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Contents of issue 1-2/2012

Beata Łopaciuk-Gonczaryk - Measuring Social Capital, summary, article

Joanna Działo - Why Is a “Good” Fiscal Policy Difficult to Pursue?, summary, article

Michał Kruszka - Cross-Border Banking in Central and Eastern Europe, summary, article

Ryszard Rapacki, Mariusz Próchniak - Economic Growth Paths in Central and Eastern European Countries and in Selected Emerging Economies, summary, article

Jakub Borowski, Adam Czerniak - The Monetary Policy of the People’s Bank of China, summary, article

Arkadiusz Bernal - Exemption of Financial Intermediation Services from Value Added Tax, summary, article

Dominika Milczarek-Andrzejewska - The Bargaining Power of Farms in Food Chains, summary, article


REVIEWS

Book Review: Michał Mackiewicz, Stabilizacyjna polityka fiskalna w krajach OECD (Fiscal Stabilization Policy in OECD Countries), Polskie Wydawnictwo Ekonomiczne, Warsaw 2010, 198 pp. - reviewed by Marek Lubiński

Book Review: Jerzy Boehlke, Firma we współczesnej myśli ekonomicznej. Studium teoretyczno-metodologiczne (The Firm in Contemporary Economic Thought: A Theoretical and Methodological Study), Wydawnictwo Naukowe Uniwersytetu Mikołaja Kopernika, Toruń 2010, 616 pp. - reviewed by Marian Gorynia

Book Review: Grzegorz Maciejewski, Ryzyko w decyzjach nabywczych konsumentów (Risk in Consumer Purchasing Decisions), Uniwersytet Ekonomiczy w Katowicach, Katowice 2010, 299 pp. - reviewed by Anna Dąbrowska


CONFERENCES

The 90th Anniversary of the Economic Society in Cracow - Tadeusz Smuga





Beata Łopaciuk-Gonczaryk - Measuring Social Capital

The article aims to critically review the most common indicators of social capital, combined with an attempt to provide general recommendations on how social capital should be measured. The article is based on an analysis of available research reports, including: (i) papers focusing on the definition and conceptualization of social capital; (ii) methodological studies on problems related to the operationalization of social capital; and (iii) examples of empirical studies using various kinds of measures of social capital.
In the first part of the article, the author discusses the fundamental difficulties of measuring social capital. The second part covers an overview of the key methods for measuring social capital used in empirical research, and their strengths and weaknesses. According to the author, there is a lack of standardization in the use of social capital indicators, which results not only from differences in conceptualization, but also from the nature of the studied processes, which are highly dependent on the context. The main recommendation is to exercise caution when choosing social capital indicators, which should be consistent with the definition of social capital adopted under specific research conditions, according to Łopaciuk-Gonczaryk. In many cases, this means the need to move away from devising indicators based on available secondary data, the author says, in favor of conducting new empirical research, for example research inspired by the social network analysis methods discussed in the article. In order to create increasingly relevant and reliable indicators of social capital, quantitative methods could be supplemented with elements of qualitative research, for example by improving questions used in questionnaires, Łopaciuk-Gonczaryk says. What is more, social capital is a multidimensional concept and as such it cannot be summarized with a single index, the author adds. Instead, it is worth attempting to identify the various dimensions of social capital and study the relationships taking place between these dimensions.

Keywords: social capital, conceptualization, operationalization, measurement, indicators
JEL classification codes: O43, O47, O12, D02
Article: PDF



Joanna Działo - Why Is a “Good” Fiscal Policy Difficult to Pursue?

The paper examines the impact of political factors on fiscal policy. The author’s main interest is in the political determinants of misguided, ineffective fiscal policies. Politicians tend to pursue their own interests and use fiscal policy to achieve their own goals, the author says. As a consequence, they usually run up excessive budget deficits and public debts. Often, fiscal policy becomes procyclical and reinforces the negative effects of the crisis instead of alleviating them.
The author examines liquidity constraints at a time of recession, the polarization of social preferences, information asymmetry and conflicts of interest as factors that make a good fiscal policy difficult to pursue. The analysis confirms that the personal interests of those in power strongly affect their fiscal policy. This explains why fiscal policy is often ineffective and generates an excessive budget deficit and public debt, Działo says.
Another research area is the role of fiscal policy and fiscal incentives at a time of global economic crisis. According to Działo, an excessive deficit and debt are in part due to a lack of a common fiscal policy in the euro zone. Better coordination of fiscal policy in EU countries could help limit the negative impact of the financial crisis on EU countries, the author says.
Działo also investigates the problem of fiscal and monetary policy coordination (policy mix), which is especially important for euro-zone countries pursuing a common monetary policy and different national fiscal policies. An expansionary fiscal policy pursued in many euro-area countries forces the European Central Bank to raise interest rates for fear of inflation, the author says. This leads to not only higher interest rates, but also a further increase in the level of public debt.

Keywords: fiscal policy, liquidity constraints, conflict of interest, information asymmetry, budget deficit, public debt, fiscal and monetary policy coordination (policy mix)
JEL classification codes: E62, E63, H62, H63
Article: PDF



Michał Kruszka - Cross-Border Banking in Central and Eastern Europe

The paper looks at cross-border banking as a mode of providing banking services. It offers an overview of World Trade Organization and European Union regulations on the internationalization of banks. Both legal systems recognize cross-border banking as equivalent to other modes of financial services supply, the author says.
The empirical analysis focuses on the banking sectors of 10 Central and Eastern European countries from 1998 to 2010. The role of cross-border banking services as a percentage of the total volume of loans/deposits makes it possible to conclude that the interbank markets are integrated across borders, Kruszka says. The retail banking sectors are dominated by banks that have established a local presence.
The paper also examines the determinants of cross-border bank flows for the nonfinancial sector. The author uses panel data techniques. The empirical results suggest that GDP growth, the exchange rate, and financial turbulence are the most important factors behind changes in cross-border lending. The growth of cross-border deposits depends on the difference between the interest rates and the depreciation of the borrower country’s currency.

Keywords: banking, cross-border services, financial integration
JEL classification codes: G21, F36
Article: PDF



Ryszard Rapacki, Mariusz Próchniak - Economic Growth Paths in Central and Eastern European Countries and in Selected Emerging Economies

The paper offers an empirical analysis of economic growth paths in two groups of countries. The first group consists of 10 Central and Eastern European (CEE10) countries. The second group constitutes a benchmark and encompasses 29 emerging economies in other regions of the world. The authors compare the growth paths of the CEE10 countries and the reference emerging economies. They use two econometric methods to test their research hypotheses: income-level convergence analysis and growth accounting exercise. The existence of convergence is checked using linear regression equations estimated with the least squares method (the explanatory variable is the rate of real GDP per capita growth in the case of β convergence and standard GDP per capita deviation between countries in the case of σ convergence. Total factor productivity (TFP), on the other hand, is calculated using the residual method, by subtracting from the overall rate of real GDP growth the average weighted growth rate of measurable factors of production: labor and physical capital.
The main findings from the analysis are as follows: (1) individual CEE countries and the CEE10 group, as a whole, displayed relatively fast economic growth, compared with the remaining 29 emerging economies; (2) the analysis did not confirm that the fast economic growth of the CEE10 countries (in comparison with the other emerging economies) resulted from the mechanism of absolute convergence. There were signs, however, that the former group was subject to conditional β convergence; (3) rapid economic growth in the CEE10 countries was to a large extent (more considerably than in other analyzed countries) driven by the increase in total factor productivity.

Keywords: economic growth, convergence, growth accounting, total factor productivity (TFP), Central and Eastern Europe
JEL classification codes: O47, P24, P27
Article: PDF



Jakub Borowski, Adam Czerniak - The Monetary Policy of the People’s Bank of China

The article discusses the results of an empirical analysis of the determinants of monetary policy in China during the period of January 2000 to September 2010. The analysis was conducted using models of ordered dependent variables. The research took into account eight possible variables that could significantly influence the likelihood of changes in the annual deposit rate and the required reserve rate for the six largest banks: (1) real annual GDP growth in China; (2) the consumer price index (CPI); (3) the increase/decrease of real estate prices in the 35 largest urban areas in China; (4) the growth of retail sales of consumer goods; (5) the growth of China’s foreign reserves; (6) export growth; (7) the growth of loans to the non-financial sector; and (8) the purchasing managers index (PMI).
GDP growth and lagged CPI inflation had a significant impact on the decisions of the People’s Bank of China on the required reserve rate in the analyzed period, the authors say. In turn, the future values of these variables were factors that influenced the level of the deposit rate. This suggests that, despite the lack of independence in shaping monetary policy, the decisions of the People’s Bank of China on interest rates were to an extent dictated by its own assessment of the outlook for economic growth and inflation. The study also revealed that the growth of real estate prices had a significant influence on the required reserve rate. This may be a harbinger of changes in the monetary policy reaction functions of key central banks in favor of a simultaneous use of monetary and macro-prudential policy tools to counter speculative bubbles on the real estate market.
The applied research method did not make it possible to determine to what extent the demand gap and the deviation of inflation from the target influenced the decisions of the People’s Bank of China in the analyzed period, Borowski and Czerniak say. The role of these factors in China’s monetary policy is therefore an interesting area for further research, the authors conclude.

Keywords: China, People’s Bank of China, monetary policy, monetary policy reaction function
JEL classification codes: C25, E43, E58
Article: PDF



Arkadiusz Bernal - Exemption of Financial Intermediation Services from Value Added Tax

The article looks at why financial intermediation services are exempt from value added tax (VAT) and discusses the implications of this situation. Financial intermediation services are exempt from value added tax although they are a significant part of the economy, the author says. There are several reasons why this exemption is justified, according to Bernal. Experts differ on whether or not financial intermediation services generate value added. If they do, the question is how this value should be calculated, the author observes. A number of factors influence the interest rate, which is the main category in financial intermediation services, but not all these factors contribute to value added. Alongside difficulties in determining taxable income, there is a problem with defining what exactly should be subject to taxation.
The article highlights the implications of the exemption for both intermediaries and their customers. The exemption for intermediaries may influence the proportion of factors of production used, and whether intermediation services are provided on an in-house basis or are outsourced. The exemption may also have an impact on cooperation between companies active in the sector, and on the choice of customer groups (corporations vs. individuals). Moreover, the exemption may influence the choice of the venue from which goods are delivered, and the location of the head office and organizational structure of the service provider. The exemption of financial intermediation services from VAT also influences intermediaries’ customers, for example with regard to the choice of the structure of capital, the choice of risk management tools, and the choice of the consumption model, as well as the international competitiveness of businesspeople taking advantage of financial intermediation services.
The article discusses examples of how financial intermediation services are approached in different countries worldwide.

Keywords: financial intermediation services, value added tax, bank, credit, European Union, directive
JEL classification codes: H25
Article: PDF



Dominika Milczarek-Andrzejewska - The Bargaining Power of Farms in Food Chains

The article reviews the theoretical arguments and conclusions of empirical studies on the bargaining power of farms in contemporary food chains. Theoretical inspirations are mainly drawn from the new political economy and new institutional economics.
The author puts forward a thesis that the bargaining power of farms depends on both their resources (economic power) and the possibilities for influencing decision makers (political power). The following market factors influencing the bargaining power of farms are analyzed: market structure, the level of economic resources held, transaction costs, and the scope of cooperation. In addition, political factors are identified: the distribution of voter preferences in society and the influence of agricultural organizations, which are important interest groups.
The author attempts to bring order to the definitions and methodological approaches used in the analysis of bargaining power. The article identifies areas for further research with a special emphasis on research into the political power of food chain players and on the need to combine this power with economic power.

Keywords: bargaining power, agri-food sector, political economy, institutional economics
JEL classification codes: B40, D72, L14, Q13
Article: PDF

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