Focus on European Economic Integration Q3/12

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• Focus on European Economic Integration Q3/12 (PDF, 2,8 MB) September 2013.

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• Olga Radzyner Award 2012 for Scientific Work on European Economic Integration (PDF, 2,1 MB) en 30.09.2013, 00:00:00

• Visiting Research Program (PDF, 2,1 MB) en 30.09.2013, 00:00:00

• The Impact of Country Risk Ratings and of the Status of EU Integration on FDI Inflows in CESEE Countries (PDF, 2,2 MB) Walch, Wörz. Walch, Wörz – Focus on European Economic Integration Q3/12 We analyze the determinants of foreign direct investment (FDI) inflows in the ten EU Member States, plus Croatia, in Central, Eastern and Southeastern Europe (CESEE) over the period from 1995 to 2011, with a particular focus on the effects of country risk ratings and the EU integration status on a country’s attractiveness for FDI. We distinguish between twelve different risk ratings and seven stages of integration (non-EU country, potential candidate country, candidate country, negotiating country, EU Member State, ERM II member country and euro area country). Using quarterly data, we identify the market size and cost factors as the most important determinants, suggesting that market- and efficiency-seeking FDI were the most prevalent forms of FDI in the region. The host country’s infrastructural environment also has the expected positive effect on FDI inflows. The effects of risk ratings turn out to be nonlinear in the sense that improvements in intermediate risk levels have the largest positive effect on FDI, while this effect diminishes in the case of upgrades at the highest levels. Turning to the status of EU integration, a more advanced stage represents an additional bonus over pure cost- and market-related factors, but only up to the onset of the global financial and economic crisis. en Foreign direct investment, European integration, country risk ratings C33, F15, F21 30.09.2013, 00:00:00

• Non-Price Competitiveness Gains of Central, Eastern and Southeastern European Countries in the EU Market (PDF, 3 MB) Benkovskis, Wörz. Benkovskis, Wörz – Focus on European Economic Integration Q3/12 We propose an export price indicator adjusted for non-price factors as a more meaningful measure of a country’s competitiveness than traditional indicators. Our starting point is the approach developed by Broda and Weinstein (2006), who adjust price developments for changes in varieties of imported products. We relax their assumption of unchanged quality over time and use the proposed index to analyze the momentum of export prices of the ten CESEE EU members which acceded in 2004 and 2007. The index is calculated using data from Eurostat Comext at the highly disaggregated eight-digit CN product level. Our analysis spans the time period 1999 to 2011, thus including the recent global recession period in 2009. The results show that all CESEE-10 countries experienced a loss in price competitiveness, but that the loss was much smaller than is usually suggested by traditional CPI- or ULC-based real effective exchange rate measures. Although relative export prices (unit values) increased more strongly in the CESEE-10 countries as compared to their competitors, the average quality of their goods increased even more strongly, thus fully compensating for the rise in prices. These improvements in non-price competitiveness were pronounced in all CESEE-10 countries. en Non-price competitiveness, quality, relative export price, new EU Member States C43, F12, F14, L15 30.09.2013, 00:00:00 O

• Banking Sector Concentration and Firm Indebtedness: Evidence from Central and Eastern Europe (PDF, 2,7 MB) Hake. Hake – Focus on European Economic Integration Q3/12 Using data from the Amadeus firm-level database, this paper explores the impact of banking sector concentration on corporate debt in the manufacturing sectors in eight Central, Eastern and Southeastern European (CESEE) countries in the precrisis period 2002–2007. Our findings indicate that banking sector concentration has a positive effect, raising firm debt. This confirms the predictions of the relationship lending theory. However, in the CESEE countries with the most concentrated banking markets – such as Estonia and Lithuania – the effect on the corporate leverage ratio is found to be negative. We also show that young firms increase their leverage, while mature firms reduce their dependence on external financing when banking markets are more concentrated. Furthermore, the positive impact of banking sector concentration is weakened by EU accession and greater stock market capitalization, which can be explained by the financial deepening process and the improved availability of alternative sources of external finance. en Firm leverage, banking sector concentration, Central, Eastern and Southeastern Europe, firm-level data G21, G32, O52 30.09.2013, 00:00:00

• CESEE-Related Abstracts from Other OeNB Publications (PDF, 2,1 MB) en 30.09.2013, 00:00:00

• 71st East Jour Fixe – Slovenia: The First Five Years in Monetary Union (PDF, 2,2 MB) Urvová. Urvova – Focus on European Economic Integration Q3/12 en 30.09.2013, 00:00:00

• Notes (PDF, 1,7 MB) en 30.09.2013, 00:00:00