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71. On Economic Growth in Europe, or, The Uncertain Growth Prospects of Western Countries

Author:
Aleksander Łaszek, Andrzej Rzońca, and Andrzej Halesiak
Publication Date:
11-2016
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
Growth in the European Union since the outbreak of the global financial crisis is slower (1) than before the crisis, (2) than the trend would indicate, (3) than forecast and (4) than in the United States. The factors driving its weakness lie more on the supply side than the demand side. The loss of potential output after the crisis was exacerbated by inequalities from before the crisis; fiscal stimulus from 2007-2009, increasing public expenditure despite the lack of fiscal space; excessive liquidity support for banks; and inflexibility of the market for goods at the moment the crisis broke out. The problems with growth may deepen and become permanent if social support for anti-market parties continues to grow. Extremist parties are supported by divergence among the countries of the “old” EU and the slowdown of convergence in the new member states, as well as tendencies related to inequality, in particular the reduction of households’ mobility between income groups. The 144th mBank - CASE Seminar Proceedings consist of the main paper "On Economic Growth in Europe, or, The Uncertain Growth Prospects of Western Countries" by Andrzej Rzońca and Aleksander Łaszek and the commentary "Economic Growth in Western Europe: The Investment Perspective" by Andrzej Halesiak.
Topic:
Economic growth, Investment, Economic Policy, Macroeconomics, and Trade
Political Geography:
Europe, Western Europe, and European Union

72. Economic policy and macroeconomic developments in Hungary, 2010-2015

Author:
Gábor Oblath
Publication Date:
09-2016
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
The publication "Economic policy and macroeconomic developments in Hungary, 2010–2015" discusses the factors responsible for Hungary’s growth performance. In the 143rd mBank - CASE Seminar Proceedings Gábor Oblath argues that that the factors essentially responsible for Hungary’s growth performance over the last five or six years were mainly exogenous to Hungarian government policy. The acceleration of economic growth observed in 2014 was due to, in particular, exceptionally large transfers from EU funds, which have nothing to do with the government’s so called “unorthodox” economic policy. By contrast, the decline in the quality of the institutional environment of the economy is a direct consequence of both the spirit and the methods of the economic policy pursued.
Topic:
Government, Economic growth, Economic Policy, and Macroeconomics
Political Geography:
Europe, Hungary, and European Union

73. Study to quantify and analyse the VAT Gap in the EU Member States. 2015 Report

Author:
Luca Barbone, Mikhail Bonch-Osmolovsky, and Grzegorz Poniatowski
Publication Date:
10-2015
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
This report provides estimates of the VAT Gap for 26 EU Member States for 2013, as well as revised estimates for the period 2009-2012. It is a follow-up to the report “Study to quantify and analyse the VAT Gap in the EU-27 Member Statess, published in September 2013 (hereafter: 2013 Report), and to the report “2012 Update Report to the Study to Quantify and Analyse the VAT Gap in the EU-27 Member States” , published in October 2014 (hereafter: 2014 Report). As in previous reports, it was not possible to include estimates for Croatia and Cyprus, due to as-yet-incomplete national account statistics for the two countries. The VAT Gap is an indicator of the effectiveness of VAT enforcement and compliance measures, as it provides an estimate of revenue loss due to fraud and evasion, tax avoidance, bankruptcies, financial insolvencies as well as miscalculations. As the VAT Gap in this study is based on a top-down approach, it does not readily lend itself to be deconstructed according to industrial sectors or other criteria (territorial, professional), and can be best used as a diagnostic tool in the context of its evolution over time. As discussed in previous reports, the VAT Gap is defined as the difference between the amount of VAT actually collected and the VAT Total Tax Liability (VTTL), in absolute or percentage terms. The VTTL is an estimated amount of VAT that is theoretically collectable based on the VAT legislation and ancillary regulations. This report calculates, for each country the VTTL on the basis of national accounts, by mapping information on standard, reduced rates and exemptions onto data available on final and intermediate consumption, as well as gross fixed capital formation, from national accounts and use tables. Thus, the quality of the VAT Gap estimates depends on the accuracy and completeness of national accounts data and use tables. The year 2013 saw a continuing overall unfavourable economic environment, as the GDP of the European Union was nearly stagnant. This contributed to a slowdown of nominal final consumption and of other economic aggregates that form the basis of the Value Added Tax. Six countries applied changes to standard or reduced rates in 2013, marking a relatively stable policy environment. During 2013, the overall VAT Total Tax Liability (VTTL) for the EU-26 Member States grew by about 1.2 percent, while collected VAT revenues rose by 1.1 percent. As a result, the overall VAT Gap in the EU-26 saw an increase in absolute values of about Euro 2.8 billion, to reach Euro 168 billion. As a percentage, the overall VAT Gap stayed constant at 15.2 percent. The median VAT Gap rose by 1.6 percentage point, to reach 13.9 percent. In 2013, Member States’ estimated VAT Gaps ranged from the low of 4 percent in Finland, the Netherlands and Sweden, to the high of 41 percent in Romania. Overall, 15 Member States decreased their VAT Gap, with the largest improvements noted in Latvia, Malta and Slovakia. 11 Member States saw an increase in the VAT Gap, generally of small magnitudes, with the largest deteriorations in Estonia and Italy. This report also provides new and expanded evidence on the Policy Gap for the EU-26. The Policy Gap is an indicator of the additional VAT revenue that a Member State could theoretically collect if it applied standard rate to all consumption of goods and services supplied for consideration. We provide here estimates of the Policy Gap adjusted to take into account items that could not easily be taxed even in an “ideal” system (imputed rents, public goods, financial services). The results moderate views of the relative importance of reduced rates and exemptions in reducing the revenue potential of VAT, and suggest that better enforcement remains a key component of any strategy of improvement of the VAT system. The results of this report and the underlying data were presented to Member States in advance of publication and discussed on several occasions with the representatives of Member States. Deviating approaches and views of Member States are noted in the relevant country section in Chapter 3. The authors are grateful for the constructive cooperation and helpful input of Member States.
Topic:
Economic growth, Macroeconomics, Fiscal Policy, Innovation, VAT, and Trade
Political Geography:
Europe and European Union

74. Revisiting the Latvian and Greek Financial Crises: The Benefits of Front-Loading Fiscal Adjustment

Author:
Anders Åslund
Publication Date:
05-2015
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
This paper discusses why Greece has done so poorly in comparison with all other European Union countries since the onslaught of the global financial crisis in 2008. To show what was wrong with its fiscal adjustment, this paper compares Greece with the other European Union country that was hit be the most severe fiscal crisis, namely Latvia. The conclusion is that front-loaded fiscal adjustment works much better. Greek economic policy has been a popular topic among opinion writers, notably Nobel Prize winner and New York Times columnist Paul Krugman, who claimed that Greece suffered from austerity. Because of his prominence in the international public debate, I shall scrutinize his arguments on the Greek crisis. The paper also examines what policy the International Monetary Fund has pursued with regard to Greece, and how its views have been influenced by the debate and Greek economic developments. Finally, the paper assesses what lessons can be drawn from the contrasting experiences of Latvia and Greece. The conclusion is that a fiscal adjustment should be sufficient to resolve the crisis to restore confidence and that it should be as front-loaded as is practically and politically possible.
Topic:
Financial Crisis, Finance, Economic growth, Macroeconomics, Fiscal Policy, and Trade
Political Geography:
Europe, Eastern Europe, Greece, and Latvia

75. Transfer of Know-how for SMEs in Georgia, Moldova and Ukraine. White Paper: Moldova

Author:
Gabor Hunya, Lidis Garbovan, Magdolna Sass, and Oliver Kovacs
Publication Date:
05-2015
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
The report focuses on the potential of the development of small and mid-size businesses in Moldova. It provides an economic overview of the country, and then analyzes various best practices and lessons learned from the development of SMEs in the Visegrad countries, especially Hungary. The report provides a description of economic developments, main trade figures, relevant labor developments, migration and the role of remittances and defines the bottlenecks for SME development in the country. The authors built their analysis on available literature and statistics as well as their own survey and interview series. The study highlights six case studies relevant for SME development selected for deeper investigation such as simplified tax schemes, online tax reporting, entrepreneurship education, agriculture and producers’ organizations, the wine industry and issues of measurement of the SME sector. Finally the report draws up potential intervention schemes for Moldovan stakeholders and provides further recommendations for longer term initiatives and actions taken for the support of economic and SME development.
Topic:
Development, Globalization, Business, Economic growth, Macroeconomics, Innovation, and Trade
Political Geography:
Europe, Ukraine, Caucasus, Moldova, Eastern Europe, and Georgia

76. Transfer of Know-how for Small and Mid-size Businesses in Georgia, Moldova and Ukraine White Paper: Ukraine

Author:
Vladimir Dubrovskiy
Publication Date:
03-2015
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
The publication was issued within the project ‘Transfer of Know-How for Small and Mid-size Businesses in Georgia, Moldova and Ukraine’ which aims to assist SMEs in those countries by providing support to stakeholders in their efforts to develop analytical and policy advocacy capabilities and by opening new channels of communication between SMEs and NGOs in the Visegrad Four countries (Czech Republic, Hungary, Poland and Slovakia) and the rest of the European Union. The objective of the study is to deliver the complete findings and outcomes of the project aimed at Ukraine. This White Paper serves as an authoritative document with action plans, budgets, and a tangible way for the beneficiary country stakeholders to move forward with the agenda of small and medium-sized business development. It presents an overview of the collected background information and contains basic data on the countries, including some key macroeconomic comparisons as well as rankings in major competitiveness reports (e.g. Doing Business report by the International Bank for Reconstruction and Development), identifies the project stakeholders and provides an overview of the situation of small and medium-sized enterprises in Ukraine. It also includes the findings of two surveys implemented by the Slovak-Ukrainian team. Based on the findings, the “Discussion and Recommendations” section presents various perspectives on the problems of SMEs in Ukraine using the experience of the accession process of Slovakia, specific examples of key initiatives that led to the resolution of the problems, as well as case studies from various industries. It stresses the involvement of all parties including the EU, local governments, civil society, business associations, and the SMEs themselves. The key outcome of the paper is a road map – a very specific plan of actions including schedules, budgets, and other details within the scope of this project that will help the beneficiary country to cope with problems regarding the agenda of small and middle business development using the expertise and experience of institutions and stakeholders accumulated throughout the Slovak EU accession process. It includes a wide range of activities including a discussion of the project results with various Ukrainian stakeholders, workshops aimed at increasing knowledge about EU markets, legislation and standards, as well as strategic and institutional moves.
Topic:
Development, Business, Economic growth, Macroeconomics, Innovation, and Trade
Political Geography:
Europe, Ukraine, Caucasus, Moldova, Eastern Europe, and Georgia

77. Macroeconomic Update: Early Signs of Rise in Investment

Author:
Geetima Das Krishna and Rajiv Kumar
Publication Date:
07-2015
Content Type:
Special Report
Institution:
Centre for Policy Research, India
Abstract:
Economic recovery remains fragile on the back of a weak consumption demand. Sustained high growth will be achieved only with an upturn in the investment cycle. The government seems to have understood the importance of pump-priming the capex cycle directly through higher public capital expenditure and front loading the expenditure. While private investment remains muted due to stressed corporate balance sheets, weak external and domestic demand prospects and commercial banks’ cautious approach to expanding credit, there are some early signs that the private investment cycle is likely to turn around in the next six to nine months.
Topic:
Government, Economic growth, Banks, Investment, and Macroeconomics
Political Geography:
South Asia, India, and Asia

78. Macroeconomic Update: Indian Exports: Loss of Global Competitiveness

Author:
Rajiv Kumar and Geetima Das Krishna
Publication Date:
06-2015
Content Type:
Special Report
Institution:
Centre for Policy Research, India
Abstract:
India’s exports have declined for six consecutive monthssince December 2014 with an average decline of 13.85% yoy. The decline was broad-based. Even exports of Manufactured goods trended lower during this time and failed to compensate for the fall in nominal value of commodity exports, which declined due to a huge erosion of global commodity and oil prices. India’s exports seem to have become more reliant on global commodity prices in recent years. In line with global crude oil prices, India’s monthly petroleum exports that peaked in July’14 at $7 billion shrunk to mere $2.4 billion in May 2015, declining at an average of 52% since the start of the year. Iron ore exports having peaked at $509.5 million in December 2011 moved from $129.5 million in April 2014 to $10 million in May 2015. It is instructive to take a longer term perspective of export performance (Please see Chart I below). Average export growth hasremained almoststagnantsince January 2012 after a sharp bounce back from the collapse in the first and second quarters of 2009, induced by the global financial crisis. Export growth since October 2011 (50 months) is much lower than the robust 20% average clocked during the seven year period of April 2002- March 2009. (marginally lower than the 23% rate of growth assumed for the five year period of 2015-16 to 2020-21 in the Foreign Trade Policy announced in early 2015).
Topic:
International Trade and Finance, Oil, Economic growth, Commodities, Exports, and Macroeconomics
Political Geography:
South Asia, India, and Global Markets

79. Macroeconomic Impact of Capital Flight in Sub-Saharan Africa

Author:
John Weeks
Publication Date:
09-2014
Content Type:
Working Paper
Institution:
African Economic Research Consortium (AERC)
Abstract:
This paper assesses the impact of capital flight on growth in thirty-one sub-Saharan African countries. It first considers the “macro fundamentals” hypothesis that capital flight would be lower in a country whose government adhered to “sound” macroeconomic policies. Analytical considerations fail to support this hypothesis. Second, it develops a growth estimating equation derived from the Harrod-Domar framework. The growth estimations support the conclusion that capital flight had a major impact on growth over the last three decades, 1980–2010. The negative impact was greatest for the petroleum-exporting countries and those affected by internal conflict, but it was also substantial for the other countries, with a few exceptions.
Topic:
Economics, Markets, Global Markets, Economic growth, Economic Policy, Macroeconomics, and Capital Flight
Political Geography:
Africa, Sudan, Nigeria, Angola, Chad, Cameroon, Global Focus, Gabon, and Republic of Congo

80. Impact of China‐Africa Investment Relations: The Case of Ethiopia

Author:
Alemayehu Geda and Atenafu G. Meskel
Publication Date:
07-2013
Content Type:
Policy Brief
Institution:
African Economic Research Consortium (AERC)
Abstract:
This study investigated the growing relation between Ethiopia and China in the last decade. It is possible for Chinese-Africa relations to be either complementary or competitive (or indeed both) and it has multifaceted features. Notwithstanding this multifaceted linkage, the study focused on one of the channels – the investment (FDI) channel. Other channels are explored depending on the degree at which they shed light on understanding the Chinese-Ethiopian investment relations, which is the subject of this study.
Topic:
Economics, International Political Economy, International Trade and Finance, Foreign Direct Investment, and Macroeconomics
Political Geography:
Africa, China, Asia, and Ethiopia