Macroeconomic adjustment: the Baltic states versus euro area crisis countries

Estonia, Latvia and Lithuania have succeeded in rapidly reducing their current account deficits despite fixed exchange rates. Which factors have played a major role in this? What similarities, and what differences, do the Baltic states show compared to Greece and Portugal? What insights can be gained for the political debate on the euro area debt crisis?     

Consequences of Economic Partnership Agreements between East and Southern African Countries and the EU for Inter- and Intra-regional Integration

Abstract

The European Union is currently negotiating Economic Partnership Agreements (EPAs) with six African, Caribbean and Pacific country groupings, aiming at establishing mutual free trade. This paper empirically assesses the impact of the EPAs on trade flows and government revenues for 22 East and Southern African countries and discusses implications for intra-regional integration. The results indicate that while moderate trade effects can be expected, relatively large budget effects are likely to occur in a number of these countries, exposing them to considerable structural and financial adjustment requirements. In addition, EPAs would strengthen the need to consolidate overlapping intra-regional integration schemes.     

EU accession: Negotiating “environmental dumping”?

“Environmental dumping” is a concern frequently raised in discussions on the potential risks involved in the eastern enlargement of the European Union¹ (EU).² There is a general concern that the Central and Eastern European accession countries may be neither willing nor able to fully apply the EU’s environmental acquis communautaire, the body of Community environmental legislation, once they have joined the EU. As a result, these countries would benefit from a competitive advantage when selling their goods on the Internal Market. This article asks whether, and in which specific cases, such concerns may be justified.     

How does capital affect bank performance during financial crises?

This paper empirically examines how capital affects a bank’s performance (survival and market share) and how this effect varies across banking crises, market crises, and normal times that occurred in the US over the past quarter century. We have two main results. First, capital helps small banks to increase their probability of survival and market share at all times (during banking crises, market crises, and normal times). Second, capital enhances the performance of medium and large banks primarily during banking crises. Additional tests explore channels through which capital generates these effects. Numerous robustness checks and additional tests are performed.     

Central Bank Independence: An Update of Theory and Evidence

This paper reviews recent research on central bank independence (CBI). After we have distinguished between independence and conservativeness, research in which the inflationary bias is endogenised is reviewed. Finally, the various challenges that have been raised against previous empirical findings on CBI are discussed. We conclude that the negative relationship between CBI and inflation is quite robust.     

Social capital,risk preference and adoption of improved farm land management practices in Ethiopia

Many developing countries grapple with high rates of farmland degradation and low agricultural productivity amidst increasing climate variability. Considerable efforts have been exerted to promote the diffusion of improved farmland management to address these challenges. Despite these efforts, adoption rates, especially of soil conservation and water harvesting technologies, are still low, which has been the subject of investigation in several studies in Ethiopia and elsewhere. Most studies on the adoption of these technologies, however, tend to focus on economic incentives only, paying little attention to the role of social capital. This article provides evidence of the effects of different dimensions of social capital on innovation adoption across households holding different levels of risk aversion. We address this issue by using cross section and panel data from Ethiopia. Results show that social capital plays a significant role in enhancing the adoption of improved farmland management practices. We also find evidence that the effect of social capital across households with heterogeneous risk taking behavior is different.     

Oil price and FX-rates dependency

Oil prices and exchange rates against the dollar have both experienced long swings over the recent decade. Regardless of the great amount of research, some issues are still open to debate. In this vein, this paper focuses on the evolution of the relationship between oil prices and dollar exchange rates of 12 oil exporting and oil importing countries based on a dynamic copula approach. We use daily data for two 5-year periods between 2003 and 2013, taking the collapse of Lehman Brothers as the dividing point. Our results have four main implications: first, the intensity of relationship between oil prices and FX-rates has increased over time even if the peak of the financial crisis is included. Second, the increased tail dependency shows that extreme events are likelier to occur simultaneously for both series. Third, the dependency has become more dynamic after the financial crisis and is therefore better characterized by time-varying copulas. Finally, currencies of oil importers and oil exporters display a different dependency structure against the US dollar in the case of rising oil prices with the latter appreciating and the former depreciating.     

Stylized facts about stabilization in central and eastern Europe

This paper analyzes the stabilization policies of the ten central and eastern European countries that have negotiated a Europe Agreement with the European Union and had officially applied for European Union membership by the end of 1997. This paper is a cross-country study of time series. Using a diagrammatic approach, the empirical findings are depicted in two-dimensional inflation-and-growth diagrams. The study shows that some common features of the macroeconomic data can be observed for most of the countries of the sample. From discussing potential determinants of the empirical findings, the analysis suggests that early liberalization attempts have had a strong positive impact on the inflation-growth pattern. While the influence of central bank legislation seems to be negligible, the choice of the exchange rate regime seems to play a crucial role. Regarding fiscal policy, the influence seems to be less obvious. This study concludes that the precondition for successful transformation and stabilization of the economy is a comprehensive approach that consists of early liberalization and tight macroeconomic policy.