The objective of the article is to measure the magnitude of the long-term exchange rate price and output effects in the Central and Eastern European countries (plus Turkey and Russia) which practice flexible exchange rate policies, while controlling for the institutional quality and policy stance as measured by the Index of Economic Freedom (IEF) from the Heritage Foundation database. Research Design & Methods:To analyse long-term price and output effects, the anticipated value of a nominal effective exchange rate was used as obtained by the ARIMA (n,m) model. We analysed the relationships between selected macroeconomic variables with the panel DOLS model using quarterly data from 2002 to 2019. Individual country estimates were provided as well. The study considered alternative specifications for regression models, with control for the money supply and institutional developments. Findings: Our study revealed that anticipated depreciation of the exchange rate was associated with the incomplete exchange rate pass-through (ERPT) into consumer prices and a decrease in output, with the former becoming stronger over the low-inflationary 2010-2019 period. Among other results, there was a trade-off between price and output effects of the money supply. As expected, investments in physical capital were the factor behind higher output. Finally, liberalisation efforts as proxied with the IEF were inflationary and contractionary. Implications & Recommendations: It was demonstrated that policies aimed at gradual strengthening of local currencies could be helpful for both acceleration of output growth and containment of inflation in the long run. At the same time, it is not recommended to proceed with further liberalisation of regulatory environment, as it seems not to bring about any favourable output effects while contributing to higher consumer prices. Contribution & Value Added:The novelty of this study is the estimation of the long-term price and output effects of the anticipated exchange rate while controlling for institutional quality and the progress of market reforms as measured by the IEF. The findings may serve as suggestions for reliable exchange rate policy, with a focus on predictability and the long-term macroeconomic effects.

Objective: The aim of this study is to examine monetary policy transmission mechanisms in four Central and Eastern European countries (the Czech Republic, Hungary, Poland and Romania), in the presence of fiscal and exchange rate effects. Research Design & Methods: We implement a structural vector autoregression (SVAR) approach for modelling the interdependencies between monetary and fiscal policies, output gap and consumer price inflation (CPI). In our six-variable model, which includes the budget balance, the output gap, CPI, the central bank reference rate, the lending rate and the real exchange rate (RER), short-run restrictions on the contemporaneous structural parameters imply that the budget balance responds to changes in the output gap and lending rate, while the central bank reference rate is a function of output and inflationary shocks. Findings: The results of our research show that the effects of an increase in the central bank's short-run interest rate on inflation, output gap and the RER are quite heterogeneous across the CEE countries. As the monetary policy response to inflation seems to be significant and rather uniform across countries, though with a different time pattern, there is no evidence of its reaction to the output gap (except for Romania in the long run). Among other results, budget surplus has a strong anti-inflationary impact in all countries but at the expense of a short-lived output slowdown (except for Hungary). The RER undervaluation is likely to stimulate output (Romania) or depress it (Poland), with a neutral stance in the two other countries. As expected, an increase in the lending rate is followed by a fall in output on impact, while there is no significant effect on inflation.

Using monthly data for the 2000-14 period, this paper discusses the macroeconomic effects of large devaluations in Ukraine. Employing a time-varying parameter framework, the author shows that a nominal devaluation in "normal" times is associated with an increase in exports and a decrease in imports, an acceleration in consumption price inflation, and a contraction in industrial output (since 2014). However, a currency collapse is likely to be inflationary and contractionary in respect of exports, imports, industrial output, and retail trade turnover. The author shows that export dynamics is stimulated by higher world commodity prices and industrial growth abroad. Since the 2008-09 financial crisis, industrial output has become more strongly linked to the performance of the largest foreign trade partners.

This paper empirically analyses fiscal policy effects in Ukraine using different identification strategies within the framework of a vector error correction model (VECM). For quarterly data from 2001 to 2016, we find a robust positive impact of both government expenditure and net revenue upon output in Ukraine, which closely corresponds with the predictions of the Mankiw-Summers model in the case of high demand for money in relation to consumption expenditure combined with significant investment elasticity in relation to the interest rate. In other respects, the fiscal policy transmission mechanism exhibits several standard features (such as an increase in government expenditure after a positive shock to revenue or a widening of the budget deficit following an interest rate hike). The results suggest the feasibility of revenue--based fiscal consolidation policies in Ukraine, as better tax collection may contribute to economic growth even in the short run. Since there is a robust conventional inverse relationship between interest rate and output, one of the puzzling results is that government expenditure puts downward pressure on the former, with net revenues being neutral in this respect. Real exchange rate (RER) depreciation is behind the decrease in output in the baseline model, but alternative identification schemes suggest that it is likely to be contractionary in the short run while turning expansionary in the long run.

Using data from 41 countries for the 2013-2018 period, the dependence of GDP growth on the rule of law index that is calculated by the non-governmental organization World Justice Project has been estimated. Compared to other specialized indicators for assessing compliance with the rule of law, such as the World Governance Indicator, the International Country Risk Guide, or the Index of Judicial Independence, the WJP differs more fully into actual legal practice (not only the quality of legislation) by combining expert judgment with the results of questionnaires surveys of residents of the country. Cross-regression estimates for the 2013-2018 averages are quite contradictory for the general sample of countries, but a direct dependence of economic growth on the rule of law has been obtained for the countries of Central and Eastern Europe and the former Soviet Union. If Ukraine rose from the current level of the WJP index (0.50) to the level of Georgia (0.61), it allows to increase the GDP growth rate by 0.6 percentage points. Estimates for panel data using the a random effects model (RE) confirm the direct relationship between the state of the rule of law and eco-economic growth for CEE and the former Soviet Union, whereas a weak inverse relationship between the two indicators can be observed in Asia and Latin America. The results show that it is advisable to strengthen the rule of law in transformational economies, while this is not urgent measures in the other studied countries. The overall study does not deny the possibility of economic growth without advancing the legal foundations or deepening the process of democratization of political life, but this does not apply to the CEE countries and the former Soviet Union. In the extended specification of the regression model, it seems that the favorable influence of the rule of law on GDP dynamics for transformational economies can be realized by slowing down inflation. At the same time, no dependence of inflation on the WJP has been found for Asian and Latin American countries; there is also no effect of consumer prices on economic growth. It is noticeable that estimates for the general sample of countries show the negative impact of only high inflation-over 15% per annum. Among other results, the direct relationship between investment and GDP growth is worth noting, regardless of the regression model chosen. This is in line with the standard assumptions of economic theory and, accordingly, reinforces the argument for the protection of property rights as a means of stimulating the investment process.