David Barlow

Growth in Transition Economies: A Trade Policy Perspective

This paper examines the influence of trade liberalization on GDP growth during the transition from communism. The level of trade liberalization is found to raise the growth rate, particularly in the early part of the transition and for the countries nearest to the European Union. For the remaining countries and for the later transition period, the positive influence of trade reform on growth requires the negative effect of the interaction between trade reform and privatization to be taken into account. Even with the interaction terms the effect of trade liberalization is not statistically significant in the later transition period.

Globalisation vs internal reforms as factors of inequality in transition economies

We examine factors of within‐country income inequality in transition economies of Central and Eastern Europe and the Commonwealth of Independent States after the breakup of the Soviet Union. Internal reforms dominate globalisation factors in accounting for inequality, with price liberalisation showing the strongest effect. Privatisation measures also show robust effects. We find some evidence that the extent of the private sector magnifies the impact of price liberalisation. The only role for globalisation seems to be to moderate the adverse impact of internal reforms on inequality.

Varieties of capitalisms and varieties of performances: accounting for inequality in post-Soviet Union transition economies

We partition post‐Soviet Union Transition Economies into two groups: European Union New Member States and countries belonging to the Commonwealth of Independent States or the South Eastern Europe area. Both groups started the 1980s with low levels of inequality, but in the early 2000s the latter group reached a level of inequality seven percentage points higher. We review various factors of inequality and examine whether these had differential effects in the two groups. Foreign Direct Investments and trade flows with the EU had a bigger inequality‐enhancing effect in New Member States. We interpret this as evidence of technological catching‐up and productivity improvements taking place in this region. Other specific reforms, such as privatisation and price liberalisation, had similarly strong effects in the two groups. We also find some evidence of an inequality‐decreasing effect of an indicator of Voice and Accountability in countries outside the EU, and that countries with higher government effectiveness experienced lower levels of inequality. This supports the relevance of institutional capacity in tackling inequality. Finally, we speculate over the effects of the current global crisis on future economic performance.

Purchasing power parity in the transition: The case of the Romanian leu against the dollar

This article uses co-integration analysis to test purchasing power parity for the Romanian leu against the US dollar. The fact that the purchasing power parity (PPP) hypothesis is not rejected leads to the conclusion that the real appreciation of the leu against the dollar over the transition has not been due to an appreciation of the equilibrium real exchange rate. Rather it is simply the consequence of the leu being devalued beyond the equilibrium level at the start of reform and slowly returning to its constant equilibrium real rate. There is evidence that the adjustment to equilibrium has fallen almost entirely on the price level, so that a major consequence of the excessive undervaluation has been higher inflation.

Have unincorporated businesses in the UK been constrained in their ability to obtain bank lending

The extent to which bank lending policies - and in particular their requirement for firms to post collateral - have imposed constraints on the ability of unincorporated businesses to meet their demand for debt finance has been examined. It was found that for the period from 1982 through to the end of the data sample, variations in the level of bank lending to unincorporated businesses can be explained in terms of a more or less conventional demand function for bank finance - albeit one with a zero interest elasticity - though there is some evidence of the importance of collateral constraints in the shape of a significant positive effect from the growth in the real value of housing wealth. Prior to 1982 there was a sharp increase in the level of bank lending to unincorporated businesses which is much harder to interpret in these terms. Instead, this is seen as having been driven largely by changes in bank lending policies; in particular, by a drive to develop new markets in response to unfavourable conditions in their traditional lending markets.

Sectoral Money Demand Behaviour and the Welfare Cost of Inflation in the UK

In this paper, we estimate separate UK money demand functions for the household and corporate sectors; and calculate estimates of the welfare cost of inflation. We find that the household sector bears most of the welfare burden which is in sharp contrast to previous (US) evidence. Also, we find aggregate welfare cost estimates that are much smaller than previous (largely US) estimates—sufficiently smaller as to challenge the oft-quoted Lucas finding that shoe leather costs are by no means trivial. For the UK, we find welfare costs no greater than one tenth of a per cent of real income.