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Working Paper Series in Economics
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No. 2006-08
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- Aurelijus Dabušinskas and Martti Randveer
- Comparison of pricing behaviour of firms in the euro area and Estonia
In this paper, we review the price setting survey of Estonian firms and compare our findings with the results of similar research in the euro area summarized by Fabiani et al. (2005). Generally, the price setting patterns that emerge from our survey are quite similar to those in the euro zone. There is some evidence, however, that price setting may be somewhat more flexible in Estonia. The findings that suggest more price flexibility in Estonia are as follows: the incidence of time-dependent pricing is lower, the share of firms that are price takers is larger, price changes are more frequent, and, finally, the speed of price adjustments to shocks is higher
- JEL-Codes: E30, D40
- Keywords: price setting, nominal rigity, inflation persistence, price survey
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No. 2006-07
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- Priit Vahter
- Productivity in Estonian enterprises: the role of innovation and competition
This paper provides some stylised facts about differences in labour productivity and total factor productivity (TFP) in Estonian firms and about the role of selected determinants of productivity differences. Enterprise level panel data of the whole population of Estonian firms from years 1995-2002 is used.
It appears that the variation of productivity indicators in Estonia is much greater than in Western Europe. Although there is a lot of entry and exit of firms, there is not much movement within the productivity distribution of surviving .rms. It is found that both innovation and less concentrated market structure seem to be positively related to higher productivity of firms
- JEL-Codes: G3; L2; O31; O4
- Keywords: productivity, competition, innovation, market structure
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No. 2006-06
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(published)
- Thomas A. Eife
- Price setting behaviour and price setting regulations at the euro changeover
This paper documents that the impact of the euro changeover in January 2002 on prices was not uniform across the 12 participating countries. There are countries where prices increased significantly, but there are also countries where price-setting behaviour during the changeover does not appear to be very different from other points in time. This paper argues that the above difference can be explained by looking at the way countries regulated price setting during the changeover, and that any impact of the changeover could have been avoided with appropriate regulations. The gap between the actual and the perceived impact is addressed and policy recommendations for future changeovers are provided
- JEL-Codes: E31; E60; L11
- Keywords: currency changeover, euro, economic policy, prices, perceived inflation
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No. 2006-04
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(published)
- Andres Vesilind
- Profitability of simple trading strategies exploiting the forward premium bias in foreign exchange markets and the time premium in yield curves
This paper focuses on two actively studied inefficiencies in financial markets: the forward premium bias in foreign exchange markets (see, for example, Hansen and Hodrick 1980, Fama 1984, Bansal and Dahlquist 2000, etc.) and the empirical finding that the time expectations theory performs relatively poorly in describing the average shape of yield curves (for a list of papers see, for example, Backus et al. 1998, p 1). The goal of the article is to test whether these two inefficiencies can still offer the possibilities of earning positive and stable excess return for investors. For that purpose, first two very simple trading strategies are tested based on the abovementioned inefficiencies: buying the currencies of the countries with higher short-term interest rates against the currencies of the countries with lower short-term interest rates (i.e. simple FX carry-strategy) and holding long-only positions in longerterm interest rate futures.
The results show that the two studied risk premiums are still present in the markets and enable investors to earn excess returns even with simple strategies. Additional tests show that the performance of these simple strategies can be further improved by the inclusion of a risk factor in the foreign exchange carry-strategy and by the addition of monetary policy direction and yield curve steepness filters in the long-only strategy in interest rate futures.
- JEL-Codes: E44; E47; E58; F37; G11; G15
- Keywords: trading rules, forward premium bias, time expectations theory
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No. 2006-03
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(published)
- Agostino Consolo
- Forecasting measures of inflation for the Estonian economy
The aim of this paper is to forecast some of the most important measures of inflation of the Estonian economy by making use of linear and non-linear models. Results from comparing classes of optimal models are similar to those in the forecasting literature. In particular, there are gains from using more sophisticated methods such as factor analysis and time-varying parameters methods.
Model discrimination is based on evaluation criteria which are computed by a real-time dynamic estimation procedure. Moreover, forecasts uncertainty is appropriately taken into account: Fan Charts can exhaustively describe the final output for what concerns out-of-sample forecasting.
- JEL-Codes: C22; C32; C53; E31
- Keywords: Estonian Economy, forecasting, inflation modelling
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No. 2006-02
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(published)
- Karin Jõeveer
- Sources of capital structure : evidence from transition countries
This study explores the significance of firm-specific, country institutional and macroeconomic factors in explaining the leverage variation of a sample of firms from nine Eastern European countries. Countryspecific factors are the most prominent determinants of leverage variation for small unlisted companies while firm-specific factors explain most of the leverage variation in listed and large unlisted companies. Half of the leverage variation related to country factors is explained by known macroeconomic and institutional factors while the other half by unquantifiable institutional differences
- JEL-Codes: G32
- Keywords: capital structure, Eastern Europe
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No. 2006-01
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(published)
- Nektarios Aslanidis
- Business Cycle Regimes in CEECs Production:
a Threshold SUR Approach
The aim of this paper is to study economic activity in CEECs and to look at the transmission of economic activity between the euro area and CEECs. Econometric techniques appropriate for a threshold seemingly unrelated regressions specification are developed to take account of factors that are common to all CEECs. This methodology also allows for asymmetries in the activity of the CEECs governed by the overall euro area activity. The results show slow growth for most CEECs when the euro area economy decelerates, but high growth when the euro area economy grows.
- JEL-Codes: C50;E32
- Keywords: threshold SUR, asymmetry, business cycles
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