Prague Economic Papers, 2009 (vol. 18), issue 4
Original contributions, Original article, Research article
The Perspective of Pension System Reforms in the New Member States
Mejra Festić, Jože Mencinger
Prague Economic Papers 2009, 18(4):291-308 | DOI: 10.18267/j.pep.355 
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...
Valuation of Convexity Related Interest Rate Derivatives
Jiří Witzany
Prague Economic Papers 2009, 18(4):309-326 | DOI: 10.18267/j.pep.356
We investigate valuation of derivatives with payoff deined 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 inite set of elementary operations and show that derivatives involving the rates in arrears are not...
Testing the Validity of the Brown-Potoski Model in the Czech and Slovak Republics
Jan Pavel, Emilia Sičáková-Beblavá
Prague Economic Papers 2009, 18(4):327-341 | DOI: 10.18267/j.pep.357
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...
On Net External Assets in Regions And States of the U.S.A.
Petr Duczynski
Prague Economic Papers 2009, 18(4):342-352 | DOI: 10.18267/j.pep.358
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 quantiied. We provide some evidence that states are more open to capital lows than regions. In the end, the...
Environmental Taxes and Wage Setting Structure
Juan Carlos Bárcena-Ruiz, María Begoña Garzón
Prague Economic Papers 2009, 18(4):353-365 | DOI: 10.18267/j.pep.359
The literature on the environment shows that imperfect competition in global markets creates a strategic interaction between governments that can lead to the ineficient 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 irm while under centralized wage setting there is an industry-wide union that sets the wages of all irms. We show that under a decentralized structure governments choose environmental taxes closer to those which are socially eficient than those chosen under...
An Estimation of Output Gap in Romanian Economy Using the DSGE Approach
Petre Caraiani
Prague Economic Papers 2009, 18(4):366-379 | DOI: 10.18267/j.pep.360
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 ilter, 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.