Tomasz Kozluk

Measuring Long-Run Exchange Rate Pass-Through

The paper discusses the issue of estimating short- and long-run exchange rate pass-through to import prices in euro area countries and reviews some problems with the measures recently proposed in the literature. Theoretical considerations suggest a long-run Engle and Granger cointegrating relationship (between import unit values, the exchange rate and foreign prices), which is typically ignored in existing empirical studies. We use time series and up-to-date panel data techniques to test for cointegration with the possibility of structural breaks and show how the long-run may be restored in the estimation. The main finding is that allowing for possible breaks around the formation of EMU and the appreciation of the euro starting in 2001 helps restore a long run cointegration relationship, where over the sample period the fixed component of the pass-through decreased while the variable component tended to increase.

The impact of Chinese monetary policy shocks on East Asia

We study the effects of Chinese monetary policy shocks on China s major trading partners in East Asia by estimating structural vector autoregressive (SVAR) models for six economies in the region. We find that a monetary expansion in Mainland China leads to an increase in real GDP (temporary) and the price level (permanent) in a number of economies in our sample, most notably in Hong Kong and the Philippines. The impact could result from intertemporal substitution present in a general equilibrium framework which allows for positive domestic impacts of foreign monetary expansions. Our results emphasize the growing importance of China for its neighboring economies and the significance of Chinese shocks for the design of monetary policy in Asian economies. Keywords: monetary policy shocks, Asian production chain, SVAR, East Asia, China, JEL: E52, F42

Global and Regional Links between Stock Markets: The Case of Russia and China

In a broad sample of developed and emerging economies over the past ten years we apply the approximate factor model in a search for common global and regional driving-forces in stock market returns and volatility. We focus particularly on two emerging stock markets - Russia and China, because of their unique characteristics and performance in the past years. We find that while Russian markets, like the CEEC region, substantially increased their integration with global stock markets, both the Chinese A- and B-share markets continued to move largely independently from global movements and only slightly increased in comovement with regional forces. We provide evidence of a general increase in global comovement of stock markets over the past decade and a decline in the role of regional forces, which imply a decrease of the effectiveness of cross-country hedging strategies.

How the Transport System can Contribute to Better Economic and Environmental Outcomes in the Netherlands

Congestion has become a burden for the Dutch economy. Commuters and businesses are suffering from the time lost in traffic and the unreliability of travel time. Expanding infrastructure can potentially solve such problems, albeit only in the long term and at a high cost. Thus short to medium-term solutions will have to be oriented at improvements in the use of existing infrastructure, more efficient public transport and better demand management. In this light the Dutch government proposed an innovative country-wide road pricing scheme. This scheme aims to make users pay for road usage and could bring about significant benefits in terms of lower congestion and less pollution. The full benefits of road pricing can be reaped by adjusting the prices to encourage more efficient economic and environmental outcomes. If the implementation of a fully-fledged road price system is delayed or aborted, the government should rely on alternative measures such as fuel taxation and congestion charges to obtain similar outcomes. Reforms to the transport system, including public transport, together with a more flexible housing market should reduce the economic and environmental burden of transport, thereby improving prospects for sustainable long-term growth. This Working Paper relates to the 2010 OECD Economic Survey of the Netherlands (www.oecd.org/eco/surveys/ netherlands). Comment le systeme de transport peut contribuer a de meilleurs resultats economiques et environnementaux aux Pays-Bas La congestion est devenue une charge pour l’economie neerlandaise. Les migrants alternants et les entreprises pâtissent des pertes de temps que les transports leur occasionnent et de l’imprevisibilite de la duree des deplacements. Un renforcement des infrastructures peut resoudre le probleme, mais seulement dans le long terme et a grands frais. A moyen ou court terme, la solution doit donc etre recherchee dans la rationalisation de l’utilisation de l’infrastructure existante, l’amelioration des transports publics et l’amelioration de la gestion de la demande. Dans cette optique, le gouvernement neerlandais a propose d’instaurer un systeme national novateur de tarification routiere qui oblige les usagers a payer pour l’usage qu’ils font des infrastructures routieres et qui pourrait etre source d’avantages appreciables en termes de reduction de la congestion et de la pollution. L’ajustement des prix permettra de maximiser les retombees economiques et environnementales de la tarification routiere. Si la mise en oeuvre d’un systeme complet de tarification routiere est retardee ou empechee, l’Etat devra faire appel a d’autres mesures telles que les taxes sur le carburant ou les peages de congestion pour arriver a des resultats comparables. Les reformes du systeme de transport, notamment des transports publics, de meme qu’un marche du logement plus flexible, devraient reduire la charge que les transports font peser sur l’economie et l’environnement et ameliorer, ainsi, les perspectives de croissance durable a long terme. Ce document de travail se rapporte a l’Etude economique des Pays-Bas de 2010 (www.oecd.org/eco/ surveys/netherlands).

Promoting Competition to Strengthen Economic Growth in Belgium

Prices for many goods and services in Belgium are higher than in other countries, reflecting generally weak competitive pressures. The government has recently introduced several reforms to strengthen the competition policy framework. Nevertheless, to reap the full benefits of competitive markets, past reforms should be complemented with a number of further measures. The powers of the Competition Authority can still be enhanced. Its effective degree of independence, substantially improved in the recent reform, and its accountability should be monitored in order to assess whether further measures in this direction are needed. In the retail sector competition-restricting regulations still protect existing companies against new entry and inhibit the diffusion of new business models and technologies. The reform efforts in the network sectors remain patchy. In the energy and telecommunication sectors the main issues are the dominant positions of the incumbents and the failure of network sector regulators to introduce a level playing field in order to allow new entry and expansion of competitors. In other sectors, such as postal services and rail transport, major steps towards liberalisation are still to come. Overall, sectoral regulators will need more independence and powers in order to tackle uncompetitive behaviour of the incumbents, while better communication between the regulatory authorities is necessary. These steps should help to secure the necessary basis for bringing productivity growth in line with best performance.