Comparative Economic Research. Central and Eastern Europe
The journal seeks to publish original comparative research, as well as results of empirical, comparative economic and social studies related to Central and Eastern European Countries.
Youth Unemployment in the Countries of Central and Eastern Europe. Is Okun’s Law Applicable?
This article investigates the empirical validity of Okun’s law regarding youth unemployment in 11 Central and Eastern European countries between 2000 and 2023. Using panel data disaggregated by age cohorts and gender, the study employs robust linear regression models (RLM) with Huber loss functions and two-way fixed effects models (TWFE). Focusing primarily on the 15–24 age cohort, the results confirm a statistically significant, negative relationship between economic growth and youth unemployment, with considerable heterogeneity across countries and gender groups. While Okun’s law holds strongly in the Baltic states and Poland, the relationship is notably weaker in Hungary and Romania. The study also shows that higher shares of temporary employment and higher Employment Protection Legislation (EPL) indices for regular employment reduce the sensitivity of youth unemployment to changes in GDP, whereas higher youth enrolment rates and higher EPL indices for temporary employment increase this sensitivity.
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Determinants of Fintech Fundraising in Europe
The study examines how the sub-indices of the Global Innovation Index (GII) affect the total value of fintech (financial technology) start-up fundraising in thirty-five European countries, including an eleven-country subsample from Central and Eastern Europe (CEE). Using annual panel data for 2013–2022. Fixed-effects models were estimated for the full sample, while random-effects models were used for the CEE countries. In these models, total fintech fundraising is the dependent variable, and the five GII subindices are the independent variables. The coefficients for Knowledge Workers, Knowledge Impact, and Business Environment are negative and statistically significant, and their effect sizes are even larger in the CEE subsample. The results suggest that improvements in the analysed factors do not necessarily lead to increased market funding for start-ups. The findings indicate that strengthening these dimensions of innovation does not automatically boost market funding for fintech start-ups. The study enriches the fintech fundraising literature by showing that improvements in the analysed factors do not translate into greater market funding for start-ups. As the study is limited to European data from 2013 to 2022, future research could extend the geographic scope or incorporate additional variables.
How Financial Inclusion Affects Environmental Pollution: Using a Threshold and the DID Model
This study investigates the nonlinear impact of financial inclusion on environmental pollution across 61 developing countries from 2005 to 2022. Using a threshold regression model, the findings reveal a critical threshold at which the impact of financial inclusion changes direction. Below this threshold, financial inclusion tends to increase carbon emissions; however, beyond this point, the relationship reverses, with financial inclusion contributing to pollution reduction. To gain deeper insights, the study further applies the Difference-in-Differences (DID) method. The DID results indicate that the effect of financial inclusion is heterogeneous and depends on the level of financial development, national income, and the timing of each country’s participation in the Paris Agreement on climate change. These findings underscore the multidimensional nature of the relationship between financial inclusion and the environment, which is significantly influenced by country-specific economic and policy factors. In addition, the study finds that national income and urbanization levels are associated with increased pollution, while credit to the private sector plays a mitigating role in reducing emissions. These results have important implications that policymakers should consider when designing strategies that promote financial inclusion while aligning with Sustainable Development Goals.
Fiscal Support, QE and Income-smoothing in European Banks during the COVID-19 Crisis
This study examines how fiscal and monetary policy responses to the COVID-19 crisis influenced banks’ income smoothing through loan-loss provisions (LLPs) in the European Economic Area (EEA). Using a panel of 1,122 commercial banks from 29 countries between 2011 and 2020, we investigate whether the intensity of income smoothing varied with the scale of public support. Fiscal liquidity measures and the European Central Bank’s quantitative easing (QE) under the Pandemic Emergency Purchase Programme (PEPP) serve as proxies for government and monetary interventions. The results show that both fiscal and monetary support reduced average LLP levels but simultaneously strengthened the link between earnings and provisioning, indicating increased income-smoothing behavior during the pandemic. This pattern reflects two complementary mechanisms: the crisis-severity channel, where larger policy interventions corresponded to deeper economic stress, and the moral-hazard channel, where public backstops expanded managerial discretion in provisioning. Overall, the findings suggest that large-scale stabilization policies mitigated credit risk and preserved financial stability but also encouraged more discretionary accounting behavior, underscoring a potential trade-off between crisis management and the transparency of banks’ financial reporting.
Cryptoassets as a Threat to State Sovereignty in the Field of Enforcement and Insolvency
Cryptoassets, as a novel manifestation of financial technology, pose a challenge to traditional legal frameworks, especially in their decentralised nature and the unique way they are held and transferred. Their emergence requires a re-examination of regulatory principles and mechanisms of rights protection in an environment where decentralisation signifies the absence of centralised control. This article examines cryptoassets as a potential threat to state sovereignty within the domains of foreclosure, enforcement, and insolvency. It analyses the legislative challenges arising from the increasing prevalence of cryptoassets and evaluates the applicability of traditional enforcement law instruments to these new technological contexts. This article also integrates empirical findings from the Czech legal environment into the broader theoretical discourse on financial crime and the erosion of state authority caused by decentralised financial systems operating across national jurisdictions Particular attention is devoted to the technical characteristics of cryptoassets, their legal classification, and the practical obstacles encountered in enforcement and insolvency proceedings, especially in situations where debtors refuse or are unable to provide access to their digital assets. The analysis also incorporates available statistics on enforcement proceedings and evaluates the Czech legal framework governing cryptoassets, focusing on its implications for the effectiveness of enforcement and insolvency processes. The research employs both primary and secondary methods, including legal and technical analysis, modelling of real scenarios, and an examination of the relevant legislative instruments.
Digital Transformation Success in the UAE: The Impact of Leadership, Organizational Flexibility, and Strategic Planning Based on Structural Equation Modeling
This study explores the relationship between leadership, organizational flexibility, and strategic planning, and the power of these elements to promote successful digital transformation in the context of the United Arab Emirates. This quantitative study involves the use of surveys and questionnaires that were distributed to 1000 mid-to-senior-level managers. Data on 600 valid answers (representing a response rate of 60%) were analyzed with Structural Equation Modelling (SEM) using AMOS software. The research examines three primary concepts: Leadership, Organizational Flexibility, and Strategic Planning, and how they influence the achievement of Successful Digital Transformation. The findings reveal that 82% of participants said that visionary leadership is essential for digital transformation, 78% stressed the need to effectively communicate goals, and 81% emphasized motivating employees. Furthermore, 75% of the participants said that their businesses had the capacity to adjust to changes, while 73% acknowledged the presence of flexible work practices, and 80% emphasized the need for cross-functional cooperation. Of the 77% of respondents who stated that their firms have a clearly defined digital strategy, 79% had aligned their digital strategy with their company goals, and 74% had included quantifiable targets and key performance indicators (KPIs). These results emphasize the significance of integrating artificial intelligence and data analytics with effective human leadership and strategic planning. It is suggested that organizations enhance their leadership capabilities, foster a flexible culture, and develop comprehensive digital strategies to reap the benefits of digital transformation to the maximum.
Energy Security and Sustainable Development of the Energy Sector: Comparative Analysis of the Visegrad Group Countries
A sustainable energy sector is crucial for a country’s stable and environmentally friendly socioeconomic development. Economic security (ES), the basis for the functioning of the state, is one of the major factors affecting the development. The objective of this article is to examine how ES influenced the sustainable development of the energy sector in the Visegrad Group countries, i.e., Poland, Slovakia, Hungary, and Czechia, over the period spanning from 2008 to 2020. To evaluate a meaningful relationship between the indicators (p < 0.05), we used correlation coefficients, the ordinary least squares method, and the seemingly unrelated regression model. The findings indicate that ES impacts the sustainable development of the energy sector, where positive results can be achieved by implementing coordinated macroeconomic policies. Green energy sources and renewable energy are crucial in this process.
Do Exchange-Rate Fluctuations Have Asymmetric Impacts on Visegrad–German Sectoral Trade?
Understanding the determinants of trade flows between countries is of particular interest to policymakers, central bankers, business owners and investors. The study examines the long-run impact of the real exchange rate, exchange-rate volatility, and output on the trade balances of 10 SITC (Standard International Trade Classification) sectors between three Visegrad countries and Germany. Because the linear Autoregressive Distributed Lag (ARDL) approach shows little effect across countries and sectors, we decompose the impacts into positive and negative changes via the Nonlinear ARDL approach. The paper adds value in the following respects. The first is that while the overall macroeconomic determinants have a relatively weak connection to these trade balances, the strongest connections are in the primary-product-producing sectors. The second finding is that while most of these trade flows often depend on the country, the sector analyzed, and the method used, there are interesting, stylized results, including the region’s chemical sector and manufacturing in Hungary, for example. The third finding is that nonlinear models show cointegration between the real exchange rate and the trade balance in Visegrad-Germany trade for a higher number of industries, even though the long-run coefficients continue to be insignificant in many cases.
The Role and Significance of EU Guidelines on Non-financial Reporting for SMEs
This study investigates the role and impact of non-financial reporting (NFR) regulations on small and medium-sized enterprises (SMEs) in the European Union. While large enterprises are the primary focus of directives such as the Non-Financial Reporting Directive (NFRD) and the Corporate Sustainability Reporting Directive (CSRD), SMEs are increasingly affected due to supply chain dependencies and financial incentives. The research aims to assess SME awareness, challenges, and expected benefits related to NFR adoption. The study is based on an empirical survey of 151 SMEs in the Kuyavian-Pomeranian Voivodeship in Poland, utilizing statistical methods such as correlation analysis and regression modeling to evaluate attitudes toward compliance and perceived barriers. The findings reveal that while SMEs acknowledge the growing relevance of NFR, resource limitations and lack of expertise hinder effective implementation. Nevertheless, SMEs that have proactively adopted NFR practices report benefits, including enhanced stakeholder relationships and a competitive market advantage. The study highlights the necessity for targeted policy interventions, including financial support, simplified compliance frameworks, and dedicated training initiatives to facilitate SME adaptation to sustainability reporting standards. This research contributes to the ongoing discussion on sustainability reporting by focusing on SMEs, a sector often neglected in NFR policy discussions. The study also provides empirical insights into how regulatory developments shape SME behavior, offering recommendations for policymakers on supporting sustainability transitions in the SME sector.
Corporate Sustainability Reporting Directive (CSRD)
ESG factors (environmental, social, governance)
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Fiscal (Un)Sustainability in Practice: Local Government Finance in Visegrad Economies
The objective of this study is to evaluate the fiscal sustainability of Local Government Units (LGUs) in the Visegrad Group economies (Czechia, Hungary, Poland, and Slovakia; the V4), focusing on three key hypotheses: (1) LGUs in the V4 are involved in so-called Ponzi games; (2) the adverse effects of such games intensified during the economic recession, the COVID-19 crisis, and the war in Ukraine; (3) primary budget balances of LGUs impact the stabilization of their debt levels. The study spans 2001–2022, encompassing significant economic disruptions. The analysis utilizes fiscal sustainability assessments, including the primary gap indicator and criteria for Ponzi-like behaviors. Key findings reveal varying degrees of fiscal sustainability across the V4, with notable disparities in resilience and debt management. The implications and recommendations emphasize the need for enhanced fiscal discipline, targeted policy adjustments, and transparent governance frameworks to address identified vulnerabilities. The paper offers a comprehensive examination of LGU fiscal sustainability in Central European economies, offering insights for policymakers and enriching the discourse on public finance management in post-transitional economies.
Organic Animal Products in the EU to Support Sustainable Consumption
A critical analysis of the research discourse on the development of organic farming is imperative if it is to contribute to the spread of sustainable consumption patterns, as indicated in the European Green Deal (EGD). However, there is a notable dearth of research from a macroeconomic perspective. What and how much we consume affects human health and the environment. Therefore, there is a need to increase consumer awareness of the consequences of food choices, as organic animal products can contribute to sustainable consumption and production. The study aims to determine the level of development of the production of organic animal products in European Union (EU) countries. Synthetic indicators of the development level of EU countries in 2016 and 2020 were constructed based on the Principal Components Approach (PCA) using Eurostat data. A survey and literature review shows that countries at the top of the ranking, such as Denmark, Sweden, Finland and Austria, have active policies to support the development of organic agriculture on both the supply and demand sides. On the other hand, a divergence in the factors that influence the development of organic agriculture was also observed in the top-ranked countries. Therefore, the development of organic agricultural production, including organic animal products, requires the diffusion of experiences across the EU to support the multifaceted OAFR (organic agriculture and food research) paradigm and the Sustainable Development Goals.
Evaluating the Suitability of the Simplified Pairs Trading Strategy for Short-term Equity Market Trading
Pairs trading has been a successful tool for traders since its inception in the 1980s and has evolved significantly with the introduction of algorithmic, machine, and AI trading. This evolution has compli­cated the implementation of this strategy that traditionally benefits institutional or specialized investors. Despite this, the simplicity of pairs trading remains accessible, indicating potential benefits for ordinary traders. By focusing on the strategy’s fundamental principles and employing a real-time market test on a popular trading platform, the study aims to reveal its applicability and efficacy for short-term equity trading. Utilizing basic trading platform tools and Excel functions, the research aims to demonstrate a simplified approach to pairs trading. The findings will provide insights into the strategy’s effectiveness, providing non-expert traders with a viable approach to navigate today’s volatile markets through a simplified yet effective pairs trading model. The experiment’s findings highlight varying performances across different stock pairs, with notable differences in volatility. While five out of 11 pairs achieved positive returns, only two met the closure criteria within the short-term horizon, suggesting that a longer trading period and a more diversified pair’s portfolio may be necessary to fully capture expected price convergence.
The Green Economy for a Sustainable Future: Experience from the Visegrad Group Countries
The objective of this paper is to identify the significance of the green economy for a sustainable future and compare the situation and developments in achieving the European Green Deal (EGD) in the Visegrad Group (V4) countries. To achieve this objective, the paper focuses on the challenges, risks and opportunities of implementing green economy policies. Comprehensive data analysis is conducted, and a European Green Deal Index (EGDI) for the V4 countries is developed. The Eurostat database is used to monitor 18 key indicators in the V4 countries from 2015 to the latest year available. The results show that Slovakia is the best-performing V4 country with the highest EGDI score, while Poland shows the most significant improvement, mainly in the category Enabling a green and just transition. Between 2015 and 2023, Slovakia and Czechia experienced negative trends in the percentage of the population unable to keep their home adequately warm for financial reasons. The paper highlights the social dimension of the EGD and the green economy as well as the importance of a just transition concept across the whole European Union since increased household spending on the green transition could affect public support.
The Pan-European Personal Pension Product – Managers’ Challenges and Savers’ Expectations
The Pan-European Personal Pension Product (PEPP) is a strategic initiative of the European Union (EU) aimed at creating a harmonized, portable pension savings framework that addresses the challenges of population aging, increased labor mobility, and the widening pension gap across Member States. This article investigates the implementation and performance of the PEPP in four EU countries – Poland, Slovakia, Croatia, and the Czech Republic – through a mixed-methods research design. The study combines a legal and comparative analysis of national pension systems with qualitative interviews conducted with PEPP fund managers and quantitative surveys of PEPP savers. The findings reveal significant disparities in regulatory approaches, tax treatment, and supervisory frameworks between countries, which affect both the attractiveness and functionality of PEPP. Despite the shared design principles of transparency, safety, and cost-efficiency, savers’ expectations differ notably across countries – especially in relation to customer service, information delivery, and minimum return expectations – while also being shaped by sociodemographic factors. The qualitative research highlights that fund managers face challenges such as regulatory fragmentation, high administrative burdens, and competition from national products with more favorable tax treatment or employer-based incentives. At the same time, digital tools and passive investment strategies are seen as key to enhancing PEPP’s scalability and efficiency. The article concludes that for PEPP to succeed as a truly pan-European product, further regulatory harmonization, consistent tax incentives, and comprehensive financial education efforts are essential. The authors also propose that increased provider competition and adaptive national policies could accelerate the product’s uptake. The study offers practical insights for EU policymakers, national regulators, and financial institutions aiming to promote inclusive and sustainable retirement savings across the continent.
The Saving–Investment Relationship Re-visited: Capital Mobility and Current Account Deficit Sustainability
The study examines the degree of current account deficit (CAD) sustainability and capital mobility for a panel of 97 countries over the period 1980–2020. To this end, the study adopts a novel interpretation of the Feldstein–Horioka coefficient in the context of CAD sustainability and examines the relationship between savings and investment using the Dynamic Common Correlated Effects Mean Group (DCCEMG) estimator. The findings reveal that all country groups exhibit “weakly” sustainable CADs. The estimates of the short-run coefficients reveal that short-run capital mobility is high in all country groups, whereas long-run capital mobility is relatively moderate or low. The rolling-window analysis shows that the 2007–2008 global financial crisis caused a significant drop in both capital mobility and CAD sustainability. In the post-crisis period, short-run capital mobility and CAD sustainability remained on a downward trend in most regions, whereas long-run capital mobility started slowly recovering. By providing a comprehensive regional analysis across six major world regions, this study contributes to the literature by shedding light on the evolving dynamics of international capital flows and regional variations in external balance sustainability.
Enhancing Resilience in International Supply Chains: The Role of Sustainable Development in a VUCA World
In today’s VUCA (Volatility, Uncertainty, Complexity, Ambiguity) world, which exerts strong pressure on international and global supply chains, academia and business are actively seeking new strategies to foster their sustainable and uninterrupted development. The results of our study, using statistical methods such as analysis of variance, show that the implementation of sustainable development principles in supply chain management positively affects the resilience of supply chains to sustainability risk across the pre-disruption, during-disruption and post-disruption phases. This, however, is contingent on a process-based approach to supply chain management and a high level of managerial awareness of the various types of risks to supply chains. Furthermore, our findings confirm that the key organizational characteristics are significant determinants of this resilience. Specifically, we observed that company size, the origin of the capital, and the degree of internationalization all affect supply chain resilience across the three disruption phases. Sustainable and resilient (SUS-RES) supply chains, which employ proactive, concurrent, and reactive approaches, are particularly noticeable in the supply chains of large enterprises with foreign capital or foreign branches. This suggests that managing international supply chain sustainably can also improve their resilience.
The Role of Broadband Usage and Telecommunications Competition in Driving Economic Growth and Labour Productivity: A Comparative Regional Analysis of MENA and Europe
This study compares the impact of using fixed and mobile broadband services and competition in the telecommunications sector on economic growth and labour productivity across 20 countries in Europe and the MENA (Middle East and North Africa) region from 2015 to 2021. Broadband usage is measured by the amount of data consumed, while sector competition is assessed using the ICT regulatory tracker index. Two econometric models were employed and applied to two samples: Group A (European countries) and Group B (MENA countries). The results show that broadband use has positive and significant impacts on economic growth and labour productivity in the two groups, but the effect in the European countries was higher. However, the study also finds that competition in the telecommunications sector produces divergent results between the two groups. The study recommends adopting policies to enhance the deployment and affordability of fixed and mobile broadband usage and services. Additionally, since competition serves as a catalyst for broadband usage, enhancing competition in the telecommunications sector is also advised.
Common and Unique Features in the Development of Startup Ecosystems in Latvia, Ukraine, and Georgia
This research presents a comprehensive analysis and comparison of the startup ecosystems in Latvia, Ukraine, and Georgia. It identifies the key factors that foster their development and growth, and highlights the primary obstacles and challenges that confront startups in these countries. The authors used the following methods to achieve these objectives: correlation and regression analysis to examine funding trends and success factors, comparative analysis of key ecosystem parameters, as well as methods of analysis and synthesis. The novelty of the study lies in its identification of the most important factors that influence startup development in the three countries, the construction of a correlation and regression model of startup financing, and the comparative analysis of startup ecosystems. Comparing the startup ecosystems of the three countries revealed both common and unique features of each country, emphasizing how differences in political, economic, and cultural conditions shape startup development.
Social Justice in the Countries of Central and Eastern Europe
The article aims to compare the level of social justice in the countries of Central and Eastern Europe (CEE) in terms of the individual indicators that constitute the Social Justice Index and to determine their level of convergence with the European Union average. The paper also describes changes in this area of social justice in recent years and examines the relationship between social justice and industrial democracy. The analysis was based on statistical data from Eurostat and the results of a study conducted by the European Foundation for the Improvement of Living and Working Conditions, the European Institute for Gender Equality, and the Legatum Institute. The findings show that Romania achieves the worst results in most indicators in the Social Justice Index, but many of them have improved significantly in recent years. Slovenia, Czechia and Slovakia are the most successful in preventing poverty and equalising income. The degree of gender equality in all CEE countries was lower than the EU27 average. Finally, CEE countries that promote social dialogue and employee participation rights also have higher levels of social justice.
The Clash of Civilisations? Religion as a Major Component of Cultural Differentiation on the Example of Belarus and Poland
This comparative study investigates the role of religion as an important factor in shaping political and economic mental models, focusing on the contexts of Belarus and Poland. It builds upon Samuel Huntington’s thesis, which posits that cultural and religious differences are fundamental to civilisational conflicts. By analysing how Catholicism and Orthodoxy have shaped the divergent mentalities of these neighbouring nations, this research highlights the long-lasting influence of religious traditions on societal development. Employing a mixed-methods approach, including CATI surveys, statistical analyses, and historical comparisons, the study identifies significant differences in political and economic behaviours between Belarusians and Poles. These disparities underline the long-term impact of religion on attitudes toward power, property, and individualism. The findings contribute to a nuanced understanding of how religious values not only define societal norms but also shape national trajectories and contemporary geopolitical alignments. This research underscores the enduring relevance of religion in explaining cultural dynamics and civilisational divides in Eastern Europe.
Gendered Wage Penalties for the Overeducated: The Experiences of Young Men and Women in Ten European Countries
In this study, we examine the impact of overeducation on wages and wage penalties among 19,000 young men and women aged 18–35 in ten European countries. Using data from the Cultural Pathways to Economic Self-sufficiency and Entrepreneurship (CUPESSE) project and controlling for some endogeneity from omitted ability variables and employment selection, we find that women’s wages and wage penalties align with job search theory, while men’s observed wage offers are consistent with job competition theory. However, once selection is accounted for, wage penalties incurred by young men do not follow the predictions from this theory. Despite lower baseline wages, women in many countries face larger overeducation penalties than men, a pattern shaped by institutional regime type and gender norms. We offer possible explanations for this disparity and conclude with policy recommendations to address overeducation penalties.
How Enterprises from Czechia, Poland and Slovakia Engage in Reporting CSR Activities during Crises
The objective of this article is to analyse selected topics included in the corporate social responsibility (CSR) reports of companies from three Visegrad Group countries: Czechia, Poland, and Slovakia. The study focuses on the emphasis that these companies place on the topics discussed and the extent to which they include them in their CSR reports to stakeholders. The study adopts a quantitative design, using an online questionnaire to explore CSR reporting in the Visegrad countries, with a sample size of 375 companies. It employs statistical tools like the Shapiro–Wilk normality test, the Kruskal-Wallis test, and the Bonferroni post hoc test to analyse data on CSR reporting across different company sizes and sectors. Despite potential methodological limitations and bias, the survey identifies differences in CSR reporting practices among companies in the three countries. The leader in CSR reporting in the region is Slovakia, which can serve as an example of good CSR reporting practices. Czechia shows moderate commitment to CSR reporting activities, while companies in Poland are the least engaged. The discrepancies are due to differences in regulations, levels of public awareness, and business priorities. The results of the study will be valuable to researchers, managers and policymakers in developing tools to support companies in introducing new reporting standards and providing information on actions taken during a crisis. The novelty of this article is the analysis, at the enterprise level, of the type of CSR activities of selected companies from Visegrad Group countries from the perspective of the anti-crisis measures they have taken. This research fills a gap in the literature and provides a basis for discussing the legitimacy of socially responsible activities in contexts extending beyond a single crisis.
Motivations and Effects of Mergers and Acquisitions on the Warsaw Stock Exchange, Considering ESG Factors
The main purpose of this article is to determine the impact of Environmental, Social, and Governance (ESG) factors on corporate mergers and acquisitions (M&A). The study was conducted on companies listed on the Warsaw Stock Exchange (WSE), which plays a significant role in European capital markets, particularly in the Central and Eastern European (CEE) region. It is the largest stock exchange in the region by both market capitalisation and the number of listed companies. Data for the study were collected in 2024 using CATI (Computer-Assisted Telephone Interviewing) and CAWI (Computer-Assisted Web Interviewing) methods from companies that had conducted M&A in the previous five years. Data analysis was performed using descriptive statistics and several tests, including ANOVA, Kolmogorov-Smirnov, Shapiro–Wilk, Levene, Welch and Kruskal-Wallis. The study investigated the motives for companies to consider ESG factors when conducting M&A transactions. The results show that WSE companies consider managerial awareness to have the greatest influence on the inclusion of these factors in M&A. Detailed information was obtained on the different motivations of listed companies to include ESG factors in M&A transactions and the subsequent impact of these transactions on their financial performance. Additionally, the study investigated the impact of company size and capital ownership on decisions to include ESG factors in M&A. The results offer an important contribution to existing research on M&A in the CEE region.
A Change in Volatility or Asymmetry? A Monetary Transmission Mechanism in Small Open European Economies during the Financial Crisis
The article analyses the influence of crisis-induced changes in economic activity on the monetary transmission mechanism in the small open economies of Czechia, Hungary, Poland, and Sweden from 2000: 1 to 2016: 5 using the Markov Switching Structural Bayesian Vector Autoregressive models. The results confirm that in countries where the exchange rate transmission channel is relatively weak (Hungary and Sweden), changes in volatilities coincide with changes in the coefficients of the monetary transmission mechanism, reducing the efficiency of a monetary policy during a crisis. The changes of the coefficients occurred in neither Poland nor Czechia, where the exchange rate pass-through was not closed completely. The results imply that in small open economies, public authorities’ efforts to sustain exchange rate pass-through may critically affect their ability to retain monetary control during a crisis.
Markov Switching Bayesian Structural Vector Autoregression (MSBSVAR)
The Reform of European Public Debt Regulations – an Opportunity and a Challenge for EU Member States
The article examines how the European Commission’s proposal to reform the Stability and Growth Pact (SGP) in terms of the pace of public debt reduction may affect basic economic parameters, such as GDP, consumption and investment levels, as well as fiscal parameters like the scale of subsidies and taxation levels of production and goods. This analysis focuses on two groups of EU countries: those with public debt below 60% of GDP (Group 1) and those with public debt above 60% of GDP (Group 2). In the first stage of the study, using Eurostat data from 1995–2022 and employing a fixed effects model, we show that in Group 1, the impact of public debt on economic growth is statistically significant (unlike in Group 2). In the second stage, we conduct a detailed analysis of the impact of public debt on basic mac­roeconomic parameters (GDP growth components) and fiscal policy in countries with high levels of public debt. We simulate both moderate and drastic variants for reducing public debt relative to GDP. The results show that in these countries, debt reduction leads to a decrease in consumer spending, an increase in investments, and an increase in taxes on production and imports. Based on these results, we recommend that the SGP reform should prioritize a gradual reduction of the public debt-to-GDP ratio because implementing drastic solutions would require deep cuts in public spend­ing and tax increases in a short timeframe. We also highlight the need to consider exceptional sit­uations in which the SGP rules may be suspended, as was the case with the COVID-19 pandemic.
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Foreign Direct Investment in Latvia and Serbia: A Comparative Analysis
The main purpose of this study is to compare foreign direct investment (FDI) patterns in Latvia and Serbia, ex­amining underlying trends, institutional frameworks, and historical contexts that shape investment dynamics. By analyzing regulatory structures, incentive schemes, and investment structure and dynamics, we synthesize best practices and policy recommendations for fostering sustainable investment inflows in both countries. The study employs a comparative case study approach to analyze institutional frameworks related to FDI, as well as the performance of foreign affiliates and the dynamics of FDI inflows in Latvia and Serbia, fo­cusing on the period from 2010 to 2023. Utilizing descriptive statistical methods and data from central banks, national statistical offices, and international organizations, the research examines trends, struc­tures, and origins of FDI, connecting them to historical contexts and institutional and economic factors. Despite their disparate historical contexts, both countries share a common thread in their transition to­ward market-oriented economies, marked by proactive policies aimed at attracting foreign investment. Our study shows how divergent approaches in integration and regulatory harmonization impact patterns, structures, and dynamics of foreign direct investment. Our research proposes tailoring FDI frameworks and incentive policies to leverage the strengths and ad­dress weaknesses in Latvia and Serbia. For Latvia, expanding economic diplomacy and supporting existing foreign affiliates could enhance investment retention and attraction, particularly from non-European Union (EU) countries. For Serbia, policies should prioritize FDI in technology-intensive and high-value-added sec­tors, supported by digitalization, workforce development, and regulatory alignment with the EU. The study provides a unique quantitative and qualitative comparison of factors that affect the FDI inflows, dynamics, and structure of those inflows in Latvia and Serbia, contributing to understanding the options of policymakers in transition economies for attracting investments and ensuring that they have positive effects on economic development.
Poverty and Social Exclusion: Key Challenges for Sustainable Rural Development in the New European Union Member States between 2007 and 2022
Poverty has emerged as a significant global issue, impacting both urban and rural areas in developing countries. Its complex and multifaceted nature, encompassing profound economic, social, and psycho­logical implications, has made addressing it even more challenging. Therefore, rural poverty is regard­ed as one of the most pressing challenges for achieving sustainable development within the European Union (EU). While the EU-15 countries (i.e., the “old” Member States) are relatively better positioned, rural poverty has remained a persistent issue in the “new” Member States, particularly in recent years. This study has examined the trends in rural poverty and social exclusion across the new EU Member States over the past 15 years. Using a data review methodology, it has analyzed rural poverty and exclu­sion trends from 2007 to 2022 in Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia. The findings have revealed that Bulgaria, Croatia, Latvia, Lithuania, and Romania significantly lag behind the EU average in addressing rural poverty among the new member states.
The Social and Economic Consequences of the First Year of Russia’s Fullscale Invasion of Ukraine
This study aims to develop an analytical framework for understanding the social and economic out­comes of Russia’s military invasion of Ukraine by studying its impact on the labor market and migration, the economy and trade, social capital, and volunteering in Ukraine. The main economic and social con­sequences include the following: the massive out-migration of refugees and internally displaced people; the change in demographic structure; the relocation and reopening of businesses and adapting to new conditions; the total collapse and de-industrialization of the occupied territories’ economy; the inter­ruption of supply chains; the reduction in trade volumes; the accumulation of social capital; and the de­velopment and spread of citizens’ volunteer cooperation to solve urgent issues at the national and lo­cal community levels. This study is limited to the available data and the effects on Ukraine’s economy and social sphere, excluding the impacts on the economies of European Union countries and the world economy in general.
Capital Structure and Changes in Companies’ Risk during the COVID-19 Pandemic in CEE Countries
The article examines the financial management of companies in the context of the COVID-19 pandem­ic, in particular, the relationship between their capital structure and risk changes during the pandemic. The study aims to determine how companies’ total, systematic and idiosyncratic risks changed during the COVID-19 pandemic depending on their capital structure. It is based on a sample of companies listed on stock exchanges in Poland, Hungary, Romania and Bulgaria. The study uses a panel data regression model. In all countries analyzed, as well as the group of companies taken collectively, the COVID-19 pan­demic positively influenced both total risk, as measured by the volatility of returns, and specific risk meas­ured with the standard deviation of the residuals in Sharpe’s single-index model. The extent to which both kinds of risk increased during the pandemic period appears to have been related to the level of excess leverage: more heavily indebted companies increased their risk more significantly. However, the impact of the pandemic on systematic risk measured with beta coefficients is more ambiguous. A plausible expla­nation for this result is given.
The Nexus between CO2 Emissions and Health Expenditure – Causality Evidence from Selected CEE Countries
Greenhouse gas emissions, primarily carbon dioxide (CO2), influence climate change and have a signif­icant impact on public health. The relationship is a subject of interest to many researchers. However, the situation of Central and Eastern European (CEE) countries is not sufficiently explored in this context. Thus, this study examines the linkages between CO2 emissions and health expenditures in 11 CEE coun­tries. The empirical findings obtained using Kónya’s bootstrap panel Granger causality test show that CO2 emissions and health expenditures are related in most CEE countries. Notably, a bidirectional relationship in the bootstrap panel Granger causality test is found for Croatia, Romania, and Slovakia. In contrast, the relationship was revealed to be insignificant in Bulgaria, Lithuania, Poland, and Slovenia. The results are significant and contribute to the existing literature. The findings allow us to issue policy recommen­dations to intensify efforts to control pollution, particularly CO2 emissions, especially in Croatia, Romania, and Slovakia, as well as in the countries where at least unidirectional effects from CO2 emissions to health expenditures were observed (e.g., Estonia, Hungary, and Latvia).