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Paradox of Excess Liquidity in European Emerging and Transition Economies

Albulenë Kastrati

Prague Economic Papers 2022, 31(1):79-114 | DOI: 10.18267/j.pep.793

European emerging and transition economies are in immense need of investments and renewal of capital, yet they produce a considerable amount of unutilized resources. In particular, banks hold excess liquidity in the face of seemingly profitable lending opportunities. Is it a demand-side or supply-side problem or is this region entirely different and have we been working under the wrong paradigm? This study creates a new estimate of excess liquidity by taking into account banks' overall liquidity position. Breaking down precautionary from involuntary excess liquidity, a significant presence of the latter is evident. A part of the story deals with insensitivity of deposits to interest rates. Based on our standard understanding of how banks work, this is puzzling and this study creates a new way to look at this. Using new measures is the way to launch the investigation of causes and policy implications for involuntary excess liquidity.

An Assessment of The Effectiveness of Sterilization of Central Bank Interventions: Empirical Evidence from India

Abdul Rishad, Sanjeev Gupta, Akhil Sharma

Prague Economic Papers 2022, 31(5):417-440 | DOI: 10.18267/j.pep.808

The active participation of the central bank in exchange rate management has accelerated the growth of foreign exchange reserve in India. The massive reserve stockpiling has substantially contributed to apprehensions about excess liquidity in the domestic economy. The extent to which these concerns are justified depends on the degree to which the central bank is able to mitigate its effects on monetary aggregates. This study is an attempt to assess the magnitude of the sterilization coefficient by using quarterly data from 1996 to 2019. In order to estimate sterilization and offset coefficients, the study employed the two-stage least squares (2SLS) method under the theoretical framework of simultaneous equation modelling. The findings show that the reserve accumulation through central bank interventions puts pressure on money supply. However, the RBI sterilization policy was effective as the central bank was able to sterilize 93 percent of its interventions, while the offset coefficient was 72 percent during the period of study. The low value of the offset coefficient compared to the sterilization coefficient indicates a high degree of monetary policy independence in neutralizing the central bank's purchase interventions. Based on the findings, it can be recommended that policymakers should consider the sustainability of interventions and sterilization operations as the dual policy objectives of independent exchange rate management and monetary policy cannot be achieved in the presence of a high interest rate in an inflation-targeting regime.

Foreign Banks in Central and Eastern Europe: The Good, the Bad and the Ugly

Mihai Niţoi, Dorina Clichici, Simona Moagăr-Poladian

Prague Economic Papers 2021, 30(5):596-612 | DOI: 10.18267/j.pep.782

Foreign banks have played a major role in Central and Eastern European economic landscape over the last decades. They have spurred banking intermediation and fuelled economic growth for years. However, the global financial crisis unveiled the other side of the coin. This article analyses foreign banks' lending behaviour in Central and Eastern Europe over the period from 2000 to 2016. It aims to investigate the nexus between bank loan growth, cross-border bank claims and the cycle period. Moreover, it captures the impact of the financial cycle on foreign banks' credit behaviour and highlights whether foreign bank ownership is influenced by host- and home-country effects. Our findings reveal the strong nexus between foreign banks' loan growth and cross-border bank claims. Also, we emphasize the pro-cyclicality of foreign banks' loan growth and cross-border bank claims. Furthermore, we see clear differences related to foreign banks' lending behaviour during normal and turbulent times, triggered by host- and home-country effects. These results raise policy challenges regarding the right bank ownership balance and the use of prudential regulation.

Synthetic Indicators of Quality of Subjective Life in the EU: Rural and Urban Areas

María-Carmen Sánchez-Sellero, Beatriz García-Carro, Pedro Sánchez-Sellero

Prague Economic Papers 2021, 30(5):529-551 | DOI: 10.18267/j.pep.783

The aim of this paper is to develop subjective synthetic indicators that quantify the quality of life in the different countries of the EU-28, with data from the 2016 European Quality of Life Survey (EQLS). We add other indicators to the general synthetic ones in order to quantify the different dimensions of quality life due to its multidimensional nature. The successive but unchained application of the principal component analysis and the Mazziota-Pareto analysis allows us to classify 5 dimensions of quality of life: subjective component of governance, public services, environment, general satisfaction with life, and socioeconomic issues. We verify that countries with the lowest or highest positions in the general index usually keep that position in most dimensions. The spatial perspective is fundamental to study of regional development. For this reason, the next objective is the analysis of differences by spatial location using the variance analysis. The general indicator shows significant differences between EU countries but it does not show differences in the quality of life of European citizens in urban and rural areas.

Does Financial Support from ERDF and CF Contribute to Convergence in the EU? Empirical Evidence at NUTS 3 Level

Mindaugas Butkus, Alma Mačiulytė-Šniukienė, Kristina Matuzevičiutė, Diana Cibulskienė

Prague Economic Papers 2020, 29(3):315-329 | DOI: 10.18267/j.pep.737

Analysing papers that reveal by decomposing territorial inequalities in the EU that the share of disparities attributed to the NUTS 3 level has increased over the last 20 years, this paper aims to examine to what extent the financial support in 2000-2006 from ERDF and CF, which are the main regional policy tools but mainly are directed to address the issues arising at the NUTS 2 level, contributed to supporting convergence at the NUTS 3 level. Our re-search strategy relies on combining a conditional β-convergence model and a difference-in-differences (DiD) estimator. Estimations are generated for four alternative post-policy periods, two ways to measure policy intervention and for different funds as well as different expenditure categories. Our research results bring to light the question of potential negative outcomes of the EU's existing regional policy since the policy that is focused on the NUTS 2 level is enlarging imbalances within these regions, i.e., among NUTS 3 regions.

Sustainability of Current Account Surpluses: Evidence from European Countries

Ayşen Sivrikaya, Zühal Kurul

Prague Economic Papers 2020, 29(4):481-501 | DOI: 10.18267/j.pep.733

Over the last two decades, the current accounts in the European Union (EU) have diverged substantially. This divergence has raised concerns about the sustainability of the core countries' current account surpluses since the peripheral countries' financing of their significantly rising levels of current deficits depends on them. In this study, by applying both linear and nonlinear unit root tests and taking into account structural breaks in the data-generating process, we examine the current account sustainability of the main core countries with large external surpluses. We find that the current accounts of Austria, Denmark and Germany are not on sustainable paths, which suggests that the core economies might not continue to run surpluses to finance the peripheral countries' external deficits. The results of this study imply that the policymakers in peripheral countries might take proactive measures against possible borrowing problems and capital outflow risk in the future.

Macroeconomic Forecast Relevance in the Central Banks Decisions. The Case of European Economies

Magdalena Szyszko, Aleksandra Rutkowska

Prague Economic Papers 2019, 28(3):257-275 | DOI: 10.18267/j.pep.711

We examine central banks' involvement in inflation forecast targeting by means of an index-based analysis and ordered logistic regression. The research encompasses the Bank of England, the Czech National Bank, the National Bank of Poland and the Sveriges Riksbank. They produce conditional or unconditional macroeconomic forecasts. Hence, two paths have been used to examine them. We examine whether the four central banks follow their forecasts to some extent. We have found that the CNB and SR are highly consistent in terms of compatibility of their decisions with the forecasts, timing of decisions, and communication by means of forecasts. The NBP follows its forecast much less consistently, while the BoE ignores it altogether. As some of the results for the BoE and NBP are unambiguous, we remain cautious while interpreting them. This paper contributes to the literature on the empirical evaluation of inflation forecast targeting.

Energy Prices and their Impact on the Competitiveness of the EU Steel Industry

Peter Baláž, Juraj Bayer

Prague Economic Papers 2019, 28(5):547-566 | DOI: 10.18267/j.pep.715

An essential part of the EU's growth strategy is support to its own international competitiveness. The reason is that the domestic industry is losing its former positions and is being pushed out of both domestic and international markets. Developments on the international steel market over the last year confirm that the market is likely to see significant changes as a result of protective measures. Most of them will jeopardise the international competitiveness of the European steel industry with negative impacts on its overall economic growth. The aim of this paper is to analyse the influence of energy prices and, based on an international comparison of production conditions, identify the comparative advantages of the EU in this segment. For this purpose, use will be made of the RCA indicator and other research methods. The authors formulate some statements concerning the future development of this sector and the conditions which need to be satisfied to boost its competitiveness.

Effects of EU Expansion on Migrants Employment and Income: A Natural Experiment

Jan-Jan Soon

Prague Economic Papers 2018, 27(1):113-128 | DOI: 10.18267/j.pep.648

With the European Union expansion in 2004 providing a unique form of natural experiment, this paper uses the European Values Study data and the difference-in-differences estimation to identify causal effects of the EU expansion on migrants’ employment chances and income. Estimation results suggest that the expansion has increased migrants’ employment chances and income. The probability of having a full-time employment for a male migrant in the postexpansion period increases by about 7.7 percentage points. The increase in income for male migrants is higher than that of their female counterparts after the expansion. When the income distribution is broken down into quantiles, estimation results show that male migrants at lower ends of the income distribution experience higher increase in income. At the highest end of the income distribution, there is no evidence that the expansion has any significant effect on either male or female migrants´ income.

Economic Sentiment Level versus the Quality of Life in European Union Member States

Robert Skikiewicz, Krzysztof Blonski

Prague Economic Papers 2018, 27(4):379-396 | DOI: 10.18267/j.pep.658

The purpose of this paper is to evaluate the interplay between variables pertaining to the satis-faction of life and economic sentiments of citizens of selected European countries. The analysis of the connections will be conducted based on existing subjective primary data. The data in question are results of international comparative surveys (European Social Survey, ESS; the OECD's Better Life Initiative) and results of consumer economic sentiment surveys ordered by the European Commission. The research procedure also benefitted from the selected items of literature available in the form of books and articles. Population economic sentiments are subject to cyclical changes connected with the changes in economic situation in individual countries. The analysis of secondary data allows for the con-clusion that there is a statistically significant direct or indirect strong relationship between assessments of life satisfaction and consumer confidence indicator. The grouping of the researched countries based on secondary data has made it possible to capture the similarities between individual states.

Central Banks Inflation Forecast and Expectations. A Comparative Analysis

Magdalena Szyszko

Prague Economic Papers 2017, 26(3):286-299 | DOI: 10.18267/j.pep.614

The question on the inflation expectations management is one of the most important ones from the central bank's point of view. The inflation forecast can be a helpful tool of managing expectations. If it actually is, the interdependences of the inflation forecast and expectations can be observed. The existence of such interdependences opens the field for determining the preconditions that might support expectations formation. The hypothesis assumes that associations of inflation forecasts and inflation expectations depend on the central bank's credibility and consistency in inflation forecast targeting. The research covers the Czech National Bank, the National Bank of Hungary, the National Bank of Poland and Sveriges Riksbank. The research combines qualitative and quantitative methods. The research uses survey-based expectations quantified with probabilistic method. The main finding is that the relatively high level of credibility and consistency in inflation forecast targeting is not sufficient to achieve strong interdependences of inflation forecast and expectations.

The Weber-Fechner Law and Public Expenditures Impact to the Win-Margins at Parliamentary Elections

Paulo Jorge Reis Mourao

Prague Economic Papers 2012, 21(3):291-308 | DOI: 10.18267/j.pep.425

This paper discusses the electoral implications of psychological motivation on voting functions. We tested a claim of the Weber-Fechner law as applied to electoral behaviour - specifically, that an expanded public sector leads politicians to make more significant, opportunistic distortions of public expenditures than the distortions observed when the public sector is diminished. We employed a system of simultaneous equations to test this hypothesis for cases observed in more than sixty democracies since 1960. We gave a special focus to the cases of Central and Eastern European countries. Our results confirm the main implications of the Weber-Fechner law. Years in incumbency, running for re-election, higher unemployment and higher inflation rates tend to generate negative moods, feelings and affects in the electorate; thus, these factors tend to approximate the vote share of the most voted party to the remaining vote share of the challenger political forces.

The Impact of Economic Crisis on Convergence Processes in European Union Regions

Beata Bal-Domańska

Prague Economic Papers 2016, 25(5):509-526 | DOI: 10.18267/j.pep.574

The effects of the financial crisis, that started in 2008 and first emerged on the American housing market, have been experienced by many European economies. The purpose of this article is to attempt to measure and assess the sensitivity of convergence processes to crisis in European Union's regional economies taking into consideration their sectoral structure. Particular resistance to crisis is associated with the presence of "modern" sectors of the economy. The study covers the panel of the European Union NUTS-2 level regions in the period 2005-2011. In the analysis, the application of panel data allows for inclusion of the specific non-measurable aspects characteristic for particular regions and time.

Dynamic Nexus between Exchange Rate and Stock Prices in the Major East European Economies

Dejan Živkov, Jovan Njegić, Vera Mirović

Prague Economic Papers 2016, 25(6):686-705 | DOI: 10.18267/j.pep.591

This paper investigates the dynamic conditional correlation (DCC) between stock returns and exchange rate in four East European emerging markets. Due to persistent long memory and the presence of the asymmetric effect in all asset markets we applied DCC-FIAPARCH model. The estimated negative DCC parameters in all scrutinized countries confirmed that portfolio-balanced theory has predominance in the short run in all selected economies. DCC parameters revealed significant time-varying behaviour, especially during the major crisis periods. By embedding dummy variables in the variance equations, we came to the conclusion that global shocks affect the volatility of DCCs. Particularly, it happened during the Global Financial Crisis and European sovereign debt crisis, but the effects were not linearly equal in all countries. Complementary rolling analysis unveils how conditional volatilities of analysed assets influence DCC. The results suggested that exchange rate conditional volatility has higher influence on DCC than stock conditional volatility.

Bank Capital, Risk and Performance in European Banking: A Case Study on Seven Banking Sectors

Irina Raluca Busuioc Witowschi, Florin Alexandru Luca

Prague Economic Papers 2016, 25(2):127-142 | DOI: 10.18267/j.pep.541

The aim of this paper is to evaluate the way in which capital influences profitability of banks and exposure to risk in seven European countries: Austria, Bulgaria, Greece, Italy, Romania, the Netherlands and Hungary. Based on previous studies, we developed a model of simultaneous equations to analyse the relation between capital, risk and performance. The model includes 68 banks and covers the period between 2006 and 2011. In addition, estimations have been made for the three capital ratios (own capital ratio, tier 1 ratio and capital adequacy ratio) for each country included in this study. The obtained results have revealed the existence of a negative relationship between capital and taken risks and a positive relationship between capital and profitability, as well as between risk and profitability.

Exchange Rate Volatility and Uncovered Interest Rate Parity in the European Emerging Economies

Dejan Živkov, Jovan Njegić, Mirela Momčilović, Ivan Milenković

Prague Economic Papers 2016, 25(3):253-270 | DOI: 10.18267/j.pep.562

This paper investigates whether UIRP principle holds and what is predominant driving force, which influences exchange rate movement - economic fundamentals or short-term speculative behaviour. Analysis covers seven East European transition countries and empirical data comprise weekly time series ranging from first week in January 2003 to last week in December 2013. The research method is Component-GARCH in Mean Model, which decomposes temporary and permanent element of volatility. The mean and variance equations have been adjusted for the structural breaks' presence in order to improve estimated parameters. The results suggested that UIRP principle does not hold in any country. After structural breaks inclusion, we have found that the permanent effect is significant in determination of exchange rate dynamics in five countries, but it does not apply for the transition effect. However, further outliers' purification revealed that only in Serbia short-term transition component plays an important role.

An Empirical Analysis of the Diffusion of Information across Stock Markets of Central and Eastern Europe

Ovidiu Stoica, Mark J. Perry, Seyed Mehdian

Prague Economic Papers 2015, 24(2):192-210 | DOI: 10.18267/j.pep.508

In this paper, we examine the efficiency of the transmission of information across the stock markets of Bulgaria, the Czech Republic, Hungary, Poland, Romania, and Slovakia, as well as the relative importance and influence of advanced equity markets of Germany and France on the abovementioned markets. The analysis is carried out using maximum likelihood regressions, Generalized Autoregressive Conditional Heteroskedastic (GARCH) models, and vector autoregression (VAR) estimations. The empirical results suggest that the Central and Eastern European stock markets react to the arrival of price innovations from Germany and France, but national stock market price innovations account for more error variance compared to those of Germany and France, and generally show an increasing responsiveness over time, which could be interpreted as progress in the European financial integration.

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.

Flexicurity Policies and their Association with Productivity in the European Union

Primož Dolenc, Suzana Laporšek

Prague Economic Papers 2013, 22(2):224-239 | DOI: 10.18267/j.pep.449

The paper examines the issue of flexicurity in the EU Member States and studies the association between flexicurity policy components (i.e. employment protection legislation, lifelong learning programs, active and passive labour market policies) and labour and total factor productivity growth in 20 EU Member States over the 1991-2008 period. The empirical analysis pointed on the existence of large differences in the level of implementation of flexicurity policies across EU Member States, by which the least successful are NMS, especially with regard to active labour market and lifelong learning programs. As regards the relation between flexicurity variables and productivity growth, panel regression estimates showed that active labour market policies and participation in lifelong learning programs have a statistically significant positive association with labour and total factor productivity growth. On the other hand, rigid employment protection and high expenditures for passive labour market policies negatively relate to productivity growth.

Recent Development of the Wage and Income Distribution in the Czech Republic

Diana Bílková

Prague Economic Papers 2012, 21(2):233-250 | DOI: 10.18267/j.pep.421

The paper presents the development of monthly gross wages and wage distributions both by gender groups and for the total sample in the Czech Republic over the years 2002-2009. The first part deals with the development of sample characteristics of the level, differentiation and shape of the wage distribution in the research period, including characteristics of wage level forecasts for 2010 and 2011. Special attention is paid to the different behaviour of the wage distribution between men and women in the Czech Republic and the gender dependence of gross monthly wages. A comparison of the income level development in the Czech Republic with that of the other European Union countries in 2005-2009 is made in the final part of the paper. The comparison is drawn in relation to the income level development both in the original fifteen EU countries and the twelve newly-accepted EU member states.

International Development Cooperation of the Czech Republic in the Context of European Development

Ingrid Majerová

Prague Economic Papers 2012, 21(2):166-185 | DOI: 10.18267/j.pep.417

The paper describes the development cooperation of the Czech Republic within the European Union. It has briefly analyzed the evolution of development cooperation until 2004 when Czech Republic joined the European Union and further the situation from 2004 to present. The paper also evaluated the financial resources for development cooperation, bilateral cooperation and the comparison with other EU Member States, background on the progress of Official Development Assistance in European Union.

A Cardiograph of the Dollar's Quality: Qualitative Easing and the Federal Reserve Balance Sheet During the Subprime Crisis

Philipp Bagus, Markus H. Schiml

Prague Economic Papers 2010, 19(3):195-217 | DOI: 10.18267/j.pep.372

In this article we argue that the balance sheet of a central bank contains valuable information for the quality of a currency. As an illustration we analyze the balance sheet of the Federal Reserve System (FED) during the subprime crisis between June 2007 and December 2008. Until September 2008 the balance sheet of the FED did not expand strongly. However, the structure of the FED assets varied pronouncedly. Starting in September 2008 the balance sheet expanded dramatically. The calculation of certain balance sheet ratios supports the assessment of an important decrease of the quality of the currency. Our analysis shows that the analysis of central bank balance sheet policies should not rely solely on quantitative issues but rather include qualitative issues.

Media Capture and Local Government Accountability

Jiancai Pi

Prague Economic Papers 2010, 19(3):273-283 | DOI: 10.18267/j.pep.376

This paper mainly discusses the effects of media capture on local government accountability in undemocratic countries. Firstly, we construct the models with and without media capture from the perspective of incentive theory. Secondly, we conduct a comparative analysis between the outcomes with and without media capture. The analysis shows that no media capture decreases the local official's equilibrium efficiency wage under whatever conditions, and at the same time makes the central government's constraint to incentivize the local official to exert effort easier to be satisfied under some conditions, while harder to be satisfied under other conditions.

Real convergence in the new eu member states

Borut Vojinović, Žan Jan Oplotnik

Prague Economic Papers 2008, 17(1):23-39 | DOI: 10.18267/j.pep.317

This paper presents the analysis of unconditional b and s convergence among the ten European countries that accessed the European Union in 2004. Unconditional b convergence means that the less developed countries (with lower GDP per capita) grow faster than the more developed countries (with higher GDP per capita). s convergence exists when income differentiation among economies decreases over time. Our results confirm the existence of both types of convergence in the second half of the 1990s and the 2000s. The poorer New EU Member States grew generally faster than the richer New EU Member States. As a result, the income gap among these countries has decreased (although it still remains quite large). The convergence occurred at the rate of 2.87% in the years 1995-2006 and 3.23% in 1996-2006. This result is very similar to the results of other analyses on the subject.

Towards measurement of political pressure on central banks: the case of the central bank of egypt

Ibrahim L. Awad

Prague Economic Papers 2008, 17(3):254-275 | DOI: 10.18267/j.pep.333

This paper assesses whether the legal independence granted to the Central Bank of Egypt (CBE) by the latest legislation promulgated in 2005 is factual. The author followed Fry's methodology, which assumes that the level of independence of the central bank is determined by fiscal attributes. In an attempt to develop Fry's method, there was used a simple criterion to assess the central bank's independence, namely, that the central bank is actually independent if it can fulfill its money supply target without squeezing the private sector. Applying this criterion to the case of the CBE, we find that the legal independence granted to the CBE by the latest legislation is not factual.

Industrial Clustering and Global Value Chains in Central and Eastern Europe: Role of Multinational Enterprises in Industrial Upgrading

Yusaf H. Akbar, Sonia Ferencikova

Prague Economic Papers 2007, 16(3):237-251 | DOI: 10.18267/j.pep.307

The authors are attempting to draw together existing literature on the governance of GVCs; research on host country ""spillovers"" as a consequence of MNE activity and the broader cluster and innovation literature. While cluster research had done important work in identifying and operationalizing the necessary conditions for cluster formation, it had relatively ignored the global-local linkage brought by the presence of MNEs. The ""spillover"" literature has identified in theory numerous benefits of MNE presence in host countries. There was relatively little empirical work done in CEE to discover if these benefits actually exist. Neither literature had focused on how MNEs govern their GVCs. Thus bringing these sources together presents an important opportunity for international business. The authors find that in the Slovak case the industrial clusters among the firms surveyed were not much functional. On a strategic level, there appears to be little evidence of cooperation in areas of marketing, export promotion or investment. This is especially of concern in sectors such as automotive where cooperative strategies among suppliers could offer significant benefits.

Monetary Policy and Asset Prices: What Role for Central Banks in New EU Member States?

Jan Frait, Luboš Komárek

Prague Economic Papers 2007, 16(1):3-23 | DOI: 10.18267/j.pep.294

The paper deals with the relationship between monetary policy and asset prices. Besides surveying the general discussion, it attempts to extend it to recent developments in the New Member States of the EU (NMS), namely the Czech Republic, Hungary, Poland and Slovakia (the EU4). After a brief description of the current macroeconomic situation in the NMS, the appropriate reaction of monetary policy to asset price bubbles is analysed and the main pros and cons associated with this reaction are summarized. Afterwards, the risks of asset market bubbles in the EU4 countries are evaluated. Since the capital markets are still underdeveloped and the real estate price boom seems to be a natural reaction to the initial undervaluation, the risks are viewed as rather small. The conclusion is thus that it is crucial for central banks in mature economies as well as in the NMS to conduct their monetary policies as well as their supervisory and regulatory roles in a way that does not promote the build-up of asset market bubbles. In exceptional times, central banks of small open economies must be ready to use monetary policy steps as a kind of insurance against the adverse effects of potential asset market bubbles.

Institutional Conditions of Monetary Policy Conduct in the Czech Republic

Petr Sedláček

Prague Economic Papers 2006, 15(2):113-134 | DOI: 10.18267/j.pep.280

This paper tries to assess the conditions under which the CNB operates. Using a basic framework suggested by Mishkin (2000), the aim is to find out whether the central bank is able to conduct high-quality monetary policy. First, general principles that central banks should follow to succeed in their pursuit of monetary goals are theoretically introduced. Then, these theoretical principles are looked at in the Czech context. Issues of the strictness and suitability of concrete monetary policy of the CNB will not be dealt with, rather institutional circumstances that potentially allow successful policy are at the centre of this paper. It is concluded that the CNB is functioning in a moderately good environment, but still much room for improvement does exist.

Subregionalism Within the EU with Special Regard to the Groupings of which the Czech Republic is a Member

Eva Cihelková, Pavel Hnát

Prague Economic Papers 2006, 15(1):50-62 | DOI: 10.18267/j.pep.276

As a consequence of the third wave of regionalism, the so called new regionalism, a marked increase in the number of regional groupings can be observed worldwide which makes the preferential relations between states even more complicated and complex. Within these relations those in which a regional grouping is one partner are the most complex. One of such complex relationships, which did not come to being during the third wave of regionalism but was strongly supported by it, is subregionalism - simply said, overlapping of regional integrations. This development can be especially observed in the regions, where a region-wide integration scheme is being formed - such as the European Union in Europe. The aim of this study is to analyze a current state and development of subregionalism within the European Union (EU) and to analyze the effects of this phenomenon in the region. The Czech Republic, as the new member of the EU, is a member of several subregional groupings in Europe. Special regard will be taken to those groupings, where the Czech Republic is an active member. Especially the future development of these groupings will be the main expected outcome of this study. An institutional and political view (analysis of agreements and documents of regional groupings) is the primal approach of this study to the problem of subregionalism and its aim is to identify integration's state, future and relation to the dominant integration. As regionalism is the main theoretical approach of this study, it will examine only the institutionalised integration within the area and will thus omit the regional processes within the EU (the so called euroregions) or the cross-boarder cooperation between particular pairs of member states.

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