Academic Working Paper Series

Inflation Dynamics and the New Keynesian Phillips Curve in EU-4
Borek Vašícek
WP No. 971 (October, 2009)

Abstract:

The paper seeks to shed light on inflation dynamics of four new EU member states (the Czech Republic, Hungary, Poland and Slovakia). To this end, the New Keynesian Phillips curve augmented for open economies is estimated and additional statistical tests applied. We find the following. (1) The claim of New Keynesians that the real marginal cost is the main inflation-forcing variable is fragile. (2) Inflation seems to be driven by external factors. (3) Although inflation holds forward-looking component, the backward-looking one is substantial. An intuitive explanation for higher inflation persistence may be rather adaptive than rational price setting of local firms.

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Jel Codes: C32, E31
Keywords: Inflation dynamics, New Keynesian Phillips curve, CEEC

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INTERNATIONAL FINANCIAL INTEGRATION AND REAL EXCHANGE RATE LONG-RUN DYNAMICS IN EMERGING COUNTRIES: SOME PANEL EVIDENCE
Guglielmo Maria Caporale; Thouraya HADJ AMOR; Christophe Rault
WP No. 970 (October, 2009)

Abstract: The aim of this paper is to provide new empirical evidence on the impact of international financial integration on the long-run Real Exchange Rate (RER) in 39 developing countries belonging to three different geographical regions (Latin America, Asia and MENA). It covers the period 1979-2004, and carries out “second-generation” tests for non-stationary panels. Several factors, including international financial integration, are shown to drive the long-run RER in emerging countries. It is found that the new financial environment characterised by international financial integration leads to a depreciation of the RER in the long run. Further, RER misalignments take the form of an under-valuation in most MENA countries and an over-valuation in most Latin American and Asian countries.
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Jel Codes: C15, E31, F0, F31
Keywords: emerging economies, real exchange rate, financial integration, misalignment, second-generation panel unit-root and cointegration tests

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ONCE BITTEN, TWICE SHY: EXPERIENCES OF A BANKING CRISIS AND EXPECTATIONS OF FUTURE CRISES
Shannon Mudd; Neven Valev
WP No. 969 (October, 2009)

Abstract: Survey data from Bulgaria show that people who had experienced a loss during a banking crisis are significantly more likely to expect a new crisis. This result holds despite 12 years between the earlier crisis and the survey, and the dramatically improved performance of the financial sector and the economy in the meantime. However, we find that earlier experiences affect expectations only for less informed individuals. Individuals who are more informed about the economy are unaffected by their prior experiences.
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Jel Codes: D8, G2
Keywords: banking crisis, trust, expectations

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Monetary policy rules and inflation process in open emerging economies: evidence for 12 new EU members
Borek Vašícek
WP No. 968 (October, 2009)

Abstract:

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Jel Codes: E31, E52, E58, P24
Keywords: open emerging economies, CEE countries, monetary policy rules, open economy Phillips curve, conditional inflation variance

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China's economic cooperation related investment
Sumon Kumar Bhaumik; Catherine Yap Co
WP No. 966 (September, 2009)

Abstract: The Chinese state undertakes large scale investments in a number of countries under the auspices of economic cooperation related investment (ECI). While there are suggestions that it is an extension of China?s soft power aimed at facilitating Chinese FDI in those countries, often for access to natural resources, there is no systematic analysis of this in the literature. In this paper, we examine this investment of the Chinese state over time. Our results suggest that the pattern of investment is indeed explained well by factors that are used in the stylised
literature to explain directional patterns of outward FDI. They also demonstrate that the (positive) relationship between Chinese ECI and the recipient countries? natural resource
richness is not economically meaningful. Finally, while there is some support for the popular wisdom that China?s willingness to do business with a country is not strongly affected by its
level of corruption, there is much weaker support, if any, for the hypotheses that China favours doing business with countries where political rights are limited.
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Jel Codes: F21, F23, F49
Keywords: China; Economic cooperation related investment; Foreign direct investment; Natural resources; Institutional quality

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CAPITAL INFLOWS, HOUSEHOLD DEBT AND THE BOOM-BUST CYCLE IN ESTONIA
Zuzana Brixiová; Laura Vartia; Andreas Worgotter
WP No. 965 (August, 2009)

Abstract: From 2000 to 2007, Estonia was one of the fastest growing emerging market economies. A housing boom, fuelled by capital inflows and credit, resulted in skyrocketing house prices and an over-expanded construction sector. However, the currency board limited the Bank of Estonia’s ability to curb credit growth, while the fiscal policy framework amplified the cycle through pro-cyclical spending increases and tax cuts. As credit was mostly financed by cross-border loans from foreign banks, the risks of disruptions to credit flows and financial contagion have increased.  Some have already materialised through tightened lending standards and capital outflows.  Estonia is now in a severe recession. To restore high and sustainable growth, the country will need to rebalance its resources from non-tradables towards exports. Regaining external competitiveness will be challenging, however, given the fixed exchange rate and recent devaluations in partner countries.  Flexibility of the economy will thus be crucial. Over the medium term, policymakers could also strengthen incentives for a better functioning of the housing finance market and gradually remove the pro-cyclical bias of fiscal policy.
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Jel Codes: C2, E3, E62
Keywords: capital inflows; credit; household debt; boom-bust cycle; Estonia

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Labour Market Flexibility in Estonia: What More Can Be Done?
Zuzana Brixiová
WP No. 964 (July, 2009)

Abstract:

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Jel Codes: E24, J64, J8
Keywords: Labour market policies; flexibility; Estonia

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Markets Globalization by Firms from Emerging Markets and Small countries: an Application of the Neoclassical Trade Model
Tamir Agmon
WP No. 963 (July, 2009)

Abstract: The changes in globalization and the world of international business make it necessary to rethink the basic model of the economics of international business. For most of the second part of the 20th century international business was about how large companies in the developed countries increase their value via international business activities. Not surprisingly the research in the economics of international business from Caves, Kindleberger, and Hymer to Buckley and Casson, Dunning and many others was based on models of industrial organization. The world has changed and international business has become a two-way street where firms and governments from emerging markets and small countries are as active as the developed countries MNEs and their governments. In this paper the basic international trade model is used to gain insights of the new world of international business. In particular, a dynamic model of changing factor intensity and of creating local specific competitive and comparative advantages for firms and governments from emerging markets is presented and discussed.
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Jel Codes: F11, F23, O14
Keywords: economics of international business, international trade models, emerging markets

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Central Bank Communication and Exchange Rate Volatility: A GARCH Analysis
Radovan Fiser; Roman Horvath
WP No. 962 (July, 2009)

Abstract: We examine the effects of the Czech National Bank communication, macroeconomic news and interest rate differential on exchange rate volatility using generalized autoregressive conditional heteroscedasticity model. Our results suggest that central bank communication has a calming effect on exchange rate volatility. The timing of central bank communication seems to matter, too, as financial markets respond more to the communication before the policy meetings than after them. Next, macroeconomic news releases are found to reduce exchange rate volatility, while interest rate differential seems to increase it.
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Jel Codes: E52, E58, F31
Keywords: central bank communication, exchange rate, GARCH

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On the Influence of Oil Prices on Stock Markets: Evidence from Panel Analysis in GCC Countries
Mohamed El Hedi AROURI; Christophe Rault
WP No. 961 (June, 2009)

Abstract: This paper implements recent bootstrap panel cointegration techniques and Seemingly Unrelated regression (SUR) methods to investigate the existence of a long-run relationship between oil prices and Gulf Corporation Countries (GCC) stock markets. Since GCC countries are major world energy market players, their stock markets are likely to be susceptible to oil price shocks. Using two different (weekly and monthly) datasets covering respectively the periods from 7 June 2005 to 21 October 2008, and from January 1996 to December 2007, our investigation shows that there is evidence for cointegration of oil prices and stock markets in GCC countries, while the SUR results indicate that oil price increases have a positive impact on stock prices, except in Saudi Arabia.
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Jel Codes: F3, G12, Q43
Keywords: GCC stock markets, oil prices, panel cointegration analysis

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Oil Prices & Stock Markets: What Drives What in the Gulf Corporation Council Countries?
Christophe Rault; Mohamed El Hedi AROURI
WP No. 960 (June, 2009)

Abstract: In the empirical literature, only few studies have focused on the relationship between oil prices and stock markets in net oil-importing countries. In net oil-exporting countries this relationship has not been widely researched. This paper implements the panel-data approach of Kónya (2006), which is based on SUR systems and Wald tests with country-specific bootstrap critical values to study the sensitivity of stock markets to oil prices in GCC (Gulf Corporation Council) countries. Using two different (weekly and monthly) datasets covering respectively the periods from 7 June 2005 to 21 October 2008, and from January 1996 to December 2007, we show strong statistical evidence that the causal relationship is consistently bi-directional for Saudi Arabia. Stock market price changes in the other GCC member countries do not Granger cause oil price changes, whereas oil price shocks Granger cause stock price changes. Therefore, investors in GCC stock markets should look at the changes in oil prices, whereas investors in oil markets should look at changes in the Saudi stock market.
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Jel Codes: F3, G12, Q43
Keywords: GCC stock markets, oil prices

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TRADE SPECIALISATION AND ECONOMIC CONVERGENCE: EVIDENCE FROM TWO EASTERN EUROPEAN COUNTRIES
Guglielmo Maria Caporale; Christophe Rault; Robert Sova; Ana Maria Sova
WP No. 959 (June, 2009)

Abstract: This paper analyses trade specialisation dynamics in two Eastern European countries (Romania and Bulgaria – EEC-2) vis-à-vis the core EU member states (EU-15) over the period 1990-2006. Specifically, we focus on whether there is a shift towards intra-industry trade leading to economic convergence and technological catch-up. We use recently developed static (FEM, REM and FEVD) and dynamic (GMM) panel data methods which take into account possible heterogeneity. Our empirical results indicate that intra-industry trade has indeed increased, but it is of the vertical rather than the horizontal type, resulting in complementary rather than competitive production patterns.
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Jel Codes: C23, F13, F15
Keywords: gravity models, panel data models, trade specialisation, comparative advantage

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Inflation differentials in the Euro area and their determinants – an empirical view
Juan Ignacio Aldasoro; Vaclav Zdarek
WP No. 958 (May, 2009)

Abstract: In this paper, we present evidence on the statistical features of observed dispersion in HICP inflation rates in the Euro area. Our descriptive exercise shows that there is still a remarkable dispersion of HICP inflation rates across the member countries. We find that most of dispersion originates in the non-traded categories of the HICP. This suggests that the main source of dispersion in countries' headline inflation rates is in those components of the HICP where non-traded goods (services, (public) goods with regulated and administered prices) are more intensely represented. We then examine the determinants of inflation differentials in a panel of the states of the Euro area in 1999–2007 using alternative classifications of this group and three different datasets. The evidence presented shows that output gaps and a proxy for price level convergence were statistically significant. On the other hand, some determinants that were found significant in previous studies (for example Honohan and Lane, 2003, 2004; ECB, 2003) has no impact on inflation in our expanded time span (e.g. exchange rate movements)
The dispersion of HICP inflation is expected to increase in the coming years as the new EU member states will join the Euro area. There are some risks for these countries connected with the common monetary policy, which is adjusted more to the conditions of stabilized advanced economies forming the core of the Euro area. This creates potential problems for the EU common monetary policy (ECB), in particular negative (positive) interest rates, their repercussions on investment processes, consumption and the possibility of creating asset bubbles.

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Jel Codes: C23, E31, F15, F41
Keywords: inflation differentials, price convergence, exchange rate, panel data

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Infrastructure and Growth: Empirical Evidence
Balázs Égert; Tomasz Kozluk; Douglas Sutherland
WP No. 957 (April, 2009)

Abstract: Investment in network infrastructure can boost long-term economic growth in OECD countries. Moreover, infrastructure investment can have a positive effect on growth that goes beyond the effect of the capital stock because of economies of scale, the existence of network externalities competition enhancing effects. This paper analyses the empirical relationship between infrastructure and economic growth. Time-series results reveal a positive impact of infrastructure investment on growth. They also show that this effect varies across countries and sectors and over time. In some cases, these results reveal evidence of possible over-investment. Bayesian model
averaging of cross-section growth regressions confirms that infrastructure investment in telecommunications and the electricity sectors has a robust positive effect on long-term growth (but not in railways and road networks). Furthermore, this effect is highly nonlinear as the impact is stronger if the
physical stock is lower.
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Jel Codes: E22, O11, O40
Keywords: investment, infrastructure, network industry, economic growth,cointegration, Bayesian model averaging

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Infrastructure investment in network industries: The role of incentive regulation and regulatory independence
Balázs Égert
WP No. 956 (April, 2009)

Abstract: This paper finds that coherent regulatory policies can boost investment in network industries of OECD economies. Rate-of-return regulation is generally thought to result in oververinvestment, while incentive regulation is believed to
entail underinvestment. Yet, previous empirical work has generally found that the introduction of incentive regulation has not systematically changed investment in network industries. According to the theoretical literature, regulatory uncertainty exposes both types of regimes to the danger of underinvestment. However, regulatory uncertainty is arguably higher under rate-of-return regulation because investment decisions (what can be included in the rate base) are usually evaluated in a discretionary manner, while firms operating under incentive regulation are less affected by this behaviour. In
addition, incentive regulation encourages investment in cost-reducing technologies. Using Bayesian model averaging techniques, this paper shows that incentive regulation implemented jointly with an independent sector regulator (indicating lower regulatory uncertainty) has a strong positive impact on investment in network industries. In addition, lower barriers to entry are also found to encourage sectoral investment. These results support the importance of implementing policies in a coherent framework.
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Jel Codes: L51, L97, L98
Keywords: network industries; regulation; incentive regulation; price cap; cost-plus regulation; rate-of-return regulation; regulatory independence; investment.

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The impact of monetary and commodity fundamentals, macro news and central bank communication on the exchange rate: Evidence from South Africa
Balázs Égert
WP No. 955 (April, 2009)

Abstract: This paper studies drivers of high-frequency (daily) dynamics of the South African rand vis-à-vis the dollar from January 2001 to July 2007. We find strong nonlinear effects of commodity prices, perceived country and emerging market risk premium and changes in the dollar-euro exchange rate on changes in daily returns of the rand-dollar exchange rate. We also identify a one-sided nonlinear mean reversion to the long-term monetary equilibrium. In addition we establish very short-lived effects on the exchange rate of selected macroeconomic surprises and central bank communication aimed at talking up the rand.
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Jel Codes: E31, F31, O11, P17
Keywords: Exchange rate, nonlinearity, commodity prices, monetary model, macroeconomic news, central bank communication, South Africa

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“Family” ownership, tunneling and earnings management: A review of the literature
Sumon Kumar Bhaumik; Andros Gregoriou
WP No. 954 (March, 2009)

Abstract: In this review article, we bring together a number of aspects of family firms that are ubiquitous in a number of institutional contexts, often as part of larger business groups. We pay particular attention to the mechanisms by which families retain control over firms, and the incentives of the families in control to expropriate other stakeholders by way of tunnelling. We examine the role of earnings management in facilitating tunnelling, and evidence about the incidence of earnings management in family firms. Our review suggests that while the literature on these aspects of family control is rich, the contexts in which the empirical exercises are undertaken are relatively few, and hence there is considerable opportunity to expand it to other contexts, in particular in the form of cross-country
comparisons of the relative impact of agency conflicts and institutions on these issues.
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Jel Codes: G34
Keywords: family control, group affiliation, agency problem, tunnelling, earnings management

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Determinants of Exchange Rate Practices in the MENA Countries: Some Further Empirical Results
Sfia Mohammed Daly; Sami Mouley
WP No. 952 (March, 2009)

Abstract: This paper analyses the determinants of exchange rate practices in 15 MENA countries for the 1977-2007 period placing special emphasis on structural and macroeconomic explanations. We use three different exchange rate regime classifications in order to avoid potentially misleading specification. Even though the empirical results using the de facto classifications are very different from those obtained from the de jure specification, we find that international reserves play a major role in determining exchange rate practices in the MENA countries.
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Jel Codes: E42, F31, F33
Keywords: Exchange rate regimes, MENA countries, ordered Probit model.

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AN ANALYTIC APPROACH TO SELECTING A NONPROFIT
Andres Ramirez; Hakan Saraoglu
WP No. 951 (March, 2009)

Abstract: Charity giving continues to be an important aspect of the economic and social fabric of the United States. The number and total assets of nonprofits registered with the Internal Revenue Service (IRS) under the section 501(c)(3) of the tax code have grown significantly over the past decade. Given the significant share of donations in supporting the activities of nonprofits, it is important for donors to have a better understanding of their operations and governance. As the number of nonprofits with similar objectives increases, it becomes overly complicated for donors to make a choice that is consistent with their own purpose for giving. The goal of this paper is to develop an analytic framework for selecting a nonprofit from among competing alternatives. Specifically, we propose a process in which consultants or financial advisors help donors evaluate
nonprofits using a set of financial and governance criteria to generate a ranked short list of alternatives for further evaluation. Donors differ in their criteria for evaluating the
performance of nonprofits. The methodology we use allows donors to incorporate their preferences for specific criteria to the selection of a nonprofit in a consistent manner.
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Jel Codes: G2, G3, L3
Keywords: Financial Performance, Philanthropy

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Anthropometry of Love Height and Gender Asymmetries in Interethnic Marriage
Michèle Belot; Jan Fidrmuc
WP No. 950 (February, 2009)

Abstract: Both in the UK and in the US, we observe puzzling gender asymmetries in the propensity to outmarry: Black men are substantially more likely to have white spouses than Black
women, but the opposite is true for Chinese: Chinese men are half less likely to be married to a White person than Chinese women. We argue that differences in height distributions,
combined with a simple preference for a taller husband, can explain a large proportion of these ethnic-specific gender asymmetries. Blacks are taller than Asians, and we argue
that this significantly a¤ects their marriage prospects with whites. We provide empirical support for this hypothesis using data from the Health Survey for England and the Mille-
nium Cohort Study, which contains valuable and unique information on heights of married couples.
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Jel Codes: J12, J15
Keywords: Intermarriage, gender, height

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IS THE COST OF LIVING IN RUSSIA REALLY THAT LOW?
Konstantin Gluschenko
WP No. 949 (February, 2009)

Abstract: There is a widespread opinion that goods, especially foods, and services in Russia are very cheap as compared to the US. A number of Russian statistical indicators characterizing the cost of living, either directly or indirectly, seemingly corroborate this opinion. This paper demonstrates that these indicators are biased, sufficiently understating the cost of living in Russia. A comparison of Russian actual prices for foods with those in the US evidences that they are comparable. Moreover, the Russian prices are tending to catch up with the US prices.
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Jel Codes: I31, O57, P22
Keywords: food prices, cost of living, minimum wage, subsistence level, Russia, US.

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Banking Market Liberalization and Bank Performance: the Role of Entry Modes
Ngoc-Anh Vo Thi
WP No. 948 (February, 2009)

Abstract: This paper analyzes the evolution in bank performance following the removal of legal restrictions on the entry of foreign banks in three transition economies: the Czech Republic, Hungary, and Poland. Two modes of foreign bank entry are considered: entry by Greenfield investments, and by foreign mergers and acquisitions of domestic banks. For this purpose, we construct a panel data of banks from the three countries over the period 1994-2004. We determine the dates on which liberalization occurred in each country. Bank performance is reflected by accounting measures of profitability, net interest margin, and operating costs. The results show a very limited effect of the entry of Greenfield banks on domestic banking market in the early transition period. In contrast, the foreign entry by mergers and acquisitions of domestic banks exerts significant impacts on bank performance. Indeed, we observe significant declines in banks' profits and net interest margins, and a significant increase in operating costs. Our results have important policy implications for those emerging and transition economies still hesitant to liberalize their banking markets.

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Jel Codes: F36, G21, C01
Keywords: Banking, Transition Economies, Foreign Bank Entry, Greenfield Investment, Mergers and Acquisitions, Bank Performance.

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The Monetary Union: The Decade Ahead. The Case of Non-Member States
Daniel Daianu; Laurian Lungu
WP No. 947 (February, 2009)

Abstract: What are the prospects for New Member States to join the euro-zone in the not too distant future? They seem to be in a catch-22 situation Because of the current financial crisis some Maastricht criteria would be more difficult to fulfil in the short and medium term, which would make it hard for them to join the eurozone. But there is also an argument, which highlight benefits of a faster accession due to dynamic effects for the countries involved and for the eurozone as a whole.
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Jel Codes: E52, F36
Keywords: finance, EU, Europe, eurozone, enlargement

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CURRENCY SUBSTITUTION: A CASE OF KAZAKHSTAN (2000:1-2007:12)
Mesut Yilmaz; Yessengali Oskenbayev; Kanat Abdulla
WP No. 946 (February, 2009)

Abstract: This paper aims to investigate the demand for money in Kazakhstan. This study covers the period starting from 2000:01, when capital liberalization program was launched and National Bank approved managed float regime (National Bank employed adjustable exchange rate regime before exchange rate crisis in Kazakhstan in 1999) to 2007:12 as recent available data for investigation variables. In order to achieve the goal we set demand for money function is estimated using cointegration methodology aimed for variables integrated of order one. The results show important key factors for controlling money demand could be applied by National Bank of Kazakhstan. Besides, there was reversal of currency in Kazakhstan over the period under the investigation.
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Jel Codes: C32, E31, E41, F31, F41, F43
Keywords: Demand for money, currency substitution, dollarization, Kazakhstan

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DETERMINANTS OF POLLUTION ABATEMENT AND CONTROL EXPENDITURE: EVIDENCE FROM ROMANIA
Guglielmo Maria Caporale; Christophe Rault; Robert Sova; Ana Maria Sova
WP No. 945 (January, 2009)

Abstract: The aim of the present study is to shed some light on the factors affecting Pollution Abatement and Control Expenditure (PACE) in the context of a transition economy such as Romania, in contrast to the existing literature which mostly focuses on developed economies. Specifically, we use survey data of the Romanian National Institute of Statistics and estimate Multilevel Regression Model (MRM) to investigate the determinants of environmental behaviour at plant level. Our results reveal some important differences vis-à-vis the developed countries, such as a less significant role for collective action and environmental taxes, which suggests some possible policy changes to achieve better environmental outcomes
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Jel Codes: C23, Q52
Keywords: Pollution Abatement and Control Expenditure, Transition Economy, Multilevel Regression Model (MRM)

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Bootstrap panel Granger-causality between government spending and revenue in the EU
Antonio Afonso; Christophe Rault
WP No. 944 (January, 2009)

Abstract:
Using bootstrap panel analysis, allowing for cross-country correlation, without the need of pre-testing for unit roots, we study the causality between government revenue and spending for the EU in the period 1960-2006. Spend-and-tax causality is found for Italy, France, Spain, Greece, and Portugal, while tax-and-spend evidence is present for Germany, Belgium, Austria, Finland and the UK, and for several EU New Member States.

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Jel Codes: C23, E62, H62
Keywords: panel causality, fiscal policy, EU

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Regional Determinants of FDI Distribution in Poland
Agnieszka Chidlow; Stephen Young
WP No. 943 (December, 2008)

Abstract: In this paper we examine the location determinants of the inflow of Foreign Direct Investment (FDI) into Poland, at a regional level. Using survey data from an online questionnaire in February 2005 and a multinomial logit model incorporating the investor’s specific characteristics, we show that knowledge-seeking factors alongside market and agglomeration factors, act as the main drivers for the inflow of FDI to the Mazowieckie region (including Warsaw), while efficiency and geographical factors encourage FDI to the other areas of Poland. Some implications are drawn for FDI attraction policy in Poland.
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Jel Codes: F23, L20, R10
Keywords: location choice, transition economies, foreign direct investment

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STRUCTURAL REFORM AND FIRM PROFITABILITY IN DEVELOPING COUNTRIES
Alvaro Cuervo-Cazurra; Luis Alfonso Dau
WP No. 940 (November, 2008)

Abstract: We extend agency theory to propose that structural reform positively impacts firm profitability in developing countries because the improvements in external monitoring that accompany structural reform decrease the agency costs faced by firms. However, we also argue that not all firms benefit equally from structural reform because their agency problems are impacted differently. Hence, we propose that structural reform results in higher improvements in profitability for domestic state-owned and domestic private firms than it does for subsidiaries of foreign firms. Results of the analyses of the largest 500 firms in Latin America support the arguments, suggesting that, contrary to the views of many critics of globalization, domestic firms are the main beneficiaries of structural reform in developing countries.
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Jel Codes: F23, G34, L33, M21
Keywords: agency theory, structural reform, firm profitability, state-owned firms, private firms, subsidiaries of foreign firms, developing countries, globalization

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PRICE SETTING AND MARKET STRUCTURE: AN EMPIRICAL ANALYSIS OF MICRO DATA
Fabrizio Coricelli; Roman Horvath
WP No. 938 (October, 2008)

Abstract: Most empirical studies on price setting that use micro data focus on advanced industrial countries. In this paper we analyze the experience of an emerging economy, Slovakia, using a large micro-level dataset that accounts for a substantial part of the consumer price index (about 5 million observations). We find that market structure is an important determinant of pricing behavior. The effect of market structure on persistence of inflation results from two conflicting forces. Increased competition may reduce persistence by increasing the frequency of price changes. In contrast, higher competition may increase persistence through inertial behaviour induced by the strategic complementarity among price setters. In our case study, we find that the latter effects dominate. Indeed, the dispersion of prices is higher while persistence is lower in the non-tradable sectors, suggesting that higher competition is not conducive to lower persistence. Furthermore, we find that the frequency of price changes depends negatively on the price dispersion and positively on the product-specific inflation. These results seem consistent with predictions of Calvo’s staggered price model.
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Jel Codes: D40, E31
Keywords: price setting, market structure, emerging markets

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Inflation Differentials in EU New Member States: An Empirical Evidence
Roman Horvath; Kamila Koprnicka
WP No. 937 (October, 2008)

Abstract: In this paper, we examine the determinants of inflation differentials in a panel of the new European Union member states vis-à-vis the euro area in 1997-2007. Our main results are as follows. Exchange rate appreciation and higher price level in the new EU members is associated with narrower inflation differential vis-à-vis the euro area, while fiscal deficit and positive output gap seem to contribute to higher inflation differential. Nevertheless, the effect of price convergence on inflation differentials is found to be dominating in these countries suggesting that a country with price level 20% below the euro area average is likely to exhibit inflation nearly one percentage point above the euro area. Overall, our results indicate that real convergence factors rather than cyclical variation are more important for inflation developments in the new EU members, as compared to the euro area.
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Jel Codes: E31, F41
Keywords: inflation differentials, price convergence, exchange rate, New EU members, panel data

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Market Reforms and Growth in Post-socialist Economies: Evidence from Panel Cointegration and Equilibrium Correction Model
Igor Pelipas; Alexander Chubrik
WP No. 936 (October, 2008)

Abstract: In this paper the impact of market reforms on economic growth has been analyzed using the panel data for 26 post-socialist economies over the period between 1989 and 2005. Taking into account the dynamic properties of the data, the concepts of cointegration and equilibrium correction model for panel data has been used as the analytical framework. First, well-specified regression models have been obtained. Second, long and short run aspects of ‘reforms-growth’ relationship have been considered. Out analysis has detected the existence of cointegration between the level of ERBD reform index and the level of real GDP per capita. This is interpreted as the presence of the long run relationship between these indicators. Third, it has been found that there is a statistically significant positive influence of economic reforms on economic growth in the long run. In addition, market reforms positively influence economic growth in the short-run, but with a one-year lag. The equilibrium correction mechanism in corresponding regressions reflects existing biases of the analyzed indicators from the equilibrium trajectory, as well as direction and speed of adjustment to this trajectory. Our approach to modeling of the relationship between market reforms and economic growth explains a puzzle of high rates of economic growth in some countries with a relatively low level of ERBD reform index. Finally, in contrast to other studies employing a different methodology, statistically significant influence of economic growth on market reforms has been established both in the long and short run, our study shows that there is no such relationship.
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Jel Codes: C23, C33, P21, P30
Keywords: post-socialist economies, market reforms, economic growth, panel cointegration,equilibrium correction model, EBRD transition indicators

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Derivatives Trading and the Volume-Volatility Link in the Indian Stock Market
Sumon Kumar Bhaumik; Menelaos Karanasos; A Kartsaklas
WP No. 935 (October, 2008)

Abstract: This paper investigates the issue of temporal ordering of the range-based volatility and volume in the Indian stock market for the period 1995-2007. We examine the dynamics of the two variables and their respective uncertainties using a bivariate dual long-memory model. We distinguish between volume traded before and after the introduction of futures and options trading. We find that in all three periods the impact of both the number of trades and the value of shares traded on volatility is negative. This result is in line with the theoretical argument that a marketplace with a larger population of liquidity providers will be less volatile than one with a smaller population. We also find
that (i) the introduction of futures trading leads to a decrease in spot volatility, (ii) volume decreases after the introduction of option contracts and, (iii) there are significant expiration day effects on both the value of shares traded and volatility series.
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Jel Codes: G12, O16
Keywords: derivatives trading; emerging markets; long-memory; range-based volatility; value of shares traded

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Yuan Real Exchange Rate Undervaluation, 1997-2006. How Much, How Often? Not Much, Not Often
Jeff Chen; Wende Deng; David M. Kemme
WP No. 934 (October, 2008)

Abstract: Yuan real effective exchange rate misalignment is esitimated in a behavioral equilibrium exchange rate (BEER) model for the period 1997 to third quarter 2007. Using the Beveridge-Nelson decomposition a vector error correction model (VECM) of the exchange rate as a function of macroeconomic fundamentals, including government expenditures, economic openness, the balance of trade surplus, and net foreign assets, is estimated. We find that the Chinese Yuan has been fluctuating moderately around its long run equilibrium value with undervaluation up to 4% and overvaluation up to 6% at various points in time since 1997. This result is consistent with findings of many of the most recent studies employing alternative econometric methodologies to determine the equilibrium exchange rate. While the Yuan real effective exchange rate has deviated from equilibrium, and it is sticky, taking over five years to correct 50% of the short run misalignment, it does not appear to have been consistently undervalued as has been widely argued.
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Jel Codes: F31, F41, P33
Keywords: Chinese Yuan, Exchange Rate, Misalignment, BEER, Behavioral, Cointegration, ARIMA,VECM, FGLS.

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How Important Are Foreign Shocks in Small Open Economy? The Case of Slovakia
Roman Horvath; Marek Rusnak
WP No. 933 (October, 2008)

Abstract: In this paper, we provide evidence on the nature and the relative importance of domestic and foreign shocks in Slovak economy based on block-restriction vector autoregression model in 1999-2007. We document well-functioning monetary transmission mechanism in Slovakia. Subject to various sensitivity checks, we find that contractionary monetary policy shock has a temporary negative effect on the degree of economic activity and price level. We find that using output gap instead of GDP alleviates the price puzzle. In general, prices are driven mainly by foreign factors and the European Central Bank monetary policy shock on Slovak prices is more powerful than that of the National Bank of Slovakia. Slovak central bank interest rate policy seems to follow the ECB’s interest rates. On the other hand, spectacular Slovak economic growth is primarily driven by domestic factors suggesting the positive role of recently undertaken Slovak economic reforms.
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Jel Codes: E58, F41, F42
Keywords: small open economy, foreign shocks, monetary policy, Slovakia, euro area.

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Estimating Poverty for Indigenous Groups in Chile by Matching Census and Survey Data
Claudio Agostini; Philip H. Brown; Andrei Roman
WP No. 932 (September, 2008)

Abstract: It is widely held that indigenous Chileans experience greater rates of poverty and indigence than non-indigenous Chileans, yet the evidence to date has been based on surveys that are not representative by ethnicity. In this paper, we use poverty mapping methodologies that are typically applied to geography to develop statistically precise estimates of poverty, indigence, poverty gaps, and indigence gaps for each of the eight indigenous groups recognized by Chilean law. We find that indigenous people experience higher rates of poverty and indigence and greater depth of poverty and indigence than non-indigenous people. These results hold within individual regions, suggesting that the differential access to economic opportunities in different parts of the country cannot fully explain the results. We also find that the burden of poverty is not shared equally across indigenous groups. Instead, the Mapuche and Aymará experience disproportionately high poverty rates. We argue that including ethnicity in criteria for identifying poor households may help policy-makers to improve antipoverty targeting.
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Jel Codes: O1
Keywords: Poverty; Indigence; Ethnicity; Poverty Mapping; Chile

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Lobbying, Corruption and Other Banes
Nauro F. Campos; Francesco Giovannoni
WP No. 930 (September, 2008)

Abstract: Although the theoretical literature often uses lobbying and
corruption synonymously, the empirical literature associates lobbying with the preferred mean for exerting influence in developed countries and corruption with the preferred one in developing countries. This paper challenges these views. Based on whether influence is sought with rulemakers or rule-enforcers, we develop a conceptual framework that highlights how political institutions are instrumental in defining the choice
between bribing and lobbying. We test our predictions using survey data for about 6000 firms in 26 countries. Our results suggest that (a) lobbying and corruption are fundamentally different, (b) political institutions play a major role in explaining whether firms choose bribing or lobbying, (c) lobbying is more effective than corruption as an instrument for political influence, and (d) lobbying is more powerful than corruption as an explanatory factor for enterprise growth, even in poorer, often perceived as highly corrupt, less developed countries.
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Jel Codes: D72, E23, H26, O17, P16
Keywords: lobbying, corruption, political institutions.

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Does the Entry Mode of Foreign Banks Matter for Bank Efficiency? Evidence from the Czech Republic, Hungary, and Poland
Ngoc-Anh Vo Thi; Dev Vencappa
WP No. 925 (July, 2008)

Abstract: This paper investigates the impact of specific modes of entry of foreign banks, i.e. greenfield investment versus merger and acquisition, on bank performance in three transition economies – the Czech Republic, Hungary, and Poland. We use stochastic
frontier analysis to model and measure the cost efficiency of banks. We adopt a maximum likelihood approach to estimation in which the variance of the one-sided error term is modeled jointly with the cost frontier, thus enabling us to retrieve efficiency
scores, as well as estimating the various determinants of X-inefficiency. We first find that foreign banks are generally more cost efficient than their domestic counterparts, a result
that confirms those of the existing empirical literature. We then turn our focus to comparative performance of greenfield banks versus merger and acquisition banks (M&As), and of M&As versus domestic banks. The results show that on average, M&As are surpassed in terms of efficiency by greenfields banks, but no cost efficiency difference is apparent between M&As and domestic banks. However, we find a strong age effect with respect to M&As which suggests that the evolution of M&As’ efficiency follows an inverse U-shape, that means M&As tend to get more inefficient following the acquisition, but approximately 4 years and a haft later, their efficiency starts to improve.
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Jel Codes: F36, G21, C01
Keywords: Banking, Transition Economies, Foreign Bank Entry, Greenfield, Mergers and Acquisitions, Stochastic Frontier Analysis, Cost Efficiency

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The Effects of Monetary Policy in the Czech Republic: An Empirical Study
Magdalena M Borys; Roman Horvath
WP No. 922 (June, 2008)

Abstract: In this paper, we examine the effects of Czech monetary policy on the economy within VAR, structural VAR, and the Factor-Augmented VAR framework. We document a well-functioning transmission mechanism similar to the euro area countries, especially in terms of persistence of monetary policy shocks. Subject to various sensitivity tests, we find that contractionary monetary policy shock has a negative effect on the degree of economic activity and price level, both with a peak response after one year or so. Regarding the prices at the sectoral level, tradables adjust faster than non-tradables, which is in line with microeconomic evidence on price stickiness. There is no price puzzle, as our data come from single monetary policy regime. There is a rationale in using the real-time output gap instead of current GDP growth as using the former results in much more precise estimates. The results indicate a rather persistent appreciation of domestic currency after monetary tightening with a gradual depreciation afterwards.
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Jel Codes: E31, E52, E58
Keywords: monetary policy transmission, VAR, real-time data, sectoral prices

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Goods Market Integration in Russia during the Economic Upturn
Konstantin Gluschenko
WP No. 921 (May, 2008)

Abstract: This paper obtains an evolving pattern of goods market integration in Russia, considering the period of economic upturn, since the second half of 2000 through the end of 2007. In an
integrated market, the price of a tradable good at any location is determined by the national market, not local demand. Based on this, the strength of dependence of local prices on local
demands is used to detect and measure market segmentation. The costs of a staples basket across almost all Russian regions with a monthly frequency are used as the empirical stuff. The pattern obtained suggests that in the time span under consideration the degree of Russia’s goods market
integration was relatively stable, fluctuating around some level; no sufficient improvements or deteriorations were detected.
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Jel Codes: P22, R10, R15
Keywords: market integration, law of one price, price dispersion, Russian regions.

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LABOUR MARKET MATCHING EFFICIENCY IN THE CZECH REPUBLIC TRANSITION
Pablo de Pedraza
WP No. 920 (April, 2008)

Abstract: Using the matching function and the monthly and yearly data from 1992 to 2000 of 76 Czech districts, this paper studies district specific characteristics affecting matching efficiency. Among the conclusions, it was found that the higher the educational level of the labour force and the higher the number of firms in new sectors, except in the commercial one, the more efficient the matching process. The results give evidence supporting the idea that employed workers participate in the matching process and, therefore, they are one of the sources of increasing returns to scale in the Czech matching function. Small new enterprises in the commercial sector are also a source of increasing returns.
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Jel Codes: J6, J64, J69
Keywords: Transition Labour Markets, matching efficiency

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The Emerging Aversion to Inequality: Evidence from Poland 1992-2005
Irena Grosfeld; Claudia Senik
WP No. 919 (May, 2008)

Abstract: This paper provides an illustration of the changing tolerance for inequality in a context of radical political and economic transformation and rapid economic growth. We focus on the
Polish experience of transition and explore self-declared attitudes of the citizens. Using monthly representative surveys of the population, realized by the Polish poll institute (CBOS)
from 1992 to 2005, we identify a structural break in the relation between income inequality and subjective evaluation of well-being. The downturn in the tolerance for inequality (1997)
coincides with the increasing distrust of political elites.
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Jel Codes: C25, D31, I30, P20, P26
Keywords: inequality, subjective satisfaction, breakpoint, transition.

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Productive, Unproductive and Destructive Entrepreneurship: A Theoretical and Empirical Exploration
Arnis Sauka
WP No. 917 (April, 2008)

Abstract: Drawing on Baumol’s concepts of productive, unproductive and destructive entrepreneurship and relevant amendments, this thesis aims to contribute to the entrepreneurship literature by developing a conceptual framework which allows operationalising the concepts for empirical assessment. Furthermore, using data from longitudinal survey, author makes one of the first attempts to address the concepts empirically. The results provide with support for the conceptual framework highlighting the importance to shift the focus from firms’ activities to output on both, venture and societal levels, short and long term, when concepts are addressed empirically. Overall findings suggest that productive entrepreneurs are those who are less involved in behaviour such as tax avoidance or illegal business and show a higher level of entrepreneurial orientation.
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Jel Codes: E26, H26, L26
Keywords: value creation; productive, unproductive and destructive entrepreneurship; transition context, small firms

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MARKET RISK DYNAMICS AND COMPETITIVENESS: AFTER THE EURO: Evidence from EMU Members
Juan P. Chousa; Artur Tamazian; Davit N. Melikyan
WP No. 916 (February, 2008)

Abstract: In this paper we propose an empirical model that considers theoretical facts on the relationship between real exchange rates and the net exports of the economy to supplement the interaction of a number of financial and economic factors with the stock market. We discuss the impact of exchange rate
fluctuations on market risk in terms of Value at Risk (VaR). Our empirical findings show that common currency introduction produced increments in VaR whereas European stock returns are more sensitive to changes in competitiveness regarding the EMU rather than national exports. Finally, we show that the
synchronisation of variation in competitiveness through the introduction of a single currency has made these changes more decisive in explaining financial market fluctuations.
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Jel Codes: F33, G24, G28, O24
Keywords: Euro, Competitiveness, Market Risk, Net Export, Value-at-Risk, Volatility

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An Impact Analysis of Microfinance in Bosnia and Herzegovina
Valentina Hartarska; Denis Nadolnyak
WP No. 915 (December, 2008)

Abstract: This paper applies the financing constraint approach to study whether microfinance institutions improved access to credit for microenterprises in Bosnia and Herzegovina. According to this approach, microenterprises with improved assess to credit rely less on internal funds for their investments. Thus, we compare investment sensitivity to internal funds of micorenterprises in municipalities with significant presence of MFIs to that of
micorenterprises in municipalities with no (or limited) presence of MFIs using Living Standards Measurement Survey and MFI branch location data. Results indicate that MFIs alleviated microbusinesses’ financing constraint. This approach is applicable to evaluating microfinance impact in other countries.
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Jel Codes: G11, G21, O16, P20
Keywords: microfinance, impact study, Microfinance Institutions, financing constraints, Eastern Europe, Bosnia and Herzegovina

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WHY ARE OPTIMISTIC ENTREPRENEURS SUCCESSFUL? AN APPLICATION OF THE REGULATORY FOCUS THEORY
Ruta Aidis; Tomasz Mickiewicz; Arnis Sauka
WP No. 914 (March, 2008)

Abstract: Does entrepreneurial optimism affect business performance? Using a unique data set based on repeated survey design, we investigate this relationship empirically. Our measures of ‘optimism’ and ‘realism’ are derived from comparing the turnover growth expectations of 133 owners-managers with the actual outcomes one year later. Our results indicate that entrepreneurial optimists perform significantly better in terms of profits than pessimists. Moreover, it is the optimist-realist combination that performs best. We interpret our results using regulatory focus theory.
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Jel Codes: D21, L21, M13, L26
Keywords: Entrepreneurship, Optimism, Venture Growth, Regulatory Focus Theory, Latvia

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Measuring Underground (Unobserved, Non-Observed, Unrecorded) Economies in Transition Countries: Can We Trust GDP?
Edgar L. Feige; Ivica Urban
WP No. 913 (March, 2008)

Abstract: This paper compiles alternative estimates of underground economies in twenty five transition countries during the transition decade and finds a disturbing lack of convergence between them, calling into question the reliability of GDP figures
(which in varying degrees now include non-transparent imputations for the “nonobserved economy”) as well as the macro model estimates of the unrecorded economy. A corollary of this finding is that substantive results from many studies
examining the consequences of the radical transition from planned to market economies must be viewed with considerable skepticism. Underground (unobserved, non-observed, unrecorded) economic activities play a major role in transition economies. Evaluations of the success and failure of the transition experience should be based on estimates of total economic activity (TEA) namely, recorded plus unrecorded economic activity. We examine the conceptual and empirical relationships between new National Income and Product Accounts (NIPA) methods for obtaining “exhaustive” measures of total economic activity and the two most popular macro-model approaches (electric consumption and currency ratio models) for estimating the size and growth of the unrecorded sector.
Our updated empirical results detailing the size and trajectory of unrecorded activities obtained from different estimation methods reveal a disturbing lack of convergence. Until these important differences are resolved, investigations of the relationship between economic reforms and economic outcomes during the
transition decade must be viewed with considerable caution. Given the shortcomings of conventional macro model estimates of the underground economy and the lack of transparency and consistency of NOE estimates, it is high time that the profession acknowledges how little we really know about underground economies and their causes and consequences.
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Jel Codes: E01, E26, H26, O11, O17, P24
Keywords: Underground, unrecorded, unobserved, non-observed, NOE, hidden, informal, shadow, GDP, national accounts, transition economies.

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On the Trade Balance Effects of Free Trade Agreements Between EU-15 & CEEC-4 Countries
Guglielmo Maria Caporale; Christophe Rault; Robert Sova; Ana Maria Sova
WP No. 912 (March, 2008)

Abstract: The expansion of regionalism has spawned an extensive theoretical literature analysing the effects of Free Trade Agreements (FTAs) on trade flows. In this paper we focus on FTAs (also called European agreements) between the European Union (EU-15) and the Central and Eastern European countries (CEEC-4, i.e. Bulgaria, Hungary, Poland and Romania) and model their effects on trade flows by treating the agreement variable as endogenous. Our theoretical framework is the gravity model, and the econometric method used to isolate and eliminate the potential endogeneity bias of the agreement variable is the fixed effect vector decomposition (FEVD) technique. Our estimation results indicate a positive and significant impact of FTAs on trade flows. However, exports and imports are affected differently, leading to some disparity in trade flow performance between countries. Therefore, there is an asymmetric impact on the trade balance, the agreement variable resulting in a trade balance deficit in the CEEC.
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Jel Codes: C25, E61, F13, F15
Keywords: Regionalisation, European integration, Panel data methods.

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Further Theoretical and Empirical Evidence on Money to Growth Relation
Alexandru Minea; Christophe Rault; Patrick Villieu
WP No. 909 (February, 2008)

Abstract: This paper proposes a theoretical growth model where seigniorage can be used to finance productive public spending, and show the existence of nonlinear effects between seigniorage and economic growth. Empirical evidence based on panel regression techniques provides some support for these nonlinear effects on a sample of OECD countries over the 1978-2005 period.
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Jel Codes: E52, E62, H54
Keywords: economic growth, nonlinear effects of monetary policy

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Impact of M&A on firm performance in India: Implications for concentration of ownership and insider entrenchment
Sumon Kumar Bhaumik; Ekta Selarka
WP No. 907 (February, 2008)

Abstract: The literature is divided in its opinion about the impact of concentration of ownership on firm performance. On the one hand, concentration of ownership that, in turn, concentrates management control in the hands of a strategic investor, eliminates agency problems associated with dispersed ownership. On the other hand, it may lead to entrenchment of upper management which may be inconsistent with the objective of profit (or value) maximisation. This paper examines the impact of M&A on profitability of firms in India, where the corporate landscape is dominated by family-owned and group-affiliated businesses, such that alignment of management and ownership coexists with management entrenchment, and draws conclusions about the impact of concentrated ownership and entrenchment of owner-managers on firm performance. Our results indicate that, during the 1995-2002 period, M&A in India led to deterioration in firm performance. We also find that neither the investors in the equity market nor the debt holders can be relied upon to discipline errant (and entrenched) management. In other words, on balance, negative effects of entrenchment of owner-managers trumps the positive effects of reduction in owner-vs.-manager agency problems. Our findings are consistent with bulk of the existing literature on family-owned and group-affiliated firms in India.

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Jel Codes: G34
Keywords: mergers and acquisitions, corporate governance, manager entrenchment, firm performance, India

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Foreign Direct Investment and Structural Reforms: Evidence from Eastern Europe and Latin America
Nauro F. Campos; Yuko Kinoshita
WP No. 906 (January, 2008)

Abstract: This paper investigates the role of structural reforms –
privatization, financial reform and trade liberalization– as determinants of FDI inflows based on newly constructed dataset on structural reforms for 19 Latin American and 25 Eastern European countries between 1989 and 2004. Our main finding is a strong empirical relationship from reforms to FDI, in particular, from financial liberalization and privatization. These results are
robust to different measures of reforms, split samples, and potential endogeneity and omitted variables biases.
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Jel Codes: F21, H11, O16
Keywords: privatization, financial reform, trade liberalization, foreign direct investment, Latin America, transition economies

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From Workers to Owners: Survey Evidence on the Impact of Property Rights Reforms on Small Farmers in Two Regions in Romania
Annette Kim; Georgeta Vidican-Sgouridis
WP No. 905 (January, 2008)

Abstract: In Romania, the 1991 Land Reform marked the beginning of a series of transformations in the ownership structure and the production system in agriculture. Nevertheless, after recently joining the EU it became evident that the agricultural sector is in need of major improvements in performance. We present preliminary findings from a unique village-level panel data at
household level. Preliminary findings suggest that there are wide regional differences in terms of agricultural performance and organizational forms. Also, we find that productivity levels do not differ significantly between farming arrangements, and that labor supply, capital endowment, and contractual arrangements might be more important.
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Jel Codes: D23, D24
Keywords: transition, land reform, property rights, productivity, Romania.

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Some New Insights Into Currency Boards: Evidence from Bulgaria
Alexandru Minea; Christophe Rault
WP No. 903 (January, 2008)

Abstract: The presence of a Currency Board (CB) monetary system in Bulgaria is a key factor in assessing monetary policy transmission, since a CB implies no monetary autonomy. Using the SVAR technique according to the statistical properties of macroeconomic time series, we propose evidence sustaining the endogeneity of main Bulgarian monetary aggregates to shocks on the ECB interest rate. These results shed a new perspective over CB functioning.
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Jel Codes: E42, E52
Keywords: Currency Board, monetary policy, SVAR, Bulgaria.

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Should we care for structural breaks when assessing fiscal sustainability?
Afonso Antonio; Christophe Rault
WP No. 902 (November, 2007)

Abstract: We apply recent panel cointegration methods to a structural equation between government expenditure and revenue. Allowing for multiple endogenous breaks and after computing appropriate bootstrap critical values, we conclude for fiscal sustainability in the overall EU15 panel.
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Jel Codes: C23, E62, H62
Keywords: sustainability, EU, panel cointegration

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A Forewarning Indicator System for Financial Crises : The Case of Six Central & Eastern European Countries
Irene Andreou; Gilles Dufrenot; Alain Sand-Zantman; Aleksandra Zdzienicka-Durand
WP No. 901 (November, 2007)

Abstract: We propose a measure of the probability of crises associated with an aggregate indicator, where the percentage of false alarms and the proportion of missed signals can be combined to give an appreciation of the vulnerability of an economy. In this perspective, the important issue is not only to determine whether a system produces true predictions of
a crisis, but also whether there are forewarning signs of a forthcoming crisis prior to its actual occurrence. To this end, we adopt the approach initiated by Kaminsky, Lizondo and Reinhart (1998), analyzing each indicator and calculating each threshold separately. We depart from this approach in that each country is also analyzed separately, permitting the creation of a more “custom-made” early warning system for each one.
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Jel Codes: F31, F47
Keywords: Currency Crisis, Early Warning System, Composite Indicator, Eastern Europe

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