Assessing the optimality of euro adoption in Romania through shock correlations

The present paper is concerned with the prospect of euro adoption in Romania. The study starts from the relevant literature of the Optimum Currency Areas and identifies the most widely acknowledged meta property and methodological model for this purpose: the SVAR Blanchard and Quah decomposition for identifying the supply and demand shocks. Employing the indicated model and the most recent data, we are able extract and analyse the underlying shocks that hit 34 European economic entities in the period 1995-2019, while also taking into account two crucial structural changes for the Romanian economy – central bank independence and EU accession. After performing the pairwise correlations between Romania and the rest of the economic entities for both the supply and demand disturbances, we map them on a bidimensional graph. We discover that while there is relevant integration and connectedness that ensures relatively high correlations between supply shocks, the politically-motivated monetary and fiscal policy disturbances that created ample and hectic demand side movements, are a factor of great concern for the prospect of single currency adoption in this Eastern European country. The findings support the view that there is room for the conduct of macro policies to become more supportive to the process of euro adoption and that the respect of convergence criteria would help in this respect. To our knowledge, this is the first study performing pairwise shock correlations between Romania and many other European economic entities, while also isolating the effect of post 2005 structural changes.

Assessment of the credit risk of Poland based on sovereign credit default swap spreads during the Covid-19 pandemic

Motivation: SCDS contracts, based on treasury bonds, are used to assess credit risk. Observation of changes in these instruments provides information on the current economic situation of individual countries. By correlating them with the economic assessment of individual countries, SCDS indicate the risk level of bankruptcy of a given country and thus play an informative role on the global financial market. Aim: The objective of the study is to investigate the impact of the Covid-19 pandemic on the level of credit risk in Poland. This aim will be achieved by determining the level and the dynamics of changes of SCDS spreads, and by identifying the determinants of changes in the level of SCDS spreads before and after the pandemic. The study hypothesises that as a result of the supply and demand shocks caused by the outbreak of the Covid-19, the level of Polish SCDS spreads increased due to macroeconomic factors. Results: The results of the study confirmed that due to the panic, Poland’s credit risk increased dynamically in the first stage of the Covid-19. However, over time, the level of credit risk in Poland decreased. Nevertheless, the reduction in Poland’s credit risk is accompanied by an increase in public debt, with a simultaneous deterioration in macroeconomic indicators. This evidence suggests that SCDS spreads are not capable of reflecting the foundations of the economy during uncertainty. The results of this study indicate that the fundamental determinants of credit risk changes occurred before and during the pandemic. However, the results showed that the magnitude of their impact on credit risk is different. Multiple linear regression analysis also showed that during the Covid-19, macroeconomic factors showed a significantly higher degree of correlation with credit risk compared to non-economic factors directly related to the effects of the pandemic.

Public Transportation and Social Movements: Learning from the Hong Kong Anti-Extradition Bill Protests

In this article, we address the public transportation system’s resilience in social movements, which has been under-explored in transportation scholarship. On the one hand, public transportation enables mass mobilization of people and materials and large-scale public engagement in political/social events in transit-reliant cities like Hong Kong. On the other hand, public transportation can be an instrument for both the government and event participants—the former interferes with the public transportation service provision to manage and mitigate the adverse impacts of social movements it perceives on society, whereas the latter disrupt public transportation services or vandalize and damage related facilities to express their discontent and to put pressure on the former. The dynamic resilience of the public transportation system against the above backdrop warrants more in-depth exploration. We incorporate both supply and demand shocks to theorize resilience as a public transportation system’s capability to return to a new equilibrium between the supply and demand after a disturbance. The theoretical approach is illustrated using empirical data and publicly available materials concerning the 2019 Anti-Extradition Law Amendment Bill movement in Hong Kong.

The economy battling Covid-19. A macroeconomic approach

Purpose: The chapter identifies the complexities of Covid-19’s impact on the economy. The empirical part presents and assesses initial reactions of inflation, industrial production, unemployment rate, Gross Domestic Product (GDP) growth rate, and shifts in the GDP expenditure structure. Design/methodology/approach: Acomplete Keynesian macroeconomic model is used to outline how the negative shock hit the economies. The model shows potential implications of the use of reactive economic policy measures. Based on the model, the empirical part provides comparative analyses of reactions of four economies of the European Monetary Union (EMU) – namely France, Germany, Italy and Spain – two non-EMU economies of Hungary and Poland, and two major large open economies: the USA and Japan. Findings: The Covid-19 pandemic has sent a universal, global shockwave with asymmetric outcomes in individual economies. Covid-19 hit all economies and struck both the demand side and – after ashort time lag – the supply side. Although interconnected, the economies have maintained notable structural differences and, therefore their autonomous reactions to negative demand and supply shocks were diverse. Practical implications: The complete macroeconomic Keynesian model allows for the conceptualization of the transmission of the Covid-19 shock on the economy’s supply and demand sides. The model is also a helpful tool in the analysis of the potential role of economic policy in reaction to the supply and demand shocks triggered by the pandemic. Originality and value: The empirical analyses unveil the eight economies’ differentiated reactions to similar counter-crisis policy measures. Their scale in all cases pushed the state back to the center of economic life. This structural shift requires attention and systematic theoretical and empirical studies.

THE POLITICAL-ECONOMY MANAGEMENT: INDONESIA'S NEEDS FOR THE COVID-19 PANDEMIC

The Covid-19 outbreak continues to spread rapidly to almost all countries in the world. The authors need to highlight how the policy perspectives are taken by Indonesia at the national scale and international relations to improve the economic and political situation during this pandemic. Referring to this phenomenon, this research provides an in-depth study of the literature review on strategic efforts and steps to address commodity demand in Indonesia. In short, from an economic and political point of view, the dual problems on the supply and demand side make the premise of comparative advantage (which is the foundation of a free-market economy and international trade) into doubt about its validity. The classical premise argues that social welfare will be optimal if the state specializes in producing goods which are. Having the lowest opportunity cost according to the availability of production factors and buying other needs in the international market, it seems only valid if the international trade mechanism is not disrupted. Conversely, in conditions of supply and demand shocks, all countries will try to produce all their needs domestically and limit exporting products abroad as much as possible. Key words: national trade, global markets, export policy, import policy, Covid-19