Marshall-Lerner Condition and Economic Globalization

The analysis considers the impact of FDI inflows and FDI outflows and shows that the presence of (cumulated) FDI requires higher import elasticities in absolute terms than stated in the standard Marshall Lerner condition. One may derive a range for the elasticity of the ratio of exports to imports with respect to the real exchange rate, namely that the sum of the absolute import elasticities at home and abroad must exceed unity plus an addi-tional parameter - for standard special cases the sum of both elasticities must exceed 2 if a real depreciation is to improve the real current account. Not only can one determine a modified Marshall Lerner condition for a world economy with economic globalization, rather one also can get new insights from considering a broader macroeconomic perspective. The insights obtained are highly relevant for the discussion about high deficits of the US and high surplus positions of countries such as Japan, China and Germany. The relevance of real income effects for current account adjustment - much emphasized by McKinnon - is emphasized here in a specific way: there is a direct real income effect of changes of the real exchange rate.Marshall-Lerner Condition, FDI, Current Account, Globalization

SEEA Revision: Accounting for Sustainability?

The 1993 United Nations System for integrated Environmental and Economic Accounting (SEEA) aimed at measuring the - environmental - sustainability of economic performance and growth in terms of produced and natural capital maintenance. To this end it advanced "greened" economic indicators, notably Environmentally-adjusted net Domestic Product (EDP) and Capital Formation (ECF). A revised (draft) version of the 1993 handbook, entitled "Integrated Environmental and Economic Accounting 2003" (IEEA), is now available on the web site of the United Nations Statistics Division. Despite its extensive discussion of sustainable development, the IEEA 2003 fails in measuring overall sustainability as it shuns monetary valuation of environmental impacts in a modular framework for physical, hybrid and - selective - monetary accounts. The revision thus missed an opportunity to bridge the persisting dichotomy between ecological and economic sustainability analysis. Future work should explore and test the capability of material flow and environmentally adjusted economic indicators to capture the elusive notions of strong and weak sustainability of economic activity.environmental accounting, sustainability, capital maintenance, dematerialization, green GDP, valuation

Determinants of Trade Specialization in the New EU Member States

European integration brings about major impulses for structural change in industry within the enlarged European Union. Underlying paper aims at explaining trade specialization patterns of the new EU member states as suppliers on the EU 15 market. The analysis is based on the key shifts in sectoral developments as shown via changing RCA indicators of relative export shares to the EU15. A dynamic panel analysis displays that the most important factors driving comparative advantages in trade are industrial production, export unit values, FDI, R&D, and low relative wages as compared to the EU 15 countries. The impact of these variables varies considerably when dealing either with total manufacturing, with labour intensive or with high-tech industries.trade specialization, comparative advantage, dynamic panel analysis

Russia's Integration into the World Economy: An Interjurisdictional Competition View

The aim of the paper is to analyze the problems of Russia´s integration into the world economy from the point of view of the theory of interjurisdictional competition. It argues, that huge exit-effects in the Russian economy do not lead to increasing quality of institutions and economic policies. In order to explain this situation, the paper focuses on the demand and supply sides of the market for institutions and public policies. Their behavior patterns contribute to the stabilization of the inefficient equilibrium. From the normative point of view, the result of the paper is that Russia´s integration into the world economy can succeed, only if the political institutions are transformed and centers of private economic power are weakened.Economic integration, Russia, interjurisdictional competition

The Application of EU Common Trade Policy in New Member States after Enlargement - Consequences on Russia's Trade with Poland

When the Enlargement took place on 1 May 2004, The Common Trade Policy with all trade policy instrument were automatically applied to imports into the enlarged European Union. As a result, current EU trade defence law and measures are automatically in force in Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. Following this the new Member States no longer apply their own, national trade defence action, they also cannot use trade defence instruments against each other. It means, furthermore, that all trade defence measures that EU-15 had against imports from any of the new Member States disappeared automatically after 1 May 2004. Equally, measures among the new Member States also disappear. Undoubtedly, the EU Eastern Enlargement created new conditions in which found themselves 8 countries from Central and Eastern Europe that became EU new members as well as Russia that stayed outside the Community. The aim of this paper, therefore was to analyse the potential effect of adopting the EU trade laws and measures applicable to Russian imports by Poland - country that always had the strongest trade ties with Russia from all post –Soviet bloc. Despite the comparative analysis of customs duty rates applied to Russian products and as well as selection of trade defence measures against Russia's export before and after Poland's accession to the EU in chapter third, the paper also describes the EU Common Trade Policy and what the adoption of this policy means for member states and non-members. Moreover, a short outline of mutual Russia - Poland trade relations is included in order to present subject in more comprehensive way and make reader familiar with the back ground of research.EU-Enlargement, trade policy, Poland, Russia

Structural Change, Growth and Bazaar Effects in the Single EU Market

This paper analyzes the link between structural change, growth and bazaar effects in the context of open economies. At first we consider the theoretical basis of structural change and discuss the interdependencies between trade, foreign direct investment and innovation dynamics. The empirical analysis puts the focus on traits of innovation and structural change in selected countries. As regards the hypothesis of a bazaar effect we distinguish between gross effects and net effects. The statistics and the analysis of input-output-tables does not provide evidence that bazaar effects would be a critical problem for Germany or other EU countries.Economic Growth, Innovation Dynamics, Structural Change, Open Economies

Innovations in the Digital Economy: Promotion of R&D and Growth in Open Economies

This paper presents key figures on innovativeness and export dynamics in selected OECD countries and develops some new ideas on optimum R&D policies in open economies. We take a look at some selected indicators of technological and economic competitiveness in the field of RCAs and export unit values with a special focus on the US, France, Italy, Germany and the UK on the one hand and Hungary as an accession country on the other. Specialization patterns differ across countries; as do weighted export unit values. The US has been very successful in the 1990s in several key sectors which have improved both RCAs and export unit values. France has made progress in some high technology fields, Italy also stands for considerable successful structural adjustment. Germany's dynamics has been very strong in the automotive sector and in the field of precision instruments; however, Hungary and the UK also have a positive development in the automotive sector which could signal problems for Germany's exports in the lower segment of the market. As regards welfare effects of R&D support in particular, interesting cases concern technology-intensive intermediate tradables and network effects. We also emphasize the macroeconomic effects of government R&D subsidies for promoting product innovations and process innovations. It would be useful to have an EU (or OECD) tax revenue sharing system which would particularly compensate producers of intermediate innovative tradables. In a more general policy perspective, one may argue that the government should subsidize those technologyintensive fields in which the respective country has a comparative advantage or enjoys sustained increases in (weighted) export unit values. The new Schumpeter-Mundell-Fleming model presented clearly points to the benefits of an expansionary fiscal policy which would stimulate product innovations, with output and employment being higher. By contrast, there is an ambiguous result in the case of stimulating process innovations by way of expansionary supply-oriented (R&D promoting) fiscal policy. Knowledge transfer from universities to the business community would be stimulated by privatization of a considerable share of stateowned universities and the introduction of incentives for professors to create technologyintensive firms on or off campus. Knowledge and skills can be kept in the region only if the overall mix of policies creates positive growth prospects or if the country has specialized in immobile Schumpeter industries.Digital economy, product and process innovation, R&D policies

Exchange Rate Developments and Stock Market Dynamics in Transition Countries: Theory and Empirical Analysis

We present new theoretical approaches to exchange rate determination and stock market price dynamics as well as first empirical results for selected transition countries. The exchange rate is considered as reflecting both the interest parity - with a specific formulation for exchange rate expectations - and impulses from purchasing power parity which in turn is related to a modified monetary approach to exchange rate determination; the modification concerns the role of stock market prices in the demand for money. Our main focus is on the nominal exchange rate. The empirical results for the dollar exchange rate presented, based on quarterly data, are two-stage and three-stage least squares estimations. The three stage estimation reflects - which is a superior approach to the two-stage estimates in terms of exploiting the information in the data of the sample - the theoretical basis, namely that exchange rate dynamics and stock market prices are interdependent. The estimations for Hungary, the Czech Republic and Poland show significant coefficients for the lagged exchange rate, the stock market price and US GDP as well as other variables which are significant only in some of the countries considered. The in-sample forecast is excellent for all three countries so that anticipation of future exchange rate changes seems to be possible: this is not only relevant for economic actors but also for the issue of Euro area membership. Moreover, the considerable impact of stock market prices on the nominal exchange rate suggest that problems of stock market bubbles in the US might strongly contribute to unstable exchange rates in Europe.Transition Countries, Exchange Rate Determination, Stock Markets.

Structural Change, Innovation and Growth in the Single EU Market

An analysis of structural change along its main dimensions (relative goods and factor prices, shifts in sectoral output and employment shares, and the respective contributions of process and product innovation) is first presented. Next, capital mobility is introduced as well as Sinn's controversial characterization of the large German trade surplus against the backdrop of the increase in international outsourcing. The authors then flesh out the model to show that growth, at least in the medium term, hinges on both demand and supply-side dynamics, with the structure of output and the intensity of trade contributing to growth. Finally, in this exegesis on structural change, innovation, and growth, some dynamic Schumpeterian considerations are offered. The bottom line is that the ability of firms from EU15 countries to rely on imported intermediate products from EU accession countries is the basis for gaining competitiveness in both the global economy and vis-à-vis the United States. It enables them to become more price competitive while restructuring domestic outsourcing in the EU15, making it more focused on producing technologically advanced intermediate products than heretofore. A detailed set of empirical regularities are investigated along two main dimensions: innovation traits and structural change, and Sinn's bazaar effect. International competitiveness is evaluated on the basis of revealed comparative advantage indicators (RCAs) and export unit values (EUVs).Open Economy Macroeconomics, Innovation Dynamics, Structural Change

Structural Change, Specialization and Growth in EU 25

Based on the OECD's classification of goods, we take a closer look at EU 15 countries and EU accession countries in terms of the dynamics of sectoral output growth - with due emphasis on the distinction between labor-intensive and science-intensive products. Sectoral output dynamics are explained by the (modified) revealed comparative advantage (RCA), specialization in terms of input intensity, the growth rate of RCA, past sectoral output dynamics and per capita output. In addition, we consider the development of nominal sectoral output development. Considerable differences between EU 15 and EU 10 countries were found, which point to different production regimes in leading EU countries and the Eastern European accession countries, respectively. This panel-based bottom-up approach to output growth suggests that structural change will affect the responsiveness of the supply side considerably.RCA, Output Growth, Sektoral Output Analysis