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The Sustainability of Government Deficits: Old Vs. New Europe
Plocek, Tomáš ; Stankov, Petar Valeriev (advisor) ; Potužák, Pavel (referee)
This work analyses fiscal sustainability and position of old and new members of EU and offers some fiscal policy implications to deal with debt reduction in the aftermath of the current fiscal crisis in the EU. Fiscal policy of Old European countries is different from fiscal policy of the new members. Due to different historical development New European members have lower debt and lower GDP per capita. Many policymakers in New Europe tried to increase GDP of their countries by generating government deficits. On the other hand Old European countries are already having large debts and current fiscal crisis is one result of this fact. The recent fiscal crisis in Europe raised the question what is sustainable fiscal policy and how to achieve it. Sustainability of the policy can be divided into three groups: short term, medium term, and long term. In short term, fiscal policy is sustainable, when government is able to issue and sell government bonds. Otherwise it defaults. In medium term, fiscal policy is sustainable when debt to GDP ratio is constant or decreasing. Situation in long term is very similar to situation in medium term. The difference is in time. Long term fiscal policy is sustainable if debt to GDP ratio converges to some finite number. All the definitions are problematic and problem arises basically from fact that variables that are part of the definitions are volatile. Fiscal policy that might seem to be sustainable in times of economic expansion may become unsustainable even in short time. Exactly this thing happened in Ireland. Ireland shows another problem of sustainability definitions. The problem is that private debt can increase public debt and even threaten its sustainability. Many countries were saving their financial sector which was very expensive and this practice is increased the debt in those countries very fast. Probably the most important indicator of fiscal sustainability is interest rate on government bonds. Reason is that price of the bonds is based on different risks that are in the assets. Countries with sustainable fiscal policy are paying lower interests than countries with unsustainable. This is reason why we tried to explain variation of interest rate on 10 years government bonds by empirical models. Two models were based on fixed effects panel data estimations and one model was based on ordinary least squares model. The panel data model showed that there was and still is huge difference between Old European and New European countries. Old Europe was viewed by markets as one segment which is relatively risk free. This lead to situation, that most important factor driving interest rates in Old Europe is the risk free rate on the German bonds. On the other hand, interest rates in New European countries are influenced by many more indicators. Most important indicator in New Europe is GDP growth and sustainability of foreign exchange reserves. Based on results of the model we came to conclusion that there is high chance that markets will start to differ among Old European countries and this could lead to increase of interest rates in some Old EU members, a conclusion which is to some degree being verified by the increased spreads between German government bonds on one hand, and Italian and Spanish bonds on the other hand in the first few weeks of August 2011. Our conclusions also suggest that the position of New Europe may stand similar in current situation. If it is true policymakers may try to adapt policy of New European countries to increase its sustainability and improve the key variables. The conclusions from this work bring several policy recommendations for improving the fiscal sustainability in Europe. First and probably the most important recommendation to fiscal policy is that policymakers should not underestimate the indicators of fiscal sustainability, which was a common practice in recent history. Countries with high GDP growth were generating large deficits and debt to GDP ratio was constant. Problem is that in recession indicators that were influencing interest rate changed and fiscal policy become unsustainable in many cases. Conclusion for fiscal policy is that policymakers should run responsible fiscal policy in good times to avoid troubles in bad times. Governments should also understand full price of deficits, because increased deficits also increase interest rate that governments have to pay on existing debt.
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Define integral in Economics
ČERMÁK, Pavel
In thesis task there was mentioned little bit of indefinite integral theory and computation methods. After that was described the definite integral theory, its properties, computation methods, first of all the Newton-Leibniz formulary, and its connection with indefinite integral. Then was shown where is possible to use definite integral on examples in mathematics. The most important part of the thesis is the application of definite integral theory on examples in economics. Each subchapter is occupied by one application. At the beginning of each part the rough description of economics view is contained. Then is defined an equation eventually equations for computing. All of this is demonstrated on examples.
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Frugal Mathematics in Finance
JANKŮJOVÁ, Kristýna
This work is focused on application examples from financial mathematics. And especially the percentage, simple and compound interest and consumer loans associated with the calculation of APR. Initially, in a nutshell acquainted with the history of banking in both the world and in the Czech context. This chapter aims to show how the development of banking has helped to increasing indebtedness of humanity. The methodology chapter theoretically describes methods, for use in practice on the issues. The aim of this chapter is an overview of the use of simple basic mathematical operations for computing examples from financial mathematics. The final chapter is devoted to application examples. There are solved examples, which are inspired by current information.
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Economics and financial leasing companies planning
PÍCHOVÁ, Lucie
Planning is a very important manager work which is necessary for governing and functioning every society. The aim of this diploma paper is to analyse the system of financial plans, define planning of society, whether it is effective and reliable, describe setting short run and long run plans. For these case study was chosen a leasing company which plans on the base of accountancy of international standards, the medium {--} term plan and at that time also the contemporary plan is checked. The medium {--} term plan relates with expenses and profits. The plan is effected by the market share, environment and the market competition. The leasing company planes for three forefronts {--} cars, consumer goods and direct loans. Significant influence on the product, if it is profitable or not, has delinquency, which is the highest in the first year of the repayment. The company creates provisions for delinquent contracts. In the first phase of ratification insurance some products is necessary to be a part of the products. The Planning department and Department of Control are in charge of following forefronts of individual product. Conclude that the leasing company is in its planning and implementation successful. Profitable products of all product forefronts are the result. Cars, with their highest position in the market, are the star of the company. Nonprofitable products are cancelled and there are substituted by other products. Liquidity is not followed much because the company is owned by a multinational company.
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History and present of mortgages in the UK
CHROMÁ, Ivana
The aim of my work was generally get familiar with the mortgage problems, the history and current state of the mortgage market in the UK and finally to compare the mortgage market in the UK with the situation in the Czech Republic. Above all I was comparing the trends and direction of mortgage markets in both countries in my thesis.
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Measurement of development of business cycle according to the Austrian school of economics
Svatoňová, Martina ; Svoboda, Miroslav (advisor) ; Mičúch, Marek (referee)
In the introduction of my work, I will focus on the presentment of the Austrian School and its main representatives. The work analyzes the Austrian business cycle theory, which is based on subjective utility theory and uses the knowledge of Austrian capital theory, monetary theory and the theory of prices. Austrian business cycle theory is based on the general economic theory. This theory suggests that the real interest rate is the market price. As a result of the change in this rate there is a variation in relative price which coordinates the time structure of production. The theory examines the production of higher order and lower order goods as well as the right to change the production of higher order goods to recognize the economic process which disrupts the structure of the economy. The main goal of this work is to identify the economic indicators which can be used to measure and predict the course of the business cycle in the conception of the Austrian school of economics. The theoretical findings are the basis of the practical part of this work. In this section I will try to answer the question whether the current economic crisis fits into the concept of the Austrian school of economics or not.
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Bilateral relations between interest rates and exchange rates (in selected countries)
Kočí, Tomáš ; Durčáková, Jaroslava (advisor) ; Kunz, Tomáš (referee)
This thesis deals with the relation between interest differential and exchange rate. First part is about the exchange rate system explanation and about explanation of theoretical background of relation between interest rate and exchange rate (i. e. Asset Market Model, Interest Rate Parity, etc.). The goal of second part is to verify theoretical assumptions on empirical data. There is a sample of ten European countries which is used for applying of graphical analysis, regression analysis and VAR model analysis.
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