Exchange rate volatility in high inflation economies: An econometric study of Poland and Brazil

This paper analyses exchange rate series for Poland and Brazil. The Polish series, related to the period soon after the first liberalizing measures, presents a high volatility which is not accounted for by some selected ‘fundamentals’. The Brazilian series, though also keeping evidence of excessive volatility, is cointegrated with fundamentals similar to those of the Polish case. This raises the issue of a learning process taking place during persistent inflations. Unsuccessful one-shot stabilization plans can reinforce this process, leaving a lasting imprint in the excessive volatility pattern. The message seems clear, though maybe not easy to implement: agents take some time to learn to live in non-stable environments; to avoid this by one-shot measures — if unsuccessful — can have a very high cost and pre-empt future corrections.     

Forecasting economies in transition: The case of Romania

Structural change is endemic in the Eastern European economies and the newly emerging Commonwealth of Independent States yet conventional econometric modelling techniques proceed under the assumption that there is a structurally stable ‘true’ economy to be discovered. This paper extends the analysis of Hall (1993) by exploring the consequences of endemic structural change for forecasting and building structural econometric models. We propose a model formulation which makes the econometric model itself able to adjust its parameters in the light of economic change using the Kalman Filter. The paper then illustrates this approach by building a small model of Romania and investigating its forecasting properties.     

Macroprudential policies and income inequality in former transition economies

Economic Change and Restructuring - We study the effects of the adoption of macroprudential policies on income inequality in former transition economies over the period 2002–2014. In general,...     

Human capital,instability and foreign investment in transition economies

I argue that the West should lend money to the former Soviet Union and Eastern Europe (FSUEE) to prevent excessive deterioration of its human capital stock. Such loans can improve the recipient countries' welfare by allowing them to enjoy the long-run benefits of a large human capital stock without incurring the costs of maintaining these stocks through lean economic times. The West can receive a fully competitive rate of return on these loans, and future foreign investors will be able to earn high rates of return by supplying physical capital to a newly stabilized FSUEE with abundant human capital.     

A model of unbalanced sectorial growth with application to transition economies

This paper studies the implications of a dynamic general equilibrium model with three production sectors, which are agriculture, industry and services. Due to the assumption of increasing returns, our model has multiple equilibria. There are two stable equilibria: one, in which a country produces only agricultural goods and converges to a steady state, and the other, in which a country operates all three sectors and has positive unbalanced long-run growth with contracting agriculture and expanding industry and services. These predictions agree well with the real-world development experiences of rich and poor countries. In the context of our model, we also investigate the evolution of the sectorial composition in the transition countries and find that such countries move to the rich rather than to the poor world.

Exchange rate, inflation and unemployment in East European economies: the case of Poland and Hungary*

The aim of the paper is to model the impact of exchange rate on both inflation and unemployment variables in economies which are characterized by important structural changes, i.e. a transition phase moving from centralized economies towards market economies. This phenomenon, which is common to the East European countries, stressed different effects both for what concerns the behaviour of economic agents and for what concerns fiscal and monetary measures adopted by governments and aiming to keep under control the inflation–unemployment trade off. Time series relationships between these variables are investigated within an econometric model. Economic theory and the available data on the hypothetically relevant variables, along with the consideration of the main facts occurred in the period under study, characterize our information set. It is found that single equation analysis yields inefficient inference relative to the whole system analysis, and important structural changes are detected which reflect possible breaks in the structure of the economic system along with a change in economic policy.     

Discovering sources of inequality in transition economies: a case study of rural Vietnam

Applying the recently developed inequality accounting framework, we quantify contributions of fundamental variables to consumption inequality in rural Vietnam. It is found that major determinants of the inequality include location, education, infrastructures. From 1993 to 1998, the contributions of education, physical capital, labour and community infrastructure to total inequality increased while those of land and credit access declined. Ethnicity is found to play a decreasing role in composing total inequality. Policy implications are discussed.

New capital accumulation in transition economies: implications for capital-labor and capital-output ratios

This paper investigates the impact of new capital accumulation on capital-labor and capital-output ratios in 26 transition economies (TE) of Central and Eastern Europe and former USSR. Using a perpetual inventory method, we estimate the amount of capital accumulated in these countries since the start of market reforms and compare it to results for developed countries and largest emerging market economies. We found that on per worker basis, capital accumulation in TE is lagging far behind that of their mature market neighbors in European Union. Disparities in capital-output ratios were not as pronounced, as higher capital-labor ratios were reached in economies with higher levels of GDP per capita. Regression analysis indicates that capital per worker was accumulated faster in TE having higher saving rates, relatively higher priced labor, closer proximity to Western Europe, and higher manufacturing share in the economy. The K/Y levels were influenced by the same determinants except for relative input costs.     

The believability of repressed memories

Two experiments investigated how mock jurors react to a case involving a repressed memory of child sexual assault. Subjects read a fictional civil trial (Experiment 1) or criminal trial (Experiment 2) summary involving the sexual assault of a 6-year-old female. The summary was presented in one of three conditions: (a)child condition: the alleged victim reported her memory of the assault in the same year that the assault occurred; (b)repressed condition: the alleged victim reported the assault 20 years later, after remembering it for the first time; or (c)no-repressed condition: the alleged victim reported the assault 20 years later, but the memory of the assault had been present for the 20 years. Although the testimony of the alleged victim was believed to some extent in all conditions, the alleged victim in the child condition was believed at the highest level, and this was associated with more decisions against the defendant. The results are discussed in terms of how delayed reporting of child sexual assault crimes is associated with lower believability of the alleged victim.We would like to thank Christy Kennedy, Paula Brinegar, and Elizabeth Thomas for their assistance in collecting and scoring the data, as well as Michael Nietzel, Monica Kern, Ronald Roesch, and three anonymous reviewers for their comments on earlier drafts of this paper.     

Tripartite decomposition of labor productivity growth,FDI and human development: evidence from transition economies

This study investigates the relative contribution of technological change, technological catch-up and capital deepening as drivers of labor productivity growth in 14 transition economies during the period 2000–2012. In addition, the study extends the usual decomposition of labor productivity growth by encompassing the impact of foreign direct investment (FDI) on labor productivity growth in transition economies. To illustrate the relative contribution of FDI as a driver of labor productivity growth, we present a simple theoretical model that augments Kohli [Labour productivity vs. total factor productivity. IFC Bulletin 20 (April), Irving Fisher Committee on Central Bank Statistics, International Statistical Institute, 2005] and Grosskopf et al. (Aggregation, efficiency, and measurement, Springer, New York, pp 97–116, 2007) decomposition of the labor productivity. The insights derived in this model provide an underpinning to the empirical analysis in this study. Using Blundell–Bond dynamic panel General Method of Moments estimators, the main finding of dynamic panel data regressions shows that technological catch-up, technological change, and human development level, trade and demographic of population ageing are the main factors that affect labor productivity growth in transition countries. Furthermore, the findings of dynamic panel data regressions show insignificant positive impact of FDI on productivity growth in transition economies. One explanation is that the 14 transition economies that are included in this study do not reach a minimum human development threshold level.     

An investigation and pathological analysis of two fatal cases of cadmium poisoning

Pollution associated with population growth, and with industrial and urban development has led to a serious decline in the water quality of Chinese rivers. Cadmium (Cd) is recognized as one of the most toxic metals and is strongly accumulated by organisms. Humans are exposed to cadmium originating from the environment and from industrial pollution. In spite of thousands of published studies on Cd, there is little information on its pathological features seen in human autopsy. The gross and pathological findings of forensic autopsies of two case of cadmium poisoning are presented and related to an epidemiological investigation. In both cases, multiple organ damage was observed, involving brain, lung, liver, kidney, red blood cells, and platelets, which is consistent with reports in the literature. In particular, in both cases, transmission electron microscopy revealed a large number of dense lysosomal and phagocytic particles in the cytoplasm near the nucleus, indicating the need for a genotoxic study of cadmium. Our observations provide new clues for the future recognition and prevention of Cd poisoning.     

Perceptions of repressed memories: A reappraisal

College students read a trial summary of a sexual abuse case. The victim in the case either claimed that (a) her memory for the abuse had been repressed for 20 years and only recently recovered during therapy, or (b) she consciously remembered the abuse for 20 years but never discussed it until recently in therapy. Participants were significantly more likely to convict the defendant when the testimony was described as nonrepressed (67%) versus repressed (58%). This effect was not modified by the age of the victim at the time the alleged abuse occurred (either 3, 8, or 13 years of age), although the younger and older victims were significantly less believable than the 8-year-old victim. Compared to female participants, male participants were significantly less likely to convict the defendant and rated the victim as significantly less believable. These findings are discussed in the context of recent research on juror reactions to repressed memory testimony.     

An elasticity approach to the analysis of Romanian foreign trade policy during the years of transition

This paper focuses on the effect of exchange rate variations on the economic evolution of a country in transition, facing inflation, output decrease and negative external shocks; the particular case of Romania is considered. The theoretical part is linked to the Fleming-Mundell model for an open economy, but additional assumptions of price mobility and capital immobility are introduced. The usual interest rate versus output graphic framework is switched from one to another, which plots the exchange rate (or real exchange rate) versus output; the author considers that such a representation fits the behavior of an economy in transition towards a market-based system better. A main role, according to this interpretation, is played by the exchange rate elasticities of imports and exports, which influence the images of the equilibria on the goods market and the balance of payment (the IS and BOP curves' slopes). Finally, an empirical analysis is made, as an example, on the Romanian energy imports data series; the attempts to calculate the exchange rate elasticity may be considered as reliable only in the short term. In order to estimate the global exchange rate elasticities of imports and exports, some aggregations of partial sectorial results might be a possible solution. In the Romanian case, the resulting elasticities seem to be lower than for other countries; this poses the question as to the effectiveness of exchange rate policies in managing the Romanian economy.