Prague Economic Papers, 2014 (vol. 23), issue 1

Original contributions, Original article, Research article

Monetary Policy Efficiency in Conditions of Excess Liquidity Withdrawal

Martin Mandel, Vladimír Tomšík

Prague Economic Papers 2014, 23(1):3-23 | DOI: 10.18267/j.pep.470  

In case that a central bank is withdrawing excess liquidity, there arises a question whether the monetary policy based on repo operations (withdrawal repo) is identically efficient as the monetary policy relying on repo rate connected with reverse repo (issuance repo) when central banks provide liquidity. The analysis of this problem is a main subject of the article. Authors develop microeconomic model of commercial bank behaviour, which is used for the definition of conditions when the interest rate policy of central bank based alternatively on repo rates for repo and reverse repo operations is efficient. Statistical data (time series of 1998 - 2011,...

Systemic Risk of the Global Banking System - An Agent-Based Network Model Approach

Tomáš Klinger, Petr Teplý

Prague Economic Papers 2014, 23(1):24-41 | DOI: 10.18267/j.pep.471  

The global banking system proved significantly vulnerable to systemic risk during the 2007-2009 financial crisis. In this paper, we construct an agent-based network model of systemic risk to a banking system, and use it for stress-testing of several different regulatory measures. First, our simulations confirm that sufficient capital buffers in individual banks are crucial for protecting the stability of the whole system. Second, we show that the regulatory measures installed as preventive measures to ensure that the banks possess sufficient capital buffers have almost no positive effects on stability when the system is collapsing. Finally, we highlight...

Mothers and Daughters: Heterogeneity of German Direct Investments in the Czech Republic

Daniel Münich, Martin Srholec, Michael Moritz, Johannes Schäffler

Prague Economic Papers 2014, 23(1):42-62 | DOI: 10.18267/j.pep.472  

Much has been written on the distinction between vertical and horizontal foreign direct investment. However, most of the empirical literature relies on indirect and aggregated measures only. The aim of this paper is to help fill this gap by examining the differences between German affiliates in the Czech Republic and their mother companies in Germany on the basis of direct evidence on factor requirements. Using a cluster analysis on firm-level data from the unique ReLOC survey, we identify four main groups of firms that partition the sample by broad sectoral lines and by technological, educational and skill intensity of their operations within each...

Changing Market Potentials, Regional Growth and Income Disparities in Poland

Jesús López-Rodríguez, Malgorzata Runiewicz-Wardyn

Prague Economic Papers 2014, 23(1):63-83 | DOI: 10.18267/j.pep.473  

In this paper we analysed to which extent the changes in market potentials in Poland have been a cause for increasing income disparities, which were observed across Polish regions from 1995 to 2008. To do so we derived and estimated a New Economy Geography Model, which relates per capita GDP growth rates to changes in market potential. The results of the crosssection estimations of the model for the period 1995-2008 and for its different subsamples point to a positive and significant effect of changing market potentials in per capita GDP growth rates. Due to the fact that core-economic regions have mostly benefited in terms of market potential growth...

Debt in Relation to the Standard of Living Enjoyed by the Population of Developed Countries

Luboš Smrčka, Markéta Arltová

Prague Economic Papers 2014, 23(1):84-107 | DOI: 10.18267/j.pep.474  

The paper attempts to analyse the effects of the cumulated public sector debt (in this relation essentially government debt and family debt), primarily on the development of the population's standard of living. In this regard, the paper quantifies the impact of debt on the real standard of living - whether we define it merely as the ability to consume, or broadly as the sum of multiple criteria including, for instance, the quality of the environment. This quantification uses data from the economy of the Czech Republic; however, this method can be in principle used for other national economies, but must be adjusted to reflect the specific features of...

Models of Subsidy Allocation among City Districts

Martin Dlouhý

Prague Economic Papers 2014, 23(1):108-120 | DOI: 10.18267/j.pep.475  

Each year, a part of the budget of the City of Prague is allocated among its city districts in the form of subsidies. The objective of the City of Prague is to find such a set of criteria and such a set of relative weights that estimate the expected cost of local public administration best. The objective of each city district is subsidy maximization by influencing the criteria and weights. Two quantitative methods that set the weights without participation of decision makers are presented. The first method is based on the multiple-criteria decision making and the second one on the zero-sum gains DEA model. The illustrative calculations for the year...

Effects of Trade Liberalization on Exports, Imports and Trade Balance in Pakistan: A Time Series Analysis

Muhammad Zakaria

Prague Economic Papers 2014, 23(1):121-139 | DOI: 10.18267/j.pep.476  

Using time series data, the paper empirically analyzes the effects of trade liberalization on exports, imports and trade balance in Pakistan for the period 1981/82 to 2007/08. It concludes that trade liberalization stimulates both exports and imports with the effect being greater on latter than on former thereby worsening the trade balance. Other variables, that is, real exchange rate, domestic and foreign incomes, terms of trade and foreign exchange market distortions affect exports, imports and trade balance in the theoretically expected directions. Inclusion of interaction terms indicate that liberalization stimulates both price and income elasticities...