This paper investigates the relationship between countries' fiscal balances and current accounts with an emphasis on the role of fiscal rules. The direct effect of fiscal policy on the current account via aggregate (import) demand is potentially amplified by indirect effects, materialising through interest rate effects and intergenerational transfers that reduce savings. On the other hand, the implied positive relation between fiscal and external balances is potentially attenuated by offsetting changes in savings through Ricardian equivalence considerations. We expect this attenuation effect to be stronger in countries with more stringent fiscal rules and test this hypothesis using a panel of 73 countries over the period 1985–2012. As with previous studies, we find a positive effect of fiscal balances on the current account, supporting the twin deficit hypothesis. However, the effect of fiscal balances on the current account depends on the stringency of fiscal (budget balance or debt) rules in place; it is reduced by one‐third on average and virtually eliminated for countries with the most stringent fiscal rules.

The focus of this paper is on cross-region R&D collaboration funded by the 5th EU Framework Programme (FP5). The objective is to measure distance, institutional, language and technological barrier effects that may hamper collaborative activities between European regions. Particular emphasis is laid on measuring discrepancies between two types of collaborative R&D activities, those generating output in terms of scientific publications and those that do not. The study area is composed of 255 NUTS-2 regions that cover the pre-2007 member states of the European Union (excluding Malta and Cyprus) as well as Norway and Switzerland. We employ a negative binomial spatial interaction model specification to address the research question, along with an eigenvector spatial filtering technique suggested by Fischer and Griffith (2008) to account for the presence of network autocorrelation in the origin-destination cooperation data. The study provides evidence that the role of geographic distance as collaborative deterrent is significantly lower if collaborations generate scientific output. Institutional barriers do not play a significant role for collaborations with scientific output. Language and technological barriers are smaller but the estimates indicate no significant discrepancies between the two types of collaborative R&D activities that are in focus of this study.

This paper uses a structural gravity approach, specifying currency movements as trade cost component to derive an empirical trade balance model, which incorporates multilateral resistance terms and accounts for the cross‐country variation in the exchange rate pass‐through into import and export prices. The model is estimated using quarterly bilateral trade flows between 47 countries over the period 2010Q1 to 2017Q2, disaggregated into 97 commodity groups. Our results support the existence of an “aggregate” J‐curve, pooled over commodity groups; at the same time they point to considerable heterogeneity in the trade balance dynamics across industries below the surface of aggregate data.

The widespread use of composite indices has often been motivated by their practicality to quantify qualitative data in an easy and intuitive way. At the same time, this approach has been challenged due to the subjective and partly ad hoc nature of computation, aggregation and weighting techniques as well as the handling of missing data. Partially ordered set (POSET) theory offers an alternative approach for summarizing qualitative data in terms of quantitative indices, which relies on a computation scheme that fully exploits the available information and does not require the subjective assignment of weights. The present paper makes the case for an increased use of POSET theory in the social sciences and provides a comparison of POSET indices and composite indices (from previous studies) measuring the "stringency" of fiscal frameworks using data from the OECD Budget Practices and Procedures survey (2007/08). JEL Codes. C43, H60, E02, E62

This study focuses on the market accessibility of European regions and its relationship to income per capita, summarized in the new economic geography (NEG) "wage equation". In a first step, we make use of a novel dataset of bilateral trade flows for 254 European nomenclature of territorial units for statistics (NUTS-2) regions (for 26 European countries excluding Bulgaria and Romania) in order to estimate trade costs and ultimately construct a regional measure of access to markets. In a second step, we test the hypothesis that access to domestic as well as to foreign markets increases income per capita. We find that, in spite of its spatial formulation, the wage equation is not able to capture local spatial patterns of the distribution of European regional income per capita. | IN TRO DUCT IO NEver since the seminal work of Krugman (1991), models of "new economic geography" (NEG) have attempted to shed light on the uneven economic distribution using a general equilibrium framework with a focus on geography represented by transport or trade costs. They aim to explain agglomeration patterns by allowing mobile production factors to move across space to regions with the highest rewards. While historical and institutional factors as well as the physical geography of a region can help explain agglomeration, NEG models focus on forces that reflect the behavior of optimizing (mobile) economic agents.One central element of NEG models that is derived from optimizing agents is the so-called "wage equation." It states that the "maximum wage that each firm in a specific region can afford to pay is a function of trade-cost-weighted market and supply capacities" (Redding & Venables, 2004, p. 58). This means that NEG models imply a spatial structure in which remunerations of factors are higher in regions that have better access to markets or a higher "real market potential."This relation was first introduced by Harris (1954), who used geographical distance to weigh income from all other regions. Real market potential has some advantages over the basic concept of Harris. It is derived from microeconomic theory and considers competition among firms in export 610 |