nep-tra New Economics Papers
on Transition Economics
Issue of 2017‒07‒30
sixteen papers chosen by
J. David Brown
United States Census Bureau

  1. The Financing of Local Government in China: Stimulus Loan Wanes and Shadow Banking Waxes By Zhuo Chen; Zhiguo He; Chun Liu
  2. Gross versus value added trade balances of the Central and Eastern European countries By ?ukasz Ambroziak
  3. Factors attracting banking investment into fintech start-ups: Russian context By Ekaterina Semerikova
  4. Financial Technology Transformation - Evidence from China?s Value Web By Andy Cheng
  5. Mapping the Stocks in MICEX: Who Is Central in Moscow Stock Exchange? By M. Hakan Eratalay; Evgenii Vladimirov
  6. Giant and dwarf - China's two faces in wind energy innovation By Gandenberger, Carsten
  7. Do High Speed Railways Lead to Urban Economic Growth in China? By Jack Strauss
  8. SOME ASPECTS OF INDUSTRIAL POLICY IN SLOVAKIA By Jana ?tofková; Stanislav ?tofko; Katarína Ga?ová
  10. The Influence of Culture Difference on Decision Making Process to Choose Integration Modes after China Purchased Germany Family Enterprises By YANAN YANG; Christoph Lütge
  11. Benefits of the retail payments card market: Evidence from Russian merchants By Egor Krivosheya; Andrew Korolev
  12. Should Inflation Measures Used by Central Banks Incorporate House Prices? The Czech Approach By Mojmir Hampl; Tomas Havranek
  13. SMEs access to formal finance in post-communist economies: Do institutional structure and political connectedness matter? By Kobil Ruziev; Don Webber
  14. The Influence of Renewable Energy Sources on the Czech Electricity Transmission System By Karel Janda; Jan Malek; Lukas Recka
  15. Influence of Renewable Energy Sources on Electricity Transmission Networks in Central Europe By Karel Janda; Jan Malek; Lukas Recka
  16. Child Labour: what do the survey results in Georgia show By Lia Charekishvili

  1. By: Zhuo Chen; Zhiguo He; Chun Liu
    Abstract: China’s four-trillion-yuan stimulus package fueled by bank loans in 2009 has led to the rapid growth of shadow banking activities in China after 2012. The local governments in China financed the stimulus plan mainly through bank loans in 2009, and resorted to non-bank debt financing after 2012 given the mounting rollover pressure from bank debt coming due, a manifestation of the stimulus-loan-hangover effect. Cross-sectionally, provinces with abnormally greater bank loan growth in 2009 experienced more Municipal Corporate Bonds issuance during 2012-2015, as well as more shadow banking activities including Entrusted loans and Wealth Management Products. We highlight the market forces behind the regulation changes on local government debt post 2012, together with the expedited reform on interest rate liberalization during that period.
    JEL: F62 F63 G23 O16 O17 O53
    Date: 2017–07
  2. By: ?ukasz Ambroziak (Warsaw School of Economics)
    Abstract: The making available in the early 2010s of databases containing world input-output tables (e.g. WIOD) was a significant advancement in research on international trade. It allowed to compile statistics of value added flows between countries. The concept ?trade in value added? accounts for the value added of one country directly and indirectly contained in final consumption of another country. The typical question would be: How much value added of other countries is contained in the consumption of the country under examination?. The trade statistics in value added term eliminate the multiple calculation of such goods in trade ? first as components (intermediate goods) and then as parts of final goods. Thus, those statistics are better to assess the benefits derived by particular countries from foreign trade. The aim of this paper is to present changes of trade balances in bilateral trade of the Central and Eastern European countries (Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia ? CEECs) in 1995-2011. The illustration of these changes is based on trade statistics both in value added terms and in gross terms. The data are downloaded from the World Input-Output Database (WIOD Release 2013). The research study shows that trade deficits and trade surpluses when measured in value added terms tend to become smaller as compared to gross trade figures. The key to understanding of this pattern is trade in intermediates. The differences between trade balances in gross and value added terms differ among the CEECs. The largest are in the Central European countries (the Czech Republic, Hungary, Poland and Slovakia). These countries are strong integrated with the global value chains.
    Keywords: gross trade, value added trade, trade balance, Central and Eastern European countries
    JEL: F14 F60 D57
    Date: 2017–05
  3. By: Ekaterina Semerikova (Moscow School of Management SKOLKOVO)
    Abstract: One of the main problems for any start-up is to find funds for the idea development, product/service creation and promoting it in the market (Binks & Ennew, 1996). In Russia banks form the main demand for fintech products and services. However, there is a belief that Russian fintech ecosystem is not well developed. This research aims at exploring which barriers for fintech start-up ecosystem development are present in Russia as well as necessary and sufficient conditions for a fintech start-up to attract bank as an investor in the context of Russian experience. Qualitative interviews with experts of Russian financial industry, including representatives from banks, a regulatory institute, IT corporations (n=32) as well as quantitative survey of fintech start-ups (n=37) provide data for this research. This study uses crisp set Qualitative Comparative Analysis (csQCA) to examine the presence of complex causality relationships between factors describing fintech start-up and receiving investment from banks. Major findings of this research corroborate the belief that Russian fintech start-up ecosystem is weakly developed. The one reason for that is the gap between what fintech start-ups offer and what market actually needs. Necessary condition for receiving bank?s investments according to crisp set QCA is having a business plan. Other conditions this research explores are sufficient and include: having a core competence in market and consumer understanding, income source as a commission per transaction, payments-related start-up?s products or services, not aiming at owning the business while doing start-up project and also readiness of the product or service. The sufficient conditions might be absent or present in certain configurations. Finally, in Russia banks finding start-up offerings unsatisfactory choose not to invest in them or to create incubators but rather develop fintech internally. This research contributes to the literature on QCA (Ragin et al., 2006; Skaaning, 2007), as well as financial technologies (Shim & Shin, 2016) and develops knowledge on fintech start-ups in particular.
    Keywords: fintech, start-ups, financial services
    JEL: G29
    Date: 2017–07
  4. By: Andy Cheng (Hang Seng Management College)
    Abstract: With the vigorous development in internet finance, the provisions of electronic platform service for online and mobile payments have become very popular in China. The internet finance has spurred the transformation and promoted innovation of the China?s banking sector, in particular under the policies support and encouragement from the Chinese Authority. At the same time, such development also brings new challenges to the Regulators. This paper examines the current status, regulatory challenges and development of the value web in China.Currently, internet finance in China mainly covers peer-to-peer (P2P) lending, third party online/mobile payment and online/mobile wealth management products. The value web has increased the financial inclusion and lowered the cost of entry for the public, which in return enhance user experience. With the advancement in technology, computing is getting faster and cheaper. Virtualization is driving up efficiency and utilization. Storage devices are growing in terms of capacity while declining in price. Delivery mechanism such as cloud computing also helps to lower costs and drive efficiencies. The internet finance business model is moving to Big Data application, banks expedite to draw close to both internet services and social communication network providers during the transformation process.Information technology has brought a new competitive agent and financial intermediate. Traditionally, banks are the confluence of financial information and fund flows. However, with opening on the operations of internet companies, information gathering and integration become more efficient, extensive and faster than those from banks. While chasing economic of scales, banks in the past have concentrated their resources to those big companies (the head) which can maximize banks? profit contribution. The ?tail?, those small and medium size enterprises with lower transaction amount but high frequency, is being ignored. This provides an excellent opportunity for internet finance to fill the gap. Thus, banks are facing the challenge on financial dis-intermediation during this wave of transformation.On the other hand, crafting enlightened regulation for the internet space, in particular, in relating to financial application is never to be an easy task. It is understood that the current regulatory framework may not be able to keep abreast with the exponential growth in the value web. In view of the challenges, a comprehensive review of the Cyber Security Law in China was conducted in June 2016. Regulators recognize the importance of technological transformation of the value web and carefully adapt the approaches to regulate this new ecosystem in China.
    Keywords: Technological Change, Innovation, Mobile Business
    JEL: M15 O31
    Date: 2017–07
  5. By: M. Hakan Eratalay; Evgenii Vladimirov
    Abstract: In this article we use partial correlations to derive bidirectional connections between the major firms listed in MICEX. We obtain the coefficients of partial correlation from the correlation estimates of constant conditional correlation GARCH (CCC-GARCH) and consistent dynamic conditional correlation GARCH (cDCC-GARCH) models. We map the graph of partial correlations using the Gaussian graphical model and apply network analysis to identify the most central firms in terms of shock propagation and in terms of connectedness with others. Moreover, we analyze some macro characteristics of the network over time and measure the system vulnerability to external shocks. Our findings suggest that during the crisis interconnectedness between firms strengthen and system becomes more vulnerable to systemic shocks. In addition, we found that the most connected firms are Sberbank and Lukoil while most central in terms of systemic risk are Gazprom and FGC UES.
    Keywords: Multivariate GARCH, Volatility Spillovers, Network connections, MICEX
    JEL: C01 C13 C32 C52
    Date: 2017–01–24
  6. By: Gandenberger, Carsten
    Abstract: A functional analysis of the TIS for wind energy in China has revealed a great disparity in performance with respect to different functions of innovation. A particular strength of the Chinese TIS is the rapid diffusion of wind power equipment which presupposes the development of domestic production capabilities, the successful adoption of existing technology, the creation of markets and legitimacy as well as the ability to mobilize financial resources. Furthermore, Chinese universities and research institutes have quickly expanded their capabilities in the area of basic research. In contrast, China's performance in the area of applied research is mixed. Although the growth in the number of transnational and domestic wind energy patents indicates that China is now among the most inventive countries in the world, a more detailed analysis suggests that inventions are less focused on the most relevant technology subfields and that Chinese firms are reluctant to engage in innovation. The most prominent drawback of the centralized planning approach in China are governance deficits relating to the integration of wind energy into China's electricity grid as well as to the lack of complementary infrastructure for energy transmission and storage. These deficits result in high curtailment rates, low incentives for quality oriented innovation, and a low overall efficiency of wind energy in China.
    Keywords: Technological Innovation System,Functions of Innovation,China,Wind Energy
    Date: 2017
  7. By: Jack Strauss (University of Denver)
    Abstract: This paper investigates the impact of high-speed railroads (HSR) on city-level economic activity using a new dataset for approximately 200 cities in China from 2007-2014. We apply panel Granger causality methods to assess whether increases in a city?s accessibility increases GDP growth, GDP per capita growth and wage growth. Or does causality run the opposite way ? does rising economic growth boost accessibility? Results document that increases in accessibility lead to significant and relatively large increases in GDP growth on the city-level; further, the benefits substantially out-weigh HSR?s fixed costs, depreciation and subsidies. Out-of-sample methods document the importance of increases in HSR in forecasting GDP growth. Monte Carlo simulations document the usefulness of OLS and out-of-sample tests in assessing panel Granger Causality tests.
    Keywords: China Infrastructure, Granger Causality, High Speed Railroads
    Date: 2017–07
  8. By: Jana ?tofková (?ilinská univerzita v ?iline); Stanislav ?tofko (?ilinská univerzita v ?iline); Katarína Ga?ová (?ilinská univerzita v ?iline)
    Abstract: In contrast to the fiscal and financial policy there is no precise, universally accepted definition of industrial policy. Industry influences crucially the development of each region, largely contributes to the development of the economy. The financial and economic crisis over the last decade affected the industry in Slovakia and other EU countries. Due to the fact that the Slovak Republic is a small open economy for purposes of comparison were chosen countries with small economies and a different competitiveness. Slovak Republic has the most developed automobile industry. It is necessary to ensure the competitiveness bear in mind the increasing employment, improving quality of life and reducing environmental pollution. Several results of a survey are presented, also some measures that could improve competitiveness as well as sustainable development.
    Keywords: Industrial policy, competitiveness, automobile industry, industrial structure, sustainable development
    JEL: O25
    Date: 2017–05
  9. By: Bogna Ka?mierska-Jó?wiak (University of Lodz, Faculty of Management); Elzbieta Wro?ska-Bukalska (Maria Curie-Sklodowska University Lublin)
    Abstract: In recent years open-market share repurchase programs have become an important payout policy not only for U.S. firms, but also European. Vast literature has examined the effect of share repurchase announcement on developed countries, especially the U.S. Relatively little research has yet been published examining the emerging markets reaction on share repurchase programs. This study attempts to extend the knowledge with the information content of buy back announcements in Poland. The main aim of the study is to test the informational con-tent of share repurchase announcements on the Polish alternative stock market us-ing event study methodology. Our sample was formed by identifying share repur-chase announcements reported by companies listed on the NewConnect Stock Ex-change over the period 2007-2016. Due to the results of prior studies which give support for positive market reaction on share repurchase announcements (i.a. Ikenberry, Lakonishok and Vermaelen, 1995; Grullon and Michaely, 2002; Chan, Ikenberry, Lee, Wang, 2010) we hypothesize that firms announcing share repurchases on NewConnect experience positive valuation effects.
    Keywords: share repurchase, payout policy, event study, abnormal returns, NewConnect, Poland
    JEL: G35
    Date: 2017–07
  10. By: YANAN YANG (Technische Universität München); Christoph Lütge (Technische Universität München)
    Abstract: This paper presents a novel method for identifying the suitable mode selection of culture integration for Chinese enterprises, during the oversea mergers and acquisitions with Germany family enterprises. Using questionnaire and case study, the national and organizational culture would be measured for the comparison of Chinese and German family enterprises, and the influence factors of culture difference and suitable culture integration modes would be teased out. Based on Berry?s Acculturation theory, this paper would propose that if the national and organizational cultures were both distant, then the marginalization would be positive; if they were both close, then the assimilation would be positive; if their national culture were close while organizational culture were distant, then the separation would be positive; lastly, if their national culture were distant while organizational culture were close, then the integration would be positive. After the questionnaire research (130 open & close questionnaires to Chinese enterprises and 20 to Germany), 86 % valid questionnaires were recovered. The result shows agreement with theoretical prediction. Three case studies would be conducted accordingly. The work presented here has profound implications for future studies of Berry?s Acculturation theory. It is hope to help solve the problem of the culture integration in mergers and acquisitions among China and Western Countries in the future and significantly improve over previous efforts by Moran, et al.
    Keywords: Culture Difference; Culture Integration Modes; Decision Making Process; Chinese and German Family Enterprises;
    Date: 2017–07
  11. By: Egor Krivosheya (Moscow school of management SKOLKOVO); Andrew Korolev (Moscow school of management SKOLKOVO)
    Abstract: This article evaluates merchants' benefits resulting from the participation in the retail payments market. Using surveys to obtain a representative sample of 800 traditional (offline) Russian merchants, the article finds significant, robust evidence in favor of positive merchant' benefits. This study further separates the benefits into direct and opportunity finding that the non-welfare improving regulatory initiatives might result from the failure to account opportunity benefits of merchants. This article also examines the factors affecting the level of merchants' benefits. Results show that factors affecting the value of benefits and the probability to accept payment cards differ. Findings imply that unbalanced intervention may be detrimental to the agents' welfare and propose a mechanism for ex-ante evaluation of the effect of shocks and interventions.
    Keywords: Retail payments; payment cards; merchant?s acceptance; benefits; financial services.
    JEL: G21 E42 D53
    Date: 2017–07
  12. By: Mojmir Hampl (Czech National Bank); Tomas Havranek (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic; Czech National Bank)
    Abstract: In this paper we describe the Czech National Bank’s approach to incorporating macroprudential considerations into monetary policy decision making: the use of a broader inflation measure that gives substantial weight to house prices and is considered along with headline CPI inflation. We argue that, in terms of theory, the broader inflation gauge is at least as suitable for measuring the value of money as headline CPI inflation is, but we also acknowledge practical problems that arise from the use of the broader index.
    Keywords: Consumer price index, financial stability, house prices, macroprudential policy, monetary policy, owner-occupied housing
    JEL: E31 E44 E50 R30
    Date: 2017–07
  13. By: Kobil Ruziev (University of the West of England, Bristol); Don Webber (University of the West of England, Bristol)
    Abstract: In post-communist economies, a disproportionately greater share of formal finance is channelled to larger enterprises and SMEs lack appropriately-priced formal finance. This article examines whether institutional structure and interpersonal connectedness with bureaucrats exacerbate this formal finance misallocation. We show that access to and use of interpersonal bureaucratic networks improve chances of receiving formal bank credit by between 4–10%. The benefits of interpersonal links are stronger for larger SMEs, and being connected to bureaucratic networks is not associated with enterprise growth. These findings imply that traditional policies that increase bank finance to SMEs should also aim to improve impartiality of bureaucratic institutions and enforceability of private contracts.
    Keywords: Financial development; Formal finance; Firm-level analysis; Transition economies
    JEL: G00 G38 B52 P3 M2
    Date: 2017–01–01
  14. By: Karel Janda (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic; Department of Banking and Insurance, Faculty of Finance and Accounting, University of Economics, Namesti Winstona Churchilla 4, 13067 Prague, Czech Republic); Jan Malek (Universiteit van Amsterdam, Amsterdam); Lukas Recka (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic)
    Abstract: This paper provides the first academic economic simulation analysis of the impact of increase in predominantly German wind and solar energy production on the Czech electricity transmission network. To assess the exact impact on the transmission grid, updated state-of-the-art techno-economic model ELMOD is employed. Two scenarios for the year 2025 are evaluated on the basis of two representative weeks. The first scenario is considered as baseline and models currently used production mix. The second scenario focuses on the effect of German Energiewende policy on the transmission networks as expected in 2025. The results confirm that higher feed-in of solar and wind power increases the total transport of electricity between transmission system operator areas as well as the average load of lines and volatility of flows. Also, an increase in number of critical high-load hours is observable. Taking into account only the Czech transmission system, considerable rise both in transported volume and volatility are observed only on border transmission lines, not inside the country. Moreover, our qualitative analysis shows that all these mentioned effects are strenghtened by the presence of German-Austrian bidding zone.
    Keywords: Energiewende, wind, solar, transmission networks, ELMOD
    JEL: L94 Q21 Q48 C61
    Date: 2017–03
  15. By: Karel Janda (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic; Department of Banking and Insurance, Faculty of Finance and Accounting, University of Economics, Namesti Winstona Churchilla 4, 13067 Prague, Czech Republic); Jan Malek (Universiteit van Amsterdam, Amsterdam); Lukas Recka (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic)
    Abstract: This paper focuses on the influence of increased wind and solar power production on the transmission networks in Central Europe. The model ELMOD is employed. Two development scenarios for the year 2025 are evaluated on the basis of four representative weeks. The first scenario focuses on the effect of Energiewende on the transmission networks, the second one drops out nuclear phase-out and thus assesses isolated effect of increased feed-in. The results indicate that higher feed-in of solar and wind power increases the exchange balance and total transport of electricity between transmission system operator areas as well as the average load of lines and volatility of flows. Solar power is identified as a key contributor to the volatility increase, wind power is identified as a key loop-flow contributor. Eventually, it is concluded that German nuclear phase-out does not significantly exacerbate mentioned problems.
    Keywords: Energiewende, RES, transmission networks, congestion, loop flows, ELMOD, Central Europe
    JEL: L94 Q21 Q48 C61
    Date: 2017–02
  16. By: Lia Charekishvili (Ivane Javakhishvili Tbilisi State University, Invited Associate Professor)
    Abstract: The child labour is very important problem in the world. The statistical findings based on the survey results, providing details on child labour phenomenon in Georgia, its dimensions and scope, including characteristics and results. According to the survey 5.8% of children aged 5-17 are economically active. The boys account for 76.5% of employed children aged 5-17. Children engaged in economic activities constitute 1.6% in urban and 11.4% in rural areas. The educational level of parents of children in child labour is relatively low compared to the educational level of non-working children. Poverty and low income are among the main causes of child labour.
    Keywords: Legislation, ILO, Survey, Statistics
    JEL: J82 D19 J01
    Date: 2017–05

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