This article examines the impact of different exchange rate regimes on economic conditions during an external economic shock. It focuses on the recent global recession of 2008 and analyses its impact on two emerging market economies: Poland and Slovakia. These countries share many similarities, such as location, main trading partners and the general level of development. However, they differ significantly in the size of their economies and economic openness. They adopted radically different currency arrangements as well, which determined the way their economies were influenced by the economic turmoil. The article examines the role of foreign loans and the export structure as potential factors influencing the Slovak and Polish economies. Several economic indicators are analysed and compared, including trade balance, inflation, conditions in the tourism sector and credibility with the investor community. The paper argues that Poland substantially benefited from its monetary autonomy and the depreciation of the Polish Zloty. The weaker currency triggered a significant expenditure switching effect and improved the balance of trade. The membership in the Euro-zone had a blurred impact on Slovakia, it increased stability and credibility, however, it did not allow nominal adjustments to cushion the real economy.
The balance-of-payments can act as a constraint on the rate of output growth, on putting a limit to the growth in the level of demand to which supply can adapt. Regional economies might be particularly sensitive to this effect, since they are presumably more integrated among them. In this paper, we examine this issue for the case of the 17 Spanish regions over the period 1988–2009, and calculate their balance-of-payments-constrained growth rates. By comparing these balance-of-payments-constrained growth rates with the actual growth rates, we would be able to assess whether the balance-of-payments has worked as a constraint on growth.
This paper addresses the impact of fundamental (economic, political and geopolitical) uncertainties on GDP growth of the world’s largest 20 economies (W-20) using the Cobb-Douglas total production function within the scope of the second-generation panel data methodology for 1990–2016. The aim of the paper is to explore whether these uncertainties lead to a contractionary impact on growth as suggested by the economic theory. The estimation results revealed that indeed this was the case. Our results also indicate that the global uncertainties led the economic growth rates of the selected countries to perform below their exact potential since the 2008 global economic crisis and to fail to attain an expected recovery during the process.
It is argued that European integration has not fulfilled its chief economic promises. Output growth has been increasingly weak and unstable. Productivity growth has been following a decreasing trend. Income inequalities, both within and between the EU member states, have been rising. This sorry state of affairs is likely to continue — and likely to precipitate further exits, or eventually, the dissolution of the Union. However, this outcome is not unavoidable. A better integration in the EU is possible, at least in theory. Also, the negative consequences implicit in the existence of the common currency could be neutralised. However, the basic paradigms of the economic policies to be followed in the EU would have to be radically changed. First, the unconditional fiscal consolidation provisions still in force would have to be repelled. Second, “beggar-thy-neighbour” (or mercantilist) wage policies would have to be “outlawed”.
This paper evaluates income convergence in the European Union, between “old” (EU15) and “new” member states from Central and East Europe (CEE10), and among the countries within these two groups. The GDP per capita convergence should be expected according to the exogenous economic growth model and neoclassical trade theory. The presence of σ-convergence and both absolute and conditional β-convergence is tested for on a sample of 25 European Union countries (EU25). Results confirm the existence of β-convergence of GDP per capita at purchasing power parity among EU25, but not among EU15 and CEE10 countries. σ-convergence has been confirmed among EU25 and CEE10 countries, while GDP per capita has been diverging in the EU15 group of countries. Moreover, the results reveal that recent economic crisis has reversed long-term tendencies and led to income convergence within EU15 and divergence within CEE10. During the crisis, the income differences among the EU25 countries have increased, but the scope and duration of this effect has been limited and has not affected the long term convergence path. However, the obtained long term speed of convergence is significantly lower compared with the previous researches.
This paper presents a case-study to demonstrate the calculation methods of growth contributions using structural decompositions of input-output tables and their Hungarian applications. Although the required data are available with a considerable time-lag, results show that taking backward linkages through demand for inputs and value chain multipliers into account can significantly alter the picture on the growth effects of industries and final demand categories by the conventional approach based on quarterly GDP calculations. This can be instructive for analysts and policy- and decision-makers not only in Hungary, but also in other countries. The study was performed by using public macroeconomic and sectoral data obtained from the Hungarian Central Statistical Office.
Oil-abundant countries, Iran, Iraq and the Gulf Cooperation Council (GCC) countries try to improve democratic institutions and to manage their chronically big governments, while experiencing decreased world oil prices. These countries pursue open door policies. Most of the foreign revenues of the region stem from oil and gas exports. Thus, how to manage the production and exports of fossil resources is of great importance. This study aims to analyse the effects of quality of democracy, government size, and the degree of openness in explaining depletion of reserves between 1985 and 2015. After testing for panel unit root and co-integration, a panel data model was estimated considering random effects. The results indicate that democratisation and political stability causes higher depletion of oil. In addition, government size affects depletion in a non-linear form, so that oil production is maximised, when government expenditure accounts for nearly 14% of GDP, on average. Furthermore, trade openness positively impacts on the oil depletion. In this case study, higher oil depletion follows strengthening democratic foundations, resizing the public sector, expanding politico-economic ties with trade partners, and applying the modern technology in the upstream oil industries.
The main objective of this paper is to identify the impacts of the COVID-crisis on growth, in particular on growth potential in the European Union (EU), in the context of a broader growth analysis. The quantitative analysis underlying this paper focuses on the financial and economic (“Great”) recession of 2008–2009, the subsequent recovery and the period of the COVID-crisis. We provide a detailed overview of some of the mechanisms of the COVID-crisis on growth.
The COVID-crisis is likely to have a direct impact on the level of potential output. A decrease in investments and labour market hysteresis may have long-lasting effects on potential growth. The former would have a negative impact on productivity. This can lead to increased inequalities and have a negative effect on social cohesion. The future development of divergences among the EU Member States is particularly important. Their possible intensification could disrupt the functioning of the euro area and the internal market.
A lasting source of potential growth in the EU Member States could be productivity growth. Its decisive structural factor is the growth dynamism of total factor productivity (TFP). There are large differences in this area with regard to the level and growth dynamism of performance of the Member States. Narrowing the output gaps vis-à-vis the front-runners through deep structural reforms could be a key factor in raising growth potential. The cleansing effects of crises, which force structural change and resource reallocation, can also create new opportunities for TFP growth.
As the world is moving ahead, all national economies need to find their own development path. The economic growth should be continually high enough to provide for a normal and growing standard of living for the citizens and, at the same time, provide opportunities for introducing and engaging the new, incoming generations in the world of business. The countries differ not only by the levels of attained development standard, but also by the possible methods which might be used for accelerating growth.The paper discusses growth factors which could help Macedonia find its way to catch up with the developed world in the long run — if this is possible. Obviously, the importance of institutions understood as the “rules of the game” and underpinning them is one of the most important issues related to development that should be seen as a conditio sine qua non and a basic prerequisite of a “developmental wave”.
This paper investigates the relationship between economic growth in Poland and a few metrics of fiscal policy: budget deficit relative to GDP, the structure of public debt, education expenditures, and public consumption. We prove that with constant values of parameters of fiscal policy, over time the economy converges to the balanced growth path which is unique and globally asymptotically stable.
Having calibrated the model with statistical data, we demonstrate that in the period of 2000–2016 economic growth in Poland was driven primarily by rapid improvement in the level of human capital (at a rate of 5.4% per annum), and secondarily due to the accumulation of capital (2.7% annually). If recent trends in fiscal policy are continued, the Polish economy will converge to the balanced growth path with GDP growing at 3.7%. This rate may be boosted, if fiscal policy is appropriately adjusted, for example by permanent reduction in budget deficit. We also analyse the effects of changes in the financing structure of public debt. Finally, we present several scenarios of increasing public and private spending on education.