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New Articles – Finance


TRANSMISSION OF FINANCIAL STRESS SHOCKS BETWEEN THE USA AND THE EURO AREA DURING DIFFERENT BUSINESS CYCLE PHASES

Silvo Dajčman, Alenka Kavkler, Peter Mikek, Dejan Romih

After the global financial crisis and the Great Recession, a large and growing body of literature has examined real business-financial cycle linkages. To this end, Claessens et al. (2012) examined a large database of business and financial stress periods, corroborating that financial crisis periods are often longer and deeper than economic recessions and tend to amplify and prolong the latter. Our research aims to contribute to an understanding of the financial stress-macroeconomy nexus by studying the spillovers of US (euro area) financial stress shocks and their macroeconomic effects (i.e. effects on industrial production, inflation and unemployment) into the euro area (USA). This paper asks whether these effects are contingent on the phase of the business cycle. Traditionally, domestic and international financial stress-business cycle linkages have been investigated within the linear modelling framework.
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IS THERE A TREND OF EUROIZATION OF EU COUNTRIES STILL USING THEIR NATIONAL CURRENCIES? TRADE AND INVOICING

Jan Mačí

Once entering the European Union, the Czech Republic as well as at present six other countries which are not currently members of the EMU committed to accept common currency – the euro. For example, Sweden accessed in 1995, the Czech Republic in 2004 and these two countries are still using their national currencies. By coincidence, these two countries use for payments their crowns – Czech koruna, respectively Swedish kronor. What is more, in case of these two countries, a date of EMU accession has not been set yet. In fact, due to several major unfortunately rather negative, economic events that have taken place over the last decade (i.e. financial crisis, debt crisis), and due to several ongoing economic problems of the Eurozone (e.g. significant public debt burden for Greece or Italy; the budgetary problems of Italy and, to some extent, France; esponsibility for indebtedness of national economies, etc), the relevant EU institutions do not even put pressure on countries still using their national currencies in order to fulfil the commitment of euro adoption.
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IMPACT OF STOCK MARKETS ON THE ECONOMY IN THE V4 COUNTRIES

Radmila Krkošková

The performance of the economy should generally reflect the performance of stock markets. Production increases, prices rise, and companies’ profits increase if the economy grows. And the shares should naturally make the profits (which means among other things, higher dividends) even more attractive. But is that really true? The aim of the article is to find out the relationship between the development of stock markets and the economic growth in Visegrad Group countries (V4). The subject of the survey is both the long-term relationship and the short-term relationship in the course of economic cycles. The article uses the tools of time series econometrics, especially VECMs, including corresponding diagnostics, Granger causality and block erogeneity. The relationships between the variables examined vary from country to country. The long-term relationship between the development of stock markets and the economic growth was confirmed in Slovakia and Hungary. It was confirmed that the GDP growth rate influenced the growth rate of stock indices in all V4 countries. The opposite relationship (the stock index growth rate influences the GDP growth rate) was not confirmed only in the Czech Republic. Quarterly data for the period from 2005/Q1 to 2018/Q4 was used for the analysis. This period was selected because all of the V4 countries have been members of the European Union since 2004. The EViews software version 9 was used for the calculations. Variables used in this research are: the GDP, the stock Exchange index of the country and stock trading volume. The PX, SAX, BUX and WIG20 stock indices are considered to be the crucial representatives of individual stock markets in this work.
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METHODOLOGY OF INDUSTRY STATISTICS: AVERAGES, QUANTILES, AND RESPONSES TO ATYPICAL VALUES

Martin Boďa, Vladimír Úradníček

The paper notices troublesome aspects of compiling industry statistics for the purpose of inter-enterprise comparison in corporate financial analysis. Whilst making a caveat that this issue is unbeknownst to practitioners and underrated by theorists, the goal of the paper is two-fold. For one thing, the paper demonstrates that financial ratios are inclined to frequency distributions characteristic of power-law (fat) tails and their typical shape precludes a simple treatment. For the other, the paper explores different approaches to compiling industry statistics by considering trimming and winsorizing cleansing protocols, and by confronting trimmed, winsorized as well as quantile measures of central tendency. The issues are empirically illustrated on data for a great number of Slovak construction enterprises for two years, 2009 and 2018. The empirical distribution of eight financial ratios is studied for troublesome features such as asymmetry and power-law (fat) tails that hamper usefulness of traditional descriptive measures of location without considering different possibilities of handling atypical values (such as infinite and outlying values). The confrontation of diverse approaches suggests a plausible route to compiling industry statistics that consists in reporting a 25% trimmed mean alongside 25% and 75% quantiles, all applied to trimmed data (i.e. data after discarding infinite values). The paper also highlights the sorely unnoticed fact that the key ratio of financial analysis, return on equity, may easily attain non-sense values and these should be removed prior to compiling financial analysis; otherwise, industry statistics is biased upward regardless of what measure of central tendency is made use of.
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EMPIRICAL ANALYSIS OF LONG MEMORY AND ASYMMETRY EFFECTS FOR THE EFFECTIVENESS OF FORECASTING VOLATILITY OF RETURNS ON THE COMMODITY MARKET BASED ON THE EXAMPLE OF GOLD AND SILVER

Bogdan Włodarczyk, Ireneusz Miciuła

Risk management is one of the most dynamically developed areas in economic sciences. One of the main driving forces for this development has been the practical challenge resulting from increasing financial risk. Risk management is a process in which key role is played by risk measurement (Jajuga, 2016). Comparison of various forecasting models and selection of the best ones for particular markets is of key importance in many fields of economics and finance. Theoretic aspects concerning commodity markets very often concentrate on relations between changes in commodity prices and on the news impact on rates of return. However, up until now studies concerning conditional volatility of returns on commodity markets and market risk have been less comprehensive than those concerning conditions affecting prices and rates of return. Nevertheless, studies concerning market volatility are becoming increasingly popular due to the growth of market volatility itself and the significance of commodities as investment assets (Kang, 2013; Thuraisamy, 2013; Vivian, 2012). The growing interest also results from the fact that commodity rates of return have some empirically verifiable features such as non-normal distribution, asymmetry, structural breaks and fat tails (Aloui, 2010; Cheng, 2011).
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