nep-tra New Economics Papers
on Transition Economics
Issue of 2009‒06‒17
ten papers chosen by
J. David Brown
Heriot-Watt University

  1. Inequality and Volatility Moderation in Russia: Evidence from Micro-Level Panel Data on Consumption and Income By Yuriy Gorodnichenko; Klara Sabirianova Peter; Dmitriy Stolyarov
  2. Competition Policy, Corporate Saving and China's Current Account Surplus By Rod Tyers; Feng Lu
  3. How big is the visible hand of the state in the Russian banking industry? By Glushkova, Ekaterina; Vernikov, Andrei
  4. An Overinvestment Cycle in Central and Eastern Europe? By Hoffmann, Andreas
  5. Combating China's Export Contraction: Fiscal Expansion or Accelerated Industrial Reform? By Rod Tyers; Ling Huang
  6. CREDIT RISK IN FINANCING SME IN ROMANIA By Vorniceanu, Marius; Covaci, Brindusa; Cocosatu, Cristinel Claudiu
  7. Poland''s Jobless Growth: A Temporary Cure? By Hilary Ingham; Mike Ingham
  8. Mechanisms and assembly of alternative financing by environmental protection in Romania By Piciu, Gabriela Cornelia
  9. The Romanian's loan agreement with IMF and EC By Mihai, Ilie
  10. China's Land Market Auctions: Evidence of Corruption By Hongbin Cai; J. Vernon Henderson; Qinghua Zhang

  1. By: Yuriy Gorodnichenko; Klara Sabirianova Peter; Dmitriy Stolyarov
    Abstract: We construct key household and individual economic variables using a panel micro data set from the Russia Longitudinal Monitoring Survey (RLMS) for 1994-2005. We analyze cross-sectional income and consumption inequality and find that inequality decreased during the 2000-2005 economic recovery. The decrease appears to be driven by falling volatility of transitory income shocks. The response of consumption to permanent and transitory income shocks becomes weaker later in the sample, consistent with greater self-insurance against permanent shocks and greater smoothing of transitory shocks. Comparisons of RLMS data with official macroeconomic statistics reveal that national accounts may underestimate the extent of unofficial economic activity, and that the official consumer price index may overstate inflation and be prone to quality bias.
    JEL: E20 I30 J30 O15 P20
    Date: 2009–06
  2. By: Rod Tyers; Feng Lu
    Abstract: China's industrial reforms have left many key industries dominated by few, often state owned, firms. Until recently, these firms were not required to pay dividends to the state and the post-2000 surge in growth made them very profitable, with their economic profits adding corporate saving amounting to a fifth of GDP. This bolstered China's overall saving-investment gap and hence its 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: 2009–03
  3. By: Glushkova, Ekaterina; Vernikov, Andrei
    Abstract: This paper tackles state participation in the Russian financial sector. We take the case of the banking industry to suggest criteria for a more accurate definition of public sector boundaries and an assessment of the actual scale of state presence in the national banking market. The approach for the assessment of the extent of state participation is based on the analysis of the peculiarity of the Russian banking industry due to the high extent and institutional specificity of government intervention in the financial system. The results presented in this paper provide evidence that the existing channels of state influence over banks are not limited to equity ownership with governance and other methods of control being employed as well and prove the hypothesis about the presence of downward bias in official estimates of the existing scale of state penetration.
    Keywords: public sector; banks; Russia; ownership; state control; state-owned companies
    JEL: P35 P31 G28 G21
    Date: 2009–06
  4. By: Hoffmann, Andreas
    Abstract: Prior to the Asian crisis, benign liquidity conditions contributed to credit expansion and overinvestment in the East Asian economies until they were hit by a deep recession (Saxena and Wong 2002). Similarly to the developments in the tiger economies in the nineties, the CEE economies grew rapidly from 2001 to 2007, due to foreign capital inflows. But the current global financial turmoil and economic downswing also pulled the CEE economies into the maelstrom of the crisis. With the Asian experience in mind, the aim of this paper is to analyze whether overinvestment due to benign liquidity conditions possibly emerged and contributed to the crisis in CEE.
    Keywords: Overinvestment; Central and Eastern Europe; Boom-and-bust cycles; Financial Crisis
    JEL: E32 F59 F41 B53
    Date: 2009–06–05
  5. By: Rod Tyers; Ling Huang
    Abstract: Initially, the global financial crisis caused a surge of financial inflows, raising Chinese investment but this abated in 2008, to be replaced by a slowdown in export demand. The government's key response has been to commit to an unprecedented fiscal expansion. Two oft-ignored consequences are, first that government spending is on non-traded goods and services and so enlarges the consequent real appreciation and, second, that a more inward-looking economy causes firms to face less elastic demand and hence to increase oligopoly rents, further enlarging the real appreciation. Both are important for China because of the contribution of its real-exchange-rate sensitive, low-margin labour-intensive export sector to total employment. An economy-wide analysis is offered, using a model that takes explicit account of oligopoly behaviour. The results suggest that a conventional fiscal expansion would further contract the Chinese economy and, moreover, that the structural changes required would be considerable and painful. On the other hand, accelerated industrial reform, emphasising the sectors that remain dominated by state-owned oligopoly firms, would reduce costs and foster further export led growth in both output and modern sector employment.
    JEL: D43 D58 F32 L13 L43 L51
    Date: 2009–05
  6. By: Vorniceanu, Marius (Universitatea Spiru Haret, Facultatea de Finante si Banci); Covaci, Brindusa (Universitatea Spiru Haret, Facultatea de Finante si Banci); Cocosatu, Cristinel Claudiu (Universitatea Spiru Haret, Facultatea de Finante si Banci)
    Abstract: Romania's integration in the European Union brought about some major changes in our banking system. One of the direct consequences is the fierce competition between banks for supremacy on the market. According to this, the Romanian banks saw in the SMEs sector a true potential for reaching their goal and they proceeded to conquer it by conceiving unique products, specially designed to reach the financial needs of this segment. Moreover, banks often come up with new attractive offers and cost reductions for the SMEs (Small and Medium Sized Enterprises) sector. In this context, some answers need to be done: the effective risk banks accept to take by providing the offers, specific risks in financing this sector, the problem of the balance between risk and profit return (or market share increase).
    Keywords: credit risk; risk management; financing SME; bank policies
    JEL: C61 G11
    Date: 2009–06–04
  7. By: Hilary Ingham; Mike Ingham
    Abstract: Poland’s post-communist economic performance has been generally good. However, for many years its growth was jobless, it exhibited very high unemployment rates and concomitantly made little progress in approaching the targets set for EU Member States under the Lisbon Strategy. Unexpectedly, in 2003 the country’s labour market began to exhibit a new dynamism, with employment growing strongly and unemployment tumbling. This apparent improvement coincided with a liberalisation of its Labour Code. Unfortunately, the measures introduced to increase flexibility are seemingly at variance with the EU’s Fixed-Term Work Directive and might need to be modified.
    Keywords: Poland, unemployment, temporary work contracts
    Date: 2009
  8. By: Piciu, Gabriela Cornelia (Centrul de Cercetari Financiare si Monetare Victor Slavescu)
    Abstract: Preventing of environmental damage, restoration and maintenance of quality parameters, improving the quality of the environment involves investment environment, labor consumption, materials and technologies, which requires financial support, financing of environmental investments which are concretize in financial flows, currency, the currency providers of any kind, for recipients, executives or end.
    Keywords: funding mechanisms; European funds; financing capacity
    JEL: Q29
    Date: 2009–06–01
  9. By: Mihai, Ilie (Universitatea Spiru Haret, Facultatea de Finante si Banci)
    Abstract: As it is very known, in the 2009 spring, Romania took the decision to take a loan, an important amount, from the international financial bodies, in order to support the currency and the local economy, overall. Further negotiations, which began unwieldy, rising controversies even between political parties which constitute the governance coalition (PDL and PSD), Romania is almost ready to sign the loan agreement, at the end of May current year, waiting that the first trenches to be available for being drawn.
    Keywords: loan agreement; IMF / International Monetary Fund; Romanian external debt; Exchange rate; Wages; Loans in foreign currency.
    JEL: E52 G28
    Date: 2009–05–28
  10. By: Hongbin Cai; J. Vernon Henderson; Qinghua Zhang
    Abstract: This paper studies the urban land market in China in 2003--2007. In China, all urban land is owned by the state. Leasehold use rights for land for (re)development are sold by city governments and are a key source of city revenue. Leasehold sales are viewed as a major venue for corruption, prompting a number of reforms over the years. Reforms now require all leasehold rights be sold at public auction. There are two main types of auction: regular English auction and an unusual type which we call a "two stage auction". The latter type of auction seems more subject to corruption, and to side deals between potential bidders and the auctioneer. Absent corruption, theory suggests that two stage auctions would most likely maximize sales revenue for properties which are likely to have relatively few bidders, or are "cold", which would suggest negative selection on property unobservables into such auctions. However, if such auctions are more corruptible, that could involve positive selection as city officials divert hotter properties to a more corruptible auction form. The paper finds that, overall, sales prices are lower for two stage auctions, and there is strong evidence of positive selection. The price difference is explained primarily by the fact that two stage auctions typically have just one bidder, or no competition despite the vibrant land market in Chinese cities.
    JEL: D44 H71 O38 O53 R14 R31 R52
    Date: 2009–06

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