Prague Economic Papers, 2016 (vol. 25), issue 4

Original contributions, Original article, Research article

Can the Taylor Rule be a Good Guidance for Policy? The Case of 2001-2008 Real Estate Bubble

Mateusz Machaj

Prague Economic Papers 2016, 25(4):381-395 | DOI: 10.18267/j.pep.573  

John Taylor (2009) argues that if the Federal Reserve had followed his famous monetary-policy rule, the severe recession that resulted from the real estate bubble could have been avoided. While one may agree with Taylor's empirical analysis and accept his demonstration that his proposed rule would lead to a more stable economic environment, it is unclear whether central banks are capable of avoiding bubbles by simply following the Taylor rule. One can construct various Taylor rules from the data. Some of those rules model what the Federal Reserve actually did. Following the specific type of Taylor rule recommended by John Taylor would in fact amount...

Regime Switching Behaviour of Real Estate and Equity Prices in Emerging Countries

Mato Njavro, Petra Posedel, Maruška Vizek

Prague Economic Papers 2016, 25(4):396-410 | DOI: 10.18267/j.pep.560  

The aim of this paper is to examine the interaction patterns between equity and real estate returns in 8 emerging economies from Central and Southeastern Europe. For that purpose we apply the TAR model entailing two regimes and endogenously determined threshold, delay parameter, and lag length. The results suggest that in all the countries, the interaction between equity and real estate returns is subject to regime switching in at least one direction. Equity returns in general seem to be much more sensitive to real estate returns changes, while the reaction of real estate returns to changes in equity returns is not always present and it is much more...

The Effect of Foreign Trade on Real Wages: The Case of Turkey

Hacer Simay Karaalp-Orhan, Orhan Sevcan Günes

Prague Economic Papers 2016, 25(4):411-426 | DOI: 10.18267/j.pep.559  

The main objective of this article is to test the existence of Stolper-Samuelson theorem between Turkey and EU-15 countries for the period 2005-2014. According to the results, a significant relationship is found between exports and real wages especially in the labour and raw intensive sectors of Turkish exports, where Turkey is relatively labour and raw abundant in comparison with the EU-15. Test results indicate a long-run relationship between exports of manufacture of wearing apparel, food, textiles and real wages, a unidirectional Granger causality relationship is found from exports to wages in manufacture of wearing apparel and food. The international...

Euro Adoption and Export: A Case Study of the Czech Republic, Slovakia and Old EU Member States

Oliver Polyák

Prague Economic Papers 2016, 25(4):427-444 | DOI: 10.18267/j.pep.568  

The present paper is focussed on the impact of introducing the common European currency on export performance. Our objective is to explore the impact of introducing the common European currency on the export performance of Slovakia in comparison to the Czech Republic and the old EU member states. Our findings suggest that the export performance and other export-related indicators evolved largely in parallel in both countries. Positive trade effects brought about by the introduction of the euro are rather moderate - up to 5%. The results to some extent do confirm the existence of the so called "Rose effect" - the effect that two countries sharing the...

The Impact of a Fat Tax: Progressive in Health, but Regressive in Income?

Tatiana Chudá, Petr Janský

Prague Economic Papers 2016, 25(4):445-458 | DOI: 10.18267/j.pep.569  

Health-motivated taxes have spread over the world to reduce increasing obesity and corresponding health care costs. These taxes have not yet been implemented in the Czech Republic, in contrast to some other, mainly European countries. However, the introduction of a fat tax has been discussed frequently in the Czech Republic during the last few years; here, we provide empirical evidence in order for this public debate to be better informed. We use detailed microeconomic data to estimate the impact of potential fat taxes on household expenditure and government revenues in the Czech Republic. We evaluate the impact of three types of fat taxes: ad valorem,...

Logo Colour, Earnings Management and Firm Value

Tao Chen

Prague Economic Papers 2016, 25(4):459-475 | DOI: 10.18267/j.pep.570  

I document a new channel that can be used by managers who can take advantage of investors preference for logo colours to influence their perception of the financial reports and thus indirectly affect firm value. Evidence suggests that firms having warm colours as a major logo colour, fewer colours used in the logo, and recognizable elements in the logo are associated with lower earnings management and higher firm value. My findings remain stable across different robustness checks.

Determinants of Development of the Mutual Fund Industry. A Socio-Cultural Approach

Ingrid-Mihaela Dragotă, Delia Tatu-Cornea, Narcis Tulbure

Prague Economic Papers 2016, 25(4):476-493 | DOI: 10.18267/j.pep.572  

The mutual fund industry has grown considerably in many countries since the 1990s. Its evolution has been explained primarily in terms of its economic and financial determinants. We draw on a dynamic set of measures for socio-cultural values to explain the differential development of mutual funds across the world. Using a sample of 38 countries for the period 1996-2009, we find a positive relation between the perception of happiness and the size of the mutual fund industry. Freedom of choice, a feature of countries that are dominated by individualistic behaviours and values, has a positive impact on the development of the industry. We also explain...

The Economic Approach to Science

Marek Loužek

Prague Economic Papers 2016, 25(4):494-506 | DOI: 10.18267/j.pep.571  

The paper poses the question whether the economics of science could be the key to economic methodology. First, the sociology of science, which tries to put science in social context, is described. Then, the economic approach to science inspired by Bartley, Wible, Tullock, Stigler and Becker is explained. We point out that knowledge originates in the competitive process of scientific criticism in similar way as economic wealth originates in the competitive market process and the competition among many individuals.