Regional investment policy impacts on FDI location in Poland (by Gábor Hunya; pp. 1-6 ) Keywords: FDI, investment policy, regional Countries covered: Poland Topics: International Trade, Competitiveness and FDI; Regional Development Creating fiscal space in the European Monetary Union (by Jan Toporowski; pp. 7-10 ) Keywords: EMU, taxation, financial sector Countries covered: European Union Topics: Macroeconomic Analysis and Policy Is there evidence of increasing fragmentation in the banking system of the euro area? (by Olga Pindyuk; pp. 11-13) Keywords: banking system, ...more

Political turmoil and early elections in Bulgaria (by Rumen Dobrinsky; pp. 1-4) Keywords: Bulgaria, elections Countries covered: Bulgaria Topics: Other A revival of industrial policy as a growth model for Russia? (by Peter Havlik; pp. 5-6) Keywords: industrial policy, growth model Countries covered: Russia Topics: Macroeconomic Analysis and Policy; International Trade, Competitiveness and FDI The determinants of income polarization at the household and country level across the EU (by Mario Holzner; pp. 7-10) Keywords: income polarization, fiscal policy Countries cove...more

Summary The protracted recession in the euro area will continue to be a drag on the economic growth of most CESEE countries in 2013. By and large, those countries are small open economies held hostage to the excessive fiscal austerity pursued in the euro area and the sluggish progress on the part of its policy-makers in adequately addressing the structural roots of the crisis. At the same time, the private sector demand in the CESEE countries is unlikely to recover substantially in the near term either. Wherever there will be an increase in investments, it will be primarily funded via public...more

The new Multiannual Financial Framework of the European Union for 2014-2020: a comment (by Sándor Richter; pp. 1-3) Keywords: financial framework Countries covered: EU Topics: Macroeconomic Analysis and Policy Labour costs, external competitiveness and economic growth in new EU member states (by Vasily Astrov; pp. 4-11) Keywords: labour costs, competitiveness, inflation Countries covered: NMS Topics: Macroeconomic Analysis and Policy, International Trade, Competitiveness and FDI Global values – new reflections and new data on an old debate (by Arno Tausch; pp. 12-18...more

The European Commission grossly underestimates the effects of German domestic demand expansion (by Leon Podkaminer; pp. 1-2) Keywords: income elasticity of imports, external imbalances Countries covered: Germany, EU Topics: Macroeconomic Analysis and Policy, International Trade, Competitiveness and FDI The new North-South divide in Europe – can the European convergence model be resuscitated? (by Michael Landesmann; pp. 3-13) Keywords: convergence model Countries covered: EU Topics: Macroeconomic Analysis and Policy; International Trade, Competitiveness and FDI Change...more

Draghi’s démarche and the nightmare of the Bundesbank (by Jan Toporowski; pp. 1-2) Keywords: monetary policy, monetary union, euro, bonds’ buyout Countries covered: EU Topics: Macroeconomic Analysis and Policy Trade does not drive global growth (by Leon Podkaminer; pp. 3-8) Keywords: global growth, global trade, VEC Countries covered: The World Topics: Macroeconomic Analysis and Policy, International Trade A note on Kazakhstan’s Oil Fund (by Vasily Astrov; pp. 9-14) Keywords: sovereign wealth, oil revenue Countries covered: Kazakhstan Topics: Sectoral studies ...more

Summary This paper looks at the changing role of the EU-27-based multinational companies in the global economy as compared with the main regions of the world. It makes conclusions reflecting on the framework conditions of various global development scenarios defined in the framework an international research project of the Seventh Framework Programme of the EU, ‘AUGUR’ (http://www.augurproject.eu/). First we summarize the findings of recent research on corporate internationalization and international sourcing strategies. Then we turn to the analysis of FDI balance of payments statistics, ma...more

(Report based on Background Study for European Competitiveness Report 2012, see http://ec.europa.eu/enterprise/policies/industrial-competitiveness/competitiveness-analysis/european-competitiveness-report/index_en.htm) Summary The ongoing internationalization of production has altered the economic landscape. Many products used to be produced locally using inputs drawn largely from the domestic economy, which implied that most of the value chains or production processes used to be located in the country where a firm had its headquarters. Technological development has facilitated the geogra...more

(Report based on Background Study for European Competitiveness Report 2012, see http://ec.europa.eu/enterprise/policies/industrial-competitiveness/competitiveness-analysis/european-competitiveness-report/index_en.htm) Summary Countries belonging to the European neighbourhood are highly diverse. Their diversity is multidimensional (geographical, socio-economic, political, cultural, religious, etc.) and the individual dimensions all have important implications for EU policies towards the region(s), for EU institutional relations with individual neighbourhood countries and for these countri...more

After the EU accession of the Visegrad countries (the Czech Republic, Hungary, Poland and Slovakia) in 2004 one of the most remarkable developments was a sudden upturn in mutual trade of this region’s countries. In 2007 the value of aggregate intra-Visegrad trade was two and a half times higher than in 2003. The rate of growth in these countries’ trade with the ‘old’ EU member states was only half as much as that. As part of a research project in search of explanation for the upturn of mutual trade, this paper addresses the questions how the structure of mutual trade of the Visegrad countries ...more

The Vienna Institute for International Economic Studies (wiiw) has just published its latest Analyses and Forecasts. The report, titled Fasting or Feasting? Europe - Old and New - at the Crossroads, analyses current economic situation and medium-term forecast for the countries of Central, East and Southeast Europe. For the CESEE countries, wiiw expects 2012 to be a rather disappointing year. GDP growth will be rather slow – at least when judged by the past standards and the ambitions harboured only a few years ago. Some countries (Czech Republic, Hungary, Slovenia, Bosnia and Herzego...more

The Vienna Institute for International Economic Studies (wiiw) has just published its latest Analyses and Forecasts. The report, titled Fasting or Feasting? Europe - Old and New - at the Crossroads, analyses current economic situation and medium-term forecast for the countries of Central, East and Southeast Europe. For the CESEE countries, wiiw expects 2012 to be a rather disappointing year. GDP growth will be rather slow – at least when judged by the past standards and the ambitions harboured only a few years ago. Some countries (Czech Republic, Hungary, Slovenia, Bosnia and Herzego...more

The Vienna Institute for International Economic Studies (wiiw) presents an analysis of foreign direct investment (FDI) in 22 Central, East and Southeast European countries based on the latest update of its database. FDI continues to be of great significance for the development of the former transition economies. The domestic engines of economic growth are still weak, and fiscal consolidation provides a drag on the economies. The short-lived recovery in 2011 was based mainly on external demand, which upgraded the importance of foreign investors, as they generate a major part of exports. ...more

The Vienna Institute for International Economic Studies (wiiw) has just published its latest Analyses and Forecasts. The report, titled New Divide(s) in Europe?, analyses current economic situation and medium-term forecast for the countries of Central, East and Southeast Europe. The present economic crisis bears all the familiar hallmarks of the financial, debt-related and structural aspects of current account crises. All these aspects have lasting level effects and recovery can be very protracted. Export-led growth was an important feature of the recovery period 2010-2011, yet signi...more

The Vienna Institute for International Economic Studies (wiiw) has just published its latest Analyses and Forecasts. The report, titled Recovery: Limp and Battered, analyses current economic situation and medium-term forecast for the countries of Central, East and Southeast Europe. In 2011 the recovery will encompass all countries in the CESEE region – even the laggards that did not grow in 2010. However GDP growth will not accelerate much in countries where the recession ended already in 2010. Later on, GDP growth rates will stabilize throughout the whole region at around 4 to 5 pe...more

In a special chapter ("Debt dynamics, flow of funds and deleveraging") of the wiiw Forecast "Recovery: Limp and Battered", the debt developments of the private (households, corporate) and public sectors before and after the start of the financial crisis are examined and compared with those in the GIPS countries (Greece, Ireland, Portugal, Spain). The burden of the build-up of private sector debt before the crisis has important consequences for spending and savings behaviour of households and enterprises and hence for the development of domestic demand (consumption and investment). In this resp...more

The Vienna Institute for International Economic Studies (wiiw) has just published its latest Analyses and Forecasts. The report, titled Recovery: Limp and Battered, analyses current economic situation and medium-term forecast for the countries of Central, East and Southeast Europe. In 2011 the recovery will encompass all countries in the CESEE region – even the laggards that did not grow in 2010. However GDP growth will not accelerate much in countries where the recession ended already in 2010. Later on, GDP growth rates will stabilize throughout the whole region at around 4 to 5 pe...more

In einem speziellen Kapitel („Debt dynamics, flow of funds and deleveraging“) des Konjunkturberichtes "Recovery: Limp and Battered" wird die Verschuldungsdynamik nach Sektoren (Haushalte, Unternehmen, Staat) vor und nach dem Ausbruch der Finanzkrise untersucht und mit den GIPS-Ländern (Griechenland, Irland, Portugal, Spanien) verglichen. Die Last der privaten Verschuldung hat wichtige Konsequenzen für das Ausgaben- und Sparverhalten des Haushalts- und Unternehmenssektors und damit für die Entwicklung der Inlandsnachfrage (Konsum und Investitionen). Dabei zeigen sich sehr unterschiedliche Muste...more

The rapid growth of China in the last thirty years has had a very strong impact on the world economy. Having gone through a rapid process of structural transformation as well as international integration, China has recently improved quantity and quality of its exports. Its market share has increased dramatically, so that in 2009 China overtook Germany to become the first world exporters of goods. A recent ample literature has been discussing the likelihood of this upgrade resulting in a change in Chinese comparative advantage towards more sophisticated productions and therefore whether there are countries/sectors more subject to increased Chinese competition. ...more

The Vienna Institute for International Economic Studies (wiiw) presents an analysis of foreign direct investment (FDI) in 20 Central, East and Southeast European countries based on the latest update of its database. FDI is still of great importance for the development of CEECs especially as the domestic engines of economic growth are still weak, and fiscal consolidation drags on many of the economies. The economic recovery that has started in the region is mainly based on external demand, which has upgraded the role of foreign investors whose subsidiaries produce the main part of exp...more

Based on recent approaches of measuring the factor content of trade when intermediates are traded we decompose value added trade and its components like capital and labour and further subcomponents (ICT and Non-ICT capital, educational attainment categories) distinguishing between direct, indirect and re-imports and –exports of value added and trade in factors. This adds to the literature by simultaneously considering both exports and imports allowing to focus on patterns and dynamics of net value added trade and its components rather than vertical specialisation patterns based on exports. As an extension we differentiate net value added trade flows resulting from trade in intermediate and final goods. The analysis can further be broken down to the industry level and bilateral trade relations. Empirically we present results of an application of the proposed decomposition method based on the recently compiled World Input-Output Database (WIOD) covering 40 countries and 35 industries over the period 1995-2006. We show that direct value added exports and imports dominate but the indirect part was increasing over time. This also holds for trade in factors with for example higher increases observed for high-educated labour. Patterns of trade in net value added closely resemble net trade flows but there are distinct patterns when looking at individual factors. For example, NAFTA countries are net exporters of high-educated labour mostly to EU-15 but have increasingly become net importers of low-educated labour from China. ...more

The Vienna Institute for International Economic Studies (wiiw) has just published its latest Analyses and Forecasts. The report, titled Recovery – in Low Gear across Tough Terrain, analyses current economic situation and medium-term forecast for the countries of Central, East and Southeast Europe. All Central, East and Southeast European (CESEE) countries will return to growth in 2011. The post-crisis GDP growth will be slower than before and not suffice to generate additional jobs. The role of external demand gradually weakens, while both household consumption and gross fixed inves...more

In the process of catching up to the EU income levels, emerging European economies built up external imbalances and attracted large capital inflows prior to the global financial crisis. Many attribute the severity of the crisis to excessive capital inflows. This paper examines the effect of structural distribution of FDI on external vulnerability - trade account balance in particular - to see if a concentration in FDI in nontradables leads to large external imbalance as is often perceived. Our study finds that this is indeed the case: trade account deficit is reduced by 0.1-0.2 per cent of GDP when a share of tradable FDI to total FDI increases by 1 per cent. We also study what determines the pattern of sectoral distribution of FDI across countries, and draw policy implications for more stable and sustainable growth strategy. ...more

The Vienna Institute for International Economic Studies (wiiw) has just published its latest Analyses and Forecasts. The report, titled Will exports prevail over austerity?, analyses current economic situation and medium-term forecast for the countries of Central, East and Southeast Europe, and China The Central, East and Southeast European (CESEE) economies will experience on average a minor rebound of economic growth to 1% in 2010 which will speed up to 2.5% in 2011 and 3.5% in 2012. GDP growth will be higher in the CIS countries and in Turkey, about average in the Central European N...more

Christian Hepenstrick, University of Zurich (UZH) This paper develops a Ricardian trade model that accounts for the empirically observed positive relation between the extensive margin of a bilateral trade flow (measured as the number of goods categories with positive volumes) and the per-capita incomes of the trading partners. The central mechanism is that richer agents consume a wider set of varieties, which leads to a positive relation between per-capita income of the importer and the extensive margin. The positive effect of exporter per-capita income, corresponding to the standard model,...more

wiiw presents its new analysis of FDI developments in 20 Central, East and Southeast European countries, based on the latest update of the wiiw FDI Database. German: Das wiiw präsentiert seine aktuelle Analyse der Entwicklung der Auslandsinvestitionen in Zentral-, Ost- und Südosteuropa, sowie den Update der "FDI Database" mit detaillierten Statistiken über Auslandsinvestitionen in 20 Ländern....more