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on Transition Economics |
| By: | Wrobel, Ralph |
| Abstract: | Since February 2022 - when Russia invaded the Ukraine - the geopolitical situation in the South Caucasus changed dramatically. On the one hand, EU sanctions on Russia made the "Middle Corridor" of the Chinese Belt and Road Initiative through the South Caucasus more attractive for China and Europe, on the other hand the "protective power" Russia is weakened by the war and the Western sanctions leaving a vacuum of power in the South Caucasus. As a result, Azerbaijan was able to reconquer the region Nagorno-Karabakh in September 2023 within a few days, only. Therefore, the region is still not more an unassailable Russian "backyard" or "sphere of interest" but place of a new "great game" of the main powers in the world. Beside Russia losing power - a slight rise of China can be observed while the West - U.S. and the EU - is still neglecting the region. Only Türkiye became a new active geopolitical player in the region. This may - beside all tragedy for the people of Nagorno-Karabakh - bring some "never ending conflicts" in the region to an end and may open up new opportunities for Armenia, Georgia and Azerbaijan to develop better economically in the near future. |
| Keywords: | Geopolitics, South Caucasus, Georgia, Armenia, Azerbaijan, EU, Belt & Road Initiative |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:opodis:279777&r=tra |
| By: | Ufuk Akcigit; Harun Alp; André Diegmann; Nicolas Serrano-Velarde |
| Abstract: | This paper investigates a unique policy designed to maintain employment during the privatization of East German firms after the fall of the Iron Curtain. The policy required new owners of the firms to commit to employment targets, with penalties for non-compliance. Using a dynamic model, we highlight three channels through which employment targets impact firms: distorted employment decisions, increased productivity, and higher exit rates. Our empirical analysis, using a novel dataset and instrumental variable approach, confirms these findings. We estimate a 22% points higher annual employment growth rate, a 14% points higher annual productivity growth, and a 3.6% points higher probability of exit for firms with binding employment targets. Our calibrated model further demonstrates that without these targets, aggregate employment would have been 15% lower after 10 years. Additionally, an alternative policy of productivity investment subsidies proved costly and less effective in the short term. |
| Keywords: | Industrial policy, Privatizations; Productivity; Size-dependent regulations |
| JEL: | D22 D24 J08 L25 |
| Date: | 2023–11–07 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1382&r=tra |
| By: | Atin Basuchoudhary (Virginia Military Institute); Andreas Freytag (Friedrich Schiller University, Jena; and University of Stellenbosch, and CESifo Research Network, and STIAS); Troy Siemers (Virginia Military Institute) |
| Abstract: | This paper offers an analytical narrative based on an assurance game with two separate populations in an evolutionary setting. In our model, Donors and Recipients are two populations; let us call them Europe and Ukraine. The donor population has two types. A proportion of this population wants to promote a Marshall Plan-type model for the recipient state, and another prefers isolationism. A proportion of the population of the recipient state also intends to coordinate a Marshall Plan-type economic integration. In contrast, others prefer foreign aid but view further integration as a violation of sovereignty (or, with Ukraine, may be afraid of further Russian attacks from this integration). Marshall plan type coordination provides the highest payoffs through, e.g., the peace dividend, better institutions in Ukraine, widened European integration trade links, or global financial integration. Coordination is costly because it requires substantial institutional change on both sides. We use simulations to track outcomes given that European support for Ukraine and Ukrainian desire for aid may be endogenous. Further, we show how these endogenous outcomes respond to political shocks in Europe that affect European support for Ukraine and implicitly the lack of support for Ukraine. |
| Keywords: | Institutional Transfer, Institutional Coordination, Evolutionary Game Theory, Ukraine War, Foreign Aid |
| JEL: | P41 C73 |
| Date: | 2023–11–10 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2023-017&r=tra |
| By: | Wei-Xing Zhou; Yun-Shi Dai; Kiet Tuan Duong; Peng-Fei Dai |
| Abstract: | The ongoing Russia-Ukraine conflict between two major agricultural powers has posed significant threats and challenges to the global food system and world food security. Focusing on the impact of the conflict on the global agricultural market, we propose a new analytical framework for tail dependence, and combine the Copula-CoVaR method with the ARMA-GARCH-skewed Student-t model to examine the tail dependence structure and extreme risk spillover between agricultural futures and spots over the pre- and post-outbreak periods. Our results indicate that the tail dependence structures in the futures-spot markets of soybean, maize, wheat, and rice have all reacted to the Russia-Ukraine conflict. Furthermore, the outbreak of the conflict has intensified risks of the four agricultural markets in varying degrees, with the wheat market being affected the most. Additionally, all the agricultural futures markets exhibit significant downside and upside risk spillovers to their corresponding spot markets before and after the outbreak of the conflict, whereas the strengths of these extreme risk spillover effects demonstrate significant asymmetries at the directional (downside versus upside) and temporal (pre-outbreak versus post-outbreak) levels. |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2310.16850&r=tra |
| By: | Sim, Soonhyung (Korea Institute for Industrial Economics and Trade); Kim, Mi Jung (Korea Institute for Industrial Economics and Trade) |
| Abstract: | In 2022, South Korea achieved an unprecedented milestone in defense exports, as orders surged to an impressive USD 17.3 billion, a record- breaking achievement in its history as an arms exporter. This remarkable growth can be attributed to growing global defense expenditures in the wake of the Russia-Ukraine war and the increased demand in Europe. The military aid to Ukraine created shortage of defense products, which has further increased demand. The Korean defense industry has capitalized on this opportunity, bolstered by its competitive edge in swift product delivery, a well-established mass production infrastructure, and an outstanding price-to-quality ratio. Of note is the surge in demand for Korean arms from Eastern European nations, which has propelled the country into the ranks of the world’s top five defense exporters. Future export prospects are promising. Global defense spending is expected to continue its upward trajectory amid the escalating geopolitical crisis in Europe, despite the effects of the COVID-19 pandemic and slowing economic growth. Germany, for instance, has decided to invest EUR 100 billion in a special defense fund to modernize and expand its armed forces. Furthermore, defense spending as a percentage of GDP in Eastern Europe and the three Baltic states is poised to exceed the NATO requirement of two percent by 2024. Should the current trend persist, Korea could eventually rank among the world’s top four defense exporters. However, achieving this goal will necessitate a nuanced and refined policy approach. Conducting a comprehensive assessment of the economic impact of growing defense exports is the first step toward positioning the defense industry as a driver of growth. In this paper, I project changes in defense sales and employment under the assumption that the value of annual export orders eventually reaches USD 20 billion. Furthermore, I offer a set of policy recommendations aimed at propelling Korea into the upper echelons of the world’s defense exporters and harnessing the full potential of the burgeoning defense industry as an engine of economic prosperity. Thank you for reading this abstract of a report from the Korea Institute for Industrial Economics and Trade! Visit us on YouTube: https://www.youtube.com/watch?v=Q36v30l5CV0 Visit us on Instagram: https://www.instagram.com/worldkiet/ Visit our website: http://www.kiet.re.kr/en |
| Keywords: | defense sector; defense industry; defense spending; defense manufacturing; defense contracting; arms exports; weapons exports; Russia-Ukraine war; defense sector employment; arms trade; manufacturing; Korea |
| JEL: | F17 F52 L64 O38 |
| Date: | 2023–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kieter:2023_023&r=tra |
| By: | Ying-Hui Shao; Yan-Hong Yang |
| Abstract: | Drawing inspiration from the significant impact of the ongoing Russia-Ukraine conflict and the recent COVID-19 pandemic on global financial markets, this study conducts a thorough analysis of three key crude oil futures markets: WTI, Brent, and Shanghai (SC). Employing the visibility graph (VG) methodology, we examine both static and dynamic characteristics using daily and high-frequency data. We identified a clear power-law decay in most VG degree distributions and highlighted the pronounced clustering tendencies within crude oil futures VGs. Our results also confirm an inverse correlation between clustering coefficient and node degree and further reveal that all VGs not only adhere to the small-world property but also exhibit intricate assortative mixing. Through the time-varying characteristics of VGs, we found that WTI and Brent demonstrate aligned behavior, while the SC market, with its unique trading mechanics, deviates. The 5-minute VGs' assortativity coefficient provides a deeper understanding of these markets' reactions to the pandemic and geopolitical events. Furthermore, the differential responses during the COVID-19 and Russia-Ukraine conflict underline the unique sensitivities of each market to global disruptions. Overall, this research offers profound insights into the structure, dynamics, and adaptability of these essential commodities markets in the face of worldwide challenges. |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2310.18903&r=tra |
| By: | Valida Pantsulaia (Financial Stability Analysis and Macro-financial Modeling Division, National Bank of Georgia); Ana Jangveladze (Financial Stability Analysis and Macro-financial Modeling Division, National Bank of Georgia); Shalva Mkhatrishvili (Head of Macroeconomics and Statistics Department, National Bank of Georgia) |
| Abstract: | Dollarization (usage of a foreign currency in place of a domestic one) is a widely observed phenomenon that historically emerged as a result of extended macro-financial instability and extreme price and nominal exchange rate fluctuations. Complete loss of public confidence in a local currency pushed lenders and borrowers to seek more stable foreign currencies like the US dollar and euro. What is more puzzling though is that in many countries dollarization remained at an elevated level even after taking care of its root cause (i.e. after achieving price stability). There have been several explanations of this phenomenon (the so-called dollarization hysteresis). In this short paper, we propose additional explanations in the form of several dollarization-induced negative externalities, including an amplification of credit procyclicality and exchange rate pass-through or a worsening of credit ratings of dollarized economies. We also offer some back-of-the-envelope calculations showing that these externalities could be economically significant (about 1 pp impact on real GDP growth per year) for a small and highly dollarized country like Georgia. This type of market failures underline the importance of prudential policies that internalize negative externalities and, hence, level the playing field for the local currency. |
| Keywords: | Financial dollarization; Negative externality |
| JEL: | E44 E58 F34 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:aez:wpaper:2023-01&r=tra |
| By: | Marjan Petreski; Stefan Tanevski; Irena Stojmenovska |
| Abstract: | This paper examines how investment in environmentally sustainable practices impacts employment and labor productivity growth of firms in transition economies. The study considers labor skill composition and geographical differences, shedding light on sustainability dynamics. The empirical analysis relies on the World Bank-s Enterprise Survey 2019 for 24 transition economies, constructing an environmental sustainability index from various indicators through a Principal Components Analysis. To address endogeneity, a battery of fixed effects and instrumental variables are employed. Results reveal the relevance of environmental sustainability for both employment and labor productivity growth. However, the significance diminishes when addressing endogeneity comprehensively, alluding that any relation between environmentally sustainable practices and jobs growth is more complex and needs time to work. The decelerating job-creation effect of sustainability investments is however confirmed for the high-skill firms, while low-skill firms benefit from labor productivity gains spurred by such investment. Geographically, Central Europe sees more pronounced labor productivity impacts, possibly due to its higher development and sustainability-awareness levels as compared to Southeast Europe and the Commonwealth of Independent States. |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2310.18989&r=tra |
| By: | Mariam Dundua (Financial and Supervisory Technology Development Department, National Bank of Georgia); Otar Gorgodze (Head of Financial and Supervisory Technologies Department, National Bank of Georgia) |
| Abstract: | The recent advances in Artificial Intelligence (AI), in particular, the development of reinforcement learning (RL) methods, are specifically suited for application to complex economic problems. We formulate a new approach looking for optimal monetary policy rules using RL. Analysis of AI generated monetary policy rules indicates that optimal policy rules exhibit significant nonlinearities. This could explain why simple monetary rules based on traditional linear modeling toolkits lack the robustness needed for practical application. The generated transition equations analysis allows us to estimate the neutral policy rate, which came out to be 6.5 percent. We discuss the potential combination of the method with state-of-the-art FinTech developments in digital finance like DeFi and CBDC and the feasibility of MonetaryTech approach to monetary policy. |
| Keywords: | Artificial Intelligence; Reinforcement Learning; Monetary policy |
| JEL: | C60 C61 C63 E17 C45 E52 |
| Date: | 2022–11 |
| URL: | http://d.repec.org/n?u=RePEc:aez:wpaper:2022-02&r=tra |
| By: | Marin, Anca Monica; Glăvan, Eugen (Romanian Academy); Chiș, Alin; Corad, Bogdan |
| Abstract: | This study analyzes the spatial differences in EU funds absorption among Romanian rural municipalities through the 2014-2020 programming period. The absorption capacity for EU funds is measured by the volume of spent EU funds by inhabitant, for each Romanian rural municipality. The results of the analysis highlight the importance of the territorial dimension when studying the distribution of EU funds among the rural municipalities of Romania. Affiliation with a specific development region (NUTS 2), county (NUTS 3) or a functional urban area (FUA) is used to differentiate the volume of absorbed EU funds. Levels of fiscal capacity, locality development, EU and state budget funding experience, and population dynamics in 2021 compared to those in 2014 are also used to distinguish between categories of municipalities receiving EU funds. In Romania, rural municipalities with higher levels of absorbed EU funding are, to a statistically higher extent, located in development regions in the Center, North‒West, South West and West of the country; in communes with no change, or even an increase, in population between 2021 and 2014; in the highest quartile of fiscal capacity and in communes with experience with EU funding from the preceding programming period. This article adds to the growing body of territorial evidence and can be used as a policy instrument to more closely examine the intervention tools embedded in EU funding policy. From a systemic approach, the results of the analysis are valuable for the design of integrated place-based strategies for EU, national and local level stakeholders, with the ultimate goal of improving quality of life for citizens living in rural areas. |
| Date: | 2023–01–28 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:vwbq2&r=tra |
| By: | Yuri Barabash (Yaroslav Mudryi National Law University); Darijus Beinoravičius (Mykolas Romeris University); Juozas Valčiukas (Mykolas Romeris University) |
| Abstract: | The paper's premise is that the invisible Constitution serves as an instrument to protect democracy and consolidate the nation. The discussion turns around the fundamental aspects of democracy and sovereignty to reveal the subject. The question which is particularly considered is how the Parliament and the Constitutional Court participate in the expression of the principles of democracy in the contemporary world. The paper concludes that the Parliament, through the formal legislative procedures, becomes less capable of achieving a social compromise. As a result, the same representative feature of democracy becomes more unpopular in society and continues to be a prevailing object of criticism among scholarly community. In contrast, the Constitutional Court's role in protecting democracy through the systematic interpretation of a constitution undergoes a profound change in the democratic world. Constitutional Court, through the understanding of both visible and invisible meaning of the Constitution turns it into an expression of the sovereign will of the permanent nation. |
| Keywords: | invisible Constitution, Democracy, Parliament, Constitutional Court, Sovereign |
| Date: | 2022–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04242890&r=tra |