Review of World Economics

Nardis, Sergio; Goglio, Alessandro; Malgarini, Marco

doi: 10.1007/BF02707804pmid: N/A

Regional Specialization and Shocks in Europe: Some Evidence from Regional Data. —The authors address the issue of the European Monetary Union (EMU), focusing on a comparison between EC countries and EC regions. They identify a number of homogeneous economic regions and show that in the period 1978–1989 asymmetric shocks in Europe have been regional rather than national. This derives from the fact that regional specialization in Europe is strongly diversified. They argue that cross-border regional diversification can cushion the net effects of differentiated sectoral shocks, reducing national instability. In addition, the costs of EMU associated with the loss of the exchange rate are likely to be smaller than usually thought.

Monticelli, Carlo

doi: 10.1007/BF02707805pmid: N/A

EU-Wide Money and Cross-Border Holdings. —The paper explores the economic properties of several measures of EU-wide money that include different definitions of cross-border holdings (CBHs). ‘Very broad’ aggregates are poorly linked with EU-wide income and price developments; in contrast, the demand for aggregates which is ‘focused on the European Union’ (which hinge on the inclusion of CBHs denominated in EU currencies and/or kept within the EU) is shown to be stable and predictable. Although aggregates extended to include CBHs do not yet outperform the traditional measure of broad money, they are likely to become an increasingly important tool for monetary analysis at the EU level.

Dewachter, Hans

doi: 10.1007/BF02707806pmid: N/A

Modelling Interest Rate Volatility: Regime Switches and Level Links.— This paper presents a model encompassing the Markov switching model and the model based on a volatility-level link. This encompassing model allows to test these competing classes of volatility models against each other. If is found that both classes capture essential but different features of the interest rate volatility process. A volatility model incorporating both features, i.e., regime switches and level links, clearly outperforms both alternatives. The consequences of this finding, both for volatility prediction and for the selection of the more appropriate theoretical (continuous time) interest rate model, are discussed.

Arnon, Arie; Spivak, Avia

doi: 10.1007/BF02707807pmid: N/A

Monetary Integration between the Israeli, Jordanian and Palestinian Economies. —The peace process between Israel and the Palestinians raises some interesting economic questions concerning integration between the West Bank, Gaza and Israel. Past and current arrangements between Israel, the occupied territories and Jordan are described, especially the flows of goods and labour. The authors’ findings indicate that Israel, the West Bank and Gaza were closely integrated, whereas economic integration between the occupied territories and Jordan was much weaker. Based on these circumstances of the past, the (imposed) monetary union between Israel and the Palestinian economy was warranted. However, optimal monetary arrangements in the future will depend on the extent of changes in real flows and on a satisfactory settlement of the seigniorage issue.

Gross, Dominique; Schmitt, Nicolas

doi: 10.1007/BF02707808pmid: N/A

Exchange Rate Pass-Through and Rivalry in the Swiss Automobile Market. —This paper investigates the pricing rivalry among foreign automobile producers in the Swiss market. The main results from the dynamic analysis of two categories of automobiles between 1977 and 1991 are: First, the degree of exchange rate pass-through differs among source-countries despite the absence of quantitative restrictions on imports and of domestic production facilities. However, for some countries, pricing strategies show remarkable consistency across product categories and time spans. Second, the degree of exchange rate pass-through is low, especially in the market for small-size automobiles. Third, this low degree of pass-through may be attributed to a low degree of competition among foreign sellers.

Svensson, Roger

doi: 10.1007/BF02707809pmid: N/A

Effects of Overseas Production on Home Country Exports: Evidence Based on Swedish Multinationals. —Using unique data on Swedish multinationals 1974–1990, the impacts of overseas production on parent exports are analyzed. Two methodological applications are introduced: (i) In order to avoid sample selection bias, the model includes also countries to which the firm exports, but has not established any affiliates; (ii) the effect of affiliate exports to “third countries” is incorporated. The results suggest that increased foreign production both replaces exports of finished goods and attracts intermediate goods from the parent. In contrast to previous studies, the net effect is negative, albeit significant only in the case of affiliate exports in the EC.

Weber, René; Straubhaar, Thomas

doi: 10.1007/BF02707810pmid: 12292869

Immigration and the Public Transfer System: Some Empirical Evidence for Switzerland. —The paper deals with the distributional effects of immigration into Switzerland. The cross-section analysis for 1990 shows that the presence of resident foreigners has not put additional strain on the public purse. On the contrary, there was a favourable financial effect for the native population. The analysis reveals how important the age and qualification of the household head and the number of children in the household are. By including both monetary and real public transfer payments a compre-hensive account of the budget effects of immigration is given.

Welsch, Heinz

doi: 10.1007/BF02707811pmid: N/A

The Carbon Tax Game: Differential Tax Recycling in a Two-Region General Equilibrium Model of the European Community. —This paper examines how the impact of an EC-wide carbon/energy tax on the economic performance of one country is influenced by the way in which the tax is recycled in that particular country and in other countries. The paper utilizes a computable general equilibrium model of (West)Germany and the rest of the EC to analyze any pair-wise combination of four different ways of revenue recycling. A key finding is that the exports of Germany are strongly influenced by the recycling behavior of the rest of EC, and vice versa. These impacts carry over to the different sectors of the economy, depending on their exposure to international competition.

Rajan, Ramkishen

doi: 10.1007/BF02707812pmid: N/A

Mátyás, László; Kőrösi, Gábor

doi: 10.1007/BF02707813pmid: N/A

We are deeply convinced that econometric and other statistical methods are essential tools of empirical economic analysis. However, they are useful only if applied properly. There is an overwhelming evidence that Zhen Quan Wang and Nigel J. Swain failed to do so in their referred article. All these problems of the empirical analysis suggest that the claims made by the paper are not supported by the data and the estimated models and can (and should) be considered as the results of pure speculation.