Focus on European Economic Integration Q1/04

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• Focus on European Economic Integration 1/04 (PDF, 1,2 MB) März 2004.

Studien und Analysen

• Developments in Selected Countries (PDF, 260 kB) en 31.03.2004, 00:00:00

• Nonlinear Exchange Rate Dynamics in Target Zones (PDF, 269 kB) Cuaresma, Égert, MacDonald. A Bumpy Road Toward a Honeymoon, Some Evidence from the ERM, ERM II and Selected New EU Member States This study investigates exchange rate movements in the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS) and in the Exchange Rate Mechanism II (ERM II). On the basis of the variant of the target zone model proposed by Bartolini and Prati (1999) and Bessec (2003), the authors set up a three-regime self-exciting threshold autoregressive model (SETAR) with a nonstationary central band and explicit modeling of the conditional variance. This modeling framework is employed to model daily Deutsche mark-based and median currency-based bilateral exchange rates of countries participating in the original ERM and also for the exchange rates of the Czech Republic, Hungary, Poland and Slovakia from 1999 to 2004. Our results confirm the presence of strong nonlinearities and asymmetries in the ERM period, which, however, seem to differ across countries and diminish during the last stage of the run-up to the euro. Important nonlinear adjustments are also detected for Denmark in ERM II and for our group of four CEE economies. en 31.03.2004, 00:00:00

• Determinants of Geographical Concentration Patterns in Central and Eastern European Countries (PDF, 240 kB) Hildebrandt, Wörz. The authors investigate the determinants of the location of industries in Central and Eastern European ; countries. Using output and employment data for thirteen manufacturing industries over the years 1993; to 2000, the authors find the concentration of industrial activity to have increased in these ten countries in contrast to the general trend prevailing in Western Europe in the same period. Further, the authors observe differences with respect to absolute and relative concentration as well as output and employment.;; In the analytical part, these developments are explained with factors derived from traditional trade theory (differences in endowments or technologies), new trade theory (expenditure patterns, scale economies) and new economic geography (backward and forward linkages, transport costs). Relative concentration is found to have been driven by differences in FDI levels, productivity differentials and expenditure patterns, absolute concentration to have been determined mainly by differences in human capital levels.;;;;;;;; en 31.03.2004, 00:00:00

• Employment and Labor Market Flexibility in the New EU Member States (PDF, 264 kB) Gruber. On May 1, 2004, ten new Member States (NMS) entered the European Union (EU). Since the NMS are still in the midst of a transition and catching-up process, not only will they face asymmetric shocks, but; these shocks will be largely uncorrelated with those prevailing in EMU. Upon EU accession the NMS also; entered the monetary integration process, which ends with the adoption of the euro. This implies that; the NMS will relinquish autonomy over monetary policy and exercise restrictions on fiscal policy. According; to optimum currency area theory, in the absence of a national monetary policy flexible labor markets; become central to accommodating idiosyncratic shocks. This paper takes a look at the labor markets in; the NMS, focusing especially on labor market flexibility. The analysis show higher labor cost flexibility in; the NMS than in the EU in general. Supply-side flexibility, notably occupational and regional mobility,; seems to be lower. However, overall flexibility seems to be small or even insignificant. Thus, the paper; suggests that the NMS have to make further efforts to enhance labor market flexibility, especially; improving regional mobility and applying active labor market policies. With a view to further monetary; integration, early participation in the euro area may not be the optimal choice for some of the NMS.; en 31.03.2004, 00:00:00

• Distorted Incentives Fading? (PDF, 237 kB) Barisitz. The Evolution of the Russian Banking Sector since Perestroika The present study attempts to trace and analyze the development of the Russian banking sector since the final years of Soviet rule. It deals with legal foundations, banking supervision, banks major sources of assets, liabilities, earnings and related changes, bank restructuring, rehabilitation programs, the roll of foreign credit institutions and FDI. For many years prevailing conditions and incentives have favored; speculative and short-term activities, but have not allowed banks to carry out effective financial intermediation in Russia. After the financial collapse of August 1998 sluggish post-crisis restructuring ensued . The banking sector only recovered on the back of the general economic recovery, buoyed by the ruble devaluation, the oil price boom, political stability and some first fruits of structural reforms. A credit boom unfolded, giving rise to new risks. Most recently, the authorities have undertaken impressive efforts to intensify reforms. If implementation follows up, Russia will have put itself on the catching-up lane with other transition countries that are further advanced in banking reforms.;;;;;; en 31.03.2004, 00:00:00

• Oil Prices and the World Economy (PDF, 244 kB) Barrell, Pomerantz. High oil prices have been associated with bouts of inflation and economic instability over the last 30 years. Consequently, the rise of oil prices in recent months has generated concern. We argue that the inflationary consequences of a rise in oil prices depend upon the policy response of the monetary authorities. They can ameliorate the short-term impacts on output, but only at the cost of higher inflation. In the short term, the size and distribution of output effects from an increase in oil prices depends on the intensity of oil use in production and on the speed at which oil producers spend their revenue. In the medium term, higher oil prices change the terms of trade between the OECD and the rest of the world and hence reduce the equilibrium level of output within the OECD. In this paper the authors first discuss oil market developments and survey previous studies on the impacts of oil price increases. In a next step, the NiGEM model is used to evaluate the impact of temporary and permanent rises in oil prices on the world economy under various policy responses, and the impact of a decline in the speed of oil revenue recycling is analyzed. en 31.03.2004, 00:00:00

• Highlights (PDF, 91 kB) Focus on European Economic Integration 1/2004 en 31.03.2004, 00:00:00

• Statistical Annex (PDF, 81 kB) Focus on European Economic Integration 04/1 en 31.03.2004, 00:00:00