On the Impacts of Economic Freedom on International Trade Flows: Asymmetries and Freedom Components

This paper employs a gravity equation to estimate the effects of economic freedom on U.S. consumer exports and imports for 131 countries over the years 2000 - 2005. Using the newly updated Fraser Institute's Economic Freedom of the World Index, we find that increased economic freedom in the rest of the world would increase the United States' overall trade volume. We also consider whether imports and exports are affected asymmetrically with respect to income, transaction costs, and economic freedom. We find considerable differences in how these variables affect imports and exports of consumer goods. Our results also give some insight into how economic freedom might affect the U.S. trade position.gravity model, trade flows, trade balance

Real Interest Parity in New Europe

In this paper we investigate the real interest parity condition in ten Eastern European transition countries during 1997-2009 period. Our sample is interesting for three reasons: It covers the second stage of economic transition in the aftermath of the collapse of socialism; the establishment of Euroland at the turn of the century: and enlargement of Euroland to include the Eastern European countries of Slovenia and Slovakia. The data enables us to investigate how the introduction of market mechanisms in the early nineties and the establishment and enlargement of Euroland acted on real interest rate convergence. We test the real interest parity condition with unit root test with and without structural breaks. Inflationary expectations are estimated in two ways: (i) under assumption of rational expectations with ex-post inflation rates and (ii) with ex-ante estimated inflation expectation using ARIMA/ARCH model. Preliminary results suggest that there is a strong evidence of stationarity and relatively weaker evidence of structural breaks.Real interest parity condition, Transition countries, Unit root test, Structural breaks

Structural breaks and Purchasing Power Parity in the CEE and Post-War former Yugoslav States

In this paper we investigate purchasing power parity in the CEE and post-War former-Yugoslav states during EU integration process 1994-2006. This work stems from longer term tests of real exchange rate convergence in the former Yugoslavia. This period is of interest on two fronts: First, it investigates real exchange dynamics in the aftermath of war financed in part through seignorage; and second, we investigate the level of economic integration with the European Union following the break up of the former Yugoslavia. Given the short run nature of the available data we use panel unit root tests with and without structural breaks. Preliminary results suggest that real exchange rates between the former Yugoslav states and Germany are stationary when breaks are accounted for. Given the size of nominal shocks in the region, particularly in the early 1990s, preliminary results indicate that convergence to the long run equilibrium is relatively quick.purchasing power parity, Economic Integration, panel unit root tests

Harrod, Balassa and Samuelson (Re)Visit Eastern Europe

In this paper we investigate Harrod Balassa Samuelson (HBS) effect in 11 transition countries. A large number of empirical papers based on quite limited datasets has already been published on HBS in Eastern Europe. The major contribution of this paper is the fact that we estimate HBS with NACE6 quarterly national account data which enables us to divide data into tradable and nontradable sector as suggested by De Gregorio, Giovannini and Wolf (1994) without any unrealistic assumptions. Following Bergstrand (1991) together with relative productivity we also employ share of government consumption in GDP as an explanatory variable. Unlike in previous studies, results have indicated that it is possible to find univariate cointegrating vectors only in Bulgaria, Croatia and Lithuania, and panel cointegration test has indicated that it is possible to find strong evidence of cointegration in post 2000 sample. For the post 1995 period, rejection of the null hypothesis is dependent on the inclusion of government consumption as independent variable and methodology used (DOLS vs. OLS cointegration test).Harrod Balassa Samuelson effect, Price convergence, Transition countries, panel cointegration tests

On the Impacts of Economic Freedom on International Trade Flows: Asymmetries and Freedom Components

This paper employs a gravity equation to estimate the effects of economic freedom on U.S. consumer exports and imports for 131 countries over the years 2000 - 2005. Using the newly updated Fraser Institute\u27s Economic Freedom of the World Index, we find that increased economic freedom in the rest of the world would increase the United States\u27 overall trade volume. We also consider whether imports and exports are affected asymmetrically with respect to income, transaction costs, and economic freedom. We find considerable differences in how these variables affect imports and exports of consumer goods. Our results also give some insight into how economic freedom might affect the U.S. trade position

Real Interest Parity in New Europe

In this paper we investigate the real interest parity condition in ten Eastern European transition countries during 1997-2009 period. Our sample is interesting for three reasons: It covers the second stage of economic transition in the aftermath of the collapse of socialism; the establishment of Euroland at the turn of the century: and enlargement of Euroland to include the Eastern European countries of Slovenia and Slovakia. The data enables us to investigate how the introduction of market mechanisms in the early nineties and the establishment and enlargement of Euroland acted on real interest rate convergence. We test the real interest parity condition with unit root test with and without structural breaks. Inflationary expectations are estimated in two ways: (i) under assumption of rational expectations with ex-post inflation rates and (ii) with ex-ante estimated inflation expectation using ARIMA/ARCH model. Preliminary results suggest that there is a strong evidence of stationarity and relatively weaker evidence of structural breaks

Individual Behavior and Policy Response in Times of a Pandemic

This paper presents a comprehensive analysis of the intricate dynamics between policy stringency, human behavior, and pandemic outcomes during the COVID-19 crisis. Drawing inspiration from the ’Taylor rule’, we develop and estimate a theoretical C-SI (Cases - Stringency Index) model, providing policymakers with an intuitive framework to assess the efficacy of economic and health policies enacted in response to the pandemic. Our C-SI model considers the interplay between formal stringency measures and individual behaviors, recognizing the nuanced factors influencing decisions to adhere to restrictions. Through rigorous theoretical development and empirical testing using a three-stage least squares (3SLS) approach we investigate the endogenous interaction between policy instruments, individual behavior, and pandemic outcomes. Our results underscore the significant influence of public interest in COVID-related topics, or the ”fear factor,” on individual behavior, suggesting that this factor rivals/complement formal stringency measures in shaping behavior. We identify a clear trade-off between economic and health outcomes and we observe a nonlinear relationship between stringency and mobility, indicating that changes in stringency measures do not consistently correlate with changes in behavior. Our analysis reveals no evidence of stringency policy endogeneity while we find strong evidence that vaccination rates exert a strong influence on policymakers across all analyzed states

Harrod, Balassa and Samuelson (Re)Visit Eastern Europe

In this paper we investigate Harrod Balassa Samuelson (HBS) effect in 11 transition countries. A large number of empirical papers based on quite limited datasets has already been published on HBS in Eastern Europe. The major contribution of this paper is the fact that we estimate HBS with NACE6 quarterly national account data which enables us to divide data into tradable and nontradable sector as suggested by De Gregorio, Giovannini and Wolf (1994) without any unrealistic assumptions. Following Bergstrand (1991) together with relative productivity we also employ share of government consumption in GDP as an explanatory variable. Unlike in previous studies, results have indicated that it is possible to find univariate cointegrating vectors only in Bulgaria, Croatia and Lithuania, and panel cointegration test has indicated that it is possible to find strong evidence of cointegration in post 2000 sample. For the post 1995 period, rejection of the null hypothesis is dependent on the inclusion of government consumption as independent variable and methodology used (DOLS vs. OLS cointegration test)