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Abstract:
The new economy is sometimes seen as the herald for a truly borderless world, where everyone can profit from the blessings of the internet regardless of his or her geographical location. However, since the internet requires substantial prerequisites concerning technical infrastructure and human capital, some worry that the developing countries will be left behind. This contribution addresses the fear of a growing "technological apartheid" between the industrialized and the developing countries and looks at policies to overcome the digital divide.

Developing Countries, New Economy, E-Commerce, Information Age, Technological Apartheid

Abstract:
This paper examines the transition process within Eastern Europe and the integration process with the EU and shows that the requirements for the transition towards a market economy overlap with the requirements for EU accession. Furthermore, the economic situation of the candidate countries is examined and it is pointed out that there is a large gap in the economic development between the Central and Eastern European countries and the EU. The paper argues that the acceding transition countries still have substantial reform tasks ahead of them and that the expanding EU membership requires also considerable reforms within the EU to reduce the danger of standstill for European policy making.

Abstract:
This paper examines to what extent Eastern Europe trade reorientation towards the West has been driven by market forces versus policies for regional integration. Hierarchical cluster analysis based on bilateral trade intensity reveals the convergence of regional trade structures to the pre-World-War II pattern. Estimates of the expected trade pattern of Eastern Europe with a gravity model predict continuing rising importance of the EU.

Furthermore, the assessment of the welfare implications of preferential access to EU markets shows that beneficial effects of trade expansion are likely to outweigh possible distortions. Hence integration policies follow the facts created by the market.

Abstract:
The Eastern enlargement of the European Union (EU) is likely to give a further boost to trade and capital flows, yet empirical evidence on its possible effects is scarce. This paper uses four different datasets to estimate the determinants of international asset holdings and trade flows. We find in most regressions that EU membership has a significant effect. Based on additional forecasts of the expected flows to ten transition economies, we conclude that for the EU candidates actual levels are still far below expected values in most cases. Consequently, we anticipate raising capital and trade flows with the approach of EU accession, in particular for the seven EU candidates besides the Czech Republic, Hungary, and Poland.

EU enlargement, International asset holdings, Trade, Gravity model, Simulations

Abstract:
The Eastern enlargement of the European Union (EU) is likely to give a further boost to trade and capital flows, yet empirical evidence on the possible magnitudes is still scarce. This paper uses four different datasets to estimate the determinants of international asset holdings and trade flows. We find in most regressions that EU membership has a significant effect. Based on additional simulations of the expected flows to ten transition economies, we conclude that for the EU candidates actual values are still far below expected ones in most cases. Consequently, we anticipate rising capital and trade flows with the approach of EU accession, in particular for the seven EU candidates besides the Czech Republic, Hungary and Poland.

Abstract:
The rapid diffusion of the internet and electronic commerce changes the way business and international trade take place. The new economy poses new challenges to the international regulatory framework, since small distortions due to differing sets of regulations and taxation between countries might grow to non-negligible dimensions. This paper examines the necessary reforms of the multilateral framework concerning standards, policy coordination and taxation and stresses that the new economy reinforces the need for consistent, transparent, non-discriminatory, simple and enforceable rules. Furthermore, strategies to overcome the digital divide between countries are set out.

New Economy, Policy Coordination, Tax Distortion, Trade Diversion, WTO, Developing Countries.

Abstract:
This paper describes the construction of a Social Accounting Matrix (SAM) for Bolivia for the year 1997. Three distinctive features render the SAM a useful starting point for distributional analyses. First, production in the agricultural and services sector is split up into formal and informal activities to account for the fact that poverty is largely confined to the latter. Second, factor and household accounts exhibit a high level of disaggregation, thus permitting the monitoring of the factorial and personal income distribution. Finally, the SAM contains a detailed system of accumulation balances which reveals the distribution of assets among household groups.

SAM, Structural Adjustment Programs, Poverty, Income Distribution, Bolivia

Abstract:
This paper presents a dynamic Computable General Equilibrium (CGE) model for Poland's integration into the European Union (EU) that allows for quantification of income and welfare effects stemming from tariff reduction, border?cost reduction, reduction of technical barriers to trade and increased EU-transfers. For all channels, long-run income increases substantially compared with the reference scenario. The welfare effects are also positive, but much smaller because the welfare measure takes into account the time path of consumption throughout the adjustment period. Typical welfare effects are estimated at less than 1 percent of total consumption over time discounted to the beginning of the adjustment period. This low figure reflects the compression of consumption early in the adjustment period that finances the investment needed to build up the capital stock to support higher output and consumption farther into the future. The paper presents also sensitivity analyses for the CGE model concerning different specifications of the adjustment cost parameters, the intertemporal elasticity of substitution, the Armington substitution elasticity and the rate of time preference. The overall result of the examination of Poland's membership in the EU with the dynamic CGE model draws attention to the fact, that income growth effects as such are not necessarily welfare gains, since growth requires investment and therefore foregone consumption.

Abstract:
The rapid diffusion of the internet and electronic commerce changes the way business and international trade take place. The new economy poses new challenges to the international and European regulatory framework, since small distortions due to differing sets of regulations and taxation between countries might grow to non-negligible dimensions. This paper examines the necessary reforms of the multilateral framework concerning standards, policy coordination and taxation and stresses that the new economy reinforces the need for consistent, transparent, non-discriminatory, simple and enforceable rules.

New Economy, Policy Coordination, Tax Distortion, Trade Diversion, European Commission, WTO, Economic Integration, E-Commerce, Technological Change

Abstract:
Initiatives to reduce transatlantic trade barriers or to harmonize trade-related domestic policies in the EU and the US appear regularly on the agenda of policy makers. The last decade saw also considerable steps in transatlantic economic cooperation focusing on special aspects. In February 2002, a new call for a study on the benefits of a transatlantic free trade area (TAFTA) was made by the President of the EU Council to facilitate further liberalization schemes. This article examines recent developments in transatlantic economic policies, discusses changes in approaches in transatlantic regionalism and presents estimates of the economic consequences of transatlantic liberalization. Given the expected small benefits of a TAFTA and the induced costs for multilateral liberalization negotiations, the article discusses alternatives to TAFTA and argues for a multilateral approach, eventually being accompanied by some sort of open regionalism.

Free Trade Area, EU-Countries, United States

Abstract:
This paper suggests a method of approximating the development of investment in transition economies through an amendment of the standard adjustment cost formulation for investment within dynamic Computable General Equilibrium (CGE) models. Letting adjustment cost depend on the difference between the investment levels of two periods (rather than only on the gross investment ratio) leads to an investment behavior of the representative household that resembles the observed time paths of investment in transition countries. In contrast to standard adjustment costs, which predict a sharp rise in investment due to the high marginal productivity of each unit of capital after a capital shock, augmented adjustment costs lead to a gradual rise in investment.

Computable General Equilibrium Model, Transition, Adjustment Costs, Investment Behavior

Abstract:
This paper examines the additional advantages of membership of the Central and Eastern European countries in the European Union (EU) over the already advanced economic integration between the Union and its eastern neighbours. Besides transfers, further reductions in trade barriers and guaranteed market access, EU accession will enhance the credibility of economic reforms in the Central and Eastern European countries through the establishment of institutions common to the EU members. EU membership requires the transition countries to bring their legal, political and economic system into conformity with EU standards and to implement effectively the so-called acquis communautaire, which includes many institutional components that are crucial for the functioning of a market economy. The paper discusses the experience of institutional integration between nations at different stages of development and investigates the economic impact of institutional reform. Furthermore, the paper delineates an approach to estimate the growth effects of the acquis communautaire on the Central and Eastern European countries.

Eastern Enlargement, European Union, Credibility, Acquis Communautaire, Institution Building, Integration, Transition, Eastern Europe

Abstract:
This paper examines the FDI flows towards two regions in the periphery of Europe: the Central and Eastern European countries (CEECs) and the countries of Southern Europe. We investigate whether evidence exists for FDI diversion from Southern Europe to the CEECs. A cursory observation of recent FDI trends might give rise to such claims of diversion. On the basis of gravity model equations, this paper compares the expected and actual FDI figures. The findings lead us to conclude that there is no evidence of FDI diversion between these two regions.

European Integration, Transition Economies

Abstract:
Trade between Eastern and Western Europe has increased considerably in the last years. Given this market-induced development, why should it be necessary to advance institutional integration? This paper argues that Central and Eastern European countries (CEECs) can potentially enhance the credibility of their governments' policies through institutional integration with the EU. The paper discusses the credibility problems faced by the CEECs and shows how EU membership will enhance the institutional setting and the governments' credibility. Based on regression results between an indicator of institutional change and key macroeconomic variables, an estimate of the potential impact of the CEECs' accession to the EU institutional framework on growth in the CEECs is derived.

Institutional change, institutional integration, transition, credibility, EU enlargement

Abstract:
The rapid diffusion of the internet and electronic commerce changes the way business and international trade take place. The new economy poses new challenges to the international and European regulatory framework, since small distortions due to differing sets of regulations and taxation between countries might grow to non-negligible dimensions. This paper examines the necessary reforms of the multilateral framework concerning standards, policy coordination and taxation and stresses that the new economy reinforces the need for consistent, transparent, non-discriminatory, simple and enforceable rules. Furthermore, strategies to overcome the digital divide between countries are set out.

European integration, New Economy, policy coordination, tax policy, trade policy, European Commission, WTO, development policy, economic integration, E-commerce, economics

Abstract:
This paper analyses the prospects and problems of a Transatlantic Free Trade Area (TAFTA) between the European Union and the United States. Possible economic reasons for the proposal of TAFTA such as the intensity of bilateral trade and a strong interdependence in investment flows and the similarity of the EU and the US in their factor endowment and tariff structure are examined. There are cases shining favourably on the idea, but the implementation of TAFTA will imply substantial costs due to the internal and external consequences. The main problem of a free trade area between the two most important economic blocs is the impact on the multilateral approach of trade liberalisation. The authors suggest a Transatlantic Liberalisation Initiative (TALI) as an alternative to TAFTA. Under TALI, the EU and the US should accelerate their implementation of their Uruguay Round commitments and liberalise in areas that are not yet covered by WTO agreements. This should be done under the Most-Favoured Nation clause and would be a strong motivating force for multilateral liberalisation. In addition, TALI could be a forerunner in reducing market segmentation and in establishing a semi-internal market between Europe and America.

Transatlantic Free Trade Area, regional integration, European Union, United States, multilateral liberalisation

Abstract:
Books reviewed:

Richard E. Baldwin and Joseph F. Francois (eds) - Dynamic Issues in Applied Commercial Policy Analysis

John Broome - Ethics out of Economics

Cristiano Antonelli - The Microdynamics of Technological Change

Abstract:
German real estate funds raise substantial amounts of resources within Germany and are active in the investments of these amounts in the real estate markets of Germany, Europe and beyond. The German “open-ended real estate funds” comprises two types: The one type, which in the following be named as real estate public funds, is focused on the retail investor. The other type, subsequently named real estate special funds, is geared towards the needs of the institutional investors. The performance of these funds is analyzed and a public funds index as well as a special funds index is calculated.

Real Estate Funds, Indices, Germany

Abstract:
Derivates on a property index offer a great opportunity to diversify a real estate portfolio quickly and cost effectively. Property investors can use derivatives to expand or reduce the allocation in certain markets and sectors. Property index derivatives allow investors to change synthetically and quickly country allocations in their portfolios. Overall, derivatives on property indices decrease effectively the illiquidity of property as asset class. Therefore derivates make asset classes comparable - also between national boundaries - and will contribute to professional property portfolio management. A well-functioning market for property derivatives helps to diversify investment markets. This contribution sets out the different types of property derivatives, potential underlying indices and recent developments. Furthermore, the license agreements and the perspective for derivatives are discussed.

Other markets demonstrate the great potential for property index derivatives. For example, derivatives on coal exist since 1998. At that time, investors traded derivatives for nominal one million tons of that resource. Until 2003, the derivatives volume increased to nominal 250 million tons, only to grow further to 2,000 million tons of coal by now. Hence, the dealing in coal derivatives is five times bigger than the real physical coal trade to date. The dealing in derivatives may even increase further as some oil markets show where the trading in derivatives is 15 times as big as the real transaction volume. Consequently, it is expected that property index derivatives might also experience a phenomenal growth in the near future.

derivatives, indices, IPD, property, real estate

Abstract:
When applying Computable General Equilibrium (CGE) models to transition economies, it is not plausible to use the standard assumption that the base year data represents stable structural characteristics or even the steady state of the economy. The suggestions forwarded until now to overcome this problem are discussed in this article. An amendment is proposed by modifying the investment modelling within the dynamic CGE setting. The standard formulation of installation costs for capital is extended through the inclusion of adjustment costs that depend on the change of the investment level. Such formulation of the adjustment costs within the dynamic CGE model leads to an investment behaviour that mirrors the empirical data of the first years of the transition.

Dynamic CGE Model, Transition Country, Investment Function, Adjustment Costs

Abstract:
This article analyses the prospects and problems of a Transatlantic Free Trade Area (TAFTA) between the European Union and the United States. Possible economic reasons for the proposal of TAFTA such as the intensity of bilateral trade and a strong interdependence in investment flows and the similarity of the EU and the US in their factor endowment and tariff structure are examined.

There are cases shining favourably on the idea, but the implementation of TAFTA will imply substantial costs due to the internal and external consequences. The main problem of a free trade area between the two most important economic blocs is the impact on the multilateral approach of trade liberalisation. The authors suggest a Transatlantic Liberalisation Initiative (TALI) as an alternative to TAFTA. Under TALI, the EU and the US should accelerate their implementation of their Uruguay Round commitments and liberalise in areas that are not yet covered by WTO agreements. This should be done under the Most-Favoured Nation clause and would be a strong motivating force for multilateral liberalisation. In addition, TALI could be a forerunner in reducing market segmentation and in establishing a semi-internal market between Europe and America.
European Union, United States, multilateral liberalization

Transatlantic Free Trade Area, regional integration,

Abstract:
Transition and reorientation towards Western Europe have been the two decisive challenges for the Central and Eastern European countries (CEECs) since 1989. Whereas in the early 1990s the transition from the central planning system to a market economy was the main goal of economic policies, the requirements for closer integration with the Western European countries have since then increasingly gained in importance. How do the two processes overlap? What requirements remain to be met before the candidate countries can join the European Union?

EU enlargement, transition economies, reform requirements, acquis communautaire

Abstract:
The economic integration between Eastern and Western Europe has increased considerably in the last years. Given this market-induced development, why should it be necessary to advance institutional integration? This paper argues that Central and Eastern European countries (CEECs) can enhance their economic growth prospects through EU?induced institutional change. Based on a macroeconomic production function accounting for institutional reform, the paper derives an estimate of the potential impact of the CEECs' accession to the EU institutional framework on growth in the CEECs.

Abstract:
The integration of the central and eastern European countries into the international capital markets has been and will be determined by the process of European Union integration. Our analysis shows that southern and eastern European countries already appear to be surprisingly similar regarding FDI flows from EU members. The central and eastern European countries, however, are likely to attract increased portfolio flows in the years to come. We argue that membership alone in a regional arrangement like the EU is neither sufficient for sustained capital inflows nor is it the guarantee for increased investment activities. Rather, domestic economic policy has to change in accordance: Liberalization matters, not only membership.

Abstract:
This paper presents a dynamic Computable General Equilibrium (CGE) model for Poland's integration into the European Union that allows for quantification of the income and welfare effects stemming from i) tariff reduction, ii) border cost reduction, iii) reduction of the technical barriers to trade, iv) increased net EU-transfers from Brussels. For all channels, steady state national income increases substantially compared with the reference scenario (status quo). However, the welfare effects are surprisingly low. The intertemporal findings show the importance of renouncing consumption today in order to build up the capital stock necessary to achieve higher output and higher consumption in the future. Large discrepancies between welfare and income effects illustrate the importance of the recent discussion on welfare versus income gains from trade liberalization, and stress the necessity of an overall welfare measure in analyzing effects of regional integration.

Abstract:
This article contributes a counter-example to the discussion about the negative effects of regionalism on the multilateral trading order. The article analyses the General Agreement on Tariffs and Trade (GATT) negotiations during the Uruguay Round and shows that France was induced to accept a more free trade oriented package due to her integration into the European Community. The importance of the European economic and diplomatic relationships led France to accept a GATT deal which she felt would be disadvantageous. The existence of a regional bloc, the European Community, had a beneficial effect for the multilateral trading system.

Abstract:
This paper examines to what extent Eastern Europe trade reorientation towards the West has been driven by market forces versus policies for regional integration. Hierarchical cluster analysis based on bilateral trade intensity reveals the convergence of regional trade structures to the pre-World-War II pattern. Estimates of the expected trade pattern of Eastern Europe with a gravity model predict continuing rising importance of the EU. Furthermore, the assessment of the welfare implications of preferential access to EU markets shows that beneficial effects of trade expansion are likely to outweigh possible distortions. Hence integration policies follow the facts created by the market.