Template-Type: ReDIF-Article 1.0 Author-Name: Mejra Festić Author-Name: Jože Mencinger Title: The Perspective of Pension System Reforms in the New Member States Abstract: Because of growing awareness of financial needs for public pensions, attention has been focused on privatisation of the pension systems. While the privatisation of pension funds can encourage development of capital markets in New Member States, equity investment in transition economies is even more volatile than in the "old" capitalist countries. Privatised pension system coincides with investment risks, higher administrative costs, and inability of private markets to provide retirees with affordable, indexed and certain annuities. Namely, private sector may not provide enough investment projects to efficiently absorb mandated pension savings and the expected pension income is subject to a number of risks: poor and volatile investment returns, longevity, and inflation eroding the purchasing power of pensions. Indeed, the PAYG system appears to be the only viable system to perform well in terms of risk and volatility of returns. Keywords: cyclicality, pay-as-you-go, ageing of population, pension funds, financial burden Classification-JEL: J23, J31, J48, O15 Pages: 291-308 Volume: 2009 Issue: 4 Year: 2009 File-URL: http://www.vse.cz/pep/download.php?jnl=pep&pdf=355.pdf File-URL: http://www.vse.cz/pep/355 File-Format: text/html Handle: RePEc:prg:jnlpep:v:2009:y:2009:i:4:id:355:p:291-308 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlpep/references/355 Template-Type: ReDIF-Article 1.0 Author-Name: Jiří Witzany Title: Valuation of Convexity Related Interest Rate Derivatives Abstract: We investigate valuation of derivatives with payoff defined as a nonlinear though close to linear function of tradable underlying assets. Interest rate derivatives involving Libor or swap rates in arrears, i.e. rates paid at wrong time, are a typical example. It is generally tempting to replace the future unknown interest rates with the forward rates. We show rigorously that indeed this is not possible in the case of Libor or swap rates in arrears. We introduce formally the notion of linear plain vanilla derivatives as those that can be replicated by a finite set of elementary operations and show that derivatives involving the rates in arrears are not (linear) plain vanilla. We also study the issue of valuation of such derivatives. Beside the popular convexity adjustment formula, we develop an improved two or more variable adjustment formula applicable in particular on swap rates in arrears. Finally, we get a precise fully analytical formula based on the usual assumption of log-normality of the relevant tradable underlying assets applicable to a wide class of convexity related derivatives. We illustrate the techniques and different results on a case study of a real life controversial exotic swap. Keywords: interest rate derivatives, Libor in arrears, constant maturity swap, valuation models, convexity adjustment Classification-JEL: C13, E43, E47, G13 Pages: 309-326 Volume: 2009 Issue: 4 Year: 2009 File-URL: http://www.vse.cz/pep/download.php?jnl=pep&pdf=356.pdf File-URL: http://www.vse.cz/pep/356 File-Format: text/html Handle: RePEc:prg:jnlpep:v:2009:y:2009:i:4:id:356:p:309-326 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlpep/references/356 Template-Type: ReDIF-Article 1.0 Author-Name: Jan Pavel Author-Name: Emilia Sičáková-Beblavá Title: Testing the Validity of the Brown-Potoski Model in the Czech and Slovak Republics Abstract: This paper is based on the new institutional economic approach, which focuses on analysis between services features (asset specificity, outcome measurability) and their eligibility to contract out. This issue, which de facto constitutes one of the subsets of the "make or buy decision" issue, is also analysed by the so-called Brown-Potoski model. It analyses the relations between selected features of a demanded service and its suitability or unsuitability for outsourcing, whilst making use of information about transaction costs economy. Using data from 100 Czech municipalities and 100 Slovak municipalities, the viability of the Brown-Potoski model is tested. The results of the research show that a connection was identified between the measurability of the required service and its suitability for external provision, but the relationship between the specificity of investments and the suitability for external provision was not. The reason is probably the previous financial demands of the initial investment, which is, above all in the case of small municipalities, beyond their budgetary means. Keywords: Czech Republic, Brown-Potoski model, public services, Slovak Republic, transaction costs Classification-JEL: D23, H42, H72 Pages: 327-341 Volume: 2009 Issue: 4 Year: 2009 File-URL: http://www.vse.cz/pep/download.php?jnl=pep&pdf=357.pdf File-URL: http://www.vse.cz/pep/357 File-Format: text/html Handle: RePEc:prg:jnlpep:v:2009:y:2009:i:4:id:357:p:327-341 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlpep/references/357 Template-Type: ReDIF-Article 1.0 Author-Name: Petr Duczynski Title: On Net External Assets in Regions And States of the U.S.A. Abstract: We present rough estimates of net external assets for 8 regions and 51 states of the United States. These estimates have been derived from the data on gross state product and state personal income. We identify the largest creditors and debtors and observe relatively important disparities in net external assets across the states and regions. The analysis is also focused on various trends in the indebtedness of regional economies. Using the correlation matrices for selected base years, the degree of capital mobility across regions and states is quantified. We provide some evidence that states are more open to capital flows than regions. In the end, the convergence of net external assets between 1980 and 2000 is confirmed. Keywords: capital movements, correlation matrices, net external assets, regions and states of the U.S.A. Classification-JEL: C82, F41, R10 Pages: 342-352 Volume: 2009 Issue: 4 Year: 2009 File-URL: http://www.vse.cz/pep/download.php?jnl=pep&pdf=358.pdf File-URL: http://www.vse.cz/pep/358 File-Format: text/html Handle: RePEc:prg:jnlpep:v:2009:y:2009:i:4:id:358:p:342-352 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlpep/references/358 Template-Type: ReDIF-Article 1.0 Author-Name: Juan Carlos Bárcena-Ruiz Author-Name: María Begona Garzón Title: Environmental Taxes and Wage Setting Structure Abstract: The literature on the environment shows that imperfect competition in global markets creates a strategic interaction between governments that can lead to the inefficient distortion of environmental taxes. This literature does not consider that workers can set up different organizational structures to set wages. We assume that under decentralized wage setting there is an independent union in each firm while under centralized wage setting there is an industry-wide union that sets the wages of all firms. We show that under a decentralized structure governments choose environmental taxes closer to those which are socially efficient than those chosen under a centralized structure. However, environmental damage is greater in the former case. Keywords: international trade, oligopoly, environmental taxes, unions´ structure Classification-JEL: H23, J51 Pages: 353-365 Volume: 2009 Issue: 4 Year: 2009 File-URL: http://www.vse.cz/pep/download.php?jnl=pep&pdf=359.pdf File-URL: http://www.vse.cz/pep/359 File-Format: text/html Handle: RePEc:prg:jnlpep:v:2009:y:2009:i:4:id:359:p:353-365 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlpep/references/359 Template-Type: ReDIF-Article 1.0 Author-Name: Petre Caraiani Title: An Estimation of Output Gap in Romanian Economy Using the DSGE Approach Abstract: In this paper I use an open economy DSGE model and estimate it for Romanian economy using Bayesian techniques. Based on estimation I derive a smoothed estimation of the output gap. I compare the results with those from standard procedures to estimate the output gap, the Hodrick Prescott filter, the production function and an unobserved components model. The results show that the DSGE approach can give a better picture of the output gap and it is more consistent with the dynamics of Romanian economy. Keywords: monetary policy, output gap, DSGE models, Bayesian techniques Classification-JEL: C51, E32, E52 Pages: 366-379 Volume: 2009 Issue: 4 Year: 2009 File-URL: http://www.vse.cz/pep/download.php?jnl=pep&pdf=360.pdf File-URL: http://www.vse.cz/pep/360 File-Format: text/html Handle: RePEc:prg:jnlpep:v:2009:y:2009:i:4:id:360:p:366-379 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlpep/references/360