International Advances in Economic Research

The relationships between real exchange rates dynamics, domestic economic growth, and external economic positions are examined for four East European countries: Poland, Hungary, Slovakia, and the Czech Republic. Results show that in Poland the dynamic of the trade balance is independent of both the real exchange rate and industrial production. In both Hungary and Slovakia, trade balances appear to have strong autonomous components, albeit in circumstances where the influence of real exchange rates and industrial production dynamics cannot be entirely denied. The Czech Republic's situation is, however, substantially different from its Central European Free Trade Assocation partners. The growing trade balance deficit appears to be determined by both the continuing real appreciation of the Czech currency and a mildly accelerating industrial production growth. Both are the consequence of accelerating capital inflow.

The main goal of this paper is to study the effects of fiscal policy on the current account in the Italian economy through the analysis of one of the most innovative intertemporal models of recent years, the Obstfeld–Rogoff Redux model. The author proposes an innovative econometric approach to the model, based on the estimation of the microeconomic parameters that appear in its fundamental equations. The estimated parameters are used to empirically determine the multipliers that, according to the theory, connect permanent and temporary variations in public expenditure to the current account. Estimation is carried out on a dynamic extension of the original model, which has been developed modifying the first order conditions system of the maximization problem. Finally, the author provides a comparison between the results obtained and the actual dynamics of the Italian current account balance.

Research on developing economies is deficient in analysing institutional quality dimensions that are beyond standard determinants of the provision of credits by banks. This study fills this gap by adopting a broad-based modelling approach in examining the effects of institutional quality on credit provided by banks for a large sample of developing economies. A structural model, including balanced annual panel data from the World Bank World Development Indicators and Worldwide Governance Indicators for the period 2004 to 2017, was estimated using panel-corrected standard errors and two-stage least squares estimation techniques. The core variables determining the credit provided by banks were controlled for in the estimation phase. The findings showed that the rule of law, regulatory quality and the strength of legal systems are significant determinants of credit provided by banks, among other factors. Investments in improving institutional quality can be beneficial for credit diffusion by the banks. This study is distinct from previous empirical studies of the developing economies as it directs attention to institutional quality measures on bank credit expansion in an inclusive modelling framework. It makes a significant positive contribution to the finance institutional nexus literature in terms of understanding the value and role that institutional quality plays in fostering bank credit provision in developing economies.

Real estate taxes are not harmonized in the European Union. Individual states use different approaches when designing such taxes and the percentage of total tax revenues varies. Real estate tax revenues are low in the Czech Republic. This tax offers a potential source of increased revenue. The research seeks to identify whether different approaches affect real estate tax collection. The objective of this article is to evaluate approaches to real estate taxation in the respective states. Approaches were evaluated from the perspective of the tax beneficiary and by the design elements of the tax. Consequently, a comparison of transition and market economies was performed. This research evaluates secondary statistical data from the Financial Administration of the Czech Republic and Eurostat. The results of primary research conducted in the Czech Republic are also presented. Based on non-parametric tests, neither real estate tax as a percentage of total tax revenue nor real estate tax revenue per capita depend on who sets the design elements of the tax and who is the beneficiary. Differences between transition and market economies in the approach to real estate taxes were confirmed. In the area of real estate taxation, transition economies have not yet adapted to the trend, typical for market economies.

This paper asks whether rating agencies played a passive role or were an active driving force during Europe’s sovereign debt crisis. We address this by estimating relationships between sovereign debt ratings and macroeconomic and structural variables. We then use these equations to decompose actual ratings into systematic and arbitrary components that are not explained by previously observed procedures of rating agencies. Finally, we check whether systematic, as well as arbitrary, parts of credit ratings affect credit spreads. We find that both do affect credit spreads, which opens the possibility that arbitrary rating downgrades trigger processes of self-fulfilling prophecies that may drive even relatively healthy countries towards default.

Most analyses of social protection are focussed on public arrangements. However, social effort is not restricted to the public domain; all kinds of private arrangements can be substitutes to public programs. OECD data indicate that accounting for private social benefits has an equalising effect on levels of social effort across a number of countries. This suggests complementarity between public and private social expenditures. But their distributional effects differ. Using cross-country data, we find a negative relationship between net public social expenditures and income inequality, but a positive relationship between net private social expenditures and income inequality. We conclude that changes in the public/private mix in the provision of social protection may affect the redistributive impact of the welfare state.

In this paper, a hybrid system combining neural networks and genetic training is designed to forecast future oil prices. The architectural design is that of the multilayer back propagation network that is fed monthly prices for West Texas Intermediate covering the period 1986–2014. The model’s predictions are compared to those of the one, two, three, and four-month futures prices and are evaluated both on their level of accuracy as well as correctness. While accuracy measures the degree of error, correctness tests the model’s ability to predict the direction of the movement. By processing information more efficiently, and identifying patterns that may be ill-defined as a result of pronounced price volatility, this paper aims to improve the accuracy of oil price forecasts.