Interest Rate Convergence, External Balances and the Euro Crisis

Typically, the catching-up process between rich Northern Europe and poor Southern Europe and the diverging cost competitiveness between the two regions are considered alternative explanations for the widening current account imbalances in the euro area. This paper proposes a new explanation for the imbalances which led to the 2009 euro crisis i.e. large interest rate differentials among the EMU-12 countries which prevailed before the adoption of the euro. This finding suggests that the euro crisis was, at least to some extent, a consequence of the initial convergence shock.

Effects of the European Monetary Union on High-Technology Exports

AbstractOur study estimates the effects of the European Monetary Union (EMU) on high-technology (HT) export and assesses the potential knowledge spillovers of such trade. Irrespective of the importance of the HT trade channel, none of the previous studies in the literature focus on the effects of a common currency on HT trade. Increasing trade in the HT sector may lead to more efficient use of resources and help countries to move towards a knowledge-based economy. Moreover, it may lead to higher overall growth. After considering multilateral resistances, pair fixed effects and bias correction in the preferred (three-way bias-corrected) model, EMU membership becomes negative and statisticall…

Cross-country variation in patience, persistent current account imbalances and the external wealth of nations

This paper is the first to utilize large-scale international surveys on economic preferences to examine the long-run relationships between patience, current accounts and external wealth. We find robust empirical evidence that countries with more patient individuals tend to run persistent current account surpluses, which in turn result in the accumulation of foreign assets. This theoretically plausible but empirically unexplored relationship holds true for euro area current account imbalances, global current account imbalances and net foreign asset positions worldwide. While the existing current account literature concentrates on proximate macroeconomic determinants, this paper’s extension o…

Trade imbalances within the euro area and with respect to the rest of the world

Abstract Many studies have explored the determinants of current account balances in Europe. However, only in a few studies has trade balance been decomposed into intra balance, trade balance vis-a-vis the euro area, and extra balance, trade balance vis-a-vis the rest of the world. This decomposition is necessary for us to understand why some core euro area countries are acting as financial intermediaries for the periphery countries. Furthermore, the determinants of intra and extra balances might be different because nominal exchange rate cannot adjust between the EMU countries while their financial markets are highly integrated. Thus, we apply this decomposition and supplement the previous …

Multidimensional financial development, exporter behavior and export diversification

Financial development shapes export sector performance because exporters need external finance and face credit constraints. Previous empirical research has relied largely on single-country studies. The Exporter Dynamics Database (EDD), which features firm-level exports from over 60 countries, reveals differences in the microstructure of the export sector across countries. In this paper, we first provide new evidence that these differences are related to cross-country variation in financial development and structure. Second, we combine the EDD and multidimensional data on financial development with a global database on export diversification. This study is the first to examine how macrolevel…

Current Accounts and Coordination of Wage Bargaining

This study provides novel evidence on the impact of labor market institutions on current account dynamics. Our results suggest that a high degree of coordination of wage bargaining has a positive effect on the current account balance over the long run. This result is not driven entirely by wage moderation induced by centralized wage setting. We also provide robust evidence that a high degree of coordination of wage bargaining is associated with a slower current account adjustment toward its long-run equilibrium. This result seems theoretically plausible; the aggregate shocks in the exporting sector are largely driven by idiosyncratic shocks and the presence of idiosyncratic shocks increases…

Patterns of international capital flows and their implications for developing countries

According to standard economic theory, capital should flow from rich to poor countries. However, a reverse pattern has prevailed in the world economy. This is the so-called Lucas paradox. In addition, it has been shown that, counterintuitively, there is a negative correlation between capital inflow and productivity growth across developing countries. This is the so-called allocation puzzle. This review sheds light on the following questions: “What are the patterns of international capital flows in the world economy?”, “What are the most plausible explanations for these patterns?”, and “What are the possible implications of these developments for developing countries?” In addition, the curre…

Coordination of Wage Bargaining, Exchange Rate Stability and External Adjustment

The literature on the determinants of the rate of current account reversion has been limited to examining the role of exchange rate regimes. We propose that the degree of coordination of wage bargaining affects the speed of current account adjustment. Our point estimates are economically and statistically significant, suggesting that fragmented firm-level wage bargaining facilitates external adjustment. We also find a strong negative interaction between the effects of coordination of wage bargaining and exchange rate stability on the rate of current account reversion.

Kustannuskilpailukyky, vaihtotase ja palkkakoordinaatio

Artikkelissa tutkitaan talouden ulkoisen tasapainon ja kustannuskilpailukyvyn välistä yhteyttä sekä sitä, miten palkkakoordinaatio vaikuttaa talouden ulkoiseen sopeutumisnopeuteen. Ulkoisen tasapainon ja kustannuskilpailukyvyn välistä yhteyttä tarkastellaan useampaa eri estimointimenetelmää käyttäen sekä aiemman varsin laajan tutkimuskirjallisuuden pohjalta. Empiiristen tulosten perusteella kustannuskilpailukyvyn ja nettoviennin välinen suhde ei vaikuta erityisen vahvalta. Tämä tulos saa myös osin tukea aiemmasta kirjallisuudesta. Palkkakoordinaation ja ulkoisen tasapainon sopeutumisnopeuden välistä yhteyttä on tutkittu vähemmän. Useampaan eri estimointitapaan pohjautuvat tulokset viittaava…

Soiden ennallistamisen suoluonto-, vesistö-, ja ilmastovaikutukset. Vertaisarvioitu raportti.

Tämän selvityksen tarkoituksena on tuottaa kirjallisuuskatsaus ja siihen pohjautuvia johtopäätöksiä soiden ennallistamisen ilmasto-, vesistö- ja suoluontovaikutuksista. Selvitys pyrkii erityisesti kasaamaan yhteen uusimpia tutkimustuloksia ja aineistoja ennallistamisen vaikutuksiin liittyen ja toisaalta muodostamaan kokonaiskuvan laaja-alaisempaa soiden ennallistamisstrategiaa silmällä pitäen. Suoekosysteemit reagoivat kokonai-suutena varsin hyvin perinteisiin ennallistamistoimiin. Ennallistaminen ei kuitenkaan ole ongelmatonta, sillä ennallistamistoimet eli yleensä kaivin- ja metsäkonetyöt sekä ennallistamisen jälkeisen alkuvaiheen voimakkaat ekosysteemin muutokset voivat aiheuttaa yhteisk…

Assessing past ecological changes in lake Isojärvi and its suitability as a Finnish lake reference site using sedimentary diatoms

The Euro's Effect on Trade Balance Dynamics

During the pre-EMU period changes in real effective exchange rate or faster-than-trading-partners growth rates Granger caused changes in trade balance in most of the EMU-12 countries. However, our data driven article provides evidence that after the adoption of euro, these Granger causalities disappeared. We decompose trade balances into intra balances (trade balance vis-a-vis the euro area) and extra balances (trade balance vis-a-vis the rest of the world), and find that the disappearance of dynamic feedback effect typically occurred in the intra balances rather than in the extra balances. Our results imply that debtor countries cannot reduce their trade deficits in the short-run by enhanc…

Elevated nutrient concentrations in headwaters affected by drained peatland

Abstract Nutrient export from drained peatland has significant impacts on aquatic environments in Nordic catchments. Spatial information on variations in nutrient concentrations across different landscapes and land uses is needed to design measures for achieving the good ecological status of the EU Water Framework Directive. In this study we determined background concentrations in natural peatland-dominated streams and examined effects of peatland use practices on water quality in headwater catchments. We quantified sources for different elements by joint analysis of water chemistry, isotopes, and hydrology for 62 small catchments in North Ostrobothnia, Finland. Concentrations of nutrients …

Editorial:Governance AI ethics

Short-Run Dynamics of the Trade Balance in the EMU-12 Countries

During the pre-EMU period real effective exchange rate or domestic and foreign GDP per capita growth rate differential Granger-caused aggregate trade balance in most of the EMU-12 countries. However, our data-driven paper provides evidence that during the EMU period neither the growth differentials nor the CPI-based real effective exchange rates have Granger-caused the aggregate trade balances. When we decompose the aggregate trade balances into the intra balances (trade balance vis-a-vis the euro area) and the extra balances (trade balance vis-a-vis the rest of the world), we find that typically the change in the dynamics of the aggregate trade balance resulted from a change in the dynamic…

Ilmavoimien kadetit verkossa : kokemuksia verkkopohjaisen oppimisympäristön käytöstä matematiikan perusopetuksessa

Blessed Mary, Forgive Us Our Deficits

Many studies have explored the medium-term determinants of current account balances. This paper contributes to the existing literature by introducing religious variables that until now have been omitted. We propose that Catholic countries tend to run current account deficits. This result remains robust even if we include both the official financial flows and the variables measuring the quality of institutions. In total we control for close to all of the variables that have been included in previous studies. To rationalize our result we consulted the World Values Survey and discovered that Roman Catholics do not consider thrift as important as other religious groups.

Long-Run Determinants and Short-Run Dynamics of the Trade Balance in the Eu-15 Countries

Several studies have analyzed the long-run determinants of current account balances using panel cointegration techniques. In this paper we will study both the long-run determinants and the short-run dynamics of the trade balances in the EU-15 countries. We will analyze each country separately and decompose the aggregate trade balance into the intra balance (trade balance vis-a-vis euro area) and the extra balance (trade balance vis-a-vis the rest of the world). Overall, our results suggest that there are significant differences in the long-run relations across the EU-15 countries which might be overlooked in the panel cointegration studies. In most of the countries there is a long-run coint…

Determinants of current account balances

Culture and current account balances

This article contributes to the literature of current account balances by introducing cultural variables that until now have been omitted. The World Values Survey indicates that the Roman Catholics do not consider thrift as important as others. We propose that Catholic countries tend to run current account deficits. This result remains robust even if we control for close to all of the determinants that have been included in previous studies. We find evidence that the inclination of Catholic countries to have high levels of uncertainty avoidance goes to a great length in explaining the result. peerReviewed

Varjopankkitoiminnan yhteys pankkikriiseihin ja suhdannevaihteluihin

Pankkeihin kohdistuvan sääntelyn tiukentuessa pankkisektorin ulkopuolisen rahoituksen välityksen eli niin sanotun varjopankkisektorin koko on kasvanut. Tutkimuksemme on mahdollisesti ensimmäinen, jossa tarkastellaan empiirisesti sitä, onko kasvanut varjopankkitoiminta yhteydessä pankkikriisien syntyyn. Havaitsemme kansainvälistä paneeliaineistoa hyödyntäen, että lyhytaikaisesta rahoituksesta riippuvaisten markkinatoimintojen välittäjien, kuten meklareiden ja diilereiden, rahoitusvarallisuuden kasvu lisää tilastollisesti merkitsevästi systeemisen pankkikriisin puhkeamisen todennäköisyyttä. Tämä havaittu yhteys on jopa vahvempi kuin pankkien luotonannolla, joka on yleisesti hyväksytty pankkik…

Luennolla lusimassa? : luennolla istuminen, itsenäinen opiskelu ja tenttiosaaminen

Artikkelissa tarkastellaan sitä, ketkä menestyvät taloustieteen kurssin tentissä. Tilastoaineiston avulla voimme kontrolloida useita taustamuuttujia ja tutkia, onko luentoläsnäololla tai itsenäisellä opiskelulla vaikutusta tenttiosaamiseen. Tutkimusasetelman tekee poikkeukselliseksi se, että kurssin jokainen luento muodostaa oman itsenäisen kokonaisuuden. Tämän lisäksi opiskelijoiden läsnäoloa, itsenäisesti suoritettavia tehtäviä ja tenttipisteitä mitataan luentokohtaisesti. Opiskelijat itse arvioivat kurssin opetuksen kauttaaltaan varsin korkeatasoiseksi. Tästä huolimatta luentoläsnäololla ei ole vaikutusta tenttipisteisiin, mikäli opiskelijoiden lähtötasoa kontrolloidaan. Ainoastaan itsen…

Vaihtotaseen epätasapainot, instituutiot ja kulttuurierot

Essays on current account imbalances

Global current account imbalances and intra-euro area imbalances have been at the forefront of academic and policy debates for the last ten years. This thesis examines the determinants of current account balances and external adjustment. It consists of an introduction and four empirical studies. This thesis highlights the importance of institutional factors such as differences in national cultures and cross-country differences in the coordination of wage bargaining on external balances. The first study investigates the effects of deep determinants on current account balances. The point estimates are economically and statistically significant, suggesting that countries populated by Roman Cat…

Jatkuvapeitteisen metsänkäsittelyn vaikutukset luonnon monimuotoisuuteen, vesistöihin, ilmastoon, virkistyskäyttöön ja metsätuhoriskeihin

Sekä jatkuvapeitteistä että jaksollista metsänkäsittelyä tehdään eri voimakkuuksilla ja erilaisin hakkuutavoin. Ei ole olemassa yksiselitteistä sääntöä, jolla voitaisiin todeta, kuuluuko jokin tietty hakkuutapa jatkuva-peitteiseen vai jaksolliseen käsittelyyn (avohakkuita lukuun ottamatta). Esimerkiksi yläharvennuksia tehdään molemmissa käsittelytavoissa. Kaikkien metsänkäsittelytapojen aiheuttama häiriö on tyypillisesti sitä voimakkaampi, mitä voimakkaampi hakkuu tehdään. Avohakkuut aiheuttavat suurimman haitallisen vaikutuksen sekä luontoon että moniin metsien tarjoamiin ekosysteemipalveluihin. Yhteiskunnan kokonais-edun kannalta jatkuvapeitteisen käsittelyn osuuden lisääminen puuntuotann…