nep-tra New Economics Papers
on Transition Economics
Issue of 2014‒03‒15
twenty-one papers chosen by
J. David Brown
IZA (Institute for the Study of Labor)

  1. Corporate Bankruptcies in Czech Republic, Slovakia, Croatia and Serbia By Janda, Karel; Rakicova, Anna
  2. Modeling the Transition Towards Renminbi's Full Convertibility: Implications for China’s Growth By Bonatti, Luigi; Fracasso, Andrea
  3. The Russian gas industry : challenges to the "Gazprom model" By Catherine Locatelli
  4. The role of the Central Bank in the Economic Slow-down in Russia. By BLINOV, Sergey
  5. Czech Export Credit Agencies and their Market Power By Janda, Karel
  6. Issues for Renminbi Internationalization : An Overview By Barry Eichengreen; Masahiro Kawai
  7. The People’s Republic of China’s Growth, Stability, and Use of International Reserves By Joshua Aizenman; Yothin Jinjarak; Nancy P. Marion
  8. The Long-Term Effects of Protestant Activities in China By Yuyu Chen; Hui Wang; Se Yan
  9. World gold prices and stock returns in China: insights for hedging and diversification strategies By Mohamed El Hedi Arouri; Amine Lahiani; Duc Khuong Nguyen
  10. Odhad nákladů na podporu české fotovoltaické energie By Janda, Karel; Krska, Stepan; Prusa , Jan
  11. Economic Crisis and Female Entrepreneurship: Evidence from Countries in Eastern Europe and Central Asia By Saumik Paul; Vengadeshvaran Sarma
  12. Exchange rate regime and household's choice of debt By Vidakovic, Neven
  13. European market integration and the determinants of firm localization: The case of Poland By Gehringer, Agnieszka; Krenz, Astrid
  14. Technological Activities in CEE Countries: A Patent Analysis for the Period 1980-2009 By Iciar Dominguez Lacasa; Alexander Giebler
  15. Price Limits and Stock Market Volatility in China By Wang, Dingyan; Chong, Terence Tai-Leung; Chan, Wing Hong
  16. Former Soviet Union Countries and European Union: Overcoming the Energy Efficiency Gap By Olga Podkorytova; Yulia Raskina
  17. Euroskepticism in the Crisis: More Mood than Economy By Ritzen, Jo; Zimmermann, Klaus F.; Wehner, Caroline
  18. Will History Repeat Itself? Lessons for the Yuan By Benjamin J. Cohen
  19. Trapped Factors and China's Impact on Global Growth By Nicholas Bloom; Paul Romer; Stephen Terry; John Van Reenen
  20. How Far Can Renminbi Internationalization Go? By Yu Yongding
  21. The effectiveness of loyalty programs in the hospitality industry: the case of hotels in Slovakia By Lubica Hikkerova; Jean-Michel Sahut

  1. By: Janda, Karel; Rakicova, Anna
    Abstract: The corporate bankruptcies legal frameworks and their economic implications are compared for two pairs of post-communist countries (Czech Republic and Slovakia and Croatia and Serbia) originating from common federative republics. Their process of gradual divergence from the common legal and economic framework is shown. All four countries are identified as creditor friendly (Czech Republic, Croatia, Serbia) or neutral countries (Slovakia). The possibilities of further development of bankruptcy proceeding in these countries are outlined.
    Keywords: Czech Republic; Slovakia; Croatia; Serbia; Bankruptcy; Insolvency
    JEL: G33 K22 P37
    Date: 2014–03–04
  2. By: Bonatti, Luigi; Fracasso, Andrea
    Abstract: There is a widespread consensus that China’s growth paradigm needs a rebalancing away from investment and external demand and towards consumption and domestic demand. This rebalancing process is supposed to be accompanied by the transition towards Renminbi’s full convertibility. In contrast, it is controversial to what extent this adjustment will accelerate the slowdown of China’s growth, which will likely occur because of other structural factors. We address these issues by means of a two-country two-stage (before and after Renminbi’s full convertibility) model, which reproduces some qualitative features of China’s growth pattern and its relationship with the US. We analyze to what extent altering the Chinese exchange rate policy, as well as other structural and policy variables, may have (short-, medium- and long-term) effects on the evolution of the Chinese economy. The paper shows that by lifting the controls on the capital account and letting the currency float, the Chinese authorities will not only expose the economy to the risks of free capital mobility, but will also renounce to important policy instruments for controlling the dynamics of China’s economy and the allocation of the national resources.
    Keywords: Growth rebalancing; global imbalances; currency convertibility; Chinese economy
    JEL: E42 F33 F41 F43 O41
    Date: 2014–01
  3. By: Catherine Locatelli (PACTE - Politiques publiques, ACtion politique, TErritoires - Institut d'Études Politiques [IEP] - Grenoble - CNRS : UMR5194 - Université Pierre-Mendès-France - Grenoble II - Université Joseph Fourier - Grenoble I)
    Abstract: The Russian gas sector is undergoing significant changes which is opening the way for an original reform. Because of the particular institutional and economic context of the country, this reorganisation is not taking place along the lines of the de-integrated model of the EU. It is characterised by increasingly significant competitive fringes. Gazprom remains the main actor of the Russian gas industry but the company is facing challenges on its main export market and an increasing competition at home with the arrival of new gas firms, independents and Russian oil companies. For Gazprom, the aim issue is to develop more flexible strategies for export markets but also on its internal market. These internal changes will not be without consequence on the country's export strategy and the implication for international markets could be considerable.
    Keywords: Russia ; reform of the gas organisational model ; institutional analysis ; Gazprom ; gas industry
    Date: 2014–03
  4. By: BLINOV, Sergey
    Abstract: This paper is looking into the causes of the GDP decline in Russia during 2008-2009 and the slow-down of the GDP growth during 2012-2013. The impact of the money supply on the GDP is discussed. Analogies are drawn with the crises in the USA: the Great Depression during 1929-1933 and the 2008-2009 crisis. Possible measures necessary for growth in Russia are investigated.
    Keywords: money supply, Great Depression, recession, central bank
    JEL: E41 E44 E51 E58 E65 G01 H12 N12 N14
    Date: 2014–03–04
  5. By: Janda, Karel
    Abstract: We describe the export credit agencies in the Czech Republic and the export promotion strategy of the Czech government. The policy part of the paper is focused on the interac- tion of government owned and supported Czech Export Bank with the Czech commercial banks. We argue that the major market share of Czech Export Bank in export credit market may be explained by a number of factors in addition to the competitive advantage provided by lower pro�t margins of Czech Export Bank. These factors may be grouped into strategic factors related to competition among commercial banks and into factors based on Czech Export Bank being state owned specialized export bank as opposed to private general banks.
    Keywords: international trade, state promotion, export credit agencies, Czech Republic
    JEL: F14 G21 G28
    Date: 2014–03–04
  6. By: Barry Eichengreen (Asian Development Bank Institute (ADBI)); Masahiro Kawai
    Abstract: The growing weight of the People’s Republic of China (PRC) in the world economy, measured by gross domestic product (GDP) and trade volume, has intensified debate on the potential international role of its currency—the renminbi (RMB). This paper provides an overview of RMB internationalization issues. Reviewing the current state of RMB internationalization, the paper finds that much progress has been made on RMB settlements for trade involving the PRC and on RMB-denominated bond issuance in Hong Kong, China, but that RMB internationalization is still limited due to capital account controls. The paper argues that a high degree of RMB internationalization requires significant capital account liberalization—supported by financial market liberalization including market-determined interest rates, and by effective financial regulation and supervision—which in turn would call for greater exchange rate flexibility so that the People’s Bank of China (PBOC) can enjoy monetary policy autonomy. This, however, would pose a challenge for PRC authorities as hasty capital account liberalization could expose PRC financial markets to the risk of crisis. The paper also emphasizes the importance of institutional reforms—such as making the PBOC independent from political processes, improving the judicial system to implement rule of law, raising transparency and accountability of policy making, and democratizing the political regime—to make the RMB a truly international reserve currency. Finally, the paper explores the implications of RMB internationalization for the international monetary system.
    Keywords: renminbi (RMB), internationalization, PRC, China, capital account internationalization, financial market liberalization, monetary policy autonomy
    JEL: F31 F32 F33 F41
    Date: 2014–01
  7. By: Joshua Aizenman (Asian Development Bank Institute (ADBI)); Yothin Jinjarak; Nancy P. Marion
    Abstract: In the run-up to the financial crisis, the world economy was characterized by large and growing current account imbalances. Since the onset of the crisis, the People’s Republic of China and the United States have rebalanced. As a share of gross domestic product, their current account imbalances are now less than half their pre-crisis levels. For the People’s Republic of China, the reduction in its current account surplus post-crisis suggests a structural change. Panel regressions for a sample of almost 100 economies over the thirty-year period, 1983–2013, confirm that the relationship between current account balances and economic variables such as performance, structure, wealth, and the exchange rate, changed in important ways after the financial crisis.
    Keywords: current account imbalances, financial crisis, China, PRC
    JEL: F32 O57
    Date: 2014–01
  8. By: Yuyu Chen; Hui Wang; Se Yan
    Abstract: Does culture, and in particular religion, exert an independent causal effect on long-term economic growth, or do culture and religion merely reflect the latter? We explore this issue by studying the case of Protestantism in China during the late nineteenth and early twentieth centuries. Combining county-level data on Protestant presence in 1920 and socioeconomic indicators in 2000, we find that the spread of Protestantism has generated significant positive effects in long-term economic growth, educational development, and health care outcomes. To better understand whether the relationship is causal, we exploit the fact that missionaries purposefully undertook disaster relief work to gain the trust of the local people. Thus, we use the frequency of historical disasters as an instrument for Protestant distribution. Our IV results confirm and enhance our OLS results. When we further investigate the transmission channels over the long historical period between 1920 and 2000, we find that although improvements in education and health care outcomes account for a sizable portion of the total effects of missionaries' past activities on today's economic outcomes, Protestant activities may have also contributed to long-term economic growth through other channels, such as through transformed social values. If so, then a significant amount of China's growth since 1978 is the result not just of sudden institutional changes but of human capital and social values acquired over a longer historical period.
    Keywords: Protestantism, Economic Growth, Education, Health Care, China
    JEL: I25 N15 N35 O11 O43 Z12
    Date: 2014–02
  9. By: Mohamed El Hedi Arouri; Amine Lahiani; Duc Khuong Nguyen
    Abstract: In this paper we make use of several multivariate GARCH models to investigate both return and volatility spillovers between world gold prices and stock market in China over the period from March 22, 2004 through March 31, 2011. We also analyze the optimal weights and hedge ratios for gold-stock portfolio holdings and show how empirical results can be used to build effective diversification and hedging strategy. Our results show evidence of significant return and volatility cross effects between gold prices and stock prices in China. In particular, past gold returns play a crucial role in explaining the dynamics of conditional return and volatility of Chinese stock market and should thus be accounted for when forecasting future stock returns. Our portfolio analysis suggests that adding gold to a portfolio of Chinese stocks improves its risk-adjusted return and helps to effectively hedge against stock risk exposure over time. Finally, we show that the VAR-GARCH model performs better than the other multivariate GARCH models.
    Keywords: Stock markets, gold prices, diversification and hedging effectiveness, GARCH models
    JEL: G12 F3 Q43
    Date: 2014–02–25
  10. By: Janda, Karel; Krska, Stepan; Prusa , Jan
    Abstract: The article is focused on the total historical and future costs of supporting photovoltaic electricity generation in the Czech Republic. The model estimation of these costs is accompanied by methodologically unified comparison with cost of the support of other renewable energy resources. We find that as long as the goals of Czech National Action Plan for Renewable Energy will be implemented, the costs on photovoltaics support will account for more than one half of all costs on renewable energy, combined production of electricity and heat and other secondary resources. The article also provides brief overview of the photovoltaic market in the Czech Republic with its past, present and possible future developments.
    Keywords: photovoltaics; renewable energy sources; energy policy; feed-in tariffs
    JEL: Q28 Q42 Q47
    Date: 2014–03–04
  11. By: Saumik Paul; Vengadeshvaran Sarma
    Abstract: Building on the theory of necessity entrepreneurship, we test whether female entrepreneurship was a part of the household coping mechanism facing the recent global crisis across 30 transition countries centered in Eastern Europe and Central Asia. The identification strategy relies on the self-reported crisis victimization indicators at the household level. Main findings indicate that female members from crisis-affected households are more willing to become entrepreneurs and have initiated firms at a significantly higher rate since 2007. The estimated outcomes are particularly critical for male headed households with propensity score matching and doubly robust tests supporting the main findings. We also find that prior entrepreneurial activity at the household level, acts as a catalyst for such female necessity entrepreneurship. Overall, the findings suggest that crisis perhaps worked as a contextual factor contributing to the creation of necessary entrepreneurship among women.
    Keywords: Female Entrepreneurship; Economic Crisis; Eastern Europe and Central Asia
  12. By: Vidakovic, Neven
    Abstract: The paper looks at the impact of the exchange rate regime and the household’s choice of debt. One of the characteristics of economic transition in eastern European countries was an increase in overall debt holding. Standard economic theory assumes the relationship S=I. According to this relationship the households should use debt only for purchases of durable goods; however in some eastern European countries there was a large increase in consumer loans which are not recognized under standard no-ponzi assumption of economic models. This paper aims to investigate the case when debt is used to live above household’s budget constraint. Our model shows a significant impact on the choice of the amount the debt the households are willing to hold is due to the choice of the exchange rate regime made by the central bank. The models investigates household’s behavior in two main cases: stable exchange rate regime (exchange rate regime with FX risk) and variable exchange rate regime (exchange rate regime without exchange rate risk). The households make different choices under alternate exchange rate regime; this pattern of is behavior shown in the model and verified by the data.
    Keywords: credit, exchange rate, dynamic programming
    JEL: C61 E51 E58
    Date: 2014–03–06
  13. By: Gehringer, Agnieszka; Krenz, Astrid
    Abstract: The paper analyses empirically the determinants of firms´ localization in Poland. We use regional data of the sixteen Polish administrative regions over the period 2003 to 2010 to examine which role agglomeration forces and other factors played in explaining the choice to operate in a certain location. Our results suggest that agglomeration economies stemming in particular from the R&D sector, as well as human capital and the infrastructure positively influence the regional localization of firms. Poland´s accession to the European Union had a positive impact for the location decision of new firms in the Polish economy. --
    Keywords: localization,agglomeration economies,knowledge externalities,Polish regions,European integration
    JEL: F14 F15 F23 R11 R12
    Date: 2014
  14. By: Iciar Dominguez Lacasa; Alexander Giebler
    Abstract: The aim of this paper is to analyze the technological activities of Central and Eastern European (CEE) economies and to compare them with the technological activities of other world regions. Using data from the EPO World Wide Statistical Database for the period 1980-2009 the analysis is based on counts of priority patent applications over time. In terms of priority patent applications, CEE reduced its technological activities drastically in absolute and per capita terms after 1990. The level of priority patent applications in this world region maintained more recently a stable level below the performance of EU15, South EU and the former USSR. In what concerns technological specialization, the results suggest a division of labor in technological activities among world regions where Europe, Latin America and the former USSR are mainly specializing in sectors losing technological dynamism in the global patent activities (Chemicals and/or Mechanical Engineering) while North America, the Middle East (especially Israel) and Asia Pacific are increasingly specializing in Electrical Engineering, a sector with strong technological opportunities.
    Keywords: CEE, patent indicators, priority counts, patstat, trends, specialization
    JEL: O30 O57
    Date: 2014–02
  15. By: Wang, Dingyan; Chong, Terence Tai-Leung; Chan, Wing Hong
    Abstract: This paper explores the effects of price limits on the stock market of China during global market turmoils. The characteristics of stocks that hit the price limits more frequently under market turmoil are investigated. It is found that the price limit system increases volatility significantly during the downward price movement. Moreover, price limit delays the efficient price discovery for upward and downward price movements. Finally, actively-traded stocks with a higher positive correlation with the entire market in the property industry hit the price limits more frequently.
    Keywords: A-share market; Price limit; Financial crises.
    JEL: G1 G18
    Date: 2014–01–26
  16. By: Olga Podkorytova; Yulia Raskina
    Abstract: This paper evaluates convergence of energy intensity for the former USSR countries during 1995-2010. We divide these countries into three clubs and show convergence in income and in energy intensity for each club. We also demonstrate that rate of convergence is higher in countries with a low level of development.
    Keywords: Сlub convergence, energy intensity, former USSR
    Date: 2014–02
  17. By: Ritzen, Jo (IZA and Maastricht University); Zimmermann, Klaus F. (IZA and University of Bonn); Wehner, Caroline (IZA)
    Abstract: Before the Great Recession, rising income inequality within the European Union member states has been considered to be one driver for an increasing Euroskepticism. Using rich data on attitudes towards European integration from the Eurobarometer (EB) surveys, we revisit the issue by analyzing the relation between macroeconomic indicators, socio-economic background variables, individual attitudes and the level of Euroskepticism within the 27 EU member states for the period 2006 to 2011. Our analysis shows that Euroskepticism has increased by on third during the financial crisis, while income inequality on average stayed stable. We find that the increase in Euroskepticism is mostly due to “mood:” the fear of losing cultural identity and financial expectations and by large unrelated to economic background variables like income inequality. We find evidence that negative financial expectations are positively related to Euroskepticism in Western European countries and negatively related to Euroskepticism in Eastern European countries. That suggests that financially pessimistic people in Western Europe might interpret European integration as a threat to their financial situation, while Eastern European people might view it as a chance to improve their economic situation.
    Keywords: Euroskepticism, income inequality, expectations, economic growth, unemployment
    JEL: D31 J31 O43 O52 P48 Z18
    Date: 2014–02
  18. By: Benjamin J. Cohen (Asian Development Bank Institute (ADBI))
    Abstract: For many observers, internationalization is the yuan’s manifest destiny—an irresistible by-product of the remarkable economic success of the People’s Republic of China (PRC). But is such confidence warranted? Recent history has seen the emergence of other currencies that were also expected, at least for a while, to attain wide, growing cross-border use. These included the deutsche mark (DM), the Japanese yen, and the euro (successor to the DM). Yet in the end their internationalization reached an upper limit, short of expectations. Will history repeat itself? Or will the yuan prove exceptional, the currency that finally managed to keep ascending where others faltered? The aim of this paper is to see what lessons may be drawn from these earlier experiences for the anticipated internationalization of the yuan. Much can be learned from their stories—first, about what may drive the internationalization of a currency, and second, about what may ultimately set a limit to the process. The main message of the analysis is that the challenge of internationalization is formidable, involving demanding conditions. Can Beijing sustain its record of price stability and effective policy management? Can the country succeed in shifting its industrial and trade structure toward exports of more advanced differentiated products? Can the yuan’s convertibility be broadened? Can domestic financial markets be adequately developed? Can the country’s political institutions be trusted? Can geopolitical tensions be avoided? Contrary to predictions of the yuan’s “inevitable†rise, success in all these respects is by no means guaranteed.
    Keywords: Internationalization of yuan, China, PRC, internationalization of a currency
    JEL: F31 F33 F41
    Date: 2014–01
  19. By: Nicholas Bloom; Paul Romer; Stephen Terry; John Van Reenen
    Abstract: In a general equilibrium product-cycle model, lower trade barriers in-crease Southern purchasing power, which lifts long-run growth by increasing the profit from innovation. In the short run, factors of production must be reallocated inside firms, which lowers the opportunity cost of innovation, generating an additional "trapped factor" effect. Starting from a baseline OECD growth rate of 2% we find that trade integration with low-wage countries in the decade around China's WTO accession could have increased long-run growth to 2.4%. There is an additional short-run trapped factors effect, raising growth to 2.7%. China accounts for about half of these growth increases.
    Keywords: Innovation, trade, China, endogenous growth
    JEL: D92 E22 D8 C23
    Date: 2014–03
  20. By: Yu Yongding (Asian Development Bank Institute (ADBI))
    Abstract: Since the formal launch of the renminbi trade settlement scheme in 2009, renminbi internationalization has made impressive inroads. The progress in renminbi trade settlement is especially impressive. However, Hong Kong, China’s offshore renminbi deposits failed to make significant progress as expected. The question of how far renminbi internationalization can go has become a common concern in the international financial community. This paper argues that while a contributing factor is the sheer size of the People’s Republic of China’s (PRC) trade and the convenience of using the renminbi for transaction settlements, exchange rate arbitrage and interest rate arbitrage matter also. Profits from arbitrages are the major driving forces of, but do not constitute a sustainable basis for, internationalization. A fundamental constraint for renminbi internationalization is the PRC’s capital controls. Before fully opening up its capital account and making the renminbi freely convertible, however, the PRC needs first to put its own house in order. Macroeconomic stability has to be achieved; the high ratio of financial leverage should be reduced; a rational and flexible interest rate structure must be created; and risk management capacity across industries should be established. Most importantly, the PRC must make the renminbi exchange rate flexible to reflect demand for and supply of foreign exchange in the market. The renminbi can and will become a major international currency eventually, but the road to internationalization is bound to be long and bumpy.
    Keywords: renminbi internationalization, renminbi trade settlement scheme, renminbi trade settlement, exchange rate and interest rate arbitrage
    JEL: F31 F33
    Date: 2014–02
  21. By: Lubica Hikkerova; Jean-Michel Sahut
    Abstract: This article deals with the issues of hotel loyalty programs implemented in the Slovak Republic. It analyzes the effectiveness of loyalty programs in relation to purchasing behaviour of Slovak customers. We propose a theoretical model of loyalty determinants, which we verify empirically. We try to explain the effectiveness of hotel loyalty programs in terms of value created and customer loyalty, due to the fact that building loyalty and the introduction of loyalty programs in the hotel requires substantial financial resources. The subjacent hypothesis is to determine if a loyalty program and its associated advantages manage to take precedence over other factors which influence choice and thus modify the probability of the hotel being chosen. More precisely, we seek to better understand the antecedents of commitment and trust and look at how these factors influence customer loyalty and thus determine the impact of loyalty schemes. Our empirical study, carried out on a sample group of consumers in Slovakia, enabled us to identify the four antecedents of loyalty (economic value of the exchange, reputation in terms of quality of the firm, communication, and shared values) so as to make managerial recommendations concerning the effectiveness of loyalty programs.
    Keywords: Loyalty, Price, Behaviour, Commitment, Trust, Hotel
    JEL: M1 M3
    Date: 2014–02–25

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