F34 - International Lending and Debt ProblemsNávrat zpět

The article deals with the two key issues that have been fundamentally changing the European Union - the crisis of Eurozone and the Brexit. The first part discusses the change of the original balance of power in the EU after the exit of Britain and its possible consequences, especially the strengthening of the relative position of France, and hence the French concept of the EU integration model (deeper federalization of the nucleus and the rest) resulting in an even more explicit model of the two-speed EU. In the ideal Pareto model of the Union, paradoxically, the possibility of exit makes the Union more stable and compact. The second part of the text discusses the problem of the uncompetitiveness of Southern Europe as a specific case of Dutch Disease and four scenarios of its solution - the disinflation or deflation of the South, the inflation of the North, the exit from the common currency and finally the transfer union. The last named scenario is the least attractive of given options, but it is already in progress. The imbalances in the Target 2 payment system discussed in the article are example of this. The conclusion of the article brings ten points summarizing necessary economic and political measures for the EU at the time of power shift after the Brexit and ongoing imbalances between the North and the South in the currency union.

The article deals with constraint of credit supply consistent with external solvency of economy and solvency of banking sector under negative international investment position, foreign ownership of banking sector and growing bank´s capital and stable funding requirements. The target is to define main parameters of sustainable supply of funding of external capital providers and to test the relationships among determinants of external solvency, foreign sources of funding the economy and banking sector and credit aggregates in the Czech Republic using unrestricted ARDL ECM model. The results show growing inflow of debt funding motivated by export led growth, the Czech FDI investments and lack of euro liquidity due to CNB foreign exchange interventions. The debt provided by foreign parent companies could overcome a constraint of home banking sector´s credit supply. Growing export causes investments to production capacity financed by equity of foreign holders. The cost of negative NFA is driven by profitability of exporters which is positively correlated with GDP growth. The bank´s capital incl. reinvested profits do not reflect a credit cycle due to excess of capital in the Czech banking sector.

The paper deals with a theoretical and empirical analysis of determinants of both net international investment position/GDP ratio and net costs of negative investment position using the case of the Czech Republic in 1999-2011. It defines country's short-run and long-run sustainability conditions that are based on dynamics of both sources created by an economy through net export surplus and negative net yields paid from international investment position. The paper points out important differences between large advanced and small transitive economies in case of costs of net investment position. The factors like country's position of FDI lender/debtor, world investment/ invoicing currency, exogeneity of foreign asset's and liability's interest yields, role of FX reserves accumulation by country's central bank and position of foreign currency denominated loans on foreign liabilities are discussed. Empirical analysis confi rms the Czech economy is not able to satisfy long run sustainability condition due to high net costs of negative investments position. Estimation of parameters in econometric model shows that worsening net investment position to GDP is a result of high dividend and interest yields paid from foreign liabilities that is still above positive balance of net export.

In attempts to explain the mechanism of a financial crisis of the third generation, the basic problem is to specify the basic causes of its emergence. In the text of the paper we have formulated a hypothesis saying that the basic cause of the emergence of a systemic financial crisis of the Asian type is an overall unsound indebtedness, initiated - using the terminology of a monetary theory of cycles - by malinvestment, caused by an excessive credit boom. If these investments are financed through credits, their systematic liquidation leads not only to recession, but also to the development of unsound indebtedness and to a massive credit non-reimbursement. If the credits are granted in the local currency, there develops an internal debt problem, a banking crisis and subsequently a monetary crisis. If the credits are given in foreign currencies, there develops an external debt problem, a monetary crisis and subsequently a banking crisis. Debt, banking and monetary problems are mutually amplified and lead to the emergence of a systemic financial crisis.

The article discusses different causes of financial crises and shows that the imputation of reinvested profits of the subsidiaries of foreign firms as a debit item on a host country's balance of payments account tends to overstate the current account deficit and to make the host country seem more vulnerable to financial crisis. It also shows that, because of the workings of the foreign direct investment financial life cycle, this phenomenon is most evident for countries that have recently received large inflows of capital. The transition economies of East Europe certainly fall among such countries. Authors verify the working of the foreign direct investment financial life cycle using a panel of transition economies.