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on Transition Economics |
| By: | Thomas Piketty (Paris School of Economics); Li Yang (World Bank); Gabriel Zucman (University of California at Berkeley) |
| Abstract: | This appendix supplements our paper and describes the full set of data files and computer codes (PYZ2017.zip) that were used to construct the series. |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:wel:wpaper:201707&r=tra |
| By: | Jan Bruha; Jaromir Tonner |
| Abstract: | In November 2013 the Czech National Bank introduced a floor for the Czech koruna exchange rate as its monetary policy instrument. The rationale for this action was to prevent the risk of deflation in a zero-lower-bound environment where policy rates could not be lowered any further. The goal of this paper is to assess ex post the effect of the exchange rate floor on the Czech economy - inflation and the main real aggregates. The paper uses two different approaches. First, the official DSGE forecasting model is used to simulate the counterfactual macroeconomic dynamics of no introduction of a floor. Second, the paper applies an empirical approach: the synthetic control method and its generalised variant are used to estimate these counterfactual trajectories. Both approaches show that the floor prevented inflation from turning negative. Moreover, both methods indicate likely positive effects on macro variables and on various measures of inflation, although strongly statistically significant effects are only obtained for core inflation. The statistical significance for other variables is weaker or zero. We conclude that the introduction of the exchange rate floor was a correct policy action that has retrospectively been successful. |
| Keywords: | DSGE modelling, exchange rate policy, monetary policy in a zero interest rate environment, synthetic control method |
| JEL: | C21 E58 F47 |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2017/04&r=tra |
| By: | Hu, Zhongzhong; Rodrigue, Joel; Tan, Yong; Yu, Chunhai |
| Abstract: | This paper quantifies the separate contribution of idiosyncratic productivity and demand growth on aggregate Chinese exports. We develop firm, product, market and year specific measures of productivity and demand. We use these measures to document a number of novel findings that distinguish the growth of Chinese exports. First, we document that changes in demand explain nearly 78–89% of aggregate export growth, while only 11–22%of export growth is determined by productivity growth. Second, our results highlight two mechanisms which contribute significantly to aggregate export growth: the rapid reallocation of market shares towards products with growing demand, and high rates of product exit among low demand products. Investigating the mechanisms underlying these results we find that new exporters suffer demand shocks which are 66% smaller than those observed for incumbent producers in the same product market. By comparison, we find that there is only an 8% difference on average between the productivity of new and incumbent exporters.Repeating our exercise with revenue productivity reveals much smaller differences. This is largely attributed to differential movements in prices and marginal costs. |
| Keywords: | Exports, China, Productivity, Demand |
| JEL: | D24 F12 L11 L25 |
| Date: | 2017–10–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:81813&r=tra |
| By: | WATANABE Mariko |
| Abstract: | China's overcapacity problem in several industries including iron and steel, aluminum, and cement may have several roots. This has appeared due to a stage in its development; the Chinese economy has reached a moderate growth period after its high speed growth era, and supply has surpassed demand. Another source that causes overcapacity is institutional defect. A type of iron and steel companies have found it difficult to exit due to subsidies from the government, and can only maintain their production by running operational deficits and engaging in exporting. This paper tested the causality between subsidy/non-operational revenue and operation profits, and quantified "overproduction of iron" by the groups that are operating in deficit. Difference-in-differences estimation finds that (1) state-owned enterprises (SOEs) which recorded operational deficits will receive a larger non-operational revenue in the next period, and (2) these SOEs, which received non-operational revenue larger than their operational profits, ended up with an overall profit, but maintained their operational deficits into the following year. The result implies that subsidies soften the budget constraint of certain iron and steel SOEs. This conduct might cause a vicious cycle of competition with deficit to occur. |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:eti:rdpsjp:17058&r=tra |
| By: | Margit Molnar; Baolin Wang; Wenhao Chen |
| Abstract: | A key priority in China’s “new normal” period -- where returns on investment are slackening -- is corporate governance, which could lead to enhanced productivity by a better management of resources at the firm level. Corporate governance principles for listed firms follow global best practices, though their history is relatively short and the Chinese stock market has a number of features, which make the investigation of the impact of various corporate governance practices on firm performance of particular interest. Productivity is considered as a major measure of firm performance, but for comparison accounting indicators are also used to check the impact of selected corporate governance practices using firm-level data of listed firms between 1999-2015. The results are broadly in line with the existing literature: once controlling for endogeneity, there is no evidence that a greater share of independent directors boosts firm performance in general. At the time when the requirement that at least one third of directors must be independent was introduced in 2002, however, profitability improved. A greater salary gap between executives and staff hurts productivity, but boosts ROA and ROE, which are often among the objectives of executives and thus encourage them to seek short-term returns, even at the expense of productivity. While volume-based growth may lead to higher performance by the accounting ratios, it does not necessarily guarantee higher productivity. If such an expansion is debt financed, it can even harm productivity. Excessive ownership concentration appears harmful, but a certain degree of concentration may improve performance. Institutional investors, even though may own only a tiny fraction of shares, are found to boost firm performance. This Working Paper relates to the 2017 OECD Economic Survey of China (www.oecd.org/eco/surveys/economic-surve y-china.htm). |
| Keywords: | board structure, executive compensation, independent directors, institutional investors, ownership concentration, productivity |
| JEL: | G34 G38 P31 |
| Date: | 2017–10–11 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1421-en&r=tra |
| By: | Cheng, Dong; Tan, Yong; Yu, Jian |
| Abstract: | In this study we examine the effect of credit rationing on export performance for small and medium sized firms in China. We use a detailed firm-level data provided by the Small and Medium-sized Enterprises Dynamic Survey (SMEDS) to conduct this analysis. SMEDS provides firm-specific measures of credit rationing based directly on firm-level responses to the survey rather than indirectly from firm-level financial statements. We find that, at the extensive margin, weak and strong credit rationing reduce SMEs' export probability by 22% and 36%, respectively. At the intensive margin, they decrease SMEs' export values by more than 32% and over 66%, respectively. Different from existing literature, we construct valid firm-level instruments, firm-level housing investments and receivables, for credit rationing rather than using province-level instruments. In addition, credit rationing exhibits heterogeneous impacts on firms with different liquidity ratios, product portfolios, external collateral and capital utilization rates. |
| Keywords: | SMEs, Strong Credit Rationing, Weak Credit Rationing, Export Performance |
| JEL: | F10 G20 |
| Date: | 2017–10–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:81914&r=tra |
| By: | Becker, Torbjörn (Stockholm Institute of Transition Economics); Olofsgård, Anders (Stockholm Institute of Transition Economics) |
| Abstract: | In this paper we look at the growth experience of 25 transition countries during the 25 years since the dissolution of the USSR. We find that compared to expectations from a parsimonious growth model the region in the 2000’s seems normal in terms of growth performance, i.e. transition in the region is over in this respect. Institutions, speed of reform and macro variables fail to show a stable correlation with (conditional) growth when comparing the early and later periods of transition. We also find that the countries in the former Soviet Union (FSU12), doing substantially worse during the 1990’s, in the 2000’s are performing better than the 10 countries that joined the EU in 2004 and 2007 (EU10). This is partly explained by rising fuel prices but also point to strong macro forces of mean reversion. Despite this, the gap between the regions is wider in 2015 than in 1991, emphasizing the challenge of making up for deep crises. Finally, the model analysis suggests that looking forward the main challenge for the FSU12 countries (in particular the non-fuel exporters) is to promote more capital investment whereas the main challenge for EU10 is to increase the productivity of existing factors of production. |
| Keywords: | Growth; transition countries; comparative performance; economic crisis; mean reversion |
| JEL: | O00 P20 |
| Date: | 2017–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hasite:0043&r=tra |
| By: | Petros C. Mavroidis; Merit E. Janow |
| Abstract: | The WTO has struggled with the treatment of nonmarket economies (NMEs). What was a nonissue in the original GATT (because of the homogeneity of participants) became quite an issue with the accession of formally centrally planned economies, which were not transformed to market economies, at least not in the eyes of the incumbents. Contracting this issue has proved to be so far always wanting, and leaving it to adjudicators has not produced good results either. With respect to Chinese SOEs this risks continuing to be an issue, since the contractually agreed deadline (2016) after which China should not be treated as NME anymore, risks proving to be full of holes and loopholes. |
| Keywords: | NME (nonmarket economy), SOE (state-owned enterprise), WTO |
| JEL: | K40 F13 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2017/13&r=tra |
| By: | Yin-Chi Wang (Chinese University of Hong Kong); Ping Wang (Washington University in St. Louis); Chong Yip (Chinese University of Hong Kong); Pei-Ju Liao (Institute of Economics, Academia Sinica) |
| Abstract: | Observing China's rapid skill-enhanced development and urbanization process accompanied by continual reforms of the household registration system, we explore the underlying drivers, highlighting the channel of rural to urban migration. In addition to conventional work-based migration, we incorporate education-based migration by constructing a dynamic spatial equilibrium model of migration decisions with educational choice. We then calibrate our model to fit the data from China over the 1980--2007 period. We find that the effects of education-based migration on total per capita output cannot be ignored. There also exist rich interactions between the two migration channels. Furthermore, our results suggest that the increase in the college admission selectivity for rural students seriously depresses China's development. Policy experiments on migration and labour-market regulations are also conducted to assess their quantitative significance. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed017:738&r=tra |
| By: | Paul S. L. Yip (Department of Economics, Nanyang Technological University, Singapore); Yiu-Kuen Tse (School of Economics, Singapore Management University, Singapore); Yingjie Dong (Business School, University of International Business and Economics, Beijing) |
| Abstract: | This paper provides a review and empirical investigation of the exchange rate system reform in China over the period between July 2005 and January 2017. We describe the People's Bank of China's (PBoC's) initial achievements and subsequent mistakes in the reform. We note that the central bank's initial honoring of its implicit indication of gradual appreciation played a significant role in its success in the reform initially. However, because of the US pressure for faster renminbi (RMB) appreciation, the PBoC's subsequent violation of the implicit indication of gradual appreci- ation triggered substantial speculative in ows and hence excessive RMB appreciation and volatility between March 2006 and July 2008. We find that during the first ten years of the reform, the PBoC was actually monitoring the RMB-USD exchange rate instead of the nominal elective exchange rate (NEER). This policy failure was one of the reasons for the substantial drop in China's foreign reserves amid the strengthening of the USD between 2014 and early 2017. The PBoC's mini deval- uation on 11 August 2015 was another mistake that had thereafter triggered sharp depreciation and high volatility of the RMB. On the other hand, the several incidences of widening of the RMB-USD exchange rate band over the sampling period was found to have only relatively mild e ect on the volatility of the RMB. |
| Keywords: | fixed exchange rate system, GARCH model, nominal e ective exchange rate, renminbi |
| JEL: | F15 F31 F33 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:nan:wpaper:1710&r=tra |
| By: | Andrej Cupák (National Bank of Slovakia); Peter Tóth (National Bank of Slovakia) |
| Abstract: | We estimate a demand system to simulate the welfare and fiscal impacts of the recent value added tax (VAT) cut on selected foods in Slovakia. We evaluate the efficiency of the tax cut vis-a-vis its hypothetical alternatives using the ratio of the welfare and fiscal impacts. Based on our findings, tax cuts tend to be more efficient if demand for a good is price-elastic or if the good has several complements. The results also indicate that cherry-picking from food sub-categories could have improved the efficiency of the recent tax change. Further, we found potential revenue-neutral welfare-improving tax schemes, namely, a reduced rate on foods financed by an increased rate on non-foods improves welfare in case of most food types. The paper contributes to the literature by demonstrating that standard approximate efficiency indicators of VAT reforms are biased compared with simulation-based results for any plausible degree of a tax change. |
| Keywords: | Consumer behavior; Demand system; QUAIDS; Value added tax; Tax reform; Efficiency; Optimal taxation; Slovakia |
| JEL: | D12 E21 H21 I31 |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:svk:wpaper:1047&r=tra |
| By: | Vladimir Gligorov (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | The Macedonian economy has weathered the post-2008 crisis better than most countries in the Balkans. Investments and exports have sustained growth and the performance of the labour market has somewhat improved. With exports to GDP at around 50%, the small, landlocked economy remains relatively closed, though not necessarily by Balkan standards. Also, with an unemployment rate above 20%, which has tended to be even higher for decades now, there is clearly untapped potential for growth and development. Export-led growth is what the long-term macroeconomic framework has been designed for. There is a fixed exchange rate regime since 1994. Fiscal policy aimed at a balanced general budget for most of the pre 2008 period. Overall, the real exchange rate was not misaligned, so that a more active income and fiscal policy was available post-2008. Finally, an open foreign trade regime, with free trade with the EU and within the regional market of CEFTA, was supportive of growing exports in the last ten or so years. The tradable sector remains small for the size of the economy, not sufficiently diversified and internationalised, with a dominance of larger firms, and not appropriately innovative. A small open economy in the context of internationalisation of production and trade grows through exports by expanding its tradable sector along both the extensive and the intensive margins. That also means that there is a lot of space for innovative activities that can access the large, primarily European market, even if those are small and medium-size companies. With export-led growth remaining the main policy end, the economy is adapted to the stability that the long-term policy framework provides. There are possible improvements to the fiscal system and there is the need of better targeting of public investments. The main policy interventions should be in support of innovation, easier access to the product market in support of entrepreneurship, support for internationalisation of economic activities, and as much support for innovation as possible. Both public policies and the financial system should be supportive of these improvements in the product market. Finally, sustain growth and catching up with the more developed economies require sustained and efficient active labour market policies to bring the unemployment rate down to low single digits. With productivity improvements, the level of the Macedonian economy is about 20% below potential. With a potential growth rate of around 4%, within a generation Macedonian GDP per capita can be close to the EU average. |
| Keywords: | Macedonia, trade, innovation, internationalisation, growth |
| JEL: | F14 F41 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:wii:rpaper:rr:420&r=tra |
| By: | Shaghil Ahmed |
| Abstract: | This note explores some key aspects of China’s economic rise and the spillovers to the rest of the world that this rise has created. It then examines, using the Federal Reserve Board’s large-scale global model (SIGMA), the potential consequences for the global economy were China’s economy to slow sharply. Although the probability of such an event is low, a sharp slowdown of Chinese economic growth could have significant consequences for the global economy. |
| Date: | 2017–09–28 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgin:2017-09-28&r=tra |