Prague Economic Papers, 2004 (vol. 13), issue 2

Original contributions, Original article, Research article

Economic and Monetary Union in the Accession Countries - Political and Economic Contexts

Maria Dunin-Wasowicz

Prague Economic Papers 2004, 13(2):99-114 | DOI: 10.18267/j.pep.233  

The EU-25 will start operating on May 1, 2004. This paper reviews the position of the new Member States (NMS) in the Economic and Monetary Union (EMU) with respect to future adoption of euro. It argues that further integration in this area is much more about the deepening of the political integrity of the EU than about lowering transaction costs. However, a debate on the political and economic implications resulting from the adoption of euro by the NMS is full of unsolved issues. The central one is to define the possible scenario of the path to the euro. It implies actions on both sides: the NMS need to implement many economic reforms and enhance the...

How to Rationalize the Export-Saving Paradigm (the Czech experience)

Bruno S. Sergi, Karel Vít

Prague Economic Papers 2004, 13(2):115-120 | DOI: 10.18267/j.pep.234  

The paper analyzes the relationship between saving and export in the Czech economy. Because the Czech economy has been increasingly trading with Western Europe, testing the relationship between these two variables is significant. OLS and 2SLS are applied to quarterly data between gross national savings, gross domestic product and exports over the period 1994 - 2001. The 2SLS procedure has also the advantage of identifying the underlying principles of the formal paradigm by means of instruments (productivity, real investments and unemployment). This study does lend support to the paradigm advanced by Maizels in 1968, which relates a country's increase...

Quantifying the Second-Round Effects of Supply-Side Shocks on Inflation

Tibor Hlédik

Prague Economic Papers 2004, 13(2):121-141 | DOI: 10.18267/j.pep.235  

This paper uses a small-scale dynamic rational expectations model based on an openeconomy version of Fuhrer-Moore-type staggered wage setting to quantify the secondround effects of selected supply-side shocks and of shocks to the nominal exchange rate on wages and subsequently on inflation. In order to analyse the desired reaction of the central bank to these shocks, optimal time-consistent policy rules are derived within the presented New-Keynesian framework. The conclusions presented in the paper suggest that the second-round effects of shocks to import prices and the nominal exchange rate on inflation should not be ignored in practical policy-making.

Fiscal Consolidation in General Equilibrium Framework (the case of the Czech Republic)

Jaromír Hurník

Prague Economic Papers 2004, 13(2):142-158 | DOI: 10.18267/j.pep.236  

Within the non-stochastic dynamic general equilibrium model framework this paper examines the implications of alternative fiscal consolidation programs for small open economy. The calibrated model enables realistically quantify the impact of the deficit financing and fiscal consolidation on consumption and saving of households, investment of firms and thereby on the capital stock and real interest rates. Through the interest rate link the impact of deficit financing and fiscal consolidation on cyclical and long-term properties of monetary policy set-up can be observed. Several fiscal consolidations were simulated in order to demonstrate the comparative...

Capital Structure of Listed Companies in Visegrad Countries

Patrik Bauer

Prague Economic Papers 2004, 13(2):159-175 | DOI: 10.18267/j.pep.237  

This paper analyzes capital structure of listed companies in Visegrad countries during the period from 2000 to 2001. The results are based on the database, which assembles financial reports of listed firms. In general, leverage of these firms is relatively low if measured in book value, but it is relatively high if assessed in market value. Quasi-maximum likelihood estimation is used in order to investigate the determinants of capital structure. According to the results, leverage of a company is positively correlated with size and it is negatively correlated with profitability, tangibility and non-debt tax shields. There is a negative relationship...

Accession to the Monetary Union and Slovenian Monetary Policy Under Exchange Rate Targeting

Peter Mikek

Prague Economic Papers 2004, 13(2):176-186 | DOI: 10.18267/j.pep.238  

After joining the EU in 2004, Slovenia and other new members will have to adopt the euro. Their accession to the European Monetary Union will require stabilizing and later fixing their exchange rates and thus restrictive monetary policy. The paper shows that successful stabilization of the exchange rate also requires restrictive fiscal policy. Fiscal policy that is not compatible with the goals of monetary policy would prevent stabilization of the exchange rate.