Prague Economic Papers, 2011 (vol. 20), issue 1

Modelling Stock Exchange Index Returns in Different GDP Growth Regimes

Alenka Kavkler, Mejra Festić

Prague Economic Papers 2011, 20(1):3-22 | DOI: 10.18267/j.pep.384  

During different GDP growth regimes, the dynamics of global financial markets impacts the Slovenian stock exchange with varying intensity. We propose a smooth transition regression model to explain Slovene stock exchange index returns employing financial and macroeconomic variables. According to our model, the reaction of the stock market to several of the explanatory variables depends on the magnitude of GDP growth. The weaker relationship between Slovene stock exchange index returns and S&P 500 returns in the period of lower or negative GDP growth could be explained by less developed financial market in Slovenia and therefore not closely linked interchange...

Operational Risk - Scenario Analysis

Milan Rippel, Petr Teplý

Prague Economic Papers 2011, 20(1):23-39 | DOI: 10.18267/j.pep.385  

This paper focuses on operational risk measurement techniques and on economic capital estimation methods. A data sample of operational losses provided by an anonymous Central European bank is analyzed using several approaches. Multiple statistical concepts such as the Loss Distribution Approach and the Extreme Value Theory, including scenario analysis method, are considered. Custom plausible loss events defined in a particular scenario are merged with the original data sample and their impact on capital estimates and on the financial institution as a whole is evaluated. Two main questions are assessed - what is the most appropriate statistical method...

The Impact of Czech Commuters on the German Labour Market

Michael Moritz

Prague Economic Papers 2011, 20(1):40-58 | DOI: 10.18267/j.pep.386  

In the process of European integration, regions close to a border are especially affected by labour market liberalisation. Using data from the IAB employment subsample (IABS) and the employment register (BeH) for the period before and after the opening of the border between Germany and the Czech Republic (1980-2001) I shed light on the development of wages. Both German employees and Czech commuters in the western German borderland of Bavaria are compared to other domestic and foreign workers. At the beginning of the 1990s, German legislation was relatively unrestrictive, so that it was quite easy for Czech workers to obtain a work permit beyond the...

Political Business Cycle in Czech Municipalities

Lucie Sedmihradská, Rudolf Kubík, Jakub Haas

Prague Economic Papers 2011, 20(1):59-70 | DOI: 10.18267/j.pep.387  

The paper examines the political business cycle at the municipal level in the Czech Republic using data for 205 municipalities in the period 2001-2007. We introduce empirical models based on fixed-effects panel data regression testing the capital and current expenditure manipulation prior to elections. The results indicate significant increase in capital expenditures and significant decrease in current expenditures prior to elections. At the same time the manipulation with capital expenditures does not increase the probability of re-election for the incumbents in the Czech municipalities.

The Role of Fair Value Measurement in the Recent Financial Crunch

David Procházka

Prague Economic Papers 2011, 20(1):71-88 | DOI: 10.18267/j.pep.388  

Fair value measurement became pervasive to financial reporting over last 20 years. Under fair value accounting, entities are obliged or permitted to measure particular assets and liabilities at their fair values as at the reporting dates. Fair value is a current market-based hypothetical value. This market value is not always directly observable. The debate on usefulness of fair value accounting has arisen in connection with the financial crunch and economic crisis in years 2007-2009. The opponents of fair value accounting insist on that financial reporting based on fair value measurement has accelerated the financial crisis and significantly worsened...

When Great Economists Know a Lot About History

Tomáš Otáhal

Prague Economic Papers 2011, 20(1):89-93 | DOI: 10.18267/j.pep.389