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This study uses the Sequential Panel Selection Method (SPSM) proposed by Chortareas and Kapetanios (2009) to investigate the non-stationarity properties of real interest rates in 12 Central and Eastern European (CEE) countries. We are thereby able to test the validity of real interest rate parity (RIRP) among these countries. The SPSM can be used to decompose a panel of real interest rate series into two groups: a group of stationary series and a group of non-stationary series. We identify the stationary processes in the panel and demonstrate that RIRP holds for 10 of the 12 countries studied. Our findings show that real interest rate convergence among these 10 countries exhibits non-linear mean reversion toward RIRP equilibrium. The results have important policy implications for the CEE countries studied.

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This paper examines the impact of firm-specific and industry characteristics on capital structure during a sample period spanning from 2007 to 2013. We used panel regression with fixed effects and found strong evidence that capital structure is most affected by firm-specific factors such as tangibility, non-debt tax shields, liquidity, firm size, taxes paid, profitability, Tobin’s Q ratio, and growth assets. In addition, the empirical results indicate that firms operating in different industries have dissimilar capital structures.

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This paper investigates the attitudes of political parties to international trade in 23 OECD countries in the period 1972–2004. Employing different datasets and various measures of trade openness, we examine how government ideology affects trade policy preferences and whether this relationship depends on international and domestic factors by employing the panel data techniques. Our main findings are that an increase in the leftist orientation of the government leads to more restrictive or less open trade policies, while right-oriented parties are likely to express more favor to trade openness. Secondly, international factors such as globalization in political and social dimension as well as financial openness, have a strong positive influence on a given party’s trade policy preferences. Thirdly, we offer clear evidence that a political party will change its partisan positions due to the influence of the domestic economic and institutional environment.

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Acta Oeconomica
Authors: Bas van Leeuwen, Aurelian-Petruş Plopeanu, and Peter Foldvari

The number of books published in a country reflects its economic, social and cultural development. Yet, all too often, the production of books is looked upon solely in economic terms, i.e. as a part of national income, or as a proxy for human capital which, in turn, might explain economic growth. In this paper, we aim to give books their day in court. Using a dataset with book titles per 1,000 inhabitants for a large number of countries since 1950, we find that the number of titles was mainly driven by the level of education and income in the lower quantiles. The reduction of printing after 1990 was, surprisingly, not caused by a rise in other media, such as the internet, but, mostly, by a reduction in the effect of education in the poorer countries.

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We analyse the impact of FDI on market concentration for the Portuguese manufacturing industries in the 2006–2009 period. Using panel data estimation, and after controlling for other determinants of industry concentration (entry barriers, market size, and growth), we found a significant negative impact of FDI on industry concentration. This finding is in line with the results of the empirical literature on other developed countries. Moreover, it supports the argument that FDI has positive effects on domestic firms, eventually through positive externalities, and contradicts the widespread view that in small economies FDI increases concentration. Overall, this study adds to the controversial literature on FDI and concentration, and it is the first study on this topic applied to Portugal.

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Technical efficiency in agriculture of 10 new EU member states is analysed by Data Envelopment Analysis and econometric panel data analysis. Technical efficiency in agriculture is significantly positively associated with agricultural factor endowments, average farm size, farm specialisation, small-scale farms, and technological change. Foreign direct investments have an ambiguous effect. Reform and institutional developments, large-scale privatisation and price liberalisation, and urban- rural income gap are associated with technical efficiency in agriculture positively. An increase in technical efficiency in agriculture and the development of the rural economy are seen as a strategy to boost the level of living standards in agriculture and in rural areas.

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This paper analyses the pricing of sovereign risk and contagion during the crises in the Central and Eastern European countries. Panel data are used to estimate the determinants of government bond spreads in three different time periods: before the crisis, during the global financial crisis, and during the European debt crisis. The econometric model includes interactions between the explanatory variables and the crisis dummies. This specification enables the coefficients to change during the crises. The empirical analysis confirms a statistically significant relationship between sovereign risk and macroeconomic fundamental variables. Additionally, the results suggest an increase in the importance of macroeconomic fundamentals during the financial crisis. The analysis also supports that sovereign credit ratings and exchange rate risk have a significant impact on government bond spreads.

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This paper deals with the effects of political decentralisation on economic growth in Spain, an issue that has generated heated debates in recent decades. Our analysis of the last three and a half decades, a period characterised by the weak narrowing of the income per capita gap within regions, does not offer conclusive results on convergence and points to the importance of alternative factors. Several proxies were used to capture the decentralisation process. We also studied some potential interactions between decentralisation and other variables. All in all, our empirical evidence shows robustly that transferring more responsibilities to subnational governments does not significantly affect growth in any sense.

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This paper evaluates the efficiency of Active Labour Market Policies (ALMPs) in the European Union (EU). The paper first reviews the main trends governing the evolution of the European Social Fund (ESF) since its creation. The ESF promotes public expenditure in ALMPs in order to foster social cohesion across the EU. In order to test to what extent this strategy can be backed up by facts, we estimate the impact of public expenditure on ALMPs on the employment rate using panel data from 28 European countries (1985–2011), taking into account the endogeneity of the explanatory variables and the dynamic behaviour of their relationship. Results support the hypothesis that expenditure in ALMPs is more beneficial for employment than aggregate public expenditure. In addition, we show that periphery countries observe a larger efficiency of their ALMPs. These results support the recent policy strategy undertaken by the European Commission to raise the budget devoted to ESF in Member States experiencing higher unemployment rates.

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Recently, there has been a growing interest in the solvency of financial intermediaries. Bank and insurer insolvency cases generated numerous adverse economic effects and also promoted academic efforts to design solvency-related taxation methods. The focus of this paper is on corporate taxation and its empirical relation to solvency in the Hungarian financial intermediation sector. Based on the previous literature, a complex empirical model of the interactions between capital formation, asset growth and solvency risk is presented, and panel data results are compared for banks and insurance companies. A comparison with international empirical results is also possible, although it may only be of limited relevance due to some differences in solvency measurement. The paper also aims to highlight the potential differences between banking and insurance. As far as solvency effects are concerned, the empirical results do not reveal significant differences in these two sectors; however, other results point to the heterogeneity of the Hungarian financial intermediation sector.

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