Dimensions of quality upgrading

The impact of the Central and Eastern European (CEE) economies’ trade integration with European markets on CEE trade structures has been studied extensively. These studies frequently observe a quality upgrading of CEE exports. In this paper we consider three dimensions of quality upgrading: upgrading across industries, upgrading across different quality segments within industries and, finally, product upgrading within quality segments inside industries. For the analysis we partition industries into quality segments based on EU‐15 import unit values. The results for ten CEE countries (comprising the CEE‐5, the Baltics and South East Europe) and thirteen industries suggest fundamental differences, both across country groups and across the three different notions of quality upgrading. The CEE‐5 show no evidence of entering a ‘low‐quality trap’ in all three dimensions. By contrast, while there is a general catching‐up process across industries and inside quality segments, the second notion of low‐quality specialization may be applicable within the high‐tech industries to the performance for the Baltics and South East Europe as a group.     

Similar GDP-inflation cycles. An application to CEE countries and the euro area

In this paper we look at business cycles similarities between CEE countries and the euro area. Particularly, we uncover GDP-inflation cycles by adopting a trend-cycle decomposition model which allows the trend to be either stochastic or deterministic, i.e. of the non-linear type. Once cyclical components are derived, we test for ex post restrictions at both with-in (GDP-to-inflation) and cross-country (CEECs vs. euro area) levels. Allowing for different degrees of cyclical similarity, we find that a similar inflation vs. GDP cycle is not rejected only for Poland, Lithuania, Romania and Estonia (with Latvia and the euro area being at the boundary). Looking at cross-country results, almost all countries feature a fair degree of similarity with respect to the euro area. Exceptions are Poland, Hungary, Latvia and Slovenia because of lack of a similar cycle either occurring in GDP or inflation, yet not in both. Finally, observing how concurrence between each CEECs cycle and the euro area evolved over time, we find that inflation conditional correlation increased stemming from the EU accession of most CEECs and as a result of the commodity price shock preceding 2008. Further, inflation and GDP conditional correlations receded during the course of 2009–2010, possibly resulting from more idiosyncratic adjustments in the aftermath of the crisis on the monetary/fiscal side. Interestingly, Slovenia, Slovakia, Estonia and Bulgaria display a conditional correlation pattern in GDP and inflation which roughly suggest a strong out-of-phase recovery starting from 2005.     

Internationalization of Italian Firms in Central and Eastern European Countries: Headquarters–Subsidiary Relationship

This article aims at providing further empirical evidence about the international activity of Italian small and medium enterprises (SMEs). In particular, the present contribution can be ascribable to the stream of research regarding the headquarters–subsidiary relationship. Focusing our attention on the subsidiary of Italian SMEs internationalized in Central and Eastern European countries (CEECs), we provide evidences about the main variables affecting their autonomy. Literature review provides us evidences of the fact that subsidiary autonomy is an extremely heterogeneous topic to investigate. Consequently, we decided to add to the quantitative analysis also a qualitative one. Through personal interviews with the Italian entrepreneurs and the managers of the local subsidiaries, we got a better and deeper insight into the evidences coming from the quantitative data.     

The real effect of financial crises in the European transition economies1

The aim of this work is to assess the impact of financial crises on output for 11 European transition economies (CEECs). The results suggest that financial crises have a significant and permanent effect, lowering long‐term output by about 12–17 percent. The effect is larger in smaller countries in which the banking sector presented more important financial disequilibria. We also found that fiscal policy has been the most efficient tool in dealing with the crises, whereas the effect of monetary policy has been rather modest. Flexible exchange rates are found to attenuate the impact of the crises in the short and medium term, but to amplify the effect in the long run. International Monetary Fund support is found to moderate the effect in the long run. Finally, the effect in the CEECs is considerably larger than in the EU advanced economies.     

Prolonged Stagnation,Hesitant Recovery: Japan from an ‘Austrian’ Perspective

Tentative indications of recovery at the turn of the millennium offer the prospect of an end to the economic crisis that has afflicted the world's second largest economy since 1991. Both the duration of these difficulties and their insusceptability to conventional policy stimuli have presented challenges to mainstream macroeconomic thinking. It is argued here that the business cycle theory developed by Friedrich Hayek on the basis of the Austrian economic tradition, although eclipsed by the contemporary writings of Keynes, offers insight into the intractable nature of the Japanese crisis. This contrasting perspective stresses the links between monetary policy and the evolution of capital structure to provide an explanation for the inevitable dislocation following a credit‐financed boom. On these grounds, the application to Japan emphasises relaterd monetary and exchange rate developments in the 1980s as the underlying cause of the long stagnation of the 1990s. It therefore contradicts the view of the IMF and other multilateral bodies that the country's financial sector deficiencies were the primary factor. The structural focus of the analysis also suggests that the current (uncharacteristic) Fund emphasis on the need for demand stimulation is misplaced. Arguing that the surrounding economies have a particular interest in the means chosen to consolidate economic recovery in Japan, a policy approach consistent with the Austrain diagnosis is set out. It provides a framework in which fiscal consolidation and monetary policy normalisation, as desired by some elements of the country's administration, would be an appropriate strategy for the promotion of recovery.     

Public debts,deficits and interest rates in CEECs: are there spatial spillovers?

In this paper we extend the literature on the relationship between public debts, deficits and government bond yields in the following directions: we examine a set of 11 Central and Eastern European countries during the period 2006–2015; we apply a novel econometric technique that allows for spatial effects; and we test forward-looking instead of current values of explanatory variables thus addressing endogeneity problem. We find that there is overall a highly significant positive effect of both public debt and deficit on long-term interest rates. This effect is found to be larger in CEECs than in developed countries. Moreover, deficits are found to exert a large and significant indirect effect, and these spillovers amount to more than 50% of the overall effect.     

A RE‐EXAMINATION OF REAL INTEREST PARITY IN CEECs USING ‘OLD’ AND ‘NEW’ SECOND‐GENERATION PANEL UNIT ROOT TESTS

This study applies ‘old’ and ‘new’ second‐generation panel unit root tests to check the validity of the long‐run real interest rate parity (RIP) hypothesis for ten Central and Eastern European Countries (CEECs) with respect to the Euro area and an average of the CEECs’ real interest rates. When the ‘new’ panel unit root tests are carried out relative to the Euro area rate as reference, we confirm the results of previous studies that support the RIP hypothesis, and the results of the ‘old’ tests used as a benchmark. Nevertheless, when the ‘new’ tests are performed using the average of the CEECs’ rate as reference, our results are mitigated, revealing that the hypothesis of CEECs’ interest rates convergence cannot be taken for granted. From a robustness analysis perspective, our findings indicate that the RIP hypothesis for CEECs should be considered with caution, because the RIP hypothesis is sensitive to the retained reference rate for computing the real interest rate differential, and also to the retained countries in the sample.     

Similarity in trade structures,integration and catching‐up1

In this paper, we look at the role of export composition in the growth process, considering how increased similarity in trade structure among countries can induce catching‐up in income levels in a group of countries in transition. We analyze the sectoral export patterns of the Central and Eastern European countries (CEECs) by comparing them to those of the current members of the European Union (EU), focusing on countries’ specialization as suppliers for the EU market, and we assess whether similar export patterns foster the catching‐up process of the CEECs. Our main result is that similarity in export composition has a positive, significant and non‐linear impact on catching‐up, and seems to be driven by the growth of the main export market and delocalization of production more than by other factors.     

Economic integration and similarity in trade structures

In this paper, we look at the similarity of the trade structures toward the EU market between four CEECs and the EU15. We evaluate the appropriateness of different indices to compare export flows—correlation indices and distance metrics—opting for the use of the Bray-Curtis semi-metric. We examine both how the export composition of a country has changed over time and how the export composition has changed with respect to the EU15 export composition. Finally, we test if the dynamics of sectoral distribution of the CEECs’ exports is related to the role acquired by processed trade in the 1990s. We give evidence that processed trade is crucial in explaining changes in the overall structure of exports of transition countries, and that greater economic integration in terms of trade flows and processing trade does not always lead to greater export similarity.

The International Competitiveness of CEEC Agriculture

The paper surveys the price competitiveness of agricultural production in Central and East European Countries (CEECs). It draws together empirical work conducted by tje authors and other studies that have estimated domestic resource cost (DRC) ratios for agriculture in various CEECs. The paper identifies that in general CEEC crop production is more internationally competitive than livestock farming. During the mid‐1990s, wheat production in Bulgaria, the Czech Republic, Hungary, Romania and Slovakia was internationally competitive. In contrast, during the same period, milk production was not internationally competitive. However, there is also a considerable degree of variation from country to country; very little of Slovenia's agricultural production is internationally competitive. In the livestock sector the greatest problems lie where large herds have been broken up resulting in fragmented production. This has particularly affected beef and milk production. Considering variations in DRCs by farm type, larger private farms in Hungary and the Czech Republic are more internationally competitive than smaller private farms in crop production. If CEEC producers faced average EU prices for their traded inputs and output, most could be price competitive. However, conclusions should be treated with caution due to sensitivity of DRC ratios to changes in international prices and the choice of the shadow prices for non‐tradeable inputs