ownership concentration; performance; executive turnover;
    JEL: M51
    Date: 2007–05
  3. By: Cédric Durand (CEPN - Centre d'économie de l'Université de Paris Nord - [CNRS : UMR7115] - [Université Paris-Nord - Paris XIII], CEMI - Centre d'étude des modes d'industrialisation - [Ecole des Hautes Etudes en Sciences Sociales])
    Abstract: Since 2002 Russian metallurgical firms have been investing abroad. Taking advantage of the very positive economic climate in the sector, they settle in peripheral as well as in core countries of the world economy. Russia has upgraded from the 50th to the 24th rank between 1995 and 2004 as far as FDI outward flow is concerned [CNUCED, 2005]. Although the Russian FDI stock is still quite limited if compared to other countries, it is five times greater in 2004 than it was in 2000 [BCR, 2005]. The emergence of Russian transnational corporations is a new step in the post-soviet transformation: after the break-up of the old system and a chaotic moment of reorganization, some firms are now building global strategies of growth. This paper addresses this unexpected outcome of the transition process while giving evidence of the trajectory of the metallurgical branch. However, it also focuses on another point. Why do firms internationalize? The scope of the Russian metallurgical shift, its simultaneity and its quickness represent a great opportunity to discuss different hypotheses suggested by the literature and to try to learn from the transition process on that point. This article puts forward an institutional and systemic perspective on multinational corporations. We focus on three kinds of determinants of the internationalization: dynamics of growth based on the resources of the firm, an advantage seeking behavior in order to improve the firm's position in front of its international competitors and a complex interaction vis-a-vis the Russian political power.
    Keywords: transnational corporations ; Foreign direct investment ; Metallurgy ; Russia
    Date: 2007–06–13
  4. By: Jesus Crespo Cuaresma; Tomas Slacik
    Abstract: We propose exploiting the term structure of relative interest rates to obtain estimates of changes in the timing of a currency crisis as perceived by market participants. Our indicator can be used to evaluate the relative probability of a crisis occurring in one week as compared to a crisis happening after one week but in less than a month. We give empirical evidence that the indicator performs well for two important currency crises in Eastern Europe: the crisis in the Czech Republic in 1997 and the Russian crisis in 1998.
    Keywords: Currency crisis, term structure of interest rates, transition economies.
    JEL: F31 F34 E43
    Date: 2007–06
  5. By: Holger Floerkemeier; Era Dabla-Norris
    Abstract: Despite far-reaching banking sector reforms and a prolonged period of macroeconomic stability and strong economic growth, financial intermediation in Armenia has lagged behind other transition countries, and interest rate spreads have remained higher than in most Central and Eastern European transition countries. This paper examines the determinants of interest rate spreads and margins in Armenia using a bank-level panel dataset for the period 2002 to 2006. We find that bank-specific factors, such as bank size, liquidity, and market power, as well as the market structure within which banks operate, explain a large proportion of crossbank, cross-time variation in spreads and margins. The results suggest that there is a large potential to increase cost efficiency and competition in the banking system.
    Keywords: Working Paper , Banking systems , Armenia , Interest rates ,
    Date: 2007–06–12
  6. By: Jan Bruha; Jiri Podpiera; Stanislav Polak
    Abstract: In this paper we develop a two-country dynamic general equilibrium model by means of which we seek to explain the long-run paths of a converging emerging market economy. We borrow a paradigm from the New Open Economy Macroeconomics literature and amend it to address specific features such as initial asymmetry in development and size of economies as well as different speed of capital accumulation. Using a calibration of productivity and deep parameters for the Czech economy we demonstrate the ability of the model to consistently replicate dynamics in key macroeconomic variables that are essential inputs for commonly used "gap models" in monetary policy routine. Based on the calibration we draw implications for future convergence of the Czech economy.
    Date: 2007–05–15
  7. By: Vivek B. Arora; Steven Vincent Dunaway
    Abstract: The rapid aging of China's population over the next few decades makes it important for a new pension system with broad and adequate coverage to be put in place quickly. Pension reforms, first initiated in 1997, have become bogged down in difficulties over dealing with the "legacy costs" associated with the relatively more generous benefits provided under the old system. This paper argues that a way forward is to separate the legacy problem from the problem of setting up a new pension system, and it suggests concrete proposals for setting up such a new system which would cover both urban and rural workers.
    Date: 2007–05–07
  8. By: Andreas Billmeier; Daehaeng Kim; Era Dabla-Norris; V. Kramarenko; Mayra Rebecca Zermeno Livas
    Abstract: This paper reviews the current monetary and exchange rate policy frameworks in Armenia and Georgia, and the challenges associated with the choice of a credible nominal anchor in the context of large nominal and real shocks. The paper makes a case for a gradual transition to full-fledged inflation targeting (FFIT) in both countries in the medium term. The implications of this option are examined from various angles. In particular, the monetary transmission mechanisms and compliance with major institutional prerequisites for successful FFIT adoption are analyzed. Based on this analysis, the paper identifies a series of short- and medium-term recommendations, drawing on the experience of emerging market countries that successfully moved to FFIT.
    Date: 2007–06–12
  9. By: Anghel, Laurentiu-Dan; Filip, Alina
    Abstract: Günter Verheugen said: “Europe is good for SME’s and SME’s are good for Europe” and this is the main reason for writing this paper. Small and medium enterprises are the backbone of the European economy, and the best potential source of jobs and growth. The paper presents how SME’s are defined in the EU and also a short comparison of their position in old and new member of the European Union.
    Keywords: Small and Medium Enterprises (SME’s); SME’s Definition; New Member States of the European Union.
    JEL: M21
    Date: 2007–04–20
  10. By: Todd D. Mattina; Victoria Gunnarsson
    Abstract: This paper assesses the relative efficiency and flexibility of public spending in Slovenia compared to the advanced and new EU member states. Spending on health care, education, and social protection is relatively high in Slovenia without achieving correspondingly better outcomes. Inefficiencies appear to stem from the financing mechanisms for social services, institutional arrangements, and the weak targeting of social benefits. In addition, the composition of spending appears to be strongly tilted towards nondiscretionary items that reduce the fiscal room for maneuver. Greater flexibility is needed to facilitate the reallocation of relatively inefficient expenditure into higher priorities. In this manner, medium-term expenditure rationalization can focus on reducing inefficient outlays rather than restraining traditionally flexible components of the budget, such as public investment.
    Date: 2007–06–08

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