Dollarisation and the Underground Economy: Accidental Partners?

Monetary methods of measuring the underground economy (UE) in all their variations are traditionally based upon domestic monetary aggregates. In recent times, however, there has been an increasing amount of evidence supporting the thesis that it is actually foreign currency that is very often linked with the UE in countries in which the phenomenon of dollarisation is widespread. New understanding of the extent and dynamics of dollarisation can, then, provide important information about the dynamics of the UE in these countries. Results derived from estimates of the amount of foreign cash in circulation in Croatia, in our estimation, show a rising tendency in the UE, like traditional monetary methods, which in principle does not have to be the case. Similar tendencies in the UE are indicated by the dynamics of electricity consumption.underground economy, dollarisation

Is Unofficial Economy a Source of Corruption?

This paper discusses the link between unofficial economy and overall economic efficiency. Special emphasis is put on tax evasion and corruption and their interaction with unofficial economy. First, we address the role of the state in the genesis of unofficial economy and corruption. Second part gives more insight into the multitude and ambiguity of definitions used to describe unofficial economy and the impact of the particular definition chosen on the final conclusions. Since we opt for the 'classical' definition of unofficial economy as unrecorded economic activity, we argue that unofficial economy in transition countries, according to this definition, does not hurt economic efficiency and growth. It is also important to make a distinction between unofficial economy and tax evasion as well as between unofficial economy and corruption. We give an argument in support of the view that those kind of activities are closer linked with official than unofficial economy, as the former uses them as a mechanism for protection from the competition. Unlike unofficial economy, these irregular activities pose more serious threat to general welfare, economic efficiency and growth. We conclude that both unofficial economy and irregular activities are caused by high degree of politicisation and reducing it gives positive impact in reducing both. In the final part we address the measures required and a policy design which could help preventing irregular activities. This would not completely eliminate unofficial economy, but would remove activities which impair economic efficiency and growth.efficiency, makroeconomics, microeconomics, corruption

Is unofficial economy a source of corruption?

This paper discusses the link between unofficial economy and overall economic efficiency. Special emphasis is put on tax evasion and corruption and their interaction with unofficial economy. First, we address the role of the state in the genesis of unofficial economy and corruption. Second part gives more insight into the multitude and ambiguity of definitions used to describe unofficial economy and the impact of the particular definition chosen on the final conclusions. Since we opt for the 'classical' definition of unofficial economy as unrecorded economic activity, we argue that unofficial economy in transition countries, according to this definition, does not hurt economic efficiency and growth. It is also important to make a distinction between unofficial economy and tax evasion as well as between unofficial economy and corruption. We give an argument in support of the view that those kind of activities are closer linked with official than unofficial economy, as the former uses them as a mechanism for protection from the competition. Unlike unofficial economy, these irregular activities pose more serious threat to general welfare, economic efficiency and growth. We conclude that both unofficial economy and irregular activities are caused by high degree of politicisation and reducing it gives positive impact in reducing both. In the final part we address the measures required and a policy design which could help preventing irregular activities. This would not completely eliminate unofficial economy, but would remove activities which impair economic efficiency and growth

WHAT SHOULD BE APPROPRIATE COVERAGE LEVEL OF DEPOSITS IN CROATIA?

Određivanje visine iznosa do kojeg se osiguravaju štedni ulozi (limit), jedno je od ključnih pitanja pri formuliranju sustava osiguranja štednih uloga. Jedino pravilno postavljen limit omogućuje uspješno ispunjavanje ciljeva samog sustava osiguranja i minimizaciju problema moralnog hazarda, negativne popratne pojave koje neumoljivo koegzistiraju sa svakim sustavom osiguranja štednih uloga. U tom se smislu postavlja pitanje: koliko je postojeći limit u Hrvatskoj (100.000 kuna) “dobar”? i hoće li promjena toga limita na 20.000 € (približno 150.000 kuna) prilikom ulaska u EU imati kakve posljedice? Radi odgovora na ta pitanja, u radu se nastoji naći svojevrstan optimalni limit za Hrvatsku. Pritom se koristi ekonometrijskom analizom podataka za široki skup zemalja koje posjeduju sustav osiguranja štednih uloga. Neovisno o ekonometrijskoj analizi, analizira se struktura štednih uloga po bankama u Hrvatskoj. Navedena dva, međusobno neovisna puta dovode do gotovo istih rezultata na osnovi kojih se može zaključiti da trenutno postojeći limit od 100.000 kuna nije značajno viši od optimalnoga, ali bi eventualna promjena limita na 150.000 kuna mogla narušiti kvalitetu ispunjavanja ciljeva sustava osiguranja štednih uloga, tj. pridonijeti smanjenju stabilnosti financijskoga sustava u srednjem roku.In the process of formulating a deposit insurance scheme, one of the key issues is to determine the level of coverage. Correctly determined coverage would help to fulfill the aims of the deposit insurance scheme itself and to minimise the moral hazard problem, a negative externality which inevitably coexists with any deposit insurance scheme. In this regard, an important question is how appropriate is the existing coverage level in Croatia (100.000 kuna). Also, one can ask whether an increase to 20.000 € (or approximately to 150.000 kuna), when entering the EU, would cause any problems. To answer these questions, this paper tries to establish the most appropriate coverage level for Croatia. There are two approaches used in the paper. The econometric one analyses data for a large sample of countries with deposit insurance schemes. Independently, the second approach analyses the structure of deposits at banks in Croatia. Both approaches lead to virtually the same results. On this basis, it can be concluded that current coverage in Croatia (100.000 kuna) is not significantly higher than the most appropriate (optimal). However, an increase in coverage to 150.000 kuna could potentially harm the deposit insurance scheme and consequently decrease the stability of the Croatian banking system in the mid-term

Croatian Accession to the European Union: Institutional Challenges

Although there is no common fiscal policy at the European Union (EU) level in Croatia, accession will entail important changes in budgetary revenue and expenditure. On the one hand, accession brings transfers from the EU budget, but also means the loss of customs revenue as well as the need to adjust the structure of tax revenue. On the other hand, in conjunction with significant expenditure for adjustment in areas such as transportation and the environment, as well as expenditures for the EU budget, there will be a change in the structure of expenditure,in order to be able to check on transfers from the Structural Funds. The objective of this paper is to evaluate the intensity and direction of fiscal effects that accession will lead to, as well as the changes in their structure and the possibility of meeting the convergence criteria.fiscal policy of Croatia, structural funds of the European Union, harmonisation of tax legislation, convergence criteria

Fiscal aspects of accession: can we enter the European Union with a budgetary deficit?

Although there is no common fiscal policy at the European Union (EU) level in Croatia, accession will entail important changes in budgetary revenue and expenditure. On the one hand, accession brings transfers from the EU budget, but also means the loss of customs revenue as well as the need to adjust the structure of tax revenue. On the other hand, in conjunction with significant expenditure for adjustment in areas such as transportation and the environment, as well as expenditures for the EU budget, there will be a change in the structure of expenditure, in order to be able to check on transfers from the Structural Funds. The objective of this paper is to evaluate the intensity and direction of fiscal effects that accession will lead to, as well as the changes in their structure and the possibility of meeting the convergence criteria

Hrvatski sustav osiguranja štednih uloga: treba li ga mijenjati, i ako treba, što promijeniti i kada?

U radu su izložena osnovna obilježja hrvatskog sustava osiguranja štednih uloga, koja se ujedno kritički preispituju te se naglašavaju njegove potencijalno slabe točke. U skladu s najboljim međunarodnim iskustvima i smjernicama Europske unije (EU) sugeriraju se načini poboljšanja postojećeg sustava. Posebno se upozorava na bitne promjene u samom dizajnu postojećeg sustava, koje će trebati učiniti slijedom usklađivanja s EU-om. Konačno, raspravlja se o najboljem trenutku za provedbu promjena, odnosno za poboljšanje sustava

Fiskalni aspekti pridruživanja: možemo li u Europsku uniju s proračunskim deficitom?

Iako ne postoji zajednička fiskalna politika na razini Europske unije (EU), priključivanjem Hrvatske EU-u doći će do značajnih promjena u proračunskim prihodima i rashodima. S jedne strane, priključivanje donosi transfere iz proračuna EU-a, ali i gubitak carinskih prihoda, kao i potrebu prilagodbe strukture poreznih prihoda. Usto, uz značajne izdatke za prilagodbu na područjima kao što su okoliš i transport te izdvajanja za proračun EU-a doći će i do promjene u strukturi rashoda kako bi se mogli pratiti transferi iz strukturnih fondova. Cilj rada je ocijeniti intenzitet i smjer fiskalnih učinaka koje će donijeti priključivanje EU-u, kao i promjene u njihovoj strukturi te mogućnost dosezanja kriterija konvergencije