Focus on European Economic Integration Q3/19

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• Focus on European Economic Integration Q3/19 (PDF, 1,9 MB) August 2019

Studien und Analysen

• Call for applications: Klaus Liebscher Economic Research Scholarship (PDF, 51 kB) en 29.08.2019, 00:00:00

• Introductory remarks – 30 years of transition: united in diversity (PDF, 57 kB) Nowotny. en 29.08.2019, 00:00:00

• A tribute to 30 years of transition in CESEE (PDF, 825 kB) Backé, Korhonen, Ritzberger-Grünwald, Solanko. We provide a selective review of transition and transformation in Central, Eastern and Southeastern Europe (CESEE), with a focus on issues particularly relevant from a central banking point of view. In doing so, we examine transformation strategies, compare transition experiences across CESEE and shed light on public perceptions of transition outcomes. We point out the EU’s role as an important anchor in the process. We cover cyclical swings in CESEE, in particular the boom-bust experience before and during the financial crisis. Moreover, we reflect on the eastward enlargement of the euro area, as it has included a number of CESEE EU Member States. Furthermore, we review the core areas of the research and analysis on CESEE carried out by the Bank of Finland Institute for Economies in Transition (BOFIT) and the Oesterreichische Nationalbank (OeNB) as well as their cooperation in CESEE-related activities. en CESEE, transition, economic development, central banking E50, F63, N14, O52, P20 29.08.2019, 00:00:00

• 30 years of East-West integration in Europe: reflections on what we have learned and on challenges ahead (PDF, 176 kB) Landesmann. This paper gives an overview of lessons learned from 30 years of experience of East-West integration in Europe. It covers issues related to the economics of transition of the Central, Eastern and Southeastern European (CESEE) economies after 1989, the relatively fast processes of institutional and economic catching-up, trade and production integration and the role of foreign direct investment (FDI). It also analyzes difficult labor market adjustments linked to structural change and changing skill demands, the strong forces leading to regional economic agglomeration and the recurrent difficulties in a range of economies in dealing with macroeconomic, particularly current account, imbalances. Finally, this contribution discusses the issues of reform reversals and political regression taking place in some CESEE countries and the political-economic analysis necessary to deal with these phenomena. en East-West integration in Europe, Central, Eastern and Southeastern Europe, CESEE, transition experience, Eastern enlargement, trade integration, external imbalances F02, F15, F43, F55, N14, P51 29.08.2019, 00:00:00

• The price of unity: the transformation of Germany and Eastern Europe after 1989 (PDF, 201 kB) Ther. This article adopts a comparative perspective and focuses on the economic reforms that were implemented in Germany and Eastern Europe during and after German unification in 1990. After the collapse of communism, most politicians and economists considered neoliberal reforms based on deregulation, liberalization and privatization as the only viable model. Although the reforms in eastern Germany were not labeled as such, they amounted to a “shock therapy,” much like in neighboring Poland. Radical privatization and hasty liberalization, in combination with monetary union coming into force in July 1990, resulted in the closure of many enterprises and mass unemployment. The German government tried to compensate the “losers of transformation” with welfare payments, but this resulted in a systemic crisis of united Germany that eventually led to a second round of neoliberal reforms under Federal Chancellor Gerhard Schröder’s center-left coalition government from 2001 to 2005. The widening social gaps and the fear of social dislocation have contributed to the rise of right-wing populist parties both in Germany and in East Central European countries like Poland. en transformation, neoliberalism, postcommunist reforms, shock therapy, populism, German unification F63, N14, O52, P20 29.08.2019, 00:00:00

• The impact of housing markets on banks’ risk-taking behavior: evidence from CESEE (PDF, 489 kB) Dushku, Hildebrandt, Suljoti. This study empirically evaluates the impact of housing market dynamics and banks’ housing market exposure on banking sector stability in Central, Eastern and Southeastern Europe (CESEE). We investigate whether there are differences between the behavior of banks located in CESEE EU Member States and the behavior of banks located in the Western Balkans. We find evidence that banks’ exposure to the housing market has a significant positive impact on bank stability in both groups of countries. Furthermore, for real estate banks in CESEE EU Member States, we find that house price dynamics are positively correlated with bank stability. This outcome may possibly be related to the fact that real estate banks in these countries have better housing market expertise and, moreover, to the generally more advanced institutional environment. At the same time, we find a negative relationship between house price dynamics and bank stability for real estate banks in the Western Balkans, which might reflect the less advanced stage of institutional development in the region. de bank risk, housing markets, housing loans, CESEE G21, R39, O52, C23 29.08.2019, 00:00:00

• The use of euro cash in CESEE and the role of euro adoption expectations (PDF, 516 kB) Scheiber. This short study presents data on the use of euro cash as a safe haven asset or as a means of payment over the last decade. We contrast these selected key indicators using OeNB Euro Survey data with the main literature findings on the determinants of currency substitution in Central, Eastern and Southeastern Europe (CESEE). According to these key indicators, euro cash holdings are currently widespread in Albania, Croatia, the Czech Republic, North and Serbia. Due to overall declining euro cash amounts in the region, the extent of currency substitution continues its long-term downward trend in all CESEE countries. However, we still see a medium to high level of currency substitution in Croatia, North Macedonia and Serbia. Apparently, the determinants of euroization that have been identified in former research are still at work; this finding rests on the new data points of the key indicators presented here with respect to euroization and CESEE respondents’ preferences for saving in cash or for saving in foreign currency as well as their habit of making certain payments in euro. Finally, we address the question whether EU integration prospects have an impact on people’s propensity to hold euro cash. The simple empirical analysis presented here finds a positive and
  significant influence of expected euro adoption on the likelihood that individuals hold euro cash. However, such expectations do not seem to affect the amounts of euro cash held. en euroization, currency substitution, expected euro adoption, microdata, CESEE D14, E41, O16, O52 29.08.2019, 00:00:00

• The OeNB’s 84th East Jour Fixe Long- run economic growth and development in CESEE: goals, priorities and implementation strategies (PDF, 85 kB) en 29.08.2019, 00:00:00