Successes and Failures of Industrial Policy in Transition Economies of Europe and Asia

2020 ◽  
pp. 778-810
Author(s):  
Vladimir Popov
Keyword(s):  
Exchange Rate ◽  
Soviet Union ◽  
Industrial Policy ◽  
Former Soviet Union ◽  
Import Substitution ◽  
High Energy ◽  
Dutch Disease ◽  
Energy Prices ◽  
Very High Energy ◽  
The Exchange Rate

This chapter discusses the achievements and failures of various models of industrial policy in post-communist countries. If industrial policy is needed, how are industries that have to be supported to be selected? What are the appropriate tools/instruments to support particular industries? Eastern European countries in general did not have any explicit industrial policy, either via tax concessions and/or subsidies, or via under/overpricing the exchange rate. Many countries of the former Soviet Union carried out large import-substitution programmes through the regulation of domestic fuel and energy prices (directly and via export tax) that subsidized all energy consumers. They also provided subsidies to agricultural enterprises. China and Vietnam (and to some extent Uzbekistan) carried out export-oriented industrial policy mostly by underpricing the exchange rate. It is argued that export-oriented industrial policy via undervaluation of the exchange rate is the best possible option to promote export-oriented catch-up development based on the export of manufactured goods. It is especially needed for resource-rich countries (Azerbaijan, Kazakhstan, Russia, Turkmenistan, Uzbekistan) that are prone to ‘Dutch disease’. Assistance to domestic producers by keeping domestic prices for fuel and energy low also helps to stimulate growth, but at the cost of very high energy intensity.

scholarly journals THE DETERMINANTS OF FDI IN SIX FORMER FSU COUNTRIES: A STUDY OF DATA 1995–2017

2020 ◽  
pp. 140-181
Author(s):  
Vijay SHENAI ◽  
Artem SHCHERBYNA ◽  
Sergei VORONIN ◽  
Dmitriy OLKHOVSKYY
Keyword(s):  
Exchange Rate ◽  
Soviet Union ◽  
Former Soviet Union ◽  
Explanatory Power ◽  
Extensive Literature ◽  
Cross Sectional ◽  
Income Levels ◽  
Long Run ◽  
Fixed Line ◽  
Determinants Of Fdi

Foreign Direct Investment (FDI) can bring in much needed capital, particularly in emerging markets, help improve manufacturing and trade sectors, bring in more efficient technologies, increase local production and exports, create jobs and develop local skills, bring about improvements in soft and hard infrastructure and overall be a contributor to sustainable economic growth in the Gross Domestic Product (GDP). With all these desirable features, it becomes relevant to ascertain the factors which attract FDI to an economy or a group of adjacent economies. This paper explores the determinants of FDI in six Former Soviet Union (FSU): Ukraine, Belarus, Armenia, Russia, Moldova and Kazakhstan. After an extensive literature review of theories and empirical research and using a set of cross-sectional data over the period 1995–2017, an ARDL model is estimated with FDI/GDP as the dependent variable. Inflation, exchange rate changes, openness, economy size (GDP), Income levels (GNI per capita), Infrastructure (measured by the number of fixed line and mobile subscription per 100 persons) are tested as independent variables for explanatory power in long run and short run relationships. Over the period, higher inflows of FDI in relation to GDP appear to be have been attracted to the markets with better infrastructure, smaller markets and higher income levels, with lower openness, depreciation in the exchange rate and higher income levels though the coefficients of the last three variables are not significant. The results show the type of FDI attracted to investments in this region and are evaluated from theoretical and practical view points. Policy recommendations are made to enhance FDI inflows and further economic development in this region. Such a study of this region has not been made in the past. JEL: C21, F21, F23.

The impact of remittances on Sudan’s economic growth: does the exchange rate matter?

2018 ◽  
Vol 45 (6) ◽  
pp. 925-939
Author(s):  
Atif Awad ◽  
Abdalla Sirag
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Dutch Disease ◽  
Annual Data ◽  
Content Type ◽  
Long Run ◽  
Show Evidence ◽  
Official Rate ◽  
The Exchange Rate ◽  
The Impact

PurposeThe purpose of this paper is to investigate the presence of the Dutch disease hypothesis through examining the remittance-growth nexus using annual data for Sudan covering the period 1977-2015. The paper seeks to answer the following critical questions: what is the impact of remittance on Sudanese economy? How exchange rate influences the impact of remittance on growth? To what extent the impact of remittance on growth differs between the short and long run.Design/methodology/approachThe paper employs the autoregressive distributive lag (ARDL) technique because of its several advantages.FindingsThe ARDL results show evidence against the existence of such a hypothesis. More specifically, the results show that over time, due to the structured nature of the economy, remittances may affect economic growth negatively through several mechanisms including the depreciation rather than the appreciation of the exchange rate.Originality/valueAfter 2011 and the secession of South Sudan, Sudan lost more than 80 per cent of foreign exchange revenues which reflected in the sharp gap between the official rate and the parallel exchange rate equal to 150 per cent. To lessening this gap, the attention was given to expatriates to encourage them to transfer their remittances through official channels. Since remittance and exchange rate mechanism may affect growth positively or negatively, no study addressed this possibility. This is the first empirical study in this matter that considers both the temporary and the permanent impacts.

scholarly journals Explaining Pakistan’s Premature Deindustrialization

2016 ◽  
Vol 21 (Special Edition) ◽  
pp. 351-368
Author(s):  
Nazia Nazeer ◽  
Rajah Rasiah
Keyword(s):  
Exchange Rate ◽  
Industrial Policy ◽  
Manufacturing Sector ◽  
Import Substitution ◽  
Strong Growth ◽  
Catch Up ◽  
The 1950S ◽  
Manufacturing Growth

Recognizing that Pakistan faces premature deindustrialization, this paper seeks to explain the phenomenon. The country experienced wild swings in industrialization during the 1950s and 1960s. The period 2001–10 was characterized by fairly strong growth, followed by contractions in other periods. Pakistan’s manufacturing sector is dominated by clothing and textiles exports. Periods of manufacturing growth were associated with pro-manufacturing and import substitution policies, while slumps were characterized by deregulation and a relatively high exchange rate. The evidence shows that the relative stagnation of manufacturing (regardless of the policies implemented) can be explained by the lack of a dynamic industrial policy targeting technological catch-up and leapfrogging. Moreover, where rents were distributed in the form of incentives, there was no emphasis on monitoring and appraisal.

scholarly journals Analysing the National Tariff Policy

2020 ◽  
Vol 59 (1) ◽  
pp. 143-149
Author(s):  
Usman Qadir
Keyword(s):  
Exchange Rate ◽  
Value Chain ◽  
Import Substitution ◽  
Market Value ◽  
Global Value Chain ◽  
Tariff Policy ◽  
Product Mix ◽  
Modern Economy ◽  
The Exchange Rate

What is the role of import tariffs in a modern economy? Tariffs may seem an easy source of revenue, but they do have real consequences for the economy. The use of tariffs makes imported goods more expensive. It can be used as a means to prevent the exchange rate from fully adjusting to market value reducing incentives for export while increasing incentives for import substitution. Tariff policy can thus affect the product mix of country, including its direction of industrialisation, which in the complex globalised world of today determines its place in the global value chain.

scholarly journals Friedrich List and Dutch Disease: two sides of the same coin?

2020 ◽  
Vol 40 (3) ◽  
pp. 493-509
Author(s):  
Kunibert Raffer
Keyword(s):  
Exchange Rate ◽  
Important Determinant ◽  
Trade Flows ◽  
Dutch Disease ◽  
Economic Policies ◽  
Valuable Contribution ◽  
Friedrich List ◽  
Development Problem ◽  
The Exchange Rate ◽  
Two Sides

ABSTRACT Comparing List’s development problem to Dutch Disease, as generalized by Bresser-Pereira, one sees quite a few similarities. While the exchange rate was understandably of no concern to List, it is meanwhile one if not the most important determinant of trade flows. This generalized Dutch Disease approach is a valuable contribution to the debate on appropriate economic policies in Southern countries. It shows a way to counter mal-developments. It certainly deserves further discussion because quite a few countries suffer from it. Bresser’s arguments fit very well into other unorthodox approaches that also tried to counter the inefficiency of really existing markets with workable proposals, which orthodoxy has quite successfully supressed. This paper also makes a proposal that might help for agro-exporting countries.

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