Domestic Savings and the Driving Forces of Investment in the ECE Emerging Market Economies

This paper dicusses possible approaches for improving the mobilization of domestic resources for development in the ECE emerging market economies, focusing on the interrelationship between domestic saving, capital accumulation and economic growth.Transition economies, economic growth, savings, investment

Innovation as a Key Driver of Competitiveness

This paper examines the link between the issue of competitiveness and innovation and their role in fostering higher living standards. The analysis is carried out at the level of both the firm and the country and then outlines some important policy implications. It appears that the innovative capacity of many of the European emerging markets would be enhanced considerably if the link between knowledge creation and its incorporation into marketable products could be strengthened. In many economies the basic national institutions supporting innovative activities could be improved, and the management of private firms have yet to fully appreciate the importance of innovative activity. The interrelationship between various economic policies, such as those for competition policy which seeks to limit firms’ market power, is also explored; it is found that these other policies often conflict with the objectives of increasing innovation and thus all these policies need to be formulated within a coherent framework that considers all these interactions.Financing for development, innovation, competitiveness, Europe, transition economies, technology investment, R&D

POLICY REGIME CHANGE AND CORPORATE CREDIT IN BULGARIA: ASYMMETRIC SUPPLY AND DEMAND RESPONSES

The paper seeks to assess how a major policy regime change – such as the introduction of the currency board in Bulgaria – affects the flow of bank credit to the corporate sector. An attempt is made to identify the determinants of corporate credit separately from the viewpoint of lenders and borrowers. The estimated credit supply and credit demand equations provide empirical evidence of important changes in microeconomic behavioral patterns which can be associated with the policy regime change. The results also suggest a considerable asymmetry in the response of credit supply and credit demand to the policy shock: while the supply shifts were quite pronounced, the patterns of firms’ credit demand remained fairly stable. The policy implications of the detected asymmetry in microeconomic adjustment are also discussed in the paper.http://deepblue.lib.umich.edu/bitstream/2027.42/39993/3/wp607.pd

POLICY REGIME CHANGE AND CORPORATE CREDIT IN BULGARIA: ASYMMETRIC SUPPLY AND DEMAND RESPONSES

The paper seeks to assess how a major policy regime change – such as the introduction of the currency board in Bulgaria – affects the flow of bank credit to the corporate sector. An attempt is made to identify the determinants of corporate credit separately from the viewpoint of lenders and borrowers. The estimated credit supply and credit demand equations provide empirical evidence of important changes in microeconomic behavioral patterns which can be associated with the policy regime change. The results also suggest a considerable asymmetry in the response of credit supply and credit demand to the policy shock: while the supply shifts were quite pronounced, the patterns of firms’ credit demand remained fairly stable. The policy implications of the detected asymmetry in microeconomic adjustment are also discussed in the paper.corporate credit, credit supply and credit demand, regime change, currency board, transition economy

Mark-Up Pricing in Bulgarian Manufacturing

The pricing policy of Bulgarian manufacturing firms is analysed in the paper in the context of the theory of the price-setting behaviour of firms endowed with market power, and more specifically, using the notion of mark-up pricing. Using some recent derivations in the literature, we estimate mark-up ratios for Bulgarian manufacturing sectors at the NACE 2-digit and NACE 3-digit levels. The estimated mark-ups are then tested against a set of variables measuring the degree of competitive pressure on a sectoral level.http://deepblue.lib.umich.edu/bitstream/2027.42/39773/3/wp389.pd

Understanding the Long-Term Growth Performance of the East European and CIS Economies

The paper analyses the determinants of long-term economic performance of east European and CIS economies in two periods: 1960-1989 (the era of central planning) and 1990-2005 (the transition to the market economy system). Throughout the 1960s and 1970s economic growth in eastern Europe progressively weakened and during the 1980s most of these economies plunged into a prolonged stagnation or recession, which contributed to the collapse of communism and central planning. The transition from plan to market began with the transformational recession, which persisted until the mid-1990s in eastern Europe, but was longer and deeper in the CIS. Since then, the east European and CIS economies have embarked on a path of strong economic growth. The recovery has been accompanied by a surge in fixed investment, often complemented by large inflows of FDI. Despite robust output growth, however, there has not been - at least so far - a noteworthy recovery in employment. The main feature of the recent strong economic growth in the region has been a remarkable upturn in both labour productivity and total factor productivity. The considerable gains in productive efficiency and rapid technological change were triggered by wide-ranging market reforms and the modernization of the capital stock. Gains in aggregate output per person employed have outpaced by a large margin increases in real GDP per capita. In terms of average productivity and real per capita income levels relative to those of the more developed, industrialized countries, the east European and CIS economies still face a long catching up process.economic growth, East Europe, CIS, transition economies

Mark-Up Pricing in Bulgarian Manufacturing

The pricing policy of Bulgarian manufacturing firms is analysed in the paper in the context of the theory of the price-setting behaviour of firms endowed with market power, and more specifically, using the notion of mark-up pricing. Using some recent derivations in the literature, we estimate mark-up ratios for Bulgarian manufacturing sectors at the NACE 2-digit and NACE 3-digit levels. The estimated mark-ups are then tested against a set of variables measuring the degree of competitive pressure on a sectoral level.mark-up pricing, competetive pressure, enterprise restructuring and adjustment, Bulgaria

Firms’ Price Markups and Returns to Scale in Imperfect Markets: Bulgaria and Hungary

Under perfect competition and constant returns to scale, firms producing homogeneous products set their prices at their marginal costs which also equal their average costs. However, the departure from these standard assumptions has important implications with respects to the derived theoretical results and the validity of the related empirical analysis. In particular, monopolistic firms will charge a markup over their marginal costs. We show that firms’ markups tend to be directly associated with the employed production technology, more specifically with their returns to scale. Accordingly, we analyze the implications for the markup ratios from the incidence of non-constant returns to scale. We present quantitative results illustrating the effect of the returns to scale index on the firms’ price markups, as well as the relationship between the two indicators, on the basis of firm-level data for Bulgarian and Hungarian manufacturing firms.http://deepblue.lib.umich.edu/bitstream/2027.42/40096/3/wp710.pd

Firms’ Price Markups and Returns to Scale in Imperfect Markets: Bulgaria and Hungary

Under perfect competition and constant returns to scale, firms producing homogeneous products set their prices at their marginal costs which also equal their average costs. However, the departure from these standard assumptions has important implications with respects to the derived theoretical results and the validity of the related empirical analysis. In particular, monopolistic firms will charge a markup over their marginal costs. We show that firms’ markups tend to be directly associated with the employed production technology, more specifically with their returns to scale. Accordingly, we analyze the implications for the markup ratios from the incidence of non-constant returns to scale. We present quantitative results illustrating the effect of the returns to scale index on the firms’ price markups, as well as the relationship between the two indicators, on the basis of firm-level data for Bulgarian and Hungarian manufacturing firms.markup pricing, market imperfections, return to scale, Bulgaria, Hungary