Mega Events and Their Effect on Mesoeconomics

The chapter proposes an analysis that claims the importance of phenomena successfully revealed only in view of mesoeconomics. The authors argue that the economic processes in the field of organizing events should not be conceived merely as resulting from macro- and micro-level relationships but rather as resulting from relationships on mesoeconomic level (where a large number of unresolved and unexplored issues still exist), discussed by the authors in terms of the black box relationships on the mesoeconomic level. The main aim of this study is to investigate a specific mega event so as to trace and analyze the roles of the operators at the three levels of social-economic activity, and finally to identify the specific roles of the operators functioning at the mesoeconomic level. Making up a small part of scientific investigation in interdisciplinary research, the chapter proposes further perspectives for a proper application of mesoeconomics when discussing issues bridging micro-economics and macro-economics.

The Money as the Necessary Link Between Micro and Macro Levels

The aim of the chapter is to introduce money as the necessary link between micro and macro levels. The author starts with a critical appraisal of the neoclassical monetary theory paradigm. The opening argument is that it is not possible to separate the relative prices and price level formation. The interdependence between the price of money and the prices of all the other goods leads to the conclusion of the gross complementarity of money what violates the gross substitutability principle. Further, it is argued that the function of money as medium of exchange in a decentralized monetary economy is only possible under cyclic sequencing of bilateral exchanges. The latter means that new macroeconomic constraint is added to the conventional micro equilibrium requirements. The macro constraint makes possible to derive the individual utility functions from macro variables such as the income velocity of money and the price level. The macro constraint allows also for optimal solutions under the second-best conditions.

Institutions and Economic Policy

This chapter discusses the problems associated to an inadequate theory of economic policy. It begins by presenting the mainstream and heterodox approaches to policy. It contends that, according to the mainstream, policy must guarantee efficiency or, at the very least, consider it a key constraint, whereas according to heterodox economists, it may have a broader variety of goals. The latter's open system perspective implies that changes in the structure of the economy eventually feedback both on how people conceive of the economy and social welfare and on how the economy itself functions. The relevance of this issue, which is understated, emerges from the subsequent discussion of how neoliberal policies have changed the structure of the economy, the way people conceive of the economy, and even their voting behavior.

Attempting an Assessment of the MoUs' Role in Confronting the Greek Crisis

This chapter wishes to analyze the full impact of the three (3) Memoranda of Understanding signed between the Greek corresponding governments and the European Commission, ECB, and IMF representations. The first Memorandum was considered as necessary due to Greece's inability to access international financial capital, while the other two (2), which followed, tried to correct “implementation errors,” control for “ownership” of the programs, and confront the prolonged and severe economic crisis and unemployment derailment. This chapter will present a series of key macroeconomic and microeconomic figures and will argue that despite the fiscal consolidation, which came at an extremely high social and economic cost, Greek economy still has a lot challenges to tackle and serious impediments to overcome. It will also shed some new light on whether Memoranda actually helped Greece to recover or used a whole country as a “guinea pig” and as an example of compliance, allowing the final reader to decide.

Panel Non-Stationarity Methods in Macro- and Microeconomic Studies

Panel data analysis aims to overcome the weaknesses of its alternatives: country-by-country analysis is usually based on short samples, there is a significant country-specific distortion in the data, and it leads to biased estimates, and the cross-section analysis neglects the time dimension. In last two decades, tests for non-stationary panels sparked a large body of literature both on tests theory and on various empirical studies in multiple areas of micro- and macroeconomic research. The most popular studies include topics such as growth, finance, exchange rates, fiscal matters, and international trade, but also popular are studies in tourism, energy, resource demand and supply, IT and technology spreading, politics, inflation, international trade and current accounts, stock markets, etc.

Diversity of Monetary Regimes and Reactions to the Pandemic Crisis

This chapter analyses to what extent the type of monetary regime in three Balkans countries (Bulgaria, Romania, and Serbia) determines the scope and nature of reactions to the pandemic crisis in the short run (providing liquidity to different sectors) and considers the possibilities for a long-term recovery. A comparative perspective is particularly suitable for the Balkan countries with great institutional diversity of the monetary regimes. In particular, the two members of the EU, Bulgaria and Romania, have been following different principles of monetary regimes for decades (Currency Board versus discretionary Monetary Policy). Both Bulgaria and Romania follow closely the ECB monetary policy. Serbia, which is outside the EU, is not affected by the constraints of European integration and actually has its independent monetary policy (although the Euro is also an important external anchor).

What Drives Euro Area Labour Productivity Growth?

This chapter uses a nonparametric, international production-frontier approach with a focus on euro area growth accounting. The authors uncover two robust findings for the period since 1980. First, estimated euro area efficiency scores lie much below the world production frontier (gap mostly in the range of 10% to 20%), suggesting the need for structural reform efforts to enhance resource use. Second, the use of human capital series points to a significant effect on euro area labour productivity—highlighting the positive macroeconomic return to education—while entailing a considerable reduction in the estimates of technological progress. Third, they fail to detect significant changes in cross-country distributions of labour productivity both before and after 1995. The only exception concerns the shift in the labour productivity distribution between 1980 and 1995—attributable to the role of physical capital deepening—when they employ the Barro and Lee human capital measure together with World Penn Tables data for the full set of countries, and this only at the 10% significance level.

Second Generation Reforms

Economic reforms include comprehensive and radical changes in the functioning of the economic system and its main rules. There is no clear and generally accepted classification of economic reforms in the literature. In this study, economic reforms are analyzed by classifying them as first-generation reforms and second-generation reforms. First-generation reforms are made in macroeconomics for the purposes of eliminating macroeconomic imbalances, ensuring stability, controlling inflation, ensuring fiscal and monetary discipline, reducing public debt. Second-generation reforms are microeconomic reforms, which include strengthening the infrastructure of the market economy, increasing efficiency, enhancing the competitive power, and strengthening the institutional infrastructure that creates competitive markets. The aim of this study is to examine the theoretical framework of first-generation and second-generation reforms in line with macroeconomic and microeconomic expectations and to explain and discuss the main areas of second-generation reforms.

New Institutional Economics and Economic Development

In recent years, the concept of “institutions” has become central in scientific and political discourse. This reflects an increasing awareness of the role of institutions in the functioning of economies and in economic development more generally. Many of the catchphrases articulated within new institutional economics such as “institutions,” “organisations,” “transaction costs,” “property rights,” and “contracts” have become very common in orthodox economics discourse. This development is intellectually stimulating and interesting because it raises some fundamental issues with regard to the role and functioning of institutions. These concepts are seated on Smith's idea of the “harmony of interests.” However, Smith sees power as dominant in the formation of institutional framework. This chapter aims to provide a Smithian critique based on the notion of power, arguing that the formation of institutions and institutional framework cannot be considered apart from the intrinsic power relations which are vested in society.

Investigating the Effect of Diplomatic Representation on Trade

Economic diplomacy is an unavoidable tool for improving economic standards, and it needs to be an important instrument for policy makers in stimulating international trade and supporting domestic firms. This chapter analyses the impact of economic diplomacy on bilateral trade flows in Croatia in the period from 1992 to 2017. The authors use an applied gravity model of trade by employing fixed effects model (FE), random effects model (RE), and pseudo Poisson maximum likelihood (PPML) estimator. PPML estimator takes into count zero trade flows because estimating zero trade flows with OLS estimator could lead to several biases. The problem of dependence between diplomacy representatives was solved by constructing individual regressions using FE model and PPML estimator. The hypothesis of the chapter, which was tested, states that diplomatic representation has had positive and significant effects on bilateral trade flows (imports and exports) of Croatia. The results of the analysis have shown that the diplomatic representation via embassies and consulates is a relevant trade and trade-enhancing factor.