How did Targeted Government Trade Policies Impact the Productivity of Manufacturing Firms in Eastern Europe and Central Asia between 1995 and 2009? ACES Working Papers, 28 August 2012

This study investigates whether trade-related, targeted, government policies had an impact on the total factor productivity (TFP) of manufacturing firms in Eastern Europe and Central Asia (ECA region) between 1995 and 2009. It does so by looking at how different types of primarily industry-specific trade policies (or their combinations) impacted firm productivity. The dependent variable is firm total factor productivity (TFP), calculated using the Levinsohn-Petrin approach. As an alternative measure of firm productivity, this study uses labor productivity. This study finds that, in most instances (10 out of 14 times), targeted policies do not show a significant impact on manufacturing firms’ TFP. Based on the analysis of 588 manufacturing firms in the ECA region, this study finds that, contrary to proponents of targeted policies, targeted trade-related government policies have a limited impact on the total factor productivity (TFP) in developing countries.

The European Central Bank in the age of banking union. Bruegel Policy Contribution 2013/13, 1 October 2013

During the crisis the European Central Bank’s roles have been greatly extended beyond its price stability mandate. In addition to the primary objective of price stability and the secondary objective of supporting EU economic policies, we identify ten new tasks related to monetary policy and financial stability. We argue that there are three main constraints on monetary policy: fiscal dominance, financial repercussions and regional divergences. By assessing the ECB’s tasks in light of these constraints, we highlight a number of synergies between these tasks and the ECB’s primary mandate of price stability. But we highlight major conflicts of interest related to the ECB’s participation in financial assistance programmes. We also underline that the ECB’s government bond purchasing programmes have introduced the concept of ‘monetary policy under conditionality’, which involves major dilemmas. A solution would be a major change towards a US-style system, in which state public debts are small, there are no federal bail-outs for states, the central bank does not purchase state debt and banks do not hold state debt. Such a change is unrealistic in the foreseeable future.

Holes in the skies over NATO's Central European member states. OSW Commentary No. 119, 22.10.2013

Over the past few months, four Central European states have made decisions which will determine the shape of their air forces over the next decade. On 11 October, Romania signed a contract under which it will buy twelve used US F-16A/B multi-role fighter aircraft from Portugal. In August, Slovakia signed contracts with Russia’s MiG for repairs and the limited modernisation of its twelve MiG-29 fighter aircraft currently in service. The Czech Republic entered into a preliminary agreement in July with Sweden on extending the lease of fourteen JAS-39 Gripen multi-role fighter aircraft (the new Czech government will hammer out the details following the parliamentary election). Bulgaria, which has been facing financial problems and political instability, in June postponed the purchase of new (non-Soviet) combat aircraft at least until the end of this year. If Sofia decides to buy any within the next few years, these will be not more than twelve relatively old and worn-out machines (most likely F-16A/B from Portuguese or Dutch army surplus). Given the fact that Hungary in 2012 made the same decision regarding its fourteen Gripen aircraft as the Czech Republic, there are good grounds to claim that the capabilities Central European NATO member states have to take action in airspace are durably limited. The region’s saturation with combat aircraft is the lowest when compared to the entire continent (with the exception of the Baltic states). Furthermore, the machines to be used in the coming decade will be the oldest and the least advanced technologically (all of them belong to the so-called “fourth generation”, the roots of which date back to the 1970s). The problem with gaining full interoperability within NATO has not been resolved in its Central European member states. By modernising its MiG-29 aircraft, Slovakia is to say the least postponing the achievement of interoperability once again. Bulgaria will gain interoperability by buying any Western combat aircraft. However, it is very unlikely to introduce new machines into service earlier than at the end of the present decade. Since the introduction of new fifth generation multi-role combat aircraft or transitional 4+ generation machines in the region’s air forces is unrealistic, the defence of the airspace of NATO member states in Central Europe can be termed an ever more porous sky.

Can Policy Make Us Happier? Individual characteristics socioeconomic factors, and life satisfaction in Central and Eastern Europe. Bruges European Economic Research (BEER) Papers 22/November 2011

In the last decade, Central and Eastern European (CEE) countries have witnessed a rapid economic convergence vis-à-vis Western Europe. However, this rapid growth has not been matched by a similarly rapid increase in life satisfaction, which has remained low in the European context. This paper sets out to address this conundrum, by looking at the individual and macro-level determinants of individual life satisfaction in ten CEE countries. The results highlight that while Central and Eastern Europeans share the same individual determinants of happiness as people in the West (despite some significant cross-country variation), macroeconomic and institutional differences are the key factors behind the lack of convergence in life satisfaction. On the macroeconomic side, GDP growth is still a source of increasing well-being, but the happiness bonus associated with it is becoming smaller. The different levels of individual happiness in CEE are therefore mostly determined by institutional factors such as corruption, government spending and decentralisation, making policies aimed at enhancing institutional quality capable of bringing about substantial improvements in the overall life satisfaction of the people in the region.