Study on the feasibility of a tool to measure the macroeconomic impact of structural reforms

The main aim of this study is to assess the feasibility of empirical tools to study the impact of structural reforms on the macroeconomic performance in the member countries of the European Union (EU). This report presents the results of the project "Study on the feasibility of a tool to measure the macroeconomic impact of structural reforms" (ECFIN-E/2005/001) and amalgamates the findings of the two previous interim reports and the main conclusions of the workshop held in Brussels on May 11th. The main goal of the project is to determine the most reliable and robust methods to investigate the impacts of economy-wide structural reforms as well as reforms in individual markets or sectors, and to make suggestions as to how they best to implement them and possible improvements of the institutional dataset. In addition, a roadmap has been created which includes the main steps in the model-developing process, and solutions feasible even in the short term are discussed.The most relevant conclusion to be drawn from the study is that the most appropriate tool that can be developed in the short term is the integration of a DSGE model (preferably QUEST due to its in-house availability) with different satellite models, to be developed.structural reforms, product markets, labour markets, financial markets, Dreger, Art�s, Moreno, Ramos, Suri�ach

Investing in rural infrastructure

Rural areas ; Rural development

Taxation, corruption and the exchange rate regime

The paper analyzes the relation between institutional quality, such as corruption, in a country and its monetary regime. It is shown that a credibly fixed exchange rate to a low inflation country, like a currency board, can reduce corruption and improve the fiscal system. A monetary union, however, has ambiguous effects. I find that there is convergence between countries with regard to the level of corruption. --Exchange Rate Regime,Monetary Policy,Fiscal Policy,Seigniorage,Corruption,Developing and Transition Countries

Abstracts : Policy research working paper series - numbers 2934-3008

This paper contains abstracts of Policy Research Working Paper series, numbers 2934-3008.Health Monitoring&Evaluation,Health Economics&Finance,Poverty Assessment,Governance Indicators,Environmental Economics&Policies

Self-employment at the Macro-Level: drivers, inhibitors and fluctuations

Esta tesis consta de seis ensayos auto contenidos estructurados de la siguiente manera. El capítulo 2 se puede considerar como una introducción a las técnicas utilizadas en el análisis de series temporales de autoempleo, donde se analiza la dinámica del ciclo económico en la Unión Europea (UE28) durante las últimas décadas y se analizan los posibles cambios en los vínculos cíclicos entre países introducidos tras la Gran Recesión en base a las similitudes en sus características cíclicas y de sincronización. Aplicamos una metodología para detectar los puntos de inflexión en las series temporales del PIB y, a continuación, datamos las expansiones y recesiones de cada país, lo que nos permite analizar la duración, la profundidad y la forma de los distintos ciclos, además de la sincronización. El capítulo 3 explora y comprueba si el sector de los autónomos responde de la misma manera en que lo hizo en anteriores episodios de recuperación económica, analizando el caso del Reino Unido. Utilizando el índice de confianza empresarial y la tasa de desempleo como indicadores, aportamos evidencia sobre i) el datado de los puntos de inflexión de las series temporales de la tasa de autoempleo para establecer un ciclo de autoempleo; ii) las características de las diferentes fases del ciclo; iii) un análisis de la sincronización entre el ciclo del autoempleo y los ciclos del desempleo y de confianza empresarial; y iv) un análisis de causalidad no lineal entre estos conjuntos de variables. Nuestro análisis empírico muestra que la evolución de la tasa de autoempleo no está causada por la evolución del mercado laboral, sino que ahora lo está por el clima empresarial, es decir, la confianza en la economía. El capítulo 3 presenta pruebas de raíces unitarias y estima un modelo de componentes no observados para comprobar la existencia de histéresis en la tasa de autoempleo en el Reino Unido. Definiendo la histéresis en términos de la evolución interdependiente de una tasa natural no estacionaria y de un componente cíclico estacionario, distinguiendo así la histéresis de las perturbaciones de la tasa natural, los resultados proporcionan pruebas sólidas de la histéresis en el autoempleo. Esto implica que las perturbaciones económicas y/o no económicas tienen efectos cíclicos y permanentes sobre el autoempleo El capítulo 5 reevalúa la relación entre las etapas de desarrollo económico y el espíritu empresarial, a nivel macro. Para sortear los problemas relacionados con la incertidumbre del modelo, utilizamos el promediado bayesiano de modelos para evaluar la solidez de los determinantes del autoempleo en un conjunto de datos de 117 países, investigando la existencia de heterogeneidad que permite las interacciones entre el PIB, como variable central, y un conjunto de 20 determinantes potenciales del espíritu empresarial. Nuestro análisis empírico muestra entonces que la variación de las tasas de autoempleo entre países está determinada principalmente por las variaciones en el desempleo, la etapa de desarrollo económico y las variaciones en las fricciones del mercado laboral. Cuando se tienen en cuenta las interacciones, los resultados confirman que existe un efecto diferencial de las fricciones del mercado laboral en países con diferentes niveles de renta. Las fricciones del mercado laboral pueden fomentar el trabajo por cuenta propia en los países más ricos. El capítulo 6 retoma la cuestión de los determinantes de la actividad empresarial/autoempleo a nivel macro, centrándose en los efectos del mayor o menor rigor de la legislación de protección del empleo (LPE, en adelante), junto con su cumplimiento y aplicación. Utilizamos series temporales de macrodatos para una muestra de muestra de 28 países de la OCDE, y aplicamos un enfoque de modelos bayesianos promediados como forma de sortear los problemas relacionados con la elección de los mejores predictores y de considerar la interacción entre las instituciones y el cumplimiento/flexibilidad. Encontramos apoyo empírico a nuestra hipótesis principal según la cual la legislación de protección del empleo puede impulsar o contraer la tasa de autoempleo en función del grado de cumplimiento práctico de la legislación laboral. El capítulo 7 proporciona una categorización empírica de las economías en términos de emprendimiento productivo utilizando un compendio de datos transnacionales mediante un panel de 120 países durante 1991-2019. Utilizando un enfoque bayesiano para la agrupación de series temporales, proporcionamos pruebas de la existencia de tres grupos de países definidos en términos de la productividad de sus sectores de autoempleo y de los factores económicos e institucionales que conducen las transiciones entre grupos. Estos grupos podrían identificarse con tres grandes grupos de países habitualmente considerados en la literatura sobre el emprendimiento: países factordriven, efficiency-driven o innovation-driven.This thesis consists of six self-contained essays structured as follows. Chapter 2 can be considered as an introduction to the techniques used on the analysis of self-employment time series, where we analyze the business cycle dynamics in the European Union (EU28) during recent decades and analyze possible changes in cyclical linkages among countries introduced after the Great Recession based on the similarities in their cyclical features and synchronization. We apply a methodology for detecting turning points in GDP time series, then date expansions and recessions of every country, which allows us to analyze the length, depth and shape for different cycles, in addition to the synchronization. Chapter 3 explores and checks whether the self-employed sector is responding in the same way as entrepreneurship in previous economic recovery episodes by analysing the case of the UK. By using the business confidence index and the unemployment rate as indicators, we provided evidence on i) turning points dating of self-employment rate time series to establish a selfemployment cycle; ii) the characteristics of the cycle phases; iii) an analysis of the synchronization between the selfemployment cycle and the cycles of unemployment and business confidence; and iv) a nonlinear causality analysis between these sets of variables. our empirical analysis shows that self-employment rate development is not caused by labour market evolution; rather, it is now caused by the business climate, that is, confidence in the economy. Chapter 3 reports evidence of unit roots and estimates an unobserved components model for testing the existence of hysteresis in the self-employment rate in the United Kingdom. Defining hysteresis in terms of the interdependent evolution of a nonstationary natural rate and a stationary cyclical component, thereby distinguishing hysteresis from natural rate shocks, the results provide robust evidence of hysteresis in entrepreneurship. This implies that economic and/or non-economic shocks have cyclical and permanent effects on rates of entrepreneurship. Chapter 5 re-evaluates the relationship between stages of economic development and entrepreneurship, at the macro level. To circumvent problems related to model uncertainty we use Bayesian Model Averaging to evaluate the robustness of determinants of self-employment in a dataset of 117 countries, investigating the existence of heterogeneity allowing interactions between GDP, as focus variable, and a set of 20 potential entrepreneurship determinants. Our empirical analysis then shows that the variation of self-employment rates across countries are mainly determined by variations in the unemployment, the stage of economic development and the variations in labor market frictions. When interactions are taken into account, results confirm that there is a differential effect of labor market frictions in countries with different levels of income. Frictions in labor market may encourage becoming self-employed in richer countries. Chapter 6 revisits the issue on the determinants of entrepreneurship/self-employment at the macro-level focusing on the effects of the greater or lesser employment protection legislation (EPL, henceforth) stringency in conjunction with compliance/enforcement. We use time series of cross-national macro data of entrepreneurship, from a sample of 28 OECD countries and apply a Bayesian Model Averaging approach as a way to circumvent problems related to the choice of the best predictors and considering the interaction between institutions and enforcement/flexibility. We find empirical support of our main hypothesis according to which employment protection legislation can either boost or contract the self-employment rate depending on the degree of practical compliance with employment legislation. Chapter 7 provides an empirical categorization of economies in terms of productive entrepreneurship by using a compendium of cross-national data by using a panel of 120 countries during 1991-2019. Using a Bayesian approach for clustering time series, we provide evidence of the existence of three clusters of countries defined in terms of the productivity of its selfemployment sectors and the economic and institutional factors which lead the transitions between groups. These groups might be identified with three major groups of countries usually considered in the entrepreneurship literature: factor-, efficiency-, and innovation-driven countries

The Economics of Terrorism and Counter-Terrorism: A Survey (Part II)

This survey provides an in-depth analysis of existing research on the economic analysis of terrorism and counter-terrorist measures. First the existing evidence on the causes of terrorism is analyzed, then we consider the evidence of the consequences of terrorism and we demonstrate why it is important to regarding of the issue of counter-terrorism policy. Moreover the survey presents the existing knowledge on the interrelation between the economy and the issue of security and it incorporates analysis the level of knowledge about the causal chains between security and the economy. Also it focuses on perspective and methodologies from the discipline of economics but also refers to research from related disciplines (sociology, political science). It also assembles the knowledge on the impact of terrorism on the economy as reflected in macro-economic variables and its impact on specific sectors. Furthermore it assesses how potential an actual terrorist event determine consumer and producer behaviour, public policy, as well as terrorist responses to these policies. Finally a European perspective on the terrorism security annexes is discussed and here we analyze the causes of terrorism in Europe.risk, insecurity, survey, terrorism, counter-terrorism, security economics

How Effective is the Invisible Hand? Agricultural and Food Markets in Central and Eastern Europe

Since the seminal work of Adam Smith, markets have been considered an efficient tool for co-ordinating the behaviour of economic agents. The basic characteristic of a market economy is that the complex system of interaction among individuals is not centrally coordinated. Under the assumption of profit and utility maximisation (and a whole set of assumptions about the institutional framework), relative prices and their change over time provide the signals that guide, like an invisible hand, the allocation of resources, i.e., the structure of production and the intensity of input use in the various production processes. They do this by co-ordinating the activities of economic agents, i.e., of resource owners, producers, intermediaries, traders, and consumers. After system change in the former Soviet Union and in Central and Eastern Europe (CEE) central economic planning had to be replaced by other forms of co-ordination. The general direction in all transition countries was towards a market economy, but the speed and depth of reforms towards an environment in which markets can evolve differed largely between countries, sectors and between different phases during the past 15 years. IAMO Forum 2005 focuses on this development and discusses the functioning of markets, the requirements for this, and the advantages and disadvantages of other co-ordination mechanisms under different environments in the agricultural and food sectors in Central and Eastern Europe. CEE agri-food markets deserve researchers' and policy makers' attention for several reasons. Two of them regard the high demand for support to policy decisions that aim to stimulate economic and social development in the region. In most CEE countries, the significance of the agricultural and food sector is relatively high with respect to income and employment. In particular, rural areas can benefit from the development of this branch of the economy. Also, there is marked indication that agri-food markets in CEE are not ensuring exchange as frictionless as possible. This means that large benefits can be expected if potential improvements of the economic environment are implemented and if individual agents adapt optimally to that environment. Another motivation for economic research on transition countries is that we are looking at a huge region that started almost as a vacuum with regard to institutional settings. This means that a wide range of substantially different settings were introduced in the respective countries, and were only weakly confined by political rigidities or path dependencies. From a distant perspective, the repeated fundamental shifts in recent economic policies almost evoke the impression of a trial and error approach. The consequences of distinctively different options (across countries and periods) can be observed in a way almost similar to a laboratory situation. Such unique opportunity has attracted economists, particularly those interested in institutional economics, to conduct research on CEE. However, this also means that the experiences made in CEEC can enhance the general understanding of what markets can do and what the limitations of market coordination are. This volume contains selected contributions presented at IAMO Forum 2005 and gives an overview of the major topics discussed there. Partial analyses of specific economic problems usually abstract from the general economic framework which is assumed to be more or less constant as expressed in ceteris paribus clauses. Oftentimes, the set of institutional conditions is even assumed to be sufficiently well-described by the framework used in neoclassical models. Particularly for transition countries, this has frequently led to spurious results because crucial aspects of the framework actually in place were not considered, and sometimes were not even thought of. An extreme and very obvious example is the neglect of the effects of the replacement of monetary by nonmonetary exchange in phases of a barter economy. There is no generic approach to avoid unintended omission of crucial framework conditions, but it must generally be emphasised that a broad look at the various interdependent markets and at the entire socioeconomic context of a country is needed before going into detail. Descriptive analyses of the situation in various markets form part of such a broad look. The contributions of POPP, FERTÃ et al., WILKIN et al., and HEIN in the chapter Selected analyses from CEEC provide excellent examples, and focus on market developments in new EU member countries. On the one hand, the papers show the heterogeneity of problems e.g. due to largely differing farm structures. On the other hand, several common patterns can be observed: The market shares and power of large processors and retailers (hypermarkets, etc.) are increasing. Also, international (especially intra-EU) trade in commodities has increased in response to CAP-induced price harmonisation. Both tendencies weaken the market position of farmers, particularly small entities which cannot supply in volumes sufficient for large processing and trade firms. Within the food industry concentration increased as many smaller firms could not comply with EU processing standards and had to quit the market. The increased size and specialization of large producers, as well as of large processors, made many of those firms co-ordinate business with each other through long-term contractual agreements rather than by relying on spot markets. This tendency is very distinct in the fruit and vegetable sector, as WILKINâs contribution describes. Two contributions draw attention to the institutional framework itself, mainly by looking at circumstances which prevent market allocation from leading to an optimal outcome. HOBBS describes factors that impede investment and growth by drawing on transaction cost economics. Situations typical for transition countries are highlighted where e.g. transparency is not sufficient or the existence and reliable enforcement of contract or corporate law are not guaranteed. NUPPENAU stresses the need for the appropriate and precise formulation of land property rights, which should evoke a balance between governance and exclusion. The importance of appropriate and reliable institutions to avoid flaws is emphasised. But even with suitable institutions, transaction costs cannot be reduced to zero. The main reason for this is that since agents may gain form a head start of information, incentives to reveal their knowledge are quite restricted. Furthermore, some of the information required to make correct decisions is not available. This especially concerns information regarding all future contingencies. An uncertain future and the asymmetric distribution of information impose special problems when decisions have long-term effects and agents are linked together through investment decisions. This offers possibilities for opportunistic behaviour, i.e., when an agent behaves in a way that allows him to extract rents from the partners' activities. The friction induced in such situations may result in a market outcome that is biased by transaction costs. Mitigating this bias should be a goal of public policy but it is also in the interest of (at least some of the) private agents involved. This issue is discussed in more detail in the papers dealing with alternative governance structures. A number of contributions to IAMO Forum highlight approaches for measuring the well-functioning of markets. While studies that aim to directly measure transaction costs are very rare and are necessarily limited to comparing only very specific portions of transaction costs, most studies focus on indirect indicators. These usually start from the idea that in a well-functioning, competitive market any supply or demand shocks are reflected in price changes, not only in the particular market where the shock occurs but also in other, related markets, i.e., in different locations or at different stages of the production and marketing chain. Consequently, an approach for assessing the functioning of markets is to compare price differentials with processing-, marketing- or transfer-costs, or â since these costs are usually difficult to quantify â to observe price differentials over time. Accepting the assumption that the costs reflected by price differentials are more or less constant (or stationary) over the observed time span, any additional price changes or a lack of price co-movement is interpreted as an indication for insufficiently connected or insufficiently functioning markets. Three contributions in the chapter Analytical approaches for measuring market efficiency describe analyses which mainly focus on the vertical dimension, i.e., between market stages. BOJNEC, in his descriptive price analysis for several agricultural products in Slovenia since 1991, finds a heterogeneous development of the farm gate/consumer price spread: The processing and marketing margins increased for wheat and beef while they declined for grapes (processed to wine), sugar and poultry. BRÃMMER and ZORYA, as well as BAKUCS and FERTÃ, use cointegration analysis to describe the degree and nature of vertical price integration in the Ukrainian wheat market and the Hungarian pork market, respectively. Both studies find that price changes are transmitted vertically, that there is a tendency to "correct" any deviations from some underlying equilibrium price-relationship. However, such error correction mechanisms are found not to be a constant, universal force. In the Hungarian paper, it could only be found for a sub-period of the observed time span, excluding the highly volatile early 1990s. Also, equilibrium was found to be achieved by adjustment of farm gate prices only while the retail prices were found to be exogenous, i.e., not responding to any disequilibrium. The paper on Ukraine shows that adjustment processes between wheat and wheat flour prices cannot be sufficiently described by a constant error correction mechanism for the period 2000 to 2004. In fact, four different regimes of adjustment processes were found to have been in force, reflecting particular phases of largely differing market situations and political interventions. The functioning of markets depends on several crucial conditions. One of these conditions concerns the availability of information. Only if agents have perfect and complete information will the exchange lead to an outcome in which no individual can be better off without reducing the welfare of others. However, in the real world this condition regarding information is not fulfilled. Information is not perfect, since the future cannot be predicted with certainty. Incomplete information results from, first, not all information being revealed, and second, individuals not possessing the mental capacity to collect and process all information. Moreover, because of its asymmetric distribution, information can be regarded as a resource that can be exploited by agents. This means that there are incentives to hamper the diffusion of information to the public domain. In general, the more uncertain the future is and the more information is tacit, the worse markets will function, and the more beneficial become alternative mechanisms of coordination. Three papers dealing with this issue of organisational choice. HANF focuses on governance structures within supply chain networks that are appropriate for allowing an optimal flow of information between the involved individuals while retaining the necessary hierarchy for efficient implementation of strategic decisions. MAACKâs analysis shows that there is strong mutual interest between producers and processors of berry fruits to reduce marketing and procurement risk, respectively. This can be achieved by switching from spot market exchange to contractual supply agreements. A prerequisite for such agreements is that a well-balanced distribution of risks and risk premiums between the farmer and processor is implemented. This means that processors, who â facing a multitude of small producers â are used to opportunities for exerting market power, have to agree to cover part of the production risk through appropriate contractual clauses. Finally, BALINT looks at the various marketing channels used by Romanian farmers and finds that a self-enforcing dualism exists. For commercially-oriented farmers who can supply large quantities, marketing directly to traders, wholesalers and processors is most favourable and involves relatively low transaction costs. Although this form of supply-relationship is usually not based on contractual agreements, it can still be characterised by a certain stability over time. In contrast, small farmers whose production does not considerably exceed the subsistence level incur relatively high (per unit) transaction costs in selling their produce on local markets and to other farmers. Another aspect of organisational choice is the question of whether ownership of production factors is transferred or only the right to use them temporarily. The uncertainty of future developments implies that the possession of resources cannot be only regarded from the point of view of income generation at a certain point in time. With perfect foresight, there is no difference whether a factor is rented or purchased, because the remuneration would be the same. This perfect substitutability is no longer given when the future is uncertain. Income generation, then, is only one feature of ownership. Additional aspects such as insurance, wealth, and speculation as motivations for possession affect the value of ownership and thus shift the demand and supply curves of the factor. HURRELMAN picks up this issue in her analysis of the Polish land market and shows the impact of additional grounds for valuing property on the decision to rent or to buy land. Uncertainty may also affect the specialization of factor use. Allocating a factor of production to different production activities reduces the risk of income instabilities, but at the cost of specialization gains through economics of scale. Moreover, the decision on income combination is â besides risk â affected by a complex interaction of other determinants. GLAUBEN et al., analyse these interactions for the case of part-time farming in China and show how the decision of income combination is affected by household characteristics, human capital and other variables. Incomplete and imperfect information not only causes individuals to choose optimal governance modes, often it is also understood as a call for government intervention. The selected papers in the chapter on policy intervention plead for careful selection and coherent implementation of policy instruments. BENNER, as well as KUHN, highlight the significance of information diffusion and argue in favour of government intervention in this area. However, both emphasise that these interferences should be used carefully and be adjusted to specific market failures. Both argue that setting up information systems would improve the functioning of markets. BENNER also discusses possible negative impacts if governments that engage in setting up and enforcing product and process standards try, at the same time, to foster a sector like agriculture through support in marketing. The latter activity affects the governmentâs (crucial) credibility in the first activity. KUHN points to negative welfare effects and budgetary requirements of an intervention system which is implemented to increase price stability. Moreover, when a government intervenes in market allocation or intends to provide rules that should facilitate the exchange on markets, it has to take into account that the new regulation has to be implemented in a coherent manner. This requires the various policy regulations and institutional settings to be complementary and not cause frictions which hamper the functioning of the system. LERMAN and SHAGAIDA highlight this aspect in their discussion of the Russian land market, where bureaucracy and high costs for the registration of property rights can be regarded as a major cause of the low number of land transactions. However, since economic activities take place in a dynamic environment, the comparative static point of view may lead to inappropriate policy formulation. WANDEL discusses this aspect in the context of competition policy. From a comparative static point of view, market power has to be assessed negatively because of the distortions of resource allocation. However, monopoly profits are an indicator of extra rents and thus provide incentives for market entry. On the one hand, this thread may lead to special pricing schemes and/or to the accelerated development of technological change so that a monopolist can consolidate its market position. But it is possible, on the other hand, that market entry may in fact happen. In this case, one would observe structural change, which would be accompanied by an improved use of resources. This in turn means that competition policy should not be oriented towards an optimal market structure but towards the facilitation of market entry so that competition can discover market opportunities and determine the optimal structure of the market. The present volume shows the wide range of interesting and controversial topics that are concerned when looking at co-ordination, particularly on markets in CEE agri-food sectors. It remains a hope that the heterogeneity and dynamics of the developments will decrease as successful constellations of framework conditions, organisational choices and individual behaviour become more and more obvious and widespread in the region. Conversion to sustainable, balanced patterns might take place, but this cannot be taken for granted. However, chances for such development are better the more stable and balanced political developments, as well as international co-operation, become. We hope that the academic community will contribute towards such goal.Agribusiness, Community/Rural/Urban Development, Industrial Organization, International Development, Labor and Human Capital, Land Economics/Use, Political Economy,

Episodes of Fluctuating Oil Prices Through the New-Normal Era: The Historical Perspective (1946-2020)

Crude oil as a principal energy source is one of the most dynamically transacted commodities, and changes in oil price have been a constant phenomenon over the years. The uncertainty associated with fluctuations in oil price affects global economic stability.  However, this paper centers on historical events and trends of fluctuating oil prices at different periods, including the recent new-normal era of the COVID-19 pandemic. It captured all the detailed oil price shocks' events at various intervals, from 1946-2020 and the possible factors responsible for the constant changes in the global oil prices.  An economic model is proposed to close the revenue gaps in these highly oil-dependent nations, given that the "oil age" is gradually fizzling out. Keywords: Episodes, Fluctuating Oil Prices, Oil-exporting nations, Covid-19 Pandemic, Declining Oil Revenue, Economic Model DOI: 10.7176/HRL/53-03 Publication date: April 30th 202

Policy research working papers : catalog of numbers 801-1200

This paper contains a numerical listing of working papers produced by the Central Vicepresidencies. Each citation contains a brief abstract, and the contact point for the paper.Environmental Economics&Policies,Economic Theory&Research,Banks&Banking Reform,Poverty Assessment,Health Economics&Finance