The Trade Deficit and Banking Sector Results in Romania and Bulgaria

We tested for the significance of macroeconomic variables that condition non-performing loan ratios. Our estimates for Bulgaria and Romania support the hypothesis that the growth of available finance might harm banking performance and deteriorate NPL dynamics, most probably due to the overheating of economies. Since we confirmed that the dynamics of net exports of these economies deteriorated the NPL ratio, the weakening of growth in export-oriented industries could lead to economic contraction with a direct impact on the sustainability of banking-sector results in these countries. Large current account deficits are typical for emerging markets and do not pose a problem as long as they are caused by the importing of capital goods, and, if future export growth is strong enough to reimburse foreign debt. Structural dependence on external financing - which is in part a by-product of the effect of low levels of internal saving - have led to large current account deficits and financial instability.cyclicality, non-performing loans, systemic risk, asset quality, economic growth

The impact of macroprudential policy on financial stability in selected EU countries

The aim of this paper is to examine the impact of selected macroprudential policy instruments on financial stability. We focus on six euro area economies (Belgium, Cyprus, Germany, Spain, Ireland and the Netherlands) over sixteen quarters (from 2015 Q1 to 2018 Q4) by using the research method of panel econometrics. The following three banking sector aggregate balance sheet variables exhibit the expected impact on credit growth and cyclical fluctuations of the economy: common equity tier one ratio, coverage ratio, and interconnectedness ratio. Moreover, common equity tier one ratio, loan-to-deposit ratio, and leverage ratio exhibit the expected impact on house price growth. Based on our empirical findings, a case can be made for the usage of carefully crafted macroprudential policy instruments that target selected financial and macroeconomic variables with the ultimate goal of attaining the stability of the financial system as a whole

Macroprudential Policy Versus Other Economic Policies

After the global financial crisis of 2007, macroprudential policy instruments have gained in recognition as a crucial tool for enhancing financial stability. Monetary policy, fiscal policy, and microprudential policy operate with a different toolkit and focus on achieving goals other than the stability of the financial system as a whole. In ligh of this, a fourth policy – namely macroprudential policy – is required to mitigate and prevent shocks that could destabilize the financial system as a whole and compromise financial stability. The aim of this paper is to contrast macroprudential policy with other economic policies and explain why other economic policies are unable to attain financial stability, which in turn justifies the need for a separate macroprudential policy, the ultimate goal whereof is precisely financial stability of the financial system as a whole. Our research results based on the descriptive research method indicate that, in order to prevent future financial crises, it is indispensable to combine both the microprudential and the macroprudential approach to financial stability. This is because the causes of the crises are often such that they cannot be prevented or mitigated by relying only on microprudential or only on macroprudential policy instruments

ODVISNOST IZMEĐU SLOVENSKOG I EUROPSKIH DIONIČKIH TRGOVA – DCCGARCH ANALIZA

This paper examines the comovement and spillover dynamics between the Slovenian and some European (the UK, German, French, Austrian, Hungarian and the Czech) stock market returns. A dynamic conditional correlation GARCH (DCC-GARCH) analysis is applied to returns series of representative national stock indices for the period from April 1997 to May 2010 to answer the following questions: i) Is correlation (comovement) between the Slovenian and European stock markets time-varying; ii) Are there return and volatility spillovers between European and Slovenian stock markets; iii) What effect did financial crises in the period from April 1997 to May 2010 have on the comovement between the investigated stock markets? Results of the DCC-GARCH analysis show that comovement between Slovenian and European stock markets is time-varying and that there were significant return spillovers between the stock markets. Financial crises in the observed period increased comovement between Slovenian and European stock markets.U ovom radu se analizira dinamika kretanja donosa i prijenosa volatilnosti između dioničkih trgova Slovenije i pojedinih europskih država (Velike Britanije, Njemačke, Austrije, Madžarske i Češke republike). Upotrijebljena je DCC-GARCH analiza na podacima dnevnih donosa dioničkih trgova za period između aprila 1997 i maja 2010 kako bi se odgovorilo na sledeča pitanja: i) Da li je korelacija između donosima slovenskog i europskih dioničkih trgova dinamična; ii) Postoje li prijenos donosa i volatilnosti između slovenskog i europskih dioničkih trgova; iii) Kako su financijske krize u Europi i svijetu u istraživanom periodu utjecale na korelaciju donosa dioničkih trgova? Rezultati pokazuju, kako je korelacija između donosima slovenskog i europskih dioničkih trgova dinamična i da postoje prijenos donosa i volatilnosti između slovenskog i europskih dioničkih trgova. Financijske krize su vodile u porast u međusobni odvisnosti slovenskog i europskih dioničkih trgova

The overheating of five EU new member states and cyclicality of systemic risk in the banking sector

Rapid credit growth has been one of the most pervasive developments in recent years in Central and Eastern Europe. We tested for the significance of macroeconomic and banking sector variables that condition non‐performing loan ratios and the hypothesis of procyclicality between economic activity and improving banking‐sector results in the Baltic States, Bulgaria and Romania. The theory of procyclicality between economic activity and the non‐performing loan ratio was proven. The increased economic activity improved the loan portfolio quality of the banking sector, as indicated by a lower NPL ratio. Due to a high share of loans denominated in a foreign currency and the fact of productivity gains in the tradable sector, the appreciation of the real exchange rate contributed to an improvement in loan portfolio quality. The procyclicality of banking sector performance and high economic activities growth could be a signal of an economy overheating and therefore a slowdown in economic activity is likely to accelerate the growth of the non‐performing loan ratio in the Baltic States, Bulgaria and Romania. First Publish Online: 14 Oct 201

Multiscale test of CAPM for three Central and Eastern European stock markets

This paper examines the systematic risk and validity of the basic capital asset pricing model of Sharpe (1964), Lintner (1965) and Mossin (1966) in three Central and Eastern European stock markets (i.e. Slovenia, Hungary and Czech Republic). The CAPM is tested on a multiscale basis, building on the Fama and MacBeth (1973) methodology and applying two modern econometric techniques – wavelet analysis and generalized method of moments estimation. Empirical results indicate that the systematic risk and validity of CAPM implications are multiscale phenomena. Empirical evidence in support of CAPM implications in the investigated Central and Eastern European stock markets is found to be weak. The most commonly violated CAPM hypotheses are the zero Jensen's alpha condition, positive market premium, and the non-systematic influence of non-observable variables on the excess returns of stocks in these stock markets

Naravni plin in slovensko gospodarstvo

Article empirically investigates how intensive is the impact of natural gas prices on production by industries in Slovenian economy. Natural gas price movements can help us in forecasting the movements in electricity, natural gas, steam, hot water supplies, the production of metals, textiles, leather, footwear, leather and fur products, clothes, the production of pulp, paper, cardboard and products from paper and cardboard, the production of products from rubber and plastic materials, processing industry and the production of furniture, the production of intermediary consumption products and recycling.V članku empirično preverjamo intenziteto vpliva dinamike gibanj cene plina na posamezne dejavnosti slovenskega gospodarstva. Gibanje cene plina seveda lahko pomaga pri prognoziranju gibanja oskrbe z električno energijo, plinom, paro in toplo vodo, kakor tudi proizvodnje kovin, proizvodnje tekstilij, usnja, obutve, usnjenih in krznenih izdelkov, oblačil, proizvodnje vlaknin, papirja, kartona ter izdelkov iz papirja in kartona, proizvodnje izdelkov iz gume in plastičnih mas, predelovalne dejavnost in proizvodnje pohištva, proizvodov za vmesno porabo ter reciklaže

Dugoročna memorija u prinosima hrvatskog i madžarskog dioničkog tržišta

The objective of this paper is to analyze and compare the fractal structure of the Croatian and Hungarian stock market returns. The presence of long memory components in asset returns provides evidence against the weak-form of stock market effi ciency. The starting working hypothesis that there is no long memory in the Croatian and Hungarian stock market returns is tested by applying the Kwiatkowski-Phillips-Schmidt-Shin (KPSS) (1992) test, Lo’s (1991) modified rescaled range (R/S) test, and the wavelet ordinary least squares (WOLS) estimator of Jensen (1999). The research showed that the WOLS estimator may lead to different conclusions regarding long memory presence in the stock returns from the KPSS and unit root tests or Lo’s R/S test. Furthermore, it proved that the fractal structure of individual stock returns may be masked in aggregated stock market returns (i.e. in returns of stock index). The main fi nding of the paper is that both the Croatian stock index Crobex and individual stocks in this index exhibit long memory. Long memory is identifi ed for some stocks in the Hungarian stock market as well, but not for the stock market index BUX. Based on the results of the long memory tests, it can be concluded that while the Hungarian stock market is weakform efficient, the Croatian stock market is not.U ovom radu analizira se dugoročna memorija prinosa hrvatskog i madžarskog dioničkog tržišta. Prisutnost dugoročne memorije u prinosima dokaz je neučinkovitosti dioničkog tržišta. Pod pretpostavkom da je moguće prinose modelirati kao ARFIMA (engl. Autoregressive Fractionally Integrated Moving Average) procese, aplicirani su Kwiatkowski-Phillips-Schmidt-Shin (KPSS) (1992) test i Jensenova (1999) valna metoda klasičnih najmanjih kvadrata (engl. wavelet ordinary least squares – WOLS) kako bi se dobila ocjena parametra integriranosti prinosa dioničkih tržišta. Rezultati ove studije ukazuju na to da WOLS, KPSS i R/S metoda vode do različitih konstatacija o dugoročnoj memoriji u prinosima dioničkog tržišta. Nadalje, utvrđeno je da dugoročna memorija u prinosima pojedinačnih dionica može biti ˝zamaskirana˝ u agregatnim prinosima dioničkog indeksa, koji uključuje ove dionice. Stoga je za investitore bitno da istovremeno testiraju i potencijalnu prisutnost dugoročne memorije u prinosima indeksa dioničkog tržišta i pojedinačne dionice u koje investiranju. Ključni rezultat studije je dokaz o dugoročnoj memoriji u prinosima hrvatskog dioničkog indeksa Crobex i pojedinačnih dionica u indeksu. Dugoročna memorija identifi cirana je i za pojedinačne dionice na madžarskom dioničkom tržištu, ali ne i za sam indeks BUX. Na temelju rezultata testova dugoročne memorije, odbačena je hipoteza slabe tržišne učinkovitosti za hrvatsko, ali ne i za madžarsko dioničko tržište