Economic Dynamics in Eastern Europe and Asia · 29 East European post-socialist economies have gone through broad transformation with many dimensions – EBRD Reports; also EU membership

Economic Dynamics in Eastern Europe and Asia

(see also various papers in the Journal International Economics and Economic Policy;

IEEP)

Prof. Dr. Paul J.J. WelfensJean Monnet Professor for European Economic Integration; chair

for Macroeconomics; president of the European Institute for International Economic Relations at the University of Wuppertal,

Alfred Grosser Professorship 2007/08, Sciences Po, Paris, Research Fellow, IZA, Bonn, Non-Resident Senior Fellow at AICGS/Johns

Hopkins University, Washington [email protected], www.eiiw.eu;

P. Welfens/EIIW, U. of Wuppertal 1

mailto:[email protected]

http://www.eiiw.eu/

Content

1. Introduction

2. Economic Dynamics: Basic Concepts

3. Key Aspects of Eastern Europe

4. Key Aspects of Asia

5. Interdependencies and International Organizations

6. Joint Challenges

2P. Welfens/EIIW, U. of Wuppertal

1. Introduction Economic Dynamics

Short-term instabilities in countries and regionsof the world economy (e.g. Asian crisis 1997/98)

Long run changes and challenges: rise ofJapan/Korea in the 1980s and 1990s; rise of China 1978-2029 (?); 2015-30 GDP of China will double

Current account imbalances: CA>>0 Jap, CH, GE

Links between EU and Asia (China + ASEAN + Japan + Korea)

New multilateral banks: BRICS bank + Asian Infrastructure Investment Bank(AIIB); China: One Belt, one Road (Obor = 60 Obor countries)


EU28/27 (Eurozone with 19 countries)

Japan & ASEAN (EU single market since 2016)

USA China

Interdependency

4

Interdependency (change of Y has effect ofY*; and this has repercussion effect on Y)

Dynamics concern

Output/income dynamics and trade dynamics

Technological dynamics and FDI dynamics

Demographical dynamics/migration dynamics

Financial market dynamics

Expectation dynamics

Political dynamics


1. Introduction

29 East European post-socialist economieshave gone through broad transformation withmany dimensions – EBRD Reports; also EU membership for some countries & globalization

Asian countries are under the tripleimpact of economic globalization, the rise ofChina and the fact that 60% of the worldpopulation are in Asia; Asean Countries (10) key player besides Japan, India and China


Post-Transition Countries

Eastern Europe/former Soviet Union = 29 post-socialist countries

Chaos in late 1980s in the socialist countries: high inflation, stagnation or output decline, massive devaluation (black market exchange rate e“: effective money supply M“ = M+e“M*); there was much currency substitution; corruption, partlyhigh foreign indebtedness: P = M“V/Y

Growth of the socialist shadow economy (SE) (compare socialist SE and capitalist SE: WELFENS)


Socialist Systems in Eastern Europe/Soviet Union (backgroundinfo; and Venezuela these days –more or less)

Socialist command economy has plannedoutput in state-owned firms (SOFs) andthere is a monopoly state-owned bankingsystem and a monopoly organization ofexports (firms sell to state-owned export organization)

Allocation of official output (C) to workers in export firms, the military, government people= creating an excess demand in the officialsystem –which has state-administered price pofficial


The Demise of SocialistSystems not much understood

Problems began in the 1960s when no longer elastic laborsupply in agriculture (for industry‘s expansion!);

Output growth in industrialized sector started todecline, could have been maintained only withbetter innovation policy – but innovation record ofsocialist firms mostly week

Weak sectoral innovation organizations; directors offirms disliked innovation= disruption of traditional production = undermining achievement of plannedoutput goals: basis for director‘s career


Socialist Economy: Official economy and socialist shadoweconomy (psh>poff); official system allocates officialoutput (distance HE0) to persons CE0


Note: In a market economy:If the marginal costs wouldbe equal to p0FF the equi-librium output is q1; theDemand in shadow economyis only the arch E0Z (inter-section with inofficial supply

curve if k‘shadow is low

Socialist Shadow Economy:has supply curve thatreflects marginal costs, including risk & corruption

Economic Dynamics...

Product innovations&process innovations

Expansion of the digital economy

Trade expansion/regional integration...

Foreign direct investment inflows; outflows

Demographic pressure 2050=10 bill. people; and ageing in

Japan, EU, CH, later US, after that developing countries(effect on savings)

Institutional changes; e.g. ASEAN in 2015 with the status of single market!

Environmental challenges/Global Warming(CH,US..)


Economic Interdependence

USA, China, EU28 (all three about the same size in terms of GDP PPP figures), plus Japan and ASEAN (600 mill. people)

EU eastern enlargement took place in 2004 (10), 2007 (Romania, Bulgaria) and 2012 (Croatia); EU28 will shrink due to BREXIT (?): UK is 18% of EU28 GDP, 12% ofpopulation; expected output decline UK -6% in the long run; implies for EU27 -1%, UK additional -0.2% P. Welfens/EIIW, U. of Wuppertal 12

Economics of BREXIT

Not a correct referendum: economicinformatiom from Treasury study publishedApril 18 not in the 16 pages brochure ofgovernment mailed to households in England: April 11-13); with this info: 52% remain; seeWelfens, 2016, An Accidental BREXIT and IIEP

Politico-economic noise until 2019 at least

EU will push for Commonweath strategy – not consistent... P. Welfens/EIIW, U. of Wuppertal 13

Current Challenge is SovereignDebt Dynamics


Europe and Asia part of the global economic system (institutions andrules)

Global Economic SystemInternational

Organizations; IMF, WTO;

G20 as

special actorsince 2008

Regional Integration Schemes;

EU, Euro Area;

ASEAN, APEC

TTIP, TPP (2015)

National PolicyMakers; with the

US, the EU and

China plus Japan as big players


Basic Perspectives

Transatlantic Banking Crisis 2008/09

Euro Crisis 2010-15

BREXIT 2016 (UK referendum on EU membership; majority51.9% for Leave)

Eurozone recovery 2015-2017

Deflation pressure in Eurozone, UK, US in 2015/2016; Quantitative Easing UK & Eurozone = extremely low interestrate i; and r; growth rate Eurozone 2016 about 1,7%, 2017..

China entering New Normal = 6-7% growth instead of10% previously; possibly only 5% in reality, but still veryhigh; government emphasizing innovation dynamicssince 2016 P. Welfens/EIIW, U. of Wuppertal 16

Regional Free Trade Agreements

Trans-Pacif Partnership (TPP) US with 12 countries, incl. Japan and Australia: agreement 2015

US with EU: Transatlantic Trade and In-vestment Partnership TTIP; 2013-?; EU hasfree trade agreement with Singapore, Korea, Thailand (soon), but no equivalent to TPP

CETA (EU-Canada) in 2016 signed?

TTIP will follow possibly laterP. Welfens/EIIW, U. of Wuppertal 17

Economic Growth in Asia: Real GDP Growth Rates 1990-2000; 2000-2010: Japan, Korea, China, Thailand, Indonesia


1990-2000 2000-2010

Japan 11.86 7.68

South Korea 80.44 50.25

Indonesia 51.19 66.49

China 169.56 170.84

Thailand 54.64 52.78

Source: WDI

Economic Growth in Eastern Europe (PL, HU, CZ, SL) and Russia, 1990-2000; 2000-2010


1990-2000 2000-2010

Czech Republic 4.38 39.58

Poland 44.94 46.56

Hungary 2.58 21.46

Slovak Republic 1.96 59.32

Source: WDI

Economic Catching-up in Asia

Japan – relying on export dynamics, access to open US marketin 1960s, 1970s, 1980s; more so on China in the 1990s andthereafter.

Industrial policy: picking winners/losers? Does it work?

Focus on industries with economies of scale (BRANDER/SPENCER); import restriction= export promotion

Korea, Taiwan, Hongkong, Singapore = Newly industrializingcountries = outward-oriented growth (relying on exports; and FDI

inflows, partly subcontracting)

China after 1978 – opening up; China in Dec. 2016 marketeconomy? US already said no (despite 15 years over: WTO 01)

ASEAN countries: almost like EU; at least in field of trade!20P. Welfens/EIIW, U. of Wuppertal

Asian Crisis 1997/98 (ASEAN..)


Asian EconomicCrisis

Prior to Asian Crisis 1997/98...

Asean countries recorded

High growth

Low government deficits, moderate inflation rate

Quasi-fixed exchange rate – idea of policymakers: keeping real interest rates low

Asian crisis started in Thailand with massive depreciation, strong increase of interest rate in response to capital outflows, recession; Malaysia regulated/stopped capital outflows (did it work?)


Thailand: CA was negative over yearsprior to 1997; then „sudden stop“; massive swing in CA-GDP ratio 97/98


CA = (S+T) – (I+G);Consider that Y=C+S+T and hence

CA = Y – (C+I+G)Improve CA by reducing C(...), G, I(..)

Many years of current account deficit

imply high foreign indebtedness(e.g. due to Thai firms‘ borrowing abroad);1997/98 regionalization syndrom =other countries in the region (also) affected for various reasons...

Inflation and Interest Rate in Thailand and Indonesia, 1990-2011 (yearly; IMF); Indonesia with big crisis


-10

0

10

20

30

40

50

60

70

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Indonesia (Interest Rate) Thailand (Interest Rate) Indonesia (Inflation) Thailand (Inflation)Source: IFS

Asian Crisis 1997/98

Inflation Rate and Interest Rate in Poland and Hungary, 1990-2011 (IMF)


0

5

10

15

20

25

30

35

40

45

50

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Hungary Poland Hungary PolandSource: IFS

If Capital Account IsLiberalized...

Typically much short-term capital inflowsat first

In a system of fixed exchange rate interestparity will hold: i= i* + a“E (a“E is expecteddevaluation rate in %).

If expected devaluation rate is zero then i=i* (+R)

If high share of short-term capital inflows there isrisk of sudden high outflows later; better morelong term portfolio investment + FDI inflows


Asian Economic Crisis 1997/98

Economic growth high in 1980s and early 1990s, but system ofeffectively fixed exchang rate

Partly problems in financial markets („cronycapitalism“; companies obtained loans fromcertain banks often not on sound economicbaisis)

1) Currency mismatch: firms took loans in foreigncurrency (at low interest rate; e.g. in US), but revenue in Baht (Thailand; etc.); 2) maturity mismatch: short-term financing of long term projects = risky(1+2=„Original Sin“)


Eastern European Post-Socialist Countries

Collapse of socialist command economy in the 1980s;

Command economy with state-owned firms, central planning ofoutput and prices, fixed exchange official exchange rate: goalwas sustained growth without unemployment and inflation

problems were corruption, economic inefficiency of big State-ownedenterprises (SOEs), declining terms of trade (due to rise of Asian NICs‘ exports), inelastic labor supply = rising wages= rising money supply=hidden inflation = fall of effective real wage rate; high devaluation ofcurrency in black foreign exchange markets. Motivation to work in officialeconomy was declining, growth very low; high foreign indebtedness(Poland, GDR) weak innovativeness; strikes in Poland in 1984, martial law,

Inefficient central planning; shadow economy rising, official economy crisis!

1991+: Transformation to market ec. (Poland 1989, end ofSoviet Union in 1991)


The Russian Crisis (and Oil)

High growth after initial recession in CEECs; efficiencygains from opening up and structural change/privatization(&restructuring), FDI inflows, innovations, trade expansion

Crisis in Russia in 1998 in the context of Asian crisis – thelatter „forced“ many countries to export more oil, includingMexico, oil and gas prices fell in 1997/98 as a consequenceof Asian crisis (=decline of demand & increase of oil supply; Indonesia, Brunei etc.); in 2000 oil price fell below 10$/barrel

Economic recovery in Russia 2001-2014; since then sanctionsand declining relative oil prices = slow growth (?crisis?)


Russia could be stabilizedunder president Putin

High growth in Russia after 1999, partly asconsequence of rising oil and gas prices

2014 Ukraine (Crimea) crisis, economicsanctions of the West vis-à-vis Russia; 2014-2016 Russia facing recession, reinforced byfalling oil prices in 2014/2015. Russia hasgas/oil exporting contract with new pipeline


Share of Asian Countries in EU Exports and EU Imports


0

5

10

15

20

25

30

35

40

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Exportshare ImportshareSource: Eurostat

Degree of Openness in Asia (Selected

Countries), 1980, 1990, 2000, 2010: X/Y


1980 1990 2000 2010

China 10.65 16.07 23.33 29.55

India 6.03 6.93 12.82 22.77

Indonesia 34.18 25.33 40.98 24.56

Japan 13.42 10.29 10.88 15.19

South Korea 32.06 27.95 38.56 52.37

Malaysia 56.69 74.54 119.81 97.30

Thailand 24.11 34.13 66.78 71.25

Source: WDI

Degree of Openness in Eastern European EU Countries (X/Y)


1980 1990 2000 2010

Belarus 45.96 69.21 54.12

Bulgaria 35.71 33.12 50.46 57.77

Czech Republic 40.53 60.93 67.86

Estonia

84.59 79.42

Hungary 39.09 31.14 74.60 86.55

Latvia 47.71 41.64 53.81

Lithuania 52.09 44.75 68.58

Poland 26.20 27.12 42.25

Romania 16.73 32.69 23.49

Russian Federation 18.16 44.06 29.89

Slovak Republic 26.55 70.45 81.25

Slovenia 90.76 53.70 65.42

Source: WDI

Export-GDP Ratio, Import-GDP Ratio

Import GDP ratios also high andincreasing

This reflects international division of labor

Rising role of intermediate products

High share of intra-industrial trade


Effective trade openness – has totake into account size of country

Size corrected openness shows

As regards „true openess“ US is relatively open among OECD countries

Some small countries are not as open as onemight think at first sight (e.g. Sweden); smallcountries always are relatively open – sizecorrected openness of Greece is much lowerthan comparable other small countries


Links Between EU and Asia

Trade

FDI

Internet


Migration and Ageing

Much immigration in Europe: South to North, East to West (see OECD Migration Report)

In Asia only limited migration

Ageing as new phenomenon in Europe and Asia

Japan No. 1 in terms of ageing; Germany No. 2

But Germany has immigration: net 2012: 360 000, 2013: 430 000

Japan has very limited immigration; pressure in Japan to raise tax rate for retirement benefits high

Long run challenge to adjust social security systems37P. Welfens/EIIW, U. of Wuppertal

Global EnergyChallenge/Renewables

Germany‘s share of renewable electricity was 25% in 2014, on some days>100%; large subsidies (€ 20 bill. per year for market value of renewable energy of € 2 bill.!); volatility of renewable energy implies thatreserve capacity of fossil fuel generation necessary

Renewable energy subsidies in Germany have noeffect on energy innovation (acording toExpertenrat Forschung und Innovation)

Problems with emission permit trading in EU; price2014/2015 only 7 €/ton – low and volatile price


Major Challenges in Europe...and Asia 2015/2016

EU facing wave of refugees from wars in Iraq, Afghanistan, Syria; most refugees would like to

go to Sweden, Germany, Austria – ad hoc allocation ofrefugees; Germany had about 1 million refugees in 2015

Eurozone still not fully stable (Greece withproblems, Italy?, Portugal!)

UK might leave EU in 2019

EU and European Commission is rather weak;

Risk of EU disintegration; US growth 2008-2016 is10% ahead of EU


Asian countries and nuclearenergy

Nuclear energy accident in Fukushima (Japan) in 2011 and certain risks...

Nuclear risks in Japan and other countries; power plants closed 2011-2013, rising imports of gas/coal

Biggest possible nuclear power plant accident in Germany (Ewers) would be about € 6000 bill (2x GDP); N. power plants have insurance for € 2.5 bill.

Nuclear power plants expansion in China

Much investment in coal power plants (India, China) P. Welfens/EIIW, U. of Wuppertal 40

Negative External Effects of NuclearEnergy (Expected Damage Probabilityimplies lower DD1)

Risk Pricing (t’ is insurance premium)


00

q1

0

q0

0

p0

0

(1+t’)p1

q

p

E0

0

E1

0

DD0

0DD1

0

k’1=k’0(1+t’)

k’0

p1 F

International Links Through TradeAND FDI (also technology transfer)

Foreign direct investment inflows: cumulated FDI inflows/K is share α* offoreign ownership in the capital stock K (in country 2: share α in K*)

We must make a distinction betweenGDP (Y) and gross national income (Z); Z = Y + net income from abroad (thismeans dividends obtained from country 2 minus dividends paid to country 2)


Recall that with production functionY=Kß(AL)1-ß – where K capital stock, A knowledge, L labor and 0<ß<1 – the shareof profits in GDP will be equal to ß(provided that there is competition in goodsmarkets and factor markets)


What Determines International Differencesin Per Capita Income z:=Z/L and z* (abroad)?

Long run perspective with focus on per capitaGDP (Y/L), based on production function

Real GNP (Z) = Y + net income from abroad

If country I (home country) receives foreign direct investmentinflows the cumulated FDI inflows imply that partα* of capitalstock K is owned by foreign investors; part (α*) of profitsaccrues to foreign subsidiaries; ß is profit share in Y

Z = Y(1-α*ß); assumption: no FDI to country II

Z*= Y* +α*ßY/q*; q*:= eP*/P real exchange rate


Growth in a closed economy (L given): Determineper capita income y# and Y#

(1) Y=K ß L1-ß; 0<ß<1; Y output, K capital, L

labor

Savings (2) S= sY; 0<s<1; capital depreciation rateδ; 0<δ<1;note y:=Y/L=(K/L)ß; define k:=K/L: y=kß

Grosss investment (3) I= dK/dt +δK; t time index

Goods market equilibrium condition S=I; (4) S/L = I/L

(5) dk/dt = skß –δk; δdepreciation rate of capital

Long run equilibrium (dk/dt=0): k#=(s/δ)1/(1-ß)

y#=(s/δ)ß/(1-ß) ; Y#=L(s/δ)ß/(1-ß) ; Y#=Lv‘0.5 if ß=1/345P. Welfens/EIIW, U. of Wuppertal

Neoclassical Growth Model will beconsidered in modified setup (withFDI inflows); e‘ is Euler number

Neoclassical model shows that the long runlevel of the growth path is raised bysavings rate s (and reduce by income tax rate)

Growth rate of output Y in model withpopulation growth L=L0e‘nt is given by n

Growth rate of Y in model with n>0 andtechnological progress rate a (growth rate ofknowledge A) is a+n; growth of y:=Y/L is „a“.


OA is level of growth rate ofoutput per capita; t is time


O

lny# = (ß/(1-ß))(lns – τ) + at (where dlnA/dt:=a>0)

In Reality 2 More Elements toBe Considered

1) population growth: growth rate is n(exogenous); capital intensity will be stableonly if K growth at the rate n! As n declinesper capita income will rise in long run...

2) role of knowledge (A); subsequently will be Harrod-neutral=labor-augmenting;

Growth rate a can be exogenous

Growth rate a can be explained: endogenousgrowth modelling (role of R&D, varieties etc.)


Consider China... Growth rate of labor supply in industry and services has been

positive 1978-2014; labor supply declining since 2015

Growth rate of knowledge (a: total factorproductivity growth) has increased throughrising imports of knowledge-intensive products and –later – rising FDI inflows (with associatedinternational technology transfer); and later throughrising human capital formation (2013: 31 mill. students) and R&D (research and development): Germany had 2.5 mill. students; 1% from China


China‘s economic expansion

Opening up in 1978, some private firms...

Special economic zones for foreinginvestors (initially a few regions, later more); roughly € 100 bill. per year in 2005-2015

Growth rates initially of about 10%, since2014 only about 7%; per capita income isabout 1/3 of EU (basis purchasing power parity figures)

WTO membership in 2001, hardly capital flow liberalization; very high savings ratio. Potential conflicts about islands in Asia


Population Growth Rate n: WhatDetermines Long Run Per Capita Income y#:= Y/L

Neoclassical growth modelf (t time index):

(1) Y=KßL1-ß; 0<ß<1; (1.1) y=kß (k:=K/L)

(2) S=sY (savings function); (2.1) S/L=sy; 0<s<1

(3) Gross investment I= dK/dt + δK (δ=depreciation rate)

Goods market equilibrium condition S=I or S/L = (dK/dt)/L + δK/L; define capital intensity k:=K/L and note here that (4) dk/dt = (dK/dt)/L – nkwhere n:= (dL/dt)/L; combine (1.1), (2.1), (3), (4):

dk/dt=0 gives k#=(s/(δ+n))1/1-ß; y#=(s/(δ+n))ß/(1-

ß)P. Welfens/EIIW, U. of Wuppertal 51

Some reflections on growthmodel with population growth

dk/dt = skß –(n+δ)k;

The long run equilibrium value of the capitalintensity k#= s/(n+δ)1/(1-ß)

k# the higher the higher s and the lower n and δ

Country with high n has lower k and lower y!

dk/dt>0 if the per capita savings exceed the term (n+δ)k –the element nk indicates the investment needed to maintainthe capital intensity despite the increase of the population, δk is per capita investment needed in the form ofreinvesment


Next Step is True Growth Model withGrowth Rate of Knowledge (a) and ofLabor (n); Knowledge is A (dlnA/dt :=a)

Production function Y =K ß (AL)1-ß

Note that if k‘:=K/(AL) we have dk‘/dt = (dK/dt)/L – (n+a)kwhere n:= (dL/dt)/L and a:=(dA/dt)/A.

We call AL labor in efficiency units;

We also can consider role of foreign direct investment for capitalaccumulation and the steady state solution for k and k‘, respectively; moreover, there is taxation (income tax rate τ)

Foreign investors have propensity to invest in county I (see s‘)

see Welfens, P., 2011, Innovations in Macroeconomics, 3rd edition, Springer. Global number of downloads of thisbook is about 5000


Growth Model explains per capita income (t istime index, τ income tax rate; α* is share of K owned

by investors from country II; profit income is ßY, A

knowledge, L labor)

(1) Y =K ß (AL)1-ß; WELFENS (2012)

(2) S= s(1- τ)Y(1- α*ß) + s‘α*ßY; s‘ is

reinvestment rate of foreign investors

Growth rate of A(t) is a, of L(t) is n; capital deprecia-tion rate δ;equilibrium condition S= dK/dt+δK; divide by AL: S/(AL)=δk‘+dk‘/dt+(a+n)k‘; k‘:=K/(AL)

Long run equilibrium (steady state: dk‘/dt=0) is givenby k‘#={[s(1- τ)+α*ß(s‘- s(1-τ))]/(a+n+δ)}ß‘;

ß‘:=[ß/(1-ß)]; y‘:=Y/(AL) = k‘#ß‘;54P. Welfens/EIIW, U. of Wuppertal

Long Run Per Capita Income y:= Y/L; y‘:=Y/(AL); e‘ Euler number

y:=A0 {[s(1- τ)+α*ß(s‘- s(1-τ))]/(a+n+δ)}ß‘ e‘at

Per capita income y:= y‘A0e‘ at ; e‘ Euler number

Level of the growth path is higher in thepresence of foreign direct investment inflowsthan in a closed economy if s‘> s(1- τ)

Endogenous growth rate of knowledge (a‘ is the

autonomous growth rate of knowledge)/progress function

a = a‘ + λα*a*; here λ is a positive parameter; cumulated FDI

inflows contribute to international technology transfer55P. Welfens/EIIW, U. of Wuppertal

What Determines Development ofPer Capita Income (y; or lny) in theLong Run?

1) The level of the growth path

2) the permanent growth rate (slope ofthe graph in lny-t-diagramme)

3) the per capita income in the long run equilibirumthus is determined by both 1) and 2)

if the level of the per capita income should fall whilethe growth rate is raised the long run impact on y# is positive


Level of Growth Path and Long Run Growth Rate (dlnα/dt=tg α). Rise of

Growth Rate of A(t) in t=T

57

ln y

A

B

D

C

tT‘

α

tT

t

α'

P. Welfens/EIIW, U. of Wuppertal

Opening up of China for trade in 1978; opening upfor FDI inflows could shift CD curve upwards...

FDI Inflows Raise Level of Growth Path AND Trend Growth Rate if...

If s‘>s(1-τ) then level of growth path is raisedthrough cumulated FDI inflows (s‘ is thereinvestment rate of profits of foreign firms)

Trend growth rate positively influenced by growthrate of foreign knowledge (a*) in the source countryof FDI

Countries in eastern Europe and Asia which haveattracted high FDI inflows could raise per capita real GNP!


Foreign GNP Per Capita

Foreign real national income Z* (* forforeign variable)= Y* +α*ßY/q*; q*:= eP*/P; division by q* translates real income units of country I into units ofcountry II

Z*/L* is an important variable; is raisedby profits from country I.

Two-way FDI also could be considered


Share of Cumulated FDI InflowsRelative to Y, Selected Countries in 2010

Italy: 25%

Germany: 40%

France: 60%

If K/Y is 4, then share of cumulated FDI inflowsrelative to K is:

Italy: 6,25% (rather low; limited technology transfer)

Germany: 10%

France: 15%; Ireland, Belgium: about 50%


Economic Growth and Crises

• Transformation, investment & internet

• Trade, FDI & the EU

Eastern Europe

catching up

• Investment, includingFDI

• Institutions & Internet

Asian economies

catching up


The Link Beetween Eastern Europe and Asia is RUSSIA

Oil and Gas from Russia

Eastern Europe‘s

interests andfears (Ukraine

crisis)

EU as Russia‘spartner,

Russia in WTO 2012

Asia is majorenergy

importer (not all countries)


Competition Between Europa and Asia

Asia is net importer of oil and gas

Eastern Europe also is importer of oil and gas; some competition between Eastern Europa and Asia to obtain oil and gas from Russia atfavorable prices

Gas markets are regional markets

Oil market is a global market (1 price); there iscompetition between oil/gas and renewableenergies (solar, wind, geothermal, water


Oil and Gas Ressources = +/-

Problem of Dutch Disease (in Russia, in Indonesia, in…)

Relative price of non-tradables(construction/houses, services) increaseand the N-sectors expands,

T-sector is shrinking; hence net exports will fall so that current account deficit problem

Corruption also is a problem


Common Traits of Eastern Europe and Asian Countries

Countries in both eastern Europe +Asia are eager to catch-up vis-à-

vis the US (or Western Europe) in terms of per capital income

Catching up requires

Trade = efficiency gains: specialization & scale ec.

Domestic investment plus FDI inflows

Political stability

Human capital formation

Knowledge (A) accumulation

Growth of bank credit and of stock markets


How to Organize EconomicCatching-up

Try to do it alone but in cooperation with US = big rich market; Taiwan, Korea, Hongkong, Singapore 70s

Try to achieve joint progress (e.g. ASEAN countries, initially starting as a group ofcountries interested in joint security – duringthe Vietnam War), later joint interest in economic integration = removing internaltariffs, opening up = more competition & moretrade; also liberalization of capital flows


Key Issues for Transition Countries in Eastern Europe and Countries in Asia

Sequencing

First open up for trade, then capital flowliberalization; or other way round? (the later no ascapital flows can be very volatile and if highinflows we get an appreciation of the currency –under flexible exchange rates – or overinvestmentand inflation (under fixed rates); until 1998 fixedexchange rates in Asia (vis-à-vis $), mostly fixedexchange rates in Europe (vis-à-vis D-Mark)

Structural Change and Growth67P. Welfens/EIIW, U. of Wuppertal

Careful Analysis of Common Interests and Rivalries

Some regional integration in both Asia and Eastern Europe

Relatively new political freedom in eastern European countries and Asian countries – tendency towardsnationalism?/NO tendency to easily surrender policyautonomy and install supranational institutions (atleast not in Asia)

Growing trade and investment links; USA as keypartner (also TTIP!); worries about € area instability


POWER and the Shapley Value In international organizations a majority of

country votes is needed for a decision: 2012 Nobel Prize Co-Winner Shapley defines power

by the relative ability of a country to switch a loser coalition of countries into a majoritywinner coalition; the marginal power is zero if a country‘s joining of an existing coalition nevertilts the weight of the new coalition into a winner team; under unananimous voting thepower of all countries is the same (e.g. WTO)


Foreign Direct Investment (FDI) in A Macro Perspective

FDI plays a crucial role in most easternEuropean countries and in most Asian countries (more in China than in India; seeUNCTAD, World Investment Report); someAsian countries have become important sourcecountries of FDI

If Y=Kß(AL)(1-ß) FDI inflows will affect capitalaccumulation (dK/dt) and knowledge (A); fromcountry II‘s knowledge (A*) spillover possible


Some FDI Aspects (WELFENS, 2011), Innovations in Macroeconomics

Real gross national product (Z) vs real GDP (Y):

Under competition capital income in home country(I) is equal to ßY (0<ß<1);

If share of foreign ownership in K is α* (0< α*<1) then Z= Y(1- α*ß); note that e is exchange rate…

Z* (foreign real GNP)= Y* + α*ßY/q*; q*:=eP*/P

Consequently: S = sY(1-τ)(1- α*ß) + s‘α*ß; S is

savings; not correct in all standard text books…


WELFENS: Innovations in Macroeconomics... (impact of level of

growth path)

Savings rates in Asia relatively high, low in some EU

countries; particularly in Greece.

Growth rate of technological progress (a) can be explained

by R&D-GDP ratio (R&D = research & development) and

the share in inward FDI inflows


Winning in the GlobalizationProcess/Opening up

Country is winner if

Big firms active and innovative

Incentives for entrepreneurship, high techcompanies: venture capital available

High FDI inflows

Adequate R&D promotion

Role of cluster promotion

...


Modernization and Opening up

Catching-up

Import ofcapital goods

andtechnology(via FDI)

Import ofintermediate

products

Export of final goods

(quality!)


Potential Problems WhenOpening up for Trade

Current accountdeficits high overyears= foreignindebtedness+

Imports could consistlargely of imported

consumption goods!*

Devaluations; high exchangre rate

volatility


Imported capital goods contribute to K and A, respectively; ability to repay isreinforced if production potential is raised.

Asia

Unfovorable:

Japan might face instability in the context of high debt-GDP (exceeding 240 % in 2014)

Favorable growth prospects:

Favorable demographic dynamics in the medium term (population growth until 2040 or 2050...)

Prospects for strong economic catching-up in somecountries (e.g. Philippines, Indonesia, Vietnam, India)

Techno-globalization: R&D is split up internationally


Global Imbalances?

77-6,00

-4,00

-2,00

0,00

2,00

4,00

6,00

8,00

10,00

12,00

Canada France Germany Italy Japan United Kingdom United States China RussianFederation

Current Account Balance (in % of GDP, annual data, source: OECD)

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Figure 9: Current Account Balance


The Debt GDP Ratio

78

Country 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995

European Union 27 87,2 86,2 83,0 80,2 74,8 62,5 59,0 61,6 62,9 62,3 61,9 60,4 61,0 61,9 65,7 66,4 68,3 NA NA

Euro area 17 92,6 91,8 88,0 85,6 79,9 70,1 66,3 68,6 70,2 69,6 69,2 68,0 68,2 69,2 71,6 72,8 73,2 73,7 72,0

Belgium 100,8 100,5 98,0 96,0 95,8 89,3 84,1 88,0 92,0 94,0 98,4 103,4 106,5 107,8 113,6 117,2 122,5 127,2 130,2

Bulgaria 18,5 17,6 16,3 16,3 14,6 13,7 17,2 21,6 27,5 37,0 44,4 52,4 66,0 72,5 77,6 79,6 105,1 NA NA

Czech Republic 44,9 43,9 41,2 38,1 34,4 28,7 27,9 28,3 28,4 28,9 28,6 27,1 23,9 17,8 15,8 14,5 12,6 11,9 14,0

Denmark 42,1 40,9 46,5 42,9 40,6 33,4 27,5 32,1 37,8 45,1 47,2 49,5 49,6 52,4 58,1 61,4 65,4 69,4 72,6

Germany 80,7 82,2 81,2 83,0 74,4 66,7 65,2 68,1 68,6 66,3 64,4 60,7 59,1 60,2 61,3 60,5 59,8 58,5 55,6

Estonia 11,7 10,4 6,0 6,7 7,2 4,5 3,7 4,4 4,6 5,0 5,6 5,7 4,8 5,1 6,5 6,0 7,0 7,6 8,2

Ireland 120,2 116,1 108,2 92,5 65,1 44,2 24,8 24,7 27,2 29,4 30,7 31,9 35,2 37,5 48,0 53,0 63,7 72,7 81,2

Greece 168,0 160,6 165,3 145,0 129,4 113,0 107,4 107,3 101,2 99,8 98,3 102,6 104,7 104,4 94,9 95,4 97,5 100,3 97,9

Spain 87,0 80,9 68,5 61,2 53,9 40,2 36,2 39,6 43,1 46,3 48,8 52,6 55,6 59,4 62,4 64,2 66,2 67,5 63,3

France 92,5 90,5 85,8 82,3 79,2 68,2 64,2 64,0 66,7 65,0 63,2 59,0 56,9 57,4 58,9 59,5 59,4 58,0 55,4

Italy 121,8 123,5 120,1 118,6 116,0 105,7 103,1 106,1 105,4 103,4 103,9 105,1 108,2 108,5 113,0 114,2 117,4 120,2 120,9

Cyprus 78,1 76,5 71,6 61,5 58,5 48,9 58,8 64,7 69,4 70,9 69,7 65,1 61,2 59,6 59,3 59,2 57,4 53,1 51,8

Latvia 44,7 43,5 42,6 44,7 36,7 19,8 9,0 10,7 12,5 15,0 14,7 13,6 14,1 12,4 12,5 9,6 11,1 13,9 15,1

Lithuania 40,9 40,4 38,5 38,0 29,4 15,5 16,8 17,9 18,3 19,3 21,0 22,2 23,0 23,6 22,6 16,4 15,3 13,8 11,4

Luxembourg 21,6 20,3 18,2 19,1 14,8 13,7 6,7 6,7 6,1 6,3 6,1 6,3 6,3 6,2 6,4 7,1 7,4 7,4 7,4

Hungary 78,0 78,5 80,6 81,4 79,8 73,0 67,1 65,9 61,7 59,5 58,6 55,9 52,7 56,1 60,8 60,9 62,9 72,4 85,6

Malta 75,2 74,8 72,0 69,4 68,1 62,3 62,3 64,4 69,7 71,7 67,6 59,1 60,9 54,9 57,1 53,4 48,4 40,1 35,3

Netherlands 73,0 70,1 65,2 62,9 60,8 58,5 45,3 47,4 51,8 52,4 52,0 50,5 50,7 53,8 61,1 65,7 68,2 74,1 76,1

Austria 74,3 74,2 72,2 71,9 69,5 63,8 60,2 62,3 64,2 64,7 65,3 66,2 66,8 66,2 66,8 64,4 64,1 68,1 68,2

Poland 53,7 55,0 56,3 54,8 50,9 47,1 45,0 47,7 47,1 45,7 47,1 42,2 37,6 36,8 39,6 38,9 42,9 43,4 49,0

Portugal 117,1 113,9 107,8 93,3 83,1 71,6 68,3 63,7 62,5 57,5 55,7 53,7 51,1 48,4 49,4 50,3 54,3 58,2 59,2

Romania 34,6 34,6 33,3 30,5 23,6 13,4 12,8 12,4 15,8 18,7 21,5 24,9 25,7 22,5 21,7 16,6 15,0 10,6 6,6

Slovenia 58,1 54,7 47,6 38,8 35,3 21,9 23,1 26,4 26,7 27,3 27,2 27,8 26,5 26,3 24,1 23,1 22,4 21,9 18,6

Slovakia 53,5 49,7 43,3 41,1 35,6 27,9 29,6 30,5 34,2 41,5 42,4 43,4 48,9 50,3 47,8 34,5 33,7 31,1 22,1

Finland 51,7 50,5 48,6 48,4 43,5 33,9 35,2 39,6 41,7 44,4 44,5 41,5 42,5 43,8 45,7 48,4 53,9 57,0 56,6

Sweden 34,2 35,6 38,4 39,4 42,6 38,8 40,2 45,3 50,4 50,3 51,7 52,5 54,7 53,9 64,3 69,9 71,2 73,3 72,8

United Kingdom 94,6 91,2 85,7 79,6 69,6 54,8 44,4 43,4 42,5 40,9 39,0 37,5 37,7 41,0 43,7 46,7 49,8 51,3 51,2

United States 111,8 108,9 103,5 99,1 90,4 76,5 67,5 66,9 68,2 68,6 60,7 57,4 55,0 55,1 61,2 65,0 68,4 71,1 71,9

Table 3: General Government Consolidated Gross Debt - GDP Ratio (in %)

Source: AMECO Database P. Welfens/EIIW, U. of Wuppertal

The Deficit-GDP Ratio

79

Table 4: General Government Deficit - GDP Ratio (in %)

Source: AMECO Database

Country 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995

European Union 27 -3,29 -3,62 -4,47 -6,54 -6,89 -2,42 -0,88 -1,48 -2,46 -2,85 -3,16 -2,59 -1,50 0,56 -1,03 -1,91 -2,72 -4,23 -6,96

Euro area 17 -2,90 -3,22 -4,12 -6,23 -6,38 -2,12 -0,68 -1,36 -2,51 -2,90 -3,14 -2,67 -1,96 -0,11 -1,49 -2,30 -2,84 -4,32 -7,23

Belgium -3,30 -2,96 -3,72 -3,81 -5,58 -0,99 -0,05 0,38 -2,49 -0,13 -0,11 -0,09 0,41 -0,04 -0,64 -0,94 -2,25 -3,97 -4,52

Bulgaria -1,70 -1,89 -2,09 -3,12 -4,33 1,67 1,16 1,87 1,04 1,86 -0,40 -1,19 1,07 -0,54 0,10 1,27 0,83 -10,07 -7,98

Czech Republic -2,61 -2,87 -3,09 -4,84 -5,84 -2,23 -0,74 -2,38 -3,25 -2,85 -6,71 -6,53 -5,59 -3,62 -3,59 -4,83 -3,62 -3,13 -12,80

Denmark -1,96 -4,08 -1,84 -2,51 -2,65 3,24 4,81 5,16 5,21 2,09 0,10 0,37 1,49 2,26 1,34 -0,04 -0,60 -2,03 -2,92

Germany -0,74 -0,87 -1,00 -4,27 -3,21 -0,06 0,24 -1,64 -3,32 -3,76 -4,15 -3,85 -3,08 1,14 -1,61 -2,33 -2,75 -3,35 -9,49

Estonia -1,27 -2,36 1,03 0,25 -2,02 -2,94 2,39 2,46 1,61 1,65 1,67 0,27 -0,06 -0,23 -3,46 -0,69 2,16 -0,35 1,09

Ireland -7,52 -8,29 -13,11 -31,16 -14,02 -7,34 0,07 2,91 1,66 1,37 0,40 -0,35 0,89 4,71 2,69 2,35 1,11 -0,10 -2,03

Greece -8,39 -7,27 -9,10 -10,35 -15,59 -9,82 -6,47 -5,73 -5,46 -7,59 -5,70 -4,81 -4,51 -3,73 -3,10 -3,86 -5,95 -6,70 -9,15

Spain -6,34 -6,44 -8,51 -9,34 -11,18 -4,50 1,92 2,37 1,27 -0,11 -0,35 -0,21 -0,53 -0,94 -1,22 -3,02 -4,01 -5,51 -7,20

France -4,19 -4,50 -5,15 -7,07 -7,54 -3,33 -2,73 -2,33 -2,92 -3,58 -4,07 -3,27 -1,65 -1,51 -1,80 -2,62 -3,31 -4,03 -5,46

Italy -1,11 -2,03 -3,95 -4,60 -5,44 -2,71 -1,63 -3,43 -4,45 -3,53 -3,61 -3,10 -3,14 -0,83 -1,94 -2,67 -2,73 -6,97 -7,45

Cyprus -2,50 -3,41 -6,30 -5,31 -6,12 0,94 3,50 -1,20 -2,43 -4,12 -6,56 -4,44 -2,25 -2,34 -4,35 -4,17 -5,06 -3,22 -0,85

Latvia -2,09 -2,08 -3,49 -8,17 -9,77 -4,24 -0,39 -0,48 -0,39 -1,03 -1,62 -2,29 -1,96 -2,79 -3,86 0,03 1,48 -0,44 -1,56

Lithuania -2,95 -3,25 -5,49 -7,22 -9,44 -3,29 -1,01 -0,45 -0,50 -1,53 -1,27 -1,86 -3,54 -3,20 -2,81 -3,01 -11,68 -3,21 -1,53

Luxembourg -2,22 -1,75 -0,59 -0,85 -0,81 3,00 3,68 1,35 0,00 -1,10 0,46 2,10 6,11 5,97 3,40 3,37 3,66 1,19 2,42

Hungary -2,94 -2,53 4,28 -4,21 -4,57 -3,72 -5,15 -9,41 -7,92 -6,47 -7,29 -8,98 -4,10 -3,04 -5,50 -7,96 -5,96 -4,44 -8,77

Malta -2,94 -2,55 -2,72 -3,72 -3,76 -4,60 -2,36 -2,79 -2,95 -4,71 -9,21 -5,84 -6,43 -5,84 -7,74 -9,93 -7,70 -7,98 -4,20

Netherlands -4,65 -4,43 -4,67 -5,10 -5,56 0,52 0,18 0,54 -0,26 -1,75 -3,12 -2,09 -0,24 1,97 0,41 -0,87 -1,25 -1,89 -4,34

Austria -1,93 -2,98 -2,60 -4,49 -4,12 -0,93 -0,87 -1,55 -1,70 -4,45 -1,51 -0,71 -0,05 -1,68 -2,30 -2,35 -1,80 -3,98 -5,78

Poland -2,54 -3,02 -5,11 -7,85 -7,37 -3,68 -1,88 -3,63 -4,07 -5,38 -6,19 -4,99 -5,27 -3,03 -2,31 -4,28 -4,63 -4,87 -4,41

Portugal -3,08 -4,68 -4,25 -9,82 -10,15 -3,63 -3,15 -4,61 -6,53 -4,01 -3,68 -3,38 -4,76 -3,27 -3,08 -3,88 -3,69 -4,86 -5,36

Romania -2,18 -2,83 -5,24 -6,83 -9,01 -5,68 -2,91 -2,24 -1,16 -1,22 -1,50 -2,00 -3,49 -4,67 -4,41 -3,21 -4,42 -3,57 -1,99

Slovenia -3,84 -4,25 -6,42 -6,01 -6,08 -1,86 -0,05 -1,36 -1,50 -2,25 -2,67 -2,45 -3,95 -3,71 -3,03 -2,37 -2,35 -1,11 -8,31

Slovakia -4,87 -4,68 -4,82 -7,68 -8,00 -2,09 -1,81 -3,17 -2,81 -2,36 -2,78 -8,22 -6,51 -12,27 -7,42 -5,33 -6,31 -9,91 -3,41

Finland -0,40 -0,74 -0,55 -2,54 -2,49 4,30 5,30 4,15 2,84 2,45 2,59 4,11 5,08 6,94 1,66 1,59 -1,37 -3,47 -6,13

Sweden 0,05 -0,29 0,29 0,25 -0,72 2,17 3,61 2,34 2,18 0,63 -1,03 -1,25 1,52 3,59 0,92 0,74 -1,54 -3,21 -7,42

United Kingdom -6,46 -6,68 -8,32 -10,20 -11,46 -5,05 -2,70 -2,69 -3,43 -3,45 -3,39 -2,06 0,48 3,57 0,92 -0,11 -2,17 -4,26 -5,92

United States -7,11 -8,29 -9,61 -10,63 -11,55 -6,42 -2,76 -2,05 -3,21 -4,41 -4,91 -3,90 -0,54 1,54 0,77 0,39 -0,81 -2,22 -3,22


80

Direct fiscal impact of financial rescues, per cent of GDP

Net revenue/cost for

general government

General

government assets

General

government

liabilities

Contingent

liabilities

2008-10 2010 2010 2010

Austria –0,5 2,0 2,6 7,8

Belgium 0,1 5,3 5,9 15,8

Estonia 0,0 0,0 0,0 0,0

Finland 0,0 0,0 0,0 0,0

France 0,1 0,1 0,0 4,7

Germany –1,6 10,9 12,5 3,6

Greece 0,2 1,7 1,7 25,4

Ireland –22,9 2,1 23,0 106,4

Italy 0,0 0,3 0,3 0,0

Luxembourg –0,1 6,3 6,2 3,3

Netherlands –0,6 8,5 9,0 6,8

Portugal –1,3 3,6 3,6 3,1

Slovak Republic 0,0 0,0 0,0 0,0

Slovenia 0,1 0,0 0,0 6,2

Spain 0,1 2,3 2,5 5,7

Euro area (15) –0,9 4,3 5,1 6,5

EU27 –0,8 4,2 5,1 8,6

Note: Gross costs over the period in some cases exceed net revenue costs as the result of gains or asset sales,

while the assets and liabilities have also evolved through the crisis.

Source: OECD Economic Area Surveys EURO AREA (2012), P.34


81

Net foreign asset position and net public assets, As a percentage of GDP

Source: OECD Economic Area Surveys EURO AREA (2012), P. 36

-120

-100

-80

-60

-40

-20

0

20

40

60

80

100

120

PRT GRC IRL ESP EST SVK ITA EA15 FRA AUT SVN FIN NLD DEU BEL LUX

Net foreign asset position, as a percentage of GDP

Net foreign assets, 2008 Net foreign assets, 2008-10 change

-120

-100

-80

-60

-40

-20

0

20

40

60

80

100

120

PRT GRC IRL ESP EST SVK ITA EA15 FRA AUT SVN FIN NLD DEU BEL LUX

Net public assets, as a percentage of GDP

Net public assets, 2008 Net public assets, 2008-10 change


Average term to maturity(total debt)


0

2

4

6

8

10

12

14

16

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

France Germany Italy Spain United States UK (domestic) UK (foreign)

Source: OECD

Macro Economic Data/FiguresLectures of Professor Welfens

Selected international macro statistics (monetary and real

macro data)

Output, Employment, Inflation, Interest Rates, Monetary Growth

Consider the data presented in the medium and long run

Compare countries and regions

Identify critical periods/crisis

Links between monetary and real developments

P.J.J. Welfens, www.eiiw.eu (2014) 84

Macroeconomic Data (Welfens), selected


-6

-4

-2

0

2

4

6

8

10

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Annualpercentchan

ge

RealGDPgrowth,1985-2014,Prognose2014-2019Source:IMF,WorldEconomicOutlookApril2014,www.imf.org

Advancedeconomies

Emergingmarketanddevelopingeconomies

World


-6

-4

-2

0

2

4

6

8

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Annualpercentchan

ge


France

Germany

Italy

Spain

UnitedKingdom


-10

-5

0

5

10

15

20

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Annualpercentchan

ge


China,People'sRepublicof

Japan

UnitedKingdom

UnitedStates

Euroarea


0

5000

10000

15000

20000

25000

30000

35000

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

US$

GNIpercapita,constant2005,1980-2013Source:WorldBank,WorldDevelopmentIndicatorsDatabase

Highincome

Low&middleincome

World


0

5000

10000

15000

20000

25000

30000

35000

40000

45000

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

US$


France

Germany

Italy

Spain

UnitedKingdom


0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

US$


China

Euroarea

Japan

UnitedKingdom

UnitedStates





0

5

10

15

20

25

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

%

Nominallong-terminterestrate,1980-2013Source:EuropeanCommission,AmecoDatabase

Germany

Spain

France

Italy

UnitedKingdom





-6

-4

-2

0

2

4

6

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

PercentofGDP

Currentaccountbalance,1985-2014Source:IMF,WorldEconomicOutlookApril2014,www.imf.org

Advancedeconomies



-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

PercentofGDP


France

Germany

Italy

Spain

UnitedKingdom


-6

-4

-2

0

2

4

6

8

10

12

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

PercentofGDP



Japan

UnitedKingdom

UnitedStates

Euroarea


0

20

40

60

80

100

120

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

PercentofGDP

Generalgovernmentgrossdebt,1985-2014Source:IMF,WorldEconomicOutlookApril2014,www.imf.org

Advancedeconomies



0

20

40

60

80

100

120

140

160

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

PercentofGDP


France

Germany

Italy

Spain

UnitedKingdom


0

50

100

150

200

250

300

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

PercentofGDP



Japan

UnitedKingdom

UnitedStates

Euroarea




Thank you for your attention!


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