Other Research Publications


Date Published: 28/11/2006

Measuring the Size of the Informal Economy: A Critical Review

May 2007 - George M. Georgiou There has been a burgeoning number of studies attempting to measure the size of the ‘black’ economy. These are based on a variety of methodologies and provide a range of estimates, not just across countries but also within the same countries and often by the same author(s). This raises a number of issues: What is meant by the term ‘black’ economy? Is it an appropriate description? What, if any, is the theory underlying the estimates of informal economic activity? This paper examines these and other issues, and concludes that whilst the existence of what we prefer to call the ‘informal’ or ‘grey’ economy in most countries is incontrovertible, there is a lack of consensus on the appropriate methodology for estimating its size. More importantly, the large number of studies so far are simply exercises in measurement without theory, though we are sceptical that even with strong theoretical underpinnings it is possible to provide accurate estimates of a complicated web of informal activities.

Date Published: 27/02/2006

The Current Framework of Exchange Rate Policy in Cyprus and Recent Developments*

Spring 2002 – George Kyriacou This paper discusses the exchange rate policy framework in Cyprus in the context of the island’s accession to the European Union and eventual adoption of the euro. It focuses in issues related to the design and implementation of an appropriate exchange rate policy and discusses the factors that influence the evolution of such a policy throughout the accession process and up to the time of Euro adoption. The paper begins with a brief history of recent developments of exchange rate policy in Cyprus and analyses the economic challenges in view of European Union accession and Economic and Monetary Union. The discussion makes reference to broader issues discussed in the literature on the strategic options for exchange rate policy, including Mundell’s incompatibility triangle. * Published in the Cyprus Journal of European Studies, Vol 1,No 2, 2002.

Date Published: 21/02/2006

A Macroeconomic Model of the Cyprus Economy: Exports and Imports*

June 2004 – Costas Ktoris and Louis Christofides * Working Paper 04-04, Department of Economics, University of Cyprus.

Date Published: 24/01/2006

The ‘Underground Economy’ : An Overview and Estimates for Cyprus*

December 1994 – George Georgiou & George Syrichas The paper begins by describing three important macroeconomic approaches to the measurement of the underground economy. Estimates of the size of the underground economy in Cyprus are then discussed. The estimates are derived using a method first applied by Tanzi to data for the United States. Using annual times series data for the period 1960-1990 the size of the underground economy in Cyprus is estimated to be, approximately, between 3% and 10% of GNP. * Published in The Cyprus Journal of Economics, Vol 7, No 2, 1994.

Date Published: 17/10/2005

Monetary Policy and Central Bank Communication*

September 2004 - Pany Karamanou & George Syrichas This paper discusses the importance of communication for central bank policy making. It analyses the main theoretical underpinnins and discusses the case of the Federal Reserve Bank, the European Central Bank and the Central Bank of Cyprus. In the past, the communication practices of central banks could best be described as secretive and ambiguous thus giving rise to a certain mystique surrounding their activities. In contrast, communication today is considered to be an essential and vital part of modern central bank policy making. Central banks have increasingly placed more emphasis on the amount of information they release to the public as well as on its timeliness and quality. The shift towards greater transparency can be attributed to greater central bank independence, the adoption of formal inflation targets and the growing importance of financial markets. This new open approach has been welcomed by the public and has improved the efficiency of different monetary policy strategies. * Presented at the Mediterranean Workshop on “Central Bank Governance”, European Central Bank & Banque de France.

Date Published: 17/10/2005

Monetary Transmission Mechanism in Cyprus: The Fixed Exchange Rate Case*

October 2001 - Pany Karamanou, Lavan Mahadeva, Paul Robinson & George Syrichas This paper models the monetary transmission mechanism in Cyprus in order to gain a better understanding of the recent financial liberalisation process and its effect on monetary policy. We model a benchmark case of a fixed exchange rate in a capital controls free regime. In this case changes in the domestic interest rate can only come about as a result of fluctuations in European Union interest rates. Even in this case we argue that the exchange rate channel is present and operational through the effective exchange rate or prices. Through an interest rate risk premium we allow for some monetary independence and a short run wedge between domestic and foreign interest rates. The paper focuses not only on how economists believe that monetary policy influences a central bank’s goals but also on the peculiarities of a small open economy. * Presented at the research meeting on “Monetary Policy Transmission in Acceding Countries”, European Central Bank.

Date Published: 14/10/2005

Assets of Cyprus Households: Lessons from the First Cyprus Survey of Consumer Finances*

November 2001 - Michael Haliassos, Christis Hassapis, Alex Karagrigoriou, George Kyriacou, Michalis C. Michael & George Syrichas This paper describes the participation of Cyprus households in financial and real assets using data from the 1999 Cyprus Survey of Consumer Finances, and compares Cyprus to the United States and four major European countries. Almost nine out of ten households in Cyprus are found to own some form of financial asset, the most popular being government savings bonds. In 1999, a year of stock market frenzy, one in two households participated in stocks directly or indirectly, reaching participation levels comparable only to the United States. Diversification across risk categories of financial assets is limited, but the majority of those holding only a few assets do not hold stocks directly. Stocks held directly are poorly diversified across different stocks. Participation in risky assets, financial or real, far exceeds that in other countries. * Working Paper 02-05, Department of Economics, University of Cyprus.

Date Published: 14/10/2005

Assets and Debts of Cyprus Households: Changes between the 1999 and 2002 Cyprus Survey of Consumer Finances*

December 2004 - Georgia Antoniou, Christiana Argyridou, Michael Haliassos, Alex Karagrigoriou, George Kyriacou, Michalis C. Michael, Maria Papageorghiou & George Syrichas. This paper describes the participation of Cyprus households in various assets and debts using data from the first (1999) and second (2002) Cyprus Survey of Consumer Finances. It complements our previous papers that separately described the breakdown of various types of assets and debts. We consider a wide range of assets, both financial and real, risky and relatively riskless. The debts examined encompass personal unsecured loans, including credit card debt, and loans secured by housing collateral, mainly mortgage debt. The findings are of considerable interest to policy makers, as they show how various demographic groups changed their participation and exposure to various assets and loans between 1999, when the stock market boom took place, and 2002, following the burst of the stock market bubble. * Working Paper 04-12, Department of Economics, University of Cyprus.

Date Published: 14/10/2005

Debts of Cyprus Households: Lessons from the First Cyprus Survey of Consumer Finances*

March 2003 - Michael Haliassos, Christis Hassapis, Alex Karagrigoriou, George Kyriacou, Michalis C. Michael & George Syrichas This paper describes the participation of Cyprus households in various types of debt using data from the first (1999) Cyprus Survey of Consumer Finances. It complements the 2001 paper by Haliassos et al. The findings are of interest to policy makers, as they show the extent of household participation in various loans and the indebtedness of various demographic groups. We document the considerable popularity of credit cards as borrowing instruments and a continuing parallel presence of antiquated forms of borrowing. There is surprisingly limited use by the young of mortgages, despite very high home ownership rates, and of car loans, despite high car ownership rates. We find evidence of a strong reliance on family transfers for the financing of higher education, home acquisitions and car purchases by the young. Finally, we note a tendency for Cypriot entrepreneurs to take out large loans from their business for personal use. * Working Paper 03-05, Department of Economics, University of Cyprus.

Date Published: 14/10/2005

EMU and the Introduction of the Euro: Macroeconomic Implications*

June 1999 - George Kyriacou & George Syrichas This paper examines the historic introduction of the euro and assesses the macroeconomic impact on the economy of Cyprus. The third and final stage of the European Union’s Economic and Monetary Union (EMU) was successfully launched on 1 January 1999. The consequences for the international monetary system as a whole as well as for individual countries or regions inside and outside the European Union, are expected to be significant. In particular, potential EU members like Cyprus are affected by EMU not only in terms of experiencing a direct economic impact through economic linkages, but also in terms of having to reform and adjust their structural and macroeconomic policies, with the ultimate goal of meeting the Maastricht criteria. * Published in the Central Bank’s Quarterly Economic Review.