Subrata Ghatak

Inter-Regional Migration in Transition Economies: The Case of Poland

The Harris-Todaro model of migration is modified to incorporate the impact of human capital, housing stock and the availability of publicly provided goods like health care and road provision in order to analyse the determinants of migration in different regions of Poland. The Seemingly Unrelated Regression Equation [SURE] model is used to investigate the data. The results show that GDP per capita, unemployment and distance have a strong effect on regional migration in this country. Human capital is also an important explanatory factor as is the provision of key publicly provided facilities such as roads. The lack of housing in Poland is important in explaining the low levels of internal migration.

Is Fiscal Policy Sustainable in Developing Economies

This paper investigates fiscal policy sustainability in Peru, the Philippines, South Africa, Thailand, and Venezuela using competing methodologies. Standard unit roots and cointegration analyses do not endorse the validity of the intertemporal budget constraint. In contrast, to varying degree across-countries, alternative testing employing a fiscal policy reaction function indicates sustainability defined as surplus adjustments in response to higher debt to income ratios. Corresponding debt-dynamics analyses show that corrective measures were put in place to revert non-sustainable trends in government debt. However, ancillary variables in the debt modeling produce statistically weak evidence of procyclical fiscal behavior in the Latin American countries.

Monetary Policy Rules for Transition Economies: An Empirical Analysis

In this paper, we innovatively apply both Taylor rule, where an interest rate is used as a policy reaction, and McCallum rule, where monetary base is considered as a policy instrument, for the new EU member states in analysing monetary policy reaction functions. For the Czech Republic, Poland, Slovakia and Slovenia, the Taylor rule is found to be suitable to exchange rate targeting, whereas the McCallum rule may be applicable to inflation targeting. Evidence also reveals that for Hungary and Romania, inflation targeting coexists with that of exchange rates taking account of both reactions of interest rates and money.

Supply Response and Risk in Chinese Agriculture

The main objective of this paper is to model the production and supply response in Chinese agriculture, which includes not only the standard arguments like expected prices but also risk. We extend Lins work [1991, 1992] by modelling supply response as a three-equation model. We fit our model to data for 28 Chinese provinces from 1970 to 1997 to determine whether national Chinese agricultural supply is price and price risk responsive. Further, we fit our model to data for North, Northeast, South and Southeast regions. Results from the three systems equations are compared to single equation estimations. At the national level, Chinese agriculture is found to be price and price risk responsive. The regional analyses suggest that significant regional differences exist. Unlike Lin, we do not find the household responsibility system (HRS) to be the dominant factor in increased yields in different regions of China.

Monetary policy rules in transition economies: the impact of ambiguity

Purpose - The purpose of this paper is to discuss the potential benefits of monetary policy rules for transition economies (TEs). Design/methodology/approach - The paper discusses monetary policy rules, inflation targeting, political risk and ambiguity and monetary policy and ambiguity. Findings - It is argued that the nominal interest rate may fail to be the appropriate instrument in such rules. One reason is the amount of non-calculable political and economic risk inherent in TEs. These risks lead to a significant and volatile-ambiguity premium in the interest rate over and above the normal risk premium, which makes the real equilibrium interest rate difficult to measure. Furthermore, ambiguity of the public regarding the monetary policy leads to an ambiguity premium on inflation. Originality/value - The paper advocates a simple monetary policy rule based on a monetary aggregate like the money base minimizes the impact of ambiguity. It may therefore be the appropriate monetary policy for TEs.

Determinants of intended expansion of Polish small firms

Abstract This paper investigates the determinants of Polish small firms’ intentions to expand production in the context of possible economic expansion on accession to the EU. Using a non-linear specification, a model is developed using 27 explanatory variables derived from a questionnaire given to Polish small firms in late 1999. Seven of these variables are found to be significant, namely: the existence of export and franchising activity, a recent increase in fixed assets, the difficulty in obtaining a bank loan, the level of human capital, the technological level of the firm’s products and the estimated proportionate change in income from 1997 to 1999. Significant catch-up gains exist for small but fast growing firms.