Pedro André Cerqueira

Growth Rates Constrained by Internal and External Imbalances: A Demand-Orientated Approach

Thirlwall’s Law considers that growth can be constrained by the balance of payments when the current account is in permanent deficit.* The law focuses on external imbalances as impediments to growth and does not consider the case where internal imbalances (budget deficits or public debt) can also constrain growth. The recent European public debt crisis shows that when internal imbalances are out of control they can constrain growth and domestic demand in a severe way. The aim of this chapter is to fill this gap by developing a growth model in line with Thirlwall’s Law that takes into account both internal and external imbalances. The model is tested for Portugal, which in 2010 fell into a public debt crisis with serious negative consequences on growth. The empirical analysis shows that the growth rate in Portugal is in fact balance of payments constrained and the main drawback is the high import elasticity of the components of demand and in particular that of exports.

Growth rates constrained by internal and external imbalances and the role of relative prices: empirical evidence from Portugal

Thirlwalls law (Thirlwall 1979) considers that growth can be constrained by the balance of payments when the current account is in permanent deficit. The law focuses on external imbalances as impediments to growth and does not consider the case where internal imbalances (budget deficits or public debt) can also constrain growth. The recent European public debt crisis shows that when internal imbalances are out of control they can constrain growth and domestic demand in a severe way. Recently, Soukiazis, Cerqueira, and Antunes (2012a) developed a model-hereafter the SCA model-that takes into account both internal and external imbalances but in which relative prices do not play any role on the pace of economic growth. The aim of this paper is to extend the SCA model by relaxing this assumption and introducing explicitly relative prices into it. The model is tested for Portugal, which recently (2011) fell into a public debt crisis with serious negative consequences for growth. It is shown that our new model makes a significant improvement in explaining actual growth in Portugal. Our empirical analysis reveals that Portuguese growth is balance-of-payments constrained and that policies aimed at reducing external imbalances and changing the share of imports and exports toward trade equilibrium will help the economy to grow faster. Competitive devaluations and lower costs of financing the economy also produce an important stimulus to growth.

Determinants of Worldwide Software Piracy Losses

This paper studies the determinants of software piracy losses along four major macroeconomic dimensions: Labor force, Technological, Educational and Access to Information using a large dataset available from 1994 to 2010, comprising 109 countries. The results show that, regarding the labor dimension, employment in services has a deterrent effect while labor force with higher education and youth unemployment have positive effects on piracy losses. As for the technological dimension, more patents by residents have a positive effect while the effect of R&D is negative. In terms of the Educational dimension the results obtained show that more spending on education increase the piracy losses but, at the same time, more schooling years have the opposite effect. Finally, regarding the Access to Information, it seems that access to Internet diminishes the losses while the share of Internet broadband subscriptions has no effect.

A survey on software piracy empirical literature: Stylized facts and theory

As software is central in today’s world, the problem of software piracy is of increasing importance. It reduces the revenues of firms that develop new software and, therefore, it may hinder innovation and growth. To understand better the causes of this phenomenon this paper presents a survey of the empirical literature regarding software piracy and discusses if the findings are coherent with the theoretical literature. Overall we are able to identify eight stylized facts in five dimensions: the Economic, Cultural, Educational, Technological and Legal. Moreover we argue that most of these findings are coherent with that which the theoretical models imply.

Is There a Political Dimension on Business Cycle Synchronization

The study of the business cycle synchronization determinants has traditionally focused on economic variables disregarding aspects such as politics and elections. This paper intends to fill in this gap and test whether the political environment is also a relevant channel explaining the synchronization between countries. Using a synchronization index for panel data we find that government ideology affects synchronization. Simultaneous left‐wing governments improve business cycle synchronization while the results for right‐wing governments, although statistically weak, suggest the opposite effect. In some particular cases, also elections and cabinet changes are found to have a negative impact on synchronization. Furthermore, the role of the traditional economic variables is not altered by the inclusion of this new channel.

The Impact of Expectations, Match Importance, and Results in the Stock Prices of European Football Teams

We analyze the relation between stock returns and results in national league matches for 13 clubs of six European countries. We assume that the stock prices should only respond to the unexpected component of match results, and we use betting odds to separate the expected component of results from the unexpected one. We consider both the unweighted results and the results weighted by a new measure of match importance that we propose. When this measure is used, a significant relation between the results and stock performance is found for most teams.

Perspectives on Financial, Monetary, and Economic Developments in Eastern Europe

This special issue of Eastern European Economics includes a selection of articles presented at the INFER Workshop on Rethinking Development and Macroeconomic Policy on April 20–21, 2017 in Cluj-Napoca (Romania) and at the 19th INFER Annual Conference at the University of Bordeaux (France) on June 7–9, 2017. These two INFER events brought together academics, practitioners, and public officials for a dialogue on development and macroeconomic policies in the wake of the recent crises. Numerous research presentations on the European countries were given. Some of the presented articles put a specific focus on the Central and Eastern European Countries (CEECs). This special issue entitled “Perspectives on Financial,Monetary, and Economic Developments in Eastern Europe” is composed of five of these articles. They analyze key challenges faced by the CEECs on their way to a deeper European integration in the context of the recent financial and debt crises. Fiscal and monetary

What can eastern European countries learn from the Slovak economy? A twin deficit growth approach

This paper applies an extended growth model to the Slovak economy and explains the potential pitfalls that a transition economy faces on the way to converging with other advanced European countries. Our empirical analysis shows that Slovakia grew at a higher rate than that allowed by the balance-of-payments equilibrium rate and that this is consistent with the accumulation of trade deficits over time. A scenarios analysis shows that improving trade competitiveness, changing import and export shares toward a current account balance, and financing the economy at a lower cost will be the most successful ways to achieve higher growth.

Market Splitting and the Swedish electricity market

A new index is introduced, the “Market Splitting Hours Share” (MSplit), varying from 0 (perfect price convergence) to 1 (no price convergence), which is inhere defined and, as an application example, used to analyse the most centrally located electricity market in the Nord Pool, the Swedish electricity market. The congestion of the existing interconnections between bidding areas creates the market splitting, with divergent electricity spot prices. The MSplit index is calculated and presented for all Swedish and related adjacent biding areas in the Nord Pool from the 2nd January 2012 to the 31st August 2015. An almost perfect price convergence is found between Swedish bidding areas 1 and 2, whilst the MSplit between Swedish bidding area 2 and 3 does not surpass 0.25, which we consider to be a good price convergence level. Good price convergence level is also found between Swedish bidding areas 3 and 4, with some excursions of the MSplit above 0.25, therefore further interconnection investment might not be worthwhile. As the index herein proposed may be used as a tool to rank other various interconnected electricity markets, MSplit can become an important instrument to be applied by national energy regulators, energy policy makers or transmissions systems operators in order to support these institutions when designing policies concerning interconnection investments.

Wind generation influence on market splitting: The Iberian spot electricity market

This paper aims to assess the influence of wind power generation on the market splitting behaviour of the Iberian electricity spot markets. Iberia stands as an ideal case study, where the high level deployment of wind power is observed, together with an early implementation of the market splitting mechanism between the Portuguese and the Spanish spot electricity markets. Non-parametric models are used to express the probability response for market splitting of day-ahead spot electricity prices as a function of wind and hydro power, together with the available transmission capacity and electricity demand. Non-parametric models overcome known limitations of previously used parametric models, providing additional detail and more efficiently. Model results show that there is an increase of market splitting probability with simultaneous higher wind and hydro power generation and lower available transfer capacity, suggesting that cross-border interconnection development should be linked to the increase in renewable power installation capacity, both current and forecasted.