New EU member states and the Euro: economic readiness,benefits and costs

All of the new EU member states (NMSs) have made a commitment to adopt the Euro. This essay considers the countries’ economic readiness to adopt the Euro as well as the economic benefits and costs of adoption. Paper applies a method suggested by Bayoumi and Eichengreen (1997) and finds that the changes of real effective exchange rates between the Euro area and the new EU member states follow the pattern predicted by the optimum currency area theory. This finding allows the construction of the readiness for adoption index for every NMS. The tangible benefits (for NMSs) of adoption are also examined in this essay. Analyses suggest that the costs of currency exchange and hedging against the uncertainty in foreign exchange markets account for about 0.08–0.012% of the countries’ GDP. In addition, countries that adopt the Euro might expect lower inflation and interest rates. This essay also examines the possible costs of adoption. These are in the forms of the lost ability to use monetary policy tools and set the level of seigniorage. Analysis suggests that many countries had given up their independence over monetary policy even before the accession to the EU. In addition, bigger NMSs have not used seigniorage as the source of fiscal income. However, they used exchange rate flexibility to depreciate their currencies during the recent crisis.     

Das allgemeine Schema des wirtschaftlichen Kreislaufes

Ohne Zusammenfassung     

Spillovers among sovereign debt markets: Identification through absolute magnitude restrictions∗

This paper studies spillovers among US and European sovereign yields. We employ absolute magnitude restrictions on the impact matrix to identify the countries that were the main sources of spillovers. Despite the large size of shocks from euro area stressed countries, connectedness among sovereign yields declined between 2008 and 2012 due to financial fragmentation, particularly between countries with more divergent business and fiscal cycles. We show that none of the sovereign yields were insulated from foreign shocks and that shocks to the Greek bond market in 2010 explained 20–30% of the variance of sovereign yields in stressed countries, while in 2011–2012 Italy (not Spain) was the source of systemic risk.     

Changing patterns of transfers in Slovenia in the last three decades: transition from a socialist economy to a market economy

Rapid population ageing increases interest in economic flows across ages and intergenerational transfers in general. This article uses the National Transfer Accounts methodology to measure consumption and production at each age, and how the difference between consumption and production is financed through (private and public) transfers and the interaction with assets, i.e. ‘asset-based reallocations’. During working ages, people earn more than they consume and with the surplus they finance the deficit of the young and old generations who consume more than they produce. Such a pattern of economic dependency is universal across countries and across time, but huge differences exist in the ages at which individuals produce more than they consume and vice versa. Moreover, the importance of private and public transfers and asset-based reallocations varies across countries and times. In the last three decades, life expectancy at birth in Slovenia increased by 9.3 years, while the age span in which production exceeds consumption narrowed rather than increased. Child dependents are predominantly financed by private transfers, whereas the elderly mainly rely on public transfers. Young and old individuals increasingly rely on public transfers. Together with rapid population ageing, this is likely to jeopardise the public finance system in the future.     

Dreaming of the West: The power of the brand in Soviet Lithuania, 1960s–1980s

Abstract

The article reveals the interest in foreign trademarks observed in Lithuanian society from the 1960s through the 1980s, when the demand for brand names spread after Western culture reached the Soviet Union. The consumption of Western cultural products, or imitations thereof, became one of the key symbolic expressions of freedom in Soviet society. In Lithuania, the most popular clothes were those bearing fake trademarks, even though Soviet authorities attempted to prevent the desire for and the wearing of these garments through the use of ideological tools.     

Quantifying and analyzing nonlinear relationships with a fresh look at a classical dataset of student scores

Quality & Quantity - Student past and present performances are analyzed, compared, and reflected upon by teachers, curriculum developers, and educational researchers. For the tasks, methods and...     

Testing for Bubbles in Housing Markets: A Panel Data Approach

We employ recently developed cross-sectionally robust panel data tests for unit roots and cointegration to find whether house prices reflect house related earnings. We use U.S. data for Metropolitan Statistical Areas, with house price measured by the weighted-repeated-sales index and cash-flows by market tenants’ rents. In our full sample period, an error-correction model is not appropriate, i.e. there is a bubble. We then combine overlapping 10-year periods, price–rent ratios, and the panel data tests to construct a bubble indicator. The indicator is high for the late 1980s, early 1990s and since the late 1990s. Finally, evidence based on panel data Granger causality tests suggests that house price changes are helpful in predicting changes in rents and vice versa. CERGE-EI is a joint workplace of the Center for Economic Research and Graduate Education, Charles University, and the Economics Institute of the Academy of Sciences of the Czech Republic.