1,721,152 research outputs found
Fiscal policy in an enlarged EU
No full textThis paper analyses the implications for acceding countries of the existing EU fiscal framework, focusing on three main issues. First, the 3% ceiling on the budget deficit does not leave sufficient room to acceding countries to run counter-cyclical policies during downturns. This is due to the much higher rate of potential output growth and volatility of rates of growth in acceding countries. Second, accession countries have much higher public investments-to-GDP ratios than current EU members. Therefore, current budgetary ceilings are much more stringent for acceding countries than for current EU members. Some form of ?golden rule? seems appropriate and consistent with the main goal of convergence and cohesion among EU countries. Third, the procedures associated to the implementation of EU fiscal rules are subject to political influence. As most acceding countries are small and relatively poor countries, they risk to become members of a second league of the EU
Finance and growth in economies in transition
No full textThe paper presents an analytical discussion and empirical evidence on the adjustment of financial markets to the stabilization and reforms implemented in a transition economy, emphasizing the role of liquidity constraints. Different types of equilibria, associated with different financial structures, can emerge after reforms. The paper argues that a key role during the transition is played by private, trade credit markets. The functioning of the latter requires the existence of a minimum set of market institutions, that can impose credible penalties and rewards for 'good' behavior
Exchange Rate Policy during transition to the European Monetary Union
No full textCountries of central eastern Europe which are candidates for accession to the European Union face fundamental challenges in the conduct of macroeconomic policies. These countries are characterized by growth rates faster than those of EU countries, along with large current account deficits and an equilibrium appreciation of the real exchange rate. In such a context, an early adoption of the euro, may be beneficial to central eastern European countries, while the ERM-II system and the Maastricht criterion on inflation may give rise to serious drawbacks for candidate countries
Democracy in the post-communist world: Unfinished business
No full textWhile in Central-Eastern Europe and in the Baltics democracy and market reform have been consolidated, culminating in entry to the European Union, in the states of the former Soviet Union democracy and economic reforms are still lagging, and in some cases we observe reversals in both political and economic reforms. The article identifies the risk of a "trap" of partial reforms, both political and economic. Incentives for further reforms are weak for policy makers, and at the same time opposition to reforms by citizens increases. Lack of competition and concentration of economic power lead to opposition by wealthy people, while the lack of social safety nets leads to opposition by those adversely affected by reforms. An external anchor (e.g., entry or candidacy to entry in the European Union) seems to be crucial; lacking such an anchor, the process is much harder
Fiscal constraints and the speed of transition
No full textThis paper develops a model of the process of reallocation of resources from a declining state sector to an expanding private sector. The transition is shown to be costly in that it entails unemployment and a deterioration of the fiscal balance. The interaction of fiscal constraints with the transition process is examined. It is shown that fiscal constraints may induce the government to maintain the state sector, slowing the speed of transition, and could jeopardize the eventual outcome of the process of restructuring
Hardened Budgets and Enterprise Restructuring: Theory and an Application To Romania
No full textWe identify the presence of soft budgets and analyze their impact on enterprise restructuring in Romania over the initial transition period. A simple analytical framework is developed to show that hardened budget constraints foster rationalization of costs but not new investment. The latter requires availability of external financing. The model emphasizes the importance of the credibility of hardened budgets and the empirical findings are consistent with its predictions. Using a sample of over 4000 Romanian enterprises from 1992 to 1995, we show that hardened budget constraints induce labor shedding. However, there is no evidence of new investments. © 2001 Elsevier Science
Stabilizing a previously centrally planned economy: Poland 1990
No full textWe examine the dynamics of the January 1990 stabilization programme in Poland, focusing on the substantial and sudden collapse in industrial output, and inflation persistence. We discuss three, non-mutually exclusive, explanations of these phenomena: excessive initial stocks of inventories, an exogenous fall in household demand and tight credit. We conjecture that tight credit was at centre stage: it helped to magnify the fall in output, and to coordinate such a fall across sectors. We base such a conjecture on the existence of substantial credit segmentation, and on the underdevelopment of private credit markets. This conjecture is further strengthened by the fact that wages increased, and even went beyond the programme's ceilings, as credit expanded during the year. We argue that the wage hike may be the reason why credit expansion did not result in a major output recovery, and inflation persisted during the year. There are discussions of this article by M. Burda and G. W. Kolodko, pp 209-212. -from Author
Price-wage dynamics and inflation in socialist economies
No full textThis article analyzes the determinants of open inflation in transitional socialist economies, with reference to recent experience in Hungary and Poland. A simple inflation model is centered on the transmission process and on the short-run dynamics of inflation. Further incorporating a number of features specific to socialist economies and working with quarterly data, dynamic price and wage equations are estimated. The estimated equations allow satisfactory exploration of the role and weight of foreign prices and domestic factors in propagating inflation. Foreign prices matter, but developments on the cost side are critical in relating exogenous, policy-driven adjustments to the price level to increases in the rate of inflation. The absence of conventional market-based, equilibrating mechanisms requires that nominal anchors, particularly wage restraints, feature prominently in any stabilization program adopted by reforming socialist economies. © 1992 The International Bank for Reconstruction and Development/THE WORLD BANK
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