Pitfalls in the European Enlargement Process: Financial Instability and Real Divergence

Many of the EU accession countries have announced that they will not only try to enter the EU as quickly as possible but also to adopt the euro at an early date. This is justified by the effort to avoid the danger of financial instability in the period prior to euro-introduction. However, by trying to avoid this danger, the CEECCs, at least the (economically, institutionally and technologically) less developed, may run into another danger or pitfall, namely of real divergence (or very slow real convergence). The paper investigates these dangers or pitfalls. It argues that for some accession countries the costs of entry at an early date may be very high, and that there may also be negative spillovers for the other accession countries and for the EU core countries. -- Viele der EU-Beitrittsländer haben angekündigt, dass sie nicht nur der EU, sondern auch der EWU schnell beitreten wollen. Dies wird damit begründet, dass so die Gefahr finanzieller Instabilität in der Zeit vor der Euro-Einführung verringert wird. Dies kann allerdings die Beitrittsländer (zumindest die ökonomisch, institutionell und technologisch schwächer entwickelten) in eine andere Gefahr stürzen, nämlich die anhaltender realer Divergenz (oder nur sehr langsamer Konvergenz). Der Aufsatz analysiert diese Gefahren oder Fallstricke der E(W)U-Erweiterung. Es wird argumentiert, dass die Kosten eines (zu) frühen EWU-Beitritts für einige der Beitrittsländer sehr hoch sein können, und dass auch Spillover-Kosten für die anderen Beitrittsländer und für die EU-Kernländer auftreten.European Integration,Transition Economies,Monetary Policy,Financial Instability,Real Convergence,Anticipatory Recession

Exports and Profitability: First Evidence for German Manufacturing Firms

Using unique recently released nationally representative high-quality longitudinal data at the enterprise level for Germany, this paper presents the first comprehensive evidence on the relationship between exports and profitability. It documents that the positive profitability differential of exporters compared to non-exporters is statistically significant, though rather small, when observed firm characteristics and unobserved firm specific effects are controlled for. In contrast to nearly all empirical studies on the relationship between productivity and exports we do not find any evidence for self-selection of more profitable firms into export markets. Due to the sampling frame of the data used we cannot test the hypothesis that firms which start exporting perform better in the years after the start than their counterparts which do not start. Instead, we use a newly developed continuous treatment approach and show that exporting improves the profitability almost over the whole range of the export-sales ratio. Only firms that generate 90 percent and more of their total sales abroad do not benefit from exporting in terms of an increased rate of profit. This means, that the usually observed higher productivity of exporters is not completely absorbed by the extra costs of exporting or by higher wages paid by internationally active firms.exports, profitability, micro data, Germany

Exports and Profitability: First Evidence for German Manufacturing Firms

Using unique recently released nationally representative high-quality longitudinal data at the enterprise level for Germany, this paper presents the first comprehensive evidence on the relationship between exports and profitability. It documents that the positive profitability differential of exporters compared to non-exporters is statistically significant, though rather small, when observed firm characteristics and unobserved firm specific effects are controlled for. In contrast to nearly all empirical studies on the relationship between productivity and exports we do not find any evidence for selfselection of more profitable firms into export markets. Due to the sampling frame of the data used we cannot test the hypothesis that firms which start exporting perform better in the years after the start than their counterparts which do not start. Instead, we use a newly developed continuous treatment approach and show that exporting improves the profitability almost over the whole range of the export-sales ratio. Only firms that generate 90 percent and more of their total sales abroad do not benefit from exporting in terms of an increased rate of profit. This means, that the usually observed higher productivity of exporters is not completely absorbed by the extra costs of exporting or by higher wages paid by internationally active firms. --exports,profitability,micro data,Germany

Implications of Globalization for Monetary Policy

This paper argues that the implications of globalization for monetary policy come mainly through two channels: On the one hand, the many structural changes, which are associated with the globalization process, cause an increase in uncertainty surrounding monetary policy. This leads to an increase in uncertainty about how to interpret macroeconomic data/indicators and about the monetary transmission mechanism. On the other hand, by strengthening the process of global economic integration, the globalization process increases international competition. Thereby, globalization forces market players to make structural adjustments or reforms which change the conditions or constraints under which monetary policy is implemented.

A New Keynesian Model with Endogenous Frictions

We develop a New Keynesian model that incorporates rigidities in the ability of households and firms to adjust their utility-efficient / profit-efficient resource allocation in response to shocks. These rigidities reflect the fact that households and firms enter into commitments for several periods of time regarding the allocation of resources limiting their ability to flexibly respond to unforeseen shocks. We show that these rigidities can adversely impact the productivity of firms and households' utility and result in the appearance of higher statistical moments in the demand and supply curves which are not exogenously constant but system-endogenous. As a result, we will derive the appearance of an inflation bias which exists even in the case of an efficient natural output and which cannot be removed by a rule-based monetary policy. Further, we show that monetary policy faces an additional trade-off in managing the friction losses due to inflation uncertainty and output uncertainty.

Population-ageing, structural change and productivity growth

Population-ageing is one of the traditional topics of development and growth theory and a key challenge to most modern societies. We focus on the following aspect: Population-ageing is associated with changes in demand-structure, since demand-patterns change with increasing age. This process induces structural changes (factor-reallocations across technologically heterogeneous sectors) and, thus, has impacts on average productivity growth. We provide a neoclassical multi-sector growth-model for analyzing these aspects and elaborate potential policy-impact channels. We show that ageing has permanent and complex/multifaceted impacts on the growth rate of the economy and could, therefore, be an important determinant of long-run GDP-growth.population-ageing; demand shifts; reallocation of factors; cross-sector technology-disparity; GDP-growth; multi-sector growth models; neoclassical growth models; structural change

Exports and Profitability - First Evidence for German Manufacturing Firms

Using unique recently released nationally representative high-quality longitudinal data at the enterprise level for Germany, this paper presents the first comprehensive evidence on the relationship between exports and profitability. It documents that the positive profitability differential of exporters compared to non-exporters is statistically significant, though rather small, when observed firm characteristics and unobserved firm specific effects are controlled for. In contrast to nearly all empirical studies on the relationship between productivity and exports we do not find any evidence for selfselection of more profitable firms into export markets. Due to the sampling frame of the data used we cannot test the hypothesis that firms which start exporting perform better in the years after the start than their counterparts which do not start. Instead, we use a newly developed continuous treatment approach and show that exporting improves the profitability almost over the whole range of the export-sales ratio. Only firms that generate 90 percent and more of their total sales abroad do not benefit from exporting in terms of an increased rate of profit. This means, that the usually observed higher productivity of exporters is not completely absorbed by the extra costs of exporting or by higher wages paid by internationally active firms.exports, profitability, micro data, Germany

The height of multiple edge plane trees

Multi-edge trees as introduced in a recent paper of Dziemia\'nczuk are plane trees where multiple edges are allowed. We first show that $d$-ary multi-edge trees where the out-degrees are bounded by $d$ are in bijection with classical $d$-ary trees. This allows us to analyse parameters such as the height. The main part of this paper is concerned with multi-edge trees counted by their number of edges. The distribution of the number of vertices as well as the height are analysed asymptotically

International Lessons for the Property Price Boom in South Africa

South Africa appears to share some of the characteristics (property price boom, easing of monetary policy, strong domestic demand growth) of asset price booms in industrial countries that were often followed by a period of weak growth. The international experience suggests that a number of practical obstacles need to be overcome before a more proactive role of monetary policy is warranted. However, a larger variety of available mortgage contracts, including longer-term fixed-rate contracts, should allow for a more efficient allocation of interest rate risks. Also, a more systematic nationwide collection of property price data, including data on commercial property price developments, would provide a more representative basis for analysis.Asset Prices,property prices,monetary policy,economic development