Focus on European Economic Integration Q1/13

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• Focus on European Economic Integration Q1/13 (PDF, 1.4 MB) March 2013.

Studies and Analyses

• Call for Entries (PDF, 874 kB) en Mar 31, 2013, 12:00:00 AM

• Call for Applications (PDF, 317 kB) en Mar 31, 2013, 12:00:00 AM

• How Important Is Total Factor Productivity for Growth in Central, Eastern and Southeastern European Countries? (PDF, 1.2 MB) Benkovskis, Fadejeva, Wörz. Konstantins Benkovskis, Ludmila Fadejeva, Robert Stehrer, Julia Wörz – Focus on European Economic Integration Q1/13 The evolution of total factor productivity (TFP) is a key determinant of long-run economic growth of a country. In this paper we analyze the contributions from technological change at the industry level to an economy’s aggregate growth performance. Our derivation of economywide TFP growth entails three major improvements over the traditional Solow residual approach: First, we allow for non-constant returns to scale as well as changes in the utilization of input factors in our estimation of industry TFP growth. Second, we use a novel approach to aggregate TFP from the industry level to the macro level, which incorporates both direct and indirect effects through intermediate linkages within an economy. Third, we take account of open economy characteristics by assigning an explicit role to terms of trade shocks. Our calculations for the sample of ten Central, Eastern and Southeastern European EU member countries over the time period 1995–2009 are based on the newly available World Input- Output Database (WIOD). en Total factor productivity, terms of trade, utilization, input-output table, Central, Eastern and Southeastern Europe C23, D24, E23, O47 Mar 31, 2013, 12:00:00 AM

• Nonperforming Loans in Western Europe – A Selective Comparison of Countries and National Definitions (PDF, 1.4 MB) Barisitz. Stephan Barisitz – Focus on European Economic Integration Q1/13 As a follow-up study to the author’s previous paper on “Nonperforming Loans in CESEE – What Do They Comprise?”, the present contribution focuses on the definitions of nonperforming loans (NPLs) in a number of Western European nations – Austria, Finland, France, Germany, Ireland, Italy, Portugal, Spain and the United Kingdom. Supervisors or at least general practice in the majority of Western European countries seem to endorse the rule that for a loan to be nonperforming, at least one of two (primary) elements has to be present: (1) principal or interest 90 days or more overdue, and (2) existence of underlying well-defined weaknesses of loan or borrower. However, there are also other (secondary) elements that have an impact on NPL measurement and the comparability of definitions: the question whether a restructured loan is classified as NPL or not, whether the presence of a collateral or guarantee influences loan classification or not, whether the full outstanding value or only part of a loan is reported as nonperforming, and whether a bank is required to downgrade all loans to a given debtor if any of these loans are classified as impaired or not. While these elements may introduce upward or downward biases into some nations’ NPL definitions and ratios, and these would need to be further investigated, the above-outlined NPL rule appears to constitute a feasible yardstick for most of the countries mentioned above. Moreover, this definition is also in line with a draft EU ruling for a Capital Requirements Regulation (CRR). en Bank lending, EU, credit quality, credit risk, financial soundness indicators, nonperforming loans G12, G21, G32, G33 Mar 31, 2013, 12:00:00 AM

• Understanding Central Banks’ Role in Enlargement – Governance Issues (PDF, 1.2 MB) Lindner, Mihailovici. Isabella Lindner, Gabriela Mihailovici – Focus on European Economic Integration Q1/13 The EU’s enlargement policy is enshrined in the Treaty on European Union, which lays down the requirements for the accession of any European state. It is against this background that Southeastern European (SEE) national central banks (NCBs) strive to prepare for the challenges of enlargement. This paper relies on the practical experience with three EU accession support projects of the European System of Central Banks (ESCB) to draw a general EU accession road map for applicant countries on which the accession framework for an NCB should be based. During preaccession, an NCB would be well advised to develop governance to improve its decisionmaking capacity. In this paper, we have defined three forms of governance: First, good governance to ensure the fulfillment of economic, legal and institutional requirements; second, external governance for an NCB to participate in accession coordination at the national and EU level; and third, internal governance comprising operational and institutional changes inside an NCB. If NCBs do not pursue a consistent path toward good governance, they might – in the medium to long run – be affected by risks of a strategic, economic, operational and institutional nature. Thus, successful acceding NCBs make EU accession a top priority of their strategy. An NCB’s policy of coordination should be the key policy for effective central bank governance. We therefore recommend that an NCB establish an EU coordination mechanism, an EU coordinator, coordination guidelines and an EU Scenario Process to continuously implement the changes necessary for successful ESCB/EU membership. This process will be more effective if NCBs cooperate in technical projects and draw on the experience of other NCBs. en Central bank, enlargement, governance, policy of coordination E58, K0, Z18 Mar 31, 2013, 12:00:00 AM

• The Dynamics of Deposit Euroization in European Post-Transition Countries: Evidence from Threshold VAR (PDF, 1.5 MB) Tkalec. Marina Tkalec – Focus on European Economic Integration Q1/13 This paper investigates the determinants and dynamics of deposit euroization (DE) in 12 European post-transition economies based on threshold models. The results suggest that exchange rates and interest rate differentials are important for explaining DE. The results for the two countries with the highest macroeconomic and institutional credibility and flexible exchange rate regimes, the Czech Republic and Poland, suggest no evidence of threshold effects, while for other countries threshold behavior was found. The threshold VAR results indicate that depreciations have a stronger effect on DE than appreciations, while interest rate spreads widen more after home currency depreciations than after appreciations. Moreover, we found evidence that DE changes more strongly after interest rate differentials increase than after they decrease. en Deposit euroization, exchange rate, transition, threshold C32, E44, E58, F31, F41 Mar 31, 2013, 12:00:00 AM

• CESEE-Related Abstracts from Other OeNB Publications (PDF, 711 kB) en Mar 31, 2013, 12:00:00 AM

• Conference on European Economic Integration 2012: Achieving Balanced Growth in the CESEE Countries (PDF, 666 kB) Compiled by Susanne Steinacher and Katharina Steiner – Focus on European Economic Integration Q1/13 en Mar 31, 2013, 12:00:00 AM

• Olga Radzyner Award Winners 2012 (PDF, 903 kB) en Mar 31, 2013, 12:00:00 AM

• EBRD Transition Report 2012: Integration across Borders (PDF, 957 kB) Compiled by Mariya Hake – Focus on European Economic Integration Q1/13 en Mar 31, 2013, 12:00:00 AM

• 72nd East Jour Fixe: External Imbalances and Adjustment to the Crisis in CESEE (PDF, 444 kB) Compiled by Mathias Lahnsteiner and Julia Wörz – Focus on European Economic Integration Q1/13 en Mar 31, 2013, 12:00:00 AM

• Notes (PDF, 375 kB) en Mar 31, 2013, 12:00:00 AM