An Overhaul of a Doctrine: Has Inflation Targeting Opened a New Era in Developing-country Peggers?

The aim of this paper is to empirically examine the effect of a regime switch, from exchange-rate targeting (fixed exchange rate) to inflation targeting, on monetary policy in developing economies, hence adding to evidence on whether inflation targeting along with a managed float provides a better monetary policy compared to exchange-rate targeting. For this purpose, a group of developing countries that have historically experienced such a switch is analysed. This is done by an augmented interest-rate rule a-la Taylor (1993; 2001). Two methodological approaches are used: switching regression and Markov-switching method. Although both approaches have different drawbacks which compensate, still both lead to the conclusion that inflation targeting represented a real switch in developing countries. The period of inflation targeting was characterized by: a more stable economic environment; by more independent monetary-policy conduct; and by strict focus on inflation. Estimates suggest that the switch to a new monetary regime explains these results.inflation targeting, exchange-rate targeting, monetary regime switch, developing economies

Exchange rate pass-through under inflation targeting in transition economies

This paper assesses whether the exchange rate pass-through in transition economies changed due to inflation targeting and the ongoing crisis. The economies of Central and South Eastern Europe and the Commonwealth of Independent States, of which nine are inflation targeters, are examined over the period 1993-2011. Results suggest that the exchange rate pass-through in transition economies is generally quite high. However, inflation targeters achieved a pass-through that was nearly four times lower and maintained it during the crisis due to their acquired monetary credibility. On the other hand, for non-inflation targeters, the pass-through increased during the crisis, likely due to temporary exchange rate shocks being perceived by agents as permanent

Unregistered Micro-Performers of Business Activity: The “Who” and “Why” in North Macedonia

The purpose of this paper is to understand who the unregistered micro-performers of business activity (MPBA) in North Macedonia are and why they decided to stay informal. We rely on a specifically designed Survey on Unregistered Micro- Enterprises collected from 151 unregistered MPBAs in May 2022. Results reveal that most common forms of unregistered MPBAs include: street sellers, individual farmers, handicraftsmen, providers of personal beauty services, painters, plasterers, bakers, lessons instructors, motor vehicle mechanics and housekeepers and cleaners. Costs of becoming a registered company, particularly taxes, social contributions, parafiscal charges and the cost for accounting, have been identified as an important impediment to registration. On the other hand, access to bigger customers, to more reliable sellers of inputs and to new markets have been identified as large benefits of formalization. The second motivation is the access to social protection and pension in the old age. Costs of staying informal have limited power in motivating registration

OUTPUT VOLATILITY IN MACEDONIA: A ROLE FOR THE EXCHANGE RATE?

The study aims to empirically explore the relationship between exchange-rate rigidity and output volatility for Macedonia, building on the flaws of the existing, though scarce literature on the topic. Specifically, it carefully constructs the output volatility regression; considers the measure of output volatility; and accounts for the endogeneity bias doubted to be present in the respective literature. Moreover, it utilizes a Hodrick-Prescott definition of volatility, to avoid persistent series which are obtained by using rolling standard deviations. The empirical investigation covers the period 1998:Q1 - 2009:Q2 and uses a GMM estimator. We find that, in general, a TOT shock opts to increase output volatility, but under a more flexible regime, it starts to affect the output fluctuations negatively, implying a role of a buffer. Quite the contrary, when nominal shocks (monetary and/or fiscal) hit the economy, a more rigid alternative of the exchange rate is preferable.exchange-rate regime, output volatility

Does Cultural Heritage Affect Job Satisfaction: The Divide between EU and Eastern Economies

The objective of this paper is to examine the factors influencing worker’s job satisfaction aside the conventional factors (personal background, individual labour market characteristics, organisational culture, and so on) and introduce the basic cultural values and beliefs, and then to put this into a comparative perspective for the South-East European (SEE) countries and for Macedonia, in particular. Cultural values have been grouped into traditional vs. secular-rational values and survival vs. self-expression values. The main result from the study is that cultural heritage exerts considerable effect on job satisfaction in SEE with some determinants – like the importance of work, religion and family – exerting stronger influence in SEE than in CEE and in Western Europe. The impact of cultural values on job satisfaction in Macedonia has been found to be only limited. Mainly the traditional cultural values have been found important, while only trust from the ‘survival’ group likely affects job satisfaction and likely with the effect being stronger than in the case of SEE, CEE and Western Europe

An Overhaul of a Doctrine: Has Inflation Targeting Opened a New Era in Developing-country Peggers?

The aim of this paper is to empirically examine the effect of a regime switch, from exchange-rate targeting (fixed exchange rate) to inflation targeting, on monetary policy in developing economies, hence adding to evidence on whether inflation targeting along with a managed float provides a better monetary policy compared to exchange-rate targeting. For this purpose, a group of developing countries that have historically experienced such a switch is analysed. This is done by an augmented interest-rate rule a-la Taylor (1993; 2001). Two methodological approaches are used: switching regression and Markov-switching method. Although both approaches have different drawbacks which compensate, still both lead to the conclusion that inflation targeting represented a real switch in developing countries. The period of inflation targeting was characterized by: a more stable economic environment; by more independent monetary-policy conduct; and by strict focus on inflation. Estimates suggest that the switch to a new monetary regime explains these results

ENTRY OF BANK FOREIGN CAPITAL IN DEVELOPING ECONOMIES: MEASURING PROFIT & COST EFFICIENCY

The paper aims at acknowledging the efficiency effects of bank privatization upon the entry of strategic foreign investor. Thus, a broad experience from the developing countries is reviewed. General conclusion is that the foreign capital infusion improves the profit and cost efficiency of the banks. The paper also investigates the various methodologies that academics employ when they investigate the topic.Privatization, Foreign capital, Cost and profit efficiency, Measurement

The covid-19 impact on exports in North Macedonia— firm-level analysis

Exports experienced extraordinary growth rates during the last decade in North Macedonia capturing above 50% share of the country’s GDP. However, the COVID-19 crisis interrupted the positive export series imposing various constraints in multiple dimensions on export-oriented firms. This study explores the multidimensionality of the COVID-19 impact on exporters in North Macedonia. We find that COVID-19 caused a systematic slowdown in the exporters’ revenue, profit, investment, capital, employment and salaries growth rates. Moreover, the limited access to finance, import exposure to EU markets, high labourintensity, export exposure to non-EU markets and lower competitiveness make exporters less resilient to the pandemic shocks representing the main obstacles exporters are/will be facing in the recovery stage

Hemlock for policy response: Monetary policy, exchange rates and labour unions in SEE and CIS during the crisis

The objective of this paper is to assess whether the level of unionization and the rigidity of the exchange rate affected wages and monetary policy in SEE and CIS during the ongoing economic crisis. Towards that end, a New Keynesian model with price and wage rigidities is used. The model is estimated with a panel GMM over the period January 2002 - March 2011 on sample of 19 countries. Several findings emerge. First, the output gap is found not to depend on the real interest rate, in accordance with the underdeveloped financial markets in these economies. Second, inflation is found not to depend on the output gap, but on the wage gap, which stresses the relevance of the labour unions for the inflation dynamics in these countries. Third, the labour wedge that arises from the monopolistic competition in the labour market works mainly through the wage gap, not the output gap, in accordance with the high unemployment in these countries. Fourth, monetary policy responded counter-cyclically during the crisis in countries with weak trade unions, differently from countries with strong unions: in crisis times, weak economy drags wages down in low-unionized countries and monetary policy relaxes in these countries, both due to lower wages and due to the weaker economy; on the other hand, strong unions prevent a weak economy to drag wages down in crisis times and central banks in these countries are found not to react to economic activity, prices or wages. Fifth, the fixed exchange rate is found to restrain monetary policy in times of crisis, too - in countries with flexible exchange rates, monetary policy during the crisis responds to movements in output gap and reserves, in contrast to countries with fixed exchange rate, where monetary policy does not respond to any domestic macroeconomic variable

Does motherhood explain lower wages for women in Macedonia?

The objective of the paper is to estimate the motherhood wage gap and its contribution to the gender wage gap in Macedonia, after considering workers’ characteristics and selectivity bias into the labour market for the childbearing-age population. In particular, it aims to disentangle the extent to which the natural role of women to have and raise children affects the gender wage gap. Due to the large female inactivity in Macedonia, we employ a repeated imputation technique, which imputes the wages of those who are unemployed or inactive. Imputed samples are used to decompose the gaps by weighing and by using a re-centred influence function. The Survey of Income and Living Conditions (2010) is used in the analysis. The results suggest that the motherhood wage gap in Macedonia is fully explained by characteristics and, hence, it does not contribute to the potential reducing of the gender wage gap. The selection is also irrelevant, i.e., its consideration does not alter these conclusions