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Gözgör, Giray (Dogus Author) This paper empirically examines short-and long-run relationships between foreign direct investments (FDI) and volatility of foreign portfolio investments (FPI) in 12 Central and Eastern European (CEE) countries. We use the Generalized Autoregressive Conditional Heteroskedasticity models to calculate volatility of the FPIs. We utilize the second generation panel unit root test, panel-Wald causality test procedure and panel cointegration analysis allowing for structural breaks, and cross-sectional dependence. The results strongly suggest that a decrease in FPI volatility is followed by an increase in FDI in the long-run, and this indicates economies that advance in capital liberalization benefit from increases in FDI. However, the relationship in opposite direction in the long-run is valid in only half of the countries studied. In short-run, we observe that the former relationship is valid only in Turkey, the Czech Republic, and Lithuania; where the latter is valid only in Latvia.

Gözgör, Giray (Dogus Author) This study investigates whether stochastic properties of the unemployment rate in ten Central and Eastern European Countries (CEE) countries: Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia can be explained by the nonaccelerating inflation rate of unemployment or the hysteresis hypotheses. We primarily show the cross-sectional dependence in unemployment rates, and then apply panel-based unit root tests that take cross-section dependence into account. The empirical findings indicate that there is no mean-reverting process in unemployment rates for ten CEE countries. Thus the results provide evidences for validity of the hysteresis hypothesis—unemployment persistence—in related CEE countries.