F4 - Macroeconomic Aspects of International Trade and FinanceReturn

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The credit crisis: what lessons for Visegrad?

Colin Lawson, Emília Zimková

Prague Economic Papers 2009, 18(2):99-113 | DOI: 10.18267/j.pep.344

The origins, growth and importance of the 2007-2009 American and European credit crisis are analysed. The causes lie in the speculative bubbles, the changed attitudes to domestic property, the growth of securitisation and derivatives trading, the changing roles of financial institutions, poor policy choices and inadequate regulation. The Visegrad states are being affected by declining export markets that have triggered domestic recessions, and growing credit problems. The recession is especially penalising economies they have followed risky policies. The course of the recession is currently impossible to predict. But it is possible for these states to draw on the regulatory lessons inflicted on others, and to respond to the challenge of co-regulating the international banks that dominate their domestic markets, and which while too large to fail, are also too large to rescue unaided.

Current Account Deficits in the Transition Economies

Mark J. Holmes

Prague Economic Papers 2004, 13(4):347-358 | DOI: 10.18267/j.pep.247

This study tests for the stationarity and sustainability of current account deficits for ten transition economies. For this purpose, a new test is employed that allows one to test for unit roots in heterogeneous panel datasets. While the benefits from creating a panel to overcome low test power are well known, this test also offers key advantages over existing alternative panel data unit root tests: it is able to identify which members within the panel are responsible for rejecting the null hypothesis of joint non-stationarity. In addition, the SURADF test does not presume disturbances that are independently and identically distributed. Using data covering 1993 - 2001, this study finds strong evidence in favour of current account mean-reversion for six countries. Of the six countries in the sample that joined the European Union in May 2004, non-stationarity was confirmed in the case of Lithuania only.

Impacts of Macroeconomic Policies on Output in the Czech Republic: An Application of Romer's ISMP-IA Model

Yu Hsing

Prague Economic Papers 2004, 13(4):339-345 | DOI: 10.18267/j.pep.246

Extending Romer's IS-MP-IA model to include foreign trade and exchange rates and applying the GARCH method, the study came to the conclusion that real gross domestic product is negatively associated with the inflation rate, exchange rate depreciation, and the foreign interest rate and positively affected by government deficit spending and world output. Therefore, inflation targeting is an appropriate monetary policy, and the depreciation of the koruna would be harmful to the Czech economy even though it would help the export sector.