nep-tra New Economics Papers
on Transition Economics
Issue of 2019‒10‒28
seven papers chosen by
J. David Brown
United States Census Bureau

  1. Credit supply constraint and external solvency: The case of the Czech Republic By Karel Br?na
  2. The Belt and Road turns five By Uri Dadush
  3. Monthly Report No. 4/2019 By Amat Adarov; Vasily Astrov; Alexandra Bykova; Olga Pindyuk
  4. Effects of emigration on Croatian growth and pension fund sustainability prospects By Tomislav Herceg; Iva Vuksanovi? Herceg; Fran Galeti?
  5. The evolution and heterogeneity of credit procyclicality in Central and Eastern Europe By Juan Carlos Cuestas; Nicolas Reigl; Yannick Lucotte
  6. Deposit Insurance, Market Discipline and Bank Risk By A.O. Karas; William Pyle; Koen Schoors
  7. What explains the gender gap in wealth? Evidence from administrative data By Jaanika Merikull; Merike Kukk; Tairi Room

  1. By: Karel Br?na (University of Economics, Prague)
    Abstract: The submission contains formal and empirical analyses of the constraints on the supply of credit in open transition economies as the external solvency of the economy and the banking sector is ensured when their international investment position is negative, foreign owners have significant participation in domestic banks, and banks face increasing regulatory requirements under Basel III. Our objective is to define the factors that affect constraints on the supply of credit at both the macro and banking level and to quantify the relationship between international investment sustainability determinants and the sources of foreign funding in the economy/banking system using an unrestricted ARDL ECM model in the Czech Republic.
    Keywords: net foreign assets, credit supply, external solvency, Basel III
    JEL: F32 F34 E51
    Date: 2019–10
  2. By: Uri Dadush
    Abstract: China’s Belt and Road Initiative (BRI) is an international trade and development strategy. Launched in 2013, it is one of the ways China asserts its role in world affairs and captures the opportunities of globalisation. The BRI has the potential to enhance development prospects across the world and in China, but that potential might not be realised because the BRI’s objectives are too broad and ill-defined, and its execution is too often non-transparent, lacking in due diligence and uncoordinated.
    Keywords: China, Belt & Road Initiative (BRI), Xi Jinping, Ancient Silk Road, World Trade Organization (WTO), Five-point plan, Steel, Infrastructure, Energy
    Date: 2019–01
  3. By: Amat Adarov (The Vienna Institute for International Economic Studies, wiiw); Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Alexandra Bykova (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Chart of the month Remittances in CESEE countries, as % of GDP in 2018 by Vasily Astrov Opinion corner ‘Integration of integrations’ Is there a way forward? by Vasily Astrov Technically and given the political will, economic integration between the EU and the Russia-led Eurasian Economic Union (EAEU) should not be overly difficult to implement, and there are good reasons to believe that it could be beneficial not only for EAEU countries but also to some extent for the EU. However, realistically this may require a change in the current political elites either in Russia or in the EU (or both). Trade effects of Eurasian economic integration to date by Amat Adarov Eurasian economic integration was initiated in 2010 with the establishment of the Eurasian Customs Union, and its successor, the Eurasian Economic Union, was formed in 2015. However, there is still little awareness about the economic content of the Eurasian bloc, rather often seen as a ‘paper tiger’ and a geopolitical project led by Russia. Likewise, empirical analysis of its actual impacts to date is lacking. The article reviews key developments to date and trade-related effects associated with the Eurasian integration. The economic outcomes are mixed, with Belarus being a major beneficiary, Russia generally gaining and mixed performance for Kazakhstan. The positive effects of integration on mutual trade, while initially notable, diminished significantly towards the year 2015. Regional trade integration in Central Asia Current status, challenges and prospects by Alexandra Bykova and Olga Pindyuk Trade integration in Central Asia remains rather low, only Kyrgyzstan is relatively well integrated with the region. The reasons behind this are (i) a low degree of complementarity and export specialisation in natural resources; (ii) deficient transport networks; (iii) low quality of institutions and diverging trade policies; and (iv) political conflicts regarding border delimitations and resources management. However, the situation seems to have changed recently and interaction among the regional states has intensified considerably. Monthly and quarterly statistics for Central, East and Southeast Europe
    Keywords: remittances, migration, economic integration, European integration, CIS, Central Asia
    Date: 2019–04
  4. By: Tomislav Herceg (Faculty of Economics and Busines, University of Zagreb); Iva Vuksanovi? Herceg (Faculty of Economics, University of Belgrade); Fran Galeti? (Faculty of Economics and Busines, University of Zagreb)
    Abstract: This paper analyses the current depopulation with respect to its impact on the labour market in Croatia and brings it into relation with the prospective of economic growth and sustainability of Croatian pension funds. Taking this situation as a starting point for further surveys, authors present an analysis of the systemic risk with respect to the population trends and input substitution driven growth. The first part of the survey shows that population trends in Croatia are detrimental: high emigration and low birth rate, resulting in an 7% fall in Croatian population since EU accession in 2013. Two different scenarios are used to make simulations of a population projection, revealing that under current conditions (0,9% birth rate and 0,33% net emigration rate) Croatia would lose 1 Million people (1 quarter) in 3 decades and more retired people than those employed. In the other scenario, under which Croatia would maintain stable population volume, a birth rate of 1,5% would be required, which means that birth count should increase by 67%. Even in that case it would take more than 2 decades to overturn the negative trend and 35 years to match current employed/retired ratio of 1,2.The second part puts the previous simulations into relation with pension fund sustainability. A simulation has shown that under an adaptive (pessimistic) scenario pension fund would require additional 12,8% of the state budget to be able to pay pensions since then there would be 10% more retired than employed people. Even in a sustainable (optimistic) scenario a state budget could expect a fall in the pension fund intervention in 30 years from now.The third part makes some growth accounting analysis. Although majority of the studies take the number of workers as constant since it varies very little in the short run, in Croatia there is a tendency of a rather hasty change in a population and workforce. It brings to conclusion that the changes in labour are not to be ignored and, if the countries want to maintain some minimum growth rates, the decrease in labour will have to be compensated by other factors, such as the increase in stocks of capital through investments and incentives for technology improvement. A simulation has shown that a country which has a fall in workforce of 1% per annum (in Croatia in 2018 it was -1,23%) the investments share in GDP should increase by 8%, making it a very costly and hardly achievable option.
    Keywords: Total Fertility Rate, Emigration, Growth Accounting, Generation Solidarity Pension System, Overlapping Generation Model
    JEL: J11 J21 H55
    Date: 2019–10
  5. By: Juan Carlos Cuestas; Nicolas Reigl; Yannick Lucotte
    Abstract: This paper presents empirical estimates of bank credit procyclicality for a sample of 11 Central and Eastern Europe countries (CEECs) for the period 2000Q1–2016Q4. In the first step we estimate a traditional-type panel VAR model and analyse the evolution of credit procyclicality in the CEECs by comparing the impulse response functions for different business cycle periods. The results confirm the existence of credit procyclicality in CEECs and show that procyclicality is higher during boom periods. Furthermore we observe the heterogeneity of credit procyclicality in the different countries in our sample. To explain the cross-country heterogeneity in credit procyclicality we construct an interacted panel VAR model (IPVAR) and analyse whether bank level competition, proxied by the aggregate Lerner index, constitutes a driving force of credit procyclicality. Our findings indicate that bank competition affects credit procyclicality and explains the differences in credit dynamics across CEECs. Specifically we show that the reaction of credit to a GDP shock is on average higher in a less competitive banking market.
    Keywords: credit cycle, business cycle, bank competition, interacted panel VAR, CEEC
    JEL: E32 E51 G20 D40 C33
    Date: 2019–10–14
  6. By: A.O. Karas; William Pyle; Koen Schoors
    Abstract: Using evidence from Russia, we explore the effect of the introduction of deposit insurance on bank risk. Drawing on within-bank variation in the ratio of firm deposits to total household and firm deposits, so as to capture the magnitude of the decrease in market discipline after the introduction of deposit insurance, we demonstrate for private, domestic banks that larger declines in market discipline generate larger increases in traditional measures of risk. These results hold in a difference-in-difference setting in which state and foreign-owned banks, whose deposit insurance regime does not change, serve as a control.
    Keywords: deposit insurance, market discipline, moral hazard, risk taking, banks, Russia
    Date: 2019–01
  7. By: Jaanika Merikull; Merike Kukk; Tairi Room
    Abstract: This paper studies the gender gap in net wealth. We use administrative data on wealth that are linked to the Estonian Household Finance and Consumption Survey, which provides individual-level wealth data for all household types. We find that the unconditional gender gap in mean wealth is 45% and that it is caused by large wealth disparities in the upper end of the wealth distribution. The structure of assets owned by men is more diversified than that for women. Men own more business assets and vehicles, while women own more deposits. The gender gaps in these asset components cannot be explained by observable characteristics. For partner-headed households the raw gender gaps across deciles are mostly in favour of men, and more strongly so for married couples, indicating that resources are not entirely pooled within households. For single-member households the raw gaps across quantiles are partially in favour of women. Accounting for observable characteristics renders the unexplained parts of the gaps mostly insignificant for all household types
    Keywords: gender gap, wealth, inequality, intra-household allocation of wealth, Estonia
    JEL: D31 J16 J71
    Date: 2019–10–16

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