The article deals with the procyclical development of risk weights and hence the risk-weighted capital ratio. The leverage ratio should be included in the regulatory reform package (CRR2) as a (non-risk-weighted) prudential backstop. The article defines the complementary relationship of capital and leverage by describing their different responses to the cyclical development associated with the change in the quality of assets in the various phases of the financial cycle. The results of the panel regression on a sample of selected countries illustrate: (i) that the banking sectors with lower capital adequacy relatively more increased the capital ratio in the period of financial stress and more often changed the structure of the assets into less risky assets for the improvement of the capital ratio, with a negative impact on profit; (ii) significantly lower pro-cyclicality of the leverage ratio than the capital ratio.
Paper deals with the assessment of the fi scal position and stabilization of government policy. First, the framework for assessment of the fi scal position and the sustainability of public fi nances is presented. It is justifi ed the usage of specifi c data based on the ESA95 methodology, including consideration of possible alternatives. Subsequently, the government defi cit is set into the framework of macroeconomic identities and expressed its impact on the current account balance and other aggregates. Sustainability of the government defi cit is fi rstly derived from the primary balance and consequently from the overall balance. Even before it is discussed appropriate fi scal policy in the short and long term, including the role of fi scal rules, OECD methodology is presented for the calculation of structural and cyclical balance, including risks associated with their quantifi cation.
Fiscal Impulse and Post-crisis Estimate of Fiscal Multipliers in the Czech Republic Fiscal policy undoubtedly represents one of the main economic policies of the state influencing the economic cycle. The subject of the article is a discussion of fiscal impulse measurement, which is a necessary condition for long-term optimal counter-cyclical fiscal policy settings. The study distinguishes between the primary effect of the fiscal impulse and the overall impact on the rest of the economy. Thus, the fiscal multipliers are estimated on Czech data including a specific crisis and post-crisis period. The findings may contribute to optimal fiscal policy settings in various stages of the business cycle.
Interaction of Capital and Liquidity Regulation in the Banking Sector Basel III responded to the financial crisis among other by redefining and expanding the capital requirements and by introduction of the liquidity requirements in the banking sector. Since banks' liquidity and capital positions influence each other through assets structure channel, asset quality channel and profitability channel, there exists a significant relationship among capital and liquidity regulatory tools. A bank can improve its capital and liquidity ratios by lowering riskweighted assets (assets structure channel), but with the negative impact on the interest profit (profitability channel). We therefore aim to test the functionality of these two channels in relation to capital and liquidity positions in the Czech banking sector. We document the effect of the assets structure channel in case of liquidity and capital positions and effect of the profitability channel for the large banks. However, low profitability and introduction of a leverage ratio can limit the effect of assets structure channel on banks´ capital positions.
Article deals with estimating real natural interest rate and exchange rate to construct monetary conditions index suitable for the Czech open economy. Despite unobservable characteristics of underlying interest rates and exchange rate, the importance of reference indicators for monetary policy is crucial. Proposed monetary condition index in gap form examines monetary impulse on economic and credit cycle in inflation targeting model.
The article deals with the estimation of import intensities of exports, final consumption expenditures and gross fixed capital formation. It uses the input-output methodology of computing direct and indirect imports to the final demand components, which compares with regression estimates. Unlike the widely used turnover approach, the results contribute fundamentally to knowledge about the genuine openness of the Czech economy with regard to how much value-added is exported. In 2015, the highest import intensity for exports amounting to 52%, closely followed by 49% for investments. Household consumption worked with 41% import intensity, while general government consumption expenditures showed the lowest import intensity of 16%. Based on our input-output findings, the true openness of the Czech economy can be revealed. While turnover of exports to GDP reached 80% in 2019, the value-added approach showed only a half, i.e., 40% value-added was exported. It implies a contra-intuitive conclusion that even in a relatively small and highly integrated country into the globalized economy, there is a 60% majority of the non-tradeable goods.
Abrupt and profound swings in economic activity can result in changes in systematic component of risk premia of capital market assets. This can translate into adjustments in risk perception by the market agents, which may lead to significant changes in real investment development. We examine the issue of time-varying systematic risk on a micro level using the capital asset pricing model in an intertemporal setting. We formulate the hypothesis within a bivariate GARCH-in-mean model, which enables us to estimate the time-varying variances and covariances of the respective assets and market returns and thus the time-varying sensitivity to systematic risk. The results of the paper show that the reaction of assets' sensitivity to systematic risk varies across the sample and the changes were rather temporary. Based on the results, the downturn in economic activity witnessed in 2008 -2009 should not be a drag on real investment.
The article deals with a critical analysis of the main methods of examining the Austrian school of economics. First, attention is paid to methodological individualism and subjectivism and potential problems that are associated with their fully consistent application. It is explained illegitimacy critique of mainstream economics by Austrian school in terms of praxeological law. The last chapter is devoted to criticism of the axiomatic understanding of rationality as a necessary precondition for methodological individualism and praxeology.
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