Business and Management Research News
Webster Vienna Professor’s Book Out Now
Recently, business and management department’s own Dr. Menbere Workie Tiruneh’s book Overshooting the Maastricht Criteria: External Imbalances and Income Convergence in the European Union was made available for purchase by Nova Science Publishers in New York. We sat down with Dr. Workie to discuss his research on the European Union and the Great Recession.
Webster Vienna: How did the economic underpinnings of the European Union become a central part of your academic research? What do you find so interesting about it?
Dr. Workie: A simple answer would be that I obtained my graduate and doctorate studies in Europe and have been living in Europe for a long time. This wouldn’t be enough to develop a research interest though. I have witnessed the fall of the Berlin Wall as well as the transformation of Europe with remarkable achievements, such as the creation of the European Union and the Economic and Monetary Union. In my understanding this was both a political achievement that has significantly reduced regional tensions as well as an economic one in response to the globalization of the world economy. It was particularly very interesting to observe and investigate the challenges of Central and Eastern European countries (former communist countries) to adopt policies in order to get the letter of invitation to join the European Union. In my view most of these countries would have been far less developed by now without the incentives to join the EU. Regional, cohesion and structural funds have also played a pivotal role in reducing income disparities across countries. Nevertheless, regional disparity within countries remains a persistent policy challenge for most of the countries in Central and Eastern Europe.
Webster Vienna: Can you tell us a little more about your book project? How would you explain your research to someone who doesn’t have a background in economic policy?
Dr. Workie: I guess every rational person understands what it takes to have bank loans which far exceed someone’s income. This holds true for a government as well: if a government spends more than its income, then sooner or later this would backfire. The bad thing about over borrowing is that interest rates are an increasing function of the level of debt. The higher the level of debt, the higher the interest rates. We have witnessed this numerous times in history. In this respect, my book discusses theoretical frameworks of global imbalances as well as systematically evaluates paradigm shifts in these imbalances in the past four decades or so. It also brings state-of-the- art empirical explorations on determinants of external imbalances with particular emphasis on optimal size of public debt in the European Union. The book also discusses policy dilemmas in an attempt to reduce future possible challenges for the European Union.
Webster Vienna: What is your verdict about the direction of economic policy and the European Union? Are you more hopeful or more doubtful about the future?
Dr. Workie: Europe has been at peace for a fairly sustainable period, which is considered as one of the outcomes of European integration. I would leave this for political scientists to offer more qualified assessments. On the economic front European economies have undoubtedly benefited from free movement of goods and services as well as investments in the last two decades. There was undeniable achievement in real income convergence, where poorer members of the European Union having significantly higher real income per capita growth for the past two decades or so. There are also challenges about the vulnerability of the current European arrangement as was disclosed during the Great Recession. Some countries are falling behind in terms of undertaking structural reforms to be more resilient when difficult times come. This of course created tensions in the European Union and there are various policies that have been discussed as how to reduce possible future challenges. A lot has been achieved about regulation of the financial system including the banking industry. There are still pending issues such as migration and coping with the consequences of Brexit. In my view there are not too many better options for the EU in spite of numerous challenges to the current arrangement. I am cautiously optimistic about the future of the European Union.
Webster Vienna: Which resources do you use to locate reliable data for your research?
Dr. Workie: I regularly use the Eurostat database, the Ameco database of the European Commission, OECD database, the World Bank database, the World Economic Outlook compiled by the International Monetary Fund, the Penn World Tables, the Groningen database, etc.
Webster Vienna: What recommendations do you have for a student who is interested in studying the economics of the European Union?
Dr. Workie: The EU is a very interesting and dynamic political, social and economic environment that is still in the making and there are plenty of issues that emerge and are tackled using a sort of “trial and error” approach. There are numerous success stories but also challenges and open issues subject to research. The EU is also the second largest economy in the world with job opportunities and I would encourage both our European and international students to focus their research on European issues, European companies, industries and institutions.
Book Description (from Nova):
While mainstream economists were convinced they had solved the business cycle phenomena of macroeconomic policy making, the Great Recession has once again underscored the verdict of history, where every boom has almost always been accompanied by a bust and recession. The book discusses theoretical controversies and state-of-the art empirical studies on the link between external imbalances and real income convergence in the European Union. The book shows successful real income convergence across the European Union on the country level and pinpoints persistent regional disparities within countries in most of the member states of the European Union. The book addresses broader aspects of external imbalances and their key determinants and provides fresh empirical and exploratory evidence on paradigm shifts in the past several decades. This book also empirically estimates both the causality between public debt and economic growth as well as the optimum level of public debt for EU member states. Additionally, the book discusses the link between illicit capital flows and external imbalances in the European Union. Overall, the book critically investigates both theoretical frameworks of global imbalances and systematically evaluates milestones and paradigm shifts in global imbalances; it also offers new empirical results based on the panel data of both “old” and “new” EU member states in the past several decades. Finally, the book addresses a number of policy challenges, disputes and controversies in the European Union in terms of solving the ongoing external imbalances and harmonizing policies to prevent future challenges. (Nova)