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.     

An analysis of repressed inflation in two transition economies

We construct a simple model that tests for repressed inflation by estimating a “true” rate of inflation that explains behavior of observed money demand. We estimate the model using quarterly data for Czechoslovakia and Poland. Although our results should be viewed as preliminary, given the imperfect nature of our data, we do have strong evidence that, prior to 1991, there was considerable repressed inflation in Poland, while there was essentially no repressed inflation in Czechoslovakia.     

Exchange rate volatility and regional trade agreements in Southern Africa

Economic Change and Restructuring - Exchange rate volatility is often perceived to cause a reduction in the overall level of trade. In view of the proliferation of rapid regional trade agreements...     

Modelling wages in centrally planned economies: The case of Poland

The main idea developed in this paper is that rising excess demand for the labour force results in higher growth of wages over the ‘notional’ rate of growth. The rationale is that employees change their jobs searching for higher wages, and employers are willing to offer higher pay in order to get additional workers. This relationship is highly nonlinear, and can be regarded as an extension of the idea known as the Phillips curve to the area of ‘negative’ rate of unemployment. Additionally, one can observe that if the disequilibrium intensity in the labour market is small, its changes cause stronger reactions of wages in strategic branches than in the remaining sectors of the economy. It is similar to the situation of excess demand for labour. If there is a high rate of unemployment, reductions of wages affect more branches of secondary importance for the economy. The empirical investigation is based on Polish data covering the time period from 1964 through 1984. As excess demand for labour is unobservable, a proxy is used as an indicator of disequilibrium. It is introduced to the equation explaining the rate of growth of average wages, in addition to the rate of productivity growth of labour and the rate of inflation. Estimates are derived for 10 industry branches and sectors of the economy. The results confirm the initial hypothesis.     

Multisectoral econometric models of the centrally planned economies and the disequilibria

The paper provides a systematic analysis of the properties of large econometric macro models built for the Centrally Planned economies of the '70s and '80s. A specific typology of macro models is introduced, distinguishing between the demand and quasi-demand determined systems on the one hand and the supply and quasi-supply determined systems on the other, and also between complete and incomplete models specifying only one side of economic activities (i.e. generating either demand or supply). It is shown that, under the command type economy, the incomplete, fully supply determined systems prevailed, generating production and showing its allocation. The economic reforms of the '80s, which aimed at a slow transition towards market economies, brought about a tendency towards constructing complete quasi-supply determined systems (especially for Poland and the CSRS). Since, in principle, they were built for shortage economies, the model builders had to allow for unobservables (final and intermediate demand, capacity utilization) and, on the other hand, for an increasing role of the financial phenomena (including prices) and financial policy instruments. A summary of the applications of macro models in forecasting and policy simulations is provided and new tendencies associated with regaining economic equilibria and approaching the market mechanisms emerging in the period of transition are shown.     

The Price-Wage Mechanism in Poland: An Endogenous Switching Model

This paper proposes a two-equation price-wage model that enables to test whether the inflationary pressure on wage rate is only present when the rate of inflation is greater than some threshold value. Since the likelihood function for this model is very nonstandard, we develop a small-sample Bayesian approach to estimate its parameters. Our empirical results for Poland, 1962–1993, give support to the hypothesis of the price- wage spiral with a positive threshold value of inflation.     

Control of drunken driving accidents in Norway: An econometric evaluation of behavior under uncertainty

This article makes use of a very simple choice-theoretic model and econometric analysis to evaluate the control of motoring accidents in Norway. The model attempts to take account of the impact of driving levels, traffic density, and road quality as well as alcohol consumption, the probability of convictions, and sanctions on the generation of accidents. Five alternative logit formulations, estimated within a simultaneous systems framework, provide insights on the impact of law enforcement on the levels of fatal and serious accidents. Results of this pooled cross-section-time-series analysis compare favorably with earlier time-series estimates of the strength of control effects.     

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.

Method of payment and the cesarean birth rate in a hospital in northeast Brazil

This paper examines factors associated with the cesarean birth rate, including medical condition and method of payment, in the largest maternity hospital of Fortaleza, Brazil. Data were collected on 5996 women who delivered at the Maternidade Escola Assis Chateaubriand from October 1980 to July 1981. All women were classified according to how they paid for their care: private (financed at least part of their care with own funds), insured (federal or state), or indigent. Private patients were found to be far more likely than patients in the other two groups to have cesarean deliveries, due primarily to the high percentage of private patients recorded as having prolonged or obstructed labor, combined with a high rate of prior cesarean sections. From this data, it appears likely that financial incentives did play a role in physician decisions on whether to perform cesarean deliveries.     

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.     

The formation of Coasean institutions to provide university knowledge for innovation: a case study and econometric evidence for Switzerland

The Journal of Technology Transfer - “Coasean” institutions are an alternative institutional form that provides a solution to some market and coordination failures. As such they can...     

Macro-economic determinants of penal policy: Estimating the unemployment and inflation influences on imprisonment rate changes in the United States, 1948–1985

Conflict theory proposes that systemic economic distress generates problem populations which require control via palliative and coercive means. Most previous research has concentrated on examining the unemployment-imprisonment relationship. A review of the literature suggests that other structural conditions that generate marginalization as well as the state's placative control must be considered in order to understand the linkage between economic-fiscal forces and penal policy. Using annual time-series data for the period 1948–1985, the present paper examines the extent to which changes in inprisonment rates reflect (a) governmental attempts to offset the threat of unemployment and inflation and (b) fiscal limitations placed by state expenditures on placative controls. The results indicate support for the conflict thesis, with inflation rates and annual fluctuations in black and white male unemployment rates exerting an independent positive effect upon imprisonment-rate changes, after controlling for variations in violent crime rates, prison capacity, and age structure. Possible reasons for the lack of evidence regarding trade-offs between state's placative and coercive policies are discussed and suggestions for further research are noted. *** DIRECT SUPPORT *** AW502010 00003     

The asymmetric effects of exchange rate volatility on US–Pakistan trade flows: new evidence from nonlinear ARDL approach

Economic Change and Restructuring - Earlier studies that examined the response of trade flows to exchange rate volatility relied on the assumption that increased volatility and decreased volatility...