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Abstract

Crowdfunding is a disruptive innovation and has provoked interest as a new way of raising finance. The objective of our research was to analyse both the demand and supply sides of the crowdfunding ecosystem. The study used two methods. The first was a database analysis of 259,114 Kickstarter campaigns. The second was a survey on public awareness of crowdfunding in Hungary, from the perspective of 132 potential investors. The findings suggest several success factors that may be useful for campaign launchers: (1) appealing project presentation; (2) diverse pool of rewards; (3) realistic set of funding goals; (4) appropriate categories and sums of pledges; and (5) frequent communication and satisfactory information about the campaign. Furthermore, the study revealed the differences between the potential investors' expectations and the reality of crowdfunding practices.

Open access

Abstract

Crowdfunding is a disruptive innovation and has provoked interest as a new way of raising finance. The objective of our research was to analyse both the demand and supply sides of the crowdfunding ecosystem. The study used two methods. The first was a database analysis of 259,114 Kickstarter campaigns. The second was a survey on public awareness of crowdfunding in Hungary, from the perspective of 132 potential investors. The findings suggest several success factors that may be useful for campaign launchers: (1) appealing project presentation; (2) diverse pool of rewards; (3) realistic set of funding goals; (4) appropriate categories and sums of pledges; and (5) frequent communication and satisfactory information about the campaign. Furthermore, the study revealed the differences between the potential investors' expectations and the reality of crowdfunding practices.

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Abstract

The paper uses data from the World Values Survey and the European Values Study on individuals in Hungary and its neighbouring countries to examine the effects of political borders on different beliefs, as opposed to that of ethnic differences or historical borders. The focus on Hungary and its neighbours is explained by the fact that parts of the Hungarian ethno-linguistic community can be found in all these countries, which makes it possible to separate the effect of culture from that of the current political community. By applying a cultural gravity model which is concerned with the differences in beliefs between all possible pairs of individuals in the sample, the paper finds that out of five areas of beliefs, it is the beliefs regarding work, markets, and democracy whose differences are robustly affected by political borders, giving some support to the approach which argues that values are shaped through the dialogue occurring within a political community.*

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Abstract

The paper uses data from the World Values Survey and the European Values Study on individuals in Hungary and its neighbouring countries to examine the effects of political borders on different beliefs, as opposed to that of ethnic differences or historical borders. The focus on Hungary and its neighbours is explained by the fact that parts of the Hungarian ethno-linguistic community can be found in all these countries, which makes it possible to separate the effect of culture from that of the current political community. By applying a cultural gravity model which is concerned with the differences in beliefs between all possible pairs of individuals in the sample, the paper finds that out of five areas of beliefs, it is the beliefs regarding work, markets, and democracy whose differences are robustly affected by political borders, giving some support to the approach which argues that values are shaped through the dialogue occurring within a political community.*

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Abstract

The paper presents a comprehensive overview of the public health system in the separatist Trasnistrian region of Moldova, an analytically unorthodox undertaking, as this entails looking at the health system of a fragile breakaway state-like entity, a set of circumstances that — rather inevitably, it seems — may define certain basic features of the health system at hand. Attention will be dedicated to outlining the main challenges the region's public health system faces, for instance, concerning the spread of infectious diseases such as tuberculosis, HIV/AIDS, and SARS-CoV-2. Studying the impact of the coronavirus pandemic can especially serve as a litmus test of the available capacities in Transnistria to deal with public health challenges: facing a novel pathogen, and the related disease and epidemic which threaten to overburden the local institutions. A key question examined here, through the example of Transnistria, is the degree to which international support to the region and the increasing cooperation with the internationally recognized state of Moldova are indispensable for public health security in the unrecognized state.

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Abstract

How China will contribute to global governance has become a critical question in international relations, amplified by the linkages between the Covid-19 pandemic, escalating geopolitical contest and multilateralism in crisis. China has been doubling down on its authoritarian model of domestic governance while becoming more internationally assertive, including in existing and new multilateral institutions. Meanwhile, the United States appeared in recent years to be undermining the institutions, norms and rules of the liberal international order that it, itself, built. The subsequent decline in international cooperation poses grave risks to public health, economic and other forms of security. Can China cooperate with other actors to contribute public goods and stabilisation of global governance in such a deteriorating international environment? While there is a wide range of institutions in which to examine China's growing role in international governance, from United Nations bodies such as the World Health Organisation and World Trade Organisation to regional initiatives such as the Regional Comprehensive Economic Partnership, this paper examines the Asian Infrastructure Investment Bank (AIIB), an example of Chinese innovation in multilateralism. Established amidst geopolitical contest, the new institution seeks to address the Asian deficit of financing for sustainable development. The bank challenges a number of prevailing norms, including replacing the disproportionate power of the US and the advanced economies in the multilateral system with a more proportionate role for China and other developing countries; a new focus on infrastructure-led development which is built on Chinese confidence in the East Asian development model; and a shift away from the Bretton Woods practices of using financing conditions to drive liberal democratic and neo-liberal economic reforms. At the same time as representing a challenge to the traditional order, the bank exhibits – at least to date – best practices in implementation and addresses previously unmet concerns of the developing world. While it is not possible to extrapolate from only one initiative to draw comprehensive conclusions about China's likely future role in global governance, the AIIB case nonetheless suggests that, at least in some fields, China will challenge liberal norms to reform rather than revolutionise the international order.

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Abstract

Central and Eastern European countries faced a serious mortality crisis in the second part of the 20th century, resulting in many years of decreasing life expectancy. In the last few decades, however, this was followed by a period in which mortality improved. This dichotomy of past trends makes it difficult to forecast mortality by way of stochastic models that incorporate these countries’ long-term historical data. The product–ratio model (Hyndman et al. 2013) is a model of the coherent type, which relies more closely on subpopulations with common socioeconomic backgrounds and perspectives to forecast mortality for all populations. This paper examines whether the product–ratio model is suitable for forecasting mortality in countries that have experienced serious mortality crises. To that end, we present a case study centered on Hungary, where the mortality crisis lasted three decades. The evaluation is founded on a comprehensive comparison of the product–ratio model and the classical Lee–Carter model. Our main finding is that in the Hungarian case, the product–ratio model is more reliably accurate than the classical Lee–Carter model. The superior performance of the product–ratio model may indicate that coherent models are better suited to handling mortality crises in forecasting mortality than are independent models.

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Abstract

Central and Eastern European countries faced a serious mortality crisis in the second part of the 20th century, resulting in many years of decreasing life expectancy. In the last few decades, however, this was followed by a period in which mortality improved. This dichotomy of past trends makes it difficult to forecast mortality by way of stochastic models that incorporate these countries’ long-term historical data. The product–ratio model (Hyndman et al. 2013) is a model of the coherent type, which relies more closely on subpopulations with common socioeconomic backgrounds and perspectives to forecast mortality for all populations. This paper examines whether the product–ratio model is suitable for forecasting mortality in countries that have experienced serious mortality crises. To that end, we present a case study centered on Hungary, where the mortality crisis lasted three decades. The evaluation is founded on a comprehensive comparison of the product–ratio model and the classical Lee–Carter model. Our main finding is that in the Hungarian case, the product–ratio model is more reliably accurate than the classical Lee–Carter model. The superior performance of the product–ratio model may indicate that coherent models are better suited to handling mortality crises in forecasting mortality than are independent models.

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Abstract

The research examines the sustainability of trade flows for two European post-communist economies: Serbia and Romania. We analysed two nonlinear forms of the relationship between exports and imports that cannot be explained by frequently applied linear model specifications. Newly developed nonlinear autoregressive distributed lag approach revealed the asymmetric and nonlinear long-run equilibrium between Serbian exports and imports. Nonlinearity tests indicated and the SETAR model specification confirmed threshold nonlinearity form in the Serbian trade flows pattern. Serbian trade flows still approach its sustainable equilibrium but the development pattern is promising. The results for Romania revealed another nonlinear form of the relationship between exports and imports, indicating a dependent cointegration. The paper provides robust results and supports the hypothesis that the relationship between exports and imports can be nonlinear and symmetric.

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Abstract

In this paper, we analyse the determinants of credit growth for banks operating in 20 countries in the post-communist Central, Eastern and South-Eastern Europe (CESEE). We focus on foreign-owned banks and the parent-subsidiary nexus against the background of all banks operating in this part of Europe. Our goal is to determine whether the macroeconomic and bank-specific determinants for host countries have a similar impact on the entire group of banks operating in CESEE and on its subset of foreign-owned banks and whether the rate of credit growth could be considered ceteris paribus equal across the foreign-owned and the complete set of banks in the CESEE. To this end, we use panel data regressions on approximately 4,600 bank-year observations over the period from 1995 to 2014. We conclude that the determinants of banks’ behaviour in the CESEE countries are consistent regardless of these banks’ ownership, the period and their EU membership. Although having a foreign investor expands the set of relevant determinants, the presence of such investors does not overshadow the importance of local conditions.

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Acta Oeconomica
Authors: Tatjana Horvat, Philipp Mayrleitner, Romana Korez Vide, and Vito Bobek

Abstract

This paper aims to examine specific cultural attributes which may be favourable to economic development or restrictive to corruptive behaviour. The indicators of GDP growth and GDP per capita, the Human Development Index (HDI), Hofstede's cultural dimensions and the Corruption Perception Index (CPI) were used within a two staged analysis on the sample of selected emerging economies between 19952015. The findings of the research outline the complexity of this topic and numerous interrelations among the involved variables. The paper emphasises the importance of understanding the cultural traits of societies and the motives for corruption, to be able to take appropriate measures to promote economic and human development and to combat corruption. Future studies could assess differences within cultural clusters of the emerging economies to allow further insights on a comparative level, increasing the possibility to find answers why different regions develop faster than others.

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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.

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This study empirically examines the relationship between the severity of recessions experienced by countries and their income distributions. The analysis is carried out for 28 higher middle- and high-income countries between 1970 and 2013. The empirical evidence derived from the changes in the Gini-index suggests that a greater degree of income inequality increases the cumulative loss of GDP inflicted by recessions. The increased cost emerges from both a longer duration and a deeper amplitude for the contractionary phase of the business cycle.

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Abstract

The euro crisis and its lessons are still not a closed chapter for economists and policy makers. The challenge to find the most appropriate ways to prevent intra-area imbalances is still on the top of the agenda. Nominal adjustment (internal devaluation) remains one of the most critical aspects of this debate. Many are indeed interested in whether austerity measures in several countries “made sense.” But much more is at stake here than evaluating the past. The true question is whether the eurozone can rely on nominal adjustment to align internal economic fluctuations. This paper contributes to the answer by investigating the size of price changes and their impacts on output and trade in the wake of the euro crisis. Selecting the most appropriate variables to measure competitive outcomes, the basic idea of “expansionary contraction” is tested. We rely on a comprehensive panel of all Eurozone member states in the post-crisis years (2010–2017). The results suggest that flexible price levels cannot be taken for granted, and a link to competitiveness is not self-evident, either. Other channels of adjustment may prove to be more important, but scaling them up will ultimately require a sound consensus on the future architecture of the euro.

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Abstract

The aim of this study is to examine the impact of selected determinants on various categories of profitability in the Polish agriculture. To answer this question, we employed a unique panel of 78 entities. We found that subsidies had a negative effect on profitability of large farms. Moreover, they did not detect a significant impact of variables related to farm operator. Financial surplus to liabilities had a positive impact on both ROS and ROA. Moreover, the significance of using the risk management tools and shaping the ratio of rented land to total land are underlined as important managerial implications. Diagnostics of the model indicated the advantage of the models with fixed effects (FE) over the models with random effects (RE).

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Abstract

Despite significant advances in economic literature on the relationship between graft and economic growth, the consensus in nowhere in sight. The current paper enriches the extant literature on the subject by: 1) extending econometric techniques in an attempt to quantify and model institutional development; and 2) providing novel results on the dynamics between non-standardised and standardised institutional metrics. Utilising a new dataset compiled for 423 publicly quoted Czech, non-financial companies with macroeconomic and institutional metrics, we fashion a dynamic model approximating the interactions between the country's institutional development and firm profits as well as examining the relationship between the Czech corruption and the national institutional framework in the years of 2007–2016. The economic property rights appear to contribute to firm accounting profits- and cash flow-based profitability metrics. As regards the anti-corruption policies, the study's outcomes indicate that improvement in economic property rights could have propelled the positive impact of lax anti-corruption government action and inefficient judiciary on firm profits.

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Abstract

The 2010–2012 euro crisis prompted a wave of institutional reforms in the European Economic and Monetary Union (EMU), and one of the most remarkable changes was the creation of a permanent bailout facility for troubled sovereigns. The birth of the European Stability Mechanism (ESM) in 2012 was preceded by harsh debates, reflecting a conflict between a German view of country-level responsibility and French-Italian calls for more risk sharing. These tensions have remained ever since, which was also highlighted by conflicts regarding the ESMs overhaul at the end of 2019. Concerns of Italy then drew attention to the fact that a wide range of issues prevented the community from finalizing the post-crisis structure of the eurozone. This paper focuses on the evolution of the EMU financial assistance framework up until the latest efforts for its reform. We analyse the impact of related policy announcements on changes in sovereign bond yields of Italy, Spain, Portugal and Ireland (i.e. the most vulnerable countries during the euro crisis). Our findings show that news on bailout arrangements significantly contributed to a contemporaneous moderation of periphery bond yields, especially in the case of shorter maturities. This result hints at the role of common facilities in supporting financial stability. To enhance this feature, a ‘package approach’ (i.e. multiple reforms together, as stressed by Italy) may well need to be considered. Such a broad perspective can help strengthen the euro area once the acute threat of the coronavirus pandemic is averted.

Open access

Abstract

Multinational enterprises (MNEs) use different methods and structures for base erosion and profit shifting (BEPS) to optimize the tax liability of the group. It is of great interest to the relevant countries to be able to identify such practices and react with appropriate measures. The objective of this paper is to verify whether selected MNEs engaged in the digital economy tend to shift profits from the Czech Republic to jurisdictions with lower taxation using the tax evasion rate (TER) indicator and the transactional net margin method (TNNM). Since the TER method has not been tested yet, this paper also aims to demonstrate its application on real world data and to evaluate its usability. On a sample of five MNEs, the analysis showed a potential tendency to shift profits within Europe for four MNEs (Amazon, Apple, Google and Uber) and a potential tendency to shift profits specifically from the Czech Republic for one MNE (Amazon). The analysis shows that TER is suitable as a preliminary indication of possible risks, rather than their exact quantification.

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Abstract

Providers of insurance used to have no other choice than to absorb the behavioral externalities of their policy-holders. New technology coupled with the incentives of low-risk consumers has made it possible for firms to price-discriminate on the basis of behavioral risk and thus internalize behavioral externalities. While cost-internalization is generally a positive development, the introduction of behavioral tracking technologies also introduces new economic and social costs. This paper explores the economic and moral trade-offs of adopting behavioral tracking technologies in various insurance settings.

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Abstract

This paper examines the drivers and the size of the shadow economies of the Czech Republic, Hungary and Poland. It also investigates the tax losses associated with these shadow economic activities in all three countries. The Multiple Indicators and Multiple Causes (MIMIC) model is applied and uses time series data covering the period 1990–2019. The key findings show that the sizes of the shadow economies of the Czech Republic, Hungary and Poland are 10.44, 11.18 and 20.47% respectively. The results also show that the average size of the shadow economies between 1990–2019 was 14.92% in the Czech Republic, 18.72% in Hungary and 22.85% in Poland. The Czech Republic loses 3.13% of tax revenue from goods and services and 2.83% from incomes and profits as a result of the shadow economy, while Hungary loses 5.05% of tax revenue from goods and services and 1.68% from incomes and profits. Poland loses 5.25% of tax revenue from goods and services and 4.34% from incomes and profits.

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Abstract

For the further development and more efficient operation of the sharing economy, a fast and inexpensive peer-to-peer payment system is an essential element. The aim of this study is to outline a prototype that ensures the automation and decentralization of processes through smart contracts without blockchain technology. The model has been built based on the narrative that a community currency created through smart contracts can promote genuine practices of sharing as opposed to the profit-oriented approach that most of the currently operating sharing economy platforms have. Features of the model, such as ease of use, high-speed transactions without transaction cost are benefits that can provide a more efficient alternative to the traditional or to the cryptocurrency-based centralized sharing economy platforms.

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Abstract

The main aim of the article is to identify unintended consequences of economic policies to combat climate change, in the short and long run, using the example of the Czech economy. The short term impacts are assessed by world input-output analysis in order to capture direct and indirect channels affecting the Czech automotive industry. Optimistic, realistic and pessimistic scenarios of decrease in demand for cars due to the imposition of environmental taxes in the European Union and the rest of the world are presented. The results show adverse impacts on Czech gross domestic product from 1.6 to 4.9 percentage points. The economy is expected to change its structure and reallocate factors of production to an alternative use, but there is a risk of suboptimal allocation, which might reveal losses from less efficient allocation of labor and capital. Therefore, the analysis of the relationship between economic welfare and the quality of the environment is conducted. Data on the Czech economy confirm the hypothesis of an environmental Kuznets curve and point to unintended consequences of overly ambitious policies to mitigate global climate change. If economic welfare excessively declines, there would be a significant risk of undermining people's will to invest into environmental protection.

Open access

Abstract

The main aim of the article is to identify unintended consequences of economic policies to combat climate change, in the short and long run, using the example of the Czech economy. The short term impacts are assessed by world input-output analysis in order to capture direct and indirect channels affecting the Czech automotive industry. Optimistic, realistic and pessimistic scenarios of decrease in demand for cars due to the imposition of environmental taxes in the European Union and the rest of the world are presented. The results show adverse impacts on Czech gross domestic product from 1.6 to 4.9 percentage points. The economy is expected to change its structure and reallocate factors of production to an alternative use, but there is a risk of suboptimal allocation, which might reveal losses from less efficient allocation of labor and capital. Therefore, the analysis of the relationship between economic welfare and the quality of the environment is conducted. Data on the Czech economy confirm the hypothesis of an environmental Kuznets curve and point to unintended consequences of overly ambitious policies to mitigate global climate change. If economic welfare excessively declines, there would be a significant risk of undermining people's will to invest into environmental protection.

Open access
Acta Oeconomica
Authors: Mirjana Gligorić Matić, Biljana Jovanović Gavrilović, and Nenad Stanišić

Abstract

After Second World War (WWII) a true evolution in understanding of economic development happened, which affected the ways of measuring prosperity, i.e. perceiving changes in people’s welfare. Numerous indicators have been created, which go ‘beyond GDP’ and cover different aspects of development and well-being. The aim of this paper is to analyse prosperity convergence in 32 European countries with a composite indicator – Legatum Prosperity Index (LPI). LPI is more complete than other indicators used in convergence analysis and reflects multidimensional nature of modern development and prosperity. Our research of absolute beta convergence is based on cross-sectional and panel data. Results indicate the existence of convergence in the overall index and its constitutive parts – dimensions and pillars, with different convergence speed regarding LPI and its segments for the total sample of countries, as well as for the countries of Eastern and Western Europe.

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Abstract

Kornai (2014) described the problems of municipal indebtedness in Hungary and analysed the process of bailout carried out between 2011 and 2014. In the same period, the central government also reformed the local government system, which included serious limitations of their financial independence. This study re-examines the state of the soft budget constraint (SBC) of Hungarian local governments. To start, the general theoretical framework of SBC is introduced. Then, the budget constraint on the Hungarian local governments before the bailout is described briefly, followed by an assessment of the corresponding measures which were expected to offset the negative messages of the completed bailout and to harden the budget constraint. The study concludes that the central government decided to harden the budget constraint through the introduction of new hierarchical mechanisms, while the development of fiscal discipline stopped. On the one hand, this resulted in the consolidation of municipal budgets, but on the other, it was accompanied by a serious limitation of local autonomy, projects and borrowing in general, while the central government employs specific administrative tools to show favour to some settlements according to its (political) interests.

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Abstract

This paper examines the links between religion and job satisfaction. Its concern is to compare Eastern and Western Europe. We use the 2015 International Social Survey Programme (ISSP) data covering both non-religious individuals and individuals affiliated to a religious denomination. While the Western European countries generally report significantly higher levels of job satisfaction compared to their Eastern counterparts, we test the hypothesis that religion also shows differentiated effects on job satisfaction and work attitudes. Our results indicate that religion has no significant effect on job satisfaction in either of the regions. In the West, religious affiliation has an influence on a larger variety of work attitude measurements compared to those in the East. In both regions, workers who regularly attend religious services would enjoy work significantly more even if they did not need money, consider high income as less important, and consider helping other people, contact with other people, and having a job useful to society as more important.

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Abstract

The literature has not settled down on safe haven property of gold in the emerging and developing countries. Therefore, we revisit the international evidence on hedging and safe haven role of gold for 34 emerging and developing countries with a span of daily data covering January 2000–November 2018. We employ the GARCH-copula approach to estimate the lower-tail extreme dependencies of the joint distribution of gold and equity returns. We also introduce a new definition for the strong safe haven property of an asset. Our findings indicate that while gold serves as a hedging instrument for all countries in our sample, we got evidence of weak safe haven property for gold, for domestic investors, only in 20 countries, and a strong safe haven asset (SHA) only in 9 countries.

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Abstract

One of the many consequences of financialization in the past decades has been the significant appreciation of the importance of financial markets' liquidity. In order to maintain financial stability, one must have a clear understanding of the sources of market liquidity (ML). A finer comprehension of liquidity and its direction would help policy makers in fine-tuning the current regulations while also identifying each of the elements that compose it. In this paper, a recursive vector autoregressive model is utilized to empirically analyze how to detect the causality relations between funding and ML in four post-communist countries (Czech Republic, Hungary, Slovakia and Poland). For the analyses freely accessible data on the balance sheets of aggregated banking sectors was utilized with the overall aim of finding a proxy for funding liquidity (FL) in every examined country. As a proxy for ML, government bonds' bid-ask spreads were utilized in the model. The paper provides an empirical evidence that FL drives ML in each economy. The results are clear, statistically significant and robust. They can be understood as evidence for the importance of the role of the trader's FL for the liquidity of financial assets' markets. The results of the paper have important implications for monetary policy, as well as micro- and macro-prudential regulation.

Open access

Abstract

Entrepreneurial innovation is a complex phenomenon. Experimenting with research designs that could claim some degree of generalizable linking between the individual and external influencing factors is challenging. However, progress even in research niches can contribute to a more structured understanding of the process. This article focuses on the first stages of entrepreneurial innovation, using a novel questionnaire design. Responses were collected from two Hungarian universities (147 and 127 responses, respectively) and analysed using Structural Equation Modelling. The results confirm that entrepreneurial innovation success in the early stage is shaped by macro-level factors, which have an influence on risk perception through locus of control. The paper makes two contributions, demonstrating (1) the possibility of using questionnaire survey for analysing multiple levels if the narrative is under control, and (2) how individual entrepreneurs approach the start of their innovation-based business, upon which personality and environmental factors both have significant impact.

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Abstract

This paper investigates the role of extra-regional capabilities in regional economic development in a Central and Eastern European context. This is done by analysing the association between the related variety of manufacturing import and export of domestic- and foreign-owned firms on the one hand, and regional employment in manufacturing export on the other. By means of a panel regression framework applied to the Hungarian microregions between 2000 and 2011, we find that domestic firms, in particular, benefit from the related variety of export activities in the regions, while import related to existing export activities is beneficial amongst both foreign and domestic firms. Furthermore, bridging the technological gap between foreign companies and the host economy requires stronger technological relatedness, unless domestic firms have experience in importing.

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Abstract

Kornai's earlier works embodied the idea that state institutions formed a system with a strong tendency to reproduce itself, and hence to resist minor reforms. Thus, at the end of socialism, huge changes were needed in politics, economics, and the law to build a new system oriented towards the market-type economy, which would again be stable, self-reinforcing and self-sustaining. Transition promoted the development of new states in Eastern Europe that conformed to the Copenhagen criteria for the EU accession. Were we too hasty in thinking that we had succeeded? The new systems are not returning to the previous one, and only in a few areas have the basic norms of a market-type economy been set aside in Hungary or Poland. But concerns arise at the interface between politics, law and economics – to do with the rule of law, the nature and role of the state, and the interactions between parliament, the executive and the judiciary. Unavoidably, there is also an interesting international dimension here, represented by the shift from the Warsaw Pact and CMEA to NATO and the EU. This paper explores these issues in the light of some of Kornai's recent analysis of developments in Hungary, while also drawing on his very insightful earlier works.

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Abstract

Both the level and composition of public expenditures and revenues have implications for economic development, as argued by the ‘fiscal multiplier’ and the ‘quality of public finance’ literature. Public finance decisions also influence the distribution of income. By reviewing the literature, I argue for a fair distribution of income as reflected in low income inequality, not particularly because of the impact of income inequality on long-term growth (which is a controversial issue), but primarily because income inequality typically implies inequality of opportunity. European Union countries have very diverse public finance structures and different levels of effectiveness, and there is room for improvement in growth and equality impacts in all countries. A general guideline would be that the most effective approach comprises progressive taxes and inheritance taxes, spending on education, health and public infrastructure, and better government effectiveness. At the height of the 2008 global and the subsequent European financial and economic crises, the fiscal consolidation strategies of EU countries largely relied on cutting public investment and social spending (except pensions), which is the opposite of what is suggested in the literature. Better fiscal rules and good fiscal institutions are needed to safeguard growth- and distribution friendly expenditures in a crisis.

Open access
Society and Economy
Authors: Prespa Ymeri, Arben Musliu, Jehona Shkodra, Iliriana Miftari, and Csaba Fogarassy

Abstract

Kosovo is one of the poorest countries in Europe, despite the various poverty alleviation programs implemented by the authorities and the international funding community. This study aims to analyze income distribution inequality and factors behind rural households' poverty in Kosovo. Data on farm income, nonfarm income, unearned income, and socio-economic characteristics were collected using a semi-structured questionnaire from 203 randomly selected households in Kosovo. Linear regression, one-way ANOVA, and different versions of poverty indexes were used to examine the data. One-quarter of households' income comes from nonfarm activities. The middle-income households had the highest potential to find alternative employment in the nonfarm sector. Years of education, household size, number of family members above the age of 18, and total income had a positive impact on nonfarm revenues. The poorest rural households had the highest share of income from farm activities (77.52%). Nonfarm revenues have a positive impact on poverty alleviation; thus, the study suggests adopting suitable rural policies to enhance nonfarm employment for vulnerable rural households. The agro-tourism sector and circular economy approaches in agriculture with the focus on renewable energy can be considered as potential sources of nonfarm income, which could lead to sustainable poverty reduction.

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Abstract

The hegemony of the Western higher education institutions in the global university market is being challenged by China. The top Chinese universities have significantly improved their international ranking positions. When it comes, however, to the ability of universities to attract foreign students and faculty, the Chinese higher education institutions' performance raises questions. The International Outlook scores of these universities, although showing an increasing trend, are still lacking behind the U.S. or Western European top universities. China is primarily a student ‘exporter.’ It also became a leading destination country for students from Asia or Africa, but it is still far from reaching the ‘international openness’ level of the U.S. or the UK universities. The publication networks of the top Chinese higher education institutions indicate that these universities prefer to publish with other Chinese institutions or the U.S. universities.

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Abstract

This essay joins in the international controversy about the nature and sustainability of the economic system in China. While official ideology continues to stick to the concept of ‘socialist market economy,’ albeit with changing contents, international observers are split. One group considers China as a de facto market economy, which is in line with the top-down tradition of ruling in the region. Others consider it as a sui generis system. And a third line takes it as yet another case of hybrid regime which proliferated globally in the new millennium. I try to create a link between these readings and the empirics of Chinese growth. This may help interpret the slowdown, exacerbated by the COVID-19 epidemics on Chinese output.

Open access

Abstract

The paper examines the importance of the ‘Chinese factor’ in today's world from the perspective of current phenomena such as particular political and economic uncertainty and also examines them against the background of processes of global cooperation and parallel unprecedented competition at the same level. Complex phenomena occurring in this area have recently been additionally disrupted by the outbreak of the COVID-19 pandemic. Will the world be different?

Globalization processes have taken place over the centuries but have gained particular importance in our present times, because we left ‘the golden age’ of globalization (1990–2010) already behind us. China, ever louder, talks about the need for a ‘new’ globalization, in line with its new aspirations as a pretender to the leadership position in the global economy. The Belt and Road Initiative, launched in 2013, has been in the centre of its vision. It has become the foundation for China's foreign policy in the horizon of at least the middle of XXI century. It was designed to re-confirm China's unprecedented economic success of the past four decades, which to a great extent could be derived from a skilful use of the ‘traditional’ mechanisms of globalization.

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Abstract

After the collapse of the Berlin Wall it was conceivable that China would follow the path towards the cessation of communism, as it happened in the successor states of the USSR, Yugoslavia and the East European satellite states of the Soviet Union. But the Communist Party of China (CPC) managed to retain control and avoided the Russian and East European collapse, a full-fledged transition to capitalism and liberal democracy. For a while, China was on its way to market capitalism with the possible outcome to turn eventually into a liberal democracy. This was a rocky road, with backs-and-forth. But the shift to liberal democracy did not happen. The massacre at Tiananmen Square in 1989, approved by Deng Xiaoping, was a more alarming setback than the contemporary Western observers were willing to realize. This paper presents an interpretation of the changes under present Chinese leader, Xi Jinping in a post-communist comparative perspective.

Open access

Abstract

Why did China grow so fast in the past four decades? What were the main factors? Important ones were: attitude of government; opening to the world; role of culture; exploitation of technological gap; role of foreign trained students; and role of government in the creation of modern infrastructure. These factors are likely to play a much smaller role in the future while several negative factors –populism, trade wars, environmental obstacles, aging of the population, authoritarianism and others are likely to lead to significantly lower growth rates.

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Abstract

The recent successes of the Chinese modernisation strategy are substantiated by an array of indicators showing an impressive improvement. Irrespective of China's current growth deceleration, these indicators suggest a highly effective implementation of an ambitious roadmap that can ultimately help China to catch up and achieve a global technological leadership. Still, some scholars point to deep structural deficiencies, and maintain that these indicators – however impressive they are – merely scratch the surface, while much deeper change is required in order to maintain economic growth. Therefore, the purpose of this paper (finalized before the ongoing COVID-19 crisis) is to contribute to this burgeoning literature – documenting the outcome and analysing the implications of China's efforts to embrace a new growth model – and analyse the chances of the Chinese digital great leap forward, that is the radical transformation of its prior modernisation trajectory. Drawing on a systematic review of the literature, the author maps, presents and analyses existing indicators quantifying China's progress in shifting to this new development trajectory, identifying also the gaps in the conventional measurement approaches. According to the findings of this paper, there are several easy-to-measure indicators, often used in international comparisons, that indeed confirm the optimistic scenario of China's development prospects in the near future. On the other hand, some hard-to-quantify factors, such as the localization of knowledge and the spreading of innovation, need to be also considered. These latter show a closer association with countries' development level as well as development potential. With regards to these latter particularities, China still has a long way to go.

Open access

Abstract

In the era of irreversible globalisation, the worldwide economic and political rules of play must take into account of the growing importance of China. Rather than fight the country, one should pragmatically cooperate on solving the mounting global problems. Contemporarily, both China should adapt to the external world and the world itself should adapt to China. There is no possibility of imposing on it a model developed elsewhere, especially that these days liberal democracy is experiencing a systemic crisis in many countries. Neither is there a chance to impose the Chinese model on others, though it seems tempting to a country; it is not an exportable ‘commodity,’ but its elements may prove useful elsewhere. China is not aiming for global domination; instead, it is consistently integrating with the world to maintain its own development. The only reasonable way forward is thorough observation, mutual learning and pragmatic collaboration based on the non-orthodox economic thought.

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In the 1990s and early 2000s, comparison of transition strategies of China versus those in Central and Eastern Europe raised controversies in the economic and political science literature. However, differences between China and the countries of the former Soviet bloc in their transition strategies resulted not necessarily from a deliberate political choice but from different initial conditions. Low-income and largely rural China, after its first radical step (de-collectivisation of agriculture in 1978), could move more gradually due to its under-industrialisation and retaining administrative control over the economy. The over-industrialised Central and Eastern Europe (CEE) and former Soviet Union (FSU) countries where the previous command system of economic management spontaneously collapsed at the end of 1980s, did not have such an option. They had to conduct market-oriented reforms as quickly as they could, with all the associated economic and social pain. Regardless of speed and strategy of transition, almost all previously centrally-planned economies, including China, completed building basic foundations of a market system by the early 2000s although the quality of economic and political institutions and policies differ between the sub-regional groups and individual countries.

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Abstract

Recently, the middle-income trap (MIT) has gained considerable attention – besides European countries, several African, Asian, and Latin-American developing countries are also affected. Many countries have remained in the middle-income bracket for decades, whilst only a few have advanced to high-income status. Felipe et al. in 2012 showed that an annual growth rate of at least 3.5 and 4.7% sustained for a period of 14 and 28 years is required respectively for upper-middle-income and lower-middle-income countries to escape the MIT. Economic growth is influenced by several factors including foreign aid received. Thus, in this study, we aim to answer the question of how aid affects economic growth in middle-income countries and whether aid may contribute to escaping the MIT. Focusing on the countries that have remained in the middle-income group between 1990 and 2017, our analysis confirms that aid contributes to economic growth; however, the impact is positive in the upper-middle-income countries and negative in the lower-middle-income countries. Aid is therefore, likely to be more effective in helping the upper-middle income countries to escape the MIT but not the lower-middle income countries.

Open access

Abstract

There is a sharp contradiction between the economic performance of the Hungarian government of Victor Orbán and the institutional framework (toolkit) by which the seemingly stellar performance of the Hungarian economy has been achieved. It looks like as if the economic playground of the government (disciplined fiscal policy, unorthodox monetary policy and contradictory institutional system) and political-institutional order built by the same government during the last ten years, represent two different worlds. This paper provides a possible explanation to resolve this contradiction by identifying reversed relationship between tools and goals of economic policies. The genuine, hidden but most important goal of the present Hungarian government is to make Orbán and his political family wealthy and make their enrichment legitimate. In disguise of a public policy to achieve this (private, personal) goal, this government needs absolute and uncontrolled power certified by the scenery of the parliamentarian democracy. This private effort should be falsified, which could be achieved if his government pretends that it wants to pursue a disciplined economic policy.

Open access

Abstract

This paper is aimed at investigating determinants of recent flows of foreign direct investment (FDI) into advanced business services (ABS) in the European Union with the distinction between “old” (till 2004) and “new” member states (after 2004 extension). Special attention is put on the Visegrád countries. The factors affecting location decisions of multinational corporations were analysed at the national and regional level. The latter approach proved to be very effective due to the fact that foreign companies operating in ABS are highly unequally distributed across economies. Indeed, there are only few regions in economies attracting bulk of the operations in ABS.

The research method applied in the paper is negative binomial regression, which measures the probability of occurrence of an ABS foreign firm in an economy or a region taking into consideration its characteristics. This research combines macroeconomic, regional and firm-level data. The explanatory variables are divided into two groups: demand and supply. The main conclusion is the high significance of the supply factors. In other words, foreign companies focus on locations offering large number of skilled workers at reasonable prices. The key recommendation for governments interested in attracting ABS type of investment is to focus on the quality of human capital.

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