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Capital accumulation during the transition from plan to market
No full textThis paper focuses on the process of capital accumulation and the forces that drive it in the countries undergoing the transition from plan to market. The methodological framework for analyzing the determinants of aggregate business investment draws on the neoclassical accelerator model, extending it to reflect some of the specificities of the transition environment. The model is estimated on data for the economies in Central and Eastern Europe (CEE) and the Commonwealth of Independent States (CIS). The results highlight the role of some key drivers of capital accumulation in an economy in transition, in particular, the relatively significant accelerator response to output, the importance of adjustment effects and financing constraints and the relatively minor role of the cost of capital. Copyright (c) 2007 The Author Journal compilation (c) 2007 The European Bank for Reconstruction and Development .
Firms’ Price Markups and Returns to Scale in Imperfect Markets: Bulgaria and Hungary
Get PDFUnder perfect competition and constant returns to scale, firms producing homogeneous products set their prices at their marginal costs which also equal their average costs. However, the departure from these standard assumptions has important implications with respects to the derived theoretical results and the validity of the related empirical analysis. In particular, monopolistic firms will charge a markup over their marginal costs. We show that firms’ markups tend to be directly associated with the employed production technology, more specifically with their returns to scale. Accordingly, we analyze the implications for the markup ratios from the incidence of non-constant returns to scale. We present quantitative results illustrating the effect of the returns to scale index on the firms’ price markups, as well as the relationship between the two indicators, on the basis of firm-level data for Bulgarian and Hungarian manufacturing firms.markup pricing, market imperfections, return to scale, Bulgaria, Hungary
Convergence in Per Capita Income . . .
No full textOne of the greatest challenges of the present round of eastern enlargement of the EU is the unprecedented gap in per capita incomes between incumbents and candidate countries and even under favorable future growth assumptions, the candidate countries still face a long process of catching up. During a catch up process there emerges an essential and fundamental economic link between nominal and real variables and hence real convergence cannot be de-coupled from nominal convergence. The link between the two surfaces in the dynamics of the real exchange rate through the "Balassa-Samuelson effect". This pape
Tax structures in transition economies in a comparative perspective with EU member states
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Fiscal Policy Under a Currency Board Arrangement: Bulgaria's Post-crisis Policy Dilemmas
No full textThe paper analyses some policy issues under a currency board arrangement (CBA), focusing on the conduct of fiscal policy which is the only policy instrument at the disposal of the authorities as the CBA precludes an independent monetary policy. It is argued that the loss in degrees of freedom under a CBA restrains considerably the room for fiscal policy manoeuvre, especially in cases of external disturbances or shocks. Within this framework the paper analyses some of the policy challenges that policy makers in Bulgaria have been facing since 1997. It is argued that despite the macroeconomic stabilization and the fiscal consolidation achieved after the introduction of the CBA, some serious economic problems still remain and new ones have emerged; among them are the deterioration in competitiveness and the large losses that SOEs continue to generate. The paper addresses also some more general issues related to fiscal accounting during the transition in the context of the intertemporal budget constraint of the public sector. Attention is drawn to the importance of monitoring not only the conventional fiscal balance but also the broader fiscal balance, including the quasi-fiscal deficit.Bulgaria, macroeconomic regime, currency board, fiscal policy, fiscal accounting, public sector solvency
Innovation as a Key Driver of Competitiveness
Get PDFThis paper examines the link between the issue of competitiveness and innovation and their role in fostering higher living standards. The analysis is carried out at the level of both the firm and the country and then outlines some important policy implications. It appears that the innovative capacity of many of the European emerging markets would be enhanced considerably if the link between knowledge creation and its incorporation into marketable products could be strengthened. In many economies the basic national institutions supporting innovative activities could be improved, and the management of private firms have yet to fully appreciate the importance of innovative activity. The interrelationship between various economic policies, such as those for competition policy which seeks to limit firms’ market power, is also explored; it is found that these other policies often conflict with the objectives of increasing innovation and thus all these policies need to be formulated within a coherent framework that considers all these interactions.Financing for development, innovation, competitiveness, Europe, transition economies, technology investment, R&D
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