Prague Economic Papers, 2013 (vol. 22), issue 2

A Dynamic Panel, Empirical Investigation on the Link between Inflation and Fiscal Imbalances. Does Heterogeneity Matter?

Avgeris Nikolaos, Katrakilidis Constantinos

Prague Economic Papers 2013, 22(2):147-162 | DOI: 10.18267/j.pep.445  

This study empirically attempts to unveil the contradictive findings regarding the relationship between fiscal imbalances and inflation in the context of the latest theoretical indications. The empirical analysis covers the period of 1970 to 2009 and applies dynamic panel techniques in a pool of 52 countries that comprises 19 developed and 33 developing ones. This segmentation is applied to illustrate the groups' specific features and the implications of heterogeneity. The findings provide supportive evidence for developing countries. We also find a significant degree of heterogeneity between the groups and the statistical significance of the relationship...

Comparison of Credit Scoring Models on Probability of Default Estimation for Us Banks

Petr Gurný, Martin Gurný

Prague Economic Papers 2013, 22(2):163-181 | DOI: 10.18267/j.pep.446  

This paper is devoted to the estimation of the probability of default (PD) as a crucial parameter in risk management, requests for loans, rating estimation, pricing of credit derivatives and many others key financial fields. Particularly, in this paper we will estimate the PD of US banks by means of the statistical models, generally known as credit scoring models. First, in theoretical part, we will briefly introduce the two main categories of credit scoring models, which will be afterwards used in application part - linear discriminant analysis and regression models (logit and probit), including testing the statistical significance of estimated parameters....

The Evaluation of Economic Recession Magnitude: Introduction and Application

Jiří Mazurek, Elena Mielcová

Prague Economic Papers 2013, 22(2):182-205 | DOI: 10.18267/j.pep.447  

We propose a new quantitative recession magnitude scale for measuring recessions' magnitudes ('strength') derived from GDP growth rates during a recession and its duration. Furthermore, we introduce a qualitative scale with four recession categories: minor, major, severe and ultra, where the categories are defined by the magnitude scale. We use both scales to evaluate several well known economic recessions of the 20th and the 21st centuries. We have found that the Great Depression in 1929-1933 and recessions in Russia and Ukraine in the 1990s belong to ultra recessions, while the recent 2007-2009 financial crisis falls mainly into major (EU and Japan)...

Institutional Efficiency of Selected EU & OECD Countries Using Dea-Like Approach

Jana Votápková, Milan Žák

Prague Economic Papers 2013, 22(2):206-223 | DOI: 10.18267/j.pep.448  

The paper estimates institutional efficiency of a sample of EU and OECD countries. We employ an output-oriented Data Envelopment Analysis (DEA-like) approach where six Worldwide Governance Indicators published by the World Bank in 2009 constitute a vector of outputs. Assuming that all countries should aim at the same level of institutional quality, inputs were considered unimportant. The results, as to in which areas and how much individual countries need to improve, were not surprising. Concerning the overall efficiency scores and rankings, the most institutionally efficient countries are situated in northern Europe. The Czech Republic ranked 24th...

Flexicurity Policies and their Association with Productivity in the European Union

Primož Dolenc, Suzana Laporšek

Prague Economic Papers 2013, 22(2):224-239 | DOI: 10.18267/j.pep.449  

The paper examines the issue of flexicurity in the EU Member States and studies the association between flexicurity policy components (i.e. employment protection legislation, lifelong learning programs, active and passive labour market policies) and labour and total factor productivity growth in 20 EU Member States over the 1991-2008 period. The empirical analysis pointed on the existence of large differences in the level of implementation of flexicurity policies across EU Member States, by which the least successful are NMS, especially with regard to active labour market and lifelong learning programs. As regards the relation between flexicurity variables...

Private Equity Investment in the Czech Republic

Alexej Sato

Prague Economic Papers 2013, 22(2):240-250 | DOI: 10.18267/j.pep.450  

New principles, tasks and expectations for the nearest future, as well as upcoming development trends of private equity investments in global economy are mentioned in this paper. Ecological investments of private equity, as for example: alternative power engineering, biotechnologies or any other technologies, regardful to the living environment, appear to replace gradually foregoing investments focusing on information engineering and communication technologies. Attention of private equity funds seems to be paid especially on emerging markets during oncoming decade. Sources, aims and conditions of usage of private equity in Europe are not similar comparing...

Estimating Correlated Jumps and Stochastic Volatilities

Jiří Witzany

Prague Economic Papers 2013, 22(2):251-283 | DOI: 10.18267/j.pep.451  

We formulate a bivariate stochastic volatility jump-diffusion model with correlated jumps and volatilities. An MCMC Metropolis-Hastings sampling algorithm is proposed to estimate the model's parameters and latent state variables (jumps and stochastic volatilities) given observed returns. The methodology is successfully tested on several artificially generated bivariate time series and then on the two most important Czech domestic financial market time series of the FX (CZK/EUR) and stock (PX index) returns. Four bivariate models with and without jumps and/or stochastic volatility are compared using the deviance information criterion (DIC) confirming...

Testing Wagner's Law for Turkey: Evidence from a Trivariate Causality Analysis

Asuman Oktayer, Nagihan Oktayer

Prague Economic Papers 2013, 22(2):284-301 | DOI: 10.18267/j.pep.452  

The purpose of this study is to analyse the relationship between government expenditure and economic growth in Turkey. The study tests the validity of Wagner's law by applying autoregressive distributed lag (ARDL) cointegration technique using annual data over 1950-2010 period. In order to find out the possible impact of omitted variables, we first tested the standard bivariate versions of Wagner's law. In the next step by including a third variable - inflation ratio - the analysis extended on a trivariate system. The findings of each testing procedure indicate that omitted variables matter. Since, while there exists no long-run relationship between...

Diversity in European Marketing

Paul-Marc Collin

Prague Economic Papers 2013, 22(2):302-304 | DOI: 10.18267/j.pep.453