Focus on European Economic Integration Q2/09

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• Focus on European Economic Integration Q2/09 (PDF, 2,3 MB) Juni 2009.

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• Developments in Selected Countries (PDF, 1,5 MB) en 30.06.2009, 00:00:00

• Financial Market Developments in Central, Eastern and Southeastern Europe (PDF, 548 kB) en 30.06.2009, 00:00:00

• Outlook for selected Central and Eastern European (CEE) Countries (PDF, 96 kB) en 30.06.2009, 00:00:00

• European and Non-European Emerging Market Currencies: Forward Premium Puzzle and Fundamentals (PDF, 206 kB) Backé, Schardax. Backé, Schardax – Focus on European Economic Integration Q2/09 The empirical literature has consistently rejected that the uncovered interest parity (UIP) theorem holds in practice, thus posing the well-known forward premium puzzle. In this study, we examine this issue for a sample of 18 emerging market currencies and, in addition, for a subsample of 6 currencies from emerging Europe. We first confirm earlier evidence for the existence of a forward premium puzzle for emerging market economies. We then extend the model with a view to exploring systematic relationships between excess returns from investments in foreign currency and country-specific economic fundamentals. Subsequently, we use this extended model to generate out-of-sample forecasts of currency returns. We also test for forecast accuracy, confirming that these forecasts are superior to naïve forecasts. Our results show that investments based on these forecasts generate considerably higher returns than alternative investment strategies. This applies in particular to our full sample of 18 emerging market currencies. For the subsample of 6 currencies from emerging Europe, profits per trade for the model-based forecasts also outperform those generated by the other investment strategies, but by a smaller margin. These results suggest that, compared with currencies of advanced countries, the smaller bias in the forward exchange rates of emerging market currencies found in the empirical literature could relate to the better predictability of currency returns for emerging market currencies. en Forward bias, emerging market currencies, forecasting F37, G14, G15 30.06.2009, 00:00:00

• The 2008 Fall Wave of the OeNB Euro Survey – A First Glimpse of Households’ Reactions to the Global Financial Crisis (PDF, 218 kB) Dvorsky, Scheiber, Stix. Dvorsky, Scheiber, Stix – Focus on European Economic Integration Q2/09 This article presents selected results of the third wave of the OeNB Euro Survey, which was conducted in Central, Eastern and Southeastern Europe (CESEE) in October/November 2008, i.e. at a time when the global financial crisis had arrived in Europe. Therefore, this article focuses on first evidence of households’ reactions to the crisis by comparing the most recent results with those of the preceding survey wave of May/June 2008. Although people’s general assessment of the economic situation and their trust in banks have both deteriorated substantially, according to our results, this has not (yet) changed people’s behavioral patterns in terms of their foreign currency holdings. In particular, the dissemination of euro cash holdings and euro-denominated savings deposits remained stable relative to earlier waves of the OeNB Euro Survey. en Euroization, global financial crisis, economic sentiment, survey data, CEE, SEE E41, E50, D14 30.06.2009, 00:00:00

• Fiscal Position and Size of Automatic Stabilizers in the CESEE EU Member States – Implications for Discretionary Measures (PDF, 126 kB) Eller. Eller – Focus on European Economic Integration Q2/09 In the EU Member States in Central, Eastern and Southeastern Europe (CESEE-10), budgetary positions have been observed to react less strongly to GDP changes than in the euro area. In the observation period, automatic stabilizers mostly operated on the revenue side, while the response of government expenditure to GDP changes was quite inelastic. In most CESEE-10 countries, the government expenditure-to-GDP ratio is smaller than the euro area average. Thus, the automatic response of the budget balance to the present downturn is expected to be rather moderate. Moreover, the room for discretionary fiscal measures is limited as there are no sufficient buffers owing to the predominantly procyclical fiscal stance during past “boom times” in several countries and, currently, government debt markets in many countries are rather illiquid. en Automatic stabilizers, fiscal space, output gap, cyclicality of fiscal policy, discretionary fiscal policy E62, H6 30.06.2009, 00:00:00

• OeNB Seminar “Recent Developments in the Baltic Countries – What Are the Lessons for Southeastern Europe?” (PDF, 72 kB) Martin, Zauchinger – Focus on European Economic Integration Q2/09 en 30.06.2009, 00:00:00

• Selected Abstracts h2 (PDF, 56 kB) Focus on European Economic Integration Q2/09 en 30.06.2009, 00:00:00

• Olga Radzyner Award for Scientific Work on European Economic Integration (PDF, 39 kB) Focus on European Economic Integration Q2/09 en 30.06.2009, 00:00:00

• Statistical Annex (PDF, 99 kB) Focus on European Economic Integration Q2/09 en 30.06.2009, 00:00:00