Impact of Currency Boards on Fiscal Policy in Central and Eastern European Countries

The paper focuses on the impact of currency boards on fiscal policy in transition economies. Starting with an overview of theoretical and empirical studies in the related area, it tests for the interaction between monetary policy regimes and fiscal policy in Central and Eastern European countries who aim for the membership in the European Union. The theoretical background of this study lies in the model of Tornell and Velasco (1998). They demonstrate that fiscal transfers do not ultimately depend on the chosen exchange rate and monetary policy, but only on the worlds real rate of interest and the rate of time preference of the fiscal authority. A sample of 10 accession candidates constitutes a group of countries which go through similar macroeconomic stabilisation processes but have chosen different nominal anchors. The paper investigates whether there are any systematic differences between those countries with a currency board arrangement and those without. The empirical evidence suggests that currency boards enhance fiscal discipline in Central and Eastern European countries.     

INVESTOR OVEROPTIMISM AND PRIVATE EQUITY PLACEMENTS

We reexamine investor tendency to overweight recent experiences when predicting future performance of firms by examining a sample of firms making private equity placements. Our findings are consistent with the projection argument that investors use the recent experiences of other firms to predict the success of placing firms. Specifically, we find that the placements preceded by a larger number of recently very successful firms are associated with the significantly more favorable market reaction to the placement announcement and significantly poorer post‐placement stock price performance.     

Foreign investor strategy development in the central and eastern European context

Investment conditions in the transition economies of Central and Eastern Europe favor long-term strategic investments. Increasing competition pressures in the saturated West European beer markets coupled with shrinking demand challenged Interbrew SA, Belgium to enter the emergent prospective markets of Central and Eastern Europe by the acquisition of former state-owned enterprises. The study of Interbrew's case shows the linkages existing between investor internationalization strategy, motives, strategy implementation, and adaptation in the highly volatile markets of Hungary and Bulgaria. This case represents a good example of slow reactive strategy development in the Hungarian environment leading the investor to the loss of its first mover advantage. Using similar motives for its acquisitions in Bulgaria, Interbrew has successfully implemented a proactive adaptation of its initial Central and Eastern European strategy to the Bulgarian environment. The lessons from the case can be used by foreign investors to increase their chances for success in FDI acquisition in transitional economies. © 1999 John Wiley & Sons, Inc.     

Structural change through exchange rate policy

Zusammenfassung Strukturwandel durch Wechselkurspolitik. -Dieser Aufsatz untersucht, ob und wie die Wechselkurspolitik Produktivit?t und Qualit?t industrieller Produkte beeinflu?t. Anhand ?sterreichischer Daten wird gezeigt, da? Aufwertungen des Schillings die strukturelle Anpassung im ?sterreichischen Exportsektor begünstigt haben. In den siebziger Jahren haben reale Aufwertungen die Produktivit?t erh?ht und die Produktqualit?t verbessert, weil die Firmen ihre Wettbewerbsf?higkeit aufrechterhalten wollten. Es wird gezeigt, da? dies im Einklang mit dem Produktzyklusmodell und dem Modell des importinduzierten Wachstums steht, welche eine positive Beziehung zwischen dem Wechselkurs und der nicht durch den Preis bestimmten Wettbewerbsf?higkeit nahelegen.

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Résumé Changement structurel par la politique de taux de change. -Cet article explore l'influence de la politique de taux de change sur la productivité industrielle et la qualité des produits. Il est démontré par des données autrichiennes que les révalorisations du schilling ont favorisé l'ajustement structurel dans le secteur exportatrice autrichien. Pendant les années soixante-dix les révalorisations réels ont mené à une productivité plus haute et amélioré la qualité des produits parce que les entreprises cherchaient à maintenir leur capacité concurrentielle. Suivant l'auteur cela se trouve en conformité avec le ?product-cycle? modèle et le ?import-led-growth? modèle suggérant une relation positive entre le taux de change et la capacité concurrentielle non-prix.

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Resumen Ajuste estructural através de la política cambiaria. -Este trabajo explora el efecto de la política de cambios sobre la productividad industrial y la calidad de los productos. Utilizando datos austríacos se muestra que las revaluaciones del tipo de cambio favorecen el ajuste estructural en el sector exportador austríaco. En los a?os setenta, las revaluaciones del tipo de cambio contribuyeron a aumentar la productividad y a mejorar la calidad de los productos, dado que las empresas estaban preocupadas por mantener su margen competitivo. Esto concuerda con la teoría del ciclo del producto y con el modelo de crecimiento inducido hacia las importaciones, que sugiere la existencia de una relación positiva entre el tipo de cambio y la competitividad no basada en el precio.

     

Self-selectivity bias with a continuous variable: potential pitfall in a common procedure

When the choice variable is continuous, selectivity bias can in principle be dealt with by a procedure first suggested by Garen (1984). However, work reported in this paper on the estimation of hedonic wage equations with compensation for dangerous jobs, where selectivity bias could arise through the endogenous choice of jobs according to their riskiness, suggests that the Garen technique may not be robust. The lack of robustness comes from collinearity, which is a result of the common situation where the empirical fit of the choice equation is moderately successful but not outstanding.     

External sources for innovation in public organisations

This article's objective is twofold: First, to provide a framework for understanding the role of external information sources in service innovation, with particular attention to innovation in public organisations. The second part of the article's objective is to test the proposed framework. Method of analysis is based on data at European level from the 2010 Innobarometer Survey on Public Innovation. Data is used for estimating a bivariate probit with sample selection, where the selection variable indicates whether or not organisations have recently implemented service innovations and the estimated variable indicates whether organisations have introduced services that are new to the whole public sector. Results indicate a significant relation between the use of both internal and external sources of information and the implementation of innovations by public organisations. External sources are shown to be more relevant for the implementation of services that are new to the public sector.     

Corporate hierarchies and international trade: Theory and evidence

Corporate organization varies within countries and between countries. We develop a theory which explains the variation in levels of decentralization across firms and links it to the trade environment that firms face. We introduce firms with internal hierarchies in a Melitz and Ottaviano (2008) model of international trade. We show that international trade increases the conflict of interest between CEO/owners and middle managers within firms and these eventually lead to decentralized corporate hierarchies. We test the theory with original data on the internal organizations of 2200 Austrian and German firms and find that the empirical evidence is consistent with the model's predictions.     

The impact of media on the legitimacy of new market categories: The case of broadband internet

Building on research in institutional theory and market categories, we argue that media coverage, through the effects of cognitive and sociopolitical legitimacy, influence the creation of new market categories. Using data on the broadband access industry, we develop and test a media coverage model of market category entries, demonstrating the legitimacy effects of media-based information exchange on the emergence of new market categories. We include two post hoc analyses on mediation effects to test the relationship between population density and media coverage. These results indicate a possible mediation relationship, which we discuss in the implications of our study.