nep-tra New Economics Papers
on Transition Economics
Issue of 2009‒09‒11
nine papers chosen by
J. David Brown
Heriot-Watt University

  1. Financial Convergence in the New EU Member States By Kalin Hristov; Rossen Rozenov
  2. Lessons for China from Financial Liberalization in Scandinavia By Hongyi Chen; Lars Jonung; Olaf Unteroberdoerster
  3. Vulnerabilities in Central and Eastern European countries: Dynamics of asymmetric shocks By Aleksandra Zdzienicka-Durand
  4. Developing Innovative Competences in an Emerging Business System: New Private Enterprises in Hangzhou’s Software Industry By Greeven, M.J.; Xiaodong, Z.
  5. From crisis to crisis: the high cost of the post-soviet institutional lock-in By Cédric Durand; Maxime Petrovski
  6. Bank Productivity in China 1997-2007: An Exercise in Measurement By Kent Matthews; Nina Zhang
  7. Measuring inequality of well-being with a correlation-sensitive multidimensional Gini index By Koen Decancq; María Ana Lugo
  8. Stress Testing Credit Risk: Is the Czech Republic Different from Germany? By Petr Jakubik; Christian Schmieder
  9. Time aggregation bias in discrete time models of aggregate duration data By Michal Franta

  1. By: Kalin Hristov; Rossen Rozenov
    Abstract: In this paper we explore the issue of financial convergence in the new EU member states (NMS). For the purposes of our analysis the countries falling into the category NMS are Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia, i.e. all countries that joined the EU in the last decade, except Cyprus and Malta.
    Date: 2009
  2. By: Hongyi Chen (Hong Kong Institute for Monetary Research); Lars Jonung (DG ECFIN, European Commission, Brussels, Hong Kong Institute for Monetary Research); Olaf Unteroberdoerster (International Monetary Fund, Washington DC)
    Abstract: This report identifies a set of policy lessons for China today drawn from the experience of financial deregulation, financial crisis and recovery in Scandinavia during the period 1985-2000. Although there are considerable differences between the huge Chinese economy and the small Nordic countries, there are enough similarities to make lesson-drawing a worthwhile exercise. Based on the Scandinavian experience and the added complexity of China¡¦s status as a transition economy, financial reforms should strike a proper balance between being gradual (to avoid costly mistakes) and substantive (to secure efficiency gains in the longer term) with due consideration being given to initial conditions concerning regulation, taxes and exchange rate arrangements. A well managed process of financial deregulation requires that policy-makers and market participants fully understand the interlinkages between financial reforms and the rest of the economy. In addition, the supervisory and management systems in the financial sector should move in step with the liberalization process.
    Keywords: Financial Liberalization, Financial Crisis, Transition, Financial Regulation, Banking, Boom-Bust, China, Scandinavia, the Nordics
    JEL: E52 E58 F31 F32 G21 G28 G32 P52
    Date: 2009–07
  3. By: Aleksandra Zdzienicka-Durand (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: In this work, we use the VAR and space-state methodology to analyze how the recent developments in 20 European countries have modified the dynamics of structural shocks. Our results confirm a visible progress in (predominated output fluctuations) supply shocks convergence between the CEECs and the euro zone, but also corroborate a positive initial impact of EMU creation and EU enlargement supply shocks correlation. In particular, we find that Croatia, Poland, Slovakia and Slovenia are good candidates to the euro adoption under condition of greater fiscal policy alignment.
    Keywords: Structural Shocks; CEECs; VAR model; Kalman filter; Euro Adoption
    Date: 2009
  4. By: Greeven, M.J.; Xiaodong, Z. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: What kind of innovative competences are credibly developed by private entrepreneurs in China’s transition economy? On the basis of original empirical fieldwork in 45 software enterprises in Hangzhou, Zhejiang Province, we propose a working theory of innovative competence development in an emerging private sector. Combining resource-based and institutional perspectives we argue that Chinese private enterprises in Hangzhou were able to develop unique innovative competences to overcome resource constraints and manage technical - and market risks while respecting the location and sector-specific constraints. The findings suggest that private software enterprises in Hangzhou developed five innovative competences: organizational integration, financial commitment, external knowledge transformation, reputation development and strategic flexibility. The analysis further allows to propose three implications: 1) These five competences form a ‘configuration’ or coherent set of competences in this particular institutional setting; 2) Technological – and institutional regimes shape the potential range of innovative competences firms credibly develop depending on the available resources of the firm; 3) Innovative competences can be functional equivalents of institutions in the absence of well-developed, mature formal institutions.
    Keywords: private entrepreneurs;innovation;China;software industry;institutions;competences;business system
    Date: 2009–08–08
  5. 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 - EHESS); Maxime Petrovski (CEMI - Centre d'étude des modes d'industrialisation - EHESS)
    Abstract: In this contribution, we shall try to characterise the Russian growth model the way it appears to have emerged in the 2000s, which we believe useful to explain the country's macroeconomic successes at an earlier stage as well as the severe problems it has to face now. We shall begin by presenting the macroeconomic indicators of the Russian Federation between the 1998 crash and up to the recent 2008 crisis, showing their very significant improvements in practically every area (part 1). However, the qualitative aspects of the economic growth suggest asking whether one the main reasons of Russia's economic success (high commodity prices) did not make it seriously sick with the “Dutch disease” (part 2). We shall further show that the impressive growth before the 2008 crisis was followed by a yet more impressive shock hitting the economy to the extent that very few analysts had imagined (part 3). We believe that the propagation of the crisis was amplified by the specific features of the capitalist system that emerged in Russia in the 2000s, particularly its “international regime” (part 4). We conclude our contribution by saying that the Russian model in the 2000 appeared to be intrinsically unstable before suggesting possible scenarios of finding paths to a sustainable growth model.
    Keywords: Russia - diversity of Capitalism - exportism - dutch disease - resource curse - post-soviet transformation
    Date: 2009–07–16
  6. By: Kent Matthews (Hong Kong Institute for Monetary Research, Cardiff University, Wales); Nina Zhang (Citibank (China), Cardiff University, Wales)
    Abstract: This study examines the productivity growth of the nationwide banks of China and a sample of city commercial, banks for the eleven years to 2007. Estimates of total factor productivity growth are constructed with appropriate confidence intervals, using a bootstrap method for the Malmquist index. The study adjusts for the quality of the output by accounting for the non-performing loans on the balance sheets of the banks and tests for the robustness of the results by examining alternative sets of outputs. The productivity growth of the state-owned commercial banks (SOCBs) is compared with the joint-stock banks (JSCBs) and city commercial banks (CCBs). The weak average growth of TFP of the SOCBs disguises strong technical innovation. As a result, the inefficient banks have a greater efficiency gap to make up. This picture is similar but to a lesser extent for the JSCBs. In contrast the CCBs show strong TFP growth driven by efficiency gains and less so by technical innovation.
    Keywords: Bank Efficiency, Productivity, Malmquist Index, Bootstrap
    JEL: D24 G21
    Date: 2009–07
  7. By: Koen Decancq (Katholieke Universiteit Leuven); María Ana Lugo (University of Oxford)
    Abstract: We propose to measure inequality of well-being with a multidimensional generalization of the Gini coefficient. We derive two inequality indices from their underlying social evaluation functions. These functions are conceived as a double aggregation functions: one across the dimensions of well-being, and another across the individuals. They differ only with respect to the sequencing of aggregations. We argue that the sequencing that does not exclude the Gini index to be sensitive to the correlation between the dimensions is more attractive. We illustrate both Gini indices using Russian household data on three dimensions of well-being: expenditure, health and education.
    Keywords: multidimensional inequality, single parameter Gini index, correlation increasing majorization, Russia.
    JEL: D63 I31 O52
    Date: 2009
  8. By: Petr Jakubik; Christian Schmieder
    Abstract: This study deals with credit risk modelling and stress testing within the context of a Merton-type one-factor model. We analyse the corporate and household sectors of the Czech Republic and Germany to find determining variables of credit risk in both countries. We find that a set of similar variables explains corporate credit risk in both countries despite substantial differences in the default rate pattern. This does not apply to households, where further research seems to be necessary. Next, we establish a framework for the stress testing of credit risk. We use a country specific stress scenario that shocks macroeconomic variables with medium severity. The test results in credit risk increasing by more than 100% in the Czech Republic and by roughly 40% in Germany. The two outcomes are not fully comparable since the shocks are calibrated according to the historical development of the time series considered and the size of the shocks for the Czech Republic was driven by the transformation period.
    Keywords: Credit risk, credit risk modelling, stress testing.
    JEL: G21 G28 G33
    Date: 2008–12
  9. By: Michal Franta
    Abstract: The paper focuses on the dynamics of unemployment in the Czech Republic over the period 1992–2007. Unemployment dynamics are elaborated in terms of unemployment inflows and unemployment duration. The paper contributes to the literature dealing with discrete time models of aggregate unemployment duration data by accounting for time aggregation bias. Another innovation relates to the way we examine the impact of time-varying macroeconomic conditions on individual duration dependence and unemployment inflow composition. The estimation results suggest that both unobserved heterogeneity and individual duration dependence are present. The relative impact of the two factors on the aggregate duration dependence, however, changes over time. Next, seasonal effects on the individual hazard rate are detected. We do not find a significant role of macroeconomic influences. Finally, we demonstrate the profound influence of time aggregation of duration data on unemployment duration parameters for empirical data for France and the Czech Republic.
    Keywords: Duration dependence, time aggregation bias, unemployment, unemployment duration.
    JEL: J64 C41 E24
    Date: 2008–12

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