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Time stability of the impact of institutions on economic growth and real convergence of the EU countries: implications from the hidden Markov models analysis

100%

Bernardelli M., Próchniak M., Witkowski B.

Equilibrium. Quarterly Journal of Economics and Economic Policy

2021

vol. 16

issue 2

285-323

Research background: It is not straightforward to identify the role of institutions for the economic growth. The possible unknown or uncertain areas refer to nonlinearities, time stability, transmission channels, and institutional complementarities. The research problem tackled in this paper is the analysis of the time stability of the relationship between institutions and economic growth and real economic convergence. Purpose of the article: The article aims to verify whether the impact of the institutional environment on GDP dynamics was stable over time or diffed in various subperiods. The analysis covers the EU28 countries and the 1995?2019 period. Methods: We use regression equations with time dummies and interactions to assess the stability of the impact of institutions on economic growth. The analysis is based on the partially overlapping observations. The models are estimated with the use of Blundell and Bond?s GMM system estimator. The results are then averaged with the Bayesian Model Averaging (BMA) approach. Structural breaks are identified on the basis of the Hidden Markov Models (HMM). Findings & value added: The value added of the study is threefold. First, we use the HMM approach to find structural breaks. Second, the BMA method is applied to assess the robustness of the outcomes. Third, we show the potential of HMM in foresighting. The results of regression estimates indicate that good institution reflected in the greater scope of economic freedom and better governance lead to the higher economic growth of the EU countries. However, the impact of institutions on economic growth was not stable over time.

Determinants of Foreign Direct Investments in the Visegrad Group Countries

72%

Wojciechowski L., Makieła K.

Acta Universitatis Lodziensis. Folia Oeconomica

2019

vol. 4

issue 343

103-121

Celem niniejszego artykułu jest określenie determinant akumulacji zagranicznych inwestycji bezpośrednich (FDI) w krajach Grupy Wyszehradzkiej. Teoria zakłada, że FDI jest motywowana głównie chęcią pozyskiwania rynku i poprawy efektywności gospodarowania. Ponieważ zagraniczni inwestorzy szukają sprawnego i relatywnie taniego środowiska biznesowego, można przyjąć założenie, że produktywność jest jednym z kluczowych czynników przyciągających inwestycje zagraniczne. W celu weryfikacji takiego założenia sformułowano model bazujący na systemie dwóch równań: pierwszego dla produkcji, szacującego produktywność, oraz drugiego dla FDI, mającego na celu przeanalizowanie wpływu produktywności na FDI. Aby sprawdzić rzetelność badanej interakcji, wzięto również pod uwagę czynniki makroekonomiczne i instytucjonalne. Badanie przeprowadzono na 13 sektorach przemysłowych NACE w krajach V4 w latach 2004-2013. Wyniki wskazują na istotny związek między FDI i produktywnością, jak również na to, że rozmiar rynku, jakość (i ilość) siły roboczej, wydatki na B+R oraz zmiany cen w czasie są istotnymi determinantami FDI na poziomie przemysłu.

The purpose of this paper is to investigate determinants of foreign direct investments (FDI) in the Visegrad Group countries. The theory indicates that FDI are mainly driven by market and efficiency seeking motives. Foreign investors are looking for a productive and relatively low‑cost business environment, which leads us to the assumption that productivity is one of key drivers of foreign capital. In order to verify this, we formulate a model based on a system of two equations: one for production to capture productivity and one for FDI to assess the influence of productivity on FDI. For robustness check, a number of macroeconomic and institutional factors are also considered. The study is conducted using a panel of 13 NACE industry sectors of the Visegrad Group countries in 2004-2013. The results indicate a positive, significant relationship between FDI and productivity as well as that market size, labour quality (and quantity), R&D expenditures and price changes over time are relevant FDI determinants at an industry level.

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1 Acta Universitatis Lodziensis. Folia Oeconomica

1 Equilibrium. Quarterly Journal of Economics and Economic Policy

1 Bernardelli M.

1 Makieła K.

1 Próchniak M.

1 Witkowski B.

1 Wojciechowski L.

1 2021

1 2019

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Time stability of the impact of institutions on economic growth and real convergence of the EU countries: implications from the hidden Markov models analysis

Determinants of Foreign Direct Investments in the Visegrad Group Countries