Template-Type: ReDIF-Article 1.0 Author-Name: Stephan Barisitz Author-Name-First: Stephan Author-Name-Last: Barisitz Author-Email: stephan.barisitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Title: Nonperforming loans in CESEE – a brief update on their definitions and recent developments Abstract: This study is a brief update of a previous contribution (2013) on national definitions of nonperforming loans (NPLs) in ten relatively large economies in Central, Eastern and Southeastern Europe (CESEE), i.e. Bulgaria, Croatia, Czechia, Hungary, Poland, Romania, Russia, Serbia, Slovakia and Ukraine. Against the background of the recent emergence (2013/2015) of internationally harmonized standards of the European Banking Authority (EBA), the present study explores how these national definitions have evolved in the past five years (2013–2018) and whether there has been a tendency toward definitional convergence. We find that some convergence toward EBA/international NPL standards has definitely taken place in recent years. All CESEE EU Member States covered in this study have adopted or confirmed their use of the EBA NPL definition (“90 days+” and/or “unlikeliness to pay”) or of a corresponding stipulation. Serbia and Ukraine have also further approached internationally accepted standards, while Russia’s definition seems to remain somewhat less strict. In any case, none of the countries observed have moved away from international standards. That said, more specific issues related to e.g. the treatment of restructured loans and collateral apparently still give rise to some differences. All observed countries – apart from Russia and Ukraine – boast declining NPL ratios in 2013–2018. Classification-JEL: G12, G21, G33 Keywords: bank lending, CESEE, credit quality, credit risk, financial soundness indicators, nonperforming loans, NPL standards Pages: 61-74 Year: 2019 Issue: Q2/19 File-URL: https://www.oenb.at/dam/jcr:fb592915-8f09-426b-90d5-ef2cc28122dd/04_feei_2019_q2_nonperforming-loans-in-CESEE.pdf File-Format: application/pdf File-Size: 766 kb Handle: RePEc:onb:oenbfi:y:2019:i:Q2/19:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Mariya Hake Author-Name-First: Mariya Author-Name-Last: Hake Author-Email: mariya.hake@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Philipp Poyntner Author-Name-First: Philipp Author-Name-Last: Poyntner Title: Household loans in CESEE from a new perspective: the role of income distribution Classification-JEL: G0, D1, D3 Keywords: household loans, relative income, income distribution, multilevel models, CESEE Pages: 75-93 Year: 2019 Issue: Q2/19 File-URL: https://www.oenb.at/dam/jcr:789c2078-b3f2-4621-b9f1-cd4fd3946f3b/05_feei_2019_q2_Household-loans-in-CESEE-from-a-new-perspective.pdf File-Format: application/pdf File-Size: 594 kb Handle: RePEc:onb:oenbfi:y:2019:i:Q2/19:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Aleksandra Riedl Author-Name-First: Aleksandra Author-Name-Last: Riedl Author-Email: aleksandra.riedl@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Household debt in CESEE economies: a joint look at macro- and micro-level data Abstract: Household debt can constitute a major risk to macrofinancial stability. This paper presents an overview of potential vulnerabilities stemming from household debt in ten Central, Eastern and Southeastern European (CESEE) economies, using the most recently available data. Unlike other papers that only evaluate macrofinancial risks, we take a complementary view on household debt. First, we provide several indicators based on macro-level data that are frequently used to assess macrofinancial risks. Second, we employ unique and newly available data from the OeNB Euro Survey conducted in fall 2017 to arrive at several vulnerability indicators that have not been available for most of the CESEE economies so far. Our analysis does not aim to provide a final risk assessment by evaluating all indicators within an elaborated analytical framework but to highlight the advantages of jointly looking at macro- and microlevel indicators when assessing macrofinancial risks. Classification-JEL: E43, E44, G01 Keywords: bank loans, DSTI, macrofinancial risk, household vulnerabilities, emerging Europe Pages: 6-28 Year: 2019 Issue: Q1/19 File-URL: https://www.oenb.at/dam/jcr:d1f06b50-f92b-4f9d-bd75-5f6e83516aee/02_feei_Q1_2019_riedl.pdf File-Format: application/pdf File-Size: 1112 kb Handle: RePEc:onb:oenbfi:y:2019:i:Q1/19:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Nico Hauzenberger Author-Name-First: Nico Author-Name-Last: Hauzenberger Author-Email: nico.hauzenberger@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business Author-Workplace-Homepage: https://www.wu.ac.at/ Title: How useful are time-varying parameter models for forecasting economic growth in CESEE? Abstract: Empirical evidence has shown that a prerequisite for generating reliable macroeconomic forecasts is either the inclusion of a large information set or modeling time variation in the models’ parameters and volatilities. In this paper we examine these claims in a comparative manner, forecasting GDP growth for six CESEE economies. We use Bayesian techniques and evaluate the models based on both the accuracy of their point forecasts as well as the degree of uncertainty surrounding these predictions. Our results indicate that forecasts from a fully-fledged time-varying parameter model tend to outperform those from its constant parameter competitors. Adding more information, e.g. from other countries, by contrast, does not improve forecast performance significantly for most of the countries under study. Last, we analyze whether it pays to forecast GDP growth indirectly by summing up forecasts of GDP components. This approach yields competitive forecasts, yet it preserves an economic interpretation of the underlying drivers for the economic growth forecasts, which is of crucial importance from a practitioner’s view. Classification-JEL: C11, C32, C53, E17 Keywords: forecasting, CESEE, time-varying parameter, aggregate GDP forecast Pages: 29-48 Year: 2019 Issue: Q1/19 File-URL: https://www.oenb.at/dam/jcr:cd7d6d50-ee23-419a-a070-83e7830657a6/03_feei_Q1_2019_feldkircher_hautzendorfer.pdf File-Format: application/pdf File-Size: 832 kb Handle: RePEc:onb:oenbfi:y:2019:i:Q1/19:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Anna Katharina Raggl Author-Name-First: Anna Katharina Author-Name-Last: Raggl Author-Email: anna.raggl@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Migration intentions in CESEE: sociodemographic profiles of prospective emigrants and their motives for moving Abstract: What are the characteristics of prospective emigrants from Central, Eastern and Southeastern Europe (CESEE)? How many people intend to move? We use data from the 2017 wave of the OeNB Euro Survey to study migration intentions among individuals in CESEE. Our descriptive findings suggest that 8.3% of individuals aged 25 to 64 have the intention to move abroad within the next year. Migration intentions are considerably more common among young people and men. In most of the countries, we do not find significant differences related to educational attainment. The prevalence of migration intentions varies considerably across countries: In non-EU CESEE countries migration intentions are more widespread on average than in CESEE EU countries. Probit estimations confirm our descriptive findings. They further highlight that individual unemployment is a robust predictor of migration intentions in CESEE, while household income is not significantly related to migration intentions. The level of regional development plays a key role in shaping migration intentions, and so do (direct and indirect) networks and trust in institutions. Finally, we find that the level of regional economic development also influences the magnitude of the push effect of individual unemployment. For individuals living in depressed regions, the positive correlation between unemployment and migration intentions is higher. Classification-JEL: J61, F22, O52 Keywords: migration intentions, individual-level data, probit, principal component analysis, CESEE Pages: 49-67 Year: 2019 Issue: Q1/19 File-URL: https://www.oenb.at/dam/jcr:8c6822a7-f6af-478a-b0fb-de0c6c2c48ac/04_feei_Q1_2019_raggl.pdf File-Format: application/pdf File-Size: 743 kb Handle: RePEc:onb:oenbfi:y:2019:i:Q1/19:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Aleksandra Riedl Author-Name-First: Aleksandra Author-Name-Last: Riedl Author-Email: aleksandra.riedl@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: A simple approach to nowcasting GDP growth in CESEE economies Abstract: Given the publication time lag inherent in national accounts data, we explore the informational content of higher-frequency indicators that become available during a quarter in nowcasting current-quarter GDP growth rates for 11 Central, Eastern and Southeastern European (CESEE) economies. Building on recent findings, we restrict our choice to three model classes: (1) principal component models, (2) bridge equations and (3) simple autoregressive (AR) models without higher-frequency variables. Moreover, we propose a variety of forecast combinations to arrive at the highest possible forecast accuracy. Our estimation sample starts in the first quarter of 2003, and our evaluation period ranges from the second quarter of 2012 to the fourth quarter of 2017. We find that higher-frequency indicators contain useful information for predicting current economic activity in most of the economies in our sample. Using forecast combinations of models with and without higher-frequency variables yields additional gains in predictive accuracy. The best performers ultimately selected vary strongly across countries: we find 10 different models for 11 countries. Eight country models produce a statistically significantly smaller forecast error than the benchmark. Calculating a CESEE-11 country aggregate based on the individual country forecasts yields a forecast performance that is highly superior to that of the benchmark. Classification-JEL: C52, C53, E37 Keywords: nowcasting, principal components, country models; Central, Eastern and Southeastern Europe Pages: 56-74 Year: 2018 Issue: Q4/18 File-URL: https://www.oenb.at/dam/jcr:c82704a3-a1c7-4348-a08f-a838d67d7676/feei_2018_q4_A_simple_approach_to_nowcasting_GDP_growth_in_CESEE_economies.pdf File-Format: application/pdf File-Size: 2633 kb Handle: RePEc:onb:oenbfi:y:2018:i:Q4/18:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Doris Ritzberger-Grünwald Author-Name-First: Doris Author-Name-Last: Ritzberger-Grünwald Author-Email: doris.ritzberger-gruenwald@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5201 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Josef Schreiner Author-Name-First: Josef Author-Name-Last: Schreiner Author-Email: josef.schreiner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Title: Restarting real economic convergence in CESEE Abstract: Economic transition, European integration and EU membership have spurred an unprecedented process of social, political and economic modernization in Central, Eastern and Southeastern Europe (CESEE). Economic catching-up, however, has slowed since the Great Recession of 2008. Potential growth rates moderated notably and have not yet returned to the dynamism
of the early 2000s. After providing a short overview of the status quo of transition in the 11 CESEE EU Member States2, this study elaborates on the reasons for weakening potential growth by focusing on the contributions of labor, capital and productivity to potential output. At the same time, we try to identify the most suitable policy options to reaccelerate economic dynamics in CESEE in the medium term. Classification-JEL: J11, J21, O11, O30, O40, O57 Keywords: Central, Eastern and Southeastern Europe, convergence, potential growth, demography, Pages: 10-23 Year: 2018 Issue: Q3-18 File-URL: https://www.oenb.at/dam/jcr:328f5074-ca09-4fb6-8b7e-29f8f9bfbe19/01_Restarting%20real%20economic_feei_2018_q3.pdf File-Format: application/pdf File-Size: 1073 kb Handle: RePEc:onb:oenbfi:y:2018:i:Q3-18:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: István P. Székely Author-Name-First: István P. Author-Name-Last: Székely Title: Sustainable and equitable convergence and integration in Central, Eastern and Southeastern Europe Abstract: The transformation of Central, Eastern and Southeastern European (CESEE) economies from centrally planned toward open market economies has been inherently linked with their Integration into the European Union. The widely held desire to join the EU was a major Driver of economic reform. Such reforms not only improved the efficiency of resource allocation but
also made EU membership a plausible outcome, which in turn attracted FDI and accelerated integration. EU accession crowned this process and unleashed historically unprecedented private and public capital flows. The positive climate that such rapid growth and convergence created temporarily masked the deep-seated problems that weak institutions and slow social
learning had created, while the excessive capital inflow led to resource misallocation in the economy. The financial and economic crisis that hit the CESEE region in 2008 thus revealed deeply rooted problems, which these countries now need to face during their journey toward the frontier of development. Reform reversals have become widespread, in some cases
touching the very foundations of a modern market economy. This article argues that the speed, sustainability and equity of future convergence in the region will crucially depend on renewed reform efforts. Reforms will also allow these countries to fully benefit from the continued deepening of European integration, further accelerating convergence. Classification-JEL: P3, F5, F6, O5 Keywords: EU integration, convergence, reform reversals Pages: 24-33 Year: 2018 Issue: Q3-18 File-URL: https://www.oenb.at/dam/jcr:d2aa9718-d5bf-4adf-9ead-dc1fae880097/02_Sustainable%20and%20equitable%20convergence_feei_2018_q3.pdf File-Format: application/pdf File-Size: 609 kb Handle: RePEc:onb:oenbfi:y:2018:i:Q3-18:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Zoltan Arokszallasi Author-Name-First: Zoltan Author-Name-Last: Arokszallasi Author-Name: Juraj Kotian Author-Name-First: Juraj Author-Name-Last: Kotian Author-Name: Katarzyna Rzentarzewska Author-Name-First: Katarzyna Author-Name-Last: Rzentarzewska Title: Digitalization and higher R&D readiness – way to foster income convergence in CESEE Abstract: After the fall of socialism and a short transition period, Central, Eastern and Southeastern Europe (CESEE2) has been outperforming the growth of Western Europe and thus helped reduce the relative gap vis-à-vis the EU-15 in GDP per capita (purchasing power standard) by one-third. The Great Recession has visibly slowed down the pace of convergence, however. The
current growth model, which is based mostly on capital accumulation, has thus been challenged, calling for CESEE economies to become more innovative and knowledge oriented. Focusing on returns from different types of investments on total factor productivity (TFP), our panel data analysis suggests that the same amount of money invested in the information and
communication technology (ICT) sector tends to have a higher immediate spillover effect on TFP growth than investment in infrastructure or machineries. Although capital accumulation is likely to remain an important growth factor in CESEE in the years to come, a sufficient Level of computer skills and Internet usage support knowledge-based investments, yielding relatively high returns. Thus, CESEE economies could potentially benefit from going digital and spending more on research and development (R&D), but on condition that complementary factors are in place. Classification-JEL: E22, O30 Keywords: income convergence, CESEE region, digital economy Pages: 34-42 Year: 2018 Issue: Q3-18 File-URL: https://www.oenb.at/dam/jcr:ff7d0632-9f12-4666-a23d-53a35d2fdf0c/03_Digitalization%20and%20higher_feei_2018_q3.pdf File-Format: application/pdf File-Size: 527 kb Handle: RePEc:onb:oenbfi:y:2018:i:Q3-18:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Peter Backé Author-Name-First: Peter Author-Name-Last: Backé Author-Email: peter.backe@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5212 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Sandra Dvorsky Author-Name-First: Sandra Author-Name-Last: Dvorsky Author-Email: sandra.dvorsky@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, European Affairs and International Financial Organizations Divison Author-Workplace-Homepage: http://www.oenb.at Title: Enlargement of the euro area toward CESEE: progress and perspectives Abstract: This article reviews the enlargement of the euro area toward CESEE EU Member States since 2010. It covers the Baltic countries’ accession to monetary union and summarizes the present state of convergence of non-euro area CESEE EU Member States, with a focus on the economic
convergence criteria. Furthermore, it depicts the current views of these countries on future euro area accession. We show how convergence assessments have developed since the onset of the crisis and examine the impact of the deepening of Economic and Monetary Union on the monetary integration process. Looking ahead, the article argues for an even-handed
application of the principle of equal treatment in an advancing environment, which combines continuity with a careful and well-grounded integration of the lessons from the past and the institutional reforms that have resulted as a consequence, for the mutual benefit of all stakeholders in the process. Classification-JEL: E42, E52, E58, N14 Keywords: European Union, euro area, monetary integration, Central, Eastern and Southeastern Europe Pages: 43-56 Year: 2018 Issue: Q3-18 File-URL: https://www.oenb.at/dam/jcr:f96da888-8003-4258-ab9a-215cd862d2ec/04_Enlargement%20of%20the%20euro_feei_2018_q3.pdf File-Format: application/pdf File-Size: 285 kb Handle: RePEc:onb:oenbfi:y:2018:i:Q3-18:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Philipp Freund Author-Name-First: Philipp Author-Name-Last: Freund Author-Name: Wolfgang Petritsch Author-Name-First: Wolfgang Author-Name-Last: Petritsch Title: External actors and European integration in the Western Balkans Abstract: The Western Balkans region has returned to the center of European policymakers’ attention amidst increased concerns over geopolitical competition and inherent instability. The present study examines the major external players and their goals and policy tools in the region and –
in spite of the EU’s less than stellar performance at the Sofia Summit of May 2018 – calls for a consistent and committed approach to the integration of the Western Balkans into the EU. Classification-JEL: F51, F55, O52 Keywords: international relations, European Union, Western Balkans Pages: 57-67 Year: 2018 Issue: Q3-18 File-URL: https://www.oenb.at/dam/jcr:d11e82cd-ccf9-491f-ac8a-9131e8431c96/05_External_actors_and_European_integration_feei_2018_q3.pdf File-Format: application/pdf File-Size: 237 kb Handle: RePEc:onb:oenbfi:y:2018:i:Q3-18:b:5 Template-Type: ReDIF-Article 1.0 Author-Name: Iikka Korhonen Author-Name-First: Iikka Author-Name-Last: Korhonen Author-Email: iikka.korhonen@bof.fi Author-Name: Heli Simola Author-Name-First: Heli Author-Name-Last: Simola Author-Name: Laura Solanko Author-Name-First: Laura Author-Name-Last: Solanko Title: Sanctions and countersanctions − effects on economy, trade and finance Abstract: In this paper we review the history and current state of sanctions imposed on Russian entities by the EU, the U.S.A. and others, as well as Russia’s countersanctions. We try to assess what kind of economic effects these measures have had, although any such analysis is bound to be
confounded by the large drop in the price of oil that occurred in 2014 and 2015. We find that sanctions have had a clear, negative effect on the Russian economy, although the decline in the price of oil affected Russian GDP much more strongly in 2014−2016. The U.S. and EU sanctions have worked e.g. by restricting Russian banks’ access to capital. EU countries’ trade with Russia and their market share in Russia have declined, but this is partly a continuation of a long-term trend. Russia’s countersanctions have e.g. affected exports of foodstuffs from the EU, but macroeconomic effects in the EU are very small. Classification-JEL: F51 Keywords: Russia, sanctions Pages: 68-76 Year: 2018 Issue: Q3-18 File-URL: https://www.oenb.at/dam/jcr:d45f7129-94eb-48f4-b4d7-e715d88c224a/06_Sanctions_and_countersanctions_feei_2018_q3.pdf File-Format: application/pdf File-Size: 423 kb Handle: RePEc:onb:oenbfi:y:2018:i:Q3-18:b:6 Template-Type: ReDIF-Article 1.0 Author-Name: Zsolt Darvas Author-Name-First: Zsolt Author-Name-Last: Darvas Author-Email: zsolt.darvas@uni-corvinus.hu Author-Name: Guntram B. Wolff Author-Name-First: Guntram B. Author-Name-Last: Wolff Title: The EU’s Multiannual Financial Framework and some implications for CESEE countries Abstract: The European Union’s budget – which is fundamentally different from the budgets of federal countries and amounts to only about 1% of the EU’s gross national income – continues to be heavy on agricultural and cohesion spending. The literature shows that the EU’s common agricultural policy (accounting for 38% of EU spending from the current budget) provides good
income support, especially for richer farmers, but is less effective for greening and biodiversity and is unevenly distributed. The EU’s cohesion policy (accounting for 34% of current EU spending) contributes to convergence, but it is unclear how strong and long-lasting the effects are. Spending on new priorities such as border control could require additional funds of at
least EUR 100 billion in the 2021–2027 period, but there will be a EUR 94 billion Brexit-related hole in the EU budget for 2021–2027 if the EU loses the United Kingdom’s share of contributions and the EU’s work program as a share of gross national income remains unchanged. The European Commission’s May 2, 2018, proposal for the 2021–2027 budget
makes several welcome steps in reforming the EU budget, e.g. by reorganizing spending commitments toward priorities which have gained more importance recently, while reducing the share of spending on agriculture and cohesion policies. But many details remain quite fuzzy
and need to be spelled out further before a critical appraisal can be made. Moreover, the new draft budget for agriculture foresees larger cuts for rural development support – important for environment and biodiversity goals – than for direct subsidies to farmers. Also, we would argue that the European Commission needs to make a significantly stronger attempt at measuring
the actual “European value added” of the various proposed initiatives. Therefore, while we regard the European Commission’s proposal a good basis for subsequent negotiations, we propose a number of significant changes. Classification-JEL: E60, H11, H41 Keywords: multi-annual EU budget, common agricultural policy, cohesion policy Pages: 77-86 Year: 2018 Issue: Q3-18 File-URL: https://www.oenb.at/dam/jcr:c3889608-413f-425e-8920-80f9c83b3351/07_The_EUs_Multiannual_Financial_Framework_feei_2018_q3_screen.pdf File-Format: application/pdf File-Size: 353 kb Handle: RePEc:onb:oenbfi:y:2018:i:Q3-18:b:7 Template-Type: ReDIF-Article 1.0 Author-Name: Rocc L. Bubbico Author-Name-First: Rocc L. Author-Name-Last: Bubbico Author-Name: Miroslav Kollar Author-Name-First: Miroslav Author-Name-Last: Kollar Author-Name: Tomáš Slacík Author-Name-First: Tomáš Author-Name-Last: Slacík Author-Email: tomas.slacik@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Structural investment needs in CESEE and the use of EU funds Abstract: Investment recovery in Central, Eastern and Southeastern Europe (CESEE) as well as in Europe as a whole is gaining steam. Hence, despite measurement challenges, there seems to be a broad consensus that there is currently no cyclical quantitative investment gap that would need to be addressed. However, there is tangible evidence suggesting that there are significant
structural investment needs, particularly with regard to the quality of capital. Against this background, the aim of the present paper is twofold. First, we shed some light on the thematic areas in which structural investment needs persist by collecting and exploring a large set of strategic indicators. Second, we compare these structural investment needs with the structure of the European Structural and Investment Funds (ESIF) in the 2007–2013 programming period. This gives us some insights into whether the ESIF were directed to areas with the greatest investment needs and offers some tentative suggestions regarding the impact the ESIF had on the respective structural areas and as to the efficient use of the ESIF. Classification-JEL: F33, F36, F42, F45, F55, O11 Keywords: European Structural and Investment Funds, investment gap, structural investment needs Pages: 87-101 Year: 2018 Issue: Q3-18 File-URL: https://www.oenb.at/dam/jcr:db0b9c02-45d1-44e9-b19e-4cadb698e0ad/08_Structural_investment_feei_2018_q3.pdf File-Format: application/pdf File-Size: 470 kb Handle: RePEc:onb:oenbfi:y:2018:i:Q3-18:b:8 Template-Type: ReDIF-Article 1.0 Author-Name: Kurt Bayer Author-Name-First: Kurt Author-Name-Last: Bayer Author-Name: Andreas Breitenfellner Author-Name-First: Andreas Author-Name-Last: Breitenfellner Author-Email: andreas.breitenfellner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Title: What is the appropriate role of structural reforms in E(M)U deepening? Abstract: Can flexibility-enhancing “structural” reforms at the national level substitute institutional reforms at the EU level, or are they rather complementary? In this article, we first look at more broadly defined structural reforms of both institutions and product and factor markets through the lens of economic theory – and also review empirical evidence. In particular, we discuss if and how reforms depend on macroeconomic conditions and policies. We then
analyze the role that reforms play for the proper functioning of Economic and Monetary Union (EMU) and for fostering the well-being of EU citizens. In a nutshell, there is no one-size policy framework that fits all. The optimal set of structural policies for an economy depends on the quality of its institutions as well as its factor endowment, level of development and/or geographical location. We argue for extending the structural reform paradigm beyond “defensive” (flexibility-enhancing) toward “upgrading” (productivity-enhancing) instruments. Design, packaging, timing and sequencing will make or break such reforms. In general, reform ownership based on broad consensus is essential at the national level. EU involvement, however,
would only be justified in the case of cross-border spillovers. Classification-JEL: E24, F45, O43 Keywords: structural reform, economic growth, institutional reform, Economic and Monetary Pages: 102-112 Year: 2018 Issue: Q3-18 File-URL: https://www.oenb.at/dam/jcr:e51b57ce-e98c-4885-9e25-1115138eb737/09_What_is_the_appropriate_role_feei_2018_q3.pdf File-Format: application/pdf File-Size: 303 kb Handle: RePEc:onb:oenbfi:y:2018:i:Q3-18:b:9 Template-Type: ReDIF-Article 1.0 Author-Name: Julia Schmieder Author-Name-First: Julia Author-Name-Last: Schmieder Author-Name: Andrea Weber Author-Name-First: Andrea Author-Name-Last: Weber Author-Email: a.weber@uni-mannheim.de Author-Workplace-Name: University of Mannheim Title: How did EU Eastern enlargement affect migrant labor supply in Austria? Abstract: In this paper, we study the employment of workers from Central, Eastern and Southeastern European (CESEE) EU Member States in Austria after the Eastern enlargement of the European Union. To prevent a sudden rush of immigrants into the labor market, Austria opted for a Transition period during which immigration remained restricted. We will show that these restrictions
had the anticipated effect; while the stock of workers from the new CESEE Member States increased slowly in Austria during the transition period, the trend became markedly steeper after the introduction of free labor market access. Between 2003 and 2016, the stock of workers from CESEE EU Member States in Austria increased fourfold by about 185,000 individuals. The
largest immigrant groups are from Hungary, Romania and Poland. A large share of migrant workers are employed in seasonal industries and in border regions closest to their home countries. Classification-JEL: J61, O52 Keywords: EU Eastern enlargement, free movement of labor, Austria Pages: 113-121 Year: 2018 Issue: Q3-18 File-URL: https://www.oenb.at/dam/jcr:0eae40d5-44b7-41a6-8228-8d56d696fadb/10_How_did_EU_Eastern_enlargement_feei_2018_q3.pdf File-Format: application/pdf File-Size: 523 kb Handle: RePEc:onb:oenbfi:y:2018:i:Q3-18:b:10 Template-Type: ReDIF-Article 1.0 Author-Name: Richard Grieveson Author-Name-First: Richard Author-Name-Last: Grieveson Title: Demographic decline does not necessarily condemn CESEE EU countries to a low growth future Abstract: Labor markets in many EU countries in Central, Eastern and Southeastern Europe (CESEE EU) are increasingly tight, reflecting strong growth, emigration and demographic decline. This Situation will only get worse in the coming years, and represents an increasingly significant challenge to economic growth. Immigration from Ukraine is a partial short-term fix, but not a long-term solution. Significant returns of workers to the region after Brexit seem to be unlikely. For political reasons, large-scale immigration from outside Europe is impossible to imagine. As a result, there is a risk that – faced by persistent labor shortages and higher wage demands – firms will move production away from the region, and that the CESEE EU countries will be condemned to a low growth future. However, this is not inevitable. First, there are big incentives for capital owners to Keep production in CESEE EU countries despite strong wage increases, including proximity to Western
markets and the quality of governance, institutions and infrastructure relative to other European or nearby emerging economies. Second, recent rises in productivity, and moves toward automation, indicate a possible long-term solution to demographic challenges. Classification-JEL: E24, J11, J21, J23, J24, J31, J61, O30, O40 Keywords: demographics, productivity, automation, labor markets, migration Pages: 122-130 Year: 2018 Issue: Q3-18 File-URL: https://www.oenb.at/dam/jcr:02851c10-fcbb-4d1f-b056-5095d246e2dc/11_Demographic_decline_feei_2018_q3.pdf File-Format: application/pdf File-Size: 589 kb Handle: RePEc:onb:oenbfi:y:2018:i:Q3-18:b:11 Template-Type: ReDIF-Article 1.0 Author-Name: Frank Dierick Author-Name-First: Frank Author-Name-Last: Dierick Author-Name: Francesco Mazzaferro Author-Name-First: Francesco Author-Name-Last: Mazzaferro Title: The ESRB and macroprudential policy in the EU Abstract: Since its establishment, the European Systemic Risk Board (ESRB) has undertaken important work in fostering a coherent macroprudential framework for the EU and in helping make it operational. The groundwork for such a framework was laid by setting up national macroprudential authorities in all EU Member States and spelling out their mandate and tasks. The
next step consisted in making the concept of macroprudential supervision more precise by identifying intermediate objectives of macroprudential policy and designating macroprudential instruments. Initially, the ESRB focused on the banking sector but, over the past few years, considerable work has also been undertaken on nonbank financial sectors. One of the very
first areas the ESRB dealt with was systemic risk resulting from lending in foreign currencies, an area particularly relevant for countries in Central, Eastern and Southeastern Europe (CESEE). Some CESEE Member States have also been most active in implementing macroprudential policies in the EU. Classification-JEL: G18, G28 Keywords: European Systemic Risk Board, financial stability, macroprudential policy Pages: 131-140 Year: 2018 Issue: Q3-18 File-URL: https://www.oenb.at/dam/jcr:c97fc02b-f06d-4bcb-9d7b-09f60ac0b07b/12_The_ESRB_feei_2018_q3.pdf File-Format: application/pdf File-Size: 555 kb Handle: RePEc:onb:oenbfi:y:2018:i:Q3-18:b:12 Template-Type: ReDIF-Article 1.0 Author-Name: Mariarosaria Comunale Author-Name-First: Mariarosaria Author-Name-Last: Comunale Author-Name: Markus Eller Author-Name-First: Markus Author-Name-Last: Eller Author-Email: markus.eller@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Mathias Lahnsteiner Author-Name-First: Mathias Author-Name-Last: Lahnsteiner Author-Email: mathias.lahnsteiner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Has private sector credit in CESEE approached levels justified by fundamentals? A post-crisis assessment Abstract: We analyze private sector credit developments in CESEE EU countries by calculating the credit-to-GDP ratios that are in line with macroeconomic and financial fundamentals and by comparing them with actual levels. In contrast to previous work in this area, we add cross-border credit to domestic bank credit and take care of global factors and cross-country spillovers.
We derive three main findings from our analysis: First, countries featuring positive credit gaps at the start of the global financial crisis (GFC) have managed to adjust their credit ratios downward toward levels justified by fundamentals, but the adjustment is apparently not yet complete in all countries. Second, in most countries characterized by credit levels close to
or below the “fundamental” levels of credit at the start of the GFC, negative credit gaps have emerged or widened. Third, the inclusion of cross-border credit matters considerably for credit gap assessments as it results in larger gaps in most cases. As part of the policy discussion, we also relate our findings to recent efforts in setting countercyclical capital buffers depending on credit gaps. Classification-JEL: C33, E44, E51, G01, G21, O16 Keywords: private sector credit, fundamental level of credit, bank lending, global financial crisis, Pages: 141-154 Year: 2018 Issue: Q3-18 File-URL: https://www.oenb.at/dam/jcr:f05045c2-41a1-4e24-a032-bf3b41fcdde2/13_Has_private_sector_credit_feei_2018_q3.pdf File-Format: application/pdf File-Size: 599 kb Handle: RePEc:onb:oenbfi:y:2018:i:Q3-18:b:13 Template-Type: ReDIF-Article 1.0 Author-Name: Markus Eller Author-Name-First: Markus Author-Name-Last: Eller Author-Email: markus.eller@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Johannes Holler Author-Name-First: Johannes Author-Name-Last: Holler Author-Email: johannes.holler@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Title: Digging into the composition of government debt in CESEE: a risk evaluation Abstract: This paper reviews the composition of government debt in Central, Eastern and Southeastern Europe (CESEE) with a particular focus on the related risk implications, using a unique dataset compiled from various sources. The comparatively strong increase in government debt Levels recorded
in CESEE since the global financial crisis (GFC), together with an increased role of foreign portfolio investors with a typically short-term orientation, has accentuated refinancing risks. Nevertheless, on the aggregate level, refinancing and interest rate risks have been reduced in CESEE as governments increasingly have been able to issue longer-term debt instruments. At the same time, however, risks are not distributed equally across CESEE: there are still a few countries that record sizeable short-term debt (partially denominated in foreign currency) and/or are likely to face pronounced repayment spikes in the period up to 2025. The combination of an
increased debt stock and a dominant share of foreign currency-denominated government debt also implies substantial exposure to exchange rate risks in a few CESEE countries. Historical default episodes underline the riskiness of the large shares of foreign currency-denominated government debt that are often observed for countries with less developed capital markets. The issuance
of debt instruments which are exposed to high refinancing and rollover risk is only partially driven by debt management strategies; it is also a direct consequence of domestic financial market conditions. Therefore, special emphasis should be placed on fostering CESEE capital markets to strengthen government borrowing at home and in the local currencies and to further
develop derivative products to hedge interest and exchange rate risk. Classification-JEL: E62, H12, H63, P35 Keywords: government debt structure, public debt management, sovereign risk, Central, Eastern Pages: 56-80 Year: 2018 Issue: Q2-18 File-URL: https://www.oenb.at/dam/jcr:96273829-255a-4cf9-8e9c-538353f18785/04_feei_2018_q2_screen_Eller_Holler.pdf File-Format: application/pdf File-Size: 1666 kb Handle: RePEc:onb:oenbfi:y:2018:i:Q2-18:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Artha Hoxha Author-Name-First: Artha Author-Name-Last: Hoxha Author-Email: arta.hoxha@research.staffs.ac.uk Title: Explaining the impact of the global financial crisis on European transition countries: a GVAR approach Abstract: This study investigates how GDP and financial shocks in the EU-15 are transmitted to European transition countries, using a global vector autoregression (GVAR) approach. Our GVAR model is estimated for 32 countries over the period from Q1 1999 to Q4 2014. The results indicate
that, while the estimated spillovers from negative shocks to GDP and financial stress in the EU-15 to European transition countries are always negative, the size of these effects varies considerably across regions. Notably, the Baltic countries’ GDP levels show the most severe and statistically significant impact from the shocks to both GDP and the financial stress index in the EU-15. Both types of shocks to the EU-15 appear to be propagated mainly through foreign
credit flows, FDI and remittances, suggesting that the financial channel, particularly foreign credit flows, play a major role in the transmission of shocks to the Baltic countries. The examined Southeastern European (SEE) countries, on the other hand, are affected mainly by shocks to EU-15 GDP, which are propagated predominantly through exports, FDI and foreign
credit flows. EU Member States in Central, Eastern and Southeastern Europe (CESEE) are less severely affected by shocks to EU-15 GDP, possibly because they represent more advanced transition countries and are better able to offset crisis effects and thus contribute to the resilience of the region. Classification-JEL: F15, F30, G01 Keywords: global financial crisis, transition countries, GVAR Pages: 81-97 Year: 2018 Issue: Q2-18 File-URL: https://www.oenb.at/dam/jcr:3a4483ee-ca2d-48c0-a2f3-a86b6ae60124/05_feei_2018_q2_Hoxha.pdf File-Format: application/pdf File-Size: 544 kb Handle: RePEc:onb:oenbfi:y:2018:i:Q2-18:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Sebastian Beer Author-Name-First: Sebastian Author-Name-Last: Beer Author-Email: sebastian.beer@univie.ac.at Author-Workplace-Name: University of Vienna Author-Workplace-Homepage: https://www.univie.ac.at/ Title: A cost-risk analysis of sovereign debt composition in CESEE Abstract: Drawing on a newly compiled structural debt database, this article examines sovereign interest rate exposure in ten countries in Central, Eastern and Southeastern Europe (CESEE). The average maturity of sovereign debt has lengthened over time and converged across CESEE, indicating that the likelihood of sudden changes in interest rate has decreased since 2009. Using a simple theoretical model, this article identifies the drivers of this development, highlighting the role of debt managers’ risk preferences. Classification-JEL: H63 Keywords: debt management, interest rate risk, financial vulnerability, CESEE region Pages: 6-25 Year: 2018 Issue: Q1-18 File-URL: https://www.oenb.at/dam/jcr:1a9ed2db-a6b2-47b6-a58a-b7eb1029c295/feei_2018_q1_studies_beer.pdf File-Format: application/pdf File-Size: 771 kb Handle: RePEc:onb:oenbfi:y:2018:i:Q1-18:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Elisabeth Beckmann Author-Name-First: Elisabeth Author-Name-Last: Beckmann Author-Email: elisabeth.beckmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Sarah Reiter Author-Name-First: Sarah Author-Name-Last: Reiter Author-Email: sarah.reiter@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Off-Site Supervision Division – Significant Institutions Author-Workplace-Homepage: https://www.oenb.at/ Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: A geographic perspective on banking in Central, Eastern and Southeastern Europe Abstract: This study presents a novel dataset covering the geographic locations of bank branches in ten Central, Eastern and Southeastern European (CESEE) countries. Based on these data, we describe the spatial provision of banking services and study whether domestically owned and foreign-owned banks show different branching behavior. We find that the provision of banking services varies substantially between and within countries. Regressions show that these differences strongly correlate with the respective countries’ GDP per capita. With regard to the question whether foreign and domestic banks show different branching behavior, we detect marked differences across countries. Thus, there is no “one-size-fits-all” explanation for the market behavior of foreign (and Austrian) banks in CESEE. In general, foreign banks in CESEE tend to branch in regions with higher population density. An exception among foreign banks are Austrian banks, which, on average across regions, also locate in areas with lower population density. When we match bank branch location data with household survey data, we find that the majority of CESEE households have a bank available within 2 km. Nevertheless, a sizeable share of CESEE households live 5 km or farther from the nearest bank branch. We provide indicators of bank branch coverage, density, concentration and ownership at Nomenclature of Territorial Units for Statistics 3 (NUTS 3) level for download on the OeNB website. Classification-JEL: D12, G11, D80 Keywords: bank branches, local market structure, spatial competition, foreign banks, Central, Eastern and Southeastern Europe, database Pages: 26-47 Year: 2018 Issue: Q1-18 File-URL: https://www.oenb.at/dam/jcr:3b49bab3-c0a8-4702-bf04-ecc9bdc37fc4/feei_2018_q1_studies_beckmann_reiter_stix.pdf File-Format: application/pdf File-Size: 1128 kb Handle: RePEc:onb:oenbfi:y:2018:i:Q1-18:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Thomas Scheiber Author-Name-First: Thomas Author-Name-Last: Scheiber Author-Email: thomas.scheiber@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5247 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: How are reduced interest rate differentials affecting euroization in Southeastern Europe? Evidence from the OeNB Euro Survey Abstract: Euroization is a widespread phenomenon in many Central, Eastern and especially Southeastern European countries. From the literature on euroization we derive potential implications of the recently observed reduced interest rate differential between local and foreign currencies for households’ demand for cash holdings, foreign currency deposits and foreign currency loans. We contrast these hypotheses with recent changes in households’ observed saving and borrowing behavior in the region. To this end, we combine information from the OeNB Euro Survey with data from national central banks. The different dynamics of asset and liability euroization observed in the recent period of reduced interest rate differentials in the euroized countries of Southeastern Europe by and large match the theoretical expectations. Based on the literature and the data compiled in this article we conclude that fostering trust in institutions, sustaining macroeconomic stability, providing incentives for saving in the local currency and pursuing a comprehensive policy mix of macro- and micro-prudential measures will help to maintain financial stability and to reduce euroization. Classification-JEL: D14, G11, G18, E43, F34 Keywords: euroization, interest rate differential, household financial decisions, Southeastern Europe Pages: 48-60 Year: 2018 Issue: Q1-18 File-URL: https://www.oenb.at/dam/jcr:43e1dbe8-8bc4-4e3c-a6d6-87fca832870d/feei_2018_q1_studies_scheiber_woerz.pdf File-Format: application/pdf File-Size: 463 kb Handle: RePEc:onb:oenbfi:y:2018:i:Q1-18:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Anna Katharina Raggl Author-Name-First: Anna Katharina Author-Name-Last: Raggl Author-Email: anna.raggl@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Migration intentions in CESEE – a descriptive analysis Abstract: Against the background of high emigration from Central, Eastern and Southeastern Europe (CESEE) in the past few decades, we study the current migration intentions of individuals in ten CESEE countries using individual-level data from the 2014 wave of the OeNB Euro Survey. Apart from the overall share of people that intend to leave their home countries, we identify the gender, age and education profiles of these prospective migrants. Using population pyramids for visualization, we compare the current population structure with a hypothetical one that would arise if all people planning to emigrate would in fact do so. We find that, on average, 11.4% of individuals aged 25 to 39 intend to leave their CESEE home countries, a share that represents a lower-bound estimate. Migration intentions vary considerably across countries; in general, they appear to be more common among men and among individuals with a relatively low level of education. Classification-JEL: F22, J11, O52 Keywords: migration intentions, population pyramids, CESEE Pages: 52-69 Year: 2017 Issue: Q4/17 File-URL: https://www.oenb.at/dam/jcr:292e1906-71a8-45c0-b33b-12b831ebed67/feei_2017_q4__screen_Migration_intentions_in_CESEE_%E2%80%93_a_descriptive_analysis.pdf File-Format: application/pdf File-Size: 212 kb Handle: RePEc:onb:oenbfi:y:2017:i:Q4/17:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Stephan Barisitz Author-Name-First: Stephan Author-Name-Last: Barisitz Author-Email: stephan.barisitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Name: Alice Radzyner Author-Name-First: Alice Author-Name-Last: Radzyner Author-Email: alice.radzyner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: https://www.oenb.at Title: The New Silk Road, part II: implications for Europe Abstract: Through the New Silk Road (NSR) initiative, China increasingly invests in building and modernizing overland and maritime infrastructures with a view to enhancing the overall connectivity between China and Europe. The NSR runs through a number of Eurasian emerging markets and extends to Southeastern Europe (SEE), where Chinese investments include the modernization of ports and highspeed rail and road projects to speed up the transport of goods between China and Europe (e.g. port of Piraeus, rail connection to Budapest). Participation in the NSR will probably stimulate SEE’s economic expansion and may even contribute to overcoming its traditional peripheral position in Europe. Ideally, SEE will play a role in catalyzing a deepening of China-EU economic relations, e.g. by facilitating European exports to China and other countries along NSR trajectories, which would boost growth in Europe more widely. In the long run, these developments might also influence the EU’s political and economic positioning on a global scale. Classification-JEL: F15, F34, N75, R12, R42 Keywords: New Silk Road, One Belt, One Road, connectivity, trade infrastructure, economic Pages: 70-81 Year: 2017 Issue: Q4/17 File-URL: https://www.oenb.at/dam/jcr:0d930f75-fc97-41c4-9ea4-cfd05e6a09c5/feei_2017_q4__screen_TheNewSilkRoad_part_II_-_implications_for_Europe.pdf File-Format: application/pdf File-Size: 340 kb Handle: RePEc:onb:oenbfi:y:2017:i:Q4/17:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Stephan Barisitz Author-Name-First: Stephan Author-Name-Last: Barisitz Author-Email: stephan.barisitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Name: Alice Radzyner Author-Name-First: Alice Author-Name-Last: Radzyner Author-Email: alice.radzyner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: https://www.oenb.at Title: The New Silk Road, part I: a stocktaking and economic assessment Abstract: China’s New Silk Road (NSR) initiative was officially launched in 2013. It aims at enhancing overall connectivity between China and Europe by both building new and modernizing existing – overland as well as maritime – infrastructures. The NSR runs through a number of Eurasian emerging markets with important growth potential. The Chinese authorities have entrusted the Silk Road Fund, the Asian Infrastructure Investment Bank and other institutions with financially supporting NSR activities. Most drivers of the initiative are of an economic or a geopolitical nature. Given the generous financial means at Beijing’s disposal and Chinese firms’ accumulated expertise in infrastructure projects, many undertakings are currently well under way and promise to (eventually) bring about considerable changes in connectivity, commerce and economic dynamism. While most Chinese NSR investments go to large countries (e.g. Pakistan, Malaysia, Indonesia, Russia, Kazakhstan and Kenya), the strategically situated smaller countries (e.g. Djibouti, Sri Lanka, Kyrgyzstan, Laos, Serbia and Montenegro) typically benefit the most (in relation to the size of their economies). Progress has been made in strengthening the maritime infrastructural trade links with the EU (e.g. through the modernization of deep-water ports) while the upgrading of the currently rather weak trans-Eurasian railroad and highway links (e.g. via Kazakhstan and Russia) is clearly improving overland transportation’s yet modest competitive position. Classification-JEL: F15, F34, N75, R12, R42 Keywords: New Silk Road, One Belt, One Road, connectivity, trade infrastructure, economic corridors, regional policy, China, Eurasia Pages: 8-30 Year: 2017 Issue: Q3/17 File-URL: https://www.oenb.at/dam/jcr:48e8ae7a-e2c7-4a2b-af4a-a9cc22c0fbee/03_Barisitz_feei_3_17.pdf File-Format: application/pdf File-Size: 776 kb Handle: RePEc:onb:oenbfi:y:2017:i:Q3/17:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Doris Ritzberger-Grünwald Author-Name-First: Doris Author-Name-Last: Ritzberger-Grünwald Author-Email: doris.ritzberger-gruenwald@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5201 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Josef Schreiner Author-Name-First: Josef Author-Name-Last: Schreiner Author-Email: josef.schreiner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: Competitiveness of CESEE EU Member States: recent trends and prospects Abstract: This short study gives a comprehensive overview of the competitive strengths and weaknesses of the 11 Central, Eastern and Southeastern European (CESEE) EU Member States over the period from 2000 to 2014. It reviews traditional measures such as market share and price developments as well as indicators reflecting non-price competitiveness and the influence of integrated production networks. While the CESEE countries have shown impressive improvements in their competitiveness over the review period, some of these gains are clearly associated with processing high-quality inputs, the transfer of technological and managerial know-how within international production networks and the participation in potent marketing and distribution networks. However, the CESEE countries continue to lag behind Western Europe with respect to infrastructure, institutions and innovation. Classification-JEL: F14, L15, P52 Keywords: competitiveness, international production networks, CESEE Pages: 31-41 Year: 2017 Issue: Q3/17 File-URL: https://www.oenb.at/dam/jcr:28021de8-95a9-4af6-9495-eb277605866a/04_Ritzberger_feei_3_17.pdf File-Format: application/pdf File-Size: 522 kb Handle: RePEc:onb:oenbfi:y:2017:i:Q3/17:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Caroline Stern Author-Name-First: Caroline Author-Name-Last: Stern Author-Email: caroline.stern@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank (OeNB), Foreign Research Division Title: Fintechs and their emergence in banking services in CESEE Abstract: Over the last years, the development of financial technology in the banking sector got a new twist with the emergence of numerous small start-ups called fintechs. Some of the new technologies will probably make specific areas of the banking business more efficient, while others may have the potential to disrupt the traditional banking sector. This paper presents the outcome of a stocktaking exercise and shows that most of the new financial technologies are still being used on a small scale. Given that the CESEE region is usually omitted in discussions of fintechs, this paper aims at closing this gap by giving an idea of which activities exist in this region with regard to financial technology. Focusing on three business areas – (1) financial services, (2) payments and (3) financing – this study finds that the level of adoption of new technologies varies across the CESEE countries. Also, a handful of countries seem to have a more active fintech scene in some areas (e.g. peer-to-peer lending) than many of their Western neighbors. Classification-JEL: G21, G23 Keywords: fintech, nonbank financial institutions, banks Pages: 42-58 Year: 2017 Issue: Q3/17 File-URL: https://www.oenb.at/dam/jcr:4604e995-f2ef-43f5-ae2a-268153d12fd3/05_Stern_feei_3_17.pdf File-Format: application/pdf File-Size: 708 kb Handle: RePEc:onb:oenbfi:y:2017:i:Q3/17:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Michael Sigmund Author-Name-First: Michael Author-Name-Last: Sigmund Author-Email: Michael.Sigmund@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Financial Markets Analysis and Surveillance Division Title: Comparing market power at home and abroad: evidence from Austrian banks and their subsidiaries in CESEE Abstract: In this study, we examine markups of Austrian banks and their subsidiaries in Central, Eastern and Southeastern Europe (CESEE) on an unconsolidated level. Markups are evaluated by means of the Lerner index by simultaneously estimating a price and a cost function derived from oligopoly theory. For that purpose, we use a novel fixed effects seemingly unrelated regression approach and a unique supervisory dataset covering around 800 banks over the period from the first quarter of 2008 to the second quarter of 2016. We find evidence for positive markups for Austrian subsidiaries in CESEE. These markups are even higher than the markups of Austrian parent banks, which emphasizes the importance of the CESEE markets for the overall profitability of the Austrian banking sector. Looking at the determinants of markups for Austrian subsidiaries in CESEE, we find that higher Lerner indices are associated with better capitalization, higher loan loss provisions and, more generally, greater size – the latter effect is especially true for banks in more developed host countries. Also, there is a negative correlation between the Lerner indices of subsidiaries and parent banks. This implies that opportunity costs in the home country play a role in determining market power in the host country. Classification-JEL: D40, G21, L10, C30 Keywords: Lerner index, banking sector, market power, CESEE Pages: 59-77 Year: 2017 Issue: Q3/17 File-URL: https://www.oenb.at/dam/jcr:6d0124c7-f8ac-46d9-8b4d-c17528d4c118/06_Feldkircher_feei_3_17.pdf File-Format: application/pdf File-Size: 563 kb Handle: RePEc:onb:oenbfi:y:2017:i:Q3/17:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Pirmin Fessler Author-Name-First: Pirmin Author-Name-Last: Fessler Author-Email: Pirmin.Fessler@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Name: Emanuel List Author-Name-First: Emanuel Author-Name-Last: List Author-Email: emanuel.list@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Name: Teresa Messner Author-Name-First: Teresa Author-Name-Last: Messner Author-Email: teresa.messner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: How financially vulnerable are CESEE households? An Austrian perspective on its neighbors Abstract: We employ newly available microdata to analyze household indebtedness and financial vulnerability in selected CESEE countries. The new 2014/15 wave of the Household Finance and Consumption Survey (HFCS) covers Slovenia, Estonia, Hungary, Latvia, Poland and Slovakia. Austrian banks have significant exposure to households in many CESEE countries, and the number of nonperforming loans is rather high in some of them. Our goal is to provide a clear picture of household vulnerability and its potential impact on financial stability and thus to allow for thinking in evidence-based scenarios. We focus on the joint distribution of debt and collateral and add several measures of financial vulnerability, such as loan-to-value, debt-to-income and debt service-to-income ratios. In addition, we employ econometric methods from the decomposition and policy evaluation literature to decompose differences in vulnerability measures between countries into two parts: one that is attributable to different borrower characteristics and another that is down to other external factors, such as differences in banks’ behavior across countries. Our results show that households are particularly vulnerable in Latvia and Hungary and that variations in household composition have different effects on vulnerability across the countries covered. Classification-JEL: C81, D31, E21, E31, G21, O52, R31 Keywords: household-specific property prices, mortgages, banking sector, Austria Pages: 58–79 Year: 2017 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:66356a63-b720-4272-8f11-f51879e91386/feei_2017_q2_studies_fessler_list_messner.pdf File-Format: application/pdf File-Size: 924 kb Handle: RePEc:onb:oenbfi:y:2017:i:2:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Anna Katharina Raggl Author-Name-First: Anna Katharina Author-Name-Last: Raggl Author-Email: anna.raggl@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: The relevance of remittance inflows to CESEE countries: evidence from macro- and micro-level data Abstract: In this study, a combined analysis of micro- and macro-level data on remittances is used to shed light on the relevance of such transfers in Central, Eastern and Southeastern European (CESEE) countries. In the early and mid-1990s, and more recently in the context of EU accession, CESEE countries experienced considerable out-migration, and remittances have become an important source of foreign exchange in these countries. Against this background, this study examines the relevance and nature of remittance inflows to CESEE. To this end, both the dispersion of remittances across individuals in a country (based on microdata from the OeNB Euro Survey) and the average amount received per recipient (estimated by combining micro- with macrodata) are assessed. By relating these two dimensions of remittances descriptively, we examine differences across countries and changes over time. Classification-JEL: F24, F22, O57 Keywords: remittances, emigration, intensive and extensive margin, CESEE Pages: 80–102 Year: 2017 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:81c3997d-309b-4eaa-8440-25b68c881606/feei_2017_q2_studies_raggl.pdf File-Format: application/pdf File-Size: 1126 kb Handle: RePEc:onb:oenbfi:y:2017:i:2:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Elisabeth Beckmann Author-Name-First: Elisabeth Author-Name-Last: Beckmann Author-Email: elisabeth.beckmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: How does foreign currency debt relief affect households’ loan demand? Evidence from the OeNB Euro Survey in CESEE Abstract: Many Central, Eastern and Southeastern European (CESEE) countries have implemented or are discussing measures to alleviate the debt burden of households with foreign currency loans, in particular Swiss franc loans, such as converting these loans at historical exchange rates. This paper presents evidence from the OeNB Euro Survey indicating whether households are aware of government efforts to help borrowers and shows that awareness of current government measures is positively and significantly correlated with expectations of future government action for debt relief. We find that expectations of debt relief have no effect on loan demand in general but positively and significantly increase demand for foreign currency loans. Classification-JEL: G18, D12, D84, F34 Keywords: usehold borrowing, debt relief, moral hazard, foreign currency loans, emerging economies Pages: 8–32 Year: 2017 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:121e6d2f-1b21-474d-bbdd-04c5a2feb4b8/feei_2017_q1_studies_beckmann.pdf File-Format: application/pdf File-Size: 334 kb Handle: RePEc:onb:oenbfi:y:2017:i:1:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Stephan Barisitz Author-Name-First: Stephan Author-Name-Last: Barisitz Author-Email: stephan.barisitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Name: Andreas Breitenfellner Author-Name-First: Andreas Author-Name-Last: Breitenfellner Author-Email: andreas.breitenfellner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Title: How do resource-driven economies cope with the oil price slump? A comparative survey of ten major oil-exporting countries Abstract: The oil price slump of about 50% since 2014 has had a detrimental effect on oil-exporting emerging market economies (EMEs), potentially threatening to trigger social unrest in countries that had benefited from the oil price boom for more than a decade. We provide a first descriptive account of the policy reactions of central banks and governments of eight important oil-exporting EMEs and compare them with those of two oil-exporting advanced economies, allowing us to distinguish three patterns: One group of countries has so far successfully defended its exchange rate peg to the U.S. dollar, the reference invoicing currency (Saudi Arabia and the United Arab Emirates). A second group gave up resistance to mounting market pressures and carried out step devaluations or switched to a floating exchange rate (Russia, Kazakhstan, Azerbaijan, Nigeria and Angola). A third group of countries continued to let their currencies float (Mexico, Canada and Norway), with the stable long-term relationship between the exchange rate and commodity export prices qualifying these currencies as “commodity currencies.” We conclude that EMEs featuring peg-like regimes and saddled with limited structural diversification, modest fiscal and external buffers as well as weak institutional conditions for capital controls are unlikely to be able to uphold their exchange rate choices if they suffer a major and sustained adverse terms-of-trade shock, and should opt for flexibility sooner rather than later. While declining oil prices may imply a degree of passive diversification, a proactive long-term strategy to develop a more diversified economic structure in good times could at least partly reduce the need for buffers. Classification-JEL: Q43, O13 Keywords: oil price shock, emerging market economies, oil-exporting countries, oil currencies, Pages: 33–53 Year: 2017 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:25833af4-3601-4de7-852f-e97cc2617191/feei_2017_q1_studies_barisitz_breitenfellner.pdf File-Format: application/pdf File-Size: 313 kb Handle: RePEc:onb:oenbfi:y:2017:i:1:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Markus Eller Author-Name-First: Markus Author-Name-Last: Eller Author-Email: markus.eller@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Florian Huber Author-Name-First: Florian Author-Name-Last: Huber Author-Email: fhuber@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business (WU) Title: How would a fiscal shock in Germany affect other European countries? Evidence from a Bayesian GVAR model with sign restrictions Abstract: In this paper we analyze the international effects of a fiscal policy shock in Germany on other European countries. To that end we use a flexible version of a Bayesian global vector autoregression (GVAR) model and a dataset with broad country coverage comprising a wide range of macroeconomic and financial variables. Our results suggest a comparatively strong response in a majority of European economies to such a shock. In particular, we provide evidence that a deficit-financed expansionary government spending shock in Germany generates long-lasting positive cross-border output spillovers. In the case of the euro area periphery and Central, Eastern and Southeastern (CESEE) economies, these effects may be transmitted via the financial channel since financial variables such as equity prices and private sector credit significantly increase in response to the assumed fiscal shock in Germany. Upward effects on consumer prices, by contrast, are limited to core euro area countries. When looking at the effects of an expansionary tax cut shock instead of those of a spending-driven fiscal shock, we identify cross-border output spillovers of a similar magnitude but with a lower degree of persistence; in the case of CESEE economies, these results are also characterized by more estimation uncertainty. Finally, we also provide evidence for considerable cross-country heterogeneity in fiscal spillovers; for instance within CESEE, output responses to a fiscal shock in Germany are strongest in Croatia, Hungary and Slovenia. Classification-JEL: C30, C54, E62, F41, H60, P2 Keywords: transmission of external shocks; cross-border spillovers; fiscal policy; global vector autoregression; sign restrictions; Central, Eastern and Southeastern Europe; euro area; Germany Pages: 54–77 Year: 2017 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:a600fade-f212-41f4-8d41-29048ec75db5/feei_2017_q1_studies_eller_feldkircher_huber.pdf File-Format: application/pdf File-Size: 390 kb Handle: RePEc:onb:oenbfi:y:2017:i:1:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: David Havrlant Author-Name-First: David Author-Name-Last: Havrlant Author-Email: david.havrlant@ec.europa.eu Author-Workplace-Name: European Commission Author-Name: Peter Tóth Author-Name-First: Peter Author-Name-Last: Tóth Author-Email: peter.toth@nbs.sk Author-Workplace-Name: Národná Banka Slovenska Research Department Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: On the optimal number of indicators – nowcasting GDP growth in CESEE Abstract: We employ principal components and dynamic factor models for nowcasting GDP growth in selected Central, Eastern and Southeastern European (CESEE) economies. Our estimation sample extends from the first quarter of 2000 to the second quarter of 2008, our evaluation period from the third quarter of 2008 to the third quarter of 2014. For this period, we produce quasi out-of-sample forecasts of past-, current- and next-quarter GDP growth for seven CESEE economies. The models differ with respect to the estimation method, model specification, and the number of short-term indicators used. We find, first of all, a clear gain in predictive accuracy from using a nowcasting model with monthly indicators compared to the naïve benchmark. Furthermore, for our sample of small, open economies, we find that models using a smaller set of carefully selected indicators yield lower prediction errors on average than models based on larger information sets. Finally, we identify a clear gain in forecast performance from including foreign or euro area indicators. Classification-JEL: C52, C53, E37 Keywords: nowcasting, dynamic factor models, principal components, Central, Eastern and Southeastern Europe Pages: 54–72 Year: 2016 Issue: 4 File-URL: https://www.oenb.at/dam/jcr:1b28450b-edab-4f2a-a71a-c521a022e52f/feei_2016_q4_studies_havrlant_toth_woerz.pdf File-Format: application/pdf File-Size: 585 kb Handle: RePEc:onb:oenbfi:y:2016:i:4:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Thomas Scheiber Author-Name-First: Thomas Author-Name-Last: Scheiber Author-Email: thomas.scheiber@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5247 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Caroline Stern Author-Name-First: Caroline Author-Name-Last: Stern Author-Email: caroline.stern@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank (OeNB), Foreign Research Division Title: Currency substitution in CESEE: why do households prefer euro payments? Abstract: This paper uses microdata from 2014 to examine the determinants of currency substitution in Central, Eastern and Southeastern European (CESEE) countries. To analyze the hysteresis of euroization in these countries, we combine the standard search-theoretic model of money demand with recent findings on the preference of CESEE households for saving in cash as well as with aspects of economic geography. In Southeastern Europe, unlike in Central and Eastern Europe, network externalities and lower trust in the local currency than in the euro are still important factors. Expectations that the local currency will depreciate, income in euro and the expectation of an official adoption of the euro are important explanatory factors for all CESEE countries. Despite the heterogeneity across the region, our results suggest that institutions and policies that foster trust are key to promote de-euroization. Classification-JEL: E41, O16, D12, P34 Keywords: euroization, currency substitution, hysteresis, microdata, CESEE Pages: 73–98 Year: 2016 Issue: 4 File-URL: https://www.oenb.at/dam/jcr:93dc8703-129d-4fca-ba88-cf266751ff68/feei_2016_q4_studies_scheiber_stern.pdf File-Format: application/pdf File-Size: 586 kb Handle: RePEc:onb:oenbfi:y:2016:i:4:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Thomas Scheiber Author-Name-First: Thomas Author-Name-Last: Scheiber Author-Email: thomas.scheiber@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5247 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Maria Antoinette Silgoner Author-Name-First: Maria Antoinette Author-Name-Last: Silgoner Author-Email: Maria.Silgoner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Name: Caroline Stern Author-Name-First: Caroline Author-Name-Last: Stern Author-Email: caroline.stern@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank (OeNB), Foreign Research Division Title: The development of bank profitability in Denmark, Sweden and Switzerland during a period of ultra-low and negative interest rates Abstract: In June 2014, the ECB decided to lower its interest rate on the deposit facility for the first time to below zero with the aim of countering deflation risks. Negative central bank interest rates have no precedent in history and thus raise questions about potential unintended side effects on the economy and the banking system. To evaluate the risks of such side effects, we investigate the development of bank profitability in three European countries that look back on more than one year of negative interest rates: Denmark, Sweden and Switzerland. Overall we conclude that in these countries, negative interest rates have so far not resulted in a significant reduction of bank profitability and particularly of net interest income. Declines in interest income have been more than compensated for by declines in interest expenses. Most fears about unintended consequences of negative interest rates, such as a rush to cash or a reduction of credit supply, have so far not materialized. Classification-JEL: E43, E52, G21 Keywords: low interest rate environment, monetary transmission, bank profitability Pages: 8–28 Year: 2016 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:e1d6151c-a826-4c08-b82d-dfdac002bebe/feei_2016_q3_studies01_scheiber_silgoner_stern.pdf File-Format: application/pdf File-Size: 788 kb Handle: RePEc:onb:oenbfi:y:2016:i:3:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Wolf Heinrich Reuter Author-Name-First: Wolf Heinrich Author-Name-Last: Reuter Author-Email: research@wreuter.eu Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Title: Design of fiscal frameworks and compliance with fiscal rules in CESEE Abstract: This paper analyzes the fiscal frameworks (i.e. the fiscal rules, fiscal councils and medium- term budgetary frameworks) in place in the 11 Central, Eastern and Southeastern European (CESEE) countries among the 28 EU Member States (EU-28). In recent years especially, these countries have significantly expanded and strengthened their fiscal frameworks, relying mostly on debt and expenditure rules with quite strong medium-term budgetary frameworks (MTBFs). The 11 CESEE EU countries adhered to their own fiscal rules in approximately 65% of the years between 1995 and 2015, mainly due to their very high compliance with debt and expenditure rules. While average compliance is currently higher in the CESEE EU countries than in the EU-28, it is actually decreasing over time, while increasing in the EU-28 sample. Classification-JEL: H60, H11 Keywords: fiscal frameworks, compliance with fiscal rules, fiscal councils, medium-term budgetary framework Pages: 29–40 Year: 2016 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:57c3fcb6-102f-4a58-8bb9-be0203cc6f78/feei_2016_q3_studies02_reuter.pdf File-Format: application/pdf File-Size: 344 kb Handle: RePEc:onb:oenbfi:y:2016:i:3:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Stephan Barisitz Author-Name-First: Stephan Author-Name-Last: Barisitz Author-Email: stephan.barisitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Title: Belarus in recession, banking sector in difficulties – Russia to the rescue Abstract: After a long period of economic growth, which weakened from 2012, Belarus slid into recession in 2015, which has continued into 2016. The downturn was triggered by a sharp contraction of exports to Russia, which itself had fallen into recession, largely on account of the plunge of the oil price. The Belarusian banking sector is mostly state-owned and has served as a conduit for directed lending to state-owned enterprises, the backbone of the economy. The currency devalued sharply in 2015, deposit and credit growth ground to a halt and banking activity started to contract, already high levels of dollarization increased further, nonperforming loans more than doubled, and profitability shrank to low levels. Meanwhile, periodic bank recapitalization measures (of an estimated 2% of GDP a year) have held capital adequacy at seemingly satisfactory levels. Major risks include exchange rate, credit, liquidity, and state solvency challenges. The salient shock-absorbing factor is Russia – essentially performing a function of external “lender of last resort” to Belarus and, a fortiori, to its banking sector. The outlook is for high short-term vulnerability, a sluggish recovery and continuing costly and externally financed muddling-through policies. Classification-JEL: D14, F36, P2, P5, R21, R3 Keywords: residential property markets, housing finance, household survey, Central, Eastern and Southeastern Europe Pages: 41–49 Year: 2016 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:308c34dd-7e29-4a6f-a160-bf9b667be4fe/feei_2016_q3_studies03_barisitz.pdf File-Format: application/pdf File-Size: 172 kb Handle: RePEc:onb:oenbfi:y:2016:i:3:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Markus Eller Author-Name-First: Markus Author-Name-Last: Eller Author-Email: markus.eller@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Thomas Reininger Author-Name-First: Thomas Author-Name-Last: Reininger Author-Email: Thomas.Reininger@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5234 Author-Workplace-Fax: +43-1-40420-5299 Title: The influence of sovereign bond yields on bank lending rates: the pass-through in Europe Abstract: In the wake of the recent crises, the question arose how to ensure the transmission of monetary policy to the lending rates for loans to private nonbanks, in particular against the background of divergent government bond yield changes. This paper investigates which variables help explain changes of long-term fixed-rate bank lending rates on loans to the private nonfinancial sector in 21 EU countries. We conduct a cross-country panel study and analyze vector error correction models for each country. We find that long-term sovereign bond yields have a significant positive and economically substantial impact on long-term lending rates in most euro area and some non-euro area countries. Our findings lend support to the view that unconventional monetary policy can influence long-term lending rates via its impact on government bond yields. Furthermore, our insights suggest adopting a cautious approach when designing changes to the regulatory treatment of sovereign exposures. To the extent that such changes cause a sustained widening of sovereign yield spreads, the impact on long-term lending rates could entrench real economic divergences between EU countries and in particular within the euro area. Classification-JEL: C32, C33, E43, E52, G21 Keywords: sovereign debt crisis, sovereign spread, sovereign credit risk, sovereign yield, government bond yield, bank interest rates, bank lending, lending conditions, long-term financing, bank funding, transmission, interest rate pass-through Pages: 54–78 Year: 2016 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:7ebaca8a-7146-489c-817e-92b7ec643dbe/feei_2016_q2_studies_eller_reininger.pdf File-Format: application/pdf File-Size: 737 kb Handle: RePEc:onb:oenbfi:y:2016:i:2:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Markus Eller Author-Name-First: Markus Author-Name-Last: Eller Author-Email: markus.eller@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Florian Huber Author-Name-First: Florian Author-Name-Last: Huber Author-Email: fhuber@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business (WU) Author-Name: Helene Schuberth Author-Name-First: Helene Author-Name-Last: Schuberth Author-Email: helene.Schuberth@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7405 Author-Workplace-Fax: +43(1)404-20-7499 Title: Understanding the drivers of capital flows into the CESEE countries Abstract: We analyze the relationship between global factors and country-specific capital flow dynamics in a sample of 12 Central, Eastern and Southeastern European (CESEE) countries from 1994 until 2014. We detect a pronounced time-varying pattern of capital flow volatility that mirrors well-known crisis episodes in several instances. We show that the global co-movement of macroeconomic, financial and capital flow variables is able to explain the lion’s share of volatility of gross capital inflows into CESEE economies and that it became even more important after the 2008/09 global financial crisis. In particular, global financial factors that approximate the global financial cycle explain by far the largest share of capital flow volatility, followed by the global real business cycle component. If common global factors are dominant in explaining the volatility of gross capital inflows, a combination of better international coordination of economic policies, macroprudential measures or capital flow management instruments is advisable to smooth the capital flow cycle. We also show that gross capital inflows were so sizeable in some countries between 2003 and 2008 that common global (financial) factors like the buildup of global leverage were not as dominant as in other periods – a result that could partly be the outcome of the strategic positioning of foreign banks in the region. Classification-JEL: C38, F32, F41, F42, F44 Keywords: volatility of capital flows, factor stochastic volatility model, global co-movement, global real business cycle, global financial cycle, CESEE Pages: 79–104 Year: 2016 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:69391f7a-5baa-4764-9760-321f6192ae9c/feei_2016_q2_studies_eller_huber_schuberth.pdf File-Format: application/pdf File-Size: 1002 kb Handle: RePEc:onb:oenbfi:y:2016:i:2:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Florian Huber Author-Name-First: Florian Author-Name-Last: Huber Author-Email: fhuber@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business (WU) Author-Name: Isabella Moder Author-Name-First: Isabella Author-Name-Last: Moder Author-Email: isabella.moder@oenb.at Author-Workplace-Name: Foreign Research Division Title: Modeling the evolution of monetary policy rules in CESEE Abstract: In this paper we use a novel econometric approach to estimate time-varying monetary policy rules for four inflation-targeting economies in Central, Eastern and Southeastern Europe (CESEE). Our results indicate that monetary policy in the Czech Republic, Hungary, Poland and Romania is strongly anchored to inflation stabilization, which implies that these economies follow a comparatively strict version of inflation targeting. By contrast, there is less evidence for output stabilization playing an important role in the conduct of monetary policy. Other factors that are of relevance in the monetary policy reaction function include the short-term interest rate in the euro area and – depending on the country under consideration – a measure of exchange rate movements. We find that the coefficients on domestic inflation expectations and euro area interest rates have declined since the mid-2000s, but that they still play an important role in central banks’ reaction functions. This decline in the size of estimated coefficients may mirror an international environment characterized by loose and unconventional monetary policies that cannot be appropriately captured by euro area interest rates. It may also reflect contained global and domestic price growth. Classification-JEL: E58, E52, C11, C22 Keywords: time-varying parameter model, monetary policy, Taylor rule Pages: 8–27 Year: 2016 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:d691ee9f-2843-48c9-a3a9-665112d82d36/feei_2016_q1_studies_feldkircher.pdf File-Format: application/pdf File-Size: 823 kb Handle: RePEc:onb:oenbfi:y:2016:i:1:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Iikka Korhonen Author-Name-First: Iikka Author-Name-Last: Korhonen Author-Email: iikka.korhonen@bof.fi Author-Name: Riikka Nuutilainen Author-Name-First: Riikka Author-Name-Last: Nuutilainen Author-Email: riikka.nuutilainen@bof.fi Title: A monetary policy rule for Russia, or is it rules? Abstract: We estimate several monetary policy rules for Russia for the period 2003–2015. We find that the traditional Taylor rule describes the conduct of monetary policy in Russia reasonably well, whether coefficients are restricted to being the same or allowed to change over the sample period. We find that the Bank of Russia often overshot its inflation target and that extensive overshooting is associated with large depreciations of the ruble, testifying to the importance of the exchange rate in the conduct of monetary policy in Russia. Classification-JEL: E31, E43, E52, P33 Keywords: monetary policy rule, Taylor rule, McCallum rule, Russia, inflation Pages: 28–45 Year: 2016 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:7bbc760a-5223-4757-8a64-cbc11df59d71/feei_2016_q1_studies_korhonen.pdf File-Format: application/pdf File-Size: 953 kb Handle: RePEc:onb:oenbfi:y:2016:i:1:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Markus Eller Author-Name-First: Markus Author-Name-Last: Eller Author-Email: markus.eller@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Florian Huber Author-Name-First: Florian Author-Name-Last: Huber Author-Email: fhuber@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business (WU) Author-Name: Helene Schuberth Author-Name-First: Helene Author-Name-Last: Schuberth Author-Email: helene.Schuberth@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7405 Author-Workplace-Fax: +43(1)404-20-7499 Title: Weathering global shocks and macrofinancial vulnerabilities in emerging Europe: Comparing Turkey and Poland Abstract: While both Turkey and Poland weathered the 2008/2009 crisis relatively well compared to other countries in Central, Eastern and Southeastern Europe (CESEE), their macrofinancial indicators responded fairly strongly to the Federal Reserve System’s tapering announcement in May 2013. Among other things, marked currency depreciation and reversals in capital flows challenged policymakers in the region. To get a deeper understanding of the transmission of global shocks to macrofinancial variables in CESEE, we use a Bayesian global vector autoregressive model to investigate the effects of a U.S.-based monetary policy shock. Our simulation results suggest that both Turkey and Poland exhibit pronounced short- to medium-run macroeconomic responses to U.S. monetary policy shocks. The responses of Turkey tend to be somewhat stronger than those of Poland and the CESEE average, signaling the structurally different nature of the Turkish economy. Overall, the identified impulse responses largely resemble the actual post-tapering announcement developments. Classification-JEL: C32, F41, F44, E52 Keywords: external vulnerabilities, international shock transmission, monetary policy shock, tapering, capital flows, GVAR, Turkey, Poland, CESEE Pages: 46–65 Year: 2016 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:7648443c-6718-4604-a4a6-46bd6a76dcb0/feei_2016_q1_studies_eller.pdf File-Format: application/pdf File-Size: 651 kb Handle: RePEc:onb:oenbfi:y:2016:i:1:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Angelika Knollmayer Author-Name-First: Angelika Author-Name-Last: Knollmayer Author-Email: angelika.knollmayer@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Name: Aleksandra Riedl Author-Name-First: Aleksandra Author-Name-Last: Riedl Author-Email: aleksandra.riedl@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Maria Antoinette Silgoner Author-Name-First: Maria Antoinette Author-Name-Last: Silgoner Author-Email: Maria.Silgoner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Title: The mixed success of EU-IMF adjustment programs in Europe – why Greece was different Abstract: The comparison of the economic, financial and fiscal conditions in four EU-IMF financial assistance countries shows that Greece’s economy was hit much harder during the crisis than Ireland, Portugal or Spain. While Greece has fallen back into recession and still depends on financial help from the international community, the adjustment programs appear to have been more successful in the other three countries.
The ongoing calamities of the Greek economy are partly the result of especially adverse starting conditions marked by manifold structural problems: Departing from a fairly low level, private debt in Greece surged rapidly. Economic growth in the pre-crisis years was thus credit-financed and consumption-based. This also applies to Ireland and Spain, which started with already comparatively high household debt levels. But in contrast to the latter two countries, credit growth in Greece was also high in the public sector, providing a strong procyclical stimulus to disposable incomes. This boosted domestic demand, whereas the performance of exports remained weak: As a consequence of rapidly growing unit labor costs, the export sector in Greece lost competitiveness, just as in Ireland, Portugal or Spain. It is the plurality of imbalances that makes the Greek case unique. The severity of the recession in Greece was also the result of the extremely strong and frontloaded consolidation efforts made in the middle of a balance sheet recession. These were prompted by the more stringent fiscal requirements in the Greek adjustment programs as compared to the other countries’ programs. Austerity measures seriously curbed domestic demand and could not stop debt from rising. Tight credit conditions and wage cuts additionally weighed on domestic demand and thus aggravated the recession.
Overall, the past years have shown that it was important and right to support countries in economic and financial difficulties. But experience with the Greek case has also taught us the limits of established forms of support which were not sufficiently underpinned by investment programs to support domestic demand. Classification-JEL: E24, E62, F32 Keywords: EU-IMF program countries,macroeconomic imbalances,fiscal austerity Pages: 52-70 Year: 2015 Issue: 4 File-URL: https://www.oenb.at/dam/jcr:5a5a41b2-378d-4f8d-81be-0b84f710bf54/feei_2015_q4_studies_riedl_silgoner.pdf File-Format: application/pdf File-Size: 450 kb Handle: RePEc:onb:oenbfi:y:2015:i:4:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Aleksandra Riedl Author-Name-First: Aleksandra Author-Name-Last: Riedl Author-Email: aleksandra.riedl@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Florian Schoiswohl Author-Name-First: Florian Author-Name-Last: Schoiswohl Author-Email: florian.schoiswohl@wu.ac.at Title: Is there an added worker effect? – European labor supply during the crisis Abstract: This paper analyzes the responsiveness of an individual’s labor supply to the job loss of his or her partner – the so-called “added worker effect (AWE).” While the bulk of empirical studies have utilized discrete choice models to identify its existence, we provide a macroeconomic indicator of the AWE in order to assess its economic significance for the labor force participation rate (LFPR). Our empirical analysis focuses on Europe in the period from 2002 to 2012, revealing that the AWE is negatively related to the business cycle and was particularly pronounced during the global financial crisis. While the LFPR increased by roughly 1 percentage point in Europe from 2009 to 2012, half of the effect is attributable to added workers. As our indicator is based on a rich micro dataset (European Labor Force Survey) we are also able to consistently present individual country results for nearly all EU Member States. Our analysis shows high increases in added workers in euro area countries that were strongly affected by financial market stress and in EU countries that experienced the bursting of housing bubbles.
By contrast, we do not find an AWE in most Central and Eastern European countries. Classification-JEL: J22, J64, J82 Keywords: labor force participation rate, unemployment, European countries Pages: 71-88 Year: 2015 Issue: 4 File-URL: https://www.oenb.at/dam/jcr:f86b7f4e-b012-429f-90c8-8150888e366c/feei_2015_q4_studies_riedl_schoiswohl.pdf File-Format: application/pdf File-Size: 536 kb Handle: RePEc:onb:oenbfi:y:2015:i:4:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Antje Hildebrandt Author-Name-First: Antje Author-Name-Last: Hildebrandt Author-Email: antje.hildebrandt@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Name: Isabella Moder Author-Name-First: Isabella Author-Name-Last: Moder Author-Email: isabella.moder@oenb.at Author-Workplace-Name: Foreign Research Division Title: Business cycle synchronization between the Western Balkans and the European Union Abstract: This paper investigates the degree of business cycle synchronization (BCS) between the Western Balkans and the European Union. While the degree of synchronization had been low or even negative before 2000, business cycles have clearly converged ever since. Since 2010, in particular, BCS with the EU has been high for all Western Balkan countries. In addition, this paper empirically tests which factors were responsible for the convergence process. Using a period-by-period correlation index for the time span from 1994 to 2013, we find that foreign trade is the most important positive contributor to business cycle convergence. Although fiscal differences are associated with negative BCS in the same year, our results suggest that they have a positive influence in subsequent periods. In contrast, we find that financial flows lead to business cycle decoupling because of their procyclical behavior in the respective domestic economy. The same relationship applies, according to our analysis, to remittances, whose impact on BCS is an underresearched topic in the empirical literature. We find that remittances from the EU to the Western Balkans behave similarly to financial flows, which supports the hypothesis that remittances are sent home to take advantage of favorable economic conditions. Classification-JEL: E32, E58, F15, F24, F36 Keywords: business cycles, convergence, Western Balkans, European integration, remittances Pages: 8-25 Year: 2015 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:50796b1c-0640-4bb8-a134-7baf848cfa99/feei_2015_q3_studies_hildebrandt_moder.pdf File-Format: application/pdf File-Size: 834 kb Handle: RePEc:onb:oenbfi:y:2015:i:3:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Elisabeth Beckmann Author-Name-First: Elisabeth Author-Name-Last: Beckmann Author-Email: elisabeth.beckmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Antje Hildebrandt Author-Name-First: Antje Author-Name-Last: Hildebrandt Author-Email: antje.hildebrandt@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Name: Krisztina Jäger-Gyovai Author-Name-First: Krisztina Author-Name-Last: Jäger-Gyovai Author-Email: krisztina.jaeger-gyovai@oenb.at Title: Current risks in the CESEE residential property market: evidence from the OeNB Euro Survey Abstract: After a pronounced boom-bust cycle during the global financial crisis, house prices in Central, Eastern and Southeastern Europe (CESEE) are now recovering but still remain below precrisis levels. Evidence from the OeNB Euro Survey of households shows that every third household considers finding a new residence difficult, with the perceived difficulty being particularly high in areas of low bank penetration and among low income households and households whose highest level of education is primary education. Foreign currency mortgage holders are found to be more frequently in arrears in Hungary and Serbia than in other CESEE countries; the exchange rate and interest rate differential risks of foreign currency mortgages have increased in several countries, however. Loan arrears are high in general, and households in arrears are at their financial limits. At the same time, demand for housing loans is found to be increasing again. Classification-JEL: D14, F36, P2, P5, R21, R3 Keywords: residential property markets, housing finance, household survey, Central, Eastern and Southeastern Europe Pages: 26-38 Year: 2015 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:e724269d-ca35-42f9-9772-531e6b7abf34/feei_2015_q3_studies_beckmann.pdf File-Format: application/pdf File-Size: 653 kb Handle: RePEc:onb:oenbfi:y:2015:i:3:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Vukan Vujic Author-Name-First: Vukan Author-Name-Last: Vujic Author-Email: Vujic_Vukan@ceu-budapest.edu Author-Workplace-Name: Central European University Title: Internal capital markets and crisis transmission: evidence from foreign bank subsidiaries in CESEE Abstract: The aim of this paper is to analyze the impact of European bank deleveraging on the asset growth of European banks’ CESEE subsidiaries. Our estimation of the effects of parent bank funding on subsidiaries’ asset growth relies on the instrumental variables strategy, instrumenting for intragroup flows with exposure to the sovereign debt of Ireland, Greece, Spain and Portugal. The novelty of this analysis is the differentiation between equity and nonequity intragroup flows and the inclusion of a significant number of countries in the sample. Previous studies in this area either did not analyze the role of equity flows or focused on one country only. The present study finds that intragroup flows have a significant effect on subsidiaries’ asset growth. A 1 percentage point increase in equity flows leads to a 6.1 percentage point increase in assets; the same increase in nonequity flows leads to a 1.7 percentage point increase in assets. This finding has significant policy implications for the regulation of domestic banks and cross-border regulatory cooperation. Classification-JEL: F23, F36, G21 Keywords: deleveraging, multinational banks, related party transactions Pages: 39-56 Year: 2015 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:4a08f201-d647-45bb-a356-adaf3f733522/feei_2015_q3_studies_vujic.pdf File-Format: application/pdf File-Size: 491 kb Handle: RePEc:onb:oenbfi:y:2015:i:3:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Florian Huber Author-Name-First: Florian Author-Name-Last: Huber Author-Email: fhuber@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business (WU) Author-Name: Josef Schreiner Author-Name-First: Josef Author-Name-Last: Schreiner Author-Email: josef.schreiner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Name: Marcel Tirpák Author-Name-First: Marcel Author-Name-Last: Tirpák Author-Email: marcel.tirpak@ecb.europa.eu Author-Workplace-Name: European Central Bank, Convergence and Competitiveness Division Author-Name: Peter Tóth Author-Name-First: Peter Author-Name-Last: Tóth Author-Email: peter.toth@mfsr.sk Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: Bridging the information gap: small-scale nowcasting models of GDP growth for selected CESEE countries Abstract: In this article, we describe short-term forecasting models of economic activity for seven countries in Central, Eastern and Southeastern Europe (CESEE) and compare their forecasting performance since the outbreak of the Great Recession. To build these models, we use four variants of bridge equations and a dynamic factor model for each country. Given the differences in availability of monthly indicators across countries and the rather short time period over which these indicators are available, we favor small-scale forecasting models. We selected monthly indicators on the basis of expert judgment, correlation analysis and Bayesian model averaging techniques. While our models generally outperform a purely time series-based forecast for all CESEE countries, there is no single technique that consistently produces the best out-of-sample forecast. To maximize forecasting accuracy, we therefore recommend selecting a country-specific modeling approach for every CESEE economy on the basis of out-of-sample forecasting performance. Classification-JEL: C52, C53, E37 Keywords: nowcasting,bridge equations,dynamic factor models,Bayesian model averaging,Central,Eastern and Southeastern Europe Pages: 56-75 Year: 2015 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:431880f1-a42d-4de3-92d5-0d14bd38cb48/feei_2015_q2_studies_feldkircher.pdf File-Format: application/pdf File-Size: 466 kb Handle: RePEc:onb:oenbfi:y:2015:i:2:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Pirmin Fessler Author-Name-First: Pirmin Author-Name-Last: Fessler Author-Email: Pirmin.Fessler@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Name: Krisztina Jäger-Gyovai Author-Name-First: Krisztina Author-Name-Last: Jäger-Gyovai Author-Email: krisztina.jaeger-gyovai@oenb.at Author-Name: Teresa Messner Author-Name-First: Teresa Author-Name-Last: Messner Author-Workplace-Name: Leibniz Universität Hannover, Institute of Economic and Cultural Geography Title: What can we learn from Eurosystem Household Finance and Consumption Survey data? – An application to household debt in Slovakia Abstract: This study delivers a stock-taking exercise of household debt in Slovakia. About 27% of all
Slovak households hold at least some debt. The rate of homeownership in Slovakia is close to 90% and the highest in the euro area, while the share of indebted households is lowest. The reason for this peculiarity lies in the country’s history. Less than 10% of households are mortgage debt holders, and about 20% hold nonmortgage debt. About 15% of total debt holdings are covered by liquid financial assets and about 50% by households’ total assets excluding the main residence. When accounting only for the debt of vulnerable households, the share of total debt not covered by households’ total assets excluding the main residence lies between about 4% and 15% – depending on the definition used for debt burden measures. In Slovakia, mostly households with relatively young household heads are indebted. Regression analyses show that while self-employed persons and persons with higher education are more likely to hold debt, especially the self-employed are less likely to be vulnerable. Classification-JEL: D10, D14, D31, D39, E44, E17 Keywords: household indebtedness,ability to pay,microdata Pages: 76-87 Year: 2015 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:dd574215-20f4-4a10-bd51-d81d72c58546/feei_2015_q2_studies_fessler.pdf File-Format: application/pdf File-Size: 863 kb Handle: RePEc:onb:oenbfi:y:2015:i:2:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Martin Gächter Author-Name-First: Martin Author-Name-Last: Gächter Author-Email: martin.gaechter@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Martin Geiger Author-Name-First: Martin Author-Name-Last: Geiger Author-Email: martin.geiger@uibk.ac.at Author-Workplace-Name: University of Innsbruck Author-Name: Florentin Glötzl Author-Name-First: Florentin Author-Name-Last: Glötzl Author-Email: florentin.gloetzl@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business Author-Name: Helene Schuberth Author-Name-First: Helene Author-Name-Last: Schuberth Author-Email: helene.Schuberth@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7405 Author-Workplace-Fax: +43(1)404-20-7499 Title: Sectoral Deleveraging in Europe and Its Economic Implications Abstract: We examine net lending/net borrowing and the underlying debt dynamics at the sectoral level in the European Union. Saving and investment patterns indicate that there have been considerable deleveraging efforts since the start of the global financial crisis, particularly in the nonfinancial corporate and household sectors. In many EU countries, however, this decline in credit transactions has not yet led to a significant reduction of sectoral debt-to-GDP ratios.
Subdued output growth and low or even negative inflation rates have undermined the
deleveraging process and increased real debt burdens in a number of European economies.
Since these are often the countries that had experienced strong credit booms prior to the
crisis, rebalancing needs are likely to persist and may be a significant drag on the recovery in the near future. Furthermore, most of the ongoing rebalancing – both in terms of debt levels and current account deficits – is based on a sharp decline in investment rather than an increase in saving, which might lead to lower potential growth in the future. Recent developments may even jeopardize the catching-up process of peripheral euro area countries and non-euro area EU Member States in Central, Eastern and Southeastern Europe. Classification-JEL: E22, E24, E44, G21, G31 Keywords: balance sheet recession, financial accelerator, credit crunch, investment Pages: 8-23 Year: 2015 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:f9968879-ba54-4c9a-af5d-94aa6d9eb1d8/feei_2015_q1_studies_gaechter.pdf File-Format: application/pdf File-Size: 530 kb Handle: RePEc:onb:oenbfi:y:2015:i:1:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Elisabeth Beckmann Author-Name-First: Elisabeth Author-Name-Last: Beckmann Author-Email: elisabeth.beckmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Anita Roitner Author-Name-First: Anita Author-Name-Last: Roitner Author-Email: anita.roitner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: A Local or a Foreign Currency Loan? Evidence on the Role of Loan Characteristics, Preferences of Households and the Effect of Foreign Banks Abstract: Using data from the OeNB Euro Survey in CESEE, which covers both EU Member States and (potential) candidate countries, we analyze how the currency of existing loans to households relates to (1) loan characteristics (loan maturity and purpose), (2) households’ preferences regarding the loan currency and (3) bank ownership (domestic or foreign). Our findings support the existing literature’s view that both demand- and supply-side factors have an influence on foreign currency lending. In the period under investigation, foreign currency loans were sought after by households in particular for long-term borrowing. Likewise, banks were more likely to grant large and long-term loans in foreign currency. On a descriptive level, we find that in Croatia and Hungary, foreign-owned banks had a higher share of foreign currency loans than local currency loans – in the remaining seven countries, however, the share of foreign currency loans is similar to or lower than that of local currency loans. In regression models we account for the possibility that foreign-owned and domestically-owned banks may differ in that they have issued loans with different characteristics and in that they have customers with different
credit ratings and different preferences. Holding these factors constant reveals that, on average, foreign-owned banks did not issue more foreign currency loans – neither consumption loans nor mortgages – than domestically-owned banks. Classification-JEL: D14, G21, F34 Keywords: foreign currency debt, household credit, bank ownership, Central, Eastern, Southeastern Europe Pages: 24-48 Year: 2015 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:63a9a6f8-8edf-4837-adca-e66787cfa31f/feei_2015_q1_studies_beckmann.pdf File-Format: application/pdf File-Size: 424 kb Handle: RePEc:onb:oenbfi:y:2015:i:1:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Florian Huber Author-Name-First: Florian Author-Name-Last: Huber Author-Email: fhuber@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business (WU) Author-Name: Magdalena Petrovska Author-Name-First: Magdalena Author-Name-Last: Petrovska Author-Email: PetrovskaM@nbrm.mk Author-Workplace-Name: National Bank of the Republic of Macedonia Title: Price and Wage Rigidities in the Republic of Macedonia: Survey Evidence from Micro- Level Data Abstract: This paper exploits the information collected from an ad hoc survey conducted on a sample of Macedonian firms to study the extent of nominal price and wage rigidities in the Republic of Macedonia. The research was motivated by the observation that sticky prices influence the responsiveness of inflation to changes in a central bank’s policy rate.
Against this background, the paper investigates the relative importance of most determinants of the frequency of price and wage changes identified in the literature. This paper presents a Bayesian analysis of ordinal data. Posterior inference is carried out using Markov Chain Monte Carlo (MCMC) techniques. Infusing the model with prior information allows us to shrink the parameter space, resulting in more precise and reliable parameter estimates.
Our results suggest that higher price flexibility is associated with a higher degree of product market competition.
Specifically, we find that firms facing high levels of domestic and international
competition tend to adjust prices faster. Classification-JEL: D21, E30, J31 Keywords: price rigidity, wage rigidity, Bayesian inference, MCMC, survey data Pages: 49-64 Year: 2015 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:19ef4653-92ef-452a-8029-8decd7fa9db2/feei_2015_q1_studies_huber.pdf File-Format: application/pdf File-Size: 485 kb Handle: RePEc:onb:oenbfi:y:2015:i:1:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Päivi Karhunen Author-Name-First: Päivi Author-Name-Last: Karhunen Author-Email: paivi.karhunen@aalto.fi Author-Workplace-Name: Aalto University School of Business, Center for Markets in Transition and Department of Economics Author-Name: Riitta Kosonen Author-Name-First: Riitta Author-Name-Last: Kosonen Author-Email: riitta.kosonen@aalto.fi Author-Workplace-Name: Aalto University School of Business, Center for Markets in Transition and Department of Economics, Author-Name: Svetlana Ledyaeva Author-Name-First: Svetlana Author-Name-Last: Ledyaeva Author-Email: svetlana.ledyaeva@aalto.fi Author-Workplace-Name: Aalto University School of Business, Center for Markets in Transition and Department of Economics Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: FDI in Russia from CESEE and Central Asia: A Micro-Level Perspective Abstract: In this paper we study FDI in Russia originating from Central, Eastern and Southeastern Europe (CESEE) and Central Asia. We describe patterns of FDI and examine the determinants underlying these patterns, basing our analysis on firm-level data for the period from 1997 to 2011 obtained from Rosstat, Russia’s Federal State Statistics Service. We split the investor countries under review into two subgroups, i.e. Central Eastern Europe, Baltics and Balkans (CEEBB) and Eastern Europe, Caucasus and Central Asia (EECCA). We find that Belarus and Ukraine are the largest contributors of FDI into Russia among the countries under review. However, firms established
by investors from Estonia, Poland and Lithuania are more profitable than those established by investors from Belarus and Ukraine. In our empirical test of locational determinants influencing the choice of a particular Russian region as an FDI destination we, among other things, find evidence against the institutional distance argument, which maintains that FDI flows are more limited among countries that exhibit greater differences in terms of their regulatory and normative business environment. Classification-JEL: D22, F15, F23 Keywords: Foreign direct investment, Russian regions, former communist countries Pages: 54-70 Year: 2014 Issue: 4 File-URL: https://www.oenb.at/dam/jcr:8f2efd92-879a-4c35-87fb-b6f19c064f77/feei_2014_q4_studies_woerz.pdf File-Format: application/pdf File-Size: 310 kb Handle: RePEc:onb:oenbfi:y:2014:i:4:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Thomas Gruber Author-Name-First: Thomas Author-Name-Last: Gruber Author-Email: thomas.gruber@bka.gv.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Name: Isabella Moder Author-Name-First: Isabella Author-Name-Last: Moder Author-Email: isabella.moder@oenb.at Author-Workplace-Name: Foreign Research Division Title: Using a Threshold Approach to Flag Vulnerabilities in CESEE Economies Abstract: In this paper we examine macroeconomic, external and financial vulnerabilities of 22 Central, Eastern and Southeastern European (CESEE) economies. Our assessment is based on a nonparametric signaling or threshold approach, which involves monitoring selected indicators that show unusual behavior in the periods leading to a crisis. For that purpose, we have collected annual data on more than 90 emerging economies spanning the period from 1995 to 2012.
Our dataset covers a broad range of potential early warning indicators related to the banking sector, the external side, and the macroeconomic and fiscal situation of the economy. Our in-sample test shows that the threshold approach identifies 73% of crisis events correctly while issuing false alarms only for 31% of the non-crisis observations. For the purpose of this paper, crisis events comprise banking crises, currency crises and sovereign debt crises. Applying a composite vulnerability indicator to CESEE economies using the latest available data (2012), we identify Turkey, Belarus and Moldova as the countries that appear especially vulnerable to an unexpected adverse event based on our threshold approach. Classification-JEL: F31, F47 Keywords: Vulnerabilities,threshold approach,CESEE Pages: 8-30 Year: 2014 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:7da96518-abad-4a77-9c78-da434529fbf0/feei_2014_q3_studies_feldkircher.pdf File-Format: application/pdf File-Size: 886 kb Handle: RePEc:onb:oenbfi:y:2014:i:3:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Konstantins Benkovskis Author-Name-First: Konstantins Author-Name-Last: Benkovskis Author-Email: konstantins.benkovskis@bank.lv Author-Workplace-Name: Latvijas Banka, Monetary Policy Department Author-Name: Jūlija Pastušenko Author-Name-First: Jūlija Author-Name-Last: Pastušenko Author-Email: Julia.Pastusenko@bank.lv Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: Assessing the Full Extent of Trade Integration between the EU and Russia – A Global Value Chain Perspective Abstract: We analyze trade linkages between EU Member States and Russia, taking into account indirect trade links in global value chains. Our analysis is based on data for 2011 from the World Input-Output Database combined with gross trade flows between Russia and individual EU economies.
We derive our conclusions from three indicators: gross exports in final use, value added in final use and value added in output. The latter two novel indicators are able to capture direct and indirect links jointly by allocating the full amount of value added from Russia in EU final domestic use and output, and inversely, the full amount of EU value added in Russia’s final domestic use and output. Russia represents the EU’s fourth-largest trade partner in terms of direct export shares, while the EU is Russia’s largest trade partner. In the same vein, Russia’s economy is considerably more dependent on European value added for both final use and output production than vice versa. However, the degree of integration varies greatly among EU Member States.
For example, the Baltic states are notably more dependent on value added from Russia than vice versa, and certain economic sectors in the EU, such as the energy sector, utilities and air transport, are strongly dependent on inputs from Russia. Classification-JEL: F12, F15, F51 Keywords: Trade integration,global value chains,Russia,European Union Pages: 31-47 Year: 2014 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:b7861511-4539-4a6d-a20f-e52747b704f8/feei_2014_q3_studies_woerz.pdf File-Format: application/pdf File-Size: 783 kb Handle: RePEc:onb:oenbfi:y:2014:i:3:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Stephan Barisitz Author-Name-First: Stephan Author-Name-Last: Barisitz Author-Email: stephan.barisitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Title: Macrofinancial Developments and Systemic Change in CIS Central Asia from 2009 to 2014 Abstract: CIS Central Asia’s structural heterogeneity may have deepened since the global crisis of 2008–09. Kazakhstan and Turkmenistan are relatively rich oil and gas exporters, the Kyrgyz Republic and Tajikistan are poor energy importers, and Uzbekistan is a more diversified but still rather poor economy. The rich hydrocarbon exporters typically achieve “twin surpluses” (current account and budget), while the hydrocarbon importers are often saddled with “twin deficits,” but benefit from remittance inflows. In contrast to the poorer countries, the energy exporters tend to attract large amounts of FDI and have carried out generous infrastructure modernization programs. Per capita income growth of the rich and the poor countries has diverged in recent years. No recession had occurred in Central Asia in 2009 and mostly robust GDP growth has ensued since. Growth drivers have been: recovering energy and other resource prices and/or export volumes, generous private and public investment expenditures, and substantial remittances. Fixed exchange rates (to the U.S. dollar) tend to be opted for by the oil and gas countries, floating currencies are preferred by the others. While price stability policies vary and inflation rates have on average come down to below double digits, price levels remain strongly exposed to volatile international food and staples markets. Banking sectors are fragile across
the region; they are either recovering from a legacy of collapsed credit booms or suffering from high nonperforming loans as a result of connected lending or they require periodic subsidies for performing quasi-fiscal activities. Classification-JEL: E52, E63, G21, G28, P34 Keywords: State-led economy, structural reforms, heterogeneity, monetary policy, convertibility, exchange rate regime, banking, quasi-fiscal functions, Central Asia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan Pages: 48-73 Year: 2014 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:0f0b725a-d7cc-4f0b-b2fe-7a3c88ead5c6/feei_2014_q3_studies_barisitz.pdf File-Format: application/pdf File-Size: 731 kb Handle: RePEc:onb:oenbfi:y:2014:i:3:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Peter Tóth Author-Name-First: Peter Author-Name-Last: Tóth Author-Email: peter.toth@mfsr.sk Title: To What Extent Can Czech Exporters Cushion Exchange Rate Shocks through Imported Inputs? Abstract: This paper examines the role of imported inputs in cushioning exchange rate shocks by using a partial equilibrium model of heterogeneous firms. Producers in the model can serve the domestic market, export final goods, import inputs or engage in both exporting and importing. In the model, an exogenous exchange rate shock simultaneously affects the variable costs and revenues associated with exports and imports. The impact of a hypothetical 1% appreciation of the domestic currency on sales is estimated using a panel of 7,356 Czech manufacturing firms observed from 2003 to 2006. We focus on the above period to exploit the rich within-firm variation in trade strategies. This variation is likely to be associated with the lifting of trade barriers following the Czech Republic’s EU accession in 2004. For firms that both export and import, the model predicts a drop in export sales of 0.8% as opposed to a 1% drop for price-taker exporters who do not use imported inputs. Classification-JEL: C23, C26, D22, D24, F12 Keywords: Exchange rate pass-through, international trade, heterogeneous firms, monopolistic competition, total factor productivity, production function Pages: 74-93 Year: 2014 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:c89d6d4f-fb22-45d7-aa67-5cdcea6e59f0/feei_2014_q3_studies_toth.pdf File-Format: application/pdf File-Size: 2466 kb Handle: RePEc:onb:oenbfi:y:2014:i:3:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Dominik Bernhofer Author-Name-First: Dominik Author-Name-Last: Bernhofer Author-Email: dominik.bernhofer@oenb.at Author-Name: Octavio Fernández-Amador Author-Name-First: Octavio Author-Name-Last: Fernández-Amador Author-Email: octavio.fernandez-amador@jku.at Author-Name: Martin Gächter Author-Name-First: Martin Author-Name-Last: Gächter Author-Email: martin.gaechter@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Friedrich Sindermann Author-Name-First: Friedrich Author-Name-Last: Sindermann Author-Email: friedrich.sindermann@uibk.ac.at Title: Finance, Potential Output and the Business Cycle: Empirical Evidence from Selected Advanced and CESEE Economies Abstract: Traditional approaches to separate the underlying trend of potential output from cyclical developments mostly rely on the concept of nonaccelerating inflation output and are thus unable to detect upswings caused by the financial cycle, which often appear to be unsustainable in the long run. In this study, we therefore propose to extend the structural unobserved components model developed by Harvey (1989) and Harvey and Jaeger (1993) by including information on the financial cycle, i.e. private credit and house price developments, to explain the cyclical deviations from potential GDP. Thus, we are able to calculate “finance-neutral” potential output and corresponding “finance-augmented” output gaps, which take the effect of financial variables into account. We apply this novel concept to four advanced economies (AT, IE, NL, US) and four economies in Central, Eastern and Southeastern Europe (BG, EE, PL, SK) in a comparative manner. Our results show a considerable impact of the financial cycle on business cycle developments in most of the economies under review, both advanced and emerging.
Remarkably, our finance-augmented output gaps exhibit a considerably higher explanatory
power for the variation of observed unemployment rates in corresponding economies than
standard approaches (such as the HP filter). In other words, our results considerably strengthen the case for considering the financial sector in business cycle measurement. Classification-JEL: E10, E32, E44, E47, E52, G01 Keywords: financial cycle, potential output, business cycles, output gap, emerging markets, finance-neutral potential output, finance-augmented output gaps Pages: 52-75 Year: 2014 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:92c642cf-5112-4acd-916e-2f102f4a3fb4/feei_2014_q2_studies_bernhofer.pdf File-Format: application/pdf File-Size: 1361 kb Handle: RePEc:onb:oenbfi:y:2014:i:2:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Majken Corti Author-Name-First: Majken Author-Name-Last: Corti Author-Email: majken.corti@oenb.at Author-Name: Thomas Scheiber Author-Name-First: Thomas Author-Name-Last: Scheiber Author-Email: thomas.scheiber@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5247 Author-Workplace-Fax: +43-1-40420-5299 Title: How Did CESEE Households Weather the Crisis? Evidence from the OeNB Euro Survey Abstract: During the crisis period from 2008 to 2013 household disposable income deteriorated significantly in Central, Eastern and Southeastern Europe (CESEE), forcing households to adjust their consumption plans. Against this background, the present paper sheds some light on households’ consumption smoothing behavior based on microdata supplied by the OeNB Euro Survey for ten countries in CESEE. We find that households reacted to stagnating and in some countries falling income mostly by cutting back on everyday consumption and reducing or postponing large expenditures, while other households coped by reducing the amounts they were setting aside as savings or by drawing on existing savings, overdrawing their current accounts and increasing work hours. Moreover, we find that macroeconomic forecasts by the European Commission, the wiiw and the OeNB are broadly in line with economic sentiment among CESEE households. Finally, Euro Survey results revealed that not all households were able to borrow as much as they would have liked to and that the share of households planning to take out a loan fell between 2008 and 2013. Classification-JEL: D12, D14, E21, G01 Keywords: economic and financial crisis, consumption smoothing, household debt, survey data, Central, Eastern and Southeastern Europe Pages: 76-87 Year: 2014 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:d9d203b6-8cd9-4b67-925a-fb1dc8434849/feei_2014_q2_studies_corti.pdf File-Format: application/pdf File-Size: 1510 kb Handle: RePEc:onb:oenbfi:y:2014:i:2:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Mariya Hake Author-Name-First: Mariya Author-Name-Last: Hake Author-Email: mariya.hake@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Fernando Lopez-Vicente Author-Name-First: Fernando Author-Name-Last: Lopez-Vicente Author-Email: fernando.lopez@bde.es Author-Name: Luis Molina Author-Name-First: Luis Author-Name-Last: Molina Author-Email: lmolina@bde.es Author-Workplace-Name: Banco de España Title: Do the Drivers of Loan Dollarization Differ between CESEE and Latin America? A Meta-Analysis Abstract: In this paper we compare the determinants of loan dollarization in two emerging market
regions, namely Central, Eastern and Southeastern Europe (CESEE) and Latin America, through a meta-analysis of 32 studies that provide around 1,200 estimated coefficients for six drivers of foreign currency lending. As a common pattern, we find macroeconomic instability (as expressed by inflation volatility) and banks’ funding in foreign currency to play a significant role in explaining loan dollarization in both regions. In contrast, the interest rate differential appears to be a key determinant only in Latin America, while the positive impact of exchange rate volatility on dollarization implies a more prominent role for supply factors in the CESEE region. While the robustness of the results has been verified, our meta-analysis shows that estimates reported in the literature tend to be influenced by study characteristics such as the methodology applied and the data used. Classification-JEL: C5, E52, F31, O57, P20 Keywords: foreign currency loans, CESEE, Latin America, metaregression, random effects maximum likelihood Pages: 8-35 Year: 2014 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:9c1355d5-df60-496a-80fb-e145797967ac/feei_2014_q1_studies_hake.pdf File-Format: application/pdf File-Size: 1334 kb Handle: RePEc:onb:oenbfi:y:2014:i:1:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Tomáš Slacík Author-Name-First: Tomáš Author-Name-Last: Slacík Author-Email: tomas.slacik@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Katharina Steiner Author-Name-First: Katharina Author-Name-Last: Steiner Author-Email: katharina.steiner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: Can Trade Partners Help Better FORCEE the Future? Impact of Trade Linkages on Economic Growth Forecasts in Selected CESEE Countries Abstract: For Central, Eastern and Southeastern European (CESEE) countries, the euro area is the most
important export destination. Nevertheless, geographical export patterns differ among
individual CESEE countries, and economic growth within the euro area has diverged in the
run-up to and since the economic and financial crisis. We therefore examine the effects such
heterogeneous developments have had on trade – and thus economic growth – in CESEE.
Given the importance of such spillovers for macroeconomic projections, we evaluate the
OeNB’s macroeconomic forecasting model (FORCEE) for Bulgaria, Croatia, the Czech
Republic, Hungary, Poland and Romania. The FORCEE model captures trade spillovers via
aggregate demand from the euro area. We challenge this simplification by introducing a more
differentiated representation of the regional structure of trading partners. Our results show
that such a modification improves the forecasting performance of our structural macro model
in particular for the three Southeastern European countries in our sample. However, our tests
do not yet account for the additional uncertainty introduced into the model by broadening the
set of external assumptions, when we cover external demand from a wider range of partner
countries. Classification-JEL: C14, C53, E37, F17 Keywords: trade linkages, forecasting; Central, Eastern and Southeastern Europe Pages: 36-56 Year: 2014 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:52843f50-d4f4-4625-a8bd-98000f24d47f/feei_2014_q1_studies_slacik.pdf File-Format: application/pdf File-Size: 2303 kb Handle: RePEc:onb:oenbfi:y:2014:i:1:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Rilind Kabashi Author-Name-First: Rilind Author-Name-Last: Kabashi Author-Email: kabashir@nbrm.mk Author-Workplace-Name: National Bank of the Republic of Macedonia and Liberta Institute – Skopje Title: The Cyclical Character of Fiscal Policy in Transition Countries Abstract: This study investigates the cyclical character of fiscal policy in transition countries in Central,
Eastern and Southeastern Europe (CESEE) in the period from 1995 to 2011, using system
GMM as the preferred estimation method for the underlying sample and model specification.
The study finds discretionary policy in the CESEE EU Member States and in the Western
Balkan countries to have been procyclical, thus aggravating economic fluctuations, whereas
automatic stabilizers moved overall policy to an acyclical stance. In addition, the analysis
indicates considerable differences in the cyclical character of fiscal policy between transition
countries and the Western European EU Member States, where both overall fiscal policy and
discretionary policy were acyclical. Finally, the study also offers several recommendations for
policymakers, particularly in transition countries. Classification-JEL: H62, E32, C33 Keywords: fiscal policy, transition countries, European Union, system GMM Pages: 57-73 Year: 2014 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:bf73b15a-ac87-4b35-8402-4b4f7e5657fe/feei_2014_q1_studies_kabashi.pdf File-Format: application/pdf File-Size: 877 kb Handle: RePEc:onb:oenbfi:y:2014:i:1:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Peter Backé Author-Name-First: Peter Author-Name-Last: Backé Author-Email: peter.backe@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5212 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Tomáš Slacík Author-Name-First: Tomáš Author-Name-Last: Slacík Author-Email: tomas.slacik@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Economic Spillovers from the Euro Area to the CESEE Region via the Financial Channel: A GVAR Approach Abstract: In this paper we examine the spillovers of a shock to real output in the euro area to Central, Eastern and Southeastern Europe (CESEE) and its subregions Central Europe, Southeastern Europe, Russia, and the other members of the Commonwealth of Independent States (CIS). To this effect, we apply a global vector autoregressive (GVAR) model and go beyond existing work by examining the relative importance of the financial channel compared with the trade channel. Moreover, we assume that shocks spill over from the euro area to the CESEE region via the financial channel whereas financial spillovers within CESEE are negligible (except for spillovers between Russia and the other CESEE countries, which we do capture). Our results are as follows: We find spillovers transmitted via the trade channel to be larger than spillovers via the financial channel for Southeastern Europe, but smaller for Russia and the other CIS countries. For Central Europe, the two channels have a broadly similar impact. When we assess the relative importance of the two channels based on how well they explain historical movements in the data we see that spillovers via the two channels have indeed been of equal importance for Central Europe. However, the financial channel has traditionally dominated the trade channel in Southeastern Europe, whereas the trade channel has traditionally played a stronger role for the CIS region. Overall spillovers reflecting both transmission channels are comparatively more moderate for Central Europe and Russia, while they are a bit larger for Southeastern Europe and considerably higher for the CIS region excluding Russia: The long-run effect of a +1% euro area output shock ranges from 0.3% in Central Europe and Russia to 0.7% in the other CIS countries. Classification-JEL: C32, F44, E32, O54 Keywords: Financial shocks, international shock transmission, GVAR, CESEE Pages: 50–64 Year: 2013 Issue: 4 File-URL: https://www.oenb.at/dam/jcr:904a5d5f-da4d-4f05-a551-b975a243295b/feei_2013_q4_studies_backe_feldkirchner_slacik.pdf File-Format: application/pdf File-Size: 953 kb Handle: RePEc:onb:oenbfi:y:2013:i:4:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Elisabeth Beckmann Author-Name-First: Elisabeth Author-Name-Last: Beckmann Author-Email: elisabeth.beckmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Isabella Moder Author-Name-First: Isabella Author-Name-Last: Moder Author-Email: isabella.moder@oenb.at Author-Workplace-Name: Foreign Research Division Title: Households’ Expectations and Macroeconomic Outcomes – Evidence from the Euro Survey Classification-JEL: D14, G01, D12, E21 Keywords: Expectations, survey data, Central, Eastern and Southeastern Europe Pages: 65–76 Year: 2013 Issue: 4 File-URL: https://www.oenb.at/dam/jcr:0d1300ef-0aca-484f-8df5-f094e8f6c069/feei_2013_q4_studies_beckmann_mader.pdf File-Format: application/pdf File-Size: 2094 kb Handle: RePEc:onb:oenbfi:y:2013:i:4:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Jouko Rautava Author-Name-First: Jouko Author-Name-Last: Rautava Author-Email: Jouko.Rautava@bof.fi Author-Workplace-Name: Bank of Finland Institute for Economies in Transition (BOFIT) Title: Oil Prices, Excess Uncertainty and Trend Growth Classification-JEL: C32, E17, O13, P28, Q43 Keywords: Russian GDP, oil prices, trend growth, uncertainty, SVEC, forecasting Pages: 77–87 Year: 2013 Issue: 4 File-URL: https://www.oenb.at/dam/jcr:aeee8d5b-ff32-4db7-919c-7e37e5d1fcb9/feei_2013_q4_studies_rautava.pdf File-Format: application/pdf File-Size: 2014 kb Handle: RePEc:onb:oenbfi:y:2013:i:4:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Elisabeth Beckmann Author-Name-First: Elisabeth Author-Name-Last: Beckmann Author-Email: elisabeth.beckmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Mariya Hake Author-Name-First: Mariya Author-Name-Last: Hake Author-Email: mariya.hake@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Jarmila Urvová Author-Name-First: Jarmila Author-Name-Last: Urvová Author-Email: jarmila.urvova@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank (OeNB), Foreign Research Division Title: Determinants of Households’ Savings in Central, Eastern and Southeastern Europe Abstract: This paper uses data from the Euro Survey of the Oesterreichische Nationalbank (OeNB) for ten Central, Eastern and Southeastern European (CESEE) countries to analyze the saving behavior of CESEE households between 2010 and 2011. We investigate households’ decisions to save and their subsequent portfolio choices based on the life-cycle hypothesis, i.e. by analyzing sociodemographic determinants of saving, most notably age. Understanding households’ saving behavior is particularly relevant for CESEE countries to properly address public policy challenges related to promoting financial market development and financial stability. Our findings suggest that age as well as education and income drive the propensity to save and reveal that the hump-shaped relationship between age and savings as predicted by the life-cycle hypothesis holds for CESEE. Age also plays a role in households’ portfolio choices, with younger persons having a higher propensity to own life insurance, while older persons are more likely to have savings deposits. Classification-JEL: D14, D80, D84, G11 Keywords: Households, savings, portfolio choice, life-cycle hypothesis, survey data, Central, Eastern and Southeastern Europe Pages: 8-29 Year: 2013 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:887f1308-3b92-4aad-b024-95b9f357eff5/feei_2013_q3_studies_beckmann_tcm16-257382.pdf File-Format: application/pdf File-Size: 646 kb Handle: RePEc:onb:oenbfi:y:2013:i:3:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Mathias Lahnsteiner Author-Name-First: Mathias Author-Name-Last: Lahnsteiner Author-Email: mathias.lahnsteiner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Private Sector Debt in CESEE EU Member States Abstract: The crisis has recalled that private sector indebtedness may constitute a core macrofinancial vulnerability. In some countries of Central, Eastern and Southeastern Europe (CESEE), risks stemming from indebtedness materialized in the form of markedly rising nonperforming loans during the crisis, following years of high credit growth. The inclusion of sector debt variables in the macroeconomic imbalances procedure – a new component in the toolbox of European economic governance – also shows the high relevance of this issue. We present systematic cross-country information about the indebtedness of the household and nonfinancial corporate sector in CESEE EU Member States and also compare this information with euro area figures. We scrutinize the fast buildup of debt prior to the financial crisis as well as the gradual adjustment that has taken place in some countries more recently. We focus on the developments of the debt stock in relation to disposable income and profitability, leverage ratios as well as the interest burden. In doing so, we are able to explore sectoral balance sheet vulnerabilities and put them into perspective. Classification-JEL: E21, E43, E44, F34, G01 Keywords: CESEE, private sector, households, NFCs, debt, indebtedness, debt overhang, deleveraging, interest burden, leverage ratios, crisis Pages: 30-47 Year: 2013 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:aadceab2-7495-4676-ab61-15a28d60cedf/feei_2013_q3_studies_lahnsteiner_tcm16-257384.pdf File-Format: application/pdf File-Size: 538 kb Handle: RePEc:onb:oenbfi:y:2013:i:3:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Petr Jakubík Author-Name-First: Petr Author-Name-Last: Jakubík Author-Email: petr.jakubik@eiopa.europa.eu Author-Workplace-Name: European Insurance and Occupational Pensions Authority and Institute of Economic Studies of Charles University in Prague Author-Name: Thomas Reininger Author-Name-First: Thomas Author-Name-Last: Reininger Author-Email: Thomas.Reininger@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5234 Author-Workplace-Fax: +43-1-40420-5299 Title: Determinants of Nonperforming Loans in Central, Eastern and Southeastern Europe Abstract: Credit risk assessment is a crucial part of macroprudential analysis, with the aggregate nonperforming loan (NPL) ratio serving as a proxy for the economy-wide probability of default of the banking sector’s overall loan exposure. Therefore, the factors driving the NPL ratio deserve a lot of interest. This study provides a macroeconomic model for nonperforming loans (NPLs) for the Central, Eastern and Southeastern European (CESEE) countries. It is based on panel data for Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania, Russia, Slovakia and Ukraine. In line with current literature, our empirical analysis confirms that economic growth is the main driver that is negatively correlated with NPL development. This inverse relation is also indicated by the stock index as a leading indicator for economic developments. However, there are also other important determinants that can help explain the change in NPL ratios in the CESEE countries: past credit growth as well as exchange rate changes coupled with the share of foreign currency loans in total loans. This study confirms and quantifies risks of excessive credit growth as well as foreign exchange lending. Classification-JEL: G28, G32, G33, G38 Keywords: Nonperforming loans, credit risk, financial stability, macroprudential framework, Central, Eastern and Southeastern Europe (CESEE), emerging Europe Pages: 48-66 Year: 2013 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:3011161e-46fb-43df-81c5-459a84aa7997/feei_2013_q3_studies_jakubik_tcm16-257383.pdf File-Format: application/pdf File-Size: 590 kb Handle: RePEc:onb:oenbfi:y:2013:i:3:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Stephan Barisitz Author-Name-First: Stephan Author-Name-Last: Barisitz Author-Email: stephan.barisitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Title: Nonperforming Loans in CESEE – An Even Deeper Definitional Comparison Abstract: This study builds on two previous studies the author contributed to Focus on European Economic Integration (FEEI), namely “Nonperforming Loans in CESEE – What Do They Comprise?” (Barisitz, 2011) and “Nonperforming Loans in Western Europe – A Selective Comparison of National Definitions” (Barisitz, 2013). It draws the following conclusions from Barisitz (2013) for the analysis of nonperforming loans (NPLs) in Central, Eastern and Southeastern Europe (CESEE): The slightly revised and simplified NPL definition (primary elements: principal or interest 90 days or more overdue and/or existence of well-defined weaknesses of loan or borrower) proposed in Barisitz (2013) facilitates cross-country comparison and is fully applicable to CESEE countries. Secondary elements (treatment of replacement loans, impact of collateral and/or guarantees, recording of total loan or only part of a loan as NPL, treatment of multiple loans to one borrower) may result in upward or downward biases of individual countries’ (suggested) NPL definitions. Overall, we derive NPL ratios that are roughly internationally comparable in a transparent and replicable manner. By providing a comparative overview of what NPLs constitute, this study (together with its two predecessors) hopes to make a contribution to the currently widely debated issues of uncertainty about banks’ balance sheets and (lack of) comparability across banks and countries. Classification-JEL: G12, G21, G33 Keywords: Bank lending, CESEE, credit quality, credit risk, financial soundness indicators, nonperforming loans Pages: 67-84 Year: 2013 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:07a8cd6f-9be6-4472-8ecf-51a5336c5977/feei_2013_q3_studies_barisitz_tcm16-257381.pdf File-Format: application/pdf File-Size: 591 kb Handle: RePEc:onb:oenbfi:y:2013:i:3:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Katharina Steiner Author-Name-First: Katharina Author-Name-Last: Steiner Author-Email: katharina.steiner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Residential Property Prices in Central, Eastern and Southeastern European Countries: Stocktaking of Data and a View on New Developments in Data Availability Abstract: Residential property prices play an important role in many areas of economics and finance. They are used, for example, to determine the value of a major component of real wealth, as an indicator of financial stability risks stemming from residential property price gyrations, or to monitor inflation developments. However, the specific characteristics of residential property make primary data collection and index calculation difficult tasks. Against this background, the aim of this paper is to compare different residential property price indices in terms of price developments and methodologies for the ten Central, Eastern and Southeastern EU Member States (CESEE-10). In doing so, we focus on new developments in data availability for the CESEE-10, in particular the recent release of the Eurostat house price index (HPI). This index is a major step forward, providing improved EU-wide cross-country comparability of housing transaction prices. The comparison of the different data series with the new Eurostat index indicates some differences in the timing of local price peaks and the degree of price dynamics. Moreover, price movements diverged in some CESEE countries in the past two years. The comparison of the new Eurostat index to a price index that is purely based on asking prices exhibits a slightly lower correlation. Panel data research is set to benefit from Eurostat’s compilation of national house price indices, while time series analysis will continue to rely on the longer series of national statistics for the time being. Classification-JEL: C8, E3, P22 Keywords: Residential property prices, housing markets, Central, Eastern and Southeastern Europe Pages: 85-97 Year: 2013 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:938a3ec3-5ca2-4db6-b5a2-99e959a8a0da/feei_2013_q3_studies_steiner_tcm16-257385.pdf File-Format: application/pdf File-Size: 506 kb Handle: RePEc:onb:oenbfi:y:2013:i:3:b:5 Template-Type: ReDIF-Article 1.0 Author-Name: Antje Hildebrandt Author-Name-First: Antje Author-Name-Last: Hildebrandt Author-Email: antje.hildebrandt@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Name: Duy T. Huynh-Olesen Author-Name-First: Duy T. Author-Name-Last: Huynh-Olesen Author-Email: duy_thanh.huynh-olesen@ecb.europa.eu Author-Workplace-Name: European Central Bank, EU Countries Division Author-Name: Katharina Steiner Author-Name-First: Katharina Author-Name-Last: Steiner Author-Email: katharina.steiner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Karin Wagner Author-Name-First: Karin Author-Name-Last: Wagner Author-Email: karin.wagner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Title: Residential Property Prices in Central, Eastern and Southeastern European Countries Abstract: The large movements in residential property prices in emerging markets observed over the past decade have raised interest in housing market developments. Within a cointegration framework applied to an unbalanced panel, we assess the relationship between residential property price developments, economic fundamentals and transition-specific factors in Central, Eastern and Southeastern European (CESEE) EU countries from 1999 to 2011.2 Our results show that demand-side fundamentals (disposable income, population, interest rates) and transition-specific factors related to housing demand (such as funding through remittances and credit growth) as well as construction costs on the supply side have been particularly important in residential property price movements. Nevertheless, these factors cannot fully explain residential property price movements, i.e. we find evidence that house prices moved above the level indicated by those factors in the years preceding the crisis. The sharp correction of residential property prices that took place following the outbreak of the financial crisis reversed these overshoots and brought house prices back to – and in some countries even below – the level indicated by the explanatory factors. This suggests that residential property prices are likely to rebound somewhat when economic conditions improve. Classification-JEL: C23, P20, R3 Keywords: Housing markets, residential property prices, Central, Eastern and Southeastern Europe, cointegration framework Pages: 52-76 Year: 2013 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:28ff1561-cbb2-47b2-9523-065adae50e93/feei_2013_q2_studies_huynh_tcm16-255713.pdf File-Format: application/pdf File-Size: 1558 kb Handle: RePEc:onb:oenbfi:y:2013:i:2:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Elisabeth Beckmann Author-Name-First: Elisabeth Author-Name-Last: Beckmann Author-Email: elisabeth.beckmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Sandra Dvorsky Author-Name-First: Sandra Author-Name-Last: Dvorsky Author-Email: sandra.dvorsky@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, European Affairs and International Financial Organizations Divison Author-Workplace-Homepage: http://www.oenb.at Author-Name: Thomas Scheiber Author-Name-First: Thomas Author-Name-Last: Scheiber Author-Email: thomas.scheiber@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5247 Author-Workplace-Fax: +43-1-40420-5299 Title: Trust in the EU in CESEE Abstract: The economic and financial crisis of 2008–09 and the ongoing sovereign debt crisis since 2010 have undermined EU citizens’ trust in national and European government institutions in many European countries. Against this background we look at trust in the EU in Central, Eastern and Southeastern Europe (CESEE) on the basis of results obtained from the OeNB Euro Survey. While we find that trust in the EU differs largely across the CESEE countries of the sample, the results are broadly comparable to average levels obtained for euro area countries over the same period. A comparison of pre-crisis and post-crisis levels of citizens’ trust in the EU reveals a certain divide: While trust in the EU declined significantly in the EU Member States of the sample during the sovereign debt crisis, an increase was found for most of the non-EU countries over the same period. A number of major EU integration steps in the latter group of countries may explain this increase. We conclude that prudent communication policies remain key in fostering not only citizens’ general trust in European institutions, but also their understanding of necessary policy measures both in normal times and in particular in crisis times. Classification-JEL: D02, E65, G01, H12, Z13 Keywords: Trust in the European Union, sovereign debt crisis, survey data; Central, Eastern and Southeastern Europe Pages: 77-90 Year: 2013 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:b0b4e070-ddf5-4fb4-aac0-04bac61f47be/feei_2013_q2_studies_beckmann_tcm16-255714.pdf File-Format: application/pdf File-Size: 1622 kb Handle: RePEc:onb:oenbfi:y:2013:i:2:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Konstantins Benkovskis Author-Name-First: Konstantins Author-Name-Last: Benkovskis Author-Email: konstantins.benkovskis@bank.lv Author-Workplace-Name: Latvijas Banka, Monetary Policy Department Author-Name: Ludmila Fadejeva Author-Name-First: Ludmila Author-Name-Last: Fadejeva Author-Email: ludmila.fadejeva@bank.lv Author-Workplace-Name: Latvijas Banka, Monetary Policy Department Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: How Important Is Total Factor Productivity for Growth in Central, Eastern and Southeastern European Countries? Abstract: The evolution of total factor productivity (TFP) is a key determinant of long-run economic growth of a country. In this paper we analyze the contributions from technological change at the industry level to an economy’s aggregate growth performance. Our derivation of economywide TFP growth entails three major improvements over the traditional Solow residual approach: First, we allow for non-constant returns to scale as well as changes in the utilization of input factors in our estimation of industry TFP growth. Second, we use a novel approach to aggregate TFP from the industry level to the macro level, which incorporates both direct and indirect effects through intermediate linkages within an economy. Third, we take account of open economy characteristics by assigning an explicit role to terms of trade shocks. Our calculations for the sample of ten Central, Eastern and Southeastern European EU member countries over the time period 1995–2009 are based on the newly available World Input- Output Database (WIOD). Classification-JEL: C23, D24, E23, O47 Keywords: Total factor productivity, terms of trade, utilization, input-output table, Central, Eastern and Southeastern Europe Pages: 8-27 Year: 2013 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:c884bea9-c348-4367-9706-62fca943ee61/feei_2013_q1_studies_benkovskis_tcm16-253777.pdf File-Format: application/pdf File-Size: 1243 kb Handle: RePEc:onb:oenbfi:y:2013:i:1:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Stephan Barisitz Author-Name-First: Stephan Author-Name-Last: Barisitz Author-Email: stephan.barisitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Title: Nonperforming Loans in Western Europe – A Selective Comparison of Countries and National Definitions Abstract: As a follow-up study to the author’s previous paper on “Nonperforming Loans in CESEE – What Do They Comprise?”, the present contribution focuses on the definitions of nonperforming loans (NPLs) in a number of Western European nations – Austria, Finland, France, Germany, Ireland, Italy, Portugal, Spain and the United Kingdom. Supervisors or at least general practice in the majority of Western European countries seem to endorse the rule that for a loan to be nonperforming, at least one of two (primary) elements has to be present: (1) principal or interest 90 days or more overdue, and (2) existence of underlying well-defined weaknesses of loan or borrower. However, there are also other (secondary) elements that have an impact on NPL measurement and the comparability of definitions: the question whether a restructured loan is classified as NPL or not, whether the presence of a collateral or guarantee influences loan classification or not, whether the full outstanding value or only part of a loan is reported as nonperforming, and whether a bank is required to downgrade all loans to a given debtor if any of these loans are classified as impaired or not. While these elements may introduce upward or downward biases into some nations’ NPL definitions and ratios, and these would need to be further investigated, the above-outlined NPL rule appears to constitute a feasible yardstick for most of the countries mentioned above. Moreover, this definition is also in line with a draft EU ruling for a Capital Requirements Regulation (CRR). Classification-JEL: G12, G21, G32, G33 Keywords: Bank lending, EU, credit quality, credit risk, financial soundness indicators, nonperforming loans Pages: 28-47 Year: 2013 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:bef7ec58-d7de-4bf1-a39d-accf0d339f3e/feei_2013_q1_studies_barisitz_tcm16-253775.pdf File-Format: application/pdf File-Size: 1384 kb Handle: RePEc:onb:oenbfi:y:2013:i:1:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Isabella Lindner Author-Name-First: Isabella Author-Name-Last: Lindner Author-Email: isabella.lindner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, European Affairs and International Financial Organizations Division Author-Name: Gabriela Mihailovici Author-Name-First: Gabriela Author-Name-Last: Mihailovici Author-Email: gabriela.mihailovici@bnro.ro Author-Workplace-Name: Banca Nationala a Romaniei (NBR) Title: Understanding Central Banks’ Role in Enlargement – Governance Issues Abstract: The EU’s enlargement policy is enshrined in the Treaty on European Union, which lays down the requirements for the accession of any European state. It is against this background that Southeastern European (SEE) national central banks (NCBs) strive to prepare for the challenges of enlargement. This paper relies on the practical experience with three EU accession support projects of the European System of Central Banks (ESCB) to draw a general EU accession road map for applicant countries on which the accession framework for an NCB should be based. During preaccession, an NCB would be well advised to develop governance to improve its decisionmaking capacity. In this paper, we have defined three forms of governance: First, good governance to ensure the fulfillment of economic, legal and institutional requirements; second, external governance for an NCB to participate in accession coordination at the national and EU level; and third, internal governance comprising operational and institutional changes inside an NCB. If NCBs do not pursue a consistent path toward good governance, they might – in the medium to long run – be affected by risks of a strategic, economic, operational and institutional nature. Thus, successful acceding NCBs make EU accession a top priority of their strategy. An NCB’s policy of coordination should be the key policy for effective central bank governance. We therefore recommend that an NCB establish an EU coordination mechanism, an EU coordinator, coordination guidelines and an EU Scenario Process to continuously implement the changes necessary for successful ESCB/EU membership. This process will be more effective if NCBs cooperate in technical projects and draw on the experience of other NCBs. Classification-JEL: E58, K0, Z18 Keywords: Central bank, enlargement, governance, policy of coordination Pages: 48-65 Year: 2013 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:5396a98d-73fa-40c2-8f07-585eff5c78db/feei_2013_q1_studies_lindner_tcm16-253780.pdf File-Format: application/pdf File-Size: 1197 kb Handle: RePEc:onb:oenbfi:y:2013:i:1:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Marina Tkalec Author-Name-First: Marina Author-Name-Last: Tkalec Author-Email: mtkalec@eizg.hr Author-Workplace-Name: Institute of Economics, Zagreb Title: The Dynamics of Deposit Euroization in European Post-Transition Countries: Evidence from Threshold VAR Abstract: This paper investigates the determinants and dynamics of deposit euroization (DE) in 12 European post-transition economies based on threshold models. The results suggest that exchange rates and interest rate differentials are important for explaining DE. The results for the two countries with the highest macroeconomic and institutional credibility and flexible exchange rate regimes, the Czech Republic and Poland, suggest no evidence of threshold effects, while for other countries threshold behavior was found. The threshold VAR results indicate that depreciations have a stronger effect on DE than appreciations, while interest rate spreads widen more after home currency depreciations than after appreciations. Moreover, we found evidence that DE changes more strongly after interest rate differentials increase than after they decrease. Classification-JEL: C32, E44, E58, F31, F41 Keywords: Deposit euroization, exchange rate, transition, threshold Pages: 66-83 Year: 2013 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:0963082b-0e89-411d-99fa-9f0952d0ed4c/feei_2013_q1_studies_tkalec_tcm16-253781.pdf File-Format: application/pdf File-Size: 1485 kb Handle: RePEc:onb:oenbfi:y:2013:i:1:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Markus Eller Author-Name-First: Markus Author-Name-Last: Eller Author-Email: markus.eller@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Jarmila Urvová Author-Name-First: Jarmila Author-Name-Last: Urvová Author-Email: jarmila.urvova@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank (OeNB), Foreign Research Division Title: How Sustainable Are Public Debt Levels in Emerging Europe? Abstract: To assess to which extent public debt positions in four CESEE economies (the Czech Republic, Hungary, Poland and Slovakia) are sustainable in the medium term, we apply a stochastic debt sustainability analysis (SDSA), building on Celasun, Debrun and Ostry (2007). In contrast to conventional debt sustainability analyses, this approach explicitly accounts for the risks surrounding medium-term debt dynamics, e.g. risks stemming from the interaction of (endogenously determined) fiscal and macroeconomic shocks. This is one of the first papers explicitly applying an SDSA to countries in emerging Europe. The baseline projections suggest that, on average, public debt would not get out of control in any of the four countries until 2016. However, when we also account for the risks around the median projection, the primary balance is apparently not responsive enough (with regard to public debt) so that increasing debt paths cover a considerable share of the overall frequency distribution. The probability of reaching, in 2016, a higher debt-to-GDP ratio than in 2011 is largest in the Czech Republic and Slovakia and less pronounced in Hungary and Poland. When confronting the baseline projections with alternative policy scenarios, we can confirm the importance of a timely and continuous response to debt developments; otherwise public debt will quickly get out of control. Furthermore, compliance with the defined Stability and Convergence Programme targets limits the overall risks to the debt outturns. Classification-JEL: C54, E62, H63, H68, E62, P2 Keywords: Public debt sustainability, fiscal reaction function, fan charts, stochastic simulations, public debt forecast, Central and Eastern Europe Pages: 48-79 Year: 2012 Issue: 4 File-URL: https://www.oenb.at/dam/jcr:63164f68-626a-4f72-ac99-5b50881b8f6b/feei_2012_q4_studies_eller_urvova_tcm16-251595.pdf File-Format: application/pdf File-Size: 1483 kb Handle: RePEc:onb:oenbfi:y:2012:i:4:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Elisabeth Beckmann Author-Name-First: Elisabeth Author-Name-Last: Beckmann Author-Email: elisabeth.beckmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Thomas Scheiber Author-Name-First: Thomas Author-Name-Last: Scheiber Author-Email: thomas.scheiber@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5247 Author-Workplace-Fax: +43-1-40420-5299 Title: The Impact of Memories of High Inflation on Households’ Trust in Currencies Abstract: Many Central, Eastern and Southeastern European (CESEE) economies experienced periods of hyperinflation during transition. Given the importance of trust for households’ financial decision making, we analyze how memories of high inflation influence people’s trust in currencies. Individuals who have lived through periods of economic turbulence are more likely to perceive the euro as more trustworthy than the local currency. Individuals who have experienced hyperinflation retain an inclination for a safe haven currency and remain more alert to economic turbulence and prone to distrust currencies in general. Classification-JEL: D03, D14, D83, D84, G01 Keywords: Trust in currencies, euroization, financial crisis, survey data; Central, Eastern and Southeastern Europe Pages: 80-93 Year: 2012 Issue: 4 File-URL: https://www.oenb.at/dam/jcr:63f4eec1-85d7-422f-8210-8e77fedba8ef/feei_2012_q4_studies_beckmann_scheiber_tcm16-251596.pdf File-Format: application/pdf File-Size: 1378 kb Handle: RePEc:onb:oenbfi:y:2012:i:4:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Nadja Walch Author-Name-First: Nadja Author-Name-Last: Walch Author-Email: nadja.walch@gmail.com Author-Workplace-Name: University of Innsbruck Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: The Impact of Country Risk Ratings and of the Status of EU Integration on FDI Inflows in CESEE Countries Abstract: We analyze the determinants of foreign direct investment (FDI) inflows in the ten EU Member States, plus Croatia, in Central, Eastern and Southeastern Europe (CESEE) over the period from 1995 to 2011, with a particular focus on the effects of country risk ratings and the EU integration status on a country’s attractiveness for FDI. We distinguish between twelve different risk ratings and seven stages of integration (non-EU country, potential candidate country, candidate country, negotiating country, EU Member State, ERM II member country and euro area country). Using quarterly data, we identify the market size and cost factors as the most important determinants, suggesting that market- and efficiency-seeking FDI were the most prevalent forms of FDI in the region. The host country’s infrastructural environment also has the expected positive effect on FDI inflows. The effects of risk ratings turn out to be nonlinear in the sense that improvements in intermediate risk levels have the largest positive effect on FDI, while this effect diminishes in the case of upgrades at the highest levels. Turning to the status of EU integration, a more advanced stage represents an additional bonus over pure cost- and market-related factors, but only up to the onset of the global financial and economic crisis. Classification-JEL: C33, F15, F21 Keywords: Foreign direct investment, European integration, country risk ratings Pages: 8-26 Year: 2012 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:075150f4-eb64-477f-9567-12c0be9bb26f/feei_2012_q3_studies1_tcm16-249595.pdf File-Format: application/pdf File-Size: 2301 kb Handle: RePEc:onb:oenbfi:y:2012:i:3:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Konstantins Benkovskis Author-Name-First: Konstantins Author-Name-Last: Benkovskis Author-Email: konstantins.benkovskis@bank.lv Author-Workplace-Name: Latvijas Banka, Monetary Policy Department Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: Non-Price Competitiveness Gains of Central, Eastern and Southeastern European Countries in the EU Market Abstract: We propose an export price indicator adjusted for non-price factors as a more meaningful measure of a country’s competitiveness than traditional indicators. Our starting point is the approach developed by Broda and Weinstein (2006), who adjust price developments for changes in varieties of imported products. We relax their assumption of unchanged quality over time and use the proposed index to analyze the momentum of export prices of the ten CESEE EU members which acceded in 2004 and 2007. The index is calculated using data from Eurostat Comext at the highly disaggregated eight-digit CN product level. Our analysis spans the time period 1999 to 2011, thus including the recent global recession period in 2009. The results show that all CESEE-10 countries experienced a loss in price competitiveness, but that the loss was much smaller than is usually suggested by traditional CPI- or ULC-based real effective exchange rate measures. Although relative export prices (unit values) increased more strongly in the CESEE-10 countries as compared to their competitors, the average quality of their goods increased even more strongly, thus fully compensating for the rise in prices. These improvements in non-price competitiveness were pronounced in all CESEE-10 countries. Classification-JEL: C43, F12, F14, L15 Keywords: Non-price competitiveness, quality, relative export price, new EU Member States Pages: 27-47 Year: 2012 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:a31148eb-6824-4365-b8e8-fab5e29d5d14/feei_2012_q3_studies2_tcm16-249596.pdf File-Format: application/pdf File-Size: 3074 kb Handle: RePEc:onb:oenbfi:y:2012:i:3:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Mariya Hake Author-Name-First: Mariya Author-Name-Last: Hake Author-Email: mariya.hake@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Banking Sector Concentration and Firm Indebtedness: Evidence from Central and Eastern Europe Abstract: Using data from the Amadeus firm-level database, this paper explores the impact of banking sector concentration on corporate debt in the manufacturing sectors in eight Central, Eastern and Southeastern European (CESEE) countries in the precrisis period 2002–2007. Our findings indicate that banking sector concentration has a positive effect, raising firm debt. This confirms the predictions of the relationship lending theory. However, in the CESEE countries with the most concentrated banking markets – such as Estonia and Lithuania – the effect on the corporate leverage ratio is found to be negative. We also show that young firms increase their leverage, while mature firms reduce their dependence on external financing when banking markets are more concentrated. Furthermore, the positive impact of banking sector concentration is weakened by EU accession and greater stock market capitalization, which can be explained by the financial deepening process and the improved availability of alternative sources of external finance. Classification-JEL: G21, G32, O52 Keywords: Firm leverage, banking sector concentration, Central, Eastern and Southeastern Europe, firm-level data Pages: 48-68 Year: 2012 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:c449993e-ad0b-4ea9-af2a-383c83ae726d/feei_2012_q3_studies3_tcm16-249597.pdf File-Format: application/pdf File-Size: 2754 kb Handle: RePEc:onb:oenbfi:y:2012:i:3:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Jesús Crespo Cuaresma Author-Name-First: Jesús Crespo Author-Name-Last: Cuaresma Author-Email: jcrespo@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business, Institute for Fiscal and Monetary Policy Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Drivers of Output Loss during the 2008–09 Crisis: A Focus on Emerging Europe Abstract: We study empirically the role that initial conditions played in the emergence of cross-country heterogeneity in real output loss during the recent global financial crisis. We use a global sample covering over 150 countries and focus on the differences in the determinants of the crisis in emerging Europe compared to those in the rest of the world. We find that the differences in crisis severity in emerging Europe can only partly be explained by the factors that appear to be important for the global sample. Our results indicate that for the European emerging economies, growth above potential before the crisis coupled with external disequilibria as well as financial openness were particularly important mechanisms that increased the severity of the crisis in terms of output loss. We also find some evidence that pre-crisis FDI inflows softened the negative real output effects of the crisis in the region. Classification-JEL: C11, C15, E01, O47 Keywords: financial crisis, cross-country analysis, Bayesian model averaging Pages: 46-64 Year: 2012 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:1a972770-8a8d-4a39-90a7-aa9503996067/feei_2012_q2_studies1_tcm16-247718.pdf File-Format: application/pdf File-Size: 2648 kb Handle: RePEc:onb:oenbfi:y:2012:i:2:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Elisabeth Beckmann Author-Name-First: Elisabeth Author-Name-Last: Beckmann Author-Email: elisabeth.beckmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Thomas Scheiber Author-Name-First: Thomas Author-Name-Last: Scheiber Author-Email: thomas.scheiber@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5247 Author-Workplace-Fax: +43-1-40420-5299 Title: Not So Trustworthy Anymore? The Euro as a Safe Haven Asset in Central, Eastern and Southeastern Europe Abstract: The euro has been the predominant safe haven currency for households in Southeastern Europe (SEE). Recent results of the OeNB Euro Survey show that the sovereign debt crisis had a substantial impact on households’ trust in the euro but nevertheless suggest that the euro has not been displaced as a safe haven currency. The euro remains more trusted than the local currencies, and households’ preferences and decisions with regard to the currency denomination of their savings indicate that larger portfolio shifts are at present unlikely. Classification-JEL: D14, G01, G11 Keywords: Trust, portfolio choice, sovereign debt crisis, survey data, Central, Eastern and Southeastern Europe Pages: 65-71 Year: 2012 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:98775de0-65df-43fe-a27c-c21bc811d02c/feei_2012_q2_studies2_tcm16-247719.pdf File-Format: application/pdf File-Size: 3014 kb Handle: RePEc:onb:oenbfi:y:2012:i:2:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Antje Hildebrandt Author-Name-First: Antje Author-Name-Last: Hildebrandt Author-Email: antje.hildebrandt@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Name: Reiner Martin Author-Name-First: Reiner Author-Name-Last: Martin Author-Email: reiner.martin@ecb.int Author-Workplace-Name: European Central Bank Author-Name: Katharina Steiner Author-Name-First: Katharina Author-Name-Last: Steiner Author-Email: katharina.steiner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Karin Wagner Author-Name-First: Karin Author-Name-Last: Wagner Author-Email: karin.wagner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Title: Residential Property Markets in CESEE EU Member States Abstract: This paper provides an overview of residential property market developments in ten Central, Eastern and Southeastern European (CESEE) EU Member States over the last 10 to 15 years, featuring price developments, housing conditions, affordability, housing financing and policy measures targeting residential property markets. The descriptive cross-country approach particularly focuses on the period of the economic and financial crisis by capturing the recent boom and bust of residential property prices across the whole region. We observe that high levels of home ownership and low costs of external housing financing were related to rising residential property prices. Besides the small size of the rental market, rising demand for affordable good-quality housing suggests that price developments during the forthcoming catching-up of residential property markets are likely to be dynamic. In this respect, policy action in different areas should increasingly attempt to keep a lid on housing market developments in CESEE. Classification-JEL: E3, F36, P2, P5, R21, R31 Keywords: Residential property market, housing finance, regulation of housing markets, CESEE countries Pages: 8-30 Year: 2012 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:00ed6c3c-27cf-40cd-890c-5a41261162f1/feei_2012_q1_studies1_tcm16-245870.pdf File-Format: application/pdf File-Size: 1583 kb Handle: RePEc:onb:oenbfi:y:2012:i:1:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Peter Backé Author-Name-First: Peter Author-Name-Last: Backé Author-Email: peter.backe@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5212 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Sándor Gardó Author-Name-First: Sándor Author-Name-Last: Gardó Author-Email: sandor.gardo@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Spillovers of the Greek Crisis to Southeastern Europe: Manageable or a Cause for Concern? Abstract: During the boom years in the run-up to the global financial and economic crisis, Greece established close economic ties with the Southeastern European (SEE) region. As a consequence, the current Greek sovereign debt crisis could potentially have adverse economic implications for SEE. Both real and financial transmission channels might have a bearing, though in most countries real economic linkages do not seem as strong as the degree of interconnectedness in the realms of banking and finance, where risks might materialize both directly and indirectly (i.e. via changes in expectations and risk perceptions). So far, the Greek crisis has only had a relatively limited impact on SEE. Available buffers and policy tools have helped SEE to cope with the related risks and also provide some more room for the region to address vulnerabilities caused by the Greek crisis that may materialize in the future. Possible challenges appear to be largest in the realm of banking, even though banking sector adjustment during the crisis has been fairly orderly so far. However, the recent intensification of the sovereign debt crisis in euro area countries may put the macrofinancial resilience of SEE countries to a much stiffer test, given its ramifications on external demand, potential negative feedback loops affecting European banks and a further rise in global risk aversion. Classification-JEL: F36, G2, O52, P2 Keywords: Financial stability, banking sector, sovereign debt crisis Pages: 31-48 Year: 2012 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:7f038f44-cfb2-41dc-89e0-aba469199b7a/feei_2012_q1_studies2_tcm16-245872.pdf File-Format: application/pdf File-Size: 2656 kb Handle: RePEc:onb:oenbfi:y:2012:i:1:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Stephan Barisitz Author-Name-First: Stephan Author-Name-Last: Barisitz Author-Email: stephan.barisitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Title: Nonperforming Loans in CESEE – What Do They Comprise? Abstract: This study attempts to shed comparative light on nonperforming loans (NPLs) by analyzing the loan classification systems in ten Central, Eastern and Southeastern European (CESEE) countries, namely Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania, Russia, Serbia, Slovakia and Ukraine. Comparing NPL data across countries is often found to be difficult. Three approaches are used to identify a loan as nonperforming. First, the most widely known NPL definition, which is based on the IMF Financial Soundness Indicators (FSIs) Compilation Guide, is simple and clear: “principal or interest 90 days or more overdue.” The IMF strives to present cross-country comparative time series of NPL and other prudential indicators on the FSI website. With respect to nonperforming loans, the FSI website as yet lacks comprehensive data coverage, and comparability is in fact restrained. Therefore, we propose to take stock of national definitions, for which more extensive time series of data are available. Second, national supervisors’ NPL definitions mostly relate to the commonly used credit quality categories proposed by the Institute of International Finance (IIF), whose weakest three categories (“substandard – doubtful – loss”) are typically identified as nonperforming loans. Third, NPL definitions of CESEE and other countries regularly refer to the existence of a “well-defined weakness” of the loan or the borrower in addition to some other factors. Based on these criteria, with priority given to the 90days+ rule, we arrive at an NPL threshold, which includes in some cases NPL bands. We hope this threshold is applicable in such a way that it enables meaningful cross-country comparisons. Finally, the study takes a rough comparative snapshot of the development of NPLs (based on the derived threshold) in the CESEE countries from 2005 to 2010. Classification-JEL: G12, G21, G33 Keywords: Bank lending, CESEE, credit quality, credit risk, financial soundness indicators, nonperforming loans Pages: 46-68 Year: 2011 Issue: 4 File-URL: https://www.oenb.at/dam/jcr:ba2e567b-97ab-4240-868c-419a226b9def/feei_2011_q4_studies_1_tcm16-241680.pdf File-Format: application/pdf File-Size: 2307 kb Handle: RePEc:onb:oenbfi:y:2011:i:4:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Jesús Crespo Cuaresma Author-Name-First: Jesús Crespo Author-Name-Last: Cuaresma Author-Email: jcrespo@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business, Institute for Fiscal and Monetary Policy Author-Name: Jarko Fidrmuc Author-Name-First: Jarko Author-Name-Last: Fidrmuc Author-Email: jarko.fidrmuc@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5218 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Mariya Hake Author-Name-First: Mariya Author-Name-Last: Hake Author-Email: mariya.hake@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Determinants of Foreign Currency Loans in CESEE Countries: A Meta-Analysis Abstract: In this paper, we analyze the growing literature on determinants of foreign currency loans in the countries of Central, Eastern and Southeastern Europe (CESEE), applying a metaregression approach. We consider the seven most common determinants presented in the literature and aim at obtaining a more clear-cut picture behind various effects related to differences in methods and data characteristics. In our meta-analysis we apply two alternative estimation methods and identify exchange rate volatility, foreign currency deposits and the minimum variance portfolio (i.e. the ratio of inflation volatility to real exchange rate volatility) as the most robust determinants of foreign currency loans. Our findings indicate that the results reported in the literature are systematically influenced by model specification, the econometric methodology applied and the country samples included in the papers. Classification-JEL: C5, E52, F31, O57, P20 Keywords: Central and Eastern Europe, foreign currency loans, metaregression, random effects maximum likelihood Pages: 69-87 Year: 2011 Issue: 4 File-URL: https://www.oenb.at/dam/jcr:a34579cd-ec78-4a79-8c1c-72f72481821f/feei_2011_q4_studies_2_tcm16-241681.pdf File-Format: application/pdf File-Size: 2554 kb Handle: RePEc:onb:oenbfi:y:2011:i:4:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Elisabeth Beckmann Author-Name-First: Elisabeth Author-Name-Last: Beckmann Author-Email: elisabeth.beckmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Sandra Dvorsky Author-Name-First: Sandra Author-Name-Last: Dvorsky Author-Email: sandra.dvorsky@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, European Affairs and International Financial Organizations Divison Author-Workplace-Homepage: http://www.oenb.at Author-Name: Thomas Scheiber Author-Name-First: Thomas Author-Name-Last: Scheiber Author-Email: thomas.scheiber@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5247 Author-Workplace-Fax: +43-1-40420-5299 Title: OeNB Euro Survey: Growing Uncertainty, but Overall Euroization Not Affected Abstract: Based on descriptive evidence obtained from the latest OeNB Euro Survey, this contribution examines whether the widespread use of the euro among households in Central, Eastern and Southeastern Europe (CESEE) has been affected by the ongoing sovereign debt crisis in the euro area. Although households’ confidence in the euro has decreased substantially in all CESEE countries, it is still stronger than confidence in the respective local currencies in all countries except the Czech Republic. Despite this loss of trust in the euro, the relative weight of euro cash in the total economy is still substantial in several Southeastern European countries. Aggregate data on the development of foreign currency deposits in total deposits provide a mixed picture across countries. The overall degree of euroization – comprising cash holdings and deposits – has remained surprisingly stable in CESEE over time and has hardly been affected by the crisis in the euro area. Interestingly, in some countries the relative contribution of foreign currency deposits to overall euroization has increased against precrisis levels, whereas euro cash holdings have lost in relative importance. Classification-JEL: D14, E41, G01, G11 Keywords: Euroization, global financial crisis, portfolio decision, survey data, Central, Eastern and Southeastern Europe Pages: 88-99 Year: 2011 Issue: 4 File-URL: https://www.oenb.at/dam/jcr:d383ea5e-bd1d-40d2-895a-f3f730cd9c4a/feei_2011_q4_studies_3_tcm16-241682.pdf File-Format: application/pdf File-Size: 2440 kb Handle: RePEc:onb:oenbfi:y:2011:i:4:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Konstantins Benkovskis Author-Name-First: Konstantins Author-Name-Last: Benkovskis Author-Email: konstantins.benkovskis@bank.lv Author-Workplace-Name: Latvijas Banka, Monetary Policy Department Author-Name: Andrejs Bessonovs Author-Name-First: Andrejs Author-Name-Last: Bessonovs Author-Email: andrejs.bessonovs@bank.lv Author-Workplace-Name: Latvijas Banka, Monetary Policy Department Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: The Transmission of Euro Area Monetary Shocks to the Czech Republic, Poland and Hungary: Evidence from a FAVAR Model Abstract: 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. Classification-JEL: C32, E31, E32, E40, F42 Keywords: FAVAR, monetary policy shocks, international transmission, euro area, Central and Pages: 8-36 Year: 2011 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:d689d891-d092-4666-bb54-ef539875ef10/feei_2011_q3_studies_01_tcm16-237365.pdf File-Format: application/pdf File-Size: 2754 kb Handle: RePEc:onb:oenbfi:y:2011:i:3:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Joseph F. Francois Author-Name-First: Joseph F. Author-Name-Last: Francois Author-Email: joseph.francois@jku.at Author-Workplace-Name: Johannes Kepler University Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: Shifts in International Trade and Value Added from 1995 to 2007: Insights into the Drivers of Growth Abstract: 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. Classification-JEL: F14, F15, O57 Keywords: Trade growth, industrial export structure, trade elasticities, Central, Eastern and Pages: 37-56 Year: 2011 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:eec93fd5-8a96-484d-928a-9b001a6dcf14/feei_2011_q3_studies_02_tcm16-237366.pdf File-Format: application/pdf File-Size: 2478 kb Handle: RePEc:onb:oenbfi:y:2011:i:3:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Marjan Petreski Author-Name-First: Marjan Author-Name-Last: Petreski Author-Email: marjan.petreski@uacs.edu.mk Author-Workplace-Name: University American College Skopje Title: A Markov Switch to Inflation Targeting in Emerging Market Peggers with a Focus on the Czech Republic, Poland and Hungary Abstract: 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. Classification-JEL: E42, E52, E58 Keywords: monetary regime switch, inflation targeting, CESEE-3, Markov switching Pages: 57-75 Year: 2011 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:c75e57fb-7124-46c0-a843-f8b40d43aa92/feei_2011_q3_studies_03_tcm16-237367.pdf File-Format: application/pdf File-Size: 2467 kb Handle: RePEc:onb:oenbfi:y:2011:i:3:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Jesús Crespo Cuaresma Author-Name-First: Jesús Crespo Author-Name-Last: Cuaresma Author-Email: jcrespo@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business, Institute for Fiscal and Monetary Policy Author-Name: Markus Eller Author-Name-First: Markus Author-Name-Last: Eller Author-Email: markus.eller@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Aaron Mehrotra Author-Name-First: Aaron Author-Name-Last: Mehrotra Author-Email: aaron.mehrotra@bof.fi Author-Workplace-Name: Bank of Finland, Institute for Economies in Transition Title: The Economic Transmission of Fiscal Policy Shocks from Western to Eastern Europe Abstract: This paper studies the transmission of a foreign fiscal policy shock (assumed to be generated in Germany) to key macroeconomic variables in five Central and Eastern European economies (CEE-5). We use quarterly data from 1995 to 2009 and estimate an open economy structural vector autoregressive (SVAR) model identified by imposing reasonable restrictions on contemporaneous responses in the system. Our model is able to identify well-known episodes of fiscal policy action in the countries under review. We find that a foreign fiscal shock affects domestic fiscal variables and vice versa, which highlights the importance of cross-country coordination of fiscal policies within the EU. All the CEE-5 respond to a fiscal expansion abroad with fiscal easing at home (more strongly on the public spending than on the revenue side). We find negative cross-border fiscal spillovers for Slovenia, the Czech Republic and Slovakia, while in Poland and Hungary, output reacts positively to a fiscal expansion in Germany. For domestic fiscal shocks, which we also explore, we find Keynesian responses in Hungary and Slovakia, while non-Keynesian responses are present in the Czech Republic, Poland and Slovenia. Our results imply that “one-size-fits-all” policy recommendations would be too simplistic for the CEE-5; a deeper understanding of the reasons for cross-country differences in response to fiscal shocks is required to be able to provide adequate information to policymakers in these countries. Classification-JEL: C54, E62, H2, H5, P2 Keywords: fiscal policy, cross-border spillovers, fiscal multiplier, foreign shock, structural vector Pages: 44-68 Year: 2011 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:988f4364-02f6-46d9-aa83-252178ab93e4/feei_2011_q2_studies_01_tcm16-232748.pdf File-Format: application/pdf File-Size: 2183 kb Handle: RePEc:onb:oenbfi:y:2011:i:2:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Katharina Steiner Author-Name-First: Katharina Author-Name-Last: Steiner Author-Email: katharina.steiner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Households’ Exposure to Foreign Currency Loans in CESEE EU Member States and Croatia Abstract: Most Central, Eastern and Southeastern European (CESEE) countries saw a substantial rise in foreign currency lending to households during the last decade. This involved risks to macrofinancial stability, in particular because most of these borrowers were unhedged. This paper provides evidence on eleven CESEE countries regarding (1) the extent of foreign currency lending to households from 1995 to 2009, (2) the supply and demand factors at work in the period before the crisis and (3) the regulatory responses to address the situation. Panel data estimates covering the period from 1996 to 2007 reveal that, on the demand side, foreign currency borrowing was attractive because interest rates for foreign currency loans were lower than those on domestic currency loans, and private sector consumption as well as housing prices were on the rise. Mitigating factors on the supply side were higher interest margins on domestic currency loans than on foreign currency loans and banking sector reforms. Regulatory measures account at least partly for the different patterns of currency structures according to descriptive evidence. Classification-JEL: C23, E41, F31, G19, P20 Keywords: Financial development in transition, foreign currency loan, supply and demand, currency substitution, emerging markets Pages: 6-24 Year: 2011 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:d68f3317-3c7f-496a-ace3-fd5642c21211/feei_2011_q1_studies_01_tcm16-224901.pdf File-Format: application/pdf File-Size: 6028 kb Handle: RePEc:onb:oenbfi:y:2011:i:1:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Elisabeth Beckmann Author-Name-First: Elisabeth Author-Name-Last: Beckmann Author-Email: elisabeth.beckmann@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Thomas Scheiber Author-Name-First: Thomas Author-Name-Last: Scheiber Author-Email: thomas.scheiber@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5247 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: How the Crisis Affected Foreign Currency Borrowing in CESEE: Microeconomic Evidence and Policy Implications Abstract: Micro data collected in the OeNB Euro Survey show that in the aftermath of the global economic and financial crisis, households have come to perceive foreign currency loans as riskier, above all in those Central, Eastern and Southeastern European (CESEE) countries that experienced depreciations during the crisis. Despite this perceived increase in risk, a majority of respondents in six out of nine countries sill regard loans in euro as more attractive than loans in domestic currency. Data about the motives indicate that both supply and demand factors drive foreign currency loans. The mutual interest of banks and households and the still high attractiveness of foreign currency loans suggest that foreign currency borrowing is unlikely to vanish without policy intervention. If foreign currency borrowing were to be curbed in the short run, the only option for policymakers would be the implementation of regulatory and supervisory measures. Classification-JEL: D14, G01, G18, G21 Keywords: Foreign currency loan, financial crisis, survey data, behavior of households, Central, Eastern and Southeastern Europe Pages: 25-43,112-113 Year: 2011 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:f966cd52-b7f4-44eb-9f9e-d9937d4a781a/feei_2011_q1_studies_02_tcm16-224902.pdf File-Format: application/pdf File-Size: 1741 kb Handle: RePEc:onb:oenbfi:y:2011:i:1:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Mathias Lahnsteiner Author-Name-First: Mathias Author-Name-Last: Lahnsteiner Author-Email: mathias.lahnsteiner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: The Refinancing Structure of Banks in Selected CESEE Countries Abstract: In this paper, we present systematic regional and cross-country information about the refinancing structure of the banking sector in selected Central, Eastern and Southeastern European (CESEE) countries. We use the most recent data available (from mid-2008 until end-2009) to focus on the situation of CESEE banking sectors following the intensification of the financial crisis triggered by the collapse of Lehman Brothers. At that time, there were fears of spillover effects, given the strong reliance of most of these countries’ banking sectors on foreign funding. Our analysis shows that in the second half of 2008, most CESEE banking sectors received additional funds from abroad, while in the course of 2009, net capital flows to banks turned at least temporarily negative in all countries under review except Poland. However, the size of net outflows on the liability side of banks’ balance sheets differed substantially across countries. Looking at the whole period from mid-2008 to end-2009, our findings suggest that outflows affected above all banking sectors that had very high net foreign liabilities at the onset of the crisis (i.e. in the Baltic countries, particularly Latvia and Estonia) and banking sectors with comparatively low levels of foreign ownership (Slovenia, Ukraine and Russia). Classification-JEL: G15, G21, G32, O16, O52 Keywords: Financial stability, banking sector, Central and Eastern Europe, refinancing, capital flows, financial crisis Pages: 44-69 Year: 2011 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:33dc0307-5c8f-4956-88ed-a39d4f397cc8/feei_2011_q1_studies_03_tcm16-224905.pdf File-Format: application/pdf File-Size: 3219 kb Handle: RePEc:onb:oenbfi:y:2011:i:1:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Jarko Fidrmuc Author-Name-First: Jarko Author-Name-Last: Fidrmuc Author-Email: jarko.fidrmuc@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5218 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Reiner Martin Author-Name-First: Reiner Author-Name-Last: Martin Author-Email: reiner.martin@ecb.int Author-Workplace-Name: European Central Bank Title: FDI, Trade and Growth in CESEE Countries Abstract: Central, Eastern and Southeastern Europe (CESEE) had experienced an export boom as well as a surge in capital inflows up to the outbreak of the economic and financial crisis, which had a major negative impact on these two facets of the CESEE growth model. Did the long-term growth prospects of the CESEE countries deteriorate, too? To answer this question, we estimate the long-run relationship and test the causality between capital flows, exports and industrial production. Vector error correction models show that exports and the stock of FDI in the CESEE region are positively related to industrial production and thus economic growth. By contrast, portfolio investment is only weakly related to the region’s industrial growth performance. These findings imply that the CESEE countries should pursue two objectives: remain attractive locations for inward FDI and enhance their export prospects. Classification-JEL: F43, F21, C32 Keywords: Export-led growth, FDI, capital inflows, heterogeneous firms, cointegration, weak exogeneity test Pages: 70-89 Year: 2011 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:78aaf101-f97c-43f8-a869-c7a002a6a600/feei_2011_q1_studies_04_tcm16-224906.pdf File-Format: application/pdf File-Size: 3341 kb Handle: RePEc:onb:oenbfi:y:2011:i:1:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Sokol Havolli Author-Name-First: Sokol Author-Name-Last: Havolli Author-Email: sokolhavolli@bqk-kos.org Author-Workplace-Name: Central Bank of the Republic of Kosovo (CBK), Directorate of Economic Analysis Title: Determinants of Migrants’ Earnings and Remittances: Evidence from Kosovo Abstract: This paper is an attempt to find the main determinants of migrants’ earnings and analyze what makes migrants remit money to their home countries. We use the dataset on migrants compiled by the Riinvest Institute2 in 2006. Ordinary least squares (OLS) and interval regression methods are used to estimate the migrants’ earnings model, while for the remittances model we use OLS and Tobit estimation methods. The results suggest, inter alia, that the returns to education are positive for migrants; also, migrants in countries with higher per capita GDP have higher family earnings. Among the most important determinants of remittances are migrants’ investments in their home countries, migrants’ perceptions of the business environment, migrants’ earnings, gender and the duration of migration. This paper tries to fill the gap in the literature, especially for the case of Kosovo, by exploring what determines the earnings of migrants and what makes migrants remit part of these earnings. Classification-JEL: D31, F22, F24 Keywords: Remittances, migration, personal income Pages: 90-99 Year: 2011 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:2df4a7a2-d05c-4ac5-8a3b-ac842861ab39/feei_2011_q1_studies_05_tcm16-224907.pdf File-Format: application/pdf File-Size: 1741 kb Handle: RePEc:onb:oenbfi:y:2011:i:1:b:5 Template-Type: ReDIF-Article 1.0 Author-Name: Stephan Barisitz Author-Name-First: Stephan Author-Name-Last: Barisitz Author-Email: stephan.barisitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Name: Hans Holzhacker Author-Name-First: Hans Author-Name-Last: Holzhacker Author-Email: Hans.Holzhacker@atfbank.kz Author-Workplace-Name: ATF Bank, Almaty Author-Name: Olena Lytvyn Author-Name-First: Olena Author-Name-Last: Lytvyn Author-Email: alina@nbi.com.ua Author-Workplace-Name: Ukrainian State University of Finance and International Trade, Kiev Author-Name: Lyaziza Sabyrova Author-Name-First: Lyaziza Author-Name-Last: Sabyrova Author-Email: lsabyrova@cear.kz Author-Workplace-Name: RAKURS Center for Economic Analysis, Almaty Title: Crisis Response Policies in Russia, Ukraine, Kazakhstan and Belarus – Stock-Taking and Comparative Assessment Abstract: This study focuses on comparing and assessing the policy measures Russia, Ukraine, Kazakhstan and Belarus took in response to the impact of the U.S. subprime crisis (2007) and of the Great Recession (2008–2009). Being most dependent on cross-border capital inflows, Kazakhstan was most affected by, and reacted most intensively to, the subprime turmoil, followed by Russia. In contrast, all four countries responded to the second crisis with a panoply of fiscal, monetary, exchange rate and other measures. After sharp across-the-board devaluations in late 2008 and early 2009, and accompanying the recovery of the oil price, the currencies of the oil exporters Russia and Kazakhstan soon stabilized, whereas the currencies of the oil importers Ukraine and Belarus stayed under pressure – giving rise to intermittent interventions. Opposing – if hitherto successful – macrofinancial restabilization strategies have been conducted: Oil exporters employed their oil stabilization funds to deliver generous fiscal stimuli, whereas oil importers took recourse to IMF Stand-By Arrangements and exchange controls. With respect to the banking turmoil and restructuring since late 2007, the following can be concluded: Although measuring recapitalization costs is not unproblematic, systems dominated by state-owned banks (Russia, Belarus) appear to have fared better in precisely this time span in the sense that they have incurred less crisis-triggered recapitalization spending than systems dominated by private domestic or even foreign-owned capital (Kazakhstan, Ukraine). One of the reasons that might explain this result is the (with hindsight) excessive pre-crisis credit booms in the privately dominated banking systems, financed largely from abroad, coupled with the possibly even weaker rule of law outside the sphere of direct state control in the CIS region. Classification-JEL: E52, G21, H30, P34 Keywords: Crisis response policies, fiscal stimulus, quasi-fiscal policy, Russia, Ukraine, Kazakhstan, Belarus, oil stabilization fund, macrofinancial stabilization, directed lending, related-party lending, banking regulation, recapitalization, rule of law Pages: 48-77 Year: 2010 Issue: 4 File-URL: https://www.oenb.at/dam/jcr:77dc4ef2-ab6f-4eec-8505-06ac47117278/feei_2010_q4_studies_01_tcm16-214816.pdf File-Format: application/pdf File-Size: 589 kb Handle: RePEc:onb:oenbfi:y:2010:i:4:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Sandra Dvorsky Author-Name-First: Sandra Author-Name-Last: Dvorsky Author-Email: sandra.dvorsky@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, European Affairs and International Financial Organizations Divison Author-Workplace-Homepage: http://www.oenb.at Author-Name: Thomas Scheiber Author-Name-First: Thomas Author-Name-Last: Scheiber Author-Email: thomas.scheiber@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5247 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: Euro Survey of Spring 2010: Sovereign Debt Crisis Left Traces in CESEE Households' Sentiment, Foreign Currency Portfolios Broadly Unchanged Abstract: The OeNB Euro Survey’s spring wave was conducted in May and June 2010 at a time of highly exceptional circumstances in the EU and in the euro area, which appear to have had a significant effect on CESEE households’ trust in the euro. However, it can be assumed that the reported low trust levels were extraordinary and of only temporary nature. Nevertheless, confidence in the euro was still “ahead” of that in the respective local currencies. By contrast, trust in the EU as an institution remained rather high in almost all countries surveyed and continued to be substantially higher than trust in domestic governments. Despite worsened results from some sentiment-related questions, people did not adjust their foreign currency portfolios. The deposit substitution index (DSI) as well as the projected amount of euro cash holdings per capita remained broadly unchanged throughout the region. Classification-JEL: D14, E41, E50, G01 Keywords: Euroization, global financial crisis, portfolio decision, survey data, Central, Eastern and Southeastern Europe Pages: 78-89 Year: 2010 Issue: 4 File-URL: https://www.oenb.at/dam/jcr:725eacd8-c03a-4262-b47e-27363a41d9d7/feei_2010_q4_studies_02_tcm16-214817.pdf File-Format: application/pdf File-Size: 656 kb Handle: RePEc:onb:oenbfi:y:2010:i:4:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Jesús Crespo Cuaresma Author-Name-First: Jesús Crespo Author-Name-Last: Cuaresma Author-Email: jcrespo@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business, Institute for Fiscal and Monetary Policy Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Regional Convergence in Europe and the Role of Urban Agglomerations Abstract: Using data for EU-27 NUTS 2 regions and major cities, we evaluate empirically the role of urban growth spillovers as a determinant of income dynamics at the regional level. We go beyond the empirically well documented static relationship between national income and productivity in urban agglomerations. We use spatial regression models to quantify the effect of city growth spillovers on neighboring regions and assess the interrelationship between urban and regional growth. Our results indicate that urban growth spillovers play an important role in explaining differences in per capita income growth across European regions: Strong income growth in urban agglomerations provides an additional growth bonus for neighboring regions. This effect is very homogeneous across regions in Western and Eastern Europe. Our results indicate that the industrial composition of the agglomeration also matters for regional growth: Regions hosting urban agglomerations with a relatively high specialization in the primary sector as well as in fuels and chemicals tend to experience lower rates of economic growth. Our study is particularly relevant for policymakers since it indicates a trade-off between fostering income convergence at the regional level on the one hand and spurring national growth on the other hand. Classification-JEL: C21, R11, O18, O52 Keywords: Determinants of economic growth, European regions, urban growth, spatial error Pages: 63-78 Year: 2010 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:b37743b8-f261-403e-aa08-9e81f1f7e6ae/feei_2010_q3_studies_crespo_tcm16-204831.pdf File-Format: application/pdf File-Size: 591 kb Handle: RePEc:onb:oenbfi:y:2010:i:3:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Reiner Martin Author-Name-First: Reiner Author-Name-Last: Martin Author-Email: reiner.martin@ecb.int Author-Workplace-Name: European Central Bank Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: Measuring Competition in CESEE: Stylized Facts and Determinants across Countries and Sectors Abstract: Using the Amadeus firm-level database, this paper examines sector-specific indicators of competition in a number of Central, Eastern and Southeastern European (CESEE) countries. More specifically, it provides an overview of two key indicators of the level of competition, namely profit margins and the concentration of sales, across 27 industries in 13 CESEE countries. We discuss the advantages and disadvantages of various indicators of competition that are commonly used in the literature and explain why we use the aforementioned proxy variables for the intensity2 of competition. The paper then provides a cross-country and cross-sector overview of the differences in these competition indicators for the period from 1999 to 2007 before empirically identifying the main determinants of these differences. We find large differences between individual sectors, while differences between countries are considerably smaller. Profit margins and concentration ratios are notably high in communications, finance, housing, and miscellaneous goods and services. Manufacturing achieves, on average, lower profit margins and concentration ratios than other sectors. Over time, profit margins have increased in most sectors as a result of the rapid catching-up process in the CESEE region, while concentration ratios have declined, suggesting that the region is still in a phase of rapid market expansion. We observe some indication of an increase in competition in only a handful of sectors, e.g. housing and utilities, passenger transport, and information services. At the same time, in many retail trade sectors and in financial services, both profit margins and concentration ratios displayed disproportionately high growth in our sample period. All remaining sectors show diverging trends for both indicators. Classification-JEL: C23, D40, L11, L52 Keywords: Competition, Central, Eastern and Southeastern Europe, profit margins, firm-level data Pages: 38-62 Year: 2010 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:380522f3-7c8d-45ff-8fe2-65ea89cd007b/feei_2010_q3_studies_feldkircher_tcm16-204834.pdf File-Format: application/pdf File-Size: 690 kb Handle: RePEc:onb:oenbfi:y:2010:i:3:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Sándor Gardó Author-Name-First: Sándor Author-Name-Last: Gardó Author-Email: sandor.gardo@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Macrofinancial Stability in Croatia in the Wake of the Global Crisis: Risks and Policy Responses Abstract: After a long-lasting boom period, the global crisis put the resilience of Croatia’s economic and financial system to a severe test. The country has mastered this test so far. To some extent, the crisis also altered the country’s macrofinancial risk profile, although – against the backdrop of a high (and increasing) degree of currency substitution – credit risk continues to represent the main challenge to financial stability, in particular as bank clients’ rising debt-servicing problems started to translate into deteriorating credit quality. However, the banking sector’s shock-absorbing capacity – as indicated by still relatively high profitability and capitalization levels – the strategically-oriented presence of foreign banks and vigilant central bank measures were key in cushioning the spillovers of the global crisis and in alleviating vulnerabilities. Classification-JEL: F36, G2, O52, P2 Keywords: Financial stability, banking sector, financial crisis Pages: 6-37 Year: 2010 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:2348e834-4828-4a41-a24d-90d1d041783f/feei_2010_q3_studies_gardo_tcm16-204835.pdf File-Format: application/pdf File-Size: 722 kb Handle: RePEc:onb:oenbfi:y:2010:i:3:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Cecília Hornok Author-Name-First: Cecília Author-Name-Last: Hornok Author-Email: cphhoc01@ceu-budapest.edu Author-Workplace-Name: Central European University Title: Trade-Enhancing EU Enlargement and the Resurgence of East-East Trade Abstract: This article uses the episode of EU enlargement in 2004 as a natural experiment to identify the trade effect of declining border barriers across otherwise well integrated markets. Despite the fact that traditional trade policy measures (tariffs, quantitative restrictions) were already eliminated for most industrial goods in trade between the pre-enlargement EU-15 countries and eight of the countries that entered the EU in 2004 (EU-8)2 as well as among the EU-8 themselves, EU enlargement is shown to have caused a significant trade creation. The effect was most pronounced for trade among EU-8 countries, with a magnitude of 4% to 9% in ad valorem tariff-equivalent terms. Technology-intensive industries benefitted most strongly from enlargement, and a significant anticipatory effect can also be detected for 2003. These findings highlight the importance of non-policy related border barriers to trade and may also prove useful in assessing the potential for trade integration in the current EU candidate countries. Classification-JEL: F13, F15 Keywords: Trade costs, border effect, gravity estimation, European integration Pages: 79-94 Year: 2010 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:8b456b8e-849b-419b-bce4-e62c9b068fb7/feei_2010_q3_studies_hornok_tcm16-204836.pdf File-Format: application/pdf File-Size: 624 kb Handle: RePEc:onb:oenbfi:y:2010:i:3:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Markus Eller Author-Name-First: Markus Author-Name-Last: Eller Author-Email: markus.eller@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Michael Frömmel Author-Name-First: Michael Author-Name-Last: Frömmel Author-Email: michael.froemmel@UGent.be Author-Workplace-Name: Ghent University, Department of Financial Economics Author-Name: Nora Srzentic Author-Name-First: Nora Author-Name-Last: Srzentic Title: Private Sector Credit in CESEE: Long-Run Relationships and Short-Run Dynamics Abstract: This paper provides an analysis of the long- and short-run determinants of domestic bank lending to the private sector in eleven Central, Eastern and Southeastern European (CESEE) countries. We identify regime shifts for the observation period of 1997 to 2009, and the resulting subperiods are characterized by a different impact of the credit growth determinants. Estimating a credit demand equation as the long-term relation, we find – for most countries – a cointegration relationship with economic activity. We then examine the short-run dynamics by applying both a linear and a nonlinear (Markov-switching) error correction model. While there is a significant correlation between credit growth and supply factors, namely bank deposits and banks’ equity, its impact differs across the subperiods. Identified regime switches in the short-run relation are driven primarily by differences in the credit supply factors rather than by the adjustment toward the credit equilibrium as the error correction coefficients show only slight cross-regime differences. In terms of regime switching, we distinguish between two groups of countries: those with one dominant regime, which is only briefly interrupted by a second one, and those with two equally pronounced regimes. In the latter group, a marked switch occurred just before or when the global crisis hit the CESEE region in the latter part of 2008. This regime shift is associated with a decreased correlation between deposit and credit growth. Classification-JEL: C3, E4, E5 Keywords: Bank lending to the private sector, transition economies, credit dynamics, Markovswitching error correction model Pages: 50-78 Year: 2010 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:a0fa640d-141b-49b4-b104-df3fa80b1418/feei_2010_q2_studies_eller_tcm16-193839.pdf File-Format: application/pdf File-Size: 2178 kb Handle: RePEc:onb:oenbfi:y:2010:i:2:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Sandra Dvorsky Author-Name-First: Sandra Author-Name-Last: Dvorsky Author-Email: sandra.dvorsky@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, European Affairs and International Financial Organizations Divison Author-Workplace-Homepage: http://www.oenb.at Author-Name: Thomas Scheiber Author-Name-First: Thomas Author-Name-Last: Scheiber Author-Email: thomas.scheiber@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5247 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: Real Effects of Crisis Have Reached CESEE Households: Euro Survey Shows Dampened Savings and Changes in Borrowing Behavior Abstract: Evidence from the 2009 fall wave of the OeNB Euro Survey in Central, Eastern and Southeastern Europe (CESEE) provides indications of the real effects that the economic downturn has had on CESEE households since the crisis arrived in the region. On the asset side, we find that the ability of households to save has been dampened, which may be explained, at least partly, by the fact that many households had to use the deposits they withdrew to finance their current expenses. On the liability side, we find that a substantial share of CESEE households indebted in foreign currency has already reacted to the crisis, be it by converting their loans, be it by renegotiating their credit terms. All in all, the overall degree of euroization of households’ financial assets has remained virtually unchanged throughout the crisis and can be expected to increase even further: euro deposits are perceived as increasingly attractive despite higher interest rates offered for deposits in local currency. At the same time, the crisis may have increased households’ perception of the exchange rate risk associated with foreign currency loans. As a consequence, the appetite for foreign currency loans may be expected to keep declining in the years ahead, which would go hand in hand with recent efforts on the regulatory side. Classification-JEL: D14, E41, E50, G01 Keywords: Euroization, global financial crisis, portfolio decision, foreign currency loans, Pages: 79-90 Year: 2010 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:33835f7f-50d1-4ad0-8d68-1929fef0c335/feei_2010_q2_studies_dvorsky_tcm16-193841.pdf File-Format: application/pdf File-Size: 1727 kb Handle: RePEc:onb:oenbfi:y:2010:i:2:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Sándor Gardó Author-Name-First: Sándor Author-Name-Last: Gardó Author-Email: sandor.gardo@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Bank Governance and Financial Stability in CESEE: A Review of the Literature Abstract: This article explores the interrelationship between bank governance and financial stability in general and in the ten Central, Eastern and Southeastern European EU Member States (CESEE MS) in particular. Agency theory is used to illustrate that banks are engaged in multiple agency relationships. Within a conceptual framework, five main dimensions of bank governance are identified and analyzed, namely internal, external, corporate, institutional and international governance. Based on the pertinent literature, we subsequently review the agency problems the CESEE MS faced in their banking sectors on their way to installing efficient and sound banking systems in the 1990s. Their experience holds important lessons for the completion of banking reform in less advanced transition economies. Most importantly, banking sector restructuring should go hand in hand with a redesign of the incentive structures for all the relevant actors in the system. This seems to be a prerequisite for achieving and maintaining financial stability and improving the efficiency of capital allocation and economic growth prospects. Overall, the CESEE MS experience also provides useful insights for dealing with the ramifications of the current global financial crisis. Classification-JEL: G01, G14, G28, G34 Keywords: Governance, financial stability, transition economies Pages: 6-31 Year: 2010 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:cc35c497-79eb-450e-a27a-054a68494792/feei_2010_q1_studies_gardo_tcm16-186369.pdf File-Format: application/pdf File-Size: 268 kb Handle: RePEc:onb:oenbfi:y:2010:i:1:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Jesús Crespo Cuaresma Author-Name-First: Jesús Crespo Author-Name-Last: Cuaresma Author-Email: jcrespo@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business, Institute for Fiscal and Monetary Policy Author-Name: Tomáš Slacík Author-Name-First: Tomáš Author-Name-Last: Slacík Author-Email: tomas.slacik@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Could Markets Have Helped Predict the Puzzling Exchange Rate Path in CESEE Countries during the Current Crisis? Abstract: In the present paper we examine whether financial markets could have helped predict exchange rates in selected Central, Eastern and Southeastern European (CESEE) economies, namely the Czech Republic, Hungary and Poland, during the current financial crisis. To this end, we derive risk-neutral densities from the implied volatilities of FX options, which approximate market expectations about exchange rate developments. Based on these risk-neutral density estimates, we then assess the out-of-sample predictive power of indicators. The forecasting results suggest that models based on FX options are inferior to the random walk in terms of the forecasting error, confirming a stylized fact about the short-term forecasting of exchange rates. Yet, we also find that, for the Czech Republic and Poland, risk-neutral densities contain useful information on the direction of change of the exchange rate. Classification-JEL: C11, C32, C53, F37, G14, G17 Keywords: Options, implied volatility, risk-neutral density, exchange rate forecasting, Bayesian model averaging, subprime crisis, emerging markets Pages: 32-48 Year: 2010 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:38138430-5118-4d7e-8d9b-f2825af5e625/feei_2010_q1_studies_crespo_tcm16-186370.pdf File-Format: application/pdf File-Size: 601 kb Handle: RePEc:onb:oenbfi:y:2010:i:1:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Peter Backé Author-Name-First: Peter Author-Name-Last: Backé Author-Email: peter.backe@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5212 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Sonsoles Gallego Author-Name-First: Sonsoles Author-Name-Last: Gallego Author-Email: sonsoles.gallego@bde.es Author-Workplace-Name: Banco de España Author-Name: Sándor Gardó Author-Name-First: Sándor Author-Name-Last: Gardó Author-Email: sandor.gardo@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Reiner Martin Author-Name-First: Reiner Author-Name-Last: Martin Author-Email: reiner.martin@ecb.int Author-Workplace-Name: European Central Bank Author-Name: Luis Molina Author-Name-First: Luis Author-Name-Last: Molina Author-Email: lmolina@bde.es Author-Workplace-Name: Banco de España Author-Name: José Maria Serena Author-Name-First: José Maria Author-Name-Last: Serena Author-Email: josemaria.serena@bde.es Author-Workplace-Name: Banco de España Title: How Did the Global Financial Crisis Affect the CESEE Region and Latin America? – A Comparative Analysis Abstract: This paper examines the impact the global economic and financial crisis had on two distinct emerging market regions, namely Central, Eastern and Southeastern Europe (CESEE) and Latin America. Similar to other emerging economies, both regions were initially surprisingly resilient as the crisis gathered momentum. They were, however, both strongly affected by the sharp retrenchment in capital inflows and the collapse of global demand that followed the demise of Lehman Brothers in September 2008. Notwithstanding differences in the channels of transmission and the intensity of the propagation, the short-term outcome in 2009 was similar for both regions: one of the deepest recessions in decades. At the same time, the worst case scenario of a fully-fledged financial meltdown occurred neither in the CESEE region nor in Latin America. Classification-JEL: F15, F32, G01, G15, G18, H30 Keywords: Financial crisis, Central, Eastern and Southeastern Europe, Latin America Pages: 49-66 Year: 2010 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:10711ea8-b3e2-4f89-8d53-2f97a562ca2a/feei_2010_q1_studies_latam_tcm16-186371.pdf File-Format: application/pdf File-Size: 333 kb Handle: RePEc:onb:oenbfi:y:2010:i:1:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Joseph F. Francois Author-Name-First: Joseph F. Author-Name-Last: Francois Author-Email: joseph.francois@jku.at Author-Workplace-Name: Johannes Kepler University Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: Trade, Economic Structure and the Great Recession: The Example of Central, Eastern and Southeastern Europe Abstract: As measured by the most recent monthly data, the trade collapse that had started in late 2008 has shifted into a rapid recovery phase. The simplest explanation that fits the facts is that trade has followed the sectoral composition of the recession. The recession has caused particularly strong declines of trade flows in heavy manufacturing, i.e. machinery, vehicles and related raw materials. This has translated into a deep manufacturing recession and an even stronger drop in trade. In particular, for CESEE countries these sectors are far more important in the composition of trade than they are in the composition of GDP. Classification-JEL: F14, F15, O52 Keywords: trade collapse, industrial structure, Central, Eastern and Southeastern Europe Pages: 67-72 Year: 2010 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:dc66c3f7-329b-4149-9b82-748af05151f0/feei_2010_q1_studies_woerz_tcm16-186372.pdf File-Format: application/pdf File-Size: 109 kb Handle: RePEc:onb:oenbfi:y:2010:i:1:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Dániel Holló Author-Name-First: Dániel Author-Name-Last: Holló Author-Email: hollod@mnb.hu Author-Workplace-Name: Magyar Nemzeti Bank, Title: Estimating Price Elasticities on the Hungarian Consumer Lending and Deposit Markets: Demand Effects and Their Possible Consequences Abstract: In this paper, we use bank product and consumer level data and estimate a random coefficient logit model (RCL) to calculate price elasticities on the Hungarian consumer lending and retail deposit markets in line with the most recent developments in the literature on discrete choice demand estimation. The findings indicate that, on average, demand for domestic currency-denominated loans is more price sensitive than demand for foreign currency loans. The results also suggest that there is an asymmetric substitution effect toward foreign currency- denominated loans as a result of a price increase of domestic currency-denominated loans (i.e. a rise in interest rates on HUF-denominated loans increases the demand for foreign currency loans more than a rise in interest rates on foreign currency loans increases the demand for HUF-denominated loans). Finally, as the substitution effect toward foreign currency-denominated loans is stronger, it might weaken the effectiveness of the interest and exchange rate channels of monetary transmission. Classification-JEL: E52, G21, L10 Keywords: Price elasticity of demand, random coefficient logit model, monetary policy, financial stability Pages: 73-89 Year: 2010 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:c762477c-7a82-4b7f-a41b-7019a0846d82/feei_2010_q1_studies_hollo_tcm16-186373.pdf File-Format: application/pdf File-Size: 299 kb Handle: RePEc:onb:oenbfi:y:2010:i:1:b:5 Template-Type: ReDIF-Article 1.0 Author-Name: Peter Mooslechner Author-Name-First: Peter Author-Name-Last: Mooslechner Author-Email: peter.mooslechner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Name: Doris Ritzberger-Grünwald Author-Name-First: Doris Author-Name-Last: Ritzberger-Grünwald Author-Email: doris.ritzberger-gruenwald@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5201 Author-Workplace-Fax: +43-1-40420-5299 Title: Taking Stock of Twenty Years of analysis and Research on CESEE at the OeNB Pages: 7-13 Year: 2009 Issue: 5 File-URL: https://www.oenb.at/dam/jcr:2f8be14d-82b2-4c38-95d5-6d60c07a846e/feei_2009_si_1_mooslechner_ritzberger_tcm16-143550.pdf File-Format: application/pdf File-Size: 198 kb Handle: RePEc:onb:oenbfi:y:2009:i:5:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Michael Landesmann Author-Name-First: Michael Author-Name-Last: Landesmann Title: Twenty Years of East-West Integration: Reflections on What We Have Learned Pages: 16-26 Year: 2009 Issue: 5 File-URL: https://www.oenb.at/dam/jcr:486a599d-0032-4746-87cd-a1d3fc6878ea/feei_2009_si_2_landesmann_tcm16-143551.pdf File-Format: application/pdf File-Size: 201 kb Handle: RePEc:onb:oenbfi:y:2009:i:5:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Marek Belka Author-Name-First: Marek Author-Name-Last: Belka Title: Five Years after EU Eastward Enlargement Pages: 27-31 Year: 2009 Issue: 5 File-URL: https://www.oenb.at/dam/jcr:24bd9fc3-ae51-482d-bf98-eb3856b85d47/feei_2009_si_3_belka_tcm16-143552.pdf File-Format: application/pdf File-Size: 149 kb Handle: RePEc:onb:oenbfi:y:2009:i:5:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Gertrude Tumpel-Gugerell Author-Name-First: Gertrude Author-Name-Last: Tumpel-Gugerell Title: Challenges of Monetary Integration in CEE Pages: 32-37 Year: 2009 Issue: 5 File-URL: https://www.oenb.at/dam/jcr:ecb5be50-c0b0-41a0-a236-f58813d4d6fa/feei_2009_si_4_tumpel-gugerell_tcm16-143553.pdf File-Format: application/pdf File-Size: 192 kb Handle: RePEc:onb:oenbfi:y:2009:i:5:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Elena Kohútiková Author-Name-First: Elena Author-Name-Last: Kohútiková Title: From the Koruna to the Euro Pages: 38-43 Year: 2009 Issue: 5 File-URL: https://www.oenb.at/dam/jcr:54d18f74-5b0a-4539-aaa2-22f218241deb/feei_2009_si_5_kohutikova_tcm16-143554.pdf File-Format: application/pdf File-Size: 151 kb Handle: RePEc:onb:oenbfi:y:2009:i:5:b:5 Template-Type: ReDIF-Article 1.0 Author-Name: Lajos Bokros Author-Name-First: Lajos Author-Name-Last: Bokros Title: Twenty (Five) Years of Banking Reform in CEE Pages: 44-47 Year: 2009 Issue: 5 File-URL: https://www.oenb.at/dam/jcr:ceab8bcf-42a1-42f7-96a3-18c8279a5a4e/feei_2009_si_6_bokros_tcm16-143555.pdf File-Format: application/pdf File-Size: 143 kb Handle: RePEc:onb:oenbfi:y:2009:i:5:b:6 Template-Type: ReDIF-Article 1.0 Author-Name: Marianne Kager Author-Name-First: Marianne Author-Name-Last: Kager Title: A Banker’s Take on Twenty Years of CEE Banking Sector Developments Pages: 48-54 Year: 2009 Issue: 5 File-URL: https://www.oenb.at/dam/jcr:4a2ecd20-05db-4cc8-a942-a619dab36cb9/feei_2009_si_7_kager_tcm16-143556.pdf File-Format: application/pdf File-Size: 164 kb Handle: RePEc:onb:oenbfi:y:2009:i:5:b:7 Template-Type: ReDIF-Article 1.0 Author-Name: Doris Ritzberger-Grünwald Author-Name-First: Doris Author-Name-Last: Ritzberger-Grünwald Author-Email: doris.ritzberger-gruenwald@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5201 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: Macroconvergence in CESEE Pages: 56-65 Year: 2009 Issue: 5 File-URL: https://www.oenb.at/dam/jcr:6560e854-2adb-4196-96e9-68a531eae20a/feei_2009_si_8_ritzberger-gruenwald_woerz_tcm16-143557.pdf File-Format: application/pdf File-Size: 203 kb Handle: RePEc:onb:oenbfi:y:2009:i:5:b:8 Template-Type: ReDIF-Article 1.0 Author-Name: Christian Ragacs Author-Name-First: Christian Author-Name-Last: Ragacs Author-Email: christian.ragacs@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Author-Name: Klaus Vondra Author-Name-First: Klaus Author-Name-Last: Vondra Author-Email: klaus.vondra@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Title: Austria’s Economic Activities in CESEE Pages: 66-72 Year: 2009 Issue: 5 File-URL: https://www.oenb.at/dam/jcr:3e104e8d-f020-4b6e-8477-15e2de83c48b/feei_2009_si_9_ragacs_vondra_tcm16-143558.pdf File-Format: application/pdf File-Size: 189 kb Handle: RePEc:onb:oenbfi:y:2009:i:5:b:9 Template-Type: ReDIF-Article 1.0 Author-Name: Peter Backé Author-Name-First: Peter Author-Name-Last: Backé Author-Email: peter.backe@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5212 Author-Workplace-Fax: +43-1-40420-5299 Title: The Monetary Integration of CESEE EU Member States: Achievements and Prospects Pages: 73-81 Year: 2009 Issue: 5 File-URL: https://www.oenb.at/dam/jcr:84baa968-30b7-4e06-af71-89fece02422e/feei_2009_si_10_backe_tcm16-143559.pdf File-Format: application/pdf File-Size: 202 kb Handle: RePEc:onb:oenbfi:y:2009:i:5:b:10 Template-Type: ReDIF-Article 1.0 Author-Name: Sandra Dvorsky Author-Name-First: Sandra Author-Name-Last: Dvorsky Author-Email: sandra.dvorsky@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, European Affairs and International Financial Organizations Divison Author-Workplace-Homepage: http://www.oenb.at Title: Central Banks in Transition: Legal and Institutional Challenges on the Way to EU Integration Pages: 82-91 Year: 2009 Issue: 5 File-URL: https://www.oenb.at/dam/jcr:180b078e-da93-4fe6-be71-3c8a6e080b3e/feei_2009_si_11_dvorsky_tcm16-143560.pdf File-Format: application/pdf File-Size: 180 kb Handle: RePEc:onb:oenbfi:y:2009:i:5:b:11 Template-Type: ReDIF-Article 1.0 Author-Name: Stephan Barisitz Author-Name-First: Stephan Author-Name-Last: Barisitz Author-Email: stephan.barisitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Title: Banking Sector Transformation in CESEE Pages: 92-100 Year: 2009 Issue: 5 File-URL: https://www.oenb.at/dam/jcr:85129597-5427-4834-993f-fda865a79556/feei_2009_si_12_barisitz_gardo_tcm16-143561.pdf File-Format: application/pdf File-Size: 198 kb Handle: RePEc:onb:oenbfi:y:2009:i:5:b:12 Template-Type: ReDIF-Article 1.0 Author-Name: Agnieszka Stazka-Gawrysiak Author-Name-First: Agnieszka Author-Name-Last: Stazka-Gawrysiak Author-Email: agnieszka.stazka@nbp.pl Author-Workplace-Name: Narodowy Bank Polski, Economic Institute, and Warsaw School of Economics Title: The Shock-Absorbing Capacity of the Flexible Exchange Rate in Poland Abstract: In recent years, numerous studies have analyzed the sources of exchange rate fluctuations in the context of the shock-absorbing capacity of flexible exchange rates. This paper analyzes, within a Structural Vector Autoregressive (SVAR) framework, the role of the flexible exchange rate in Poland over the past decade. Our contribution to the existing literature is twofold: First, we expand the prevailing SVAR models to include a financial market shock, defined as a stochastic change in a country’s risk premium. This appears to be highly relevant in the face of the ongoing global financial crisis. Second, we analyze to what extent the crisis has affected the stabilizing capacity of the z?oty/euro exchange rate. We find that the exchange rate has been a shock-absorbing rather than a shock-propagating instrument. We also demonstrate that – in line with our expectations – the contribution of financial market disturbances to exchange rate volatility has increased during the current global crisis. Classification-JEL: F31, C32, F33 Keywords: flexible exchange rate, euro area enlargement, financial crisis, SVAR Pages: 54-70 Year: 2009 Issue: 4 File-URL: https://www.oenb.at/dam/jcr:92d6534d-c5df-4bd9-9c49-89342ea311cf/feei_2009_q4_studies_stazkae_tcm16-144283.pdf File-Format: application/pdf File-Size: 826 kb Handle: RePEc:onb:oenbfi:y:2009:i:4:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Sandra Dvorsky Author-Name-First: Sandra Author-Name-Last: Dvorsky Author-Email: sandra.dvorsky@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, European Affairs and International Financial Organizations Divison Author-Workplace-Homepage: http://www.oenb.at Author-Name: Thomas Scheiber Author-Name-First: Thomas Author-Name-Last: Scheiber Author-Email: thomas.scheiber@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5247 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: CESEE Households amid the Financial Crisis: Euro Survey Shows Darkened Economic Sentiment and Changes in Savings Behavior Abstract: This paper utilizes information from the OeNB Euro Survey, which was launched in 2007 and is conducted twice a year in ten CESEE countries. The most recent survey wave of May to June 2009 focused on the impact of the financial crisis on CESEE households. Results show, first, that the financial crisis is in fact severely felt throughout the region: Respondents’ assessment of the current economic situation has deteriorated, trust in the future stability of local currencies has diminished, and trust in banks has declined in almost all countries surveyed. Second, the analysis of aggregate monetary statistics reveals that households reacted by adjusting their portfolios immediately, but developments differ substantially across countries. Third, in countries with more persistent withdrawals, euro cash in circulation, surprisingly, has declined because households resorted to dissaving to compensate for decreasing income. The authors conclude that although a massive shock has hit the region, no dramatic changes in the overall degree of euroization have occurred. This subdued impact is likely to signal that past stabilization efforts have paid off and that the economic and monetary policy measures taken in the course of t the crisis were successful. Classification-JEL: D14, E41, E50, G11 Keywords: Euroization, global financial crisis, portfolio decision, trust, survey data, Central, Eastern and Southeastern Europe Pages: 71-83 Year: 2009 Issue: 4 File-URL: https://www.oenb.at/dam/jcr:fd84b5f9-f00e-46cc-a008-84089be95d1c/feei_2009_q4_studies_dvorsky-scheiber-stix_tcm16-144284.pdf File-Format: application/pdf File-Size: 262 kb Handle: RePEc:onb:oenbfi:y:2009:i:4:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Jesús Crespo Cuaresma Author-Name-First: Jesús Crespo Author-Name-Last: Cuaresma Author-Email: jcrespo@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business, Institute for Fiscal and Monetary Policy Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Tomáš Slacík Author-Name-First: Tomáš Author-Name-Last: Slacík Author-Email: tomas.slacik@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: Simple but Effective: The OeNB’s Forecasting Model for Selected CESEE Countries Abstract: This paper describes the new forecasting tool used by the Oesterreichische Nationalbank (OeNB) to derive near-term forecasts for GDP and imports for five Central, Eastern and Southeastern European (CESEE) countries, namely Bulgaria, Croatia, the Czech Republic, Hungary and Poland. An error correction (EC) model is estimated separately for each country by means of seemingly unrelated regressions. Each country-specific macromodel consists of six structural cointegration relationships that model private consumption, investment, exports, imports, the nominal exchange rate and the nominal interest rate using an augmented Taylor rule. Using quarterly data as of the first quarter of 1995, we produce forecasts for GDP and imports with this model. Notwithstanding the dynamic nature of the transition process as well as the limited availability and, in some cases, quality of data, our structural model for the CESEE countries performs fairly well and we expect further gains in forecasting accuracy as more data become available and their quality improves. Classification-JEL: C32, C53, E17 Keywords: Error correction model, model validation, Central, Eastern and Southeastern Europe, Pages: 84-95 Year: 2009 Issue: 4 File-URL: https://www.oenb.at/dam/jcr:9b2d06e7-83ad-496c-b056-ce514aa63cbb/feei_2009_q4_studies_crespo_cuaresma-feldkircher-slacik-woerz_tcm16-144285.pdf File-Format: application/pdf File-Size: 515 kb Handle: RePEc:onb:oenbfi:y:2009:i:4:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Aaron Mehrotra Author-Name-First: Aaron Author-Name-Last: Mehrotra Author-Email: aaron.mehrotra@bof.fi Author-Workplace-Name: Bank of Finland, Institute for Economies in Transition Author-Name: Tomáš Slacík Author-Name-First: Tomáš Author-Name-Last: Slacík Author-Email: tomas.slacik@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Evaluating Inflation Determinants with a Money Supply Rule in Four Central and Eastern European EU Member States Abstract: We evaluate the monetary determinants of inflation in the Czech Republic, Hungary, Poland and Slovakia by using the McCallum rule for money supply. The deviation of actual money growth from the rule is included in the estimation of Phillips curves for the four economies by Bayesian model averaging. We find that money provides information about price developments over a horizon of ten quarters ahead, albeit the estimates are in most cases rather imprecise. Moreover, the effect of excessive monetary growth on inflation is mixed: It is positive for Poland and Slovakia, but negative for the Czech Republic and Hungary. Nevertheless, these results suggest that money does provide information about future inflation and that a McCallum rule could potentially be used in the future as an additional indicator of the monetary policy stance once the precision of the estimation improves with more data available. Classification-JEL: C11, C22, E31, E52, O52 Keywords: Determinants of inflation, McCallum rule, Phillips curve, Bayesian model averaging, Pages: 6-21 Year: 2009 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:0cd124c6-8484-454b-aad6-1f663e95c8ee/feei_2009_q3_studies_mehrotra_tcm16-141351.pdf File-Format: application/pdf File-Size: 783 kb Handle: RePEc:onb:oenbfi:y:2009:i:3:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Jesús Crespo Cuaresma Author-Name-First: Jesús Crespo Author-Name-Last: Cuaresma Author-Email: jcrespo@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business, Institute for Fiscal and Monetary Policy Author-Name: Gernot Doppelhofer Author-Name-First: Gernot Author-Name-Last: Doppelhofer Author-Email: gernot.doppelhofer@nhh.no Author-Workplace-Name: Norwegian School of Economics and Business Administration Author-Name: Martin Feldkircher Author-Name-First: Martin Author-Name-Last: Feldkircher Author-Email: martin.feldkircher@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Economic Growth Determinants for European Regions: Is Central and Eastern Europe Different? Abstract: We evaluate the monetary determinants of inflation in the Czech Republic, Hungary, Poland and Slovakia by using the McCallum rule for money supply. The deviation of actual money growth from the rule is included in the estimation of Phillips curves for the four economies by Bayesian model averaging. We find that money provides information about price developments over a horizon of ten quarters ahead, albeit the estimates are in most cases rather imprecise. Moreover, the effect of excessive monetary growth on inflation is mixed: It is positive for Poland and Slovakia, but negative for the Czech Republic and Hungary. Nevertheless, these results suggest that money does provide information about future inflation and that a McCallum rule could potentially be used in the future as an additional indicator of the monetary policy stance once the precision of the estimation improves with more data available. Classification-JEL: C11, C22, E31, E52, O52 Keywords: Determinants of inflation, McCallum rule, Phillips curve, Bayesian model averaging, Central and Eastern Europe Pages: 22-37 Year: 2009 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:5ef5413d-9b71-4aa7-93af-9cfbc6892c79/feei_2009_q3_studies_crespo_tcm16-141352.pdf File-Format: application/pdf File-Size: 835 kb Handle: RePEc:onb:oenbfi:y:2009:i:3:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Stephan Barisitz Author-Name-First: Stephan Author-Name-Last: Barisitz Author-Email: stephan.barisitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Title: Macrofinancial Developments and Systemic Change in CIS Central Asia Abstract: In CIS Central Asia, the institutional economic framework is found to be remarkably heterogeneous across the region: Kazakhstan and the Kyrgyz Republic are market-oriented reforming economies, Tajikistan and Uzbekistan can be characterized as hybrid economies, while Turkmenistan remains largely centrally-planned. All CIS Central Asian countries – except for Turkmenistan – have introduced current account convertibility, if obstructed by trade restrictions in the Uzbek case. Kazakhstan liberalized its capital account in early 2007. Energy and other export proceeds, remittance inflows, FDI and other capital inflows and credit booms have contributed to the region’s strong economic expansion, at least up to 2007. In this period, Central Asia has pragmatically coped with the potentially conflicting dual goals of combating inflation while preventing too strong currency appreciation (to support competitiveness). The global inflationary spike and the world financial crisis substituted a new policy dilemma for the old one: whether to give priority to fighting inflation or to bailing out credit institutions. With its relatively large banking sector, Kazakhstan was the only country really struck by this dilemma. The Kazakh authorities heavily intervened and partially nationalized the sector, which has, however, not prevented nationalized banks from defaulting. At the other extreme, the Turkmen and Uzbek financial sectors have remained insulated from international financial contagion, albeit at high costs in terms of economic development and income. Classification-JEL: E52, E63, G21, G28, P34 Keywords: Banking, financial stability, monetary policy, exchange rate regime, Central Asia, Pages: 38-61 Year: 2009 Issue: 3 File-URL: https://www.oenb.at/dam/jcr:18897e36-a38d-43f1-aa66-b47099a74af3/feei_2009_q3_studies_barisitz_tcm16-141353.pdf File-Format: application/pdf File-Size: 587 kb Handle: RePEc:onb:oenbfi:y:2009:i:3:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Peter Backé Author-Name-First: Peter Author-Name-Last: Backé Author-Email: peter.backe@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5212 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Franz Schardax Author-Name-First: Franz Author-Name-Last: Schardax Author-Email: franz.schardax@iqam.eu Author-Workplace-Name: Institut für Quantitatives Asset Management (IQAM) Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5232 Author-Workplace-Fax: +43-1-40420-5299 Title: European and Non-European Emerging Market Currencies: Forward Premium Puzzle and Fundamentals Abstract: 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. Classification-JEL: F37, G14, G15 Keywords: Forward bias, emerging market currencies, forecasting Pages: 56-66 Year: 2009 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:24c5203f-616b-4ee1-a038-ba030616679d/feei_2009_q2_backe_tcm16-137027.pdf File-Format: application/pdf File-Size: 206 kb Handle: RePEc:onb:oenbfi:y:2009:i:2:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Sandra Dvorsky Author-Name-First: Sandra Author-Name-Last: Dvorsky Author-Email: sandra.dvorsky@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, European Affairs and International Financial Organizations Divison Author-Workplace-Homepage: http://www.oenb.at Author-Name: Thomas Scheiber Author-Name-First: Thomas Author-Name-Last: Scheiber Author-Email: thomas.scheiber@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5247 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: The 2008 Fall Wave of the OeNB Euro Survey – A First Glimpse of Households’ Reactions to the Global Financial Crisis Abstract: 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 uro Survey. Classification-JEL: E41, E50, D14 Keywords: Euroization, global financial crisis, economic sentiment, survey data, CEE, SEE Pages: 1-11 Year: 2009 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:2f8bcf2e-c843-48ec-a7af-9b7a703c1bcb/oenb_euro_survey_feei_2009_2_final_tcm16-111733.pdf File-Format: application/pdf File-Size: 218 kb Handle: RePEc:onb:oenbfi:y:2009:i:2:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Markus Eller Author-Name-First: Markus Author-Name-Last: Eller Author-Email: markus.eller@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Fiscal Position and Size of Automatic Stabilizers in the CESEE EU Member States – Implications for Discretionary Measures Abstract: 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. Classification-JEL: E62, H6 Keywords: Automatic stabilizers, fiscal space, output gap, cyclicality of fiscal policy, discretionary fiscal policy Pages: 78-84 Year: 2009 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:843212ec-3b9c-4ac1-9624-d0e822893a01/feei_2009_q2_eller_tcm16-137028.pdf File-Format: application/pdf File-Size: 126 kb Handle: RePEc:onb:oenbfi:y:2009:i:2:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Éva Katalin Polgár Author-Name-First: Éva Katalin Author-Name-Last: Polgár Author-Email: eva-katalin.polgar@ecb.int Author-Workplace-Name: European Central Bank Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: Trade and Wages: Winning and Losing Sectors in the Enlarged European Union Abstract: This paper contributes to the abundant but as yet inconclusive literature on the effect increased openness to trade has on wages by presenting an analysis of industry-level data for 21 service and manufacturing industries in 25 EU countries covering the period from 1995 to 2005. By applying a cross-country and industry-specific approach, it is possible to control for unobserved heterogeneity at both country and industry levels. While we are able to identify some – often resource-based – industries as winners of increased trade integration, we find very few and comparatively small effects in general. The relation between trade and wages tends to be weaker in Western European countries (EU-15) than in the EU Member States in Central and Eastern Europe (EU-10). At the same time, greater trade openness appears to have increased the influence wage levels abroad – as opposed to productivity – have on wage setting in the EU-15. By contrast, wages in the EU-10 have become less responsive to foreign wages and more realigned with productivity developments as a result of trade openness. Pages: 6-35 Year: 2009 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:f98ef6fa-c09b-41cd-b0ba-72ffc86e26bf/feei_2009_q1_polgar_woerz_tcm16-97950.pdf File-Format: application/pdf File-Size: 508 kb Handle: RePEc:onb:oenbfi:y:2009:i:1:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Wolfgang Pointner Author-Name-First: Wolfgang Author-Name-Last: Pointner Author-Email: wolfgang.pointner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Title: The Distributional Effects of Trade on Austrian Wages Abstract: To shed some light on the impact of the growing international division of labor on wages, this paper aims to assess the effect of trade on wage distribution in the Austrian manufacturing industry by estimating quantile wage regressions. In the regressions, we control for the share of imports and exports in the total production of industrial sectors and take into account the wage level of trading partners. A decomposition of wage changes from 1996 to 2002 shows that, while imports from low-wage countries had a dampening effect on manufacturing wages in Austria, wage growth was dampened above all by exports to high-wage countries. This could be interpreted as evidence for the “bazaar economy” hypothesis. Pages: 36-56 Year: 2009 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:cf457b2d-859a-4db5-90d4-7f3a682f6f9d/feei_2009_q1_pointner_tcm16-97949.pdf File-Format: application/pdf File-Size: 501 kb Handle: RePEc:onb:oenbfi:y:2009:i:1:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Katarzyna B. Budnik Author-Name-First: Katarzyna B. Author-Name-Last: Budnik Author-Email: Katarzyna.Budnik@nbp.pl Author-Workplace-Name: Narodowy Bank Polski Title: Rationality of Post-Accession Migration Abstract: Given large-scale Polish migration to the U.K. following EU enlargement in 2004, this study evaluates market efficiency in sorting Polish-born workers to the locations offering the highest returns to their skills. To establish whether Polish workers that emigrated to the U.K. did so on rational premises, wage regressions are run to identify the wage gains individuals may have expected to realize when migrating and when staying; and the Heckman (1979) self-selection model is used to tie up the migration decision with the decision to work and to identify returns to unobservable skills (e.g. motivation). Whereas the results support the rationality of migration from Poland to the U.K. (those who left gained in nominal and real terms), they are less conclusive about the optimality of staying (some of those who stayed might have earned more abroad). The outcomes suggest that the anticipated wage gains do not fully explain the intensity of observed migration and underline the importance of including nonincome factors, i.e. social costs, in exploring post-accession migration. Pages: 57-83 Year: 2009 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:9001c172-2f83-4656-b407-993d452f91e6/feei_2009_q1_budnik_tcm16-97946.pdf File-Format: application/pdf File-Size: 634 kb Handle: RePEc:onb:oenbfi:y:2009:i:1:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Adalbert Winkler Author-Name-First: Adalbert Author-Name-Last: Winkler Author-Email: a.winkler@frankfurt-school.de Author-Workplace-Name: Frankfurt School of Finance & Management, Title: Southeastern Europe: Financial Deepening, Foreign Banks and Sudden Stops in Capital Flows Abstract: Over recent years, rapid financial deepening has been observed in Southeastern Europe. While originally welcomed as a sign of financial development spurring growth, macrofinancial stability concerns emerged as inflationary pressures rose and current account deficits came close to or surpassed double-digit levels. However, until autumn 2008, stability risks remained contained. Since then, Southeastern European countries appear to have been confronted with a sudden stop of capital flows, creating an Asian-crisis-like scenario. While this seems to vindicate warnings that financial deepening had taken an unsustainable course, the drying up of capital flows has largely been reflecting contagion from the financial turmoil in mature markets. Against this background, the most recent events indicate that the strategy of fostering financial development based on fit and proper foreign banks does not automatically provide a guarantee for financial stability. Pages: 84-97 Year: 2009 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:139a35ef-c6af-405b-925e-b5f145494ab3/feei_2009_q1_winkler_tcm16-97953.pdf File-Format: application/pdf File-Size: 511 kb Handle: RePEc:onb:oenbfi:y:2009:i:1:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Balázs Égert Author-Name-First: Balázs Author-Name-Last: Égert Author-Email: Balazs.EGERT@oecd.org Author-Workplace-Name: OECD Author-Name: Reiner Martin Author-Name-First: Reiner Author-Name-Last: Martin Author-Email: reiner.martin@ecb.int Author-Workplace-Name: European Central Bank Title: Real Estate, Construction and Growth in Central and Eastern Europe: Impact on Competitiveness? Abstract: This paper studies recent developments in the construction sector in Central and Eastern Europe (CEE) against a number of benchmarks including a set of mature OECD countries. In addition to analyzing the recent rapid increase in the importance of the construction sector in CEE countries, the paper also asks whether rapid growth in this sector may have negative implications for the long-term competitiveness of the CEE economies. In order to address this question, we look at negative Dutch disease-style repercussions on the manufacturing sector by the recent strong growth in construction in the CEE countries. We find some tentative evidence for such effects although the strong growth of the construction sector in the CEE countries is a rather recent phenomenon. Pages: 52-72 Year: 2008 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:88533711-97db-476a-9579-6e4a953cf004/feei_2008_2_egert_martin_tcm16-95554.pdf File-Format: application/pdf File-Size: 359 kb Handle: RePEc:onb:oenbfi:y:2008:i:2:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Zoltan Walko Author-Name-First: Zoltan Author-Name-Last: Walko Author-Email: zoltan.walko@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: Housing Loan Developments in the Central and Eastern European EU Member States Abstract: Over the past few years, lending to households2 has grown substantially in most Central, Eastern and Southeastern European (CESEE) countries, with housing loans accounting for the bulk of new lending in many of them. The pace of credit growth has raised concerns about macroeconomic and financial stability, and has been a topic often addressed by economic analysis on the region. The rapid development of housing loans in CESEE has assumed an additional dimension since mid-2007, when the problems in the U.S. housing market started to culminate. Given the topicality of the issue, this short analysis reviews recent major developments of housing loans in the ten Central and Eastern European EU Members States(CEE-MS) and outlines its major driving forces, associated risks, and policy implications, covering the period from end-2004 to end-2007. Pages: 73-82 Year: 2008 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:931c1331-7898-4be0-832e-a0de3f87646e/feei_2008_2_walko_tcm16-95548.pdf File-Format: application/pdf File-Size: 233 kb Handle: RePEc:onb:oenbfi:y:2008:i:2:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Sandra Dvorsky Author-Name-First: Sandra Author-Name-Last: Dvorsky Author-Email: sandra.dvorsky@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, European Affairs and International Financial Organizations Divison Author-Workplace-Homepage: http://www.oenb.at Author-Name: Thomas Scheiber Author-Name-First: Thomas Author-Name-Last: Scheiber Author-Email: thomas.scheiber@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5247 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: The OeNB Euro Survey in Central, Eastern and Southeastern Europe - The 2008 Spring Wave Update Abstract: This paper presents the main results of the second wave of the OeNB Euro Survey conducted in Central, Eastern and Southeastern Europe (CESEE) in May/June 2008. The results on foreign currency-denominated assets, both cash and deposits, broadly confirm the picture obtained from the first wave of the survey, namely that the euro plays a dominant role throughout the CESEE region. New evidence on foreign currency loans (FCLs) reveals that the share of FCLs in total household loans is substantial, both in Central and Eastern Europe (CEE) and Southeastern Europe (SEE). The article for the first time presents survey results on people’s general economic sentiment, comprising their assessment of the present and future economic situation, perceived and expected inflation and expected exchange rate developments. Finally, the paper provides an update on the expected date of euro adoption in the EU Member States surveyed. Pages: 83-93 Year: 2008 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:2c4ec90d-c73f-46d6-b3e1-45383084e7f7/feei_2008_2_dvorsky_tcm16-95551.pdf File-Format: application/pdf File-Size: 227 kb Handle: RePEc:onb:oenbfi:y:2008:i:2:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Stephan Barisitz Author-Name-First: Stephan Author-Name-Last: Barisitz Author-Email: stephan.barisitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Name: Sándor Gardó Author-Name-First: Sándor Author-Name-Last: Gardó Author-Email: sandor.gardo@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Financial Sector Development in Serbia: Closing Ranks with Peers Abstract: After a major structural reshuffling in the early 2000s, the Serbian banking sector embarked on a rapid catching-up process. Against the background of an emerging credit boom, financial deepening has advanced rapidly in recent years, largely making up for the late onset of banking reform. However, the pace of convergence to the intermediation levels of Serbia’s Central, Eastern and Southeastern European peers as well as the high degree of euroization have also raised financial stability concerns, with credit and foreign exchange risks representing the main challenges. The sector’s high capitalization, its increasing efficiency, the predominance of foreign banks and the central bank’s efforts to rein in lending growth to more sustainable levels are important factors in alleviating financial stability concerns. Profitability is still comparatively low, but increasing. Pages: 94-119 Year: 2008 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:89fbcb7d-aa1a-423c-b4c9-cd11eb15d6bb/feei_2008_2_barisits_gardo_tcm16-95549.pdf File-Format: application/pdf File-Size: 568 kb Handle: RePEc:onb:oenbfi:y:2008:i:2:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Sandra Dvorsky Author-Name-First: Sandra Author-Name-Last: Dvorsky Author-Email: sandra.dvorsky@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, European Affairs and International Financial Organizations Divison Author-Workplace-Homepage: http://www.oenb.at Author-Name: Thomas Scheiber Author-Name-First: Thomas Author-Name-Last: Scheiber Author-Email: thomas.scheiber@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5247 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: Euroization in Central, Eastern and Southeastern Europe – First Results from the New OeNB Euro Survey Abstract: This article presents the main results of a new OeNB survey on foreign currency holdings, which was conducted for the first time in late 2007 in four Central and Eastern European (CEE) as well as seven Southeastern European (SEE) countries. The most important questions asked in the survey pertain to the currency composition and the amounts of foreign currency cash holdings and foreign currency deposits as well as to the motives for holding foreign currency cash and deposits. The authors conclude that the euro plays a dominant role in foreign currency-denominated assets (both cash and deposits) throughout the region. Pages: 48-60 Year: 2008 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:f63d9fff-490b-429a-8371-eeeafb372706/feei_2008_1_dvorsky_tcm16-86774.pdf File-Format: application/pdf File-Size: 174 kb Handle: RePEc:onb:oenbfi:y:2008:i:1:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Sándor Gardó Author-Name-First: Sándor Author-Name-Last: Gardó Author-Email: sandor.gardo@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Croatia: Coping with Rapid Financial Deepening Abstract: The Croatian banking sector underwent sweeping structural changes in the late 1990s and has remained relatively stable and profitable since then. Driven by brisk credit growth, financial deepening has continued rapidly in recent years, with the level of bank intermediation now being among the highest in Central, Eastern and Southeastern Europe. With regard to financial stability, relatively high credit and foreign exchange risks would appear to constitute the main challenges. However, the most recent slowdown in domestic credit growth and the sector’s relatively high shock-absorbing capacities, as indicated by quite high profitability and capitalization levels and the strategically oriented presence of foreign banks, help mitigate risk concerns. Yet, the increasing debt burden of both households and corporates requires careful monitoring. Pages: 61-81 Year: 2008 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:49b31ae7-59fc-4649-a09e-6b8ceb298b0b/feei_2008_1_gardo_tcm16-86777.pdf File-Format: application/pdf File-Size: 328 kb Handle: RePEc:onb:oenbfi:y:2008:i:1:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Josef Schreiner Author-Name-First: Josef Author-Name-Last: Schreiner Author-Email: josef.schreiner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Analysis Division Title: Labor Markets in Central, Eastern and Southeastern European EU Member States: General Trends and Migration Effects Abstract: This study gives an overview of labor market developments in Central, Eastern and Southeastern European (CESEE) EU Member States since their accession to the EU. By using data on net migration rates, the study also sheds light on the question whether migration in the aftermath of the EU enlargement has caused labor shortages and rising wage pressure in the region. The study finds virtually no evidence for this proposition. Net migration has been rather contained since 2004, with most of the countries actually showing higher immigration than emigration. Pages: 82-99 Year: 2008 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:d08dba21-ebcc-4349-9fb7-23bfd9ac5317/feei_2008_1_schreiner_tcm16-86780.pdf File-Format: application/pdf File-Size: 233 kb Handle: RePEc:onb:oenbfi:y:2008:i:1:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Thomas Reininger Author-Name-First: Thomas Author-Name-Last: Reininger Author-Email: Thomas.Reininger@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5234 Author-Workplace-Fax: +43-1-40420-5299 Title: Factors Driving Import Demand in Selected Central, Eastern and Southeastern European Countries Abstract: This study presents estimates of both country-specific and panel long-run import elasticities for EU Member States from Central, Eastern and Southeastern Europe and for Croatia and Turkey. The results confirm (1) the existence of a strong export-import link in most of the countries, (2) the prominent role of fixed investment in determining imports in nearly all countries, and (3) with some exceptions, the relatively smaller role of private consumption for imports. Furthermore, we use import elasticities to test for economic interlinkages within the EU-27 and find that economic integration is advanced. Pages: 100-125 Year: 2008 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:e0437197-1160-407e-9b52-2e876361e4fd/feei_2008_1_reininger_tcm16-86779.pdf File-Format: application/pdf File-Size: 369 kb Handle: RePEc:onb:oenbfi:y:2008:i:1:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Jesús Crespo Cuaresma Author-Name-First: Jesús Crespo Author-Name-Last: Cuaresma Author-Email: jcrespo@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business, Institute for Fiscal and Monetary Policy Author-Name: Tomáš Slacík Author-Name-First: Tomáš Author-Name-Last: Slacík Author-Email: tomas.slacik@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Determinants of Currency Crises: A Conflict of Generations? Abstract: Crespo Cuaresma and Slacík (2007) show that macroeconomic fundamentals are rather fragile determinants of currency crises under model uncertainty. The objective of the present follow-up study is to search for empirical support for the first- and second-generation models of currency crises in emerging economies using a larger dataset that includes crisis episodes of the 1980s and 1990s, while explicitly taking into account model uncertainty in a Bayesian manner. In line with the propositions made in the theoretical literature, our results suggest that crisis episodes in the 1980s were driven predominantly by adverse developments of macroeconomic fundamentals, while the results for crises in the 1990s might well be interpreted as empirical support for the second-generation type of crises. In addition, our estimation results stand in contradiction to the popular bipolar view and suggest that de facto intermediate exchange rate arrangements considerably reduce the risk of a speculative currency attack. Pages: 126-141 Year: 2008 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:c94146f6-e598-40ba-8007-7d3e60e6c883/feei_2008_1_cuaresma_tcm16-86737.pdf File-Format: application/pdf File-Size: 281 kb Handle: RePEc:onb:oenbfi:y:2008:i:1:b:5 Template-Type: ReDIF-Article 1.0 Author-Name: Jesús Crespo Cuaresma Author-Name-First: Jesús Crespo Author-Name-Last: Cuaresma Author-Email: jcrespo@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business, Institute for Fiscal and Monetary Policy Author-Name: Tomáš Slacík Author-Name-First: Tomáš Author-Name-Last: Slacík Author-Email: tomas.slacik@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: On the Determinants of Currency Crises: The Role of Model Uncertainty Abstract: In this contribution, we tackle explicitly the issue of model uncertainty in the framework of binary variable models of currency crises. Using Bayesian model averaging techniques, we assess the robustness of the explanatory variables proposed in the recent literature for both static and dynamic models. Our results indicate that the variables belonging to the set of macroeconomic fundamentals proposed by the literature are very fragile determinants of the occurrence of currency crises. Pages: 54-68 Year: 2007 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:27e8c307-7ec3-407c-98c8-6dd9a6f8a7a3/feei_2007_2_cuaresma_slacik_tcm16-79069.pdf File-Format: application/pdf File-Size: 354 kb Handle: RePEc:onb:oenbfi:y:2007:i:2:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Peter Backé Author-Name-First: Peter Author-Name-Last: Backé Author-Email: peter.backe@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5212 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Balázs Égert Author-Name-First: Balázs Author-Name-Last: Égert Author-Email: balazs.egert@oecd.org Author-Workplace-Name: Oesterreichische Nationalbank Author-Name: Zoltan Walko Author-Name-First: Zoltan Author-Name-Last: Walko Author-Email: zoltan.walko@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: Credit Growth in Central and Eastern Europe Revisited Abstract: This short study builds on earlier work by Égert, Backé and Zumer that analyzes data up to the end of 2004 and presents updated results on the deviations of private sector credit-to-GDP levels from their estimated equilibrium levels in the ten new Central, Eastern and Southeastern European EU Member States and in Croatia. The study uses new data on lending and its determinants until end-2006, which show that the levels of private sector credit to GDP continued to catch up with their long-run equilibrium levels in 2005 and 2006. Moreover, in a few countries, credit levels have already become fairly elevated relative to the underlying fundamentals. The paper discusses implications for policymaking in European emerging economies on the basis of these developments, focusing on the contributions the most important policy domains can make to managing dynamic financial sector deepening and its implications for macroeconomic developments. Pages: 69-77 Year: 2007 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:9a6bbc6a-c6e5-4604-a7a8-d478ca5cdb61/feei_2007_2_backe_egert_walko_tcm16-79072.pdf File-Format: application/pdf File-Size: 172 kb Handle: RePEc:onb:oenbfi:y:2007:i:2:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Stephan Barisitz Author-Name-First: Stephan Author-Name-Last: Barisitz Author-Email: stephan.barisitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Title: Exchange Rate Arrangements and Monetary Policy in Southeastern Europe: An Update (2004–2007) Abstract: This contribution updates a study published in 2004. Four of the ten countries analyzed (Bosnia and Herzegovina, Bulgaria, Croatia and the Republic of Macedonia) continue to feature hard pegs and nominal exchange rate anchors to the euro, while four others (Albania, Romania, Serbia and Turkey) conduct loosely managed floats, and – with the exception of Albania – introduced inflation targeting in 2005 or 2006. One country (Montenegro) and one nonsovereign territory (Kosovo) remain unilaterally euroized. Although all countries have upheld prudent monetary policies supported by strengthened fiscal positions, disinflation has slowed down in recent years. Recent upticks of inflation have been triggered by rising wage pressures, accelerating credit booms, food price spikes caused by extreme weather conditions, and increases in oil prices, utility tariffs and indirect taxes (with some of the latter being one-off factors). While the antiinflationary effectiveness of pegs continues to be satisfactory overall, the comparatively brief experience with inflation targeting has already delivered good results in some cases. In other cases it may yet be too early to judge. The impact of capital flows on monetary policy has been on the rise, creating new challenges, and triggering repercussions (in both ways) for inflation rates. Pages: 78-99 Year: 2007 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:6dad225e-cc8c-4e65-863f-bdeba3885bd4/feei_2007_2_barisitz_tcm16-79073.pdf File-Format: application/pdf File-Size: 249 kb Handle: RePEc:onb:oenbfi:y:2007:i:2:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Béla Szörfi Author-Name-First: Béla Author-Name-Last: Szörfi Author-Email: bela.szorfi@kopint-tarki.hu Author-Workplace-Name: Kopint-Tárki Economic Research Institute Title: Development and Regional Disparities – Testing the Williamson Curve Hypothesis in the European Union Abstract: In this paper I examine the relationship between within-country regional disparities and the development of nations in the enlarged European Union. Using panel data methods, I find evidence on the Williamson curve hypothesis, which says that disparities are lower in the early stages of development, peak in middle-income stages, but diminish again as a country becomes rich. More importantly, however, I point out that several factors have a greater influence on disparities than national income. Among these country-specific factors, the date of EU accession plays an outstanding role, being responsible for more than one-half of the differences in regional disparities between the Member States. Four other factors connected to EU membership are also possible reasons for the disparities: the economic transition process in the new Member States, Economic and Monetary Union, the funds made available by the EU Structural and Cohesion Funds as well as effective institutions. Pages: 100-121 Year: 2007 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:93114358-b0ab-43ac-8269-ee772c2460ac/feei_2007_2_szoerfi_tcm16-79074.pdf File-Format: application/pdf File-Size: 398 kb Handle: RePEc:onb:oenbfi:y:2007:i:2:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Balázs Égert Author-Name-First: Balázs Author-Name-Last: Égert Author-Email: balazs.egert@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Determinants of House Price Dynamics in Central and Eastern Europe Abstract: This paper examines the determinants of house price dynamics in Central and Eastern European (CEE) transition economies. While we emphasize the role of conventional fundamental factors, we also highlight the importance of transition-specific factors in house price dynamics in the region. We take a comparative approach by looking at various panels composed of eight CEE transition economies (Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Lithuania, Poland and Slovenia) and 19 industrialized non-CEE OECD countries. The use of these panels provides insights into the common determinants of house prices for the two groups of countries and, at the same time, allows us to identify the reasons for important differences in house price dynamics across countries. Overall, this paper shows that the growth in house prices in Central and Eastern Europe can be explained fairly well by the development of conventional underlying fundamentals and transition-specific factors. Pages: 52-76 Year: 2007 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:42177fef-0319-45fe-9be8-2efb08d40b10/feei_2007_1_egert_mihaljek_tcm16-58435.pdf File-Format: application/pdf File-Size: 350 kb Handle: RePEc:onb:oenbfi:y:2007:i:1:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Doris Ritzberger-Grünwald Author-Name-First: Doris Author-Name-Last: Ritzberger-Grünwald Author-Email: doris.ritzberger-gruenwald@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5201 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Helmut Stix Author-Name-First: Helmut Author-Name-Last: Stix Author-Email: helmut.stix@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Economic Studies Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43(1)404-20-7211 Author-Workplace-Fax: +43(1)404-20-7299 Title: Are Euro Cash Holdings in Central and Eastern Europe Driven by Experience or Anticipation? Results from an OeNB Survey Abstract: Although euroization is an important phenomenon in emerging markets, still very little is known about who holds how much euro and for what purposes. In this paper, we employ unique survey data to analyze various aspects of foreign currency holdings in five Central and Eastern European countries (CEECs). This allows us to study the impact of expectations and hysteresis on individual behavior. Our results show that a substantial share of the population in the countries under review holds euro cash. We fi nd little evidence that infl ation or exchange rate expectations are important determinants of euroization, whereas variables related to a country’s economic history seem to be of some significance. Our results also indicate that the demand for euro and its use in domestic payments increases as the date of euro adoption approaches. Pages: 77-100 Year: 2007 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:b56b9c6b-ec08-4d46-ad8c-39fefc50b343/feei_2007_1_ritzberger_stix_tcm16-58437.pdf File-Format: application/pdf File-Size: 283 kb Handle: RePEc:onb:oenbfi:y:2007:i:1:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Sandra Dvorsky Author-Name-First: Sandra Author-Name-Last: Dvorsky Author-Email: sandra.dvorsky@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, European Affairs and International Financial Organizations Divison Author-Workplace-Homepage: http://www.oenb.at Title: Central Bank Independence in Southeastern Europe with a View to EU Integration – Revisited Abstract: This contribution updates an analysis of central bank legislation in eight Southeastern European (SEE) countries published in 2004. It uses the ECB classification and examines functional, institutional, personal and financial independence. The relevant Treaty requirements serve as a benchmark for assessing the degree of legal central bank independence (CBI) already achieved in the respective areas. The author finds that since 2004 some SEE countries have achieved further progress in aligning central bank legislation with Treaty requirements. As in 2004, the degree of CBI continues to correspond largely to the respective country’s level of integration with the EU. The main remaining weakness can be found in the area of personal independence, in particular in the provisions on the dismissal of central bank top officials. Further crucial areas are the prohibition of monetary financing and provisions on loss coverage. The paper concludes that legal arrangements to protect the status of the central bank are a necessary, though not sufficient, prerequisite for CBI. In fact, the importance of practical implementation cannot be overestimated. Pages: 101-114 Year: 2007 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:bebc7978-66c5-4a0c-ba79-d29914887a5b/feei_2007_1_dvorsky_tcm16-58438.pdf File-Format: application/pdf File-Size: 185 kb Handle: RePEc:onb:oenbfi:y:2007:i:1:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Anna Naszódi Author-Name-First: Anna Author-Name-Last: Naszódi Author-Email: naszodia@mnb.hu Author-Workplace-Name: Magyar Nemzeti Bank and Central European University Title: Are the Exchange Rates of EMU Candidate Countries Anchored by their Expected Euro Locking Rates? Abstract: This paper examines whether the exchange rates of the Czech koruna, the Hungarian forint and the Polish z?oty were anchored by the market expectations for their euro locking rates in the period from December 15, 2004, to August 3, 2006. First, I derive the process of the exchange rate as a function of the processes of the following three factors: latent exchange rate, market expectations for the euro locking rate and locking date. Then the expected fi nal conversion rates are fi ltered. The time-varying volatilities of the state variables are estimated from cross-sectional data on option prices. Pages: 115-134 Year: 2007 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:f603e88e-3186-44b8-b10d-c45c47940487/feei_2007_1_naszodi_tcm16-58440.pdf File-Format: application/pdf File-Size: 551 kb Handle: RePEc:onb:oenbfi:y:2007:i:1:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Jesús Crespo Cuaresma Author-Name-First: Jesús Crespo Author-Name-Last: Cuaresma Author-Email: jcrespo@wu.ac.at Author-Workplace-Name: Vienna University of Economics and Business, Institute for Fiscal and Monetary Policy Author-Name: Tomáš Slacík Author-Name-First: Tomáš Author-Name-Last: Slacík Author-Email: tomas.slacik@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Predicting Currency Crises Using the Term Structure of Relative Interest Rates: Case Studies of the Czech Republic and Russia Abstract: Among the plethora of early warning mechanisms for currency crises proposed in the literature, there is an approach which has received little attention so far. This rather simple early warning indicator relies on the term structure of relative interest rates, unlike the vast majority of such systems that are based on macroeconomic fundamentals to predict a crisis in a long- or medium-term horizon. It measures changes in market sentiment regarding the relative probability of a currency crisis to estimate the timing of a crisis within a very short time window. This indicator thus complements long-horizon models that have been widely used so far. We apply this method to currency crises in the Czech Republic in 1997 and in Russia in 1998 and fi nd evidence that the indicator would have performed well as a real-time predictor in both episodes of currency distress. Pages: 135-149 Year: 2007 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:debdc755-4e03-45dc-95f1-8034224ea6ba/feei_2007_1_cuaresma_slacik_tcm16-58442.pdf File-Format: application/pdf File-Size: 326 kb Handle: RePEc:onb:oenbfi:y:2007:i:1:b:5 Template-Type: ReDIF-Article 1.0 Author-Name: Stephan Barisitz Author-Name-First: Stephan Author-Name-Last: Barisitz Author-Email: stephan.barisitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Name: Simon-Erik Ollus Author-Name-First: Simon-Erik Author-Name-Last: Ollus Author-Email: simon.ollus@bof.fi Author-Workplace-Name: Bank of Finland Institute for Economies in Transition Title: The Russian Nonfuel Sector: Signs of the Dutch Disease? Evidence from EU-25 Import Competition Abstract: It is evident that the Russian economy is largely based on the energy sector. This fact has caused concern in academic circles as to whether Russia is to some degree affected by the Dutch disease, i.e. whether a sharp rise of commodity prices might result in an appreciation of the real exchange rate, which would undermine the competitiveness of manufacturing and could lead to the deindustrialization of the economy. We focus on this possible fi nal outcome, which has not been studied much in the literature so far: We compare Russian industrial import growth (based on figures of the volume of EU-25 exports to Russia) with domestic industrial production growth (disaggregated by industries) in the period from 2002 to 2006. In all manufacturing sectors except electrical, electronic and optical equipment and strongly protected foodstuffs, Russian imports are found to be expanding faster than domestic output. In some sectors, imports have even exceeded domestic production. Import competition is therefore strong and rising. We conclude that Russia may be facing incipient deindustrialization at least in some parts of the manufacturing sector. This could indicate that the Russian economy has contracted the Dutch disease, although it should be noted that other factors could also have driven sectoral changes. While it is beyond the scope of our study to examine whether the other chain links of the Dutch disease hold as well, the study does provide evidence of some movements in the direction of deindustrialization, which is in line with the Dutch disease theory. Pages: 150-166 Year: 2007 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:6e4bdadb-79a1-4f57-8a4c-4e7687754d75/feei_2007_1_barisits_ollus_tcm16-58444.pdf File-Format: application/pdf File-Size: 258 kb Handle: RePEc:onb:oenbfi:y:2007:i:1:b:6 Template-Type: ReDIF-Article 1.0 Author-Name: Vasily Astrov Author-Name-First: Vasily Author-Name-Last: Astrov Author-Email: astrov@wiiw.ac.at Author-Workplace-Name: The Vienna Institute for International Economic Studies Title: The Russian Oil Fund as a Tool of Stabilization and Sterilization Abstract: The favorable world oil price dynamics has resulted in mounting reserves in the Russian Oil Stabilization Fund (OSF). This has raised the issue of an adequate economic policy response. Initially, the OSF was set up to reduce the vulnerability of the budget to the oil price volatility and to sterilize the impact of oil-related foreign exchange infl ows on the money supply. Our fi ndings suggest that the OSF has been instrumental in achieving both goals: it has contributed to macroeconomic stability and has helped decouple the GDP growth rate from oil price dynamics. However, given the current size of the OSF and a widely shared expectation that oil prices will remain comparatively high, the present dilemma is whether the OSF should be increasingly spent or whether it should be saved as a wealth-generating vehicle. Spending from the OSF on a current basis has been resisted so far largely because of rampant corruption and fears of infl ation. However, there are several arguments which may support a change in this policy stance. In particular, it seems that concerns about intergenerational solidarity are of minor relevance for Russia; investments in the country’s infrastructure are badly needed which, via productivity gains, might counteract the possible Dutch disease effects; moreover, spending on public sector wages could reduce incentives for corruption. Pages: 167-176 Year: 2007 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:c620146e-c948-4120-8925-bbd690c9fc36/feei_2007_1_astrov_tcm16-58446.pdf File-Format: application/pdf File-Size: 141 kb Handle: RePEc:onb:oenbfi:y:2007:i:1:b:7 Template-Type: ReDIF-Article 1.0 Author-Name: Peter Backé Author-Name-First: Peter Author-Name-Last: Backé Author-Email: peter.backe@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5212 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Walko Zoltan Author-Name-First: Walko Author-Name-Last: Zoltan Author-Email: zoltan.walko@oenb.at Author-Workplace-Name: Oesterreicische Nationalbank Title: Bank Intermediation in Southeastern Europe: Depth and Structure Abstract: This short study examines similarities and differences in the depth and structure of bank intermediation in Southeastern European (SEE) countries. In the process, we also analyze to what extent the patterns of bank intermediation in SEE countries are already similar to those observed in the new EU Member States of Central and Eastern Europe. Overall, it turns out that the depth, structure and quality of bank intermediation has advanced considerably in all SEE countries. At the same time, the development in the individual SEE countries is far from uniform. In some countries, bank intermediation is already similar to, or approaching the levels observed in, the new Member States, while in others, it is at an earlier stage, notwithstanding major progress in recent years. Pages: 48-68 Year: 2006 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:92f4355e-2c55-4ad3-ae88-95c622c0d48c/feei_2006_2_backe_walko_tcm16-49881.pdf File-Format: application/pdf File-Size: 265 kb Handle: RePEc:onb:oenbfi:y:2006:i:2:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Agnieszka Markiewicz Author-Name-First: Agnieszka Author-Name-Last: Markiewicz Author-Email: Agnieszka.Markiewicz@econ.kuleuven.ac.be Title: How Central and Eastern European Countries Choose Exchange Rate Regimes Abstract: In this study, we identify the main determinants of the exchange rate regime choices in Central and Eastern European countries (CEECs). For this purpose, we use an ordered logit model for the official (de jure) and the actual (de facto) exchange rate classifications. We find that trade openness and concentration, inflation differentials, international reserves stocks and financial conditions are the main determinants of the selection of exchange rate regimes in the CEECs. Pages: 69-84 Year: 2006 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:32a0a5f0-aefb-4ad7-bd78-ef08208e819b/feei_2006_2_markiewicz_tcm16-49882.pdf File-Format: application/pdf File-Size: 244 kb Handle: RePEc:onb:oenbfi:y:2006:i:2:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Balázs Égert Author-Name-First: Balázs Author-Name-Last: Égert Author-Email: balazs.egert@oecd.org Author-Workplace-Name: Oesterreichische Nationalbank Author-Name: Carol S. Leonard Author-Name-First: Carol S. Author-Name-Last: Leonard Author-Email: carol.leonard@sant.ox.ac.uk Title: The Dutch Disease in Kazakhstan: An Empirical Investigation Abstract: In this paper we investigate whether or not the Dutch disease is at work in, or poses a threat to, the Kazakh economy. For this purpose, we first summarize the mechanism through which fluctuations in the price of oil could possibly damage the non-oil manufacturing industry and thus the long-term growth perspectives of an economy that relies heavily on oil production. Subsequently, we seek to analyze the specific chains of this transmission mechanism in Kazakhstan. The analysis of annual data for the period from 1998 to 2005 suggests that non-oil manufacturing has so far been spared the perverse effects of oil price increases. However, the real exchange rate of the open sector has appreciated during the last couple of years chiefly due to the appreciation of the nominal exchange rate. In a second step, we analyze to what extent this appreciation is linked to oil price developments and oil revenues. Our econometric estimations based on the monetary model of the exchange rate and a variety of real exchange rate models provide us with some indication that the rise in the price of oil and in oil revenues might be linked to an appreciation of the U.S. dollar exchange rate of the oil and non-oil sectors. However, the appreciation is mainly limited to the oil sector for the real effective exchange rate and seems to be statistically insignificant for the non-oil manufacturing sector. Pages: 85-108 Year: 2006 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:82e51a82-1ef7-4e70-af2d-6dd896bc166b/feei_2006_2_egert_leonard_tcm16-49883.pdf File-Format: application/pdf File-Size: 369 kb Handle: RePEc:onb:oenbfi:y:2006:i:2:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Klaus Michal Author-Name-First: Klaus Author-Name-Last: Michal Author-Email: klaus.michal@gmx.at Author-Name: Tomáš Slacík Author-Name-First: Tomáš Author-Name-Last: Slacík Author-Email: tomas.slacik@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Title: Serbia: Country Profile and Recent Economic Developments Abstract: This study provides an overview of economic developments in the Republic of Serbia since the end of the Miloševic regime in the fall of 2000. Starting from a short review of the political context, the study reports on Serbia’s relations with the EU and the IMF as well as the Paris and the London Clubs. Subsequently, the most important structural reform measures are presented. The article then turns to macroeconomic developments, focusing on GDP growth, the labor market, inflation, monetary policy, fiscal policy and the external sector. Based on this discussion, the paper concludes that after a lost decade Serbia has embarked on a fairly dynamic transition path and has achieved substantial progress in recent years. At the same time, however, the Serbian authorities are still facing a set of key challenges at the current juncture, such as high inflation and unemployment or the high current account deficit. Other major tasks include further advancing the privatization process and combating corruption. On the political front, further progress in the cooperation with the International Criminal Tribunal for the Former Yugoslavia (ICTY) in The Hague is needed, also with a view to promoting negotiations with the EU on a Stabilisation and Association Agreement. Given that Serbia’s economic weight is comparatively large in the Western Balkans, a successful completion of the transformation process in Serbia is important also from a regional perspective. Pages: 109-133 Year: 2006 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:716c0b09-2a60-4b06-b840-915ab4b21577/feei_2006_2_michal_slacik_tcm16-49919.pdf File-Format: application/pdf File-Size: 271 kb Handle: RePEc:onb:oenbfi:y:2006:i:2:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Thomas Reininger Author-Name-First: Thomas Author-Name-Last: Reininger Author-Email: Thomas.Reininger@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5234 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Zoltan Walko Author-Name-First: Zoltan Author-Name-Last: Walko Author-Email: zoltan.walko@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: The Financial Situation and Financing of Nonfinancial Corporations in the Ten New EU Member States – A First Empirical Orientation Abstract: This paper provides a first stocktaking of the available data on the financial situation and the financing of nonfinancial corporations (NFCs) in the ten new EU Member States (NMS-10). It focuses on comparing the situation in the NMS-10 with the status quo in the euro area. For most indicators of financial results and of the structure of liabilities and financial assets, the range between the minimum and the maximum within the euro area was sufficiently wide to embrace the corresponding NMS-10 values. Thus, the two groups are not very different from each other in this respect. Still, there are some differences between them that tend to be typical and are primarily attributable to the ongoing catching-up process of the NMS-10 economies and the more prominent role of inward FDI as well as the still minor role of outward FDI in their economic structure. Pages: 134-151 Year: 2006 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:6502ffaf-8a01-4678-ad39-62dccc68354f/feei_2006_2_reininger_walko_tcm16-49920.pdf File-Format: application/pdf File-Size: 220 kb Handle: RePEc:onb:oenbfi:y:2006:i:2:b:5 Template-Type: ReDIF-Article 1.0 Author-Name: Fabrizio Coricelli Author-Name-First: Fabrizio Author-Name-Last: Coricelli Author-Email: coricelli@unisi.it Author-Name: Balázs Égert Author-Name-First: Balázs Author-Name-Last: Égert Author-Email: balazs.egert@oecd.org Author-Workplace-Name: Oesterreichische Nationalbank Author-Name: Ronald MacDonald Author-Name-First: Ronald Author-Name-Last: MacDonald Author-Email: Ronald.MacDonald@glasgow.ac.uk Title: Monetary Transmission in Central and Eastern Europe: Gliding on a Wind of Change Abstract: This paper surveys recent advances in empirical studies of the monetary transmission mechanism (MTM), with special attention to Central and Eastern Europe (CEE). In particular, while laying out the functioning of the separate channels in the MTM, it explores possible interrelations between different channels through which they may amplify or attenuate each others’ impact on prices and the real economy. The empirical findings for CEE are then briefly compared with results for industrialized countries, especially for the euro area. We highlight potential pitfalls in the literature and assess the relative importance, and potential development, of the different transmission channels, emphasizing the relevant asymmetries between Central and Eastern European countries (CEECs) and the euro area. Pages: 44-87 Year: 2006 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:3a554fef-adc6-4540-b96c-7f562842f5bc/feei_2006_1_special_focus_1_tcm16-43656.pdf File-Format: application/pdf File-Size: 541 kb Handle: RePEc:onb:oenbfi:y:2006:i:1:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Jesus Crespo Cuaresma Author-Name-First: Jesus Crespo Author-Name-Last: Cuaresma Author-Email: jesus.cuaresma@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Name: Balázs Égert Author-Name-First: Balázs Author-Name-Last: Égert Author-Email: balazs.egert@oecd.org Author-Workplace-Name: Oesterreichische Nationalbank Author-Name: Thomas Reininger Author-Name-First: Thomas Author-Name-Last: Reininger Author-Email: Thomas.Reininger@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5234 Author-Workplace-Fax: +43-1-40420-5299 Title: Interest Rate Pass-Through in Central and Eastern Europe: Reborn from Ashes Merely to Pass Away? Abstract: In this study, we seek to better understand the interest rate pass-through in fi ve Central and Eastern European countries – the Czech Republic, Hungary, Poland, Slovakia and Slovenia, the CEE-5 – and compare it with the pass-through in selected euro area countries – Austria, Germany and Spain. We fi nd that the pass-through is not operational for long-term market rates because of the unstable yield curve. We fi nd evidence that the pass-through from policy rates even transits through short-term market rates to long-term retail rates. Although nearly complete pass-through is detected for corporate lending rates in a majority of the CEE-5, pass-through estimates for several retail rates are generally lower than those reported in the literature, given the absence of cointegration between policy rates and long- or even short-term market rates. Although the pass-through is usually higher in the CEE-5 than in Austria and Germany, it has been declining over time in particular in Hungary and (with respect to lending rates) in Poland. The adoption of the euro seems to have slightly increased the pass-through in Spain and Austria but not in Germany. Pages: 88-111 Year: 2006 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:188e48da-34f1-45da-8e86-20896b29c6a5/feei_2006_1_special_focus_2_tcm16-43657.pdf File-Format: application/pdf File-Size: 443 kb Handle: RePEc:onb:oenbfi:y:2006:i:1:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Peter Backé Author-Name-First: Peter Author-Name-Last: Backé Author-Email: peter.backe@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5212 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Balázs Égert Author-Name-First: Balázs Author-Name-Last: Égert Author-Email: balazs.egert@oecd.org Author-Workplace-Name: Oesterreichische Nationalbank Title: Credit Growth in Central and Eastern Europe: New (Over)Shooting Stars? Abstract: This paper analyzes the equilibrium level of private credit to GDP in 11 Central and Eastern European countries on the basis of a number of dynamic panels containing quarterly data on Central and Eastern European economies, emerging markets and developed OECD countries. In doing so, we propose a unifying framework which includes factors driving both the demand for and the supply of private credit. We emphasize that relying on in-sample panel (i.e. including only transition countries) estimates for transition economies is problematic not only because of the upward bias of the estimated constant and slope coefficients due to the initial undershooting and the ensuing steady adjustment toward equilibrium, but also because of the instability of the equations estimated for transition economies. The use of out-of-sample (i.e. excluding transition economies) panels suggests that some of the transition economies might have already come close to equilibrium by 2004, whereas others have private credit-to-GDP ratios which are well below the level the fundamentals would justify. Pages: 112-139 Year: 2006 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:d7d43e78-78be-427b-83ee-b2e9ffc52d9f/feei_2001_1_special_focus_3_tcm16-43658.pdf File-Format: application/pdf File-Size: 371 kb Handle: RePEc:onb:oenbfi:y:2006:i:1:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Zsolt Darvas Author-Name-First: Zsolt Author-Name-Last: Darvas Author-Email: zsolt.darvas@uni-corvinus.hu Title: Monetary Transmission in the New EU Member States: Evidence from Time-Varying Coefficient Vector Autoregression Abstract: This paper studies the transmission of monetary policy in selected new EU Member States with structural time-varying coefficient vector autoregressions in comparison with that in the euro area. In line with the Lucas Critique, reduced-form models, like standard vector autoregressions (VARs), are not invariant to changes in policy regimes. Many of the new members of the EU have experienced changes in monetary policy regimes, which calls for the use of a time-varying parameter analysis. Our results indicate that some parameters change significantly, altering the shape of the impulse response functions. Monetary policy is most powerful in Poland and comparable in strength to that in the euro area and is least powerful in Hungary, while the strength of monetary policy in the Czech Republic lies in between. We explain these results by the credibility of monetary policy and openness. Pages: 140-155 Year: 2006 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:5648a153-e0df-4f09-8b24-cc301d65ac46/feei_2006_1_special_focus_4_tcm16-43659.pdf File-Format: application/pdf File-Size: 383 kb Handle: RePEc:onb:oenbfi:y:2006:i:1:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Stephan Barisitz Author-Name-First: Stephan Author-Name-Last: Barisitz Author-Email: stephan.barisitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Name: Annemarie Pemmer Author-Name-First: Annemarie Author-Name-Last: Pemmer Author-Email: annemarie.pemmer@rzb.at Title: Ukraine: Macroeconomic Developments and Structural Change with a Special Focus on the Energy Sector Abstract: Major traits of Ukraine’s macroeconomic and structural development since the turn of the millennium constitute the focus of this study. Following a brief look back at the decade-long recession of the 1990s, the authors identify positive terms-of-trade shocks, the cumulative effect of structural reforms and the strong recovery of domestic demand as the underpinnings of the country’s robust economic recovery of 2000–2004, while a halt, respectively reversal, of terms-of-trade gains and a deterioration of the investment climate are regarded as the driving forces of the sharp slowdown of 2005 and early 2006. Fiscal policy and tax reforms, monetary and exchange rate policies, and the evolution of external accounts are analyzed in more detail. Given Ukraine’s extremely energy-intensive economic and export structure and concomitant vulnerability, energy and gas sector developments are given prominence on the structural front. A near-term economic outlook wraps up the study. Pages: 158-176 Year: 2006 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:acdb3a59-c44a-4018-9726-84b5f8bfe35a/feei_2006_1_studies_1_tcm16-43661.pdf File-Format: application/pdf File-Size: 272 kb Handle: RePEc:onb:oenbfi:y:2006:i:1:b:5 Template-Type: ReDIF-Article 1.0 Author-Name: Stephan Barisitz Author-Name-First: Stephan Author-Name-Last: Barisitz Author-Email: stephan.barisitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Title: Banking in Central and Eastern Europe since the Turn of the Millennium — An Overview of Structural Modernization in Ten Countries Abstract: This study gives an analytical overview of the evolution of the banking sectors of ten relatively large Central and Eastern European countries (Hungary, Poland, the Czech Republic, Slovakia; Bulgaria, Romania, Croatia, Serbia; Russia and Ukraine) since 1999—2000. Set in the period following the banking crises and painful transformation of the 1990s, the analysis focuses on the newest structural changes and modernization in an environment of generally strong growth. The emphasis is on salient features of the development of banking regulation and supervision, banks' major sources of assets, liabilities, earnings and related changes, bank restructuring, rehabilitation programs and the role of foreign banks and FDI. Conclusions sum up the main findings on a comparative basis: Selling banks to foreign strategic investors has generally paid off, although there are some exceptions. The ongoing swift dissemination of IT and e-banking may help reconcile the seeming paradoxes of these countries being "overbanked" and "underbanked" at the same time. The near-ubiquitous credit boom, while embodying a welcome structural catching-up process, is not without dangers and has not yet been fully brought under control. Even in relation to the region's modest income levels, consumption of banking products remains low in Central and Eastern Europe. Thus, there is still ample room for expansion. Pages: 58-82 Year: 2005 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:67c84844-9207-4240-b2e5-e48522b11caa/feei_2005_2_special_focus_1_banking_tcm16-33486.pdf File-Format: application/pdf File-Size: 264 kb Handle: RePEc:onb:oenbfi:y:2005:i:2:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Peter Backé Author-Name-First: Peter Author-Name-Last: Backé Author-Email: peter.backe@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5212 Author-Workplace-Fax: +43-1-40420-5299 Title: Developments in Credit to the Private Sector in Central and Eastern European EU Member States: Emerging from Financial Repression — A Comparative Overview Abstract: This article provides an overview of developments in credit to the private sector in Central and Eastern European EU Member States in the period from 1999 to 2004. It discusses the main determinants of credit expansion, explores its impact on economic developments and examines policy implications. The paper also reviews how the issue of credit growth has featured in the monetary integration process of new Member States so far. The analysis shows that (i) lending to the private sector has grown dynamically in most but not all countries under review, (ii) loans to households have risen dynamically in all countries and (iii) foreign currency lending has been sizeable, in particular in countries with pegged exchange rates. Credit growth has been promoted by macroeconomic stabilization, comprehensive reforms and privatization in the financial sector and by the introduction of market institutions and legal reforms. Financial depth in most new Member States continues to be comparatively low, which suggests that credit growth will tend to be high, especially over the medium term. In those countries that have recorded fast and persistent private sector credit growth in recent years, current account deficits have moved above levels that can be deemed sustainable over a longer period of time. Our analysis thus corroborates the case for keeping macroeconomic vulnerabilities in check by containing domestic demand growth and current account deficits to sustainable levels over the medium term in the countries concerned. Pages: 83-109 Year: 2005 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:658c57f0-bea8-49fe-8654-b3a83813e562/feei_2005_2_special_focus_2_tcm16-33488.pdf File-Format: application/pdf File-Size: 321 kb Handle: RePEc:onb:oenbfi:y:2005:i:2:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Markus Arpa Author-Name-First: Markus Author-Name-Last: Arpa Author-Email: markus.arpa@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Name: Thomas Reininger Author-Name-First: Thomas Author-Name-Last: Reininger Author-Email: Thomas.Reininger@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5234 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Zoltan Walko Author-Name-First: Zoltan Author-Name-Last: Walko Author-Email: zoltan.walko@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: Can Banking Intermediation in the Central and Eastern European Countries Ever Catch up with the Euro Area? Abstract: This paper focuses on the private credit flow-to-GDP ratio for measuring and comparing the degree of banking intermediation, which complements the widely used stock-flow measure. The authors find that, on the basis of this flow-flow measure, the current degree of banking intermediation in most Central and Eastern European countries (CEECs) is significantly closer to the euro area average than suggested by the traditional stock-flow measure. Nevertheless, the longer-term average of annual figures of the recent past indicates that most CEECs still have some way to go to catch up with intermediation in the euro area in a persistent manner, even on the basis of the flow-flow measure. Furthermore, the authors analyze the implications of the different concepts of convergence in the degree of banking intermediation. According to simulations, maintaining a flow-flow ratio in the CEECs equal to the euro area average of the past ten years (i.e. given full convergence in the flow-flow ratio) will also lead to convergent stock-flow ratios. However, this will only be the case at a rather late point in time, i.e. not before the end of this century, and will thus come considerably later than convergence in GDP per capita at purchasing power parity (PPP). On the other hand, for the CEECs to simultaneously achieve convergence in the stock-flow ratio and in per capita income levels, the flow-flow ratios would have to significantly and persistently exceed the euro area average of the period from 1994 to 2003 for a period of between 15 and 50 years, depending on the respective country. Drawing on the experience of major catching-up economies in the past 50 years worldwide, the authors do not completely exclude, but take a rather skeptical view on, the possibility of realizing in a sustainable manner the high level of the flow-flow ratio that would be required for the simultaneous convergence in the stock-flow ratio and in per capita income levels. Pages: 110-133 Year: 2005 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:763b7803-3134-441c-a13a-9f31d92d4fbd/feei_2005_2_special_focus_3_can_tcm16-33489.pdf File-Format: application/pdf File-Size: 327 kb Handle: RePEc:onb:oenbfi:y:2005:i:2:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Tamás Mágel Author-Name-First: Tamás Author-Name-Last: Mágel Title: The Banking Sector of Bosnia and Herzegovina: The Dominant Role of Austrian Banks Abstract: This study analyzes the development of the banking sector of Bosnia and Herzegovina until the end of 2004. After a brief description of the institutional and macroeconomic background, it covers the ownership structure and concentration in the banking sector, the degree of financial intermediation, the structure of the aggregated balance sheet and the role of foreign exchange in the banking sectors' balance sheet. Finally, this paper investigates the development of capital adequacy and profitability. The author finds that macroeconomic stabilization (on the back of a currency board arrangement) and the market entry of foreign banks supported the reform process in the banking sector and helped deepen financial intermediation, while leading to a relatively high concentration of banking sector assets. The author argues that the main challenges for the banking sector in Bosnia and Herzegovina are first, to increase (longer-term) lending to nonfinancial corporations; second, to keep its overall net foreign currency position under control amidst the domestic household lending boom; third, to closely monitor the development of asset quality; and fourth, to further improve the banking sector's operational efficiency. Pages: 134-156 Year: 2005 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:cd29a955-6d5d-44ca-a39c-5289bcfc3ae9/feei_2005_2_special_focus_4_tbanking_tcm16-33490.pdf File-Format: application/pdf File-Size: 286 kb Handle: RePEc:onb:oenbfi:y:2005:i:2:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Ingrid Ettl Author-Name-First: Ingrid Author-Name-Last: Ettl Author-Email: ingrid.ettl@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Name: Alexandra Schober-Rhomberg Author-Name-First: Alexandra Author-Name-Last: Schober-Rhomberg Author-Email: alexandra.schober-rhomberg@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: The Implementation of the Basel Core Principles in Selected Countries from the Perspective of the International Monetary Fund Abstract: This study examines the implementation of the Basel Core Principles (BCPs) based on the Financial System Stability Assessments (FSSAs) carried out by the International Monetary Fund (IMF) in Bulgaria, the Czech Republic, Germany, Croatia, Hungary, Austria, Poland, Romania, Russia, Slovenia, Slovakia and Ukraine. From the perspective of Austria's financial sector, these countries are of particular interest owing to Austrian banks' investment focus on Central and Eastern European countries (CEECs). The 25 Core Principles, which were developed by the Basel Committee on Banking Supervision in 1997, in collaboration with international bank supervisors, the IMF and the World Bank, represent minimum requirements for good banking governance and an efficient supervisory system. The seven supervisory areas examined, to which the BCPs relate, are: preconditions for effective banking supervision, licensing and structure of banks, prudential regulations and requirements, methods of ongoing banking supervision, information requirements, formal powers of supervisors and cross-border banking. By comparing BCP implementation in the relevant countries, the strengths and weaknesses of financial regulation and banking supervision can be identified and a need for action to strengthen the supervisory regime can be inferred. Pages: 157-173 Year: 2005 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:6a593203-902a-4dbe-b140-452fd6602d90/feei_2005_2_special_focus_5_implementation_tcm16-33491.pdf File-Format: application/pdf File-Size: 222 kb Handle: RePEc:onb:oenbfi:y:2005:i:2:b:5 Template-Type: ReDIF-Article 1.0 Author-Name: Thomas Gruber Author-Name-First: Thomas Author-Name-Last: Gruber Author-Email: thomas.gruber@bka.gv.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Name: Doris Ritzberger-Grünwald Author-Name-First: Doris Author-Name-Last: Ritzberger-Grünwald Author-Email: doris.ritzberger-gruenwald@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5201 Author-Workplace-Fax: +43-1-40420-5299 Title: The Euro Changeover in the New Member States - A Preview Abstract: This study discusses issues that can be expected to arise in the context of preparations for the euro changeover in the new Member States. In doing so, it draws on the experiences of those 12 countries that have already introduced the single European currency, with a specific focus on the case of Austria. This experience can be a useful signpost for new Member States, even though their starting conditions differ because the euro already exists and most of the countries in question are on a catching-up route. The paper makes reference to the two main dimensions of the process, namely the noncash and cash changeover. The study stresses the crucial importance of timely preparations and well-devised information for ensuring a smooth changeover. In conclusion, the paper expresses confidence that the new Member States will manage the changeover process successfully when the time has come. Pages: 52-75 Year: 2005 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:6e80b97b-afb7-4792-9b59-bbd570f449fe/focus_01_05_euro_changeover_tcm16-29787.pdf File-Format: application/pdf File-Size: 386 kb Handle: RePEc:onb:oenbfi:y:2005:i:1:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Balázs Égert Author-Name-First: Balázs Author-Name-Last: Égert Author-Email: balazs.egert@oecd.org Author-Workplace-Name: Oesterreichische Nationalbank Author-Name: Amalia Morales-Zumaquero Author-Name-First: Amalia Author-Name-Last: Morales-Zumaquero Author-Email: amalia@uma.es Title: Exchange Rate Regimes, Foreign Exchange Volatility and Export Performance in Central and Eastern Europe Abstract: This paper attempts to analyze the direct impact of exchange rate volatility on the export performance of ten Central and Eastern European transition economies as well as its indirect impact via changes in exchange rate regimes. Not only aggregate but also bilateral and sectoral export flows are studied. To this end, we first analyze shifts in exchange rate volatility linked to changes in the exchange rate regimes and second, use these changes to construct dummy variables we include in our export function. The results suggest that the size and the direction of the impact of forex volatility and of regime changes on exports vary considerably across sectors and countries and that they may be related to specific periods. Pages: 76-97 Year: 2005 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:9f0aba1d-7e53-4766-9cda-9af3ce684d4a/feei_05_1_exchange_rate_tcm16-29794.pdf File-Format: application/pdf File-Size: 347 kb Handle: RePEc:onb:oenbfi:y:2005:i:1:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Gabriel Moser Author-Name-First: Gabriel Author-Name-Last: Moser Author-Email: gabriel_moser@aon.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5214 Author-Name: Wolfgang Pointner Author-Name-First: Wolfgang Author-Name-Last: Pointner Author-Email: wolfgang.pointner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Title: Financial Globalization, Capital Account Liberalization and International Consumption Risk-Sharing Abstract: This paper analyzes whether international risk-sharing has improved along the same lines as the process of financial globalization. International financial markets allow investors to efficiently diversify their risks. Agents can protect themselves against fluctuations in their incomes through trading in assets with appropriate payoff structures. However, the usual finding in the literature is that international risk-sharing is quite limited. We argue that despite the liberalization of capital accounts and the removal of various legal barriers to capital mobility, international risk-sharing still appears to be rather limited. Pages: 98-106 Year: 2005 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:656dc2d0-a103-4723-a7d9-db705ea9f4de/feei_05_1_financial_glob_tcm16-29797.pdf File-Format: application/pdf File-Size: 257 kb Handle: RePEc:onb:oenbfi:y:2005:i:1:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Anton Schautzer Author-Name-First: Anton Author-Name-Last: Schautzer Author-Email: anton.schautzer@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Title: Albania: Country Profile and Recent Economic Developments Pages: 107-126 Year: 2005 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:65f7aeb8-6505-4050-a5bb-6ba4333c4faa/feei_05_1_albania_tcm16-29791.pdf File-Format: application/pdf File-Size: 348 kb Handle: RePEc:onb:oenbfi:y:2005:i:1:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Sandra Dvorsky Author-Name-First: Sandra Author-Name-Last: Dvorsky Author-Email: sandra.dvorsky@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, European Affairs and International Financial Organizations Divison Author-Workplace-Homepage: http://www.oenb.at Title: Central Bank Independence in Southeastern Europe with a View to Future EU Accession Abstract: The paper provides a qualitative overview on current central bank legislation in Southeastern Europe (SEE), namely Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Romania, and Serbia and Montenegro, and assesses the degree of central bank independence (CBI) already achieved, using the Maastricht Treaty requirements as a yardstick. The following aspects of legal CBI are examined: first, the definition of statutory objectives in central bank laws (functional independence); second, the central banks independence in the formulation and implementation of monetary policy (institutional independence); third, the legal status of the central bank governor and other members of the highest decision-making body (personal independence). Fourth, the paper examines two aspects of financial independence, namely the budgetary independence of the central bank itself and the prohibition of monetary financing. Fifth, the paper briefly deals with central bank accountability issues. Moreover, selected aspects of actual CBI are analyzed. The paper concludes that the central bank laws already comply with Treaty requirements in some areas, while a considerable number of weaknesses remain. With a view to future EU accession, a further strengthening of both legal and actual CBI will be necessary for the countries to fulfill the requirements of the Maastricht Treaty. Pages: 50-75 Year: 2004 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:878da599-c35e-4e2a-8493-6f053b198bdf/feei_2004_2_special_focus_1_tcm16-25037.pdf File-Format: application/pdf File-Size: 217 kb Handle: RePEc:onb:oenbfi:y:2004:i:2:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Jarko Fidrmuc Author-Name-First: Jarko Author-Name-Last: Fidrmuc Author-Email: jarko.fidrmuc@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5218 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Iikka Korhonen Author-Name-First: Iikka Author-Name-Last: Korhonen Author-Email: iikka.korhonen@bof.fi Title: A Meta-Analysis of Business Cycle Correlations between the Euro Area, CEECs and SEECs – What Do We Know? Abstract: We review the literature on business cycle correlation between the euro area, eight new EU Member States (the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia), and two Southeastern European candidate countries (Bulgaria and Romania) which are expected to join the EU in 2007. Our meta-analysis suggests that several new Member States have already achieved a comparably high degree of synchronization with the euro area business cycle. We also find that estimation methodologies can have a significant effect on correlation coefficients. Finally, we show that Bulgaria and Romania also display a lower but still positive correlation of business cycles with Europe, although these countries have been increasingly disregarded in most recent publications. Pages: 76-94 Year: 2004 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:e662480a-95e9-408a-ae3a-657724335932/feei_2004_2_special_focus_2_tcm16-25038.pdf File-Format: application/pdf File-Size: 223 kb Handle: RePEc:onb:oenbfi:y:2004:i:2:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Stephan Barisitz Author-Name-First: Stephan Author-Name-Last: Barisitz Author-Email: stephan.barisitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Title: Exchange Rate Arrangements and Monetary Policy in Southeastern Europe and Turkey: Some Stylized Facts Abstract: This paper offers an analytical overview of exchange rate regimes and monetary policy frameworks in the countries of Southeastern Europe and Turkey. The following ten countries/nonsovereign territories are analyzed here: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, the Former Yugoslav Republic of Macedonia (FYROM), Montenegro, Romania, Serbia and Turkey. Hard pegs and nominal exchange rate anchors feature in four cases, managed floats and money growth targeting in three cases, unilaterally euroized regimes in two cases, and a managed float and real exchange rate anchor in one case. The paper deals with the institutional importance as well as the unofficial role of the euro in Southeastern Europe. Furthermore, individual countries/territories economic developments in recent years (2001—04) and current monetary and exchange rate policies, instruments, issues and outcomes are explored in more detail. Inflation is found to have been on a declining and monetization on a rising trend across the region. In a number of cases, inflation performance can be explained by the stabilizing influence of the exchange rate as an external anchor. But some countries with money growth targeting strategies and loosely managed floats have also boasted low price rises. Overall monetary and economic policy credibility and perseverance may be the key to success here. The paper concludes with a brief outlook focusing on the euro as a stable anchor and point of convergence. Pages: 95-118 Year: 2004 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:a5eece53-341f-45a1-bb8d-ca79ecdb525c/feei_2004_2_special_focus_3_tcm16-25039.pdf File-Format: application/pdf File-Size: 212 kb Handle: RePEc:onb:oenbfi:y:2004:i:2:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Jesus Crespo Cuaresma Author-Name-First: Jesus Crespo Author-Name-Last: Cuaresma Author-Email: jesus.cuaresma@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Name: Jarko Fidrmuc Author-Name-First: Jarko Author-Name-Last: Fidrmuc Author-Email: jarko.fidrmuc@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Workplace-Phone: +43-1-40420-5218 Author-Workplace-Fax: +43-1-40420-5299 Author-Name: Maria Antoinette Silgoner Author-Name-First: Maria Antoinette Author-Name-Last: Silgoner Author-Email: Maria.Silgoner@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Title: Exchange Rate Developments and Fundamentals in Four EU Accession and Candidate Countries: Bulgaria, Croatia, Romania and Turkey Abstract: This paper deals with exchange rate challenges in the four potential EU Member States Bulgaria, Croatia, Romania and Turkey. For the two countries with freely floating currencies, Romania and Turkey, we evaluate possible exchange rate misalignments based on a monetary model of exchange rate determination. In the case of Bulgaria and Croatia, two countries with currency board and narrow-band peg arrangements against the euro, we discuss possible exit strategies. We argue that a continuation of their current exchange rate regimes is likely to represent an optimal strategy for these countries in the run-up to both EU membership and the eventual adoption of the euro. Pages: 119-137 Year: 2004 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:62441d9b-5b1e-4364-beb0-ce337dc13695/feei_2004_2_special_focus_4_tcm16-25040.pdf File-Format: application/pdf File-Size: 224 kb Handle: RePEc:onb:oenbfi:y:2004:i:2:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Balázs Égert Author-Name-First: Balázs Author-Name-Last: Égert Author-Email: balazs.egert@oecd.org Author-Workplace-Name: Oesterreichische Nationalbank Title: Equilibrium Exchange Rates in Southeastern Europe, Russia, Ukraine and Turkey: Healthy or (Dutch) Diseased? Abstract: This paper investigates the equilibrium exchange rates of three Southeastern European countries, namely Bulgaria, Croatia and Romania, of two CIS economies, namely Russia and Ukraine, and of Turkey. A systematic approach in terms of different time horizons at which the equilibrium exchange rate is assessed is conducted, combined with a careful analysis of country-specific factors. The deviation from absolute purchasing power parity (PPP) and from the real exchange rate, which is given by relative productivity levels, is investigated. For Russia, a first look is taken at the Dutch disease phenomenon as a possible driving force behind equilibrium exchange rates. As a next step, a Behavioral Equilibrium Exchange Rate (BEER) model including productivity and net foreign assets is estimated using both time series and panel techniques. Control variables such as openness, public debt and public expenditures are also used to check for the robustness of the results. In a final stage, total real misalignment bands are computed for the countries under study. Pages: 138-181 Year: 2004 Issue: 2 File-URL: https://www.oenb.at/dam/jcr:7095a979-93cf-4df1-99f6-9e4042f1fd2f/feei_2004_2_special_focus_5_tcm16-25041.pdf File-Format: application/pdf File-Size: 403 kb Handle: RePEc:onb:oenbfi:y:2004:i:2:b:5 Template-Type: ReDIF-Article 1.0 Author-Name: Jesus Crespo Cuaresma Author-Name-First: Jesus Crespo Author-Name-Last: Cuaresma Author-Email: jesus.cuaresma@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Name: Balázs Égert Author-Name-First: Balázs Author-Name-Last: Égert Author-Email: balazs.egert@oecd.org Author-Workplace-Name: Oesterreichische Nationalbank Author-Name: Ronald MacDonald Author-Name-First: Ronald Author-Name-Last: MacDonald Author-Email: Ronald.MacDonald@glasgow.ac.uk Title: Nonlinear Exchange Rate Dynamics in Target Zones Abstract: 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. Pages: 46-69 Year: 2004 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:e2f88ff7-7607-4f57-8c88-6ab32def8009/nonlinear_exchange_tcm16-20270.pdf File-Format: application/pdf File-Size: 269 kb Handle: RePEc:onb:oenbfi:y:2004:i:1:b:1 Template-Type: ReDIF-Article 1.0 Author-Name: Antje Hildebrandt Author-Name-First: Antje Author-Name-Last: Hildebrandt Author-Email: antje.hildebrandt@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Author-Name: Julia Wörz Author-Name-First: Julia Author-Name-Last: Wörz Author-Email: Julia.Woerz@oenb.at Author-Workplace-Name: Foreign Research Division, Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: Determinants of Geographical Concentration Patterns in Central and Eastern European Countries Abstract: 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.;;;;;;;; Pages: 70-95 Year: 2004 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:271cab85-918b-4c69-9a25-5a484bf5241f/determinants_tcm16-20265.pdf File-Format: application/pdf File-Size: 240 kb Handle: RePEc:onb:oenbfi:y:2004:i:1:b:2 Template-Type: ReDIF-Article 1.0 Author-Name: Thomas Gruber Author-Name-First: Thomas Author-Name-Last: Gruber Author-Email: thomas.gruber@bka.gv.at Author-Workplace-Name: Oesterreichische Nationalbank Author-Workplace-Homepage: http://www.oenb.at Title: Employment and Labor Market Flexibility in the New EU Member States Abstract: 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.; Pages: 96-121 Year: 2004 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:fd8979e3-9e8a-4220-8eaa-02c2b016c5a7/employment_tcm16-20268.pdf File-Format: application/pdf File-Size: 264 kb Handle: RePEc:onb:oenbfi:y:2004:i:1:b:3 Template-Type: ReDIF-Article 1.0 Author-Name: Stephan Barisitz Author-Name-First: Stephan Author-Name-Last: Barisitz Author-Email: stephan.barisitz@oenb.at Author-Workplace-Name: Oesterreichische Nationalbank, Foreign Research Division Author-Workplace-Homepage: http://www.oenb.at Title: Distorted Incentives Fading? Abstract: 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.;;;;;; Pages: 122-152 Year: 2004 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:7ad7de68-3566-415c-8a24-4be103ce9dc8/feei_20041_studies4_tcm16-20267.pdf File-Format: application/pdf File-Size: 237 kb Handle: RePEc:onb:oenbfi:y:2004:i:1:b:4 Template-Type: ReDIF-Article 1.0 Author-Name: Ray Barrell Author-Name-First: Ray Author-Name-Last: Barrell Author-Email: r.barrell@niesr.ac.uk Author-Name: Olga Pomerantz Author-Name-First: Olga Author-Name-Last: Pomerantz Author-Email: o.pomerantz@niesr.ac.uk Title: Oil Prices and the World Economy Abstract: 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. Pages: 152-177 Year: 2004 Issue: 1 File-URL: https://www.oenb.at/dam/jcr:2401c1b1-e9d5-43ac-88ad-be41ebfbb260/oil_prices_tcm16-20271.pdf File-Format: application/pdf File-Size: 244 kb Handle: RePEc:onb:oenbfi:y:2004:i:1:b:5