Identifying Determinants of German Inflation: An Eclectic Approach

The paper applies an equilibrium correction model to discuss impacts of monetary, labour and external factors on the German inflation. The approach presented is of eclectic character and allows for examination which variables representative for various inflation theories matter empirically when analysing inflation processes in Germany. The results obtained suggest that inflation in Germany is determined by adjustment processes on the market of production factors, external shocks embodied in import prices, level of capacity utilisation and monetary policy actions.equilibrium correction model, inflation modelling, Germany

The Polish Zloty and Currency Speculation

This paper uses Markov switching models to study short-run movements of the Polish zloty and speculative phenomena in Poland, that is, to investigate whether the exchange rate is "contaminated" by a speculative bubble. The zloty movements are examined in terms of so-called long swings - periods of prevailing appreciation and depreciation of the exchange rate. Speculative fluctuations of the zloty are investigated within two different frameworks: the uncovered interest parity hypothesis and a model of a zloty bubble. The results obtained suggest that the zloty exchange rate is characterised by interweaving periods of appreciation and depreciation with different durations. The uncovered interest parity hypothesis does not hold. Periods were identified, in which the zloty exhibited "bubble properties".Markov switching, exchange rates, speculative bubbles

The Welfare State, Thresholds, and Economic Growth

Can a growing welfare state induce a regime switch in the growth rate of an econ-omy? This paper constructs a dynamic political economy model of economic growth and the welfare state in which both variables are non-linearly related and jointly en-dogenous. Using a Markov switching framework over the period 1950-2001, we find that the structural decline in growth rates that several welfare state economies expe-rienced during 1970-1975 are preceded by movements to a high welfare state regime. This suggests that expanding welfare state regimes are associated with low economic growth regimes, while contracting welfare state regimes are associated with high growth regimes. However, we also find that the structural decline in growth rates leads to a downward structural break in the welfare state for many welfare state economies. This suggests that declining growth regimes are associated with contracting welfare state regimes, as lower growth forces politicians to cut the size of the welfare state. We also report strong evidence that both expansion and contractions in the welfare state affects growth non-linearly. These results are able to characterize a predictable and general pattern of welfare state-growth evolution.Welfare state; Structural change; Regime switching models; Positive political economy; Endogenous growth

Political Instability and the August 1998 Ruble Crisis

The main objective of this study is to highlight the importance of political instability, defined as frequent changes in and of government, in undermining the Russian exchange rate based stabilization program of the 1990s. The empirical evidence supports the significance of political instability along with economic fundamentals in determining Russian real effective exchange rate and exchange market pressure, used as a proxy to the crisis.Currency crises, political instability

Potential Impacts On The UK Of Future Migration From Bulgaria and Romania

This report provides evidence from which the UK Government can assess the potential impacts of migration from EU2 countries following the lifting of transitional controls at the end of 2013

The Banking Sector and Recovery in the EU Economy. ESRI Research Bulletin 2011/2/2

The financial crisis of the last three years has seen a dramatic change in the EU financial sector. Since the early 1990s, with the completion of the internal market, there had been a growing trend towards an EU financial services market. Banks were becoming more international with greater regional coverage within the EU (and the world) resulting in a more efficient use of capital in the EU economy and enhanced competition. The benefit of this growth in “European” banks was expected to arise from both efficiency gains within the sector and also from a more efficient allocation of capital across wider European economy, all leading to higher growth. Experience has shown that the expected changes in the banking sector within the EU did, in fact, translate into welfare benefits for consumers in the period prior to the current crisis

Fiscal policy coordination in Europe

Abstract It is widely accepted that policy makers should act quickly and in a concerted action to combat adverse effects of the financial crisis which has badly hit all European economies. While a redesign of the global financial architecture is required, it may become fully effective in the longer term only. To minimize macroeconomic costs of the financial turmoil in the short term, a well designed and coordinated response from macroeconomic policies is needed. This paper looks into gains from coordination of fiscal policy actions across members of the Euro Area. They vary across countries, and the pattern of relative impacts of coordinated and uncoordinated policies help explain positions taken in opening the bargaining