Prague Economic Papers, 2005 (vol. 14), issue 2

Original contributions, Original article, Research article

Spontaneous Euroization in the Czech Republic (is it a problem and why not?)

Martina Horníková, Jaromír Hurník, Viktor Kotlán

Prague Economic Papers 2005, 14(2):99-108 | DOI: 10.18267/j.pep.255  

The paper offers a preliminary analysis of possible spontaneous euroization in the Czech economy. After a brief general introduction of the issue of currency substitution it specifically discusses two things. First, the transmission channels of potential spontaneous euroization, through which the process could possibly complicate the implementation of domestic monetary policy. Second, it analyses the degree of euroization. Among the transmission channels, attention is paid to interest rate and exchange rate channels. The circumstances under which the transmission would be sub-optimal are discussed. Besides the impact on the monetary policy transmission,...

Effects of Macroeconomic Policies and Stock Market Performance on the Estonian Economy

Yu Hsing

Prague Economic Papers 2005, 14(2):109-116 | DOI: 10.18267/j.pep.256  

Based on a general equilibrium model, this study finds that real output in Estonia is positively associated with real quantity of money and negatively influenced by real depreciation of the kroon, real stock prices, and the expected inflation rate. Government deficit spending is found to be insignificant. Policy implications are that fiscal discipline pursued by the Estonian government is appropriate, that a stronger currency may better serve Estonia, and that the wealth effect of an increase in the stock price on real money balances is greater than the substitution effect.

Empirical Testing of New Keynesian Phillips Curve in Conditions of the Czech Republic in 1994 - 2003

Josef Arlt, Miroslav Plašil

Prague Economic Papers 2005, 14(2):117-129 | DOI: 10.18267/j.pep.257  

New concepts have been presented in modelling of inflation dynamics recently, among others the new Keynesian Phillips curve (NKPC). There are several traditional ways of NKPC model validity testing, but none of them seems to be practically applicable in conditions of the Czech Republic. We tried to test the validity of NKPC on the basis of time series. For this purpose we applied an interesting non-traditional method proposed by Demery and Duck. This method does not rely on direct estimation of NKPC parameters, but relatively easy tests based on the cointegration analysis of time series are employed. Its application indicates that the NKPC model cannot...

Financial Market in the Czech Republic and Human Capital Investment: Private Financing of Higher Education

Václav Urbánek, Kateřina Maršíková-Nepolská

Prague Economic Papers 2005, 14(2):131-146 | DOI: 10.18267/j.pep.258  

In this paper we investigate the possibilities of investing in human capital at the financial market of the Czech Republic. In particular, the conditions for this investment would be different among individuals due to the difference of bequest amount and the credit market condition in financing the money for human capital investment or education. There is also higher risk for possible investors in determining individuals' income and in adverse selection. Our paper deals with the possibilities of avoiding these problems and we use our data from the survey of Czech universities students' earnings expectations collected during the years 2002 - 2004. We...

Understanding Corruption and Corruptibility Through Experiments

Libor Dušek, Andreas Ortmann, Lubomír Lízal

Prague Economic Papers 2005, 14(2):147-162 | DOI: 10.18267/j.pep.259  

Corruption and corruptibility - due to their illegal and therefore secretive nature - are difficult to be assessed either with traditional tools, such as hard data on criminal convictions or soft data elicited through opinion polls, questionnaires, or case studies. While there seems to be agreement nowadays that corruption does have a negative impact on (foreign) private investment and growth, government revenue and infrastructure, and social equality, and while there seems to be evidence that low economic development, federal structure and short histories of experience with democracy and free trade all favour corruption on the macro-level, it is poorly...

Dynamical Agents' Strategies and the Fractal Market Hypothesis

Lukáš Vácha, Miloslav S. Vošvrda

Prague Economic Papers 2005, 14(2):163-170 | DOI: 10.18267/j.pep.260  

The efficient market hypothesis (EMH) fails as a valid model of financial markets. The fractal market hypothesis (FMH) is a more general alternative way to the EMH. The FMH is formed on the following parameter space: agents' investment horizons. A financial market is more stable when a fractal character in the structures of agent's investment horizons is adopted. For computer simulations, the classical model is modified. This adjusted model shows that various frequency distributions on agents' investment horizons lead to different returns behaviour. The FMH focuses on matching of demand and supply of agents' investment horizons in the financial market....

Impact of Monetary Policy on Economic Instability in Turkey (1983 - 2003)

Mete Feridun

Prague Economic Papers 2005, 14(2):171-179 | DOI: 10.18267/j.pep.261  

This article aims at revealing the effectiveness of Turkish monetary policy in controlling inflation rate and the stability of exchange rate using the rational expectation framework that incorporates the fiscal role of exchange rate. Based on quarterly data covering the period between 1983: Q4 and 2003: Q4, the analysis affirms that the effort of the Turkish monetary policy at influencing the finance of government fiscal deficit through the determination of the inflation-tax rate, to some extent, affects both the rate of inflation and the real exchange rate, thereby causing volatility in their rates. Moderate evidence emerges that inflation affects...