Antonin Rusek

Industrial growth in Czechoslovakia 1971-1985: Total factor productivity and capital-labor substitution

Abstract A CES production function with a low elasticity of substitution and a steady rate of growth of total factor productivity emerges as the dominant model to explain the output growth retardation in Czechoslovak industry when official data are used. The main cause of the output growth retardation is the sharp decrease in the marginal productivity of capital, accelerated somewhat by the decreasing rate of growth of inputs. The rate of growth of total factor productivity is the main growth factor in Czechoslovak industry.

Financial integration and growth in the global economy

This paper analyzes the growth dynamics in the developed world and its relationship to the financial structure. The new entrepreneurial economy of creativity and innovation is identified as the main growth area today. However, such an economy needs financial structure capable of coping with the higher risk inherent in the new economy. To provide such a financial structure, the financial markets must be broad, deep, and liquid. Today, only the U.S. financial markets are large enough to provide this financial structure. Hence, financial integration became the imperative for other countries—especially the European Union (EU) and Japan—in order to achieve the level of economic growth as that of the U.S.

The role and impact of monetary policy in CEFTA countries

An effective monetary policy requires a stable relationship between the money stock and macroeconomic variables such as output, price level, interest rates, and exchange rates. A dynamism of structural changes in transition economies of eastern Europe makes such stability far from obvious. This is reflected in the fact that a stable demand for money function cannot be estimated even for the most advanced East European countries: Poland, Hungary, and the Czech Republic. Empirical analysis of the relationship between nominal variables indicates rather limited relationships as well. Therefore, all that can be expected from monetary policy in eastern Europe is not to be too tight so as to starve the economy of needed liquidity and not to be too loose so as to ignite inflation.

Real exchange rates, economic performance, and trade balances in the central european free trade association

The relationships between real exchange rates dynamics, domestic economic growth, and external economic positions are examined for four East European countries: Poland, Hungary, Slovakia, and the Czech Republic. Results show that in Poland the dynamic of the trade balance is independent of both the real exchange rate and industrial production. In both Hungary and Slovakia, trade balances appear to have strong autonomous components, albeit in circumstances where the influence of real exchange rates and industrial production dynamics cannot be entirely denied. The Czech Republics situation is, however, substantially different from its Central European Free Trade Assocation partners. The growing trade balance deficit appears to be determined by both the continuing real appreciation of the Czech currency and a mildly accelerating industrial production growth. Both are the consequence of accelerating capital inflow.

Pros and cons of official dollarization in Eastern Europe

The balance of payments barrier is the biggest obstacle to growth in Eastern Europe. This problem stems from the existence of individual national currencies which dynamically increases the risk associated with capital inflows. Capital inflow leads to both domestic growth and domestic currency real appreciation, reducing net exports to a level insufficient to service international debt obligations stemming from capital inflow. To avoid losses when capital flows are reversed, high domestic interest rates are required to stem capital outflow. Result is the decline of domestic economic activity. Adoption of foreign currency eliminates the need for net exports as the source of revenue needed to service debt obligation, hence it renders the balance of payments as an obstacle to sustained capital flows and economic growth irrelevant.

Eastern Europe and the Euro Area

The recent string of economic difficulties and financial collapses in Eastern Europe revived the interest in monetary and exchange rate arrangements as linchpins of reform efforts in the former communist economies. Given the geographical location, the advent of the European Monetary Union (EMU) is, indeed, the major factor determining the shape of this reform effort.

The Czech economic crisis: Policy revenge?

The current Czech economic crisis is defined and its causes are analyzed. The role of policies followed after the collapse of communism—especially the privatization strategy, macroeconomic stabilization (based on a balanced budget and a stable exchange rate regime), and the microsphere liberalization in the absence of a functioning legal environment—will be assessed in view of current economic difficulties. These policies are identified as the primary cause of these difficulties. The need for policy changes and the nature of such changes are elucidated.

Financial openness and economic policy

Economic policy works via two interrelated areas: changes in supply-demand balances and changes in relative prices. Effectiveness of economic policies then depends on the environment in which a given economy operates. The analysis shows that traditional economic policies of fostering growth via public sector investments crucially depend on the private capital account being closed (practically, on the capital mobility being low). An open capital account requires a different set of policies, aimed at facilitating the functioning of private markets and an increase of domestic private savings. This shift in the policy and growth paradigm constitutes the biggest challenge to the global economic community in the beginning of the 21st century.

Can government's choice of a high inflation policy be rational?

Out of the two inflation tax equilibria—i.e., the two inflation rates which bring the same revenue to the government—the higher one is not infrequently chosen. It is shown that such a choice may not be irrational for a government whose policy includes a financial repression and exchange rate controls and which is trying to maximize public sector expenditures. However, such policy is not sustainable in the long run, whatever its short-term advantages may be. Hence, policy makers should always weight advantages of higher public sector expenditures today against hardships of inevitable stabilization programs in the future.

OCCUPATION EXPERIENCE AND PERFORMANCE DETERMINE LABOR INCOME

This paper studies the determinants of income of a group of professionals working in the College of Business of Lamar University in Beaumont, Texas. Occupation experience and performance determine income and the posi? tion in the income distribution of faculty members. Tinbergen (1947) has shown that the position a worker achieves in the distribution of incomes depends on the choice of occupation, which is only partly determined by aptitudes.1 Once an individual has chosen an occupation, he or she belongs to an exclusive or non-competing group, since moving from one occupation to another entails high and often prohibitive opportunity costs.2 The labor income of a member of an occupation and his/her position in the distribution of labor incomes is therefore tied to the average or representative income earned by the members of that occupation. However, a persons occupation does not determine exclusively his/her labor income because members of an occupation do not provide perfectly homogeneous services. Members differ in experience and performance, which determines not only differences in income within occupations but also the position each member holds in the distribution of other labor incomes. Discrimination by race, age and sex ? if present at all ? will further influence an individuals position in the distribution of labor incomes.