Uncovering the link between a flexible exchange rate and fundamentals: the case of Central and Eastern European economies

This article examines the link between a nominal exchange rate and macrofundamentals in Central and Eastern European (CEE) countries. We use the model based on the monetary policy rule as a theoretical framework that explains the relations between the exchange rate and price level, risk premium, output gap, and expected inflation. It allows for endogeneity of the monetary policy – the issue ignored in the widely used monetary model. The sample covers the period January 2000 – December 2014, so the data are not plagued by high-inflation differentials characteristic for the early transition period and include countries with relatively flexible exchange rates. Our empirical strategy employs the panel error correction model that allows for cross-sectional dependence and a series of panel causality tests. The main finding is that the nominal exchange rates in CEE countries are not disconnected from macrofundamentals implied by the Taylor rule-based model. More specifically, we find that there is a strong cross-sectional dependence among CEE countries, exchange rates Granger-cause macrofundamentals and tend to revert to the long-run relation, and that the results are robust to the ‘extraordinary circumstances’ argument, i.e. do not rest on the dynamics during the global financial crisis.     

ICT skills measurement in social surveys: Can we trust self-reports?

Quality & Quantity - Self-reports are the most common way of measuring information and communications technology (ICT) skills in social surveys. Studies comparing self-reported computer skills...     

Poland's agricultural sector under transformation

The Polish agricultural sector and food processing industry was the first industry to follow market economy because of agriculture's significance in the Polish economy and the dominant role of private ownership in agriculture. Full price liberalization, internal convertibility of the Polish currency, and liberalization of foreign trade completely changed the situation in agriculture. The main objective of this paper is to test the existence of market processes using monthly data from the agriculture and food processing industry covering the time period 1990–92. The largest part of the estimation is dedicated to agricultural products' and foodstuffs' prices. Typical demand-supply relations are observed on the pig, cattle, and milk markets only. In many equations, such variables like imports and exports of agricultural goods are not significant.     

LANGUAGE AND TOTALITARIAN REGIMES

The communist misappropriation of words for political purposes still makes people in Eastern Europe struggle to find unambiguous language of political and economic thought. This paper discusses the problem of language that distorts reality and focuses on traps that hinder communication between people from the West and people from the post-communist Eastern Europe.     

REFORMING HEALTH AND SOCIAL SERVICES IN POLAND - An overview

The transformations taking place in Poland aim, among others, at adapting the system to new conditions of a market economy. The irrationality of funding social services by the budget made it necessary to restrict the role played by the State in their funding. It means the need for changes concerning not only institutional reforms but also new sources of income. The goal of this paper is to present the main directions of reforms occurring in the Polish economy on the example of health care. The paper concentrates on the problems of implementation, the reform in health care, its reasons and consequences. The trends indicate that the process of reforms is going in the direction of developing new methods and forms of funding and reducing the share of budgetary funds in the funding of social services. The state responsible for the reforms makes an attempt to create appropriate legal and organizational conditions for the question of institutions providing social services.     

Demand-supply coevolution with multiple increasing returns: Policy analysis for unlocking and system transitions

Currently, there is much concern about how to make a transition away from environmentally unsustainable activities to sustainable ones, notably in agriculture, energy and transport sectors. The success of such a transition depends on whether one is capable of escaping the lock-in of the dominant, unsustainable technology, which is usually due to multiple lock-in factors. Here, we present a formal model to study the likelihood of market lock-in in the presence of multiple increasing returns. The proposed framework describes coevolving populations of boundedly rational consumers and innovating firms. On the demand side, we focus attention on the interdependence of consumer preferences. We examine the impact of alternative demand side specifications on the direction of innovative activities of firms. On the supply side, a technological trajectory arises from the interplay of incremental innovation, search for a new product design and marketing activities. Our framework provides a general and complete account of increasing returns on supply and demand sides, as well as their synergetic interactions. The model is used to study a number of policy instruments aimed at escaping lock-in.     

Entrepreneur and the state-managed economy under socialism

The paper deals with institutional change in Poland. The accompanying pherlomenon is an escalating wave of entrepreneurial ventures. They take on different legal forms. The most popular, limited liability companies, emerge in the private, the cooperative, and the state sectors, and often across these sectors. These developments give rise to new interest groups which generally support a market reform. The conflict between the market oriented sector and the administered sector becomes one of the main factors influencing the economic policies of the state. In the paper, the development of the private sector is analyzed with the use of measures relating to the proportion of revenues from the private sector in the total state budget revenues.     

Using Geographically Weighted Choice Models to Account for the Spatial Heterogeneity of Preferences

In this paper, we investigate the use of geographically weighted choice models for modelling spatially clustered preferences. We argue that this is a useful way of generating highly‐detailed spatial maps of willingness to pay for environmental conservation, given the costs of collecting data. The data used in this study come from a discrete choice experiment survey of public preferences for the implementation of a new national forest management and protection programme in Poland. We combine these with high‐resolution spatial data related to local forest characteristics. Using locally estimated discrete choice models we obtain location‐specific estimates of willingness to pay (WTP). Variation in these estimates is explained by characteristics of the forests close to where respondents live. These results are compared with those obtained from a more typical, two stage procedure which uses Bayesian posterior means of the mixed logit model random parameters to calculate location‐specific estimates of WTP. We find that there are indeed strong spatial patterns to the benefits of changes to the management to national forests. People living in areas with more species‐rich forests and those living nearer bigger areas of mixed forests have significantly different WTP values than those living in other locations. This kind of information potentially enables a better distributional analysis of the gains and losses from changes to natural resource management, and better targeting of investments in forest quality.     

Empirical Likelihood Approach for Aligning Information from Multiple Surveys

When two surveys carried out separately in the same population have common variables, it might be desirable to adjust each survey's weights so that they give equal estimates for the common variables. This problem has been studied extensively and has often been referred to as alignment or numerical consistency. We develop a design-based empirical likelihood approach for alignment and estimation of complex parameters defined by estimating equations. We focus on a general case when a single set of adjusted weights, which can be applied to both common and non-common variables, is produced for each survey. The main contribution of the paper is to show that the impirical log-likelihood ratio statistic is pivotal in the presence of alignment constraints. This pivotal statistic can be used to test hypotheses and derive confidence regions. Hence, the empirical likelihood approach proposed for alignment possesses the self-normalisation property, under a design-based approach. The proposed approach accommodates large sampling fractions, stratification and population level auxiliary information. It is particularly well suited for inference about small domains, when data are skewed. It includes implicit adjustments when the samples considerably differ in size. The confidence regions are constructed without the need for variance estimates, joint-inclusion probabilities, linearisation and re-sampling.