Capital flows and growth dynamics in Central and Eastern Europe

The stock markets of most CEE countries have been actively developing and improving over the past decades but they still do not belong to the developed markets according to MSCI classification, the financial systems of these countries tends towards the bank-oriented type. Does the level of stock market development affect economic growth in CEE countries and do these countries need to develop their stock markets accordingly? The purpose of this article is to identify the direction of the causal link between stock market development, banking sector development and economic growth in Central and Eastern European (CEE) countries. The subject of the research is the relationship between the stock market development, banking sector development and economic growth in the CEE countries. Methodology. The research is based on the annual data for two time periods 1999-2012 and 1999-2015 for the 8 and 5 CEE countries, respectively. The study is based on the Granger causality test and linear regression models. According to results of the research the stock market development plays an important role in attracting foreign direct investment and economic growth in CEE countries in the long-run period. There are revealed the channels of indirect influence of the stock market capitalization on the economic growth. Stock market capitalization has impact on the banking sector and gross capital formation, which in turn have impact on the economic growth of CEE countries. There is the impact of both the stock market and the banking sector development on the economic growth in CEE countries during 1999-2015. However, the impact of the stock market size on the economic growth is positive and the impact of domestic credit to private sector is negative. Practical implications. The study proves the reasonable need for the CEE countries to move towards further development of the stock market, improving the market infrastructure and institutional environment in order to expand the size of the stock market and thereby contribute to the economic growth of this countries. Value/originality. The obtained conclusion about the role of the stock market in economic growth and attraction of FDI is of great importance both for Ukraine and other countries with similar trajectory of economic development in general and similar historical aspects of the origin of stock markets in particular and should be taken into account by state leaders when making decisions on the need to create conditions for development of such element of the country’s financial system as the stock market.

The United States, EU members, and Russia share extensive and important interests in Central and Eastern Europe (CEE) in terms of geo-security, energy, and values. The US–EU–Russia trilateral interaction in this region features three characteristics: intensifying security competition between Washington and Moscow; closer transatlantic coordination against Russia; and growing wariness about China’s larger economic footprint. New changes have taken place in the regional distribution of power amid continued China–US competition, increasingly diverging values among the United States, Germany, and CEE countries like Poland and Hungary, and heightening geopolitical tensions between Washington and Germany on the one hand and Russia on the other. China–CEEC (CEE countries) cooperation is also coming under mounting geopolitical pressure, owing to Washington’s containment policy toward China, the EU’s weakening control over the CEE countries, Russia’s shift from a defensive to an offensive posture in response to Western sanctions, the new German government’s values-based diplomacy, and the European Commission’s new China policy. However, the transatlantic world is not a monolith. The EU’s weakening control over CEE countries and Washington’s deteriorating relations with Poland and Hungary are bringing potential opportunities for furthering China–CEEC cooperation. The aforementioned factors merit closer attention as important variables in CEE countries’ China policies.

In our study, we will focus on determining the dynamics and structural changes in the flows of foreign capital to the countries of Central and Eastern Europe after the global financial crisis of 2008. For the analysis, we selected a group of Central and Eastern European countries that joined the European Union: Bulgaria, Romania, Poland, Hungary, the Czech Republic, Slovakia, Slovenia, Estonia, Lithuania, Latvia, as well as the post-Soviet European countries - Ukraine, Belarus, Russia and Moldova. We chose three periods for the study: the first period from the beginning of liberal reforms to the present (1991-2021); the second period from macroeconomic stabilization to the global financial crisis (1994-2008); the third period covers the post-crisis period before the start of the Russian-Ukrainian war (2009-2021). The article examines the structure of the inflow of foreign capital to the countries of Central and Eastern Europe before the global financial crisis of 2008 and in the period after it. It was determined that the share of direct and portfolio foreign investments in the structure of foreign capital increased significantly in the post-crisis period. In the post-crisis period of 2009-2021, there was a significant increase in the average value of the stock of foreign direct investment to 41.2% of GDP and a more than two-fold decrease in the volatility of FDI inflows, which amounted to 5.2, as well as a 1.5-fold increase in portfolio foreign investments and a drastic reduction in the volatility of this type of foreign capital to 2.69. As for other investments, they remained at the pre-crisis level, but volatility decreased by a quarter. An econometric study of the influence of the stock of foreign direct investment and foreign debt per worker on the level of economic well-being in the CEE countries was conducted, which proved the strengthening of the role of foreign direct investment after the global financial crisis and the lack of influence of foreign debt. In our opinion, the governments of the CEE countries have focused on the economic policy of slowing down foreign capital flows and avoiding financial risks associated with foreign debt flows. Today's geopolitical tensions, the Russian-Ukrainian war will contribute to the deepening of these processes, increasing the influence of states on limiting international financial flows.

In 2004 the United Nations University World Institute for Development Economics Research (UNU-WIDER) embarked on a large-scale research project on the ‘Impact of Globalization on the World’s Poor’ co-directed by Machiko Nissanke and Erik Thorbecke. The first conference was essentially conceptual in nature, meant to understand better the various mechanisms and channels through which globalization affects the poor either directly or indirectly. The other three conferences focused on each of the major regions of the developing world: Asia, Africa and Latin America. Theobjectivesofthisintroductionarethreefold:first,toreviewbrieflyhow the forces of globalization influence poverty in general; second, to describe and discuss the main transmission channels and mechanisms; and third to analyze the impact of globalization on Africa and present an overview of the six Africa case studies included in this issue. 1. The Impact of Globalization on the World’s Poor Globalization provides a strong potential for a major reduction in poverty in the developing world because it creates an environment conducive to fastereconomicgrowthandtransmissionofknowledge. 1 However,structural factors and policies within the world economy and national economies have impeded the full transmission of the benefits of the various channels of globalization for poverty reduction. In particular sub-Saharan Africa (SSA) hasbeenrelativelylessaffectedbytheforcesofglobalizationthanotherparts of the world. World income distribution continues to be very unequal and many poor countries particularly in Africa are stagnating. Moreover, there is much empirical evidence that openness contributes to more within-country

Due to negotiations on accession to the EU, the new EU member states from Central and Eastern Europe went through the financial opening. In the pre-crisis period followed by high liquidity in global markets, most of the EU new member states experienced rapid credit growth, which conditioned the appreciation of the exchange rate. External imbalances and vulnerabilities built up. Countries experienced deterioration in their current accounts. This paper investigates the link between financial openness, real effective exchange rate, financial crisis and current account balance within the Panel Auto-Regressive Distributed Lag (ARDL) framework for 11 new European Union members during the period from 1999 to 2016. The results obtained by the use of pooled mean group estimator (PMG) show that in the long run, financial openness has a significant negative impact on the current account balance. In the short run, crisis significantly influences the current account balance having a positive sign.

The author continues the analysis started in the previous issue. The same analytical framework is used to discuss European Union's (EU's) policy towards the Central and Eastern European countries (CEECs) and its dynamics after the Copenhagen summit. The policy development was brought into a new stage during this period, and its main outcome was the pre-accession strategy designed for the CEECs that expressed the wish to become EU members. The main focus of the article is defining the main factors that seem to have influenced EU's policy and attempting to explain changes in the policy content. The Copenhagen Council decisions indicated the beginning of a long-term search for integration strategy on the part of EU decision-makers. This indicated that EU's policy towards CEECs started developing towards being outward-oriented and proactive rather than inward-oriented and reactive. This was reflected by the decisions of the Essen Council. The continuous pressure on the part of CEECs leaders resulting because of the mismatch between their expectations and actual EU's policy, critique of EU policy coming from the expert community, initiative showed by some Commissioners and member states, and two-level bargains were important factors that influenced changes in the policy nature and content. The significant result of the policy change was the White Book with a detailed list of measures to be implemented by CEECs seeking to join the EU. On the whole, the policy-making process was characterized by successive stages emerging as the outcome of partial bargains and compromises, reached under pressure of internal and external forces and commitments. The analysis illustrates that the negotiations process exposes a number of diverging interests and preferences coming from the different levels of governments, the Commission, and interest groups. Therefore, in order to understand better the outcome of policy-making, one needs to examine both the technocratic consensus emphasized by neofunctionalism, and the domestic coalition building that liberal intergovernmentalism focuses on. The EU policy towards CEECs progressed mainly as a result of changing policy preferences within the Commission and the member states. The position of the Commission, as I showed before, was not coherent and stable. Its negotiating position was influenced by its administrative capacity, the number of competing priorities, as well as the leadership of certain commissioners. The positions of member states were dependent on a number of factors including domestic opinion, electoral commitments, interest groups, leadership, geographical proximity, and security and commercial interest in Eastern Europe. Therefore, the cleavage was not simply between supporters and opponents of the EU integrationist policy as a whole but cut across the institutions and different policy areas. Thus, during the period under review, the policy-making process was characterized by a tension between the perceived necessity of integrative action towards CEECs based on broader political and economic objectives and internal inertia coming from the restrictive economic interests. The tension is resolved, and policy changes occur when there is a certain combination of internal forces and pressure from outside, which change the balance in the internal compromise by adding weight to the previous minority view in the internal debate.

Income inequality has become an inevitable topic in every country regardless of its level of economic development.However, the increase of wealth with the outpouring of globalization has put a particular emphasis on the income inequality, especially for countries that were characterized as transition economies.Thus, the purpose of this study is to investigate the economic determinants of income inequality of Central and Eastern European countries (CEEC).The research methodology consists of panel regression analysis based on Least Squares Dummy Variable (LSDV) model.By adding the dummy for each country, we are estimating the pure effect of economic indicators (by controlling for the unobserved heterogeneity) on Gini index.Each dummy is absorbing the effects particular to each country.The dataset covers an unbalanced panel of 18 countries.The empirical results reveal that income inequality of CEE countries primarily depends on main macroeconomic indicators such that GDP per capita, unemployment rate, and inflation as well as general government consumption expenditures, current account balance, real interest rate and the population growth rate.

Central and Eastern European (CEE) countries have ratified the United Nations Convention on the Rights of Persons with Disability, necessitating adjustments in tax and benefit policies. However, the eventual outcome of these modifications remains uncertain. To evaluate possible changes, we conducted a comparative analysis of current instruments in CEE countries vis-a-vis Sweden, Denmark, and Finland. Our research discovered that tax and benefit systems in both CEE and Scandinavian countries are built on the same foundational principles, yet differ significantly in their specific solutions and approaches. Notably, benefits systems in CEE countries are considerably more intricate and inclined toward means-tested benefits and specialized instruments dedicated solely to individuals with disabilities. We posit that changes arising from the convention’s implementation will streamline the benefits system, incorporating more generalized instruments with disability added as supplementary eligibility conditions or income parameters. The velocity of this transformation will be influenced by the pace of economic growth, as evidenced by the strong positive correlation between disability expenditure’s proportion in gross domestic product and the European Union countries’ level of economic development. JEL classification D61, H51, O52

The Structural Relationship Between Current and Capital Account Balance in India: A Time Series Analysis

We examine the evolution of the net external asset positions of Central and Eastern Europe (CEEC) countries over the past decade, with a strong emphasis on the composition of their international balance sheets. We assess the extent of their international financial integration, compared with the advanced economies and other emerging markets, and highlight the salient features of their external capital structure in terms of the relative importance of FDI, portfolio equity, and external debt. In addition, we briefly describe the country and currency composition of their external liabilities. Finally, we explore the implications of the accumulated stock of external liabilities for future trade and current account balances.

BackgroundAccording to the conventional point of view, compulsory health insurance (CHI) models in the Central and Eastern European (CEE) countries are classified as Social Health Insurance (SHI) schemes. However, the absolute dominance of the state in their regulation in many CEE countries calls into question such a qualification. The existing approaches to the definition of SHI are insufficient to clearly distinguish existing CHI models from government health financing schemes as well as to identify their exact similarities and differences with SHI models in Western Europe (WE).MethodsThe new conceptual framework is used to compare the similarities and differences between the SHI models in CEE and WE countries. The characteristics of financial flows regulation are considered to distinguish SHI from government healthcare financing schemes. Different CHI models are compared by using three different types of regulation (state, societal, market) of the three main functions of health financing system (collection, pooling, purchasing), and by types of financing agents. A qualitative, cross-country analysis is implemented with use the data from the WHO Health system reviews Health Systems in Transition.ResultsIn almost all countries considered, state regulation is dominant in the implementation of collection and pooling functions. A variety of combinations of state, societal, and market regulation is observed in the purchasing of medical services. State regulation dominates in most CEE countries, societal regulation dominates in some of them and in almost all WE countries. In most CEE countries and in some WE countries state regulation of purchasing is complemented by market regulation. Based on these characteristics, four types of SHI models are identified (State, Etatist, Bismarckian, and Quasi-Market).ConclusionThe dominance of state regulation in the CHI models in almost all CEE countries is not a sufficient reason to qualify these models as hybrid financing systems. They retain fundamental differences from government financing schemes: the systems of financial flows are separated from state budgets and operate according to the rules set specifically for these systems.

The starting point of this study is the argument that not only rankings of higher education institutions (HEIs) are inescapable, but so is the constant criticism to which they are subjected. Against this background, the paper discusses how HEIs from Central and Eastern Europe countries (CEECs) are (non)represented in the main global university rankings. The analysis adopts two perspectives: 1) From the point of view of higher education in CEECs – what are the specificity, basic problems and perspectives of higher education in CEECs as seen through the prism of the global ranking systems? 2) From the point of view of the ranking systems – what strengths and weaknesses of the global ranking systems can be identified through the prism of higher education in CEECs? The study shows that most of the HEIs from CEECs remain invisible in the international and European academic world and tries to identify the main reasons for their (non)appearance in global rankings. It is argued that although global rankings are an important instrument for measuring and comparing the achievements of HEIs by certain indicators, they are only one of the mechanisms – and not a perfect one – for assessing the quality of higher education.

Economic growth and capital flow in European countries in pre and post-crisis periods

Nigeria is a mono-economy that depends largely on the revenue from crude oil exports and the country’s economic policies revolve around the revenue generated from oil. However, despite the increased revenue the country generates from crude oil export, the level of development is still inadequate and Nigeria still continues to experience deficits in its current account balance. This study investigates the effect of oil price and exchange rate on current account balance in Nigeria using annual time series data for the periods 1986 to 2016. Assessment of the properties of the data suggests Vector Error Correction Model (VECM) as an appropriate method of analysis. The study revealed the presence of a long-run relationship between the variables. The study also revealed that depreciation in the real exchange rate would lead to improvement in the country’s current account balance, while a shock in oil price would produce a positive response in the current account balance of the country. This implies that a rise in oil price will lead to improvement in the country’s current account balance. In addition, the study also shows that oil price accounts for the major variation in the country’s current account balance. The policy implication of the result from this study is that proactive management of the exchange rate policy following anticipated movement in current account balance can help stabilize the exchange rate. Hence, Nigeria’s best policy option to stabilize the exchange rate and other economic indices is to improve the current account position by diversifying the economy from oil and promoting non-oil exports. Finally, a systematic reduction in propensity to consume foreign imports that could otherwise be produced locally should be aggressively pursued using fiscal and legislative instruments. This will ensure that the gain from increase in oil price is not lost due to disproportionate demand in foreign exchange to support a high import consumption pattern.

Governance Territoriale Comunitaria e Sistemi di Pianificazione. Riflessioni sull'Allargamento ad Est dell'Unione Europea