the interdependence of european russian energy relations abstract the aim of this article is to explore this dynamic interdependent relationship between russia and europe in the field of energy based on the concept of interdependence and perspectives on the political aspects of trade relations we discuss how russia can exercise power based on its energy resources and how the eu can compensate for its lack of power in the energy game with other trade related capabilities in particular we explore the implications of the lack of a full fledged eu foreign energy policy towards russia with the somewhat counter intuitive conclusion that the eu countries on average not necessarily are better off with a common foreign energy policy

capital quality improvement and the sources of economic growth in the euro area sources of growth europe s growth slowed in the 1990s reinforcing the overall impression of a need to catch up with the us regarding standards of living in reaction eu leaders adopted the famous lisbon agenda in 2000 the agenda is now under review the aim being to determine why progress on its pro growth goals has been unsatisfactory and what can be done about it the first crucial step in this process is to understand the true sources of the european growth slowdown sources of growth calculations have always been imprecise but evidence from the us suggests that quality upgrading especially in capital goods has substantially worsened the precision problem since the 1990s unfortunately quality adjusted sources of growth calculations however have not performed satisfactorily for europe so europe s leaders are working with potentially misleading accounts of europe s growth slowdown redressing this omission is the goal of this paper failure to account properly for capital quality improvements leads to two mistakes first overall gdp is underestimated our calculations for example show that euro area gdp growth was underestimated on average by 0 7 percentage points annually in the late 1990s however similar quality adjustment figures raise us growth figures in the same period by even more so quality adjusting suggests that the us eu growth gap was even more pronounced than previously believed secondly the sources of growth calculations used to prioritize europe s pro growth policies are skewed our calculations show that the contribution of the slowdown in disembodied technical progress to the overall slowdown is more pronounced after quality adjustment our findings point to the need for adoption of microeconomic measures aimed at enhancing overall efficiency and boosting innovation activity such measures would aim at a better business environment e g by easing regulatory and administrative burden and liberalizing energy and telecommunications markets plutarchos sakellaris and focco vijselaar

the labor market status of immigrants effects of the unemployment rate at arrival and duration of residence combining current population survey samples from november 1979 april 1983 june 1986 and june 1988 all of which included data on country of birth and year of immigration the authors examine pat

tracking the new economy using growth theory to detect changes in trend productivity abstract the acceleration of productivity after 1995 prompted a debate over whether the economy s underlying growth rate would remain high in this paper we draw on growth theory to identify variables other than productivity namely consumption and labor compensation to help estimate trend productivity growth we treat that trend as a common factor with two regimes high and low growth our analysis picks up striking evidence of a return in 1997 to the high growth regime nearly 25 years after a switch from high to low growth we find that both the common factor and regime switching aspects of the model are important for identifying changes in trend productivity and also show that the trend breaks are more difficult to detect with per capita as opposed to per hour based data because of persistent labor supply shifts finally we argue that our methodology is effective in detecting changes in trend in real time in the case of the 1990s the methodology would have signaled the regime switch by 1999 or within roughly six quarters of when it occurred according to the full sample

euro dollar real exchange rate dynamics in an estimated two country model an assessment abstract several theoretical contributions using two country models have combined alternative forms of pricing under nominal rigidities with different asset market structures to explain real exchange rate dynamics we estimate a two country model using data for the united states and the euro area and study the importance of such alternative assumptions in fitting the data a model with local currency pricing and incomplete markets does a good job in explaining real exchange rate volatility and fits the dynamics of domestic variables well the complete markets assumption delivers a similar fit only when the structure of shocks is rich enough

investment specific shocks and external balances in a small open economy model we set up a standard small open economy business cycle model driven by govern ment spending shocks neutral productivity tfp shocks and investment specific shocks the model is calibrated to quarterly canadian data and its predicted moments and sample paths are compared with their canadian counterparts we find that the model captures the dynamics in investment and in the trade balance better than special cases of the model where either one of the productivity shocks is omitted more specifically the model matches the variance of the trade balance output ratio its correlation with output and its autocorrelation it also matches the output investment correlation jel classification f41 e32

a new approach to multi step forecasting using dynamic stochastic general equilibrium models dsge models are of interest because they offer structural interpretations but are also increasingly used for forecasting estimation often proceeds by methods which involve building the likelihood by one step ahead h 1 prediction errors however in principle this can be done using different horizons where h 1 using the well known model of smets and wouters 2007 for h 1 classical ml parameter estimates are similar to those originally reported as h extends some estimated parameters change but not to an economically significant degree forecast performance is often improved in several cases significantly

does lootable wealth breed disorder a political economy of extraction framework this article proposes a political economy of extraction framework that explains political order and state collapse as alternative outcomes in the face of lootable wealth different types of institutions of extraction can be built on lootable resources with divergent effects on political stability if rulers are able to forge institutions of extraction that give them control of revenues generated by lootable resources then these resources can contribute to political order by providing the income with which to govern conversely the breakdown or absence of such institutions increases the risk of civil war by making it easier for rebels to organize the framework is used to explain two puzzling cases that experienced sharply contrasting political trajectories in the face of lootable resources sierra leone and burma a focus on institutions of extraction provides a stronger understanding of the wide range of political outcomes from chaos to dictatorship to democracy in resource rich countries

tastes and technology in a two country model of the business cycle explaining international trade on international financial markets allows people to insure country specific risk and smooth consumption intertemporally equilibrium models of business cycles with trade on global financial markets typically yield international consumption correlations near one and excessive volatility of investment the authors incorporate nontraded goods in the model and find that the implications for aggregate consumption investment and the trade balance are consistent with business cycle properties of industrialized countries however the model driven by technology shocks alone yields counterfactual implications for comovements between consumption and prices at the sectoral level taste shocks produce price quantity relationships more consistent with the data copyright 1995 by american economic association

contra coercion russian tax reform exogenous shocks and negotiated institutional change the view of institutions as coercion rather than as contracts dominates the comparative politics literature on both institutional creation and the politics of economic reform the emergence of a collectively optimal tax code in russia demonstrates the limitations of this emphasis on coercion this new tax code was not imposed by a strong central leader mandated by international institutions or the result of state capture by powerful economic interest groups rather it is the product of a mutually beneficial exchange between the russian government and the russian oil companies russia s ability to negotiate an effective tax regime also suggests the conditions under which and the microcausal mechanism whereby exogenous shocks promote institutional change and economic reform owing to their mutual vulnerability and interdependence the august 1998 financial crisis generated widely shared perceptions among these actors that the payoffs of cooperation had changed yet the economic reform institution that resulted required a series of incremental strategic moves that established common knowledge

an equilibrium theory of nominal and real exchange rate comovement abstract this study develops a quantitative equilibrium theory to offer an explanation of one of the most puzzling aspects of empirical exchange rate behavior the high degree of nominal and real exchange rate comovement technology shocks coupled with the accomodative response of monetary policy to output fluctuations are primarily responsible for the covariation between nominal and real exchange rates shocks to the marginal efficiency of investment also play an important role

does money matter in shaping domestic business cycles an international investigation we study the contribution of money to business cycle uctuations in the us the uk japan and the euro area using a small scale structural monetary business cycle model constrained likelihood based estimates of the parameters are provided and time instabilities analyzed real balances are statistically important for output and in ation uctuations their contribution changes over time models giving money no role provide a distorted representation of the sources of cyclical uctuations of the transmission of shocks and of the events of the last 40 years

interdependent international relations and the expansion of ethanol production and consumption the brazilian perspective abstract the global production and consumption of ethanol are expected to increase the growing interdependence of markets and nations producers and consumers of biofuels has led actors to seek and devise mechanisms intended to develop the sector this paper aims to analyze the interdependent international relations between brazil and other ethanol biofuel producer and consumer countries to do so the paper explores the theory of complex interdependence and the game theory a quali quantitative study was conducted involving the application of two questionnaires to experts on biofuels and documentary analysis aided by qda miner software the results show that brazil shares highly interdependent relations with the united states an intermediate degree of interdependence with europe and a low degree of interdependence with china the dimensions of those interdependent relations can be ranked according to importance in the following order first the political then the economic technical and finally the social environmental dimensions a number of actions can be envisaged that could lead ethanol to achieve an increasingly strategic position in the diversification of the energy matrix in different countries technological efforts to improve production efficiency the creation of globally integrated policies designed to provide security and develop the production and consumption infrastructure the reduction of international tariffs on the product and the transformation of ethanol into a global commodity with a large number of countries buying and selling the product this paper faced the challenge of integrating approaches and concepts from two complex theoretical areas complex interdependence theory and game theory the research methodology and the insights gained from the ethanol case contribute to the literature on the applicability of these two theoretical approaches

the unemployment experience of male immigrants in england in this paper the unemployment experience of immigrant men in the english labour market is examined using 1993 1994 data from the quarterly labour force survey of the united kingdom hypotheses proposed by chiswick 1982 are investigated for both the claimant count and the ilo measures of unemployment using logistic regression analysis our results show that recent white and nonwhite immigrant men experience much higher levels of unemployment than earlier cohorts for whites this effect is transitory whereas for nonwhites unemployment rates adjust more slowly as the duration of stay increases immigrant unemployment rates also vary considerably with country of birth

risk sharing and real exchange rates the role of non tradable sector and trend shocks abstract in this paper we show that the tradable and non tradable total factor productivity tfp processes of the us and europe have unit roots and can be modeled by a vector error correction model vecm then we develop a standard two country and two good tradable and non tradable dsge model our model implies that using cointegrated tfp processes and including non tradables help solve the real exchange rate rer volatility and risk sharing puzzles cointegrated tfp shocks or trend shocks generate significant income effects and amplify the mechanisms that produce high rer volatility moreover trend shocks can break the tight link between relative consumption and rer for low and high values of trade elasticity parameters the non tradable sector in the model improves the results for the risk sharing significantly

migration theories and evidence an assessment abstract this paper presents a critical survey of theories of migration their welfare and policy implications and their empirical relevance we also develop some extensions to the theory beginning with the harris and todaro ht model in particular the ht model is extended to examine risk averse behaviour within families where the migration of members of families serves to diversify risk the welfare implications of the individual migration decision and government intervention in the form of employment subsidies are examined recent evidence on international migration is presented it is shown that migration does not flow automatically in response to wage differentials characteristics of migrants and the process of self selection are found to be important determinants of the rate of migration

the earnings of male immigrants in england evidence from the quarterly lfs in this paper we estimate earnings functions for native born and foreign born white and non white males in the english labour market using data from the quarterly labour force survey our results highlight the importance of distinguishing between native born and foreign born males when investigating the labour market experience of ethnic minorities furthermore the earnings performance amongst white immigrants varies considerably

occupational transition and country of origin effects in the early stage occupational assimilation of immigrants some evidence from australia we examine the occupational attainment of recent immigrants at 2 years post migration in order to study their early stage assimilation into the labour market in australia human capital endowments and country of origin effects are examined for six occupational groups we also study transitions across occupations from source to host country the empirical approach utilizes the ordered generalized extreme value ogev model which embodies differing utility functions across occupational outcomes as well as accounting for any ordering in these outcomes the results suggest that the transferability of knowledge and skills is affected by cultural and social backgrounds and that non western immigrants are disproportionately channelled into inferior jobs post migration the investigation of the country of origin effect on the skilled migrants occupational transition process is especially apt in the context of skill shortages in many host countries

non stationary hours in a dsge model the time series fit of dynamic stochastic general equilibrium dsge models often suffers from restrictions on the long run dynamics that are at odds with the data using bayesian methods we estimate a stochastic growth model in which hours worked are stationary and a modified version with permanent labor supply shocks if firms can freely adjust labor inputs the data support the latter specification once we introduce frictions in terms of labor adjustment costs the overall time series fit improves and the model specification in which labor supply shocks and hours worked are stationary is preferred

bridging dsge models and the raw data abstract a method to estimate dsge models using the raw data is proposed the approach links the observables to the model counterparts via a flexible specification which does not require the model based component to be located solely at business cycle frequencies allows the non model based component to take various time series patterns and permits certain types of model misspecification applying standard data transformations induces biases in structural estimates and distortions in the policy conclusions the proposed approach recovers important model based features in selected experimental designs two widely discussed issues are used to illustrate its practical use

stochastic trends and economic fluctuations are business cycles mainly the result of permanent shocks to productivity this paper uses a long run restriction implied by a large class of real business cycle models identifying permanent productivity shocks as shocks to the common stochastic trend in output consumption and investment to provide new evidence on this question econometric tests indicate that this common stochastic trend cointegration implication is consistent with postwar u s data however in systems with nominal variables the estimates of this common stochastic trend indicate that permanent productivity shocks typically explain less than half of the business cycle variability in output consumption and investment copyright 1991 by american economic association

a framework to evaluate security of supply in the electricity sector security of electricity supply soes has become a major concern for regulators and policymakers over the last decade however most work focusses either more generally on energy security or on a single fuel we develop a comprehensive but flexible framework to assess the soes for a single jurisdiction taking into the account the specificities of electricity this framework has two aims i provide a snapshot of the situation to understand current weaknesses and determine what actions are required ii capture the evolution over time to evaluate progress and identify potential problems before they materialise the framework based on an extensive literature review consists of twelve dimensions that are critical for soes we develop metrics that capture the state and evolution of each dimension this framework is intended to be a management information tool for all stakeholders aimed at organising data and structuring its analysis to enable monitoring the evolution of the soes while also functioning as an early warning system by flagging potential future problems

prelude to the resource curse explaining oil and gas development strategies in the soviet successor states and beyond the literature on resource rich states leaves a key and prior question unexplored why and how do states choose to develop their natural resources the authors address this gap by explaining the di

endogenous oil rents oil rents may at times fall like manna from heaven into the fiscal coffers of the state yet politicians also make decisions that can increase or decrease the extent to which oil rents accrue to the central government though counterintuitive various evidence suggests that politicians sometimes do not seek to maximize the state s claim on rents in this article the author substantiates this observation with evidence from venezuela and then develops a formal model of the relationship between electoral competition and rent choice the author argues that the model can explain why politicians allowed the central government s share of rents to decline in venezuela beginning in the 1990s even though a decline in rents plausibly contributed to the destabilization of venezuelan democracy the argument illuminates patterns of rent capture in other cases whereas the model may be useful in many settings in which the gains from economic investment are realized over several electoral terms

dynamics of the trade balance and the terms of trade the j curve the authors provide a theoretical interpretation of two features of international data the countercyclical movements in net exports and the tendency for the trade balance to be negatively correlated with current and future movements in terms of trade but positively correlated with past movements they document the same properties in a two country stochastic growth model in which trade fluctuations reflect in large part the dynamics of capital formation the authors find that their general equilibrium perspective is essential the relation between the trade balance and the terms of trade depends critically on the source of fluctuations copyright 1994 by american economic association

consumption and real exchange rates in dynamic economies with non traded goods abstract we examine the possibility that non traded goods may account for several striking features of international macroeconomic data large persistent deviations from purchasing power parity small correlations of aggregate consumption fluctuations across countries and substantial international real interest rate differentials a dynamic exchange economy is used to show that non traded goods in principle can account for each of these phenomena in the theory there is a close relation between fluctuations in consumption ratios and those in bilateral real exchange rates but we find little evidence for this relation in time series data for eight oecd countries

how well can the new open economy macroeconomics explain the exchange rate and current account abstract this paper advances the new open economy macroeconomic literature in an empirical direction estimating and testing a two country model fit to u s and g7 data the model performs moderately well for the exchange rate and current account results offer guidance for future theoretical work parameter estimates lend support to the assumption of local currency pricing estimates are found for key parameters commonly calibrated in the theoretical literature such as the elasticity of substitution between home and foreign composite goods and the response of a country s risk premium to the net foreign asset position results also indicate that deviations from interest rate parity are not closely related to monetary policy shocks as recently hypothesized but that these deviations are strongly related to shifts in the current account

assimilation changes in cohort quality and the earnings of immigrants this paper reexamines the empirical basis for two facts that seem to be found in most cross section studies of immigrant earnings 1 the earnings of immigrants grow rapidly as they assimilate into the united states and 2 this rapid growth leads to many immigrants overtaking the earnings of the natives within 10 15 years after immigration using the 1970 and 1980 u s censuses this paper studies the earnings growth experienced by specific immigrant cohorts during the period 1970 80 it is found that within cohort growth is significantly smaller than the growth predicted by cross section regressions for most immigrant groups this differential is consistent with the hypothesis that there has been a secular decline in the quality of immigrants admitted to the united states

the legacy of immigration labour market performance and education in the second generation previous research finds that the children of immigrants or the second generation earn at least as much as other native born but that there are persistent ethnic differences in the intergenerational transmission of education and wages we explain why these results are not incompatible and extend the empirical evidence in several directions using the canadian survey of labour and income dynamics first we estimate a model of wages earnings and hours worked using modern econometric techniques to corroborate earlier us results of complete integration by the second generation in the labour market we find that ethnic differences in labour market performance are significant but that these difference do not alter conclusions about the relative performance of the second generation second we find a source of superior labour market performance for the second generation in higher educational attainment which constitutes an important legacy of immigration that should not be ignored third we find that the de

a bargaining model with incomplete information about time preferences etude d un jeu de negociation strategique sequentiel avec information incomplete caracterisation d une classe d equilibres sequentiels appeles equilibres sequentiels de negociation et demonstration de l unicite de cet equilibre

does issue linkage work evidence from european alliance negotiations 1860 to 1945 though scholars widely claim that issue linkage the simultaneous negotiation of multiple issues for joint settlement can help states conclude international agreements there exist some notable skeptics resolving this debate requires empirical evidence however beyond a few case studies there exists no direct and systematic evidence that issue linkages actually increase the probability of agreement i address this lack of direct and systematic evidence by combing original data on failed alliance negotiations with data from the alliance treaty obligations and provisions atop database using matching techniques i find that for alliance negotiations between 1860 to 1945 offers of trade linkage did substantially increase the probability of agreement besides confirming issue linkage s ability to help clinch an agreement this article s research design and evidence have far reaching implications for the study of negotiations and alliances the research design illustrates the value of considering the dogs that didn t bark as it identifies both successful and failed negotiations the article s evidence explains the high rate of alliance compliance identified by previous scholars and highlights a need to rethink the alliance formation process

self selection and the earnings of immigrants this paper analyzes the way in which the earnings of the immigrant population may be expected to differ from the earnings of the native population because of the endogeneity of the decision to migrate the empirical study shows that differences in the u s earnings of immigrants with the same measured skills but from different home countries are attributable to variations in political and economic conditions in the countries of origin at the time of migration excerpt

economic interdependence bargaining power and political influence bargaining theory is used to evaluate the proposition that asymmetrical economic interdependence among states is a source of political power it is shown that asymmetrical economic interdependence does not imply that less dependent actors will be able to exercise political influence over more dependent ones the use of economic interdependence for political influence requires instead that the exchange of economic resources for political concessions make both parties to a relationship better off than they would be if they bargained over the distribution of the gains from the economic relationship alone whether this is true is independent of the degree of asymmetry in the economic relationship or its direction an explanation is given for the fact that other scholars have reached different conclusions and the implications of these results for our understanding of a variety of types of relations among governments are derived

the hidden hand of economic coercion why do policymakers consistently employ economic sanctions even though scholars consider them an ineffective tool of statecraft game theoretic models of economic coercion suggest the success rate may be understated because of selection effects when the targeted country prefers conceding to incurring the cost of sanctions it has an incentive to acquiesce before the imposition of sanctions the bulk of successful coercion episodes should therefore end with sanctions threatened but not imposed this contradicts the recent literature on sanctions which assumes that sanctions rarely if ever work at generating significant concessions from the targeted country and are imposed for domestic or symbolic political reasons if the game theoretic argument is correct the crucial cases to study are those in which coercion is threatened but not implemented a statistical analysis of data on sanctions in pursuit of economic or regulatory goals strongly supports the gametheoretic argument these results suggest that the significance of economic coercion has been undervalued in the study of statecraft and international relations more generally

endogenous capital depreciation and technology shocks i examine the dynamic impact of capital maintenance on key aggregates through the depreciation rate i find that two factors are crucial for the short run effects of total factor productivity and investment specific shocks i the marginal efficiency of maintenance and its connection with the rate of utilization and ii the interplay between the intertemporal effect of maintenance and the substitution effect between maintenance and utilization the latter is expressed by the relative size of the elasticity of maintenance to the hicksian elasticity of complementarity between maintenance and utilization these theoretical results suggest that to match the observed responses of the macroeconomic aggregates the sign of the cross derivative should be negative and that the relative size of the hicksian elasticity should be smaller than the maintenance elasticity of marginal depreciation finally the model suggests that the main macroeconomic aggregates react procyclically with the exception of maintenance the behavior of which depends on the type of the shock

stochastic growth in the united states and euro area this paper estimates using data from the united states and the euro area a two country stochastic growth model in which both neutral and investment specific technology shocks are nonstationary but cointegrated across economies the results point to large and persistent swings in productivity both favorable and adverse originating in the united states but not transmitted to the euro area more specifically the results suggest that while the euro area missed out on the period of rapid investment specific technological change enjoyed in the united states during the 1990s it also escaped the stagnation in neutral technological progress that plagued the united states in the 1970s

the economics of immigration this literature review concerns the impact of immigration on the economy of the host country focusing on the experience of the united states the emphasis is on the period from the 1970s to the 1990s the author shows that research earlier in this period generally concluded that the economic effects of immigration were positive but that more recent research on later migrations have generally concluded that immigration may be having an adverse effect on the earnings of native unskilled workers and be placing an increased burden on welfare programs the importance of such economic analysis for the formulation of appropriate migration policies is stressed

trade in capital goods and investment specific technical change abstract this paper studies the role of trade in capital goods and investment specific technical change in the determination of the cross country correlation of output and the volatility of the terms of trade the cross country correlation of output for g7 countries ranges from 0 42 to 0 85 and the relative volatility of the terms of trade ranges from 1 24 to 6 06 the standard model with total factor productivity change and trade in final goods only generates an average cross country correlation of 0 05 and an average volatility of 0 68 models with trade in capital goods and investment specific technical change produce an average cross country correlation of 0 71 and an average volatility of 2 81

will the european commission s policy hinder gas supplies to central and eastern european countries opal case decision abstract natural gas has become one of the most important sources of energy the liberalization of the gas sector in the last decades brought a dynamic development of the energy infrastructure in the eu thus it must be underlined that the liquidity of the gas market is dependent on the outside supplies the study examines the european commission s policy taking into consideration specifically its decision on the exemption of opal gas pipeline from eu rules the main question is what would be the long term effect of such policy in the authors opinion there are several serious doubts whether the commission has made an appropriate decision the major one concentrate on the impact of the decision which according to the commission refers only to germany and czechia gas market nevertheless an analysis of gas flow based on the entsog leads to a conclusions that decision could have a substantial influence on slovakia and poland if so under the eu provisions the investment can not be excluded form the eu rules therefore the authors will analyze step by step the commission decision and present its possible future impact on the internal energy market

early labour market experiences of second generation immigrants in sweden this article investigates second generation immigrant s early labour market performances in sweden to study their labour market success we estimate dynamic transition rate models cox type proportional hazards in a competing risk framework using register based panel data set our results reveal that parental resources affect not only second generation immigrants continuing education but also their later labour market success the study verifies that finding a job is difficult for second generation immigrants and the significant unobserved heterogeneity parameter estimate may indicate discrimination as a whole second generation immigrants have worse labour market performances compared to their native born counterparts

long run implications of investment specific technological change an attempt is made to disentangle its effects from the more traditional hicksneutral form of technological progress the balanced growth path for the model is characterized and calibrated to u s national income and product account nipa data the quantitative analysis suggests that investment specific technological change accounts for the major part of growth jel e13 030 041 047

do economic sanctions destabilize country leaders do economic sanctions destabilize the governments they target a form of foreign pressure sanctions are typically meant to alter the policies of other countries there is much pessimism on whether they ever work this article shows that economic pressure works in at least one respect it destabilizes the leaders it targets i present a theoretical argument that explains why destabilization is a necessary condition for successful coercion i find evidence that pressure destabilizes in a large panel of cross country time series data the destabilization finding indicates that sanctions may be more effective at altering policies than we think i conclude by noting that greater optimism regarding the effectiveness of sanctions should be balanced by a careful consideration of the policy s real and sizeable costs for those caught in the middle

the energy union and security of gas supply this paper discusses and contrasts the proposals for an energy union in the european union and its impact on security of gas supply based on an examination of historical east west gas trade and by revisiting energy security concepts the paper analyzes how problems with dependency on energy imports can be reduced the paper discusses how the positions of central and eastern european countries ceec where security challenges are especially evident and the positions of countries in western europe where they are less acute interact and conflicts in making a common energy security policy as part of the energy union the paper argues that the mainly confederative structure of the eu and diverging national situations make it difficult to unify positions into an effective common energy policy however with the ceec in the eu the eu is also changing and an increased focus on energy security may be accepted extended interconnectedness within and to the ceec appears to be the central issue that would mitigate albeit not solve contemporary security of gas supply problems as it would also bring the internal energy market closer to reality it could in addition help the energy union to become a unifying project merging the interests in the east and the west despite their different security of gas supply concerns with russian gas

aggregate volatility and international dynamics the role of credit supply abstract changes in country specific aggregate volatility are positively correlated with the current account but negatively correlated with investment output and credit flows an international real business cycle model with time varying aggregate uncertainty through a precautionary savings channel can account for the positive correlation but implies counterfactual comovements for the other variables adding a credit supply channel with default and lenders exposed to aggregate risk allows the model to match all the facts higher volatility contracts credit supply and lowers investment and output the current account turns to a surplus because savings increase but also because investment collapses

the dynamic effects of neutral and investment specific technology shocks the neoclassical growth model is used to identify the short run effects of neutral technology shocks which affect the production of all goods homogeneously and investment specific shocks which affect only investment goods the real equipment price crucial for identifying the investment shocks experiences an abrupt increase in its average rate of decline in 1982 so the analysis is based on a split sample on the basis of the preferred specification the two technology shocks account for 73 percent of hours and 44 percent of output s business cycle variation before 1982 and 38 percent and 80 percent afterward the shocks also account for more than 40 percent of hours and 58 percent of output s forecast errors over a three to eight year horizon in both samples the majority of these effects are driven by the investment shocks