Transcript Bulgarian context in teaching international economics

BULGARIAN CONTEXT IN TEACHING
INTERNATIONAL ECONOMY
ASSOCIATE PROFESSOR
DR. DANIELA BOBEVA
OUTLINE: THE THREE “W”
• Why we need to present the Bulgarian case in
lecturing International Economy?
• What we would mean by “Bulgarian context” ?
• Where we have to put focus on?
MAIN THESIS
We need to have in all lectures in International
Economy a presentation of the Bulgarian case.
The specific Bulgarian context requires also more
Bulgarian authors’ publications to be included in the
readings and the theoretical basis
WHY WE NEED TO PRESENT “THE
BULGARIAN CASE”?
• The international economy course integrates a wide
range of subjects and represents a modern view of the
way today world economy works. The synergy between
the national and international construct the real
understanding of the economy. The national economies
are more international than ever.
• A combination of characteristics makes the Bulgarian
economy rather specific and nonconventional
economy.
• Students are interested in the implication of international
economy theories in Bulgaria.
• Students need to know the advantages and
opportunities and also the risks the international
economy creates to Bulgarian market participants
WHAT MAKES THE BULGARIAN
ECONOMY NONCONVENTIONAL
• Sustainable monetary regime: 19 years of currency
board arrangement
• Small public sector: Public sector enterprises only 5%
of GDP
• Open economy: 85% of GDP through foreign trade
• Large foreign investment sector: 75% of financial
sector, 60% of mining, 65% of chemical industry, etc.
THE BULGARIAN CONTEXT: FOCUS ON:
• Bulgaria and the currency regime
• Bulgaria and the euro area.
• BoP specifics for Bulgaria. The story about high
current account deficit
• FDI and multinational companies in Bulgaria
• Free trade and Bulgaria
• The external debt of Bulgaria
• Bulgaria and the IFIs
• BG goods on the global stock exchanges
• Global crisis and the impact on Bulgaria
Focusing on the Bulgarian context
may challenge the conventional
wisdom in international economy
theories
LECTURE:
INTERNATIONAL
MONETARY
SYSTEMS
Thesis: Fixed exchange
rate regimes are
imposed in vulnerable
economies and they do
not provide with a
sufficient level of
flexibility
• Stable and rigid monetary
regime: 19 years of
currency board
arrangement without
fluctuation and tension
• Surviving during different
stages of the cycle
proving sustainability
• Adjustment through fiscal
policy and structural
reforms instead of
monetary policy
• Imposing strict fiscal
policy and larger buffers
against risks
• Low level of public debt
LECTURE:
ECONOMIC AND
MONETARY
UNION
The single currency has
to be adopted only by
mature economies
where Maastricht
criteria are met but also
real convergence has
to be advanced
• Currency board is
compatible with ERM II but
formally not accepted by
the ECB
• BGN not allowed to the
ERM II due to other than
macroeconomic
considerations
• Bulgaria is the only country
that meets all numerical
criteria according to three
consecutive convergence
reports of the ECB and EC
• Macroeconomic stability
and prudent fiscal policy
for more than
LECTURE : DEBT
AND DEBT
CRISIS
Public debt should be
kept small – up to 50% of
GDP.
• Bulgaria: Ups and
Downs
• Reduction of public
debt is difficult but
the accumulation is
easy
• Maintaining low
public debt for 16
years has not
brought sufficient
benefits
LECTURE:
BALANCE OF
PAYMENTS
Current account deficit
beyond 6% is an
indication of severe
tension and
macroeconomic
imbalances
• Bulgarian economy
reached historically highest
current account deficits (
22% of GDP) but
• Not led to a crisis since
driven by large FDI inflows
• Self corrected for less than
one year but
• “The price” was shrinking
FDI
LECTURE :
MULTINATIONAL
COMPANIES AND
FDI
FDI and foreign
companies contribute
to the growth, exports
and innovations
• Bulgaria: Highly
unstable but large FDI
inflows
• The quality of FDI is a
challenge: low value
added, low export
potential,
concentrated in low
skilled sectors
• Small reinvested profit
of foreign controlled
companies and
limited innovation
LECTURE:
INTERNATIONAL
FINANCIAL
INSTITUTIONS
IFIs may impose policies
that create challenges
for sustainable growth .
Their policies have not
proven success in most
of the countries of
operation
• Bulgaria is a success story
for Bretton Woods
institutions?
• After 13 agreements with
the IMF the economy is
stabilised and restructed,
private sector makes 95%
of GDP , open economy
with a strong FDI impact
• Fiscal discipline imposed
and limited social benefits
Thank you