Wojciech Paczynski

The Relationship between Energy and Socio-Economic Development in the Southern and Eastern Mediterranean

This report aims to identify, explain and detail the links and interactions in southern and eastern Mediterranean countries (SEMCs) between energy supply and demand and socio-economic development, as well as the potential role of energy supply and demand policies on both. Another related aim is to identify and analyse, in a quantitative and qualitative way, the changing role of energy (both demand and supply) in southern Mediterranean economies, focusing on its positive and negative impact on socio-economic development. This report investigates in particular: ? The most important channels through which resource wealth can contribute to or hamper economic and social development in the analysed region; ? Mechanisms and channels of relations between energy supply and demand policies and economic and social development. The burdens of energy subsidies and ‘oil syndrome’ are of particular relevance for the region. An integrated socio-economic development and energy policy scenario approach showing the potential benefits and synergies within countries and the region is developed in the final part of the report.

Exchange Rate Regimes and the Real Sector: A Sectoral Analysis of CEE Countries

This paper analyses the impact of exchange rate regimes on the real sector. While most studies in this field have so far concentrated on aggregate variables, we pursue a sectoral approach distinguishing between the tradable and nontradable sectors. Firstly, we present a survey of the relevant theoretical and empirical literature. This demonstrates that evaluations of exchange rate regimes and their impact on the real economy are largely dependant on specific assumptions concerning, in particular, the parameters of a utility function, the nature of the price adjustment process and the characteristics of analysed shocks. Secondly, we conduct an empirical analysis of the behaviour of the tradable and nontradable sectors under different exchange rate regimes for seven Central and Eastern European countries. We find no firm evidence of a differential impact of given exchange rate regimes on the dynamics of output and prices in the two sectors. We proffer a conceptual and technical interpretation of this.

The Economic and Social Consequences of Currency Crises

The literature dealing with the causes of currency crises is vast and, especially in recent years, much progress has been recorded in this field. In contrast, the consequences of financial turbulence are rarely examined. The set of ‘early warning indicators’ is of course useful since it helps to predict crises, but the performance of economies after crises is at least equally important. For example, were it the case that crises are a crude but optimal way of removing the imbalances in an economy, it would be unnecessary to analyze indexes of financial market pressure (something that brings questionable results anyway) or other ways of measuring potential vulnerabilities. Moreover, transition economies are often excluded from analyses. The most important reason for this is perhaps the lack of good quality data. Also, the transition process itself embraces great systemic changes in the functioning of economies, so it is extremely difficult to separate the effects ofthese changes from those stemming from crises.

ECB Decision-making and the Status of the Eurogroup in an Enlarged EMU

This paper analyses the link between forthcoming EU enlargement and selected aspects of EU institutional reforms, namely decision making rules in the European Central Bank and the status of the Eurogroup. It argues that some earlier arguments calling for urgent ECB reform are based on unrealistic assumptions. It concludes that the reform recently adopted by the EU Council as well as the present system, while not free from shortcomings, could provide a workable environment for monetary policy in an enlarged EMU. Additionally, the paper claims that designing efficient institutional solutions for the EU Council is also important from the perspective of new member states as it might impact on their chances for early adoption of the common currency.

Fighting Inflation in Russia

The purpose of this study is to explain the main sources of continued inflationary pressure in Russia and propose a policy remedy to this situation. In the transition period Russia has gone through different monetary and exchange rate regimes. The disinflation process has been marked by several reversals, the most recent being the consequence of the currency and banking crisis in August 1998. Although annual inflation was brought back down to a moderate two-digit level (around 20%) in 2001, such a level cannot be considered as satisfactory from the viewpoint of a long-term investment and growth climate.

European Neighbourhood Policy and Economic Reforms in the Eastern Neighbourhood

The paper discusses the current and potential role of the European Neighbourhood Policy (ENP) in anchoring economic reforms in the countries of the EUs Eastern Neighbourhood. It claims that it is too early to assess the success of the ENP in this sphere especially given that the actual progress of the ENP agenda has been limited. A review of the empirical evidence on external reform anchors confirms that the ENP shares some features with the EU accession process that has proven to be an effective mechanism supporting major economic, political and social changes in the countries concerned. The eventual ENP economic offer is meaningful and integration with the EU is getting stronger public support in several CIS countries and among their political elites. On the other hand several factors limit the reform anchoring potential of the ENP. This paper offers recommendations on policies that could strengthen this potential.

Energizing EU-FSU Relations: Challenges and Opportunities

This chapter discusses the role of the energy sector and, especially, natural gas in the relations between EU and FSU countries. It outlines the EU energy demand outlook and FSU production and export prospects, including the controversies surrounding the competition between new gas pipeline projects. The discussion of opportunities and risks for gas trade and cooperation between the EU and FSU partners concludes with policy recommendations.

Global Food Price Shock and the Poor in Egypt and Ukraine

The global food price shock of 2006-2008 has particularly affected poorer strata of populations in several developing countries. In Egypt and some other countries it has put food subsidy schemes to the test. This paper develops two comparable computable general equilibrium models for Egypt and Ukraine which are used to simulate direct and indirect impacts of the food price surge and various policy options on the performance of the main macroeconomic indicators as well as on poverty outcomes. The results illustrate the limited ability of realistic policy responses to mitigate negative social consequences of an external price shock. Food import tariff cuts are a partial remedy faring better than other analysed options. Furthermore, the Egyptian system of food subsidies needs substantial reforms limiting the related fiscal burden and improving the targeting of the poor population.

The Social Dimension in Selected Candidate Countries in the Balkans - Bulgaria, Romania, Croatia and Turkey: Synthesis Report

The European Commission awarded a contract in November 2005 to a consortium composed of the TARKI Social Research Institute (Hungary), CASE, Center for Social and Economic Research (Poland) and CEPS to analyse the socio-economic developments and the process of structural reforms in what were then four candidate countries: Bulgaria, Croatia, Romania and Turkey. The objective was to identify the major challenges in the current demographic, social and economic context that could be considered relevant in determining the capacity of these countries to function in the European Union. This study presents a synthesis of the findings for all four countries, and consists of an analytical section and a statistical annex. The four country reports are published separately in this same series.