nep-tra New Economics Papers
on Transition Economics
Issue of 2016‒03‒10
27 papers chosen by
J. David Brown
United States Census Bureau

  1. Can the Chinese bond market facilitate a globalizing renminbi? By Ma, Guonan; Yao, Wang
  2. Republic of Tajikistan: Financial System Stability Assessment Report By International Monetary Fund
  3. Republic of Lithuania; Staff Report for the 2015 Article IV Consultation By International Monetary Fund
  4. Building a competitive city through innovation and global knowledge -- the case of Sino-Singapore Suzhou industrial park By Zeng,Zhihua
  5. How Firms Export: Processing vs. Ordinary Trade with Financial Frictions By Manova, Kalina; Yu, Zhihong
  6. Wage Rigidities and Jobless Recovery in Slovakia: New Survey Evidence By Peter Toth; Katarina Valkova
  7. Spillovers from Global and Regional Shocks to Armenia By Knarik Ayvazyan; Teresa Daban Sanchez
  8. Republic of Poland: Review Under the Flexible Credit Line Arrangement-Press Release; Staff Report; and Statement by the Alternate Executive Director for the Republic of Poland By International Monetary Fund
  9. Who gains from credit granted between firms? Evidence from inter-corporate loan announcements made in China By He, Qing; Lu, Liping; Ongena, Steven
  10. Macroprudential Policies in Southeastern Europe By Dilyana Dimova; Piyabha Kongsamut; Jérôme Vandenbussche
  11. The Effect of Housing Wealth on Labor Force Participation: Evidence from China By Fu, Shihe; Liao, Yu; Zhang, Junfu
  12. Labour Market Adjustment since the Global Financial Crisis: Evidence from a Survey of Czech Firms By Jan Babecky; Kamil Galuscak; Diana Zigraiova
  13. Robust Measures of Core Inflation for Vietnam By Sanjay Kalra; Bui Thi Trang Dzung
  14. China's Sex Ratio and Crime: Behavioral Change or Financial Necessity? By Cameron, Lisa A.; Meng, Xin; Zhang, Dandan
  15. Republic of Serbia: Third Review Under the Stand-By Arrangement and Request for Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Serbia By International Monetary Fund
  16. Measure consumer preferences for pork attributes under different media coverage in China By Yan, Zhen; Yu, Xiaohua; Zhou, Jiehong
  17. Republic of Estonia: 2015 Article IV Consultation-Press Release; Staff Report; and Informational Annex By International Monetary Fund
  18. The Feldstein-Horioka Puzzle in the Presence of Structural Breaks: Evidence from China By Dilem Yıldırım; Ethem Erdem Orman
  19. The Republic of Moldova: Staff Report for the 2015 Article IV Consultation and Third Post-Program Monitoring Discussions-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Moldova By International Monetary Fund
  20. Current Account Determinats in Central Eastern European Countries By Jonida Bollano; Delina Ibrahimaj
  21. Being Poor, Feeling Poorer; Inequality, Poverty and Poverty Perceptions in the Western Balkans By Zsoka Koczan
  22. EU integration and the introduction of State aid control in Serbia: Institutional challenges and reform prospects By Milenkovic, Marko
  23. Solid fuel use in rural China and its health effects By Hua Liao; Xin Tang; Yi-Ming Wei
  24. Slovak Republic: 2015 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Slovak Republic By International Monetary Fund
  25. Financial Distortions in China; A General Equilibrium Approach By Diego Anzoategui; Mali Chivakul; Wojciech Maliszewski
  26. Labor flows in Hungary and Europe By István Konya
  27. Levelling the Playing Field: The Effects of Slovenia's 2013 Labour Market Reform By Vodopivec, Matija; Laporsek, Suzana; Vodopivec, Milan

  1. By: Ma, Guonan (BOFIT); Yao, Wang (BOFIT)
    Abstract: A global renminbi needs to be backed by a large, deep and liquid renminbi bond market with a world-class Chinese government bond (CGB) market as its core. China’s CGB market is the seventh largest in the world while sitting alongside a huge but non-tradable and captive central bank liability in the form of required reserves. By transforming the non-tradable central bank liabilities into homogeneous and tradable CGBs through halving the high Chinese reserve requirements, the size of the CGB market can easily double. This would help over-come some market impediments and elevate the CGBs to a top three government bond market globally, boosting market liquidity while trimming distortions to the banking system. With a foreign ownership similar to that of the JGBs, CGBs held by foreign investors may increase ten-fold by 2020, approaching 5 percent of the 2014 global foreign reserves and facilitating a potential global renminbi, especially in the wake of the renminbi’s inclusion into the basket of the IMF Special Drawing Rights.
    Keywords: bond market; government bond market; renminbi internationalization
    JEL: E42 E44 E58 F02 G10 H63
    Date: 2016–02–06
  2. By: International Monetary Fund
    Abstract: Tajikistan’s economy is entering a downturn and the banking sector is showing substantial weaknesses. In particular, the economy and the financial sector are facing the downside risks and negative spillovers from: (i) a protracted period of negative growth in Russia, coupled with a possible slowdown of growth in China; (ii) commodity (especially cotton and aluminum) price shocks; and (iii) delays in structural reforms, particularly in banks and state-owned enterprises. System-wide nonperforming loans grew substantially in 2014 and capital buffers are likely to be overstated due to misclassification and underprovisioning of bad loans. Credit quality is poor, owing to inadequate credit assessment methodologies and insufficient credit information, but also to directed and related-party lending in the past, which have heightened moral hazard.
    Keywords: Financial system stability assessment;Financial sector;Banks;Stress testing;Bank supervision;Bank regulations;Bank resolution;Deposit insurance;Macroprudential Policy;Crisis prevention;Tajikistan;
    Date: 2016–02–09
  3. By: International Monetary Fund
    Abstract: This 2015 Article IV Consultation highlights that growth in Lithuania has remained resilient, despite challenges in the external environment. Strong domestic demand growth on the back of improving labor market conditions underpinned real GDP growth of 2.9 percent in 2014. Exports held up reasonably well despite Russian import bans. Growth should remain largely unchanged at 2.8 percent from last year in 2015, as positive external factors counterbalance negative ones and domestic demand remains robust. The main policy challenge will be to secure reasonably rapid convergence with living standards in western Europe going forward.
    Keywords: Lithuania;inflation, monetary fund, debt, investment, market
    Date: 2015–06–01
  4. By: Zeng,Zhihua
    Abstract: Special economic zones can be an effective instrument to promote industrialization if implemented properly in the right context. In China, starting in the 1980s, special economic zones were used as a testing ground for the country's transition from a planned to a market economy, and they are a prime example of China's pragmatic and experimental approach to reforms. One of the great special economic zone success stories in China is the Suzhou Industrial Park, a modern industrial township developed in the early 1990s through a Sino-Singapore partnership. It is successful not just in the economic sense, but also in terms of urban and social development in an eco-friendly way. One key lesson is that in a weak market environment, a facilitating and reform-oriented host government, coupled with foreign expertise and knowledge as well as a"whole value chain"approach can go a long way in developing urban-industry well-integrated special economic zones. This paper is intended to examine the success factors and key lessons of the Sino-Singapore Suzhou Industrial Park, which can be useful for other developing countries.
    Keywords: E-Business,ICT Policy and Strategies,Emerging Markets,Environmental Economics&Policies,Tertiary Education
    Date: 2016–02–18
  5. By: Manova, Kalina; Yu, Zhihong
    Abstract: The fragmentation of production across borders allows firms to make and export final goods, or to perform only intermediate stages of production by processing imported inputs for re-exporting. We examine how financial frictions affect companies' choice between processing and ordinary trade - implicitly a choice of production technology and position in global supply chains - and how this decision affects performance. We exploit matched customs and balance-sheet data from China, where exports are classified as ordinary trade, import-and-assembly processing trade (processing firm sources and pays for imported inputs), and pure-assembly processing trade (processing firm receives foreign inputs for free). Value added, profits and profitability rise from pure assembly to processing with imports to ordinary trade. However, more profitable trade regimes require more working capital because they entail higher up-front costs. As a result, credit constraints induce firms to conduct more processing trade and pure assembly in particular, and preclude them from pursuing higher value-added, more profitable activities. Financial market imperfections thus impact the organization of production across firms and countries, and inform optimal trade and development policy in the presence of global production networks.
    Keywords: China; credit constraints; global value chain; Heterogeneous Firms; processing trade; trade regime
    JEL: F10 F13 F14 F23 F34 G32
    Date: 2016–02
  6. By: Peter Toth (National Bank of Slovakia, Research Department); Katarina Valkova (WU Wirtschaftsuniversität Wien)
    Abstract: The aim of this paper is to test the determinants of labour cost adjustments by Slovak firms during the recent recovery period from 2010 to 2013. We use a new dataset from a firm-level survey, which was conducted in cooperation with the Wage Dynamics Network of the European Central Bank. The main findings are broadly in line with macroeconomic data, such as the uneven recovery of demand across sectors, stagnation of employment and increase in wages. Our estimates highlight the importance of demand shocks in explaining labour cost adjustments. Further, the role of collective agreements and wage rigidities seems crucial, which forces firms to downsize their labour inputs rather than to cut wages. Finally, we find evidence that large and foreign owned firms face fewer barriers to adjusting their labour costs. The mentioned factors seem to be the main explanation for the recent jobless recovery in Slovakia during 2010 to 2013.
    Keywords: labour cost adjustment, firm-level survey, collective bargaining, wage rigidities, adjustment costs
    JEL: E24 J30 J50 C81
    Date: 2015–12
  7. By: Knarik Ayvazyan; Teresa Daban Sanchez
    Abstract: Using a structural vector auto-regression (SVAR) model, this paper examines the size, geographical sources, and transmission channels of global and regional shocks to the Armenian economy. Results show that Armenian economic activity is strongly influenced by global demand shocks and changes in oil prices, yet relatively immune to financial volatility. Transmission takes place through the Russian and EU economies, remittances, and external borrowing. The role of exports and tourism is low. Russia is key in transforming the potentially negative impact of an increase in oil prices into a positive event, through stronger remittances and exports. Services and construction, which depend significantly on remittances and external borrowing, are the most affected by global and regional shocks.
    Keywords: Armenia;Middle East;Remittances;Spillovers, Trade, Business cycles, Transmission channels, SVAR, economy, trading partners, regional shocks, oil prices, General, Open Economy Macroeconomics, Forecasting and Simulation, Economic Growth of Open Economies,
    Date: 2015–11–23
  8. By: International Monetary Fund
    Abstract: This paper discusses Poland’s performance under the Flexible Credit Line Arrangement. In recent years, Poland’s macroeconomic policies have focused on further strengthening fundamentals and institutional frameworks. Fiscal consolidation has led to an exit from the Excessive Deficit Procedure. Monetary policy has been eased to help lift inflation. Financial sector supervision has been strengthened with a new macroprudential framework. Reserves are broadly adequate against standard metrics. The new government has pledged to maintain prudent policies, including gradual fiscal consolidation over the medium term, and to ensure the continued stability of the banking system. In the period ahead, it will be important to identify specific growth-friendly measures to underpin the fiscal adjustment and reduce implementation risk.
    Keywords: Europe;Poland;market, credit line, monetary fund, financial market, markets
    Date: 2016–01–13
  9. By: He, Qing; Lu, Liping; Ongena, Steven
    Abstract: Who gains from inter-corporate credit? To answer this question we measure the impact of the announcements of inter-corporate loans in China on the stock prices of the firms involved. We find that the average abnormal return for the issuers of inter-corporate loans is significantly negative, whereas it is positive for the receivers. Issuing firms may be perceived by investors to have run out of worthwhile projects to finance, while receiving firms are being certified as creditworthy. Subsequent firm performance and investment confirms these valuations as overall accurate.
    Keywords: entrusted loan,inter-corporate loan,credit misallocation,certification
    JEL: G30 G14 G21
    Date: 2016
  10. By: Dilyana Dimova; Piyabha Kongsamut; Jérôme Vandenbussche
    Abstract: This paper presents a detailed account of the rich set of macroprudential measures taken in four Southeastern European countries—Bulgaria, Croatia, Romania, and Serbia—during their synchronized boom and bust cycles in 2003–12, and assesses their effectiveness. We find that only strong measures helped contain domestic credit growth, the share of foreigncurrency- denominated loans provided by the domestic banking sector, or the domestic banking sector’s reliance on foreign borrowing during the boom years. We also find that circumvention via direct external borrowing often fully offset the effectiveness of these strict measures, and thatmeasures taken during the bust had no discernible impact. We conclude that (i) proper calibration of macroprudential measures is of the essence; (ii) only strong, broad-based macroprudential measures can contain credit booms; (iii) econometric studies of macroprudential policy effectiveness should focus on measures rather than on instruments (i.e. classes of measures) and in so doing allow for possible non-linear and state-contingent effects.
    Date: 2016–02–15
  11. By: Fu, Shihe (Southwestern University of Finance and Economics); Liao, Yu (Clark University); Zhang, Junfu (Clark University)
    Abstract: This paper uses the 2011 China Household Finance Survey data to estimate the effect of change in housing value on homeowners' labor force participation. Using the average housing capital gains of other homes in the same community as an instrument for the housing capital gains of a given household, we find that a 100 thousand yuan increase in housing value leads to a 1.37 percentage point decrease in female homeowners' probability of participating in the labor force and a 1.49 percentage point increase in their probability of becoming housewives. We find little effect on men's labor force participation.
    Keywords: housing wealth effect, housing price, labor supply, labor force participation
    JEL: J21 J22 R20 R30
    Date: 2016–02
  12. By: Jan Babecky; Kamil Galuscak; Diana Zigraiova
    Abstract: The paper reports how Czech firms reacted to changes in economic conditions in the aftermath of the global financial crisis of 2008–2009 until 2013 and identifies specific patterns of employment, wage and price adjustment by firms. The results are drawn from a survey of firms conducted within the third wave of the ESCB Wage Dynamics Network (WDN3). Overall, while changes in demand were both positive and negative over the period, aggregate wage growth remained low, although more firms experienced an increase in average productivity over labour costs than a decline. Labour cost reduction was achieved mainly by reduction of new hires and by individual layoffs. The main obstacles to hiring workers were uncertainty about economic conditions, high payroll taxes and a shortage of labour with the required skills. The frequency of wage changes was lower in 2010–2013 than before and was attributed by firms inter alia to stronger competition. Wage freezes and wage cuts were still in use, while wage growth was more likely to be observed in very small and large firms and firms with a foreign owner. The frequency of price changes in 2010–2013 compared to 2008–2009 remained unchanged for more than 80% of firms. More frequent price changes were due to stronger competition and volatility in demand, while exchange rate changes contributed to higher frequency of price changes on foreign markets.
    Keywords: Downward wage rigidity, price setting, survey data, wage setting
    JEL: C83 J31 J41 L11
    Date: 2015–12
  13. By: Sanjay Kalra; Bui Thi Trang Dzung
    Abstract: The paper develops robust measures of core inflation for Vietnam that can be used in policy making. These core inflation measures (CIMs) are based on an analytical evaluation of the inflation process in Vietnam, and use a filtering approach to narrow down potential measures that satisfy certain empirically desirable criteria. The paper finds that commonly used exclusion-based measures (EBMs) do not perform well against these empirical criteria; trimmed mean measures (TMMs) do better. Among TMMs, “one trim does not fit all periods†; periods of high and variable inflation require larger trims, and conversely. EVIEWS and MATLAB programs which accompany the paper allow quick, timely replication of CIMs as new data become available, making them valuable tools for the State Bank of Vietnam on an ongoing basis.
    Keywords: Inflation;Vietnam;Inflation measurement;Monetary policy;Interest rate increases;Central bank policy;Core inflation, Monetary Policy; Vietnam
    Date: 2016–02–10
  14. By: Cameron, Lisa A. (Monash University); Meng, Xin (Australian National University); Zhang, Dandan (Peking University)
    Abstract: This paper uses survey and experimental data from prison inmates and comparable non-inmates to examine the drivers of rising criminality in China. Consistent with socio-biological research on other species, we find that China's high sex-ratios are associated with greater risk-taking and impatience amongst males. These underlying behavioral impacts explain some part of the increase in criminality. The primary avenue through which the sex-ratio increases crime, however, is the direct pressure on men to appear financially attractive in order to find a partner in the marriage market. These marriage market pressures result in a higher propensity to commit financially rewarding crimes.
    Keywords: crime, marriage markets, risk-taking, time preferences, sex-ratio, one child policy, China
    JEL: O12 J12
    Date: 2016–02
  15. By: International Monetary Fund
    Abstract: This paper discusses Serbia’s Third Review Under the Stand-By Arrangement and Request for Modification of Performance Criteria (PCs). The program is delivering good results. Significant fiscal tightening and efforts to address structural weaknesses and improve the business climate have helped restore growth and boost confidence and foreign direct investment. All end-September PCs were met with significant margins. However, there was a minor deviation in the indicative criterion on domestic arrears, and implementation of structural benchmarks has faced delays. Modifications of the end-December fiscal performance criteria are proposed to allow recognition of past liabilities.
    Keywords: Stand-by arrangement reviews;Fiscal policy;Fiscal reforms;Public sector;Public enterprises;Monetary policy;Economic indicators;Balance of payments statistics;Letters of Intent;Staff Reports;Press releases;Performance criteria modifications;Serbia;
    Date: 2015–12–18
  16. By: Yan, Zhen; Yu, Xiaohua; Zhou, Jiehong
    Abstract: Media reports could help shape consumer attitudes towards food quality and safety. By introducing an information treatment with positive or negative media coverage, we study the impact on consumer preference for pork products. The hypothesis is tested by a hypothetical choice experiment with 788 samples in 15 cities in China. Attributes we take into account include traceability, farming style, brand and certificates, in addition to prices. The results indicate that the media coverage could significantly shape consumers’ preference. A comparison of the two treatments indicates that the positive information treatment could yield smaller WTP values for all attributes related to food quality and safety.
    Keywords: Media coverage, Choice experiments, Pork products, China, Agribusiness, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, Q13, Q18,
    Date: 2016–02–15
  17. By: International Monetary Fund
    Abstract: This 2015 Article IV Consultation highlights that Estonia’s economic growth has slowed following the rebound from the deep recession in 2009. Although Estonia’s economic and institutional fundamentals are among the strongest in the region, the economy is expected to expand by only a modest 1.6 percent in 2015. Growth is primarily driven by private consumption, which benefits from strong wage growth as labor market slack diminishes for demographic reasons. The economy should gather speed going forward. Growth is projected at 2.5 percent for 2016 and should average about 3 percent over the next few years.
    Keywords: Article IV consultation reports;Economic growth;Fiscal policy;Public finance;Labor markets;Banking sector;Financial soundness indicators;Economic indicators;Staff Reports;Press releases;Estonia;
    Date: 2015–12–14
  18. By: Dilem Yıldırım (Department of Economics, METU); Ethem Erdem Orman (Republic of Turkey Prime Ministry Undersecretariat of Treasury)
    Abstract: This study explores the empirical validity of the Feldstein-Horioka puzzle for China in the presence of structural breaks. To this end, we employ the recently proposed multiple-break cointegration test of Maki (2012), along with the one-break Gregory and Hansen (1996) cointegration test. Once the existence of the cointegration between domestic savings and investment is ensured by allowing for endogenous structural breaks, Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) estimation procedures are implemented to obtain reliable inferences from the cointegrating regression. Empirical results reveal that the relationship between Chinese domestic savings and investment has changed with the regime shift towards flexible exchange rates and the 2008-2009 global financial crises. More specifically, with the introduction of managed floating exchange rate regime, a substantial reduction is observed in the almost unitary saving retention coefficient of the fixed exchange rate period. Furthermore, the correlation has experienced a slight increase since 2009, which coincides with the worldwide protectionist policies adopted in the depth of the global financial crisis.
    Keywords: Feldstein-Horioka puzzle, saving-investment association, capital mobility, exchange rate regimes, 2008-2009 global financial crises, cointegration, structural breaks, China
    JEL: E21 E22 F21 C22 C51 G01
    Date: 2016–01
  19. By: International Monetary Fund
    Abstract: This 2015 Article IV Consultation highlights that Moldova’s economic growth, at 3.6 percent, came in surprisingly strong in the first half of 2015 and was largely driven by net exports. Reserves fell by about a third between October 2014 and February 2015, but have been stable since. Net outflows in the financial account surged at end-2014, owing to election uncertainty and the banking crisis, but the outflow in currency and deposits tapered off in the second quarter of 2015. The near-term outlook is difficult. The economy is projected to contract by 1.75 percent in 2015, followed by a marginal recovery of about 1.5 percent in 2016. Deep reform is needed in the financial sector.
    Keywords: Europe;Moldova;monetary fund, exchange, budget, debt, exchange rate
    Date: 2016–01–20
  20. By: Jonida Bollano (Bank of Albania); Delina Ibrahimaj (Bank of Albania)
    Abstract: This paper empirically investigates the determinants of current accounts for a sample of 11 Central and East European Countries outside the Euro area. To this end we rely on the estimation of a panel VAR model with fixed effects over the period Q1 2005 to Q42014. Consistent with existing literature, we show that domestic GDP, the fiscal deficit, and the real effective exchange rate are key determinants of the current accounts of these countries. The dynamic relationships revealed in the paper complement the empirical literature on several fronts by providing new evidence from these emerging market economies.
    Keywords: Current account determinants, Central East Europe, P-VAR, GMM estimation
    JEL: F31 F32 F41 F42
    Date: 2015–10–01
  21. By: Zsoka Koczan
    Abstract: Emerging Europe has undergone a major economic transformation over the past 25 years. Most countries experienced initial drops in output during transition, followed by recovery in the second half of the 1990s. The path of transition in the Western Balkans has however been particularly uneven. The effects of transition also seem to have been more traumatic and persistent in the Western Balkans, and nostalgia for the past appears to be more prevalent here than in other former communist regions. Such dissatisfaction has important implications for the political economy of further reforms. This paper aims to inform policy by complementing the analysis of standard macro-level measures of inequality and poverty with a household-level analysis of subjective perceptions of poverty. We find that many more people appear to feel poor than are classified as such using purely income-based measures. Uncertainty, in particular related to expectations of future income and vulnerability to shocks, appears to be a key driver behind this discrepancy.
    Date: 2016–02–19
  22. By: Milenkovic, Marko
    Abstract: Serbia's EU integration has gained momentum after political change in 2000. From that point, numerous EU initiatives have been employed to facilitate the country's legal, economic and political change in order to prepare it for (potential) EU membership. The cornerstone of the relations between the country and the EU is the Stabilisation and Association Agreement, which mandates the full alignment of state aid measures to EU standards. Since 2006, subsequent governments have been working on aligning the substantive rules for the granting of state aid to the (ever-changing) EU framework, with a growing number of state aid measures and schemes being notified to and approved by the Commission for State Aid Control. However, this period was also characterised by a severe economic crisis that created the challenge for the Serbian government of aligning with the EU state aid regime, on the one hand, and facing pressure to save failing banks and companies, and prevent job losses, on the other. By examining the institutional structure of the regime's control body and the overall experiences of the first phase of the implementation of the Law on State aid, this paper draws conclusions on the major challenges and obstacles to introducing a new regulatory regime in the context of a deep economic crisis, ongoing enlargement fatigue and conflicting political legacies.
    Keywords: Serbia,state aid,legislative transformation,institutional independence,integration challenges,conditionality,enlargement fatigue
    Date: 2016
  23. By: Hua Liao; Xin Tang; Yi-Ming Wei (Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology)
    Abstract: Solid fuels such as firewood and coal are widely used for cooking and heating in the developing countries, which result in serious indoor air pollutions and health effects. Governments and international organizations have been devoted to addressing this issue for a long time. Based on the micro survey data from 1989¨C2011, this paper quantitatively investigate the situations and evolutions of cooking fuel using and its health effects in rural China. We have four findings: (i) most rural households still rely on solid fuels for cooking in modern China. ii) the cooking fuels are slowly diversifying in the last two decades, (iii) there are considerably geographical differences in cooking fuel using across China, and (iv) those resident usually using solid fuel have lower levels of self-assessed health and higher prevalence of respiratory diseases. We then draw some policy implications to reduce cooking fuel use..
    Keywords: rural residents; solid fuel; indoor air pollution (IAP); cooking; health
    JEL: Q54 Q40
    Date: 2016–02–10
  24. By: International Monetary Fund
    Abstract: This 2015 Article IV Consultation highlights that Slovakia remains among Europe’s stronger economies, with growth continuing to pick up in 2015, driven by strong domestic demand. A push to spend expiring European Union funds has underpinned rising investment while job creation and real wage growth have supported private consumption. Unemployment has fallen significantly since 2013, but is still about 11 percent overall, and is much higher for the long-term unemployed, youth, and women. The outlook is favorable with growth of 3–3.5 percent expected through the medium-term, reflecting sustained domestic demand as well as further contributions from the important export sector as substantial additional foreign auto sector investment is planned.
    Keywords: Slovak Republic;Europe;debt, inflation, market, investment, monetary fund
    Date: 2016–01–14
  25. By: Diego Anzoategui; Mali Chivakul; Wojciech Maliszewski
    Abstract: Widespread implicit guarantees and interest ceilings were major distortions in China’s financial system, contributing to a misallocation of resources. We analyze the impact of removing such frictions in a general equilibrium setting. The results show that comprehensive reforms generate better outcomes than partial ones: removing the deposit rate ceiling alone increases output, but the efficiency of capital allocation does not improve. Removing implicit guarantees improves output through lower cost of capital for private companies and better resource allocation.
    Keywords: Asia and Pacific;China;China, People's Republic of;Financial distortions, interest rate liberalization, implicit government guarantees, interest, guarantees, deposit, implicit guarantees, deposits, General, Asia including Middle East, Government Policy and Regulation,
    Date: 2015–12–24
  26. By: István Konya (Institute of Economics - Centre for Economic and Regional Studies, Hungarian Academy of Sciences and Central European University)
    Abstract: It is common practice in the literature to compute labor flows from data on stocks. To use these flows in standard search models, it is assumed that the economically relevant movements occur between employment and unemployment. If there are significant flows between labor force participation and inactivity, ignoring the participation decision can lead to biased results. This paper shows that while with three states it is impossible to identify all the flows from publicly available data on stocks, partial identification is possible. A new method is described, which allows the computation of the transition probabilities that are most relevant from a macroeconomic perspective. The method is easy to use, and the paper describes the detailed steps for its implementation to potential users.
    Keywords: Labor flows, Inactivity, Measurement, Macro data
    JEL: C82 J21 J63 J64
    Date: 2016–01
  27. By: Vodopivec, Matija (University of Primorska); Laporsek, Suzana (University of Primorska); Vodopivec, Milan (International School for Social and Business Studies, Celje, Slovenia)
    Abstract: We examine the effects of a 2013 labour market reform in Slovenia which made permanent contracts less restrictive and fixed-term contracts more restrictive. Using matched employer-employee database covering the entirety of Slovenia's labour market participants, we compare the difference in outcomes for workers employed under permanent vs. fixed-term contracts before and after the legislative change. We find that the reform achieved both its stated goals of reducing labour market segmentation and improving access to jobs for vulnerable groups: (i) it increased the probability of accessing permanent jobs via transitions from both fixed-term jobs and unemployment, and (ii) it improved the accessibility of permanent jobs for both young and old workers.
    Keywords: employment protection legislation, labor market dynamics, labor market segmentation
    JEL: J62 J63 J68
    Date: 2016–02

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