nep-tra New Economics Papers
on Transition Economics
Issue of 2008‒07‒20
nineteen papers chosen by
J. David Brown
Heriot-Watt University

  1. Are private banks more efficient than public banks? Evidence from Russia By A. KARAS; K. SCHOORS; L. WEILL
  2. Banking In China: Are New Tigers Supplanting the Mammoths? By Giovanni Ferri
  3. Current Account Deficits in European Emerging Markets By Robert Shelburne
  4. The Big Boom is Over, but Growth Remains Strong and Inflation Calms Down By Mario Holzner; Sebastian Leitner; Josef Pöschl; A. Mihailov; Waltraut Urban; Hermine Vidovic; Leon Podkaminer; Sándor Richter; Olga Pindyuk; Vladimir Gligorov; Gábor Hunya; Vasily Astrov; Peter Havlik; Zdenek Lukas
  5. Development of international investment position in the selected new European Union member countries By Mirdala, Rajmund
  6. The internationalization Strategies of French Companies in Romania By BRANCU, Laura; BIBU, Nicolae Aurelian
  7. Investors’ behaviour in the Chinese Stock Exchanges: Empirical Evidence in a Systemic Approach By Lucarelli, Caterina; Palomba, Giulio
  8. Competition Policy, Corporate Saving and China's Current Account Surplus By Rod Tyers
  9. Social Entrepreneurship in the Context of Romania’s European Integration By BIBU, Nicolae Aurelian; ORHEI, Loredana
  11. The External Wealth of China: An Investigation from the International Balance Sheet Perspective By Andrew Sheng; Allen Ng
  12. Managing Capital Flows: Experiences from Central and Eastern By von Hagen, Jurgen; Siedschlag, Iulia
  13. Considerations about the Influence Factors on the Competitiveness of SME’s from Western Region of Romania By BIBU, Nicolae Aurelian; SALA, Diana; PANTEA, Marius; BIZOI, Gabriel
  14. Liquidity matters: Evidence from the Russian interbank market By A. KARAS; K. SCHOORS; G. LANINE
  15. Testing for Energy Market Integration in China By Hengyun Ma; Les Oxley; John Gibson
  16. Energy services at local and national level in the transition period in Hungary By Pal Valentiny
  17. Measuring Material Deprivation in the Enlarged EU By Christopher T. Whelan; Brian Nolan; Bertrand Maitre
  18. Changes in return to higher education in Poland 1998-2005. By Strawinski, Pawel
  19. Convergences of the Romanian societal culture with European culture clusters in the process of European integration. The role of intercultural teams management in increasing European cohesion By BIBU, Nicolae Aurelian; BRANCU, Laura

    Abstract: We study whether bank efficiency is related to bank ownership in Russia. We find that foreign banks are more efficient than domestic private banks and – surprisingly – that domestic private banks are not more efficient than domestic public banks. These results are not driven by the choice of production process, the bank’s environment, management’s risk preferences, the bank’s activity mix or size, the econometric approach, or the introduction of deposit insurance. The policy conclusion is that the efficiency of the Russian banking system may benefit more from increased levels of competition and greater access of foreign banks than from bank privatization.
    Keywords: Bank Efficiency; State Ownership; Foreign ownership; Russia
    JEL: G21 P30 P34 P52
    Date: 2008–06
  2. By: Giovanni Ferri (University of Bari, Italy, Hong Kong Institute for Monetary Research)
    Abstract: "New Tigers" (including city commercial banks) outperform state-owned commercial banks burdened with non-performing loans from unprofitable state-owned enterprises. We study whether this is due solely to superior corporate governance (multiple shareholders versus total government ownership) or also to the favorable environment (the New Tigers target affluent China, while state-owned commercial banks operate nationwide). Using a field survey on 20 city commercial banks from three provinces at different levels of economic development, we find better performance at those in the East and worse performance at those controlled by state-owned enterprises. Geography and policy do matter, and reform of state-owned commercial banks is necessary to bring better banking to China.
    Keywords: China, State Ownership of Banks, Corporate Governance, Geography and Performance
    JEL: G21 G30 G38
    Date: 2008–05
  3. By: Robert Shelburne (United Nations Economic Commission for Europe)
    Abstract: Many of the emerging market economies in Europe are presently running current account deficits which are quite high relative to any global or historical standard and are fundamentally unsustainable. This includes the three poorer European Union (EU) members of the old Europe (Greece, Portugal, and Spain), many of the EU’s new member states (largely the former transition economies which have joined since 2004), most of those non-EU members in south-east Europe, and a number of the CIS economies in eastern Europe and the Caucasus. The unweighted average current account deficit for this group has more than doubled from under four percent of GDP in 2003 to well over eight percent in 2007. This trend is significantly different than what has evolved in many of the world’s other emerging markets; these other economies have generally been running current account surpluses. This paper documents this development, describes the underlying factors that have brought it about, assesses the underlying vulnerability that has been created, and discusses the implications of this development for other emerging markets and global financial stability more generally. In addition, how these risks have evolved since the appearance of the global credit crisis beginning in the summer of 2007 is examined.
    Keywords: Current Account, Energing Markets, Europe, financing, development, transition economies, vulnerability, capital inflows
    JEL: F32 F36 F21 O11 O16 O52
    Date: 2008–06
  4. By: Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Josef Pöschl (The Vienna Institute for International Economic Studies, wiiw); A. Mihailov; Waltraut Urban (The Vienna Institute for International Economic Studies, wiiw); Hermine Vidovic (The Vienna Institute for International Economic Studies, wiiw); Leon Podkaminer (The Vienna Institute for International Economic Studies, wiiw); Sándor Richter (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw); Vladimir Gligorov (The Vienna Institute for International Economic Studies, wiiw); Gábor Hunya (The Vienna Institute for International Economic Studies, wiiw); Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Peter Havlik (The Vienna Institute for International Economic Studies, wiiw); Zdenek Lukas (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: After a period of exceptionally high growth in the whole region of Central, East and Southeast Europe in the past two years, there has been some slowdown in GDP growth. Nevertheless growth remains largely robust. In particular the new member states of the EU (NMS) appear to be largely decoupled from negative global impacts, experiencing only a moderate slowdown in growth, except for the Baltics. The NMS feel, of course, the effects of external price or supply shocks. These effects should however be transient, provided there are no further price shocks in world markets. These are the main results of the medium-term forecast published by the Vienna Institute for International Economic Studies (wiiw). The resilience of the NMS derives from growing labour productivity partly offsetting the combined effects of appreciating currencies and rising wage costs. Therefore the slowdown is generally more moderate than commonly expected (with the exception of the Baltic countries, where more pronounce adjustments took place). The semi-sovereign monetary policies pursued in the major NMS bear many risks, yet on the whole they have proven effective in preventing the rise of both excessive credit booms and excessive real appreciation. The economies of the EU candidate and potential candidate countries in Southeast Europe continue to catch up vis-à-vis the EU. Southeast Europe (SEE-7: Albania, Bosnia and Herzegovina, Croatia, Macedonia, Montenegro, Serbia and Turkey) has turned into a high-growth region in recent years, but some deceleration of real GDP growth has become visible there too. The slowdown was most pronounced in Turkey after several years of very high growth. We reckon with an improving international business climate and expect the SEE-7 to return to higher growth by the year 2010. Inflation has calmed down, but it is still a matter of concern especially in Serbia and Turkey, the two countries where its dynamism was accompanied by currency depreciation against the euro. The countries are also faced with higher bills for imports of energy and food, so that the gap in the current account has widened. Unemployment is high, a fact that will not change substantially during the next few years. Inflation calms down: The whole region was hit by the external price shock that swiftly resulted in a rapid surge in domestic prices for food and energy. The report argues that the worldwide hike in energy and food prices in the period 2007-2008 is primarily a supply-side shock caused by production shortfalls that can be traced back to weather conditions or specific factors restricting production. Authorities in the countries of Central, East and Southeast Europe seem to be taking the current inflation acceleration in an unusually light manner. Some of the countries (those on a fixed exchange rate regime) lack the means to respond. Others respond weakly (if at all) because they expect a growth slowdown and harbour concerns over the continuing appreciation of local currencies. In the longer term, inflation and unit labour costs are shown to be moving mostly in tandem. Rising wages will not incur much of an inflationary risk as long as roughly matched by gains in labour productivity. As this holds true on the whole for the NMS, their longer-term inflation prospects are quite good. Price-wage spirals are not expected to spin out of control. In the absence of another round of world-market price shocks, inflation will subside fairly quickly. In the West Balkans, the inflationary spike will also be overcome relatively swiftly. Disinflation, however, will be slower in Kazakhstan, Russia, Turkey and Ukraine, given that it will be starting from much higher levels than elsewhere. The Russian economy has been booming in the past decade, largely owing to surging energy prices and export revenues. Apart from rising assertiveness, the shadow side of this boom has been widespread corruption and deteriorating external relations ' not only with the EU. The key challenges are ' apart from the fight against corruption and bureaucratic obstacles ' the diversification of the economy using Industrial Policy tools and government-sponsored investment programmes. The wiiw forecast for Russian GDP growth in the coming years reckons with ongoing reliance on the (modernized) energy sector, possibly with a few high-tech niches, and an average annual GDP growth of around 6% in 2010. The expected modest growth slowdown appears inevitable, at least until the end of the decade, before any (uncertain) modernization efforts start to bear fruit. Ukraine's economy keeps performing well, largely on account of the booming household consumption backed by expanding credit and generous social transfers. The dramatic surge in food prices has driven consumer inflation to above 30%; however, inflationary pressures should subside in the second half of 2008, not least thanks to the expected good grain harvest. The immediate growth prospects are good. The economic growth is home-driven, the widening external imbalances are covered by strong inflows of FDI, which are likely to pick up further following the country's recent WTO accession. Banking sector problems remain central to the economic development of Kazakhstan. On the positive side, the government has sufficient financial resources to withstand the crisis. Problems resulting from the banking crisis forced us to reduce our forecast for the GDP growth. But we have also revised our inflation forecast downwards primarily due to higher efficiency of government's policy which has included a broad spectrum of measures. Also in China the fast economic growth has moderately cooled down and the slowing down of the global economy will probably have a significant impact only in the months to come. Because of rapidly rising prices, China's policy makers will have to balance measures to fight inflation against the weakening economic outlook.
    Keywords: Central and East European new EU member states, Southeast Europe, Balkans, former Soviet Union, China, Turkey, economic forecasts, GDP growth, labour productivity, exchange rates, inflation, EU integration
    JEL: O52 O57 P24 P27 P33 P52
    Date: 2008–07
  5. By: Mirdala, Rajmund
    Abstract: In the following paper we examine the main aspects of international investment position development in the selected new European Union member countries since the year 1999, with an emphasis on their international financial assets and liabilities structure. We assess the extent of the Bulgaria’s and Romania’s international financial integration compared with the Czech republic and the Slovak republic ones. The aim is to examine the main implications of the different economic performances of the countries on the selected aspects of their international financial integration. We also observe the main trends in their external capital structure development in terms of the relative importance of foreign direct investments, portfolio equity and debt investments and external debt. Finally, we explore the implications of the accumulated stock of external capital for future trade and current account balances development.
    JEL: F15 F41 F36
    Date: 2008–05–09
  6. By: BRANCU, Laura; BIBU, Nicolae Aurelian
    Abstract: Central and Eastern European countries (CEECs) are currently attracting important flows of direct investments, after being closed to inflows of foreign capital before 1990. The governments of these countries have been multiplying measures and incentives for encouraging the presence of Multinational Companies (MNCs), during the past years. They are doing it because they consider this fact to represent an important growth vector. This current article will be focusing on Romanian situation. Statistical data indicate that Romania has attracted less foreign investments per inhabitant compared to the other countries in the region. Therefore, the article is aiming to analyze some of the strategies that are followed by companies intending to invest in foreign countries. We will analyze the strategic variables that have determined 62 French companies to invest and implant in Romania, based on the results of a specific survey we have conducted. The main conclusion is that the large majority of them were pursuing a “market seeking” strategy, and only a minority was pursuing a “search for resources” strategy.
    Keywords: entry strategy; multinational company; Central and Eastern European countries; Romania
    JEL: F23 M19 F21
    Date: 2008–05–22
  7. By: Lucarelli, Caterina; Palomba, Giulio
    Abstract: This paper investigates the Chinese mainland Stock Exchanges and their following interconnecting features: savers’ attitude towards stock investments, investors’ trading behaviour and stock returns explanations. We evaluate the effectiveness of the recent efforts made by the Chinese authorities to improve the level of legal protections for shareholders and the opening-up of the Chinese Stock Markets to foreign investors. The whole analysis is carried out through a system of simultaneous equations. The main results are that Chinese shareholders and stock markets are mostly driven by emotional behaviour. Stock market returns are barely influenced by the overall Chinese economic booming, but reveal the presence of speculative influences. Investors’ behaviour, as well as general trading activities, hardly seems to be affected by the legal framework introduced by the national Authorities.
    Keywords: Chinese Stock Exchanges; shareholders’ rights; corporate governance; investors’ behaviour; system of simultaneous equations.
    JEL: F30 G18 C30
    Date: 2007–11–01
  8. By: Rod Tyers
    Abstract: China’s industrial reforms have left many key industries dominated by single or small numbers of firms, most of which remain state owned. Until recently, these firms have not been required to pay dividends to the state and the recent surge in China’s growth has made them very profitable, with their economic profits adding 20% of GDP to corporate saving. This bolsters the overall saving-investment gap and hence China’s controversial current account surplus. In other countries, oligopolistic industries tend to be taxed more heavily and they are commonly subjected to price regulation. This study offers an economy-wide analysis of approaches to oligopoly rents in China. The results suggest that, while policy changes targeting national saving, including increased corporate taxation, expansionary fiscal policy and SOE privatisation all help to control the external imbalance, they tend also to turn demand inward, inducing higher oligopoly rents and slower growth. Competition policy, embodying both price cap regulation and free entry, proves more effective both in controlling the external imbalance and in fostering continued growth.
    JEL: D43 D58 F32 L13 L43 L51
    Date: 2008–07
  9. By: BIBU, Nicolae Aurelian; ORHEI, Loredana
    Abstract: The social sector or social economy is still at a developing stage and the concept of social entrepreneurship is just in the emergence phase in Romania. There is still a lot to do in this field, in order to create sustainability among the actors of the social economy or social sector. The paper will attempt to emphase the differences between entrepreneurship in NGO’s and social entrepreneurship and clarify the two terms in relationship with the Romanian social sector and what needs to be taken into consideration for the future development of this sector in Romania, in the context of EU membership.
    Keywords: social entrepreneurship; non-profit organization; social enterprise; sustainability
    JEL: M14 L30 L31 M13 L33
    Date: 2008–05–30
  10. By: Michael Geiger
    Abstract: China’s monetary policy applies to two sets of monetary policy instruments: (i) instruments of the Central Bank (CB), the People’s Bank of China (PBC); and (ii) non-Central Bank (NCB) policy instruments. Additionally, the PBC’s instruments include: (i) price-based indirect; and (ii) quantity-based direct instruments. The simultaneous usage of these instruments leads to various distortions that ultimately prevent the interest rate channel of monetary transmission from functioning. Moreover, the strong influence of quantity-based direct instruments and non-central bank policy instruments bring into question the approach of indirect monetary policy in general.
    Date: 2008
  11. By: Andrew Sheng (Tsinghua University); Allen Ng (Bank Negara Malaysia)
    Abstract: International financial integration has accelerated at an unprecedented pace in recent years. External holdings of financial assets and liabilities for both industrial and emerging countries have grown rapidly since the mid-1990s, many times exceeding their respective national income, and traditional surveillance methods using flow data are increasingly incapable of satisfactorily explaining the recent major global economic developments. Using Lane and Milesi-Ferretti's (2006) rich data-set of external positions for 145 countries from 1970 to 2004, this paper selects several issues to highlight the usefulness of balance sheet analysis as a tool for historical understanding and to examine how it can help in an analysis of possible future vulnerabilities. Starting from a global overview, the study looks at China from a comparative angle vis-¨¤-vis the world and the rest of Asia, and finally focuses on the evolution of the external position of China. Although the investigations are preliminary in nature, this paper demonstrates how China has emerged as an important net creditor in an increasingly integrated world and suggests that as China becomes more important globally as a net creditor, the balance sheet analysis of trends and a clearer focus on real total rates of return on external assets, and their risk management, have become increasingly more important over time. It is hoped that this paper will stimulate more academic and policy analysis in this growing area of policy importance.
    Date: 2008–01
  12. By: von Hagen, Jurgen; Siedschlag, Iulia (Economic and Social Research Institute (ESRI))
    Abstract: The countries of Central and Eastern Europe went from being largely closed to being largely open to international capital flows. This paper discusses their experience with capital account liberalization and coping with large capital inflows. We start with a discussion of basic economic characteristics and the real convergence achieved so far, and then discuss the pace and sequencing of capital account liberalization and the degree of international financial integration over the past decade. We then analyze trends and patterns of capital inflows in these countries in recent years. These stylized facts are useful for understanding the macroeconomic implications and policy challenges of coping with large capital inflows, which we discuss next. Finally we conclude with policy implications for emerging Asian economies.
    JEL: E44 F36 F41
    Date: 2008–04
  13. By: BIBU, Nicolae Aurelian; SALA, Diana; PANTEA, Marius; BIZOI, Gabriel
    Abstract: There are many ways in which the firm competitiveness can be understood in the related literature. The purpose of this research is to undertake a better understanding of expectations and concerns of small and medium sized enterprises from Romanian Western region, in term of competitiveness. This study presents preliminary results of a finished grant focused on SME’s competitiveness. There are some positive and negative factors in our research which are influencing firms’ competitiveness. This study has confirmed our hypothesis. The external environment influence on the competitiveness of SME’s is strong and contributes decisively to their performance.
    Keywords: SME’s; competitiveness; growth; external factors; Romania
    JEL: O18 L20 M13
    Date: 2008–05–30
    Abstract: We suggest a new transmission channel of contagion on the interbank market, namely the liquidity channel. We apply this idea to the Russian banking sector and .nd that the liquidity channel contributes signi.cantly to a better understanding and prediction of actual interbank market crises. Interbank market stability Granger causes the interbank market struc- ture, while the opposite causality is rejected. This emboldens the case for viewing the interbank market structure as endogenous. The results corroborate the thesis that prudential regulation at individual bank level is insu¢ cient to prevent systemic crises. We demonstrate that liquidity injections of a classical LOLR can e¤ectively mitigate coordination fail- ures on the interbank market not only in theory, but also in practice. In short: liquidity matters.
    Keywords: interbank market stability, contagion, liquidity channel, lender of last resort, Russia
    JEL: C8 G21
    Date: 2008–06
  15. By: Hengyun Ma; Les Oxley (University of Canterbury); John Gibson
    Abstract: The paper investigates energy market integration in China by employing univariate, and panel-based unit root tests and Granger causality tests applied to a new, energy price data set. We identify price series that converge either to absolute or relative price parity. In addition we estimate the rates (speed) at which relative prices converge to their long-run values, and the direction of causality. The results show that gasoline and diesel markets are very well integrated as a whole; that once some geographically isolated regions are excluded, we can regard the coal market as integrated; however, the electricity markets is not well integrated. The estimated intercept terms are all very small and close to zero, such that most of the relative price series can be regarded as convergent to absolute price parity. The convergence rates vary little and are relatively short when compared internationally. A rich set of causal relationships are established many showing bi-directional causality between regional centres.
    Keywords: China; Energy; Market integration; Price convergence; Time series tests
    JEL: D24 O33 Q41
    Date: 2008–06–20
  16. By: Pal Valentiny (Institute of Economics, Hugarian Academy of Sciences)
    Abstract: Energy industries are mainly organised at national level in Hungary, however local governments have their specific role in the system. Local governments have been major performers in the first period of the transition process: they were entitled to receive 25 per cent of the shares in electric utilities and 40 per cent of the shares in gas supply during the privatisation process. They did not build up long standing portfolios in these utilities. They became more important players at district heating, where they have a contradictory triple function - owner, regulator and provider of the local social safety net. Local governments are also in the forefront of the energy saving programmes.
    Keywords: energy industries, regulation, local governments
    JEL: L43 L51 L97 Q48
    Date: 2008–04
  17. By: Christopher T. Whelan (Economic and Social Research Institute (ESRI)); Brian Nolan (University College Dublin); Bertrand Maitre (Economic and Social Research Institute (ESRI))
    Abstract: This paper uses new data from EU-SILC for twenty-six European countries to examine the structure and distribution of material deprivation in the enlarged EU. We identify three distinct dimensions of material deprivation relating to consumption, household facilities and neighbourhood environment, and construct indices of these dimensions for each country and the EU as a whole. The extent of variation across countries and welfare regimes is shown to depend on the dimension on which one focuses, as does the strength of the association with household income and subjective economic stress. The index of consumption deprivation has by far the highest correlation with income, provides a highly reliable measure in itself, and allows segments of the population to be identified that are sharply differentiated in terms of their multi-dimensional deprivation profiles. On the basis of this evidence we make some suggestions as to the manner in which the measurement of material deprivation in the European Union should be developed through the proposed special module of deprivation which will form part of the 2009 wave of EU-SILC.
    Date: 2008–06
  18. By: Strawinski, Pawel
    Abstract: In the article private rate of return to higher education in the 1998-2005 period is considered. The model is based on a comparative advantage theory. Extended Mincerian wage equation is used to account for a non-random decision to undertake studies at university level. The estimate of private rate of return in Poland is roughly 9%, and it is among the highest in Europe. In addition, the unexpected rise in rate of return is observed. Moreover, positive relationship between graduation and the obtained wages was found. This change has been linked to labour market transformation and Skill Biased Technical Change. Also the influence of financing tertiary education is considered.
    Keywords: return to education, private returns, skill biased technical change, sample selection.
    JEL: I20
    Date: 2008–06–02
  19. By: BIBU, Nicolae Aurelian; BRANCU, Laura
    Abstract: This paper is discussing the issue of European cohesion based on a management approach. It describes the positioning of Romania on the European map of cultures, in order to identify the convergence and divergence of its societal culture with various European cultural clusters. The paper is arguing that: a) European organizations have a major role to play in the process of increasing cohesion within the European Union; b) Organizational Management and leadership are paramount to their success and to society welfare; c) Performant Intercultural Knowledge Management is needed for achieving the most out of European organizations; d) Intercultural teams are one of the most effective ways to reduce the current cohesion-less of EU at individual and organizational level.
    Keywords: GLOBE;Romania;European Union;cross-cultural team;cohesion
    JEL: M14 Z10 O19 M54
    Date: 2008–02–23

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