Daniel Piazolo

Foreign direct investment in Europe: Is there redirection from the South to the East?

Abstract This paper examines patterns of Foreign Direct Investment (FDI) in two regions on the periphery of Europe, namely, the Central and Eastern European countries (CEECs) and the countries of Southern Europe. We investigate FDI redirection from Southern Europe to the CEECs. Using gravity model equations, we compare expected and actual FDI figures. We ultimately conclude that there is no evidence of FDI redirection between these two regions.

Capital and Trade Flows in Europe and the Impact of Enlargement

The Eastern enlargement of the European Union (EU) is likely to give a further boost to trade and capital flows, yet empirical evidence on the possible magnitudes is still scarce. This paper uses four different datasets to estimate the determinants of international asset holdings and trade flows. We find in most regressions that EU membership has a significant effect. Based on additional simulations of the expected flows to ten transition economies, we conclude that for the EU candidates actual values are still far below expected ones in most cases. Consequently, we anticipate rising capital and trade flows with the approach of EU accession, in particular for the seven EU candidates besides the Czech Republic, Hungary and Poland.

Does the East Get What Would Otherwise Flow to the South? FDI Diversion in Europe

This paper examines the FDI flows towards two regions in the periphery of Europe: the Central and Eastern European countries (CEECs) and the countries of Southern Europe. We investigate whether evidence exists for FDI diversion from Southern Europe to the CEECs. A cursory observation of recent FDI trends might give rise to such claims of diversion. On the basis of gravity model equations, this paper compares the expected and actual FDI figures. The findings lead us to conclude that there is no evidence of FDI diversion between these two regions.

Green Performs Better: Energy Efficiency and Financial Return on Buildings

This study investigates the effect of energy consumption on the financial performance of residential buildings in a large panel framework. Based on prior European studies regarding the use of energy performance certificates (EPCs), we analyse whether the responsible use of energy leads to a significant price differentiation between 2008 and 2010. Based on the IPD Databank and the German statistical office, our descriptive portfolio results show that energy efficient buildings have an up to 3.15% higher return and 0.76 €/m² higher rent prices than inefficient assets. Furthermore, (un-) conditional regression results provide evidence that one percent decline in energy consumption affects the total return of buildings positively by 0.015%, all else equal. The hedonic results additionally show that one percent energy conservation boosts rent prices by 0.08% and market value by 0.45%. Overall, our study presents alternative methodologies when describing and estimating hedonic data and offers the first empirical evidence of the energy price premium in German residential markets.

A SOCIAL ACCOUTING MATRIX FOR BOLIVIA FEATURING FORMAL AND INFORMAL ACTIVITIES

This paper describes the construction of a Social Accounting Matrix (SAM) for Bolivia for the year 1997. Three distinctive features render the SAM a useful starting point for distributional analyses. First, production in the agricultural and services sect

Investment behaviour in transition countries and computable general equilibrium models

When applying Computable General Equilibrium (CGE) models to transition economies, it is not plausible to use the standard assumption that the base year data represent stable structural characteristics or even the steady state of the economy. The suggestions forwarded until now to overcome this problem are discussed in this article. An amendment is proposed by modifying the investment modelling within the dynamic CGE setting. The standard formulation of installation costs for capital is extended through the inclusion of adjustment costs that depend on the change of the investment level. Such formulation of the adjustment costs within the dynamic CGE model leads to an investment behaviour that mirrors the empirical data of the first years of the transition.

The New Economy and the International Regulatory Framework

The rapid diffusion of the internet and electronic commerce changes the way business and international trade take place. The new economy poses new challenges to the international regulatory framework, since small distortions due to differing sets of regulations and taxation between countries might grow to non-negligible dimensions. This paper examines the necessary reforms of the multilateral framework concerning standards, policy coordination and taxation and stresses that the new economy reinforces the need for consistent, transparent, non-discriminatory, simple and enforceable rules. Furthermore, strategies to overcome the digital divide between countries are set out.

TAFTA: fuelling trade discrimination or global liberalisation?

This paper analyses the prospects and problems of a Transatlantic Free Trade Area (TAFTA) between the European Union and the United States. Possible economic reasons for the proposal of TAFFA such as the intensity of bilateral trade and a strong interdependence in investment flows and the similarity of the EU and the US in their factor endowment and tariff structure are examined. There are cases shining favourably on the idea, but the implementation of TAFTA will imply substantial costs due to the internal and external consequences. The main problem of a free trade area between the two most important economic blocs is the impact on the multilateral approach of trade liberalisation. The authors suggest a Transatlantic Liberalisation Initiative (TALI) as an alternative to TAFTA. Under TALI, the EU and the US should accelerate their implementation of their Uruguay Round commitments and liberalise in areas that are not yet covered by WTO agreements. This should be done under the Most-Favoured Nation clause and would be a strong motivating force for multilateral liberalisation. In addition, TALI could be a forerunner in reducing market segmentation and in establishing a semiinternal market between Europe and America.

Poland's Membership in the European Union: An Analysis with a Dynamic Computable General Equilibrium (CGE) Model

This paper presents a dynamic Computable General Equilibrium (CGE) model for Polands integration into the European Union (EU) that allows for quantification of income and welfare effects stemming from tariff reduction, border-cost reduction, reduction of technical barriers to trade and increased EU-transfers. For all channels, long-run income increases substantially compared with the reference scenario. The welfare effects are also positive, but much smaller because the welfare measure takes into account the time path of consumption throughout the adjustment period. Typical welfare effects are estimated at less than 1 percent of total consumption over time discounted to the beginning of the adjustment period. This low figure reflects the compression of consumption early in the adjustment period that finances the investment needed to build up the capital stock to support higher output and consumption farther into the future. The paper presents also sensitivity analyses for the CGE model concerning different specifications of the adjustment cost parameters, the intertemporal elasticity of substitution, the Armington substitution elasticity and the rate of time preference. The overall result of the examination of Polands membership in the EU with the dynamic CGE model draws attention to the fact, that income growth effects as such are not necessarily welfare gains, since growth requires investment and therefore foregone consumption.

Eastern Europe between Transition and Accession: An Analysis of Reform Requirements

This paper examines the transition process within Eastern Europe and the integration process with the EU and shows that the requirements for the transition towards a market economy overlap with the requirements for EU accession. Furthermore, the economic situation of the candidate countries is examined and it is pointed out that there is a large gap in the economic development between the Central and Eastern European countries and the EU. The paper argues that the acceding transition countries still have substantial reform tasks ahead of them and that the expanding EU membership requires also considerable reforms within the EU to reduce the danger of standstill for European policy making.