Focus on European Economic Integration Q3/11

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• Focus on European Economic Integration Q3/11 (PDF, 2,8 MB) September 2011.

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• Olga Radzyner Award 2011 – Call for Entries (PDF, 2 MB) en 30.09.2011, 00:00:00

• Visiting Research Program (PDF, 2,1 MB) en 30.09.2011, 00:00:00

• The Transmission of Euro Area Monetary Shocks to the Czech Republic, Poland and Hungary: Evidence from a FAVAR Model (PDF, 2,7 MB) Benkovskis, Bessonovs, Feldkircher, Wörz. Benkovskis, Bessonovs, Feldkircher, Wörz – Focus on European Economic Integration Q3/11 We analyze the effects of euro area monetary policy on three Central and Eastern European non-euro area EU countries: the Czech Republic, Poland and Hungary. We employ an open economy version of the factor-augmented vector autoregression model (FAVAR) to estimate the cross-border effects of a contractionary monetary policy of the ECB. We find significant and sizeable effects of euro area monetary policy in these small and highly open economies, with economic activity variables being primarily affected through the impact of increased interest rates and reduced foreign demand – thus leading to a contraction of GDP – and exchange rate effects being important for price reactions. en FAVAR, monetary policy shocks, international transmission, euro area, Central and C32, E31, E32, E40, F42 30.09.2011, 00:00:00

• Shifts in International Trade and Value Added from 1995 to 2007: Insights into the Drivers of Growth (PDF, 2,4 MB) Francois, Wörz. Francois, Wörz – Focus on European Economic Integration Q3/11 We decompose global export growth into a structural and a pure growth component in order to highlight the importance of structural change at the regional and industry level for the impressive growth performance of international trade. For this, we combine data on exports, output and sector-specific prices for a sample of roughly 150 countries and 22 manufacturing industries over the period from 1995 to 2007. While structural change played only a minor role for Western Europe, NAFTA and also Southeast Asia over this period, the region of Central, Eastern and Southeastern Europe shows an outstanding amount of restructuring at the industry level. Especially the new EU member countries were rapidly restructuring toward globally important industries despite their initial harmful specialization pattern. Furthermore, this region shows by far the highest elasticity of exports to output and demand changes at the industry level. While we do not observe an excessive reaction of exports to output expansion at the level of individual industries, exports react highly elastically to changes in global demand. However, elasticity differs greatly among individual regions and among industries. This corroborates the view that rapid growth in world trade arises from changes in the regional and sectoral composition of global production and trade, with faster-growing economies moving rapidly into more trade-intensive activities. en Trade growth, industrial export structure, trade elasticities, Central, Eastern and F14, F15, O57 30.09.2011, 00:00:00

• A Markov Switch to Inflation Targeting in Emerging Market Peggers with a Focus on the Czech Republic, Poland and Hungary (PDF, 2,4 MB) Petreski. Petreski – Focus on European Economic Integration Q3/11 The objective of this paper is to empirically examine if monetary policy conduct has significantly changed in nine emerging economies, including the Czech Republic, Poland and Hungary, after the switch from exchange rate targeting to inflation targeting. An augmented Taylor rule is estimated with a Markov switching method for each of the nine countries on the basis of monthly data over the period from the early 1990s to end-2009. In general, the results suggest that inflation targeting represented a real switch in eight emerging economies. We identified the following differences for the period of inflation targeting compared to the preceding period of exchange rate targeting: (1) The economic environment became more stable; (2) the central bank’s reaction to inflation deviations from the target moderated (as it was probably possible to share the burden of inflationary pressures between interest rate increases and currency depreciations); (3) the central bank’s response to the output gap also moderated although it was statistically significant in only half of the countries; this is an indication of strict inflation targeting whereby meeting the inflation target is the primary objective. For the Czech Republic and Poland, an intermediate regime is identified, which is associated with the economic developments in these two countries prior to establishing a full-fledged inflation targeting regime. For Hungary, we identified only one regime, which is likely to reflect the combined strategy of targeting both the exchange rate and inflation that the country followed nearly over the entire period under review. en monetary regime switch, inflation targeting, CESEE-3, Markov switching E42, E52, E58 30.09.2011, 00:00:00

• CESEE-Related Abstracts from Other OeNB Publications (PDF, 1,6 MB) en 30.09.2011, 00:00:00

• 69th East Jour Fixe – Credit to the Private Sector: Threat to or Opportunity for Growth in CESEE? (PDF, 2,1 MB) Focus on European Economic Integration Q3/11 en 30.09.2011, 00:00:00

• Notes (PDF, 1,6 MB) en 30.09.2011, 00:00:00