Camelia TURCU

In this paper, we reconsider the role of uncertainty in explaining uncovered interest rate parity (UIP) deviations by focusing on 60 emerging and developing (EMDE) and advanced (AE) economies, over the period 1995M1–2023M3. We show that differentiating between EMDE currencies and AE currencies is crucial for understanding UIP deviations as the behaviour of excess returns differs in the two groups in periods of uncertainty: deviations become wider for EMDEs and narrow for AEs. These new results are consistent with the idea that in periods of uncertainty, global investors might change their risk preferences and move from high currency-risk investments in EMDEs towards less risky ones in AEs. This evidence holds for both the short-run and long-run UIP, and becomes stronger since the Global Financial Crisis (GFC).

In this article, we explore the effects of China’s foreign aid on its exports. To do this, we use a sample of 165 countries during the period 2000–2014 and employ a gravity model. We find that the return on Chinese exports for every dollar spent on foreign aid is from $0.156 to $0.4, at the aggregate level. The aid provided in past periods continues to promote China’s exports. We also show, while taking into account aid heterogeneity, that China experiences a higher return in terms of exports when providing development aid intended for infrastructure, to the recipients. Additionally, we find that China’s international aid helps the country to trade more with similar income-level economies. Hence, it can, to a certain extent, foster South-South trade relations.

This paper focuses on creative industries and the role played by the existing spatial distribution and agglomeration economies of these activities in relation to their entry decisions. We rely on employment and firm-level data in the creative industries (provided by INSEE) and compare the location of new establishments in the creative and non-creative industries between 2009 and 2013 in French departments (NUTS 3 regions). We use count data models and spatial econometrics to show that location determinants are rather similar in creative and non-creative industries and that specialisation in creative industries positively influences the entry of all other industries. The French case provides new insights to understand the geographical patterns of creative industries.

Abstract This paper analyzes environmental convergence and its determinants. We construct our analysis in a bilateral setting and hypothesize that, through foreign direct investment (FDI), one or more investor countries could impact the environmental performance of their hosts, leading thus to a possible environmental convergence between home and host economies. To do this, we construct an original database on bilateral FDI encompassing 128 countries for the period 2000–2012. Our results suggest that, in general, FDI does not directly impact environmental convergence, except for the case of FDI originating from major investor countries. Under specific conditions, FDI can be expected to influence environmental convergence along with other variables such as GDP per capita, industrial development, geographical proximity, or cultural and historical ties. Overall, these effects may vary depending on the type of partnership considered (North–North, North–South, South–North, and South–South).

Abstract This Special Issue (SI) gathers 13 papers presented at the 23rd INFER Annual Conference which took place in Lisbon, 8–10 September 2021, at ISEG – Lisbon School of Economics and Management. The conference was organised by INFER (International Network for Economic Research), UECE (Research Unit on Complexity and Economics), and REM (Research in Economics and Mathematics). The papers of the SI focus on key topics in international macroeconomics, revisit the fiscal policy conduct within a globalised world, investigate how uncertainty and risk affect macroeconomic policies, and analyse the links between labor market outcomes, automation, and economic integration.

We analyze the fiscal outcomes associated to the current account imbalances within Europe. We hypothesize that the effects of current account imbalances on fiscal variables within the European Union are nonlinear and that the nonlinearity is modulated by the quality of governance. We use data on 28 European Union countries from 2000 to 2019, apply a Panel Smooth Transition Regression (PSTR) approach and proxy governance by measures of corruption. We find evidence of a nonlinear relationship: the fiscal effects related to current account imbalances are differentiated among European countries. On the one hand, we find a positive elasticity of fiscal balance to current account balance when the quality of institutions is low. This suggests that in countries with high corruption, a deterioration of the current account results in a degradation of fiscal balance and an increase of debt. On the other hand, we find a negative elasticity of fiscal balance to current account balance when the quality of institutions is high. This implies that in countries with low corruption, larger current account imbalances can be related to an improved fiscal balance and a lower debt. Robustness checks comfort our findings.

Abstract In this article, we investigate how some MNEs which spread their home culture over time and space to the rest of the world are affecting, in turn, trade flows from home. By selling products embodying cultural information related to their country of origin, those MNEs embrace the role of ambassadors of their home country. We argue that IKEA offers an ideal case to identify a multinational’s culture-promotion effect on trade. We build a dataset on IKEA’s presence in foreign markets between 1995 and 2015 and merge it with disaggregated product level trade between pairs of countries. We find solid evidence of an externality linked to IKEA: a setting of an IKEA new store in a destination increases trade flows by around 2% from Sweden for products that resemble to what the multinational offers (despite being completely unrelated to that multinational). This result is driven primarily by the products identified to encompass a high-cultural content. Other robustness checks and tests seem to be very much consistent with the hypothesis of IKEA promoting the Swedish culture to the world.

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Abstract We analyze the channels through which institutional quality can impact the corruption–growth nexus. To do this, we develop an endogenous growth model and test its implications empirically, through panel data models using GMM and PSTR settings. Our sample consists of 136 developed and developing countries analyzed over the period 1984–2015. We show, both theoretically and empirically, that (i) the corruption–growth relation can be subject to nonlinearities highly influenced by countries’ institutional development; and (ii) private investment and public spending are two main channels through which institutional quality affects, positively or negatively, the relation between corruption and economic growth.

We analyze the channels through which institutional quality can impact the corruption–growth nexus. To do this, we develop an endogenous growth model and test its implications empirically, through panel data models using GMM and PSTR settings. Our sample consists of 136 developed and developing countries analyzed over the period 1984–2015. We show, both theoretically and empirically, that (i) the corruption–growth relation can be subject to nonlinearities highly influenced by countries’ institutional development; and (ii) private investment and public spending are two main channels through which institutional quality affects, positively or negatively, the relation between corruption and economic growth.

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Abstract This special issue contains a selection of six articles in the field of environmental and resource economics, which were presented in INFER workshops and supported events over the last two years. The topics include the effects of income inequality and freedom of the press on environmental stringency; the trade-environment nexus in China; the behavior of cross-country growth rates with respect to resource abundance and dependence; a stochastic frontier analysis to show that technological change is biased more towards energy rather than labor; how recycling and environmental taxes can affect the imbalances between the availability of and the demand for rare earth elements; and the interaction between demographic features and environmental constraints in Caribbean small island developing states. The papers include three empirical contributions and three methodological approaches, which help to improve our understanding of these topics.

Abstract This paper examines the impact of exports and its main determinants on the financial performance of the Romanian wine industry. We draw on a dataset consisting of mixed firm-level (i.e., 207 companies) data, Google Trends data, and regional variables covering the period from 2009 to 2017. We show that Romanian wine exports, at the firm level, are positively affected by regional wine yields (especially in the case of red wine varieties), temperature, and firm agglomeration, and negatively impacted by firm size. We also find a close positive correlation between financial performance and exports. (JEL Classifications: F61, L66, C23)

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In this paper, we show how environmental regulation affects trade in fuels. The regulation is assessed along two dimensions: one tackling the extraction and another one dealing with the use of fuels. Using a gravity model with 141 countries for the period 1998-2015, we show that regulations on the extraction of fuels have no impact on trade compared to those related to the use of these non-renewable resources. Specifically, we find that introducing Energy laws slows down fuels trade at the world level and that if importers get involved in more international environmental treaties, they will import less fuels.

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The paper analyzes the eurozone crisis through the lens of a new systemic sovereign risk measure. This measure is built on countries' budgetary constraint and the Marginal Expected Shortfall (MES) estimated through a DCC-Garch model. We use daily data on government bonds yields and quarterly macroeconomic data over the period . Our measure, applied to the sovereign debt crisis of the euro area, captures countries' expected financing requirements in times of crisis. The results underline the most systemically important countries and their contribution to a potential system's default. Specifically, Italy and Greece are highlighted as the most systemically important countries in crisis times.

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Cet article propose une mise en perspective théorique de la localisation du travail et des entreprises en lien avec la compétitivité des territoires. La localisation est ainsi analysée sous trois angles : en lien avec la mobilité de la main-d’œuvre et ceci dans une approche d’économie géographique ; à travers les choix de localisation des firmes, dans une perspective de commerce international et de localisation des multinationales ; et par rapport au développement et à la concentration des services, des technologies et des connaissances. Ces approches complémentaires nous permettent de dresser une analyse globale des dynamiques de localisation, phénomène qui sera amplement analysé par la suite dans les articles présents dans ce numéro spécial.

This paper traces the origins of the different monetary regimes adopted in Bulgaria and Romania in 1996-97 and examines their performance during the EU accession. The findings indicate that the constraints of the currency board in Bulgaria shifted economic activity towards the private sector, while the discretionary policies in Romania turned public finances into both a contributor and a response mechanism to economic imbalances. While the prospects of EU accession initially enhanced the performance of the monetary anchors, the implicit insurance of EU membership increased moral hazard and led to a rapid rise in private and public debt. The paper also explores the historical parallels between the monetary regimes of Bulgaria and Romania in 1996-97 and 1925-1940.

This paper deals with the monetary policy transmission channels of six Central European countries: CEECs - Hungary, Poland, Czech Republic, Romania, Slovakia and Slovenia - over recent periods corresponding to stable monetary regimes. We will take into account three channels - the interest rate, the exchange rate and the domestic credit - whose relative importance will be accounted for using a structural VAR model. The results show that all the countries share a weak domestic credit channel while they are highly heterogeneous with regards to the relative effectiveness of the interest rate and exchange rate channels. Thus, Hungary and Poland's distinctive feature is the presence of a price puzzle effect combined with a high influence of the exchange rate which acts both as a mechanism of monetary policy transmission and as a supply and demand shock absorber. On the contrary, just like in the case of the Euro zone countries, it is the interest rate channel that has the major influence in the case of the Czech Republic, Slovakia, Slovenia and partially Romania. Therefore, this latter group appears to be more apt to join the EMU in the near future, which can be confirmed by the Slovenian case.

This paper analyzes the evolution of the three main economic sectors - agriculture, industry and services - at the level of European countries and regions. We base our analysis on the Theil index constructed using European gross value added data for 23 EU countries and compare it to regional data for a ten-year period (from 1995 to 2004). Our results show that the most difficult challenges posed by the unequal concentration in the main sectors appear at the wider region not the country level. It will therefore be necessary to devise new regional policies that take into account these disparities.

Ce symposium est une sélection de quatre articles de recherche présentés à la conférence thématique GEBA-GDR Monnaie-Banque-Finance 2019 organisée par la Faculté d'économie et d'administration des affaires (FEAA) de l'Université "Alexandru Ioan Cuza" de Iasi (Roumanie) et soutenue par l'INFER (Réseau International Pour la Recherche Economique). Le numéro spécial est dédié à l'analyse des politiques budgétaires dans les pays post-communistes d’Europe Centrale et de l'Est pour deux raisons. Tout d'abord, parce’que la politique budgétaire a été (et est toujours) le principal outil de stabilisation après la crise financière de 2008-2009 ; et, aussi, car, par rapport aux autres unions économiques et monétaires, l’Union européenne est un espace économique particulier.

The paper investigates the interaction between the trade and business cycle synchronization, using an extended wavelet approach. The analysis is conducted in several Eurozone countries, for the period 1960Q1-2016Q2. We show that the trade promotes economic synchronization in the considered Eurozone countries, on medium and long terms. The key ingredients are economic integration and monetary union. A reversed connection is also distinguished. On medium and long terms, a low degree of synchronization accelerates trade only if the given country has an ascending growth trend. Several different scenarios are found on short term, for particular economic contexts.

This paper analyzes the impact of exchange rate variability on the economic specialization of European countries. Two theoretical approaches are used: the first one, advanced by Krugman (1991), underlines that the monetary integration is favouring the specialization of countries members of an integrated area while the second one, supported by Ricci (1997), considers that the exchange rate variability is the one that is enhancing countries specialization. In line with these two theoretical dimensions, we conduct empirical estimations on the EU countries (1993-2008) using two different measures of specialization. The results give a mixed picture: the link between specialization and exchange rate regimes is found to be significant but its sign differs according to the sectors desegregation. In order to conciliate these results with the two challenging theoretical settings, we propose an explanation based on the difference between inter-industry and intra-industry specialization.

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