Prague Economic Papers, 2012 (vol. 21), issue 4

Original contributions, Original article, Research article

China and the Dollar: An Optimum Currency Area View

Chee-Heong Quah, Patrick M. Crowley

Prague Economic Papers 2012, 21(4):391-411 | DOI: 10.18267/j.pep.431  

This paper attempts to assess how compatible China is with respect to its dollar-based exchange rate regime. Assessment is made in terms of the real convergence criteria suggested by the optimum currency areas (OCA) theory. In light of the endogenous problem in OCA analysis and this view of convergence criteria, the relevant features of China are evaluated against economies implementing rigid dollar standard in practice, namely Hong Kong, Macau, and Panama. Findings suggest that economic conditions in China broadly conform to those prevailing in these economies which maintain strong links to the US dollar.

Impact of R&D Investment on Economic Growth of the Czech Republic - A Recursively Dynamic CGE Approach

Zuzana Křístková

Prague Economic Papers 2012, 21(4):412-433 | DOI: 10.18267/j.pep.432  

The paper investigates how results obtained with standard CGE models can be improved by incorporating the effects of R&D activity in a recursively-dynamic CGE model built for the economy of the Czech Republic. The main objective of the paper is to quantify the impact of R&D activity on the long-term economic growth of the Czech Republic within the recursively dynamic CGE framework. The effect of R&D investment is modelled via the accumulation of knowledge that is treated as a specific production factor. The main findings show that knowledge accumulation can contribute to higher economic growth, but the impact of the dynamisation in the CGE model is...

Parent Influence on Loan Pricing by Czech Banks

Alexis Derviz, Marie Raková

Prague Economic Papers 2012, 21(4):434-449 | DOI: 10.18267/j.pep.433  

We investigate the influence which the financial condition of a multinational bank group may have on the lending rates of its affiliates, using data from the ten biggest banks in the Czech Republic under foreign control. The analysis is based on a theory of bank lending in which the implicit opportunity costs of lending by a foreign bank affiliate are influenced by the scarcity of funds within the multinational conglomerate. The theory predicts that parent banks' influence should be stronger in loan segments with more pronounced information asymmetry. Our empirical model, which explains the interest rate charged by the affiliate by means of affiliate-level...

Testing the "EU Announcement Effect" on Stock Market Indices and Macroeconomic Variables in Croatia Between 2000 and 2010

Anita Radman Peša, Mejra Festić

Prague Economic Papers 2012, 21(4):450-469 | DOI: 10.18267/j.pep.434  

We tested the hypothesis of procyclicality against the economic activity and stock exchange of Croatia - as a country preparing for EU accession - in order to investigate the spillover effect, i.e., the degree and pace of integration into larger financial markets such as the EU. The empirical findings obtained in application of OLS methodology for the 2000-2010 period provided evidence that EU accession is a trigger for a closer financial integration of a candidate country as Croatia; and a trigger for a rise in stock prices and economic revival, was reflected in by an increase in GDP and large FDI.

Do the Board of Directors' Characteristics Influence Firm's Performance? The U.S. Evidence

Roman Horváth, Persida Spirollari

Prague Economic Papers 2012, 21(4):470-486 | DOI: 10.18267/j.pep.435  

We examine the relationship of selected Board of Directors' characteristics and firm's financial performance. Using a sample of large U.S firms in 2005-2009, we find that the degree of insider ownership influences positively firm performance, because it reduces agency problems. The age of the Board of Directors matters, to a certain degree, as well. Younger members are probably willing to bear more risk and to undertake major structural changes to improve firm's future prospects. On the other hand, we find that independent directors reduce firm performance and this negative effect was even more important during the recent financial crisis. We suppose...

Determinants of Firm's Innovation

Alena Zemplinerová, Eva Hromádková

Prague Economic Papers 2012, 21(4):487-503 | DOI: 10.18267/j.pep.436  

The primary aim of the paper is an analysis of the relationships between growth, innovation and subsidies based on a large firm-level data set in the period 2004-2007. The novelty of the approach lies in linking data from financial statements with data from innovation surveys of the Czech Statistical. Innovation activities of firms are modelled as a four stage model (CDM) which allows studying several interrelated questions while controlling for simultaneity and for causality problem. In the first two stages determinants of decision to innovate and consequent innovation investment are separated. In the third stage innovation input (R&D investment)...

Financial Conditions and Transparency of the Czech Professional Football Clubs

David Procházka

Prague Economic Papers 2012, 21(4):504-521 | DOI: 10.18267/j.pep.437  

The UEFA approved the Club Licensing and Financial Fair Play Regulation in 2010, which governs the requirements on transparency and financial conditions of football clubs participating at the European cups. The paper focuses on the specifics of Czech professional football clubs. The research is carried out in two ways. Firstly, the compliance with information duties set up by Czech commercial law is analysed. According to the performed empirical survey, a significant number of Czech football clubs submit their financial statements to the Business Register with a delay or they do not submit the statements at all despite the submission is mandatory....