Template-Type: ReDIF-Article 1.0 Author-Name: Boţoc Claudiu Title: Univariate and Bivariate Volatility in Central European Stock Markets Abstract: This paper examines if the volatility exhibits a symmetric or an asymmetric response to past shocks, particularly the relevance of structural breaks for Central European (hereinafter referred to as “CEE”) stock markets. In addition, it is of great interest to see if the CEE emerging markets are correlated with other emerging ones, as well as to analyse the correlation with the developed markets, for optimizing investment portfolios. Using a CEE group approach (regional index) and daily data from 2002 to 2015, the results suggest that markets react differently to similar negative and positive returns, except for the rapid growth period, when the greed sentiment dominates the markets. Furthermore, the structural break dates affect volatility, the highest asymmetric coefficient being recorded for the pre-crisis period. For the bivariate approach, the emerging markets and developed markets indexes provided by the Morgan Stanley Capital International (hereinafter referred to as “MSCI”) have been considered and the results suggest that CEE stock markets are correlated with emerging stock markets rather than developed ones. For both pairs, the correlation is consistently higher for the break dates characterized by an increase in volatility, which is in line with the literature that claims that the co-movements increase when international factors dominate the national ones, and influence stock markets. Keywords: volatility, contagion, structural breaks, asymmetry, multivariate GARCH Classification-JEL: C32, C58, G10 Pages: 127-141 Volume: 2017 Issue: 2 Year: 2017 File-URL: http://www.vse.cz/pep/download.php?jnl=pep&pdf=598.pdf File-URL: http://www.vse.cz/pep/598 File-Format: text/html Handle: RePEc:prg:jnlpep:v:2017:y:2017:i:2:id:598:p:127-141 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlpep/references/598 Template-Type: ReDIF-Article 1.0 Author-Name: Pelin Varol Iyidogan Author-Name: Taner Turan Title: Government Size and Economic Growth in Turkey: A Threshold Regression Analysis Abstract: We examine the relationship between the government size and economic growth by using threshold regression model and quarterly data over the period 1998:1-2015:1 for Turkey. Our results provide a strong evidence for the existence of a non-linear relationship. The estimated threshold levels, as a percentage of GDP, are 16.5 for the government total expenditures, 12.6 for consumption expenditures and 3.9 for investment expenditures. We find that an increase in the government size leads to a significant rise (decline) in economic growth rate when the government size is below (above) the threshold level, confirming the predictions of Armey curve. Our findings have a clear policy implication: since the realized government consumption and total expenditures are well above the estimated threshold levels, a reduction in the government size would boost the growth rate. Keywords: economic growth, government size, non-linearity, threshold estimations Classification-JEL: E60, E62, H00, H50 Pages: 142-154 Volume: 2017 Issue: 2 Year: 2017 File-URL: http://www.vse.cz/pep/download.php?jnl=pep&pdf=600.pdf File-URL: http://www.vse.cz/pep/600 File-Format: text/html Handle: RePEc:prg:jnlpep:v:2017:y:2017:i:2:id:600:p:142-154 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlpep/references/600 Template-Type: ReDIF-Article 1.0 Author-Name: Jiří Šindelář Title: GDP Forecasting by Czech Institutions: An Empirical Evaluation Abstract: This paper evaluates the accuracy of real GDP growth forecasts published in the period 1995-2013 by two Czech institutions: the Ministry of Finance (MF) and the Czech National Bank (CNB). A two-stepped approach is adopted: first a battery of forecasting errors (MAE, RMSE, MASE) is calculated, complementary to evaluation papers already available. Then statistical analysis is carried out by comparing both MF and CNB forecasts with OECD, European Commission and consensus benchmarks (Kruskal-Wallis test), assessing the presence of systemic bias (Wilcoxon test) and determining their incremental improvement (Page trend test). The results show that although some error patterns might suggest performance deficiencies (i.e. during the recession periods), the accuracy of forecasts prepared by both the MF and CNB does not differ significantly from the benchmark forecasts; MF and CNB predictions do not contain systemic bias and their accuracy improves as the horizon shortens. The paper also highlights several methodological shortcomings in the internal evaluations conducted by both institutions, indicating a potential for further improvement. Keywords: Czech National Bank, GDP forecasting, accuracy measures, Ministry of Finance Classification-JEL: E37, E66, H68, O47 Pages: 155-169 Volume: 2017 Issue: 2 Year: 2017 File-URL: http://www.vse.cz/pep/download.php?jnl=pep&pdf=601.pdf File-URL: http://www.vse.cz/pep/601 File-Format: text/html Handle: RePEc:prg:jnlpep:v:2017:y:2017:i:2:id:601:p:155-169 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlpep/references/601 Template-Type: ReDIF-Article 1.0 Author-Name: Domenico Buccella Title: (Local) Wage Settings and (International) Entry Deterrence Abstract: The present paper investigates the use of national wage settings as a mechanism to deter entry via foreign direct investment (FDI) in a unionized monopoly industry. A union which sets centralized wages in a multi-unit firm can both decentralize and change the agenda to prevent the market entry of a non-unionized firm. The adoption of the efficient bargaining agenda is especially effective to deter entry because it lowers the fixed-cost threshold the entrant can bear. Moreover, through side-payments, the incumbent and the union can have common interests in modifying the wage setting to reach outcomes that is Pareto-superior to duopoly. However, if the union cedes “too much power” and becomes “too weak”, internal conflicts with the incumbent firm may arise. Keywords: oligopoly, labour unions, market entry Classification-JEL: J51, L13, L22 Pages: 170-187 Volume: 2017 Issue: 2 Year: 2017 File-URL: http://www.vse.cz/pep/download.php?jnl=pep&pdf=602.pdf File-URL: http://www.vse.cz/pep/602 File-Format: text/html Handle: RePEc:prg:jnlpep:v:2017:y:2017:i:2:id:602:p:170-187 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlpep/references/602 Template-Type: ReDIF-Article 1.0 Author-Name: Yo Jiang Author-Name: Xianming Fang Author-Name: Haofei Wang Title: IPO Price, Heterogeneous Priors and Gradual Information Flows Abstract: This paper attempts to develop a theoretical framework that builds on heterogeneous beliefs to explain the financial anomalies related to IPO stocks. In particular, we develop a dynamic analysis framework to study the valuation of IPO price and the short-term probability of falling below IPO price based on perspectives of investors’ heterogeneous priors and gradual information flow. Our study shows that the valuation of IPO price increases as the degree of heterogeneity due to investors’ heterogeneous priors increases. Moreover, the short-term probability of falling below IPO price increases as the degree of investors’ cognitive biases caused by gradual information flow increases. Keywords: heterogeneous priors, gradual information flow, IPO price, probability of falling below IPO price Classification-JEL: G02, G14 Pages: 188-197 Volume: 2017 Issue: 2 Year: 2017 File-URL: http://www.vse.cz/pep/download.php?jnl=pep&pdf=603.pdf File-URL: http://www.vse.cz/pep/603 File-Format: text/html Handle: RePEc:prg:jnlpep:v:2017:y:2017:i:2:id:603:p:188-197 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlpep/references/603 Template-Type: ReDIF-Article 1.0 Author-Name: Kateřina Gawthorpe Title: Competition of Currencies: An Alternative to Legal Tender Abstract: The aim of this paper is to question the scenario with legal tender law by an analysis of potential competition of alternative currencies. To accomplish such a goal, this study offers an original version of the dynamic macroeconomic model based on the money in the utility function. This model compares the current monetary conditions with the potential situation permitting more currencies circulating alongside. The main assumption about individuals’ preferences over stable currencies underlines the whole paper with emphasis on the mathematical model. The outcome of the model reveals lower inflation rate in scenario with competition among currencies in comparison to the present scenario. This result by itself seems to favour the idea of an exclusion of legal tender clause and allowance of free currency competition. The final simulation of the model, using statistical software, brings to this so far “unambiguous” view scepticism due to possible difficulties during the discovery process. Keywords: monetary policy, alternative currencies, legal tender, money in the utility function Classification-JEL: E13 Pages: 198-212 Volume: 2017 Issue: 2 Year: 2017 File-URL: http://www.vse.cz/pep/download.php?jnl=pep&pdf=604.pdf File-URL: http://www.vse.cz/pep/604 File-Format: text/html Handle: RePEc:prg:jnlpep:v:2017:y:2017:i:2:id:604:p:198-212 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlpep/references/604 Template-Type: ReDIF-Article 1.0 Author-Name: Magdalena Olczyk Author-Name: Aleksandra Kordalska Title: International Competitiveness of Czech Manufacturing - A Sectoral Approach with Error Correction Model Abstract: The main objective of this paper is to find the determinants of the international competitiveness of the manufacturing sectors of the Czech economy, using the database of 13 manufacturing subsectors in 1995-2011, with the aid of ECM model. The authors research the question of how much foreign and domestic demand, the level of labour costs, the level of sector innovation intensity, the level of sector openness to foreign markets as well as sectoral labour productivity influence the changes in their trade balance. The results of the analysis conducted show substantial differences in the roles particular variables play in explaining the net exports in individual sectors. The results of the analysis indicate mostly a greater impact of the researched factors on net exports in long rather than short term. Keywords: manufacturing, error correction model, net exports, international competitiveness of economy, CEE economies Classification-JEL: C23, F14, F40, L60, O14 Pages: 213-226 Volume: 2017 Issue: 2 Year: 2017 File-URL: http://www.vse.cz/pep/download.php?jnl=pep&pdf=605.pdf File-URL: http://www.vse.cz/pep/605 File-Format: text/html Handle: RePEc:prg:jnlpep:v:2017:y:2017:i:2:id:605:p:213-226 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlpep/references/605 Template-Type: ReDIF-Article 1.0 Author-Name: Milan Hrdý Author-Name: Eva Ducháčková Title: Valuation Standards for Insurance Companies in the Financial Theory Abstract: This article aims to evaluate the research of the different published opinions on the insurance company valuation, to analyse them and to judge their use in practice. The process of the valuation of the insurance company is very complicated and there are not many theoretical studies concerning this problem. The valuation of insurance companies should take into account the specifics of insurance activities and should look for the optimal approach. There were different approaches available - the income approach, the market comparison approach, the assets-based approach and the Bond Pricing Model. They can be combined and so there can be created different types of models. The two most important models of Massari, Gianfrate and Zanetti (2014) and Hrdý, Ducháčková (2014) were analysed and compared. Both models are applicable in practice. For the final valuation standards it could be recommended to use minimum of two methods of valuation or one of the two in detailed analysed models. Keywords: valuation, insurance company, standards, models Classification-JEL: G22, G32 Pages: 227-239 Volume: 2017 Issue: 2 Year: 2017 File-URL: http://www.vse.cz/pep/download.php?jnl=pep&pdf=606.pdf File-URL: http://www.vse.cz/pep/606 File-Format: text/html Handle: RePEc:prg:jnlpep:v:2017:y:2017:i:2:id:606:p:227-239 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlpep/references/606 Template-Type: ReDIF-Article 1.0 Author-Name: Martin Dlouhý Author-Name: Tomáš Hudeček Title: Location of Unwanted Facilities in Prague: NIMBY in Public Administration Hierarchy Abstract: The paper investigates how the problem of NIMBY (Not-In-My-Back-Yard) related to the location of unwanted facilities is dealt in a hierarchically organized city. The conventional view of NIMBY is based on two premises: first, that locally unwanted facilities are essential to achieve an important societal benefit and realize the public good; second, that selfish opposition of local community prevents the realization of that societal good. The NIMBY effect is studied as a conflict between the City of Prague and its city districts. The official documents of the Prague City Council and of the Prague City Assembly were searched to find examples of decisions on the location of unwanted facilities. The documents search was concentrated on five selected facilities: municipal waste dumps, services for the homeless, services for drug users, regulation of gambling facilities, and the system of parking zones. In the documents, the authors identified five types of approaches to NIMBY that are called financial compensation, fair distribution, local autonomy, gradual problem shifting, and consultation/cooperation. It was observed that city districts, lower level of public administration, behave as guardians of local interests if they communicate with a higher level of public administration, a guardian of global interests. As local politicians depend on their local voters, it is not surprising that they prefer local interests to global ones. This naturally creates an internal policy conflict in the city that is divided into smaller units. Keywords: public administration, NIMBY, LULUs, Prague, negative externality Classification-JEL: H49, R53 Pages: 240-252 Volume: 2017 Issue: 2 Year: 2017 File-URL: http://www.vse.cz/pep/download.php?jnl=pep&pdf=607.pdf File-URL: http://www.vse.cz/pep/607 File-Format: text/html Handle: RePEc:prg:jnlpep:v:2017:y:2017:i:2:id:607:p:240-252 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlpep/references/607 Template-Type: ReDIF-Article 1.0 Author-Name: Gijs van Dijck Title: Control and Takeover of Companies as Strategy of Growth Pages: 253-254 Volume: 2017 Issue: 2 Year: 2017 File-URL: http://www.vse.cz/pep/download.php?jnl=pep&pdf=612.pdf File-URL: http://www.vse.cz/pep/612 File-Format: text/html Handle: RePEc:prg:jnlpep:v:2017:y:2017:i:2:id:612:p:253-254 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlpep/references/612