An aided economy: the characteristics of the Transnistrian economic model. OSW Commentary No. 108, 2013-05-14

The economy of breakaway Transnistria is a peculiar combination of the command-and-distribution model inherited from the USSR with elements of a free-market economy which is heavily dependent on Russian energy and financial subsidies. The main pillars of the region’s economy are several large industrial plants, built in the Soviet era, which generate more than half of its GDP (in 2012, Transnistria’s GDP reached around US$1 billion). As a consequence, the condition of each of these companies, whose production is almost exclusively export- -oriented, has a huge impact on the economic situation in Transnistria. This makes the region extremely sensitive to any changes in the economic situation of its key trade partners. This problem is additionally aggravated by the extremely low diversification of Transnistrian exports. The only major economic entity in Transnistria which regularly yields profits and is not so heavily dependent on the external situation is Sheriff. This corporation controls the greater part of the local wholesale and retail trade, as well as a major part of the services sector on the domestic market.

An economy with unrealistic indicators: an evaluation of the economic situation in Belarus and a forecast for 2013. OSW Commentary No. 103, 2013-02-20

The macroeconomic results achieved by Belarus in 2012 laid bare the weakness and the inefficiency of its economy. Belarus’s GDP and positive trade balance were growing in the first half of last year. However, this trend was reversed when Russia blocked the scheme of extremely lucrative manipulations in the re-export of Russian petroleum products by Belarus and when the demand for potassium fertilisers fell on the global market. It became clear once again that the outdated Belarusian model of a centrally planned economy is unable to generate sustainable growth, and the Belarusian economy needs thorough structural reforms. Nevertheless, President Alyaksandr Lukashenka consistently continues to block any changes in the system and at the same time expects that the economic indicators this year will reach levels far beyond the possibilities of the Belarusian economy. Therefore, there is a risk that the Belarusian government may employ – as they used to do – instruments aimed at artificially stimulating domestic demand, including money creation. This may upset the relative stability of state finances, which the regime managed to achieve last year. The worst case scenario would see a repeat of what happened in 2011, when a serious financial crisis occurred, forcing Minsk to make concessions (including selling the national network of gas pipelines) to Moscow, its only real source of loans. It thus cannot be ruled out that also this time the only way to recover from the slump will be to receive additional loan support and energy subsidies from Russia at the expense of selling further strategic companies to Russian investors.

Big business in the Russian economy and politics under Putin's rule; The Russian power industry shortly before reforms; Ukrainian metallurgy: the economic link in the oligarchical system. OSW Study 5/2002

Big business in Russia: The pace of ownership transfer in the Russian economy has speeded up considerably over the last year. There has been a significant rise in the number of acquisitions of whole enterprises, and large blocks of shares in individual firms and plants. Similarly the number of mergers, bankruptcies and take-overs of failing firms by their strongest competitors has grown. The Russian power industry: This study is an overview of the current condition and principles on which the Russian power sector has been functioning so far. This analysis has been carried out against the background of the changes that have been taking place in the sector since the beginning of the 1990s. This text also contains a description of guidelines and progress made so far in implementing the reform of the Russian power industry, the draft of which was adopted by the government of the Russian Federation in summer 2001. However, the purpose of this study is not an economic analysis of the draft, but an attempt to present the political conditions and possible consequences of the transformations carried out in the Russian power sector. The final part attempts to evaluate the possibilities and threats related to the implementation of the reform in its present shape. Ukrainian metallurgy: The metallurgic sector, like the east-west transit of energy raw materials, is a strategic source of revenue for Ukraine. Over the last ten years, this sector has become Kiev's most important source of foreign currency inflows, accounting for over 40 per cent of its total export revenues. The growth of metallurgic production, which has continued almost without interruption since the mid-1990s, has contributed considerably to the increase in GDP which Ukraine showed in 2000, for the first time in its independent history.

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.

Turkey's economy: a story of success with an uncertain future. OSW Commentary No. 120, 2013-11-05

In the decade since the Justice and Development Party (AKP) came to power, Turkey’s economy has become synonymous with success and well-implemented reforms. Economic development has been the basis of both socio-political stability inside the country and of an ambitious foreign policy agenda pursued by the AKP. However, the risks associated with a series of unresolved issues are becoming increasingly apparent. These include the country’s current account deficit, its over-reliance on short-term external financing, and unfinished reforms, for example of the education sector. This leaves Turkey exposed to over-dependence on investors, especially from the West. Consequently, Ankara has become a hostage of its own image as an economically successful state with a stable socio-political system. Any changes to this image would cause capital flight, as exemplified by the outflow of portfolio investment1 and an increase in the cost of external debt2 that followed the nationwide protests over the proposed closure of Gezi Park last summer. In addition, Turkey remains vulnerable to potential changes in investor sentiment towards emerging markets.

Is Independence Possible in an Interdependent World? Scotland vs. the UK's Participation in the European Economy. Bruges European Economic Policy (BEEP) Briefing 30/2013

Many commentators have criticised the strategy used to finance regional governments such as the Scottish Parliament – both the block grant system and the limited amount of fiscal autonomy devised in the Scotland Act of 2012. This lecture sets out to identify what level of autonomy or independence would best suit a regional economy in a currency union, and also the institutional changes needed to sustain those arrangements. Our argument is developed along three lines. First, we set out the advantages of a fiscal federalism framework and the institutions needed to support it, but which the Euro-zone currently lacks. The second is to elaborate a model of fiscal federalism where comprehensive powers of taxation and spending are devolved (an independent Scotland and the UK remain constituent members of the EU and European economy). Third, we evaluate the main arguments for the breakup of nations or economic unions with Scotland and the UK as leading examples. We note that greater autonomy may not result in increases in long run economic growth rate, but it does imply that enhancing the fiscal competence and responsibility of regional governments would result in productivity gains and hence higher levels of GDP per head. That means the population is permanently richer than before, even if ultimately their incomes continue to grow at the same rate. It turns out that these improvements can be achieved through devolved tax powers, but not through devolved spending powers or shared taxes.

Supply and Demand Side Limitations Affecting the Structure of Agriculture and the Rural Economy. Factor Markets Working Paper No. 21, February 2012

The paper criticises the neo-classical assumptions of perfect factor markets and of complete information, which constitute central elements in labour market theory. Based on literature review and on economic reports from transition economies, as well as developing countries and more advanced economies, this deliverable focuses on the structural impediments and imperfections which often characterise rural labour markets and which may prevent an efficient allocation of labour. According to empirical studies, transactions costs and rigidities hinder the well-functioning of labour markets and constrain labour adjustments. The paper attempts to classify the various limitations of rural labour markets from both supply and demand side, although the distinction is not always clear-cut as some problems occur on both sides. The identification of these issues is extremely important as it allows us to highlight the inefficiencies and the failures in labour markets and to understand their impact on labour allocation. In this context, market intervention is desirable and the paper provides particular support for rural development policies such as investments in human capital. Lastly, labour institutions can play a key role in promoting the well functioning of labour markets, thus it is fundamental that they are well in place.

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.

Political economy of the Agenda 2010 reforms: How Gerhard Schröder overcame the "blocked republic". ACES Cases No. 2008.3

This essay will show that the Schröder-led government managed to break the political gridlock and introduce the Agenda 2010 because key institutional structures of Germany‟s political economy had lost their obstructive powers. In other words, the formerly semi-sovereign state had reclaimed its sovereignty. To understand how this happened, Peter Katzenstein's concept of the semi-sovereign state is first explored as a framework through which to analyze economic policy continuity and change. Within this framework, the causes for constant reform inertia between 1982 and 2002, in spite of varying political constellations and changes in the country‟s economic structure, are then discussed. This analysis will demonstrate that the Agenda 2010 reforms are predominantly a result of underlying incremental change in the political economy and its effect on the political decision-making process. Finally, the findings of this analysis are summarized and discussed with the aim of better understanding the economic policies of the current grand coalition government of the CDU/CSU and the SPD government under Chancellor Angela Merkel.

Integrating Europeans: The Political Economy and Social Aspects of Europeanization. ACES Working Papers (Curriculum Development), 2012

This course, then, investigates the effects of integration on European citizens as well as the duality of the EU as a competitive and social model. It is sensitive to the involvement of social groups, protest, and domestic politics in the study of market integration. Some of the questions we explore are: What are the effects of regulatory policy-making on social actors, how do such actors’ strategies and behaviors change as a consequence, and how to they overcome their collective action problems? Why is it that the logic of integration has at times followed a logic of “permissive consensus” while at other times it has been described as a “constraining dissensus”? What is the importance of discourse in domestic politics in order to articulate and legitimate Europeanization? How do European identities change as a consequence of policymaking as well as of protest? To what extent do ordinary Europeans matter in terms of accepting and opposing the project of European integration, how do European citizens in core and peripheral EU states experience Europeanization, and how is their involvement in the integration project to be conceptualized?

Money, Finance and the Real Economy: What went wrong? CEPS Paperback, 17 March 2015

The functions of the financial system of a developed economy are often badly understood. This can largely be attributed to free-market ideology, which has spread the belief that leaving finance to its own devices would provide the best possible mechanism for allocating savings. The latest financial crisis has sparked the beginnings of a new awareness on this point, but it is far from having led to an improved understanding of the role of the financial institutions. For many people, finance remains more an enemy to be resisted than an instrument to be intelligently exploited. Its institutions, which issue and circulate money, play an important role in the working of the real economy that it would be imprudent to neglect. The allocation of savings, but also the level of activity and the growth rate depend on it. In this book, the authors carefully analyse the close links between money, finance and the real economy. In the process, they show why today the existence of a substantial potential of saving, instead of being an opportunity for the world economy, could threaten it with ‘secular stagnation’.