Christos Papazoglou

A Gravity Model Forecast of the Potential Trade Effects of EU Enlargement: Lessons from 2004 and Path-dependency in Integration

This paper uses a gravity model to forecast the potential impact on trade balances and trade patterns of the 2004 EU enlargement. The results suggest that gross trade creation for the accession economies is about 25 per cent of their 2003 trade. Although membership of the EU creates trade it also results in trade diversion; that is, a declining share of accession country exports and imports with non-EU15 countries. Overall, the trade balances of the accession countries suffer larger trade deficits after accession due to import growth surpassing export growth. The extent of increase in the trade deficit due to accession is inversely related to the level of integration and income of the new members. Hence integration is path-dependent and the EU should take this into account when preparing for further enlargements to the Balkans and Southeast Europe.

Exchange Rate Policies, Prices and Supply-Side Response

Introduction: Issues, Structure and Policy Recommendations PART I: THE THEORETICAL FRAMEWORK Output Dynamics in Transition Economies Under Alternative Exchange Rate Regimes Currency Options and Trade Smoothing Under an Exchange Rate Regime Shift PART II: COMPARATIVE STUDIES Exchange Rate Policy and Output Growth in Transition Economies: The Experience of Bulgaria, the Czech Republic, Poland and Slovenia The Real Exchange Rate and the Output Response in Four Transition Economies: A Panel Data Study The Exchange Rate, Prices and The Supply Response Under Transition: A Simulation Study PART III: COUNTRY STUDIES Price and Output Dynamics Under a Currency Board: The Case of Bulgaria Exchange Rates and the Supply Response in the Czech Republic: Is PPP a Relevant Rule for Assessing the Equilibrium? Exchange Rate and the Price Response in the Czech Republic Economic Performance in Poland Under Fixed and Flexible Exchange Rate Regimes Supply and Price Effects of Monetary and Fiscal Policy in Poland Under Transition: An Econometric Analysis The Determination of the Real Exchange Rate and its Effects on Output and Prices in Slovenia

Output Dynamics in Transition Economies under Alternative Exchange Rate Regimes

It has become a stylized fact that transition economies suffer falls in output in the early years of liberalization, and several reasons have been postulated for this fall in real GDP. Borensztein, Demekas and Ostry (1993) argue, for example, that for Bulgaria and the Czech Republic supply shocks were the most important explanation with national factors capable of explaining nearly all the variation in output with sector-specific factors playing only a minor role. An alternative hypothesis due to Calvo and Coricelli (1992) is the credit-crunch hypothesis, whereby high real interest rates were imposed on enterprises, which responded by reducing their demand for credit and output levels. A third hypothesis is that at least part of the fall in output is a statistical exaggeration due to underreporting of private sector activity (Berg and Sachs, 1992; and Berg and Blanchard, 1994).

Introduction: Issues, Structure and Policy Recommendations

The significant fall in output was a common experience of all transition economies of Central and Eastern Europe in the early 1990s. This fall in output was to a large extent unavoidable due to the destruction of the existing structure of production as these economies moved to new, market-guided activities. While the output decline has been a common event in all these countries, the extent of output recovery, as the transition process has progressed, has not been the same. That is, while most countries have followed qualitatively the same steps, their growth paths have deviated significantly. There are countries with quite impressive growth performance, while others have lagged significantly behind.

Target Zones: Testing the Intervention Mechanism for the European Currencies

The adoption of exchange rate target zones by a number of countries represents one of the major international monetary developments. A target zone exchange rate system constraints the participating nations to maintain their bilateral parities within a pre-established band. That is, while the exchange rate is allowed to float more or less freely within the specified band, foreign exchange interventions prevent it from moving outside the band.