Foreign Trade Patterns Between Estonia and the EU

In this paper, we focus on the development of the foreign trade flows between Estonia and the EU. We observe rapid reorientation of the trade flows from the former Soviet Union towards Western markets because of economic reforms and foreign trade liberalization. Moreover, we determine the commodity groups with a comparative advantage in the EU market and analyze its dynamics. Further analysis of the intra-industry trade (ITT) shows that vertical IIT plays a dominant role in Estonian-EU IIT flows. Shares of total, vertical, and horizontal IIT have grown rapidly since 2004, the year of accession to the EU.     

DISENTANGLING DEMAND AND SUPPLY SHOCKS IN THE CRUDE OIL MARKET: HOW TO CHECK SIGN RESTRICTIONS IN STRUCTURAL VARS

Sign restrictions have become increasingly popular for identifying shocks in structural vector autoregressive (SVAR) models. So far there are no techniques for validating the shocks identified via such restrictions. Although in an ideal setting the sign restrictions specify shocks of interest, sign restrictions may be invalidated by measurement errors, data adjustments or omitted variables. We model changes in the volatility of the shocks via a Markov switching (MS) mechanism and use this device to give the data a chance to object to sign restrictions. The approach is illustrated by considering a small model for the market of crude oil. Earlier findings that oil supply shocks explain only a very small fraction of movements in the price of oil are confirmed and it is found that the importance of aggregate demand shocks for oil price movements has declined since the mid 1980s. Copyright © 2013 John Wiley & Sons, Ltd.     

St Petersburg's Progress Towards the Market

This paper discusses the progress of economic reform in St Petersburg. It first discusses several difficulties, legacies of the previous system and problems of the transition, which are having to be overcome. Despite these, and with the aid of an advantageous tax system, significant foreign investment is being attracted. The development of an effective banking system supports these investments, although there was a large scale banking crisis in 1995. There has also been a radical liberalization of the restrictions which particularly affected small business growth. However, an inadequate city budget provided an obstacle to further economic development. A reform of the city's tax system was implemented in 1994–5. This did not increase the aggregate tax burden but increased tax on property and decreased taxes on profits and incomes. Nevertheless, because of high inflation the city is having to meet increasing proportions of the costs of housing and transport. Further changes are now occurring following the election of a new city government in 1996. Cet article examine le progrès de la réforme économique à Saint Pétersbourg. Il commence par examiner plusieurs difficultés, legs du système précédent et problèmes de cette transition, qui doivent être surmontées. Malgré ces difficultés, et avec l'aide d'un système fiscal avantageux, des investissements étrangers considérables ont été suscités. Le développement d'un système bancaire efficace supporte ces investissements, bien qu'il y ait eu une importante crise bancaire en 1995. Il y a aussi eu une libéralisation radicale des restrictions qui affectaient particulièrement l'expansion des petites entreprises. Néanmoins, le budget insuffisant de la ville a empêché les développements économiques supplémentaires. Une réforme du système fiscal de la ville a été mise à exécution en 1995. Ceci n'a pas augmenté la charge totale des impositions fiscales mais a augmenté l'impôt foncier et diminué l'impôt sur les bénéfices et sur les revenus. Néanmoins, à cause du taux d'inflation élevé, la ville doit payer une proportion de plus en plus importante du coût du logement et du transport. D'autres changements sont en cours à la suite des élections d'un nouveau gouvernement de la ville en 1996.