F41 - Open Economy MacroeconomicsNávrat zpět

Purpose: This paper aims to examine the real interest rate parity (RIP) theory for EU5 countries (France, Germany, Italy, Spain and the UK) versus the USA. Design/methodology/approach: Utilizing RALS-FADF and RALS-FKSS unit root tests, this study addresses non-normality, non-linearity and structural breaks in real interest rate differentials. Findings: The results confirm the RIP theory, indicating mean reversion of real interest rate differentials and highlighting impact of financial integration on monetary policy independence and arbitrage opportunities. The study notes that central banks' ability to influence domestic economies through interest rates is limited due to global financial interconnectedness. Originality/value: The paper offers a new test and bases its empirical setup on whether interest rate differentials are non-normally distributed. The test also considers real interest rate non-linearity and the non-normality in the analysis.

We construct a simple model of exchange rates stemming from the methodology of behavioural equilibrium exchange rate (BEER) models on annual panel data for 34 countries with a floating exchange rate regime during the period 2000-2020. The basic building block of the model is the absolute version of purchasing power parity theory (the ratio of domestic and foreign price levels), further extended by other variables rooted in economic theory. A complementary interpretation of our approach could be a measurement of exchange rate deviations from purchasing power parity caused by variation in economic fundamentals. The results suggest that purchasing power parity is an appropriate reference point for exchange rate models. Furthermore, national currencies tend to be stronger against the euro with higher GDP per capita, interest rates, investment freedom, urbanization rate and terms of trade, and with lower inflation. The presented deviations of exchange rates from the model equilibrium are significantly lower than those implied by a naïve model based on purchasing power parity alone.

We investigate the impact of the Czech Republic's membership in the European Union on capital mobility. Our estimation of capital mobility is based on the alternative Feldstein-Horioka model. The model comes from intertemporal budget constraints with the additional assumption of a different data generation process. We propose an empirical framework to capture two different regimes in the vector error correction model. We show that the period 1996-2004 is composed of both regimes. The most important conclusion is that the period 1996-2004 is connected with a mix of both regimes. However, the period 2005-2017 comprises only one regime, which is connected with higher capital mobility. Therefore, capital mobility in the Czech Republic increased after 2004.

This paper attempts to verify the economic theory that the government expenditure multiplier is higher at the zero lower bound than under normal circumstances. The theory is tested by a vector autoregression on US data between 1955 and 2015. The results obtained suggest a higher multiplier during the 1980s and 1990s than after 2000, when the zero lower bound was reached. According to our results, the proposed economic theory has been rejected. The persistence of the government spending shock is a possible explanation why the multiplier is not higher at the zero lower bound.

This paper studies the impact of inflation dynamics on a common economic policy in the monetary union using a small New Keynesian model of the monetary union. We are considering two open economy versions of the Phillips curve: a typical New Keynesian Phillips curve with only forward looking dynamics and a hybrid New Keynesian Phillips curve with forward and backward looking dynamics. The main findings are as follows: (i) the backward looking dynamics (persistence) of inflation in the Phillips curve is an important determinant of the common economic policy in the monetary union; (ii) in the case of asymmetric dynamics of inflation in the monetary union countries, the country with more persistent inflation dynamics has a significant impact on the common economic policy.

The sovereign debt crisis inside the European Monetary Union (EMU) as well as competitiveness problems of some EMU members made the members and non-members of the club address one question: Is a monetary union advantageous? This paper deals with the issue whether or not the Maastricht criteria are good indicators for deciding to join the eurozone, namely for a small open economy, as the Czech Republic. In particular, this analysis addresses the issue of price competition, which can be measured by the real effective exchange rate. In fact, the Maastricht criteria do not reflect the competitiveness of a country. Thus the arguments concerning the advantages/disadvantages of the adoption of a common currency should not be based only on the Maastricht criteria, but at first on the philosophy of the real effective exchange rate. We define a basis for setting new criteria to decideing on joining the monetary union. To sum up, if depreciation/devaluation of the real exchange rate is not a competitive advantage for both Czech exports and the Czech economy (especially in the long term), then the main economic argument against joining the EMU disappears.

European Union member countries are currently exposed to the large complex of the economic crisis implications. Poor macroeconomic performance together with an increased uncertainty on the financial markets causes is accompanied with increased exchange rate volatility. As the result exchange rates determine macroeconomic development of the countries during the crisis period the way that seems to differ in comparison with the pre-crisis period. Considering the wide variety of effects that exchange rates transmit to the domestic economy from abroad in the paper we focus on the external price impulses and their impact on the domestic price indexes in the new EU member states. VAR methodology is implemented to investigate responsiveness of exchange rate to the exogenous price shock to examine the dynamics (volatility) in the exchange rate leading path followed by the unexpected oil price shock and effect of the unexpected exchange rate shift to domestic price indexes to examine its distribution along the internal pricing chain. Our results revealed differences in absorption capabilities of exchange rates in countries with rigid and flexible exchange rate arrangements. Implications are even stronger considering distortionary effects of the crisis period.

Paper deals with an important area of monetary economics, the demand for money. Concretely we propose results from an empirical investigation of determinants of the demand for real money balances in the Czech Republic. From the methodological point of view we use models of multivariate time series analysis in the co-integrated context, the VAR and VEC models, and the generalized impulse response functions for an estimation of trajectories of adjustment processes. Based on the results, we can say that the real money balances in the broader definition (in the sense of M2 monetary aggregate) are demanded by economic agents in relation to a long-run evolution of their needs, and during this, they are not systematically influenced by economic shocks. This also implies stability and simple predictability of the demand. Demand in the narrow sense, including currency and demand deposits, exhibits a greater volatility due to different shocks. Therefore this narrow demand is continuously adjusted to arising disequilibriums, going from both inside and outside of the economy. Nevertheless in the long run there exists an equilibrium relationship among the demand for real money balances in the narrow sense, the interest rate, the real effective exchange rate and the rate of unemployment. Majority of observed relationships is consistent with a priori assumptions, which are formulated through a theoretical model. Finally, it is possible to show, that direct long-run equilibrium relationship between the demand for real money balances in the narrow sense and the volume of transactions (or real production) does not exist. On the contrary, we have also found that a transactions demand is influenced by the business cycle. However the elasticity of transactions demand with respect to the business cycle is relatively small and hence we conclude that a considerable part of this demand is constant over time and a speculative demand is more important for the description of the demand for real money balances development. The difference between a behavior of the demand for real money balances in the narrow and in the broader definition, we are explaining by a portfolio re-optimization effect.

The article is focused on the analysis of export performance of the German economy, including the model scenarios that illustrate the transmission of shocks to the external environment of the Germany into the Czech economy. The analysis is motivated by the fact that the German economy is by far the largest trading partner of the Czech Republic since its establishment in 1993 and that Germany plays the role of an economic "locomotive" in the broader European region.

A phenomenon of globalization of world economy leads to diminishing of the borders between states. There is an important role of international trade in this process, which appears in much more heterogeneous forms than in the past. While the classical theory of foreign trade basically assumed commodity trade with the final products, due to fragmentation of production chains the major part of trade is performed with intermediate goods and also the trade in services becomes more and more dynamic. Increasing volume of the trade between countries is carried out without changing the ownership of traded goods, and vice versa - changing the ownership of goods without crossing the border of the country. There is important role of multinational enterprises, which are currently behind most of the economic operations. The major implication of these phenomena is increasingly difficult possibility to capture the statistical data correctly and therefore to obtain objective data on the behaviour of the economy for analytical purposes and economic policy.

In this paper we are presenting an analysis of shift of tax burden from income onto consumption. The analyzed consumption tax is value added tax, while destination principle is applied. The result of analysis is finding that the contemporary tax policy in the Czech Republic is suboptimal from the point of view of tax burden distribution between production factors and consumption. Theoretical findings are confirmed by analysis of data from European countries. Every percentage above the EU27 average of consumption taxes share on total tax quota results into increase of GDP growth by 0,04% to 0,05% p.a. The Czech political "elite" determines the fiscal policy to be popular and recent surveys confirmed Czechs' dislike towards consumption taxes, especially value added tax. Therefore the huge cost of the Czech tax system - high taxation of wages and low value added tax - can be viewed also as agency cost.

The exchange rate cannot significantly diverge from a (real) long-term equilibrium level consistent with the macroeconomic picture of an economy for a long period of time; otherwise, the economy suffers from macroeconomic imbalances such as below-potential growth and below natural employment, or on the other hand faces overheating of the economy with rising inflation. The paper focuses on different methods of how to measure the long-term equilibrium exchange rate. After a brief discussion of different approaches, the NATREX one was theoretically developed for the case of an open economy and empirically validated for the Czech economy. The NATREX concept represents a macroeconomic model based on stock-flow interaction. After the estimation of the NATREX model for the CZK, we have been able to answer such questions as: What are the pace and main determinants of the current long-term equilibrium appreciation? What is the current value of the equilibrium exchange rate and the misalignment of the current exchange rate? And, how fast is the exchange rate likely to revert to its equilibrium value?

The article analyses a development of the external balance in five Central and Eastern European countries: the Czech Republic, Hungary, Poland, the Slovak Republic, and Slovenia. The main idea of the article is to apply, expand, and empirically verify the ideas of life cycle theory in the area of the impacts of foreign direct investment on the balance of payments in the transition countries. The article defines and explores the basic general stages in the external balance of a transition country. The definition of the stages draws from a model consumer behaviour within the life cycle theory once the external balance stages have been defined as follows: young transition economy, mature transition economy, post-transition economy, and expanding economy. The authors have developed a model that provides criteria which not only classify the current stage of each transition country, but also evaluate the success in the catching-up process of the country examined.

The paper analyses a relationship between monetary aggregate M2 and inflation in a small open economy. The relationship between monetary expansion and inflation as well as a dynamic of income velocity of money framework in a small open economy are discussed in more details in the paper. Authors have developed a medium-term structural model using for an empirical verification of the relationship between monetary aggregate M2 and price development in tradable and non-tradable goods and services in the Czech Republic in the period 1996-2004. The empirical results of the model indicate that money has a significant impact on the price development of non-tradables. On the other hand, a statistically significant relationship between money and tradables inflation in the case of the Czech small open economy is not found. The conclusions presented in the paper suggest that the monetary aggregate should not be ignored in practical policy-making.

The article discusses a current account imbalance in the eurozone member countries, respectively whether the economic policy institutions should respond to the rising external imbalance, even if there is no threat of the monetary crisis. The monetary policy reactions can not be expected resulting from the general current account surplus in the eurozone as the whole. The relevancy of deficits for the eurozone member countries acts as an important factor by an intertemporal budget constraint, where the threat of the monetary crisis that limits the foreign debt accumulation is eliminated and at the same time the financial integration joint with the higher trade market integration enables wider intertemporal consumption allocation venting into the deficit of current account. The mastering of a credit risk by the financial institutions will have a major influence on then optimal intertemporal consumption allocation, if there is no revision of a fiscal policy role.

The article arrives to the following conclusions. First, the optimal currency area theory cannot deliver critical (objective) values of tests, whose passing would guarantee that costs of adoption of euro would be lower than the benefits. Second, several empirical observations strongly support the hypothesis that early adoption of euro by the Czech Republic would not incur any substantial losses. Third, several recent studies focused on testing the synchronisation of Czech business cycle vis-à-vis Eurozone do apply analytical techniques inappropriately, which implies biased results. Fourth, the Czech economy has enough experience with excessively volatile exchange rate. The greatest advantage of adoption of euro will consist in a replacement of exchange rate fluctuations and substantially higher stability of inflation. In quantitative terms, the weight of accession countries in Eurozone will be too small to influence the overall inflation and thus co-determine the European Central Bank monetary policy.