Vertical Intra-industry Trade between EU and Accession Countries

The paper analyses vertical intra-industry trade between EU and Accession countries, and concentrates on two country-specific determinants: Differences in personal income distribution and in technology. Both determinants have a strong link to national policies and to cross-border investment flows. In contrast to most other studies, income distribution is not seen as time-invariant variable, but as changing over time. What is new is also that differences in technology are tested in comparison with cost advantages from capital/labour ratios. The study applies panel estimation techniques with GLS. Results show country-pair fixed effects to be of high relevance for explaining vertical intraindustry trade. In addition, bilateral differences in personal income distribution and their changes are positive related to vertical intra-industry trade in this special regional integration framework; hence, distributional effects of policies matter. Also, technology differences turn out to be positively correlated with vertical intra-industry trade. However, the cost variable (here: relative GDP per capita) shows no clear picture, particularly not in combination with the technology variable.intra-industry trade, transition countries

On the Twin Deficits Hypothesis and the Import Propensity in Transition Countries

This article uses co-integration and related techniques to test for a long-run causal relationship between the fiscal and external deficits of three post-transition countries in Central and Eastern Europe. In addition, an import propensity model is tested by applying OLS and GMM. All the results reject the Twin Deficits Hypothesis. Instead, the results demonstrate that specific transition factors such as a high import intensity of exports and net capital inflows affect the trade balance.twin deficits, import propensity, transition countries

The Extreme Risk Problem for Monetary Policies of the Euro-Candidates

We argue that monetary policies in euro-candidate countries should also aim at mitigating excessive instability of the key target and instrument variables of monetary policy during turbulent market periods. Our empirical tests show a significant degree of leptokurtosis, thus prevalence of tail-risks, in the conditional volatility series of such variables in the euro-candidate countries. Their central banks will be well-advised to use both standard and unorthodox (discretionary) tools of monetary policy to mitigate such extreme risks while steering their economies out of the crisis and through the euroconvergence process. Such policies provide flexibility that is not embedded in the Taylor-type instrument rules, or in the Maastricht convergence criteria.monetary policy rules, tail-risks, convergence to the Euro, global financial crisis, equity market risk, interest rate risk, exchange rate risk

The unemployment-growth relationship in transition countries

Does the disappointingly high unemployment in Central and East European countries reflect non-completed adjustment to institutional shocks from transition to a market economy, or is it the result of high labour market rigidities, or rather a syndrome of too weak aggregate demand and output? In the case of transitional causes, unemployment is expected to decline over time. Otherwise, it would pose a challenge to the European Union, particular in case of accession countries, for it jeopardizes the ambitious integration plans of, and may trigger excessive migration to the Union. In order to find out which hypothesis holds 15 years after transition has started, we analyze the unemploymentgrowth dynamics in the eight new member countries from Central-Eastern Europe. The study is based on country and panel regressions with instrument variables (TSLS). The results suggest to declare the transition of labour markets as completed; unemployment responds to output and not to a changing institutional environment for job creation. The regression coefficients report a high trend rate of productivity and a high unemployment intensity of output growth since 1998. The conclusion is that labour market rigidities do not to play an important role in explaining high unemployment rates. Rather, GDP growth is dominated by productivity progress, while the employment relevant component of aggregate demand is too low to reduce substantially the high level of unemployment.unemployment, Okun’s law, transition

Vertical Intra-industry Trade between EU and Accession Countries

The paper analyses vertical intra-industry trade between EU and Accession countries, and concentrates on two country-specific determinants: Differences in personal income distribution and in technology. Both determinants have a strong link to national policies and to cross-border investment flows. In contrast to most other studies, income distribution is not seen as time-invariant variable, but as changing over time. What is new is also that differences in technology are tested in comparison with cost advantages from capital/labour ratios. The study applies panel estimation techniques with GLS. Results show country-pair fixed effects to be of high relevance for explaining vertical intraindustry trade. In addition, bilateral differences in personal income distribution and their changes are positive related to vertical intra-industry trade in this special regional integration framework; hence, distributional effects of policies matter. Also, technology differences turn out to be positively correlated with vertical intra-industry trade. However, the cost variable (here: relative GDP per capita) shows no clear picture, particularly not in combination with the technology variable.Diese Studie konzentriert sich auf zwei länderspezifische Bestimmungsgrößen des vertikalen intra-industriellen Handels, die auch für den Handel zwischen der EU und den Beitrittsländern von Relevanz sein könnten: Unterschiede in der personellen Einkommensverteilung und in der verwendeten Technologie. Beide Determinanten weisen eine Verbindung zu nationalen Politiken und zu grenzüberschreitenden Investitionen auf. Anders als in den meisten Studien wird die Einkommensverteilung nicht als zeitinvariante Konstante, sondern als sich über die Zeit hinweg ändernde Variable gesehen. Neu ist ebenfalls, daß Unterschiede in den angewendeten Produktionstechnologien im Vergleich mit Kostenvorteilen getestet werden, die ihrerseits auf die Faktorausstattung (Kapital-Arbeit) zurückgehen. Die Studie verwendet Panel-Techniken mit GLS. Ihre Ergebnisse zeigen, dass länderpaarspezifische feste Effekte von hoher Relevanz für die Erklärung vertikaler Strukturen im intra-industriellen Handel sind. Gleichfalls sind bilaterale Differenzen in der Einkommensverteilung und ihre Veränderungen positiv mit vertikalem intra-industriellen Handel im vorliegenden regionalen Integrationsrahmen korreliert sind. Das heißt, die Verteilungseffekte der Politik spielen ebenfalls eine Rolle. Etwas Ähnliches gilt für die Bestimmungsgröße "Technologie". Im Gegensatz dazu zeigt die Kostenvariable keine klaren Ergebnisse, vor allem dann nicht, wenn sie in Kombination mit der Technologievariable getestet wird