Unraveling the economic performance of the CEEC countries The role of exports and global value chains
In this study we assess the importance of exports and global value chains (GVC) participation for economic growth. Using novel methods and an extensive dataset, we decompose GDP growth in the Central and Eastern European (CEEC) countries to show that in a large part of the period of transition and integration with the EU, exports have played a predominant role in shaping economic growth. We also show that exports have been the major factor driving the convergence of the CEEC countries with their advanced counterparts. We employ panel methods to analyze the determinants of growth of exported value added and show that the major growth drivers in the analyzed period of 1995-2014 are GVC participation, imports of technology and capital deepening.
Towards increased complexity in Russian regions : networks, diversification and growth
Following Hausmann et al. (2011), we apply a network approach to measure the level of economic complexity and diversification opportunities of Russian regions. Using Russian and international export data, we find that the complexity of Russian regional economies varies substantially: rela-tively high in western and central regions, lower in southern and northern Russia and lowest in eastern regions. While Russian regions, on average, have poor diversification opportunities, regions can still diversify their exports by participating in international value-added chains or cooperating in developing group strategies. Our results are highly consistent with two well-established rankings of Russian regional R&D development based on numerous regional indicators, and imply that our network-based measure of complexity captures important features such as the level of regional R&D.
The post-crisis TFP growth slowdown in CEE countries: exploring the role of Global Value Chains
Using micro-aggregated firm information for nine Central and Eastern European (CEE) countries and data from input-output tables, we examine the role of Global Value Chains (GVCs) for technology diffusion across EU countries. Our empirical results provide support for a two-stage diffusion process of technology across countries. In the first stage, the most productive firms in the host economy benefit from their direct exposure to new technology created in parent firms as a result of their GVC
participation. In the second stage, technology spills over to the rest of firms in the host economy via domestic production networks. In addition, we show that the import of intermediate inputs –i.e. backward linkages- is the main channel of technology diffusion within GVCs. We use these results to explain the pronounced post-crisis drop in Total Factor Productivity (TFP) growth in CEE countries.
We show that due to their deep integration in GVCs, CEE countries have been exposed to two recent developments highly correlated with their TFP performance: (i) a slowdown in TFP growth of parent firms located in non-CEE EU countries; and (ii) a global slowdown in the growth rate of GVC participation, which is evident also for CEE countries from 2011 onwards. Moreover, we find that the capacity of host firms in CEE countries to absorb and understand new knowledge has decreased since the crisis. We argue that this is related to the drop in R&D investment in the CEE region during the post-crisis period.
A cost-risk analysis of sovereign debt composition in CESEE
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.
A geographic perspective on banking in Central, Eastern and Southeastern Europe
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 de-scribe 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 differ-ences 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 popula-tion 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.
How are reduced interest rate differentials affecting euroization in Southeastern Europe? Evidence from the OeNB Euro Survey
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.
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