Michał Brzozowski

Exchange Rate Variability and Foreign Direct Investment: Consequences of EMU Enlargement

This paper analyzes theoretically and empirically the likely impact of the reduction in exchange rate uncertainty, due to European Monetary Union accession, on the intensity of foreign direct investment (FDI) inflow into candidate countries. Theoretical models give an ambiguous picture of how exchange rate uncertainty and volatility affect the direction and magnitude of such inflows. This paper finds that exchange rate uncertainty and volatility--and nominal exchange rate uncertainty in particular--may negatively influence the decision to locate investment in transition and accession countries. Euro adoption, on the other hand, is likely to positively influence FDI inflows in accession countries.

The Impact of Fiscal Rules on Fiscal Policy Volatility

In this paper, we study the impact of fiscal rules, in the form of explicit deficit or debt constraints, on fiscal policy volatility. The main motivation behind this research is, on the one hand, a negative and robust correlation of fiscal policy volatility and long run growth documented in several papers and, on the other, the relatively small number of works that discuss possible determinants of the former. We argue that fiscal rules have a significant impact on fiscal policy volatility, but depending on the target of the rule—public debt or fiscal balance—rules will increase or decrease policy volatility. This result is novel, and, to the best of our knowledge, has not been discussed in the literature.

Impact of GDP volatility on current account balances

This paper reports on an empirical investigation of the impact of GDP volatility on current account balances for a large sample of developed and developing countries. We extend the standard set of short- and long-term determinants of current accounts to include GDP volatility computed from the annual growth rate of GDP. We found that for low income countries, the impact of GDP volatility on their current account balances is negative, whereas the reverse is true for high income countries. The intertemporal approach to the balance of payments followed in this paper suggests that a diverse response of current account balances to GDP volatility can result from the various degrees of shock persistence in developed and developing countries.

Determinants of investment and innovation expenditure in Polish manufacturing industries

This article analyses determinants of sectoral R&D and innovation expenditure as well as investment in Polish manufacturing industries in 1994–2004. The estimated coefficients for user cost of capital are generally in line with the neoclassical model of investment, except for R&D intensity. The latter are primarily discouraged by systemic uncertainty. The rate of growth of sales is not a prominent determinant of investment and innovation expenditure. Market concentration coupled with uncertainty has a damaging effect on physical capital investment but it promotes R&D expenditure and leaves innovation intensity unaltered.

Sovereign External Debt and Private Sector Entry in International Financial Markets

Abstract The aim of this paper is to shed light on the public and private sector interdependencies in the international financial market. Using annual data on sovereign and private sector external indebtedness for 95 emerging and developing countries in the 1970-2012 period it looks at the relationship between the level and structure of public external debt and the likelihood of private sector entry in international bond and loan markets. The private sector entry in the offshore loans and bonds markets is shown to be conditional on the amount of public sector external debt. The relationship is complex but in general the saturation of the financial market with external government liabilities renders the private sector entry into the bonds’ market more difficult.

The relationship between human development, exports and foreign direct investments in emerging Europe

Contents: Human development and internationalization of the economy - Measures of human development - Human development and aggregate exports: A country level analysis - Export activity and human development in Central and Eastern European countries: A firm level analysis - Human Development and FDI inflows at the macroeconomic level Firm Level Analysis of FDI and Human Development.

The interplay between labor market rigidity and volatility-growth nexus

Using a simple innovation‐driven growth model I investigate to what extent labor market regulations underlie the devastating effects of output volatility on long‐run growth trends. Empirical analysis conducted for 154 countries over the 1996–2005 period shows that an increase from low values of the rigidity of employment index strengthens the influence of volatility on growth. This effect weakens with further increases in rigidity. Hence implementation of labor protection legislation is recommended in economies frequently hit by shocks.