nep-tra New Economics Papers
on Transition Economics
Issue of 2008‒02‒02
nine papers chosen by
J. David Brown
Heriot-Watt University

  1. Are Oligarchs Productive? Theory and Evidence By Gorodnichenko, Yuriy; Grygorenko, Yegor
  2. Volatility Regimes in Central and Eastern European Countries’ Exchange Rates By M. FRÖMMEL
  3. China's and India's roles in global trade and finance - twin titans for the new millennium? By Matthieu Bussière; Arnaud Mehl
  4. An application of MSIASM to Chinese exosomatic energy metabolism By Mario Giampietro; Kozo Mayumi; Jesús Ramos-Martín
  5. Tendencies in the Romania's Regional Economic Development during the Period 1991-2004 By Andrei, Tudorel; Iacob, Andreea Iluzia; Vlad, Liviu Bogdan
  6. Earnings Differences between Chinese and Indian Wage Earners, 1987–2004 By Bargain, Olivier; Bhaumik, Sumon; Chakrabarty, Manisha; Zhao, Zhong
  7. The Effect of Corporate Taxes on Investment and Entrepreneurship By Simeon Djankov; Tim Ganser; Caralee McLiesh; Rita Ramalho; Andrei Shleifer
  8. Interdependencies between Monetary policy and Foreign-Exchange Intervention under Inflation Targeting: The case of Brazil and the Czech Republic By Luiz de Mello; Diego Moccero; Jean-Yves Gnabo
  9. Price Discovery for Cross-Listed Securities from Emerging Eastern European Countries By Wölfle, Marco

  1. By: Gorodnichenko, Yuriy (University of California, Berkeley); Grygorenko, Yegor (affiliation not available)
    Abstract: This paper develops a partial equilibrium model to account for stylized facts about the behavior of oligarchs, politically and economically strong conglomerates in transition and developing countries. The model predicts that oligarchs are more likely than other owners to invest in productivity enhancing projects and to vertically integrate firms to capture the gains from possible synergies and, thus, oligarchs can be productive. Using a unique dataset comprising almost 2,000 Ukrainian open joint stock companies, the paper tests empirical implications of the model. In contrast to commonly held views, econometric results suggest that, after controlling for endogeneity of ownership, oligarchs can improve the performance of the firms they own relative to other firms.
    Keywords: treatment effect, oligarch, transition, firm performance, property rights
    JEL: C21 C25 D24 O17 P26 P31
    Date: 2008–01
  2. By: M. FRÖMMEL
    Abstract: The choice of an exchange rate arrangement affects exchange rate volatility: higher flexibility goes ahead with increasing volatility and vice versa (Flood and Rose 1995, 1999). We investigate five Central and Eastern European countries between 1994 and 2004. The analysis merges two approaches, the GARCH-model (Bollerslev 1986) and the Markov Switching- Model (Hamilton 1989). We discover switches between high and low volatility regimes consistent with policy settings for Hungary, Poland and, less pronounced, the Czech Republic, whereas Romania and Slovakia do not show a clear picture.
    Keywords: CEEC, exchange rate volatility, regime switching GARCH, Markov switching model, transition economies
    JEL: E42 F31 F36
    Date: 2007–10
  3. By: Matthieu Bussière (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Arnaud Mehl (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: This paper analyses the integration of China and India into the global economy. To this end, it presents estimates from a gravity model to gauge the overall degree of their trade intensity and the depth of their bilateral trade linkages, as well as selected measures of revealed comparative advantage and economic distance. The paper also reviews the key characteristics of the two countries’ domestic economies that are relevant to their global integration and analyses their financial linkages with the rest of the world. Four main fi ndings stand out. First, considering trade in goods, the overall degree of China’s trade intensity is higher than fundamentals would suggest, whereas the converse is true for India. Second, Chinese goods exports seem to compete increasingly with those of mature economies, while Indian exports remain more low-tech. Third, China’s exports of services tend to complement its exports of goods, while India’s exports are growing only in deregulated sectors, such as IT-related services. Last, China’s and India’s roles in the global financial system are still relatively limited and often complementary to their roles in global trade. JEL Classification: E44, F3, C5.
    Keywords: China, India, global trade, gravity models, competitiveness indicators, global finance.
    Date: 2008–01
  4. By: Mario Giampietro (ICREA Institut de Ciencia i Tecnologia Ambientals, Universitat Autonoma de Barcelona); Kozo Mayumi (University of Tokushima); Jesús Ramos-Martín (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)
    Abstract: The methodology of Multi-Scale Integrated Analysis of Societal Metabolism (MSIASM) is applied to analyze the Chinese economy. This paper presents four tasks: (i) identifying a set of benchmarks that makes it possible to compare various characteristics of the Chinese economy with those of other country groups and the world (level) average; (ii) explaining the differences over the selected set of benchmarks, by looking at the characteristics of the various sub-sectors of the Chinese economy; (iii) understanding existing trends and future feasible future development paths for China by studying the existence of reciprocal constraints between the whole economy and its sub-sectors; and
    Keywords: China, Energy, Multi-Scale Integrated Analysis, Societal Metabolism,
    JEL: O11 O13 O53 Q01 Q57 Q58
    Date: 2008–01
  5. By: Andrei, Tudorel; Iacob, Andreea Iluzia; Vlad, Liviu Bogdan
    Abstract: The objective of this paper represents the analysis of the way the Romania's economic integration in the EU will influence the regional specialization and industrial activities localization within NUTS (the eight regions of Romania) during the period 1991-2004, using absolute measures (Herfindahl index).
    Keywords: regional specialization; geographic concentration; panel data; fixed effect model; random effect model.
    JEL: C13 C51 C52 B23 C23 C33
    Date: 2007–06
  6. By: Bargain, Olivier (University College Dublin); Bhaumik, Sumon (Brunel University); Chakrabarty, Manisha (Indian Institute of Management); Zhao, Zhong (IZA)
    Abstract: This paper is one of the first comprehensive attempts to compare earnings in urban China and India over the recent period. While both economies have grown considerably, we illustrate significant cross-country differences in wage growth since the late 1980s. For this purpose, we make use of comparable datasets, estimate Mincer equations and perform Oaxaca-Blinder decompositions at the mean and quantile decompositions at different points of the wage distribution. The initial wage differential in favour of Indian workers, observed in the middle and upper part of the distribution, partly disappears over time. While the 1980s Indian premium is mainly due to higher returns to education and experience, a combination of price and endowment effects explains why Chinese wages have caught up, especially since the mid-1990s. The price effect is only partly explained by the observed convergence in returns to education; the endowment effect is driven by faster increase in education levels in China and significantly accentuates the reversal of the wage gap in favour of this country for the first half of the wage distribution.
    Keywords: returns to education, earnings, India, China, quantile regression, Oaxaca-Blinder decomposition
    JEL: O15 J24 O53 P52
    Date: 2008–01
  7. By: Simeon Djankov; Tim Ganser; Caralee McLiesh; Rita Ramalho; Andrei Shleifer
    Abstract: We present new data on effective corporate income tax rates in 85 countries in 2004. The data come from a survey, conducted jointly with PricewaterhouseCoopers, of all taxes imposed on "the same" standardized mid-size domestic firm. In a cross-section of countries, our estimates of the effective corporate tax rate have a large adverse impact on aggregate investment, FDI, and entrepreneurial activity. For example, a 10 percent increase in the effective corporate tax rate reduces aggregate investment to GDP ratio by 2 percentage points. Corporate tax rates are also negatively correlated with growth, and positively correlated with the size of the informal economy. The results are robust to the inclusion of controls for other tax rates, quality of tax administration, security of property rights, level of economic development, regulation, inflation, and openness to trade.
    JEL: G38 H25
    Date: 2008–01
  8. By: Luiz de Mello; Diego Moccero; Jean-Yves Gnabo
    Abstract: The bulk of recent literature on foreign-exchange interventions has overlooked the potential interdependencies that may exist between these operations and the conduct of monetary policy. This is the case even under inflation targeting and especially in emerging-market economies, because central banks often explicitly reserve the right to intervene to calm disorderly markets and to accumulate foreign reserves, and when the exchange rate is perceived as out of step with fundamentals. This paper uses a friction model to estimate intervention reaction functions and the associated marginal effects for Brazil and the Czech Republic since adoption of inflation targeting in these countries in 1999 and 1998, respectively. The main findings are that: i) in both countries interventions occur predominantly to reduce exchange-rate volatility, while in Brazil the central bank also reacts to exchange-rate deviations from medium-term trends; ii) there are strong, asymmetric threshold effects in the reaction functions, and interventions are more likely and of higher magnitudes when they are carried out to depreciate than to appreciate the domestic currency; and iii) interventions seem to take place independently of contemporaneous monetary policy in Brazil, but not in the Czech Republic, where both policies appear to be interrelated. <P>Interdépendance entre politique monétaire et interventions sur le marché du change dans des régimes de ciblage d’inflation : le cas du Brésil et de la République tchèque <BR>La littérature récente sur les interventions de banques centrales sur le marché des changes a négligé l’interdépendance potentielle qui peut exister entre ces opérations et la politique monétaire. Pourtant, la question de l’interdépendance se pose même lorsque les économies adoptent un ciblage inflation, en particulier pour les pays émergeants, car les banques centrales se réservent, en général, ouvertement le droit d’intervenir pour calmer les désordres de marché, accumuler des réserves, ou réajuster le niveau du taux de change lorsque celui-ci ne semble pas en phase avec les fondamentaux. Cet article utilise un modèle de friction afin d’estimer une fonction de réaction sur le marché du change et les effets marginaux qui y sont associés pour le Brésil et la République Tchèque, à partir du moment où ces deux pays ont adopté un ciblage d’inflation (i.e., respectivement 1999 et 1998). Les principaux résultats sont que : i) les interventions visent principalement à réduire la volatilité du taux de change dans les deux pays, toutefois, la Banque centrale brésilienne réagit également aux déviations du taux de change par rapport à la tendance de moyen terme ; ii) il y a une forte asymétrie dans le comportement des banques centrales : les interventions sont plus importantes et plus probables lorsque la banque centrale doit déprécier plutôt qu’apprécier sa monnaie ; enfin iii) la politique d’interventions semble être indépendante de la politique monétaire pour le Brésil, alors qu’elles sont liées dans le cas de la République tchèque.
    Keywords: intervention, intervention, monetary policy, politique monétaire, Brazil, Brésil, Czech Republic, République tchèque
    JEL: C24 E52 F31
    Date: 2008–01–21
  9. By: Wölfle, Marco
    Abstract: This study provides empirical evidence verifying the theory of price discovery for Eastern European enterprises based on their cross-listing on Western European exchanges. Despite the fact that the crosslisting behavior of companies has been analyzed very actively since the mid-70s, many competing hypotheses exist, and the debate is far from reaching an end. Cumulative average residuals (CARs) document increased information efficiency after the listing in Frankfurt or London. This result is supported by a stylized microstructure model. To be precise, competition for order flow alleviates informational frictions and reduces dealers’ market power. These properties, however, are unevenly distributed among the auction system Frankfurt and the market maker system London. GARCH volatility spillovers strongly support these results and quantify a dominant role for home markets in information discovery. Moreover, they provide information on the relative functions of Frankfurt and London.
    Keywords: Cross-Listing, Cumulative Average Residuals, Eastern Europe, Information Discovery, Time Series
    JEL: C32 D53 F36 G14 G15 G30
    Date: 2007

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