Law and Foreign Direct Investment. IES WORKING PAPER 4/2011

In this paper we examine the effect of law on foreign direct investment outflows with a specific interest in the relationship between international investment law and domestic private property laws. Our results indicate that FDI investor is indifferent to host country property rights, hence shareholder protection by law is not a significant determinant of FDI outflows. We argue that FDI, in contrast with other types of capital flows, can effectively mitigate the agency problem through majority ownership and control, hence reduce exposure to ex-post expropriation by the affiliate. On the other hand, FDI investor remains exposed to risk of expropriation by the host government and is strongly sensitive to the enforcement of law in the host country. In contrast with recent literature we conclude that there are no causal relationship between bilateral investment treaties and FDI.

United States-EU Economic Relations. Jean Monnet/Robert Schuman Paper Series Vol. 14 No. 6, May 2014

The United States and the countries comprising the European Union have dominated the global economy during the past seventy years. However, momentous change is underway. China will soon be the largest economy in the world, and other countries of the developing world are rapidly increasing in economic importance. Meanwhile, the European Union is experiencing slow growth and the United States is struggling with serious economic problems. This paper considers how the transatlantic economic relationship is likely to be affected by these circumstances, and how the US and the EU can best work together to facilitate smooth transitions in the global economy.

The Asian Infrastructure Investment Bank (AIIB): China’s new multilateralism and the erosion of the West. Security Policy Brief No. 63, April 2015

China will launch a new development bank for Asia later this year, called the AIIB. 58 countries worldwide have already applied to become founding members, including numerous Western nations. This policy brief argues that the AIIB constitutes an important international development, as it reflects a new geopolitical reality and marks a new turn in China’s practice of multilateralism. It also looks critically at the European uncoordinated response to the AIIB, and what it tells about Europe’s shrinking role in the world.

The grand divergence: global and European current account surpluses. Bruegel Working Paper 2015/08, 13 August 2015

Global current account imbalances widened before the 2007/2008 crisis and have narrowed since. While the post-crisis adjustment of European current account deficits was in line with global developments (though more forceful), European current account surpluses defied global trends and increased. We use panel econometric models to analyse the determinants of medium-term current account balances. Our results confirm that higher fiscal balances, higher GDP per capita, more rapidly aging populations, larger net foreign assets, larger oil rents and better legal systems increase the medium-term current account balance, while a larger growth differential and a higher old-age dependency ratio reduce it. European current account surpluses became excessive during the past twelve years according to our estimates, while they were in line with model predictions in the preceding three decades. Generally, the gap between the actual current account and its fitted value in the model has a strong predictive power for future current account changes. Excess deficits adjust more forcefully than excess surpluses. However, in the 2004-07 period, excess imbalances were amplified, which was followed by a forceful correction in 2008-15, with the exception of European surpluses.

Analysis of developments in EU capital flows in the global context. Bruegel Final study Bruegel N° 2015.2574, November 2015

Free movement of capital, which is one of the four fundamental economic freedoms of the European Union, can enhance welfare if it leads to better allocation of financial and productive resources. However, it can also be a source of vulnerability, with far-reaching spillovers. Monitoring and assessing capital flows is therefore crucial for policymakers, market participants and analysts.

Maastricht 2.0 - Proposed reform of EU sovereign debt rules. Policy Brief #2012/05

The European Union’s regulations governing sovereign debt are based on the principle of equal treatment of all member states. The recommendations we make here concerning changes in European Union sovereign-debt reduction rules take account of national particularities, but are by no means arbitrary in nature. According to the calculations we present here, such reformed regulations would do far more to promote economic growth than would be the case under the Fiscal Compact’s European debt brake. By 2030, real gains in growth will amount to more than 450 billion euros more than the outcome that would presumably be obtained under the European debt brake.

International financial regulation: A role for the Eurozone? EU Diplomacy Paper 08/2012, October 2012

The deepest financial crisis to strike the global economy since the Great Depression has unceremoniously called into question the very foundations of the Western economic model. The liberalisation of capital flows and the growing internationalisation of financial markets outpaced global regulatory and supervisory efforts. The repercussions of the financial crisis have given new dynamism to the reform of financial regulation both globally and within the European Union (EU). The Eurozone, by way of its own failings, has emerged as a stronger conceptual and legitimate entity since the onset of the crisis, but to what extent does this equate to a greater external role, in particular in the reform of international financial regulation? This paper argues that the Eurozone is currently not in a position to play an important role in the reform of international financial regulation, as it is a weak actor in the context of the EU financial architecture, which is still largely characterised by differing national regimes, a prevailing influence from the UK and fragmented external representation. The key finding from this study is that internal tensions in the EU are at the very heart of the Eurozone’s difficulties in playing a role in the reform of international financial regulation. Surmounting these tensions is a pre-requisite for the Eurozone if it is to overcome its structural weakness in international financial politics. However, the implications of such evolutions to the Eurozone, as an entity, and to European integration are far-reaching.

Ukrainian economy overshadowed by war. OSW Commentary No. 148, 08.10.2014

Ukraine’s financial results over the past few months prove that the economic crisis which has been ongoing since mid 2012 has exacerbated. According to data from the Ukrainian Ministry of Economy, Gross Domestic Product for the first six months of 2014 shrank by 3%. In the second quarter, it fell by 4.6%1 and may further be reduced by as much as 8–10% over the year as a whole. After the first six months of this year, the balance of payments deficit reached US$4.3 billion. After deflation last year, prices grew by 12%, and the hryvnia dropped to a historic low. Although a surplus was seen in Ukrainian foreign trade in goods and services, reaching over US$3 billion at the end of June, its trade volume is shrinking. The main reason behind this deteriorating situation is the actions taken by Russia. Moscow has been fomenting the conflict in Donbas since April, has consistently imposed embargoes on imports of more and more Ukrainian goods and cut gas supplies to Ukraine in June. This has forced the government to focus on the current management of state finances and to carry out budget sequestration twice this year. The government has also used this as an excuse not to implement necessary systemic reforms. The increasing share of military expenditure, the shrinking exports (-5% in the first six months), including in particular to Russia, which until recently was Ukraine’s key trade partner, and the rapid fall in industrial production and investments have all made the situation even worse. All that saves Ukraine from an economic collapse is the loan from the International Monetary Fund and higher taxes, which allows the government to maintain budget liquidity. However, if the conflict in Donbas lasts longer and if Russia continues its economic blackmail, including withholding gas supplies, the economic crisis may prove to be long-lasting.

The Russian economy under Putin: Growth factors and impediments to economic development. OSW Study 20/2005

After a dramatic economic decline after the collapse of the Soviet Union and the financial breakdown of 1998, the Russian economy has begun to emerge from its deep crisis. The years 1999-2004 were a period of dynamic development in all sectors of Russian economy, and saw a rapid growth in GDP of over 7 per cent per year. Russia owed the excellent macroeconomic results of that period to a combination of favourable factors. The key factors were: high hydrocarbon prices on the global markets; an increase in Russia's international competitiveness thanks to the "rouble devaluation effect" (following the 1998 financial crash); and the market reforms carried out within that period. In 2004, despite very high oil and gas prices on world markets, a slowdown of the GDP growth took place. Even though the economy is still developing fairly rapidly, we are able to say that Russia is exhausting those traditional mechanisms (apart from oil and gas prices) which have hitherto stimulated GDP growth. Moreover, there are no new mechanisms which could replace the old ones. In the longer term, these unsolved structural problems may seriously impede Russia's economic growth.

Changes in the political elite, economy and society of Belarus: Appearances and reality. OSW Study 30/2008

In late 2006 and early 2007, relations between Russia and Belarus were hit by the most serious crisis in many years. In a setting of heightened tension, the Belarusian authorities decided to gradually modify their economic policy and thoroughly restructure the ruling class. The new situation created new, much more difficult challenges for the Belarusian opposition. The processes initiated by the authorities were not intended to bring about either the democratisation of public and political life or full economic liberalisation; their only purpose was to enable the regime to tackle new challenges and survive in the changing international context. Nevertheless, modernisation has been initiated in Belarus' authoritarian system of power, which until now was considered to be completely incapable of reform. This puts the country's main political and economic partners, including the European Union, in a new situation.

Ukrainian economy on the verge of recession. OSW Commentary No. 96, 2012-11-21

In the third quarter of 2012, Ukraine’s economy recorded negative growth (-1.3%) for the first time since its 2009 economic crisis. Q4 GDP is projected to suffer a further decline, bringing Ukraine into formal recession. In addition to the worsening macroeconomic indicators, Ukraine is also facing a series of concomitant economic problems: a growing trade deficit, industrial decline, shrinking foreign exchange reserves, and the weakening of the hryvnia. Poor economic growth is expected to result in lower than projected budget revenues, which in turn could lead to the sequestration of the budget in December. The decline evident across the key economic indicators in the second half of 2012 brings to a close a period of relative economic stability and two years of economic growth, which had been seen as a significant personal achievement of President Viktor Yanukovych and the ruling Party of Regions. The health of the Ukrainian economy largely depends on the state of the country’s export- -oriented industries. The current economic forecasts for foreign markets are not very optimistic. It is impossible to determine whether the current economic downturn is likely to be merely temporary or whether it heralds the onset of a prolonged economic crisis. The limited capacity to deal with the growing economic problems may mean that Kiev will need to seek financial support from abroad. This is particularly significant with regard to external debt servicing, since in 2013 Ukraine will need to pay back around 9 billion USD, including over 5.5 billion USD to the International Monetary Fund. In order to overcome the recession and stabilise public finances, the government may be forced to take a series of unpopular measures, including raising the price of natural gas and utilities. These measures have been stipulated by the IMF as a condition of further financial assistance and the disbursement of the 12 billion USD stabilisation loan granted to Ukraine in July 2010. The only alternative for Western loans and economic reforms appears to be financial support from Russia. The price for Moscow’s help might however turn out to be very high, and precipitate a turn in Kiev’s foreign policy towards a gradual re-integration of former Soviet republics under Moscow-led geopolitical projects.

Afghan Opium and the EU: Fighting the War Economy through Development Cooperation. EU Diplomacy Paper No. 4, 2014

Opium is at the heart of the war economy in Afghanistan, involving a broad range of actors. It generates a sustainable violence cycle and, while international troops withdraw from the country, threatens the Afghan government’s reconstruction efforts. The European Union (EU) plays an important part in the debate on how to deal with this issue. Several counter-narcotics policies have been implemented since 2001 and have mostly failed. This paper looks at these failures and questions the European Union’s ability to help tackle the problem of opium in Afghanistan. It argues that a comprehensive development response, backed by counter-narcotics incentives, could unfasten the spiral of the war economy. It also argues that the EU has developed relevant policies based on poverty alleviation and a structural approach to the opium issue but still lacks the means for action and for donor coordination in order to significantly influence the situation.

Growing global brands in foreign markets: A brand equity perspective. Impact of national culture on trademark registrations in emerging economy: Evidence from Russia. ACES Working Papers, August 2010

In this study we explore how firms deploy intellectual property assets (trademarks) in international context and the impact of cultural characteristics on such activities. Trademarks capture important elements of firm's brand-building efforts. Using growth model, a special case of hierarchical linear model, we demonstrate that that stock of trademarks in foreign market increase future trademark activity. Also, we explore the moderating roles of two cultural dimensions, individualism and masculinity, on such relationships. The findings indicated that firms from countries closer to host market (Russia) on individualism dimension tend to register more trademarks in host market. The opposite result is observed for masculinity dimension.