nep-tra New Economics Papers
on Transition Economics
Issue of 2019‒11‒18
fifteen papers chosen by
J. David Brown
United States Census Bureau

  1. Braced for Fallout from Global Slowdown By Vasily Astrov; Alexandra Bykova; Rumen Dobrinsky; Vladimir Gligorov; Richard Grieveson; Doris Hanzl-Weiss; Gabor Hunya; Sebastian Leitner; Isilda Mara; Olga Pindyuk; Leon Podkaminer; Sandor Richter; Hermine Vidovic
  2. Former Communist party membership and present-day entrepreneurship in Central and Eastern Europe By Ivlevs, Artjoms; Nikolova, Milena; Popova, Olga
  3. Analysis of impediments to grain export from Russia, Ukraine and Kazakhstan: Three essays By Kulyk, Iryna
  4. Slovak Republic; Technical Assistance Report-Public Investment Management Assessment By International Monetary Fund
  5. Local crowding out in China By Huang, Yi; Pagano, Marco; Panizza, Ugo
  6. Reevaluating distributional consequences of the transition to market economy in Poland: new results from combined household survey and tax return data By Michał Brzeziński; Michał Myck; Mateusz Najsztub
  7. China's Shadow Banking: Bank's Shadow and Traditional Shadow Banking By Guofeng Sun
  8. Current account and structural change in European transition economies By Simeon Coleman; Juan Carlos Cuestas
  9. Eurozone periphery post-crisis - Financialisation and industrialisation in Slovenia and Slovakia By Ana Podvršič; Joachim Becker
  10. What measures of real economic activity slack are helpful for forecasting Russian inflation? By Ramis Khabibullin
  11. Oligopsony power in the Kazakh grain supply chain By Chezhia, Giorgi
  12. Quarterly Projection Model for Ukraine By Anton Grui; Artem Vdovychenko
  13. Russian Federation; Fiscal Transparency Evaluation Update By International Monetary Fund
  14. Exchange Rate Risk and Trade Mode Choice in the Processing Trade: Evidence from Chinese Data By Chen, Zhe; Hong, Junjie; Sun, Xiaonan
  15. The long-term costs of government surveillance: Insights from stasi spying in East Germany By Lichter, Andreas; Löffler, Max; Siegloch, Sebastian

  1. By: Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Alexandra Bykova (The Vienna Institute for International Economic Studies, wiiw); Rumen Dobrinsky (The Vienna Institute for International Economic Studies, wiiw); Vladimir Gligorov (The Vienna Institute for International Economic Studies, wiiw); Richard Grieveson (The Vienna Institute for International Economic Studies, wiiw); Doris Hanzl-Weiss (The Vienna Institute for International Economic Studies, wiiw); Gabor Hunya (The Vienna Institute for International Economic Studies, wiiw); Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Isilda Mara (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw); Leon Podkaminer (The Vienna Institute for International Economic Studies, wiiw); Sandor Richter (The Vienna Institute for International Economic Studies, wiiw); Hermine Vidovic (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Much of CESEE has so far weathered the slowdown in the global economy well, but signs of contagion are starting to emerge. Global economic growth is at its weakest level since the 2008-09 crisis, and there is no way that the region will be able to avoid this, given its high degree of reliance on exports and integration with Germany. Although the peak years are over, we expect a soft landing rather than an outright collapse for CESEE. Domestic demand will remain resilient, helped by strong wage growth, robust public investment, loose fiscal policy and plentiful credit. Downside risks to our projections are significant, and include a smaller post-Brexit EU budget, the fallout from global trade tensions, the impact of political developments in CESEE on institutions, and potential instability emanating from the financial sector.
    Keywords: CESEE, economic forecast, Europe, Central and Eastern Europe, Southeast Europe, Western Balkans, new EU Member States, CIS, Russia, Ukraine, Romania, Czech Republic, Hungary, Turkey, Serbia, convergence, business cycle, overheating, external risks, trade war, EU funds, private consumption, credit, investment, exports, FDI, labour markets, unemployment, employment, wage growth, migration, inflation, central banks
    JEL: E20 E31 E32 F15 F21 F22 F32 F51 G21 H60 J20 J30 J61 O47 O52 O57 P24 P27 P33 P52
    Date: 2019–11
  2. By: Ivlevs, Artjoms; Nikolova, Milena; Popova, Olga
    Abstract: After the collapse of Communism in Central and Eastern Europe, former party members were particularly likely to start businesses and become entrepreneurs. However, it remains unclear whether this entrepreneurial activity was driven by the resources, information and opportunities provided by former party membership or because people with specific individual attributes were more likely to become party members (self-selection). This study is the first to separate the causal effect of former Communist party membership from self-selection. Using individual-level Life in Transition–III survey and instrumental variables analysis, we find that, in Central and Eastern European countries, membership of former Communist party has facilitated business set-up but not business longevity. Our results also suggest evidence of negative self-selection, meaning that people who joined the former ruling party tended have fewer of the traits associated with entrepreneurship such as motivation, risk tolerance, and entrepreneurial spirit. We show that former Communist party membership still matters for business practices, business ethics, and the nature of doing business in transition economies.
    Keywords: communism,communist party,elite networks,entrepreneurship,post-socialist countries
    JEL: L26 P20 P31
    Date: 2019
  3. By: Kulyk, Iryna
    Abstract: Food security has emerged high on the agenda of development agencies, policy makers and private stakeholders. As a consequence of major events affecting agricultural production such as the world food crisis of 2007-2008 which prompted skyrocketing world market prices for grains, or highly variable weather leading to harvest failures, the governments of exporting countries tend to restrict their exports with the aim of limiting domestic food price inflation and mitigating any negative impacts on their local markets. According to USDA projections to 2025, Russia, Ukraine and Kazakhstan will further strengthen their position on the world wheat market. The countries are known to have unrealised grain production potential, deteriorated grain storage and transport infrastructure, and government interference in agricultural trade, i.e. application of restrictive measures on grain exports. The topic of trade barriers in the RUK countries remains highly relevant as demonstrated by the recent implementation of export duties for wheat in the Russian Federation. Given the highly variable weather in the RUK region as well as other changing macroeconomic factors, it is hard to predict whether the countries will restrict exports in the future. Barriers to trade can be of formal or informal nature. Formal barriers are documented in governmental resolutions, while informal barriers can stem from administrative procedures, the market structure and the institutional framework observed in the country (Deardorff and Stern, 1997). Administrative measures such as the delayed supply of wagons, additional certifications and controls, bribing, preferential access and soft budget constraints for state trading enterprises are a few examples of the informal impediments to trade observed in the RUK region. Both the formal and informal barriers described above lead to higher transaction and time costs, result in foregone opportunities for trade, damage the image of the country and provide disincentives for investments in the sector. This prevents the RUK countries from realising their potential in grain production as well as grain export. Goal of the dissertation: Thus, the general objective of this thesis is to analyse the impediments to grain exports from Russia, Ukraine and Kazakhstan. In order to reach this objective I have divided it into three more specific goals, which are reflected in the structure of the thesis. Each aspect is covered in a separate essay. [...]
    Keywords: Agricultural and Food Policy, Crop Production/Industries, Food Security and Poverty, International Relations/Trade
    Date: 2019
  4. By: International Monetary Fund
    Abstract: Since 2016, the Slovak government has prepared several spending reviews with the aim of improving the efficiency of public expenditures, better serve citizens, and consolidate the public finances. Some of these reviews (e.g., transport) have included a strong focus on infrastructure investment. To further improve public investment management (PIM), the authorities requested that a Public Investment Management Assessment (PIMA) mission be conducted in parallel to the ongoing program of spending reviews.
    Date: 2019–10–31
  5. By: Huang, Yi; Pagano, Marco; Panizza, Ugo
    Abstract: In China, between 2006 and 2013, local public debt crowded out the investment of private firms by tightening their funding constraints, while leaving state-owned firms' investment unaffected. We establish this result using a purpose-built dataset for Chinese local public debt. Private firms invest less in cities with more public debt, the reduction in investment being larger for firms located farther from banks in other cities or more dependent on external funding. Moreover, in cities where public debt is high, private firms' investment is more sensitive to internal cash flow, also when cash-flow sensitivity is estimated jointly with the probability of being credit-constrained.
    Keywords: investment,local public debt,crowding out,credit constraints,China
    JEL: E22 H63 H74 L60 O16
    Date: 2019
  6. By: Michał Brzeziński (Faculty of Economic Sciences, University of Warsaw); Michał Myck (Centre for Economic Analysis); Mateusz Najsztub (Centre for Economic Analysis)
    Abstract: We use Pareto imputation, survey reweighting, and microsimulation methods applied to combined household survey and tax return data to reevaluate distributional consequences of the post-socialist transition in Poland. Our approach results in the first estimates of top-corrected inequality trends for real equivalized disposable incomes over the years 1994-2015. We find that the top-corrected Gini coefficient grew by 14-26% more compared to the unadjusted survey-based estimates. This implies that over the last three decades Poland has become one of the most unequal European countries among those for which top-corrected inequality estimates exist. The highest-income earners benefited the most during the post-socialist transformation: the annual rate of in-come growth for the top 5% of the population exceeded 3.5%, while the median income grew by about 2.5%.
    Keywords: income inequality, Gini index, top income shares, tax record, survey data, Pareto distribution, Poland
    JEL: D31 D63 C46 P36
    Date: 2019
  7. By: Guofeng Sun
    Abstract: Banks' shadow, or money creation by banks beyond traditional loans, plays an important role in China's money-creation process, posing a number of challenges to monetary policy operations and financial risk management. This paper analyzes the money-creation mechanisms of China's shadow banking sector in detail, provides accurate measurements, investigates its effects on financial risk, and surveys recent regulation. To strengthen supervision, China's regulators should closely track the evolution of various shadow banking channels, both on- and off-balance sheet. Specific macroprudential regulation tools, such as asset reserves and risk reserves, should be applied separately to banks' shadow and traditional shadow banking.
    Keywords: banks' shadow, traditional shadow banking, credit money creation, bank accounting, regulation
    JEL: E44 E51 G28
    Date: 2019–11
  8. By: Simeon Coleman (School of Business and Economics, Loughborough University, UK); Juan Carlos Cuestas (Department of Economics, Universitat Jaume I, Castellón, Spain)
    Abstract: How have the transition economies’ current accounts evolved? How similar are the factors that have influenced their evolution in each of these countries? In this paper, we examine the evolution of the current account in Central and Eastern European countries and the relationship with the main fundamentals. We employ dynamic ordinary least squares (DOLS) and Threshold Estimation methods to examine the relationship with its main fundamentals (i.e., the Real Exchange Rate, Terms of Trade, Investment, Government Consumption and Income). Our results suggest that the long-run determinants of the current account have indeed changed over time. In addition, the threshold cointegrated estimates show that the parameters are dependent on thresholds for certain variables.
    Keywords: Current account, Central and Eastern Europe, structural breaks, European integration.
    JEL: F15 F32
    Date: 2019
  9. By: Ana Podvršič (Centre d'Economie de l'Université de Paris Nord (CEPN)); Joachim Becker (Institute for International Economics and Development, Department of Economics,WU Vienna University of Economics and Business)
    Abstract: The article provides a comparative study of Slovenia and Slovakia to analyse the transformation of dependent accumulation regimes in the Eurozone periphery after 2010. The study of these two economies from CEE is particularly insightful to understand how the Eurozone countries from the industrial periphery coped with the challenges of restructuring after the outbreak of the crisis. The article combines dependency and régulationist approaches to study European asymmetrical accumulation regimes. We argue that the post-crisis economic trajectories in CEE continue to reflect main traits of the pre-crisis asymmetrical relationship with the core. The key vulnerabilities are linked to the on-going reliance on FDI for export industrialisation, the narrow export specialisation, and, particularly in Slovakia, a rapid expansion of household debt. In Slovenia, under the EU supervision, the pre-crisis private debts were shifted to the public sector and henceforth burden public investment. Our findings suggest that financialisation as well the Eurozone monetary constraints should be systemically included in the analysis of post-crisis CEE growth trajectories. In addition, despite economic recovery, the accumulation regimes at Eurozone industrialised periphery continue to exhibit strong anti-labour bias.
    JEL: O11 O19 P16
    Date: 2019–11
  10. By: Ramis Khabibullin (Bank of Russia, Russian Federation)
    Abstract: This paper investigates inflation forecasting accuracy of several real activity slack measures for the Russian economy. Several Bayesian unobservable-components models using several real activity variables were considered. I show that real-activity slacks gain no improvement in Russian inflation forecasting. This is true for the monthly and for the quarterly data. The estimation was made in the period from the beginning of 2003 to the end of 2018 for monthly data and from the beginning of 1999 to the end of 2018 for the quarterly data. Moreover, their real-times estimates are unreliable in the sense of the magnitude of their revisions.
    Keywords: Phillips curve, factor model, unobserved components model, output gap, real activity slack, Bayesian estimation
    JEL: C32 C53 E31 E32 E37
    Date: 2019–10
  11. By: Chezhia, Giorgi
    Abstract: The Kazakh grain producing and processing sectors are prominent components of the Kazakh agriculture. Production and export of grain, especially of wheat and wheat flour, has demonstrated significant annual growth after the 1990's crisis. However, the grain market is highly regulated by the government and some of the implemented policy instruments cause local grain market distortions. For example, the wheat export ban imposed by the government in 2008 triggered local wheat price fluctuations, followed by the price spikes after the ban elimination. In addition to the government interventions, the Kazakh grain sector is seriously challenged by production inefficiency, outdated production technology, low yields, limited access to financial recourses, landlocked position of the country and underdeveloped infrastructure. Furthermore, a non-competitive market structure, such as asymmetric price developments and antitrust law violations, is observed within the Kazakh grain supply chain. Evidence suggests that the grain processing sector, procuring roughly a third of the grain produced in the country, might be influencing the grain prices in Kazakhstan. Moreover, the grain sector became highly concentrated in recent years. Many processing companies exit the sector, enabling the remaining players to control the large share of the market. Therefore, the focus of this study is to analyze the structure of the grain supply chain in Kazakhstan, followed by the examination of the competitiveness of the Kazakh grain processing sector using econometric analyses. The econometric analyses are conducted within the framework of the New Empirical Industrial Organizations (NEIO). The three approaches being applied for the market power analysis are Hall's approach, General Identification Method (GIM) and Production Theoretical Approach (PTA). The results are examined and reported in combination with the analysis of the grain supply chain. [...]
    Keywords: Crop Production/Industries
    Date: 2019
  12. By: Anton Grui (National Bank of Ukraine); Artem Vdovychenko (National Bank of Ukraine)
    Abstract: This paper introduces the Quarterly Projection Model utilized by the National Bank of Ukraine to make its regular macroeconomic forecasts and monetary policy recommendations. The model is a semi-structural representation of an open-economy New-Keynesian general equilibrium model. It captures the transmission mechanism of monetary policy in the context of the Ukrainian economy. Among the economy’s key features are the disinflation agenda, heterogeneous prices, imperfect monetary policy credibility, high openness and dollarization.
    Keywords: National Bank of Ukraine, inflation targeting, monetary policy, projection model, monetary policy transmission mechanism in Ukraine.
    JEL: C52 C53 E37 E52
    Date: 2019–09
  13. By: International Monetary Fund
    Abstract: Russia was one of the first countries (and first G20 country) to volunteer to pilot the IMF’s new Fiscal Transparency Evaluation (FTE). The evaluation was conducted in October 2013 on the basis of a draft version of the IMF’s revised Fiscal Transparency Code released for consultation in July 2013. The evaluation report was finalized following comments from the authorities and internal reviews and published in May 2014. In light of feedback from consultation and experience from the pilot FTEs, the Fiscal Transparency Code (“the Code”) was further refined, approved by the IMF Executive Board, and published in June 2014.1 As part of the IMF Article IV surveillance mission in May 2019, Russia’s progress in improving fiscal transparency and responding the recommendations over the past five years was evaluated. This report provides a summary of the changes to Russia’s fiscal transparency practices since 2014 and makes recommendations for further improvements.
    Date: 2019–10–30
  14. By: Chen, Zhe; Hong, Junjie; Sun, Xiaonan
    Abstract: This study investigates the impact of exchange rate fluctuations on trade mode choices among assembly firms. Using the Chinese Customs data from 2000 to 2006, we show that exchange rate pass-through (ERPT) depends on which entity is responsible for importing inputs. Relative to passively receiving inputs under pure assembly (PA) mode, foreign invested assembly firms mainly source inputs by themselves through import and assembly (IA) mode and enjoy lower ERPT by doing so. We then relate exchange rate fluctuations to processing mode choices and find that the share of import through PA increases with exchange rate volatilities. This effect is more pronounced for firms in liquidity constrained industries and is mitigated by better local financial development.
    Keywords: exchange rate risk, trade mode choice, processing trade, financial constraint, F14, F23, F31
    Date: 2019–10
  15. By: Lichter, Andreas; Löffler, Max; Siegloch, Sebastian
    Abstract: We investigate the long-run effects of government surveillance on civic capital and economic performance, studying the case of the Stasi in East Germany. Exploiting regional variation in the number of spies and administrative features of the system, we combine a border discontinuity design with an instrumental variables strategy to estimate the long-term, post-reunification effect of government surveillance. We find that a higher spying density led to persistently lower levels of interpersonal and institutional trust in post-reunification Germany. We also find substantial and long-lasting economic effects of Stasi surveillance, resulting in lower income, higher exposure to unemployment, and lower self-employment.
    Keywords: civic capital,government surveillance,trust,economic performance,East Germany
    JEL: H11 N34 N44 P20
    Date: 2019

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