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Front Matter

Front Matter

Author(s):
International Monetary Fund
Published Date:
August 1997
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    © 1995 International Monetary Fund

    Cataloging-in-Publication Data

    Western Europe in transition: the impact of the opening up of Eastern Europe and the Former Soviet Union / edited by Patrick de Fontenay, Giorgio Gomel [and] Eduard Hochreiter.—Washington, D.C.: International Monetary Fund; Rome: Banca d’Italia; Vienna: Oesterreichische Nationalbank, [1995]

    • p. cm.

    Papers presented at the Seminar on Western Europe in Transition: the Impact of the Opening Up of Eastern Europe and the Former Soviet Union, held in Trieste, Italy, on October 10-11, 1994.

    ISBN 1-5575-5019

    1. Europe—Commerce—Congresses. 2. Labor market—Europe—Congresses. 3. Capital market—Europe—Congresses. 4. Capital movements—Europe, Eastern—Congresses. I. Fontenay, Patrick de. II. Gomel, Giorgio. III. Hochreiter, Eduard. IV. Seminar on Western Europe in Transition: the Impact of the Opening Up of Eastern Europe and the Former Soviet Union (1994: Trieste, Italy)

    HF3496.5.W47 1995

    Published and printed by the Banca d’Italia (Rome), the International Monetary Fund (Washington, D.C.), and the Oesterreichische Nationalbank (Vienna). The legal publishing provisions of the above three countries apply. The views expressed in this volume are purely those of the authors and do not commit the sponsors or institutions affiliated with the authors in any way.

    Contents

    Preface

    Patrick de Fontenay, International Monetary Fund; Giorgio Gomel, Banca d’Italia; and Eduard Hochreiter, Oesterreichische Nationalbank

    This volume is the second of the two sets of papers presented at the Seminar on Western Europe in Transition: the Impact of the Opening Up of Eastern Europe and the Former Soviet Union, held in Trieste, Italy, on October 10-11, 1994. The first volume, Selected Case Studies, consists of country studies on Austria, Germany, Italy, Portugal, and Switzerland and was published earlier this year. The present volume includes the proceedings of the part of the seminar devoted to conceptual and empirical issues and the proceedings of a panel discussion on more general policy issues.

    The papers provide a detailed discussion of the impact of the opening up of trade with Eastern Europe on the labor and capital markets of the West European economies. In addition, they address the general macroeconomic impact on Eastern Europe of the capital flows associated with the costs of transition.

    The first paper, by Robert Lawrence, attempts to extend some of the principles of the North American Free Trade Agreement to a more general regional framework. His paper is followed by Leonardo Bartolini and Steven Symansky’s simulation study, which analyzes the macroeconomic effects of alternative modes of financing the previously centrally planned economies. Based on the simulation results, the authors conclude that even under a high-capital flow scenario, the impact on the macroeconomic aggregates of the West European economies would not be disruptive. The next two papers take up the issue of the impact of increased trade with Eastern Europe and the former Soviet Union (FSU) on West European labor markets. In the first of these papers, Peter Dittus and Palle Anderson note the decline in manufacturing employment and the increase in unemployment rates in West European economies, analyze the contribution of increased import competition to these developments, and examine the effect of trade on the composition of labor demand and the relative wage structure. The authors find that the competitive pressure exerted by rising imports has contributed to the upward drift in unemployment in Western Europe but conclude that increased trade with Eastern Europe and the FSU countries would result in only small employment losses in “sensitive” sectors and that the impact on total employment would be minuscule.

    Charles Wyplosz takes another approach. His paper presents a detailed analysis of the effect of trade with developing countries on European labor markets. He finds that while competition from developing countries has no significant aggregate impact, it does have strong effects on wages and employment in specific industries, although the results differ across countries. The final paper by Guillermo Calvo, Ratna Sahay, and Carlos Végh examines the nature and consequences of capital inflows to selected Central and East European countries. The authors find that following a period of capital outflows during 1987-91, capital inflows occurred in 1992-93. The inflows were used to finance widening current account deficits, which largely mirrored increases in private consumption rather than investment, and were largely responsible for a real appreciation of the currencies. The authors explain the macroeconomic consequences of these developments and suggest alternative policy prescriptions.

    The seminar concluded with a panel discussion on the policy implications for Western Europe of the opening up of Eastern Europe. The discussion covered a wide range of issues, including the possible integration of the East European economies into the European Union, the consequences of direct investment and/or lending to Eastern Europe and the FSU countries, and the need for the more advanced economies to “practice what they preach” in terms of liberalizing trade. While a diversity of views were expressed on these issues, the panel was in agreement that in order for integration efforts to evolve successfully, the structural and macroeconomic problems of each individual country need to be addressed.

    We would like to thank Richard Barth of the IMF Institute for his efforts in putting together and editing the papers, Laura Kirkpatrick for designing and producing the volume, Emily Chalmers for careful copyediting, and Evelyn McClung for typing the documents. The views expressed in this volume are solely those of the authors.

    August 15, 1995

    Patrick de Fontenay

    Giorgio Gomel

    Eduard Hochreiter

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