Understanding China’s monetary policy: an institutional perspective

Given China’s status as a large transitional economy, analysing the country’s monetary policy requires an understanding of the institutional and policy environment within which monetary policy operates. As China’s monetary policy has multiple objectives and the central bank is subordinate to the State Council in monetary policy decisions, addressing deep-rooted structural issues and improving governance and institutions are essential so that monetary policy can be more focused and effective. Confronted with the Impossible Trinity dilemma, China faces daunting challenges in tackling the inevitable policy choice between monetary autonomy and exchange rate control as its capital account increasingly liberalises. This article analyses China’s unique and evolving monetary policy framework from an institutional perspective and evaluates the challenges to monetary management and reforms. Relevant policy implications for monetary policy implementation are also discussed.     

Measuring the degree of competition in Pakistan’s banking industry: an empirical analysis

Pakistan’s banking industry has gone through significant transformation from being in a heavily state regulated and controlled environment to a more liberalized market structure in recent years. This liberalization of banking industry in Pakistan has raised concerns over the dominant banks’ exercise of market power on account of increase in market concentration due to mergers and acquisitions, high profitability in banking sector and increasing interest rate spread. Present study therefore explicitly tests the market conduct of banks using quarterly panel data of 30 banks from 2004 to 2012 and employing Panzar–Rosse, Bresnahan–Lau, Hall–Roeger and Boone’s approaches to study market power. Our findings suggest that Pakistan’s banking industry is working in a competitive environment and we find little evidence for the exercise of market power by the dominant banks. Our results remain robust across all these approaches to measure market power. These findings indicate that the liberalization and deregulation of Pakistan’s banking industry has been successful in improving the competitive conditions in the market.     

Structural change and macroeconomic policy: the case of Greece (1981–85)

This article examines one aspect of ‘alternative economic strategies’ which seek to introduce planning and other interventionist economic policies in order to promote structural change. Experience has shown, most recently in France and Greece in the 1980s, that such strategies are often abandoned because of macro-economic imbalances, such as current account crises. Thus it seems that a crucial aspect of such strategies should be the co-ordination of short-term, or macro-economic, policies with longer-term supply-side policies. The interest in the Greek experiment (1981–85) lies in the fact that the Greek socialists were aware of the need for such co-ordination and their strategy for ‘stabilization through development’ and ‘gradual adjustment’ was formulated for this purpose. This article looks at the economic theory underlying this approach and the implementation of the strategy. However it is argued that the degree of control necessary for the successful implementation of the strategy was lacking. The failure of macroeconomic policy once more contributed to the abandonment of an alternative economic strategy. I investigate the reasons behind this failure and draw some lessons of more general relevance for the successful co-ordination of macroeconomic and supply-side policies.

Accumulation involves a process of continual structural transformation, a qualitative change, in which the scale, content and location of economic activity are progressively transformed. There is no automatic mechanism ensuring that this takes place in a desirable manner or at a desirable pace (Eatwell and Green, 1984: 202).     

On the assessment of the performance in earnings management for the banking industry: the case of China’s banks

Earnings management is popular in the banking industry. Earnings can be manipulated by discretionary loan loss provisions (DLLP). Analysing the trajectories of banks’ DLLP (i.e. their change in DLLP over time) is an effective way to assess the performance in earnings management for the banking industry, but seems not to have been addressed in the earnings management literature. In this study, we analyse the trajectories of DLLP with the yearly data from 2007 through 2012 for four types of banks in China. The results have indicated that state-owned banks, policy banks and city commercial banks seem to manage earnings well. Cautionary notes about bank risks are provided.     

The institutional ideas virus: the case of Johan Åkerman

Swedish economists have received impulses from historical or institutuionalist sources on many occasions. A couple of these economists, Gunnar Myrdal and Johan Åkerman, received obvious impulses from American institutionalism. This article deals with the case of Åkerman. To attempt a wall-to-wall chart of institutional influences on an economist is hardly possible. But what is possible is to examine occasions when he was exposed to powerful ‘jolts’, viz in conjunction with studies at an American university. Johan åkerman studied at Harvard in Cambridge in 1919–20. he evetually became – alongside Myrdal – the leading institutional economist.     

The international spillover of china’s monetary policy: a case study of a developing country

This paper aimed to investigate the evidence on the transmission of China’s monetary policy shocks to macroeconomic variables in Iran. Since 1990, China has become one of the main trading partners of Iran; therefore, it is expected that China’s macroeconomic shocks have some consequences on Iran’s Economy. In this study, a structural vector autoregressive model is used to explore such a transmission. The findings of the study reveal that the China’s monetary policy changes significantly affect the Consumer Price Index (CPI) as Iran’s CPI meaningfully increases with the expansion of China’s money supply. Furthermore, it was found that Iran’s other economic variables, including the real GDP, real effective exchange rate, and interest rate, do not significantly reflect the China’s monetary shocks; even though confirm the expected sign and direction.     

The transition from ‘socialist’ agriculture to the common agricultural policy: the case of Slovenia

This article describes the changes in Slovenian agricultural policy in the period 1993–2001 in light of Slovenia's anticipated accession to the European Union. Agriculture in Slovenia is characterised by relatively unfavourable natural and structural conditions, which also explains its status as a net food importer and its relatively protectionist agricultural policy. The period of transition was also a period of thorough restructuring of agricultural policy, which was gradually brought into line with the goals and mechanisms of the Common Agricultural Policy (CAP). Even before accession Slovenia started to implement CAP-like measures, including direct payments and rural development policy measures. Slovenia is thus the only candidate country for EU accession with a level of support for agriculture comparable with that in the European Union. In its negotiations for EU membership, Slovenia agreed on the same level of direct payments for Slovenian farmers as received by farmers in the European Union, except that in the first period they will be largely covered from the national budget. As a result of the outcome of negotiations, the economic position of Slovenian farmers after accession is not expected to change markedly on the aggregate level, particularly if all the necessary steps are taken with regard to the building of an efficient system for the transposition of the CAP. Accession to the EU will, however, not solve the problem of relatively poor compeititiveness of the agricultural sector in Slovenia, which still has to undergo comprehensive structural changes and adjustments.     

The twilight of the setter? Public school budgets in a time of institutional change

We use a policy change that occurred in Oregon in the late 1980s to re‐visit the budget‐maximizing agenda setter theory of local public expenditure. Prior to 1987, Oregon school districts held operating levy elections with an exogenous, often zero or very low, spending reversion. From 1987 through 1990, districts experienced a “safety net” regime where the reversion was at least the previous year's nominal spending. We find that the “safety net” sharply limited the agenda setter's ability to use the reversion as a threat to obtain voter approval of relatively large expenditures.     

China’s direct investment in the European Union: challenges and policy responses

The dramatic rise of Chinese direct investment into the European Union (EU) has sparked a debate about the control that China may be seeking to take over European economies. Quite naturally, these concerns have led to repeated calls that action be taken to slow down, if not to halt entirely, this growing trend. The objective of the article is to shed light on this debate. Following a thorough analysis of Chinese direct investment in the EU, this article suggests that the challenges posed by these inflows are widely overblown. Despite this, the article concludes that it is necessary to have a systematic approach to regulating inbound foreign investment (including from China) in the EU. Such an approach may help guard against the risk of a protectionist drift inside the EU, as well as the possibility that some investors may one day pose a threat to national security. This article concludes that although the current fragmented regulatory approach is unsatisfactory, because of the difficulties associated with a unified EU-wide review process, the most realistic option is to promote a more systematic and coordinated use of existing mechanisms such as competition policy. Also, pushing for the negotiation of a China–EU BIT is certainly a promising avenue to enhance the EU’s bargaining leverage based on the principle of positive reciprocity.     

International spillovers of ECB’s unconventional monetary policy: the effect on Central Europe

We examine how unconventional monetary policy of the European Central Bank (ECB) influences macroeconomic stability in three Central European economies. We estimate various panel vector autoregressions (PVARs) using monthly data from 2008 to 2014. Using the shadow policy rate and central bank assets as measures of unconventional policies, we find that output growth and inflation in Central Europe temporarily increase following an expansionary unconventional monetary policy shock by the ECB. Using both impulse responses and variance decompositions, we find that the effect of unconventional policies on output growth is much stronger than the effect on inflation.     

Kuznets’ swings and intangible investments in forecast: the case of Greece

This article offers an analysis of the relationship between intangible investments and the pattern of local economic productivity in Greece. There are two main objectives in the article: (i) to explore the pattern of economic development in the country; (ii) to find evidence whether this pattern – and its trend – can be better predicted through a forecasting model including intangible investments (next to other relevant factors). To operationalize our study, we use the World Bank Development Indicators database which offers a time-series for Greece for the period from 1981 till date. This data set has two alternative relevant measures for intangible investments: knowledge- and health-related investments. In our analysis we employ first, a centred moving average with a stochastic estimation of the trend, and second a double exponential smoothing, as two alternative (‘deductive’ and next ‘inductive’) approaches to identifying a trend in our data for Greece. We find evidence for a Kuznets swing type of cyclical pattern for Greece – confirmed by triangulation. Most significantly, we also find a relationship between local economic development and intangible investments. These results prompt an evidence-based query about underlying Myrdalian and Tieboutian foundations of wave theory for understanding local economic crises.     

Reappraisal of outbound open innovation under the policy of China’s ‘Market for Technology’

China’s ‘Market for Technology’ policy has attracted much interest over the past decade. In light of a relative emphasis on the spillover effects of joint ventures, this study examines the transferring effects of Multinationals’ (MNCs) outbound open innovation in such a context. A survey of 2071 research and development (R&D) contract transactions between Chinese entities and MNCs indicates both internal factors (e.g. organisational capabilities) and external factors (e.g. the role of Intellectual Property protection) affect the transferring effects, which reformulate the focus of the Policy from the relational dimension of ‘Government vs. MNCs’ to the transactional dimension of ‘Domestic entities vs. MNCs’. We thus conclude that MNCs’ active initiative in the involvement of technology transfer and the success of domestic transaction partners combine to contribute to the technology progress within China’s ‘Market for Technology’ policy.     

Time-varying transmission efficiency of China’s monetary policy

This paper tries to investigate the time-varying characteristics of China’s monetary policy transmission from the impulse response evidence of both open-economy DSGE model and TVP-VAR model. We find that the transmission efficiency of price-based monetary policy has significantly improved over the sample period, while quantity-based monetary policy is weakening. The resume of exchange reform in 2010 also strengthens the exchange rate channel especially in terms of price-based monetary policy. Combining with the evidence from DSGE model underlines the importance of further interest rate liberalization and price-based monetary policy Taylor rule should also consider the exchange rate stability.     

Determinants of persistence in innovation: evidence from the case study of the ‘Eye Microsurgery’ Complex

This study aims at determining the major factors supporting innovative persistence based on an in-depth analysis of the internal organizational processes of the state-owned medical institution, ‘Eye Microsurgery’ Complex in Moscow. I propose a systemic approach to the study of innovation activities, which incorporates aspects of evolutionary economics, institutional analysis and dynamic capabilities theory. The study explicitly incorporates the changing external environment as a factor shaping innovation dynamics. The findings suggest that at the earliest stage of the firm's development, the interaction between the nature of the technology and the nature of the demand, the presence of prolific innovators and a certain organizational structure that supports learning, effective knowledge production and accumulation are determinant of persistence in innovation. In later periods, the availability of resources (material, financial, specialized human capital), external collaborations, specific production techniques, well-organized technological diffusion, and motivational factors are the elements providing the basis for innovative persistence. Leadership plays a crucial role in supporting innovation and organizational transformation.     

Credit money and Kaldor’s ‘institutional’ theory of income distribution

This paper combines two major contributions by Kaldor: the view that the supply of money, ensuing mainly from bank credit, is endogenous, and the framework which assigns a crucial role to the saving and investment behaviour of corporations in determining the general rate of profit (the neo‐Pasinetti theorem). Bank loans are introduced as another means of financing investment by firms, in addition to retained profits and the new issuance of shares. The proposed model provides a convenient framework in which two different approaches in the money‐endogeneity view are classified. Kaldor’s neo‐Pasinetti theorem is shown to hold for only one of these approaches and is then extended to include the influence of banks.     

Political incentives and the effectiveness of monetary policy: evidence from China’s city commercial banks

From the perspective of official-and-director (OAD), this article takes studies of the effect of monetary policy on bank loans to the heterogeneity of bank. We explore how political incentives affect the lending channel of monetary policy transmission, using a sample of China’s city commercial banks during 2006–2014. And we further analyse the role of OAD’s characteristics, including administrative rank and age. The results indicate that although tight monetary policy can reduce bank loans, the OAD can weaken this relationship, and the higher is the administrative rank of OAD, the larger is the effect. And the older is OAD, the larger is the effect. More importantly, the relationship between monetary policy and bank loan is insignificant in banks with OAD, implying that the lending channel of monetary policy is absent when considering the role of OAD.     

Did the pattern of aggregate employment growth change in the euro area in the late 1990s?

This paper examines whether the pattern of growth in euro area employment seen in the period 1997 to 2001 differs from that recorded in the past and what could be the reasons. First, a standard employment equation is estimated for the euro area as a whole. This shows that the lagged impact of both output growth and real labour cost growth, together with a productivity trend and employment ‘inertia’, can account for most of the employment developments between 1970 and the early 1990s. Conversely, these traditional determinants can only explain part of the employment development seen in recent years (1997 to 2001). Second, the paper shows sound evidence of a structural break in the aggregate employment equation in the late 1990s. Third, the paper provides some tentative explanations for this change in aggregate employment developments, using in particular country panels of institutional variables and of active labour market policies but also cross-sectional analyses. Among the relevant factors likely to have contributed to rising aggregate employment in recent years are changes in the sectoral composition of euro area employment, the strong development of part-time jobs, lower labour tax rates and possibly less stringent employment protection legislation and greater subsidies to private employment.     

Revising higher education policy in Greece: filling the Danaids’ Jar

The study examines the possible effects of a recent policy change in Greece on students’ graduation rates. Our study mainly concentrates on the potential impact that the reform may have on the various categories of students, as these are classified by the way they enter the university. Records for students studying at a university of economic and social studies are analyzed by employing a probit model. Our main empirical finding suggests that students from all the other modes of entry, compared to students entering by means of general examinations, face a considerably higher probability of failure.     

Walter Eucken’s place in the history of ideas

German neoliberalism, as represented by the so called Freiburg School, was mainly influenced by the economist Walter Eucken. Eucken’s economic methodology can only be understood if placed in the context of the German philosophical and sociological debate of that time. The revelation of these connections is at the center of this paper. To this purpose, first, the influence of Max Weber and of his ideal typical approach will be discussed. Second, the role played by Walter Eucken’s father, the philosopher Rudolf Eucken and the significance of the Freiburg phenomenologist Edmund Husserl for the concept of ordoliberalism will be analyzed. Third, it will be shown that Eucken’s method is set against all relativist currents and sustained by the hope of discovering the “realm of truth” (Edmund Husserl) in economics as well. On this basis, Eucken’s oeuvre can be characterized by the aspects of order, freedom and truthfulness.