ABSTRACT We examine the long-run relationship between fiscal policy and income inequality in Central and Eastern European (CEE) economies using second-generation heterogeneous panel estimators (Common Correlated Effects Mean Group (CCEMG) and Augmented Mean Group (AMG)). Greater tax effort and higher social expenditure are systematically associated with lower inequality, whereas the distributive reach of direct taxation is comparatively weak. Taken together, the results indicate that equity gains in post-transition settings are more strongly associated with effective revenue mobilization and the scale of social spending than on the structure of the tax system. Policy priorities therefore lie in strengthening fiscal capacity and ensuring stable and well-financed social outlays.

ABSTRACT This paper aims to quantify the impact of the policies established by IFRS (International Financial Reporting Standards) 9 regarding the recognition and measurement of financial instruments and derivatives on the sustainability and financial performance of Romanian credit institutions. The results show a positive significant impact on performance when the evaluation is made at fair value through profit and loss and a negative one when is made through elements of other comprehensive income. While the expected credit loss policy is essential to underpin prudential policy, it also brought some financial instability for the sampled institutions.

ABSTRACT State socialism failed due to its inner contradictions. We compare the two economies that existed in parallel in the two Germanies to shed light on the successes and failures of the socialist system of innovation until its collapse in 1989. Based on newly created indicators from archival data, we show that investments in R&D-intensive industries were much larger in comparison to economic performance in the last decades of the German Democratic Republic than in the Federal Republic of Germany. These achievements, however, could not be fully realized through economic growth due to obstacles related to research priorities, innovation incentives, and knowledge flow.

ABSTRACT The paper examines factors behind the expansion of overeducation incidence among tertiary educated workers in Poland, which grew by up to 8 percentage points from 2006–2020. It is one of the first attempts in the literature to explain changes in overeducation incidence using age, cohort, and period effects simultaneously. The study finds a strong upward cohort shift in the overeducation risk for workers born after 1970. It suggests that the overeducation expansion in Poland is a cohort-driven phenomenon and it affects more profoundly individuals who received their tertiary education after the collapse of communism.

ABSTRACT This paper applies a novel time series-based additive nonparametric quantile regression technique to stress test the credit risk of conventional and participation banks in Turkey. We particularly examine the effects of the exchange rate, unemployment rate, the policy interest rate, and the public debt-to-GDP ratio on the non-performing loan ratio (NPL) of Turkish banks at distinct quantile levels. We find that their effects are heterogeneous and significantly vary across different types of banks and quantiles. Overall, participation banks are more vulnerable to negative scenarios associated with the exchange rate, unemployment rate, and public debt ratio than conventional banks.

ABSTRACT Utilizing survey data collected over three rounds, this paper investigates the impact of pre-COVID innovation performance, innovation type, sources of knowledge, and the moderating role of financial constraints on survival following the outbreak of COVID-19. The findings pinpoint a strong and positive link between firm survival and innovation, especially process innovation, confirming the ability of innovators to adapt to new conditions as a determinant of survival. Moreover, relying on internal knowledge is found to increase the chance of survival and adaptability to times of crisis. The results further indicate that access to finance strengthens the positive impact of innovation on firm survival/adaptation.

ABSTRACT This paper investigates the driving forces of shadow banking in 27 EU Member States, using annual data for 1999–2020. To account for heterogeneity, the panel is split into two sub-groups labeled “old” Europe and Eastern Europe. The estimations provide evidence that bank assets, insurance corporation assets, interest rate spreads, and regulatory quality significantly determine shadow banking growth. Financial development also has a considerable influence. The strong link between shadow banking entities and insurance corporations highlights the need to create a framework to test the interconnectedness of financial institutions at the EU level.

ABSTRACT Using new data from the World Bank Group’s COVID-19 Impact Follow-up Enterprise Surveys completed in 39 countries, we find that a firm’s pre-pandemic financial condition is an important predictor of employment but only at the onset of the pandemic. Second, firms with teleworking arrangements, furloughed workers, and temporarily closed or reporting a decreased demand for products/services are more likely to reduce their workforce at extensive and intensive margins. We also found a clear effect of gender on employment. Firms with a majority of female workers are more likely to reduce their workforce than firms with a majority of male workers.

ABSTRACT This study provides an empirical assessment of the impacts of Armenia’s accession to the Eurasian Economic Union on consumer welfare. Specifically, it combines primary individual-level expenditure survey data with the recent advances in consumer theory to examine the welfare consequences of rising prices of a broad range of widely consumed dairy products. The choice of the dairy category reflects its importance in the structure of the modern Armenian diet, with its respective nutritional and financial implications. Our findings shed light on the disproportionate effects of the EAEU-induced dairy price surge in Armenia and may prove useful in designing information-based alleviation policies.

ABSTRACT This study investigates the drivers of the shadow economy within the Baltic region, emphasizing the role of financial development, a missing feature from the extant literature. To this end, we analyzed an annual dataset covering the 2009–2019 period for Estonia, Latvia, and Lithuania using panel ARDL and obtained Pooled Mean Group (PMG) estimates. Empirical findings indicate that a rise in the tax burden, further financial development, and institutional development results in the expansion of the shadow economy. However, the establishment of the rule of law and political stability contribute to the contraction of the shadow economy.