Balkan and Eastern European Countries in the Midst of the Global Economic Crisis

This paper examines the origins of foreign direct investment (FDI) into the Republic of Croatia, paying special attention to gravity effects. The gravity model posits that interaction between two countries is positively associated with their mass and negatively associated with the distance between them. Six expanded gravity models are set forth to analyze FDI into Croatia, with dependent variables defined as cumulative FDI value from 2000 to 2009, FDI during the global recession (2008–2009), and FDI measured by the number of transactions. Results show that Croatia fits a distinctive transition economy scenario that favors follow-the-leader firms from nearby (especially EU) origins. Another key finding is the role of shared history, which favors firms from the successor states of the Austro-Hungarian Empire and Yugoslavia. Policy implications of the results include a call for government action to enhance FDI facilitation and overcome remaining barriers for foreign firms.

This paper empirically explores the issue of income convergence of the Balkan economies with the European Union’s-15 average (EU-15) over the period 1989–2009. The adopted econometric methodology has been suggested by Nahar and Inder (2002) and is considered more efficient in detecting possible catching up effects compared to the relevant conventional methods. The findings of this paper point out the existence of dissimilarities among the examined Balkan economies in the process to catch up with the EU-15. In particular, the results support income convergence with the EU-15 only for Greece and Slovenia.

In the mid-1980s, in the former Yugoslavia, the phenomenon of the rise of nationalism among the ethnic groups that make up the country appeared. The revival of nationalistic passions led to the dissolution of the country in a particularly bloody ethnic conflict in the early 1990s. This process contributed greatly to the appearance in leadership positions of the Yugoslavian government structures of individuals who used the ethnic passions of the people of the country in order to reap personal benefits. The main passions were rooted in events that took place in Yugoslavia during the Second World War, the interwar period and the formation of the Kingdom of Serbs, Croats and Slovenes, which was later renamed the Kingdom of Yugoslavia. To resolve the ethnic conflict in the former Yugoslavia the international community had to intervene militarily in both cases of the conflicts in Bosnia and Herzegovina and Kosovo and politically in the conflicts in Bosnia and FYROM in an effort to achieve the Dayton and Ohrid agreements. In the years that followed the dismantling of Yugoslavia into the countries that was created by, a phenomenon appeared among people of different social groups: they felt nostalgic for their life in the years of Yugoslavia; this phenomenon has been termed in literature as “Yugonostalgia”. This study is an attempt to analyze not only the economic and trade relations between Bosnia-Herzegovina and FYROM with the other states which were parts of former Yugoslavia in light of the spirit of the Dayton and Ohrid agreements, but the phenomenon of “Yugonostalgia” as well. Since a large volume of trade of both countries is associated with the states that emerged from the breakup of Yugoslavia, we will consider if this is linked to the political-social climate that was shaped by the two agreements. We will also study if the phenomenon of the strengthened “Yugonostalgia” had obvious effects on the trade or if, instead, the constant and growing trade and economic relations are linked with the socioeconomic structures developed in Yugoslavia. Moreover, both the economic conditions of the degradation period of Yugoslavia and the transition of newcomers to the market economy are going to be examined.

Turkey represents a potential laboratory experiment in which the performance of an adoption of inflation targeting regime can be studied. Under this perspective, this article tries to evaluate the effect of Inflation Targeting Policy on inflation uncertainty in Turkey after 2001. An empirical analysis based on ARCH-GARCH method is made in order to create inflation uncertainty series. The findings denote that Inflation Targeting Policy is a powerful strategy in eliminating the inflation uncertainty.

Although the criteria, that had been used to justify the establishment of the Economic and Monetary Union (EMU), were challenged, in particular on the issues of labor mobility, flexibility of wages, and harmonization of the fiscal policies of the member-states, EMU moved on towards completion through three stages. Nowadays, monetary policy is conducted by the European Central Bank (ECB), while national governments have maintained their authority over fiscal policy. However, the orientation and independence of the national fiscal policies depends a lot on the priorities and rules set by the “Stability and Growth Pact” (SGP). Does the SGP take into account the differences among states concerning prospects of economic growth? It could be argued, that some degree of flexible implementation of the SGP is necessary in order to reduce social imbalances and that the recent Euro Plus Pact (EPP) would have greater chances of success under the given circumstances. The economic crisis of 2008 was violent, and so were the policy responses. The fact remains that there is a widespread discussion of the need for an efficient program of fiscal management, which, however, would allow economic development prospects to remain alive, in particular in the fragile European Union’ economies.

Since the establishment of the first Central Bank in the seventeenth century, Central Banks managed to play an important role in the national economies by conducting their classic functions: the issuance of currency and the discount one, With the passage of time and with the extraordinary development of the global economy (especially in the twentieth century), central banks have been in a position to increasingly support the financial and economic environment and to control the entire national banking system, by defending their modern functions which joined to the classical ones. Perhaps the most important modern function is the application of monetary policy which aims at price stability, high employment rate, economic growth, stable financial markets, etc. Definitely, adding these modern functions to the classic ones has positively influenced the national economies in most cases, and their future role will be increasingly important given the current world economy context. Excepting the banknotes printing and national coins minting, a National Bank needs to keep safe banknotes or coins that are not into circulation and destruct them when necessary. The classical functions that rise from these actions are the distribution of issued currency and cash reserves management. Normally, the currency is issued in accordance with economic development: industrial production, agriculture, trade, services, etc. With the modernization of national economies, central banks started to have, in addition to classical functions, other new modern functions. Further, in this paper the authors aim to describe some of them and will present the role of services adaptation to current economy conditions.

This paper provides empirical evidence on the determinants of credit risk in the Romanian banking system over the period December 2001 to November 2010 by employing the Autoregressive Distributed Lag (ARDL) approach to cointegration. This approach allows us to investigate both the long-run and the short-run determinants of credit risk and has only recently been employed in the relevant literature. Empirical findings indicate that bank specific factors (credit growth) as well as macroeconomic activity factors (money supply and unemployment) all have a significant impact on Romania’s credit risk both in the short and in the long-run. Furthermore, the findings strongly support our hypothesis that the Greek crisis has a significant impact on Romanian non-performing loans.

This paper investigates the extent of regional cohesion in the European Union by taking into account the notion of knowledge-based economy. To pursue this task, we present results produced by estimating different regional models on an extensive regional data set. The empirical results suggest a development gap across the EU-27 regions. Possible ways to overcome this gap and certain areas of intervention are also suggested.

The main objective of this study is to indicate that many times rural development is achievable endogenously through local forces. It is believed that a direct relationship exists between local cooperation and local forces in rural communities, allowing them to become a mechanism for endogenous development. The examination of local cooperation as a mechanism for endogenous development is important and thus, after a review of theoretical works related to local cooperation and endogenous development, the study presents an analysis derived from a case study, performed in a typical peripheral rural area in northwest Greece. Especially, after the recent spectacular shift of the global financial status, the existence of a local cooperation framework attracts the interest of the analysts as it can shed new light on endogenous development and on modeling and understanding better the long-term behavior of rural residents. Thus, this study examines the willingness of the local society to accept and support a local factor such as an investment proposal of the local union of agricultural cooperatives, by revealing the foremost reasons thereof. Both descriptive statistics and multivariate analysis were employed. Two-step cluster analysis was used to explore the different levels of local factor’s adoption and a binomial logit model was estimated to determine the relation between social characteristics and willingness to adopt endogenous development.

This paper examines the consumers buying behaviour towards organic food, particularly towards organic wine in a Convergence E.U. Region, the one of East Macedonia and Thrace (Emth) in Greece. Specifically, this study identifies the factors that affect consumers’ purchasing behaviour towards organic wine and classifies the purchasers into groups with similar buying behaviour. Field interviews were conducted in a random selected sample of 511 consumers in April and May of 2010. A multivariate statistical analysis on the data was used to identify consumers’ attitude towards organic wine. In particular, principal components analysis (PCA) was conducted to reveal that the factors affecting people’s preference in consuming organic wine are: (a) health safety and (b) prestige and curiosity. In the next stage, hierarchical and non hierarchical cluster techniques were applied which classified consumers with similar buying behaviour into three groups: (a) those influenced by prestige and curiosity, (b) the opportunists (those who are not influenced by any factor) and (c) those who showed a tendency to consume healthy products. Discriminant analysis was performed to assess how the identified factors derived from PCA could predict cluster membership. Finally, non parametric statistical tests were used to profile the identified group of consumers with regard to their personal traits as well as other factors affecting their consuming behaviour.

Information-Communication Technologies (ICT) are the general technology impacting the economy universally. The analysis of these processes was done within the framework of the Information Society concept. Standard statistical indicators had been insufficient to evaluate its development, so it was proposed to calculate the composite ICT Development Index (IDI). IDI ranges from 0 to 1. The top ten countries are headed by Korea. Its IDI is 8.4; Chad scored the lowest – 0.83. This indicates a significant gap in Information Society development between the countries. On the one hand, this could be explained by the model of the index constructing, on the other, ICT implementation is directly influenced by their value. Nevertheless, the level of IDI in the CIS countries is higher than expected, taking into account their income per capita. This indicates that national strategies can facilitate their transition to the Information Society (IS). These strategies should be coordinated with the current level of ICT implementation and economic development. Therefore, the objective of the study was to form the priorities for IS strategy according to the particular stage of its development. To define these stages statistically we set the following tasks: to create a list of the indicators, to analyze statistical data, and to identify the clusters of the countries which are on the same IS stage.