International Economics and Economic Policy

Inside the EU, the commercial integration of the CEE countries has gained remarkable momentum before the crisis appearance, but it has slightly slowed down afterwards. Consequently, the interest in identifying the factors supporting the commercial integration process is high. Recent findings in the new trade theory suggest that FDI influence the trade intensity but the studies approaching this relationship for the CEE countries present mixed evidence, and investigate the commercial integration of CEE countries with the old EU members. Against this background, the purpose of this paper is to assess the CEE countries’ intra-integration, focusing on the Czech Republic, Hungary, Poland and the Slovak Republic. For each country we employ a panel gravitational model for the bilateral trade and FDI, considering its interactions with the other three countries in the sample on the one hand, and with the three EU main commercial partners on the other hand. We investigate different facets of the trade – FDI nexus, resorting to a fixed effects model, a random effects model, as well as to an instrumental variable estimator, over the period 2000–2013. Our results suggest that outward FDI sustains the CEE countries’ commercial integration, while inward FDI has no significant effect. In all the cases a complementarity effect between trade and FDI is documented, which is stronger for the CEE countries’ historical trade partners. Consequently, these findings show that CEE countries’ policymakers are interested in encouraging the outward FDI toward their neighbour countries to increase the commercial integration.

The analysis investigates the determinants of the intention to bring mobile phones for recycling. The paper is based on data regarding the determinants of bringing mobile phones for recycling collected from university students in Autumn 2016 (N = 1013) in both the Chinese and German academia. Using structural equation modeling, we examine the direct and indirect effects of social norms, knowledge about the environmental benefits of recycling and a pro-environmental attitude on the intention to recycle mobile phones. We find confirmation that attitude, social norms, and knowledge contribute positively and significantly to the intention to bring phones for recycling. As for three mediating effects tested, attitude mediates the relationship between knowledge and intention, as well as between social norms and intention. Knowledge as a mediator between social norms and attitude does not have a highly significant effect. Looking at the results of the Chinese and German sub-samples, we find that social norms have no direct effect on intention for the German sub-sample, but an indirect one through attitude. Knowledge has no significant effect for the German sub-sample. Results for the Chinese sub-sample indicate an indirect effect of social norms on attitude via knowledge, while knowledge itself has an indirect effect on intention through attitude.

This essay provides an introduction and overview for a symposium on macroeconomic policy, international finance and banking in Japan. The symposium consists of thirteen papers. Nine of the papers including most of those on macroeconomic policy and international finance appear in this issue. The remaining papers including one on macroeconomic relations within the Asia-Pacific region and three on Japan's banking system will appear in a special section of the next issue of this journal.

The paper examines a wide range of potential predictors of 25 international banking crises that broke out in 2007–2011 on the basis of cross–sectional logit models and the BCT (binary classification tree) algorithm, a novel technique in assessing the causes of banking crises. The major determinants of the crises arise from an excessive credit depth (measured as private credit to GDP ratio) and illiquidity of the banking sector (credits to deposits ratio). The implementation of explicit deposit insurance schemes is also a pro-crisis factor due to the moral hazard effect they tend to cause. On the contrary, higher values of remittance inflows to GDP decrease the susceptibility to banking crises. These findings are robust under both methodologies. Lower bank concentration, bigger values of cost to income ratios as well as a higher level of economic liberalization and inflation make countries more vulnerable to banking crises, as derived from the logit analysis. The pre-crisis credit depth, credits to deposits ratio, inflation, financial openness and net interest margin are also significant predictors of the crisis costs proxied by the peak ratio of non-performing loans (NPL) relative to gross loans, the increase in public debt to GDP ratio and real output losses.

I study the behavior of textile and clothing makers in the U.S. as they were exposed to a large, uncertainly anticipated increase in foreign competition through the removal of import quotas. I find a large secular decline in capital investment in the industries that are likely to have been the most vulnerable to such competition. The decline is significant beginning immediately after announcement of the policy–nine years before the scheduled liberalization date. The investment decline is interrupted by a large, short-lived increase when the policy uncertainty is resolved. I show that each of these features of the data is predicted by a model of optimal industry investment in the presence of capital adjustment costs, under an anticipated but uncertain demand shock that mimics this liberalization. Using industry-level panel data, I examine other developments in the output and capital markets for these industries, and I find that they too are consistent with the model’s predictions. Calibration to fit the observed investment path yields parameter values that are close to directly estimated values. These findings demonstrate that considering capital adjustment costs and policy uncertainty can be critical in understanding industry behavior, even over a relatively long time horizon.

Existing literature repeatedly documented a strong correlation between trade and growth. It has also shown a causal effect of imports (though not necessarily exports) on growth in simultaneous equation models but to a lesser extent in Granger-causality tests. Export and import taxes have sometimes been found to negatively affect growth. Drawing policy conclusions from these general findings for a particular country is difficult not only because of the contradictory results but also because of potential second best world effects and the implied endogeneity of trade policy. Policy recommendations for a specific country require a careful analysis of market and institutional arrangements and can not be based on the existing cross-country literature.

International capital flows in a system of flexible exchange rates will affect stock market dynamics and stock market developments should affect capital flows and the exchange rate respectively. In this analysis, four accession countries have been considered in order to examine any potential links between nominal stock market index and nominal exchange rate. For this purpose, monthly data were used. The cointegration concept was employed for testing long-term links and the VAR approach for short-term links. Finally, Granger causality tests were employed for the determination of the exogenous and endogenous variables. The results show that significant links exist between the stock market index and the foreign exchange rate for three countries, where for Poland, both long-term and short-term links exist. The other key aspect considered in this analysis is the stock market integration in Eastern European countries. Our analysis shows that the integration of the stock markets in Eastern European countries seems to be rather week except for the Hungarian stock market. This means that only the Hungarian stock market is integrated. A standard regression analysis reveals that the Hungarian market exhibits a strong co-movement with the benchmark market, i.e. the German stock market. Furthermore, there is a clear-cut result with respect to the dynamic of stock market synchronization. The degree of synchronization increased particularly in the period 2005–2008.

We study the effects of unconventional monetary policy shocks on output, inflation and uncertainty using a sign restricted panel VAR over the monthly period of 2008:1–2015:1. Our sample includes primarily OECD countries (Canada, Germany, France, Italy, Japan, Spain, UK and US) that reached the interest rate zero lower bound in response to the recent financial crisis. Central bank balance sheets are used to gauge the size of unconventional monetary policy reactions to the crisis. We control for the degree of uncertainty by estimating the economic response to balance sheet shocks in two economic states: high versus low uncertainty. We use sign restrictions to identify our shocks, but remain agnostic regarding price and output responses to balance sheet shocks. We show that the mean group response of prices and output increases in response to monetary policy. The results, however, vary by country and are sensitive to the degree of uncertainty. Prices and output do not necessarily increase uniformly across countries.