Core Economies Research Articles

Urbanization and GDP per capita: New data and results for the Polish lands, 1790–1910

Polish lands in 19th century are usually located in the economic peripheries of Europe. However there are no usable datasets of Polish GDP for this period to verify this hypothesis. The main problem is lack of reliable and comparable macroeconomic data from country divided between Russia, Austria and Prussia. The main goal of this research was to propose the method based on the urbanization data set to estimate the GDP of Polish territories and to verify the hypothesis on the peripheral development of Polish lands. In result the new estimates on GDP per capita were established, that allowed to confirm the hypothesis of semi-peripheral development of Polish territories in 19th century and slow process of catching-up with the core economies.

Global Foreign Direct Investment: A network perspective

Foreign Direct Investment (FDI) research has usually focused on inward and outward levels of assets flows and stocks, yet very few studies have examined the Global FDI Network. We study the economic performance of countries in terms of their associations with certain FDI partners employing social network analysis. This new approach shifts the focus away from the study of certain country features and their influence on FDI stock levels. Our study of FDI stocks from 229 economies sheds light on the interactions of the global FDI network within its singular context of country-level determinants, its after-effects, internal patterns, and relationship with the network of Bilateral Investment Treaties (BITs). Our conclusion is that country features such as size, openness, skill levels, and institutional stability not only set the pace of FDI, but that they also influence both the network structure and the power positions of each node. We investigate whether that structure responds to homophilic relations between countries or to core–periphery patterns with only a few core economies and we question the strategy of signing BITs to form FDI relations. Finally, we inquire into strategic connections with powerful partners, to ascertain whether they provide beneficial settings for country growth and trade performance.

The eurozone financial crisis and bank efficiency asymmetries: Peripheral versus core economies

This paper assesses the impact of the financial crisis on the levels of banking efficiency within the Eurozone. We examine if the crisis had asymmetric effects on bank efficiency across different regions of the Eurozone, comparing the banks in the financially stressed European periphery to those in the surplus economies of the core during 2005–2012. We use Data Envelopment Analysis (DEA) to measure bank efficiency and the Brockett and Golany (1996) test to identify group-based differences in efficiency. Our results indicate a gradual convergence process in efficiency between the banks of the core and periphery countries up to 2008. This process is reversed with the escalation of the financial crisis from 2009 to 2012 and the pattern of bank performance becomes asymmetric. Moreover, our findings suggest a more benign impact of the crisis on the core banks, which anyway outperform peripheral banks throughout the period considered.

Geoeconomic Uses of Global Warming: The “Green” Technological Revolution and the Role of the Semi-Periphery

While some semi-peripheral countries have seen renewable energies as an opportunity to build their industrial and technological capacities, core countries and global governance organizations have been promoting “green growth.” Since the 2008 global financial crisis, global warming has been used as a catalyst for big business. As the global economy may be entering the first stage of a “green” technology revolution, neo-Schumpeterian economists have regained visibility. We intend to show how, as a consequence of the lack of a world-systemic perspective, crucial inconsistencies arise in neo-Schumpeterian contributions that weaken their conceptualization of the role of non-core economies in technological change. We examine the case of the tortuous trajectory of wind energy in Argentina to show the specific organizational, institutional, and macroeconomic constraints faced by a semi-peripheral economy as it attempts to develop its own technological and industrial capacities. The neo-Schumpeterian view of the “green industrial revolution” must be understood as valid only for the core-economy subsystem, which seems to require as well polarization of the world-system through what we call “semi-peripheral neoliberalism,” a peripheralizing force upon the semi-periphery necessary in order to rejuvenate core economies.

China's Opening up after 40 Years: Standing at a Historic Turning Point

AbstractThis paper comprehensively reviews China's openness since 1978 from three aspects: trade, foreign investment and global production sharing. We point out that the economic development of China is now standing at a historic turning point. Specifically, economic changes in China are discussed from four dimensions: (i) from China being a world assembly line to a world manufacturing powerhouse; (ii) from China being a world capital receiver to a world investor; (iii) from China being a world factory to a world market; and (iv) from the situation of “made in China” to “innovated in China.” At the same time, the global economic system has also reached a turning point. A “North America–Europe–Asia” tri‐polar system has formed, in which the USA, Germany and China, respectively, serve as the regional core economies.

The King Midas Monoculture

The King Midas Monoculture

Cross-border spill-overs from fiscal stimulus in a monetary union

We analyse domestic and cross-border effects of fiscal policy in a two-region business cycle model of a monetary union. Without relying on debt consolidation via spending reversals along the lines of Corsetti, Meier and Mueller (2010) and Corsetti and Mueller (2014) we show that a fiscal expansion by the core economies of the euro area is associated with crowding in of both core and periphery consumption. Interestingly, cross-border spill-over effects are larger the larger the share of credit constrained households in the periphery.

Jump-Starting the Euro-Area Recovery: Would a Rise in Core Fiscal Spending Help the Periphery?

We show that a fiscal expansion by the core economies of the euro area would have a large and positive impact on periphery GDP assuming that policy rates remain low for a prolonged period. Under our preferred model specification, an expansion of core government spending equal to 1% of euro-area GDP would boost periphery GDP by over 1%in a liquidity trap lasting three years, nearly half as large as the effect oncore GDP. Accordingly, under a standard ad hoc loss function involving output and inflation gaps, increasing core spending would generate substantial welfare improvements, especially in the periphery. The benefits are considerably smaller under a utility-based welfare measure, reflecting in part that higher net exports play a material role in raising periphery GDP.

On measuring uncertainty and its impact on investment: Cross-country evidence from the euro area

Investment fell sharply in the euro area after the financial crisis and has not yet returned to pre-crisis levels in many core economies. Focusing on the four largest euro-area countries, this paper investigates the role of uncertainty for investment dynamics. By doing so, we compare five prominent uncertainty proxies put forward in the recent literature: the (implied) stock market volatility, a survey-derived measure of expectations dispersion, a newspaper-based indicator of policy uncertainty, and two indicators taking up the concept of (econometric) unpredictability. Although all uncertainty measures show countercyclical behavior, we find uncertainty as measured by the conditional volatility of the unforecastable components of a broad set of time series to exhibit noticeable robust effects across different model specifications and countries. Based on this type of uncertainty proxy, we document pronounced negative investment responses to uncertainty shocks. We further show that these effects can explain a relevant portion of the decrease in investment in the course of the Great Recession.

Economic policy uncertainty and risk spillovers in the Eurozone

This paper focuses on the impact of economic policy uncertainty on risk spillovers within the Eurozone and contributes to these two growing literatures. To this end, we adapt the two-step procedure developed by Adrian and Brunnermeier (forthcoming) in the framework of financial systemic risk to the sovereign bond market. Accordingly, we attempt (i) to measure the extent to which distress affecting one given country's sovereign spreads can affect the Eurozone's bond market as a whole and then (ii) to identify the determinants of risk spillovers by estimating a panel data model with macroeconomic state variables and economic policy uncertainty (EPU) indices introduced by Baker et al. (2013) as regressors. EPU indices considered concern the four largest Eurozone countries, i.e. Germany, France, Italy and Spain, as well as the United States. The model is estimated with quarterly data for ten countries representing the bulk of debt issuances within the Eurozone over a period ranging from Q4/2008 to Q2/2013, which is characterized by historically high dispersion of sovereign bond spreads either across time or across countries. Our results support the idea that economic policy uncertainty in the core economies of the Eurozone, i.e. Germany and France, as well as in the largest periphery countries, i.e. Italy and Spain, can create an environment likely to exacerbate the transmission of risk arising from abnormal developments of individual countries' sovereign spreads to the Eurozone bond market as a whole. In this respect, our results plead for larger effort of Eurozone “leaders” to reduce the uncertainty surrounding their economic policy in periods of crisis not only to avoid adverse effects on their own economies but also to reduce the risk of a destabilization of the Eurozone sovereign bond market as a whole.

On Measuring Uncertainty and its Impact on Investment: Cross-Country Evidence from the Euro Area

Investment fell sharply in the euro area after the financial crisis and has not yet returned to pre-crisis levels in many core economies. Focusing on the four largest euro-area countries, this paper investigates the role of uncertainty for investment dynamics. By doing so, we compare five prominent uncertainty proxies put forward in the recent literature: the (implied) stock market volatility, a survey-derived measure of expectations dispersion, a newspaper-based indicator of policy uncertainty, and two indicators taking up the concept of (econometric) unpredictability. Although all uncertainty measures show countercyclical behavior, we find uncertainty as measured by the conditional volatility of the unforecastable components of a broad set of time series to exhibit noticeable robust effects across different model specifications and countries. Based on this type of uncertainty proxy, we document pronounced negative investment responses to uncertainty shocks. We further show that these effects can explain a relevant portion of the decrease in investment in the course of the Great Recession.

Jump-Starting the Euro Area Recovery: Would a Rise in Core Fiscal Spending Help the Periphery?

We show that a fiscal expansion by the core economies of the euro area would have a large and positive impact on periphery GDP assuming that policy rates remain low for a prolonged period. Under our preferred model specification, an expansion of core government spending equal to one percent of euro area GDP would boost periphery GDP around 1 percent in a liquidity trap lasting three years, about half as large as the effect on core GDP. Accordingly, under a standard ad hoc loss function involving output and inflation gaps, increasing core spending would generate substantial welfare improvements, especially in the periphery. The benefits are considerably smaller under a utility-based welfare measure, reflecting in part that higher net exports play a material role in raising periphery GDP.

Control in the multinational enterprise: The polycentric case of global professional service firms

This paper contributes to research on control in multinational enterprises (MNEs) by considering the case of global professional service firms (GPSFs). Drawing on fieldwork in four firms, it argues that GPSFs are seeking greater control over their subsidiaries in order to provide integrated cross-national services to global clients and, in the process, are becoming subject to a center-subsidiary tension similar to that observed in more conventional MNEs. However, and importantly, the paper also argues that the center-subsidiary tension operates differently in GPSFs. This is because central control in this particular context is pursued by not only headquarters but also subsidiaries based in core economies where major global clients are headquartered. Such polycentric control leads to the center-subsidiary tension expressing itself along not just the vertical (headquarters-subsidiary) axis but also the horizontal (inter-subsidiary) one and, in particular, along core-periphery lines. The research and managerial implications of these findings are discussed.

Stagnation and Financialization: The Nature of the Contradiction

More than six years after the beginning of the Great Recession in the United States, and nearly five years since it was officially declared over in this country, the core economies of the capitalist world system remain crisis-ridden. The jobs in the downturn in the United States have not yet been fully recovered and the economy remains sluggish. In Europe the crisis has hardly abated at all and a number of the peripheral European Union countries are in what can only be called a depression—especially Greece, Spain, and Portugal. The last member of the triad of advanced capitalist centers, Japan, has gone through what have been called two lost decades of slow growth and deflation and is attempting once again to jump-start the economy through a combination of devaluation of the yen and deficit spending.This article can also be found at the Monthly Review website, where most recent articles are published in full.Click here to purchase a PDF version of this article at the Monthly Review website.

Editor’s Introduction: Commodity Chains in and of the World System

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The System Worked: Global Economic Governance during the Great Recession

Prior to 2008, numerous international relations scholars had predicted a looming crisis in global economic governance. Policy analysts have only reinforced this perception since the financial crisis, declaring that we live in a “G-Zero” world. This article takes a closer look at the global response to the financial crisis and reveals a more optimistic picture. Despite initial shocks that were more severe than the 1929 financial crisis, global economic governance structures responded quickly and robustly. Whether one measures results by outcomes, outputs, or process, formal and informal governance structures displayed surprising resiliency. Multilateral economic institutions performed well in crisis situations to reinforce open economic policies, especially in contrast to the 1930s. While there are areas where governance has either faltered or failed, on the whole, the system has worked. Misperceptions about global economic governance persist because the Great Recession has disproportionately affected the core economies; analysts have conflated national with global governance; and the efficacy of past periods of global economic governance has been badly overestimated. Why the system has worked better than expected remains an open question, but we can tentatively conclude that both the power of the United States and the resilience of neoliberal economic ideas were underestimated.

Core–periphery dynamics in the Portland, Oregon, region: 1982–2006

The relative strength of positive and negative spillovers of urban development is a long-standing and contested issue in regional and development economics, and the search for spread and backwash effects of development in urban core economies goes back at least 50 years. Using data from IMPLAN and the Bureau of Economic Analysis to develop multiregional input–output models, we developed estimates of core–periphery economic interdependence (sales and purchases of goods and services and commuting of workers between the core and the periphery) of the Portland, Oregon, region for 1982 and 2006. We explored whether the changing flows of sales and purchases, spillovers and commuting between 1982 and 2006 suggested a dominance of spread effects or backwash effects. We found increased commuting between periphery and core, decreased core–periphery transactions, and smaller core-to-periphery spillovers and periphery-to-core spillovers in both goods and services. Our findings do not point to a clear dominance of spread or backwash effects. Results showing smaller core-to-periphery and periphery-to-core multipliers/spillovers suggest that spread effects related to trade in goods and services weakened between 1982 and 2006. Our findings of increased commuting are consistent with enhanced spread effects in labor markets.

Velhos e novos desenvolvimentismos

Na segunda metade dos anos 2000, a retomada do crescimento com distribuição da renda no Brasil e na América do Sul, após o fracasso do neoliberalismo e sua variante suavizada, o Consenso de Washington, ao promover o crescimento econômico e reduzir significativamente a desigualdade social na região, contribuiu para o ressurgimento e atualização de antigos paradigmas de políticas econômicas. A crise financeira global e os impasses do desenvolvimento nas economias centrais deram força, ao menos nos países periféricos, à busca e consolidação desses novos perfis de política econômica. Este artigo propõe-se a examinar como tais mudanças influenciaram o pensamento desenvolvimentista no Brasil, dando origem, no período recente, a novas correntes interpretativas do desenvolvimento brasileiro e suas relações com a estratégia inovadora de desenvolvimento em curso.

World Overview

Global economic prospects have deteriorated markedly in recent months. Risks around our central forecast have shifted distinctly to the downside. Much of this is due to the heightened uncertainty surrounding Europe's sovereign debt crisis. There is widespread agreement among policymakers - ranging from the IMF, European Commission and European Central Bank to individual heads of state both within and outside the Euro Area - that resolution to the crisis requires urgent, comprehensive and coordinated action. Yet 17 months after the first bail-out programme was introduced in Greece, policymakers have failed to deliver a strategy that promises a credible prospect of growth and an end to rising debt profiles. Solvency concerns in three relatively small peripheral countries (Greece, Ireland and Portugal), combined with weakening growth across the continent, raise the dangerous spectre of illiquidity beginning to affect solvency in the larger core economies with high debt ratios - notably Italy. Left unchecked, the consequences would be severe for the world economy.

Business‐relatedness and strategy moderations: impacts on foreign subsidiary performance

PurposeThe purpose of this paper is to improve the existing knowledge of international strategy antecedents of foreign subsidiary performance.Design/methodology/approachHypotheses are developed regarding the impact of perceived relatedness between the foreign subsidiary and the parent firm's core business unit, and the moderating effect of the subsidiary's business strategy. In order to test the hypotheses, the study uses survey data from Europe (Germany and the UK), and the USA, and the subsidiaries belong to Swedish manufacturing firms.FindingsPerceived relatedness regarding intangible resources affects foreign subsidiary performance positively. Competitive differentiation and market knowledge of a foreign subsidiary reinforce the performance impact of the perceived relatedness.Research limitations/implicationsA foreign subsidiary's relatedness to the core business unit of its parent firm determines the subsidiary's ability to assimilate the parent firm's core competencies. The relatedness represents a synergy potential that is realized by the subsidiary's core competence exploitation and economies of learning.Originality/valueThe paper extends current knowledge of international strategy antecedents of foreign subsidiary performance as it applies the perceptual approach to relatedness and acknowledges the impact of foreign subsidiary strategy.