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Google Econometrics: An Application to the Czech Republic
Platil, Lukáš ; Horváth, Roman (advisor) ; Červinka, Michal (referee)
This thesis examines the applicability of Google Econometrics - the use of search volume data of particular queries as explanatory variables in time se- ries modeling - in the case of the Czech Republic. We analyze the contribu- tion of Google data by comparing out-of-sample nowcasting performance and in-sample fit with control variables in three related areas: using an auto- regressive model for unemployment, vector autoregression and logit models for GDP and household consumption, and Granger causality test for consum- er confidence. The improvement in quality of unemployment nowcasting is modest but statistically significant; sentiment index based on Google queries shows reciprocal relationship with the official Consumer Confidence Indicator, and it also provides superior nowcasts for household consumption as well as in- sample fit in logit models; its performance in GDP nowcasting is average among control variables. These conclusions proved stable also on an extended dataset. In overall, the results suggest that Google Econometrics is applicable also to the Czech Republic, despite the fact that the internet penetration rate and Google popularity was lower over the analyzed period compared with developed economies where these methods were usually tested. In the future, Google data may be used...
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Influence of German Bundestag Elections on the Stock Market Performance in Visegrad Group Countries
Skála, Jakub ; Horváth, Roman (advisor) ; Chytilová, Julie (referee)
This thesis deals with the behaviour of stock markets during the period of election process. We focus on the influence of elections to the German Bundestag on stock market performance of the countries allied in Visegrad Group during the reference period 1994-2013 covering six Bundestag elections. Germany is a major export partner for all members of Visegrad Group - the Czech Republic, Hungary, Poland and Slovakia. We examine whether there are abnormal returns on stock markets in Visegrad Group countries around the date of German Bundestag elections. We thus examine if the fact that performance of German economy is important for performance of economies of countries allied in Visegrad Group means that Bundestag elections influences their stock markets. We also analyze the influence of elections to German Bundestag on domestic stock market during the reference period 1961-2013. To measure the effect of elections we employ event study methodology using the mean-adjusted return model to measure normal returns. Our event window consists of 65 trading days around the election day (-15,50). We use the estimation window of 100 days (-150,-51). We assess our main hypothesis for each country around every Bundestag elections in our reference period separately over three event windows and also over eight event...
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The Evolution of Optimum Currency Area Index: Post-crisis Perspective
Kadlecová, Pavlína ; Horváth, Roman (advisor) ; Geršl, Adam (referee)
This paper estimates the determinants of exchange rate variability for 21 developed economies in 1980-1998. The results show that traditional criteria implied by the optimum currency area (OCA) theory, such as business cycle synchronisation, trade linkages and economy size, determine to a large extent bilateral exchange rate variability. Using the ordinary least squares estimation, we compute OCA indices for European economies vis-à-vis Germany and identify countries showing consistently large or little signs of convergence. We find that since 1998, most European developed economies have converged to Germany whether or not they are using the euro, suggesting that structural similarity is not driven solely by monetary integration. Our results from the model estimated by the generalized method of moments suggest that two additional criteria reflecting labour market flexibility and private credit growth are significant in explaining the exchange rate variability and lead to a ranking of countries different from the traditional approach. We find a positive relationship between the OCA indices and GDP decline during the economic crisis of 2008-09, which further supports the view that the OCA index is a useful indicator of the candidates' readiness to join the Euro Area. We apply the results to the...
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Communication of the European Central Bank and contagion on financial markets
Jonášová, Júlia ; Horváth, Roman (advisor) ; Hlaváček, Michal (referee)
v Abstract The aim of this thesis is to assess the effect of central bank communication on joint occurrence of extreme returns and on extreme movements shared by two stock markets. The research concentrates on the following aspects: predictability of increased share of countries experiencing extreme returns in the eurozone based on the nature of policymaker's statement and also a set of control variables, change in probability of extreme returns joint occurrence after president's speech, determinants of joint occurrence when non-standard measures were announced and finally, effect of crisis period. Additionally, determinants of shared extreme movements between particular countries are examined. The results suggest that communication nature or crisis are not significant predictors of extreme returns joint occurrence. Moreover, markets seem to react jointly to ECB president's speech only when they have extremely high returns. Furthermore, markets jointly react on days of nonstandard measures announcement differently. We also found that in the first quantile dovish statements tend to increase returns above their mean in case of Greece and Germany, and Greece and the UK. Rest of the pairs of countries have opposite reaction to dovish tone and communication is significant in the 95th quantile for the pair...
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Coexceedance in Exchange Rates - Analysis of Contagion in Central and Eastern European Countries
Bláhová, Pavla ; Horváth, Roman (advisor) ; Kočenda, Evžen (referee)
The objective of this thesis is to examine the contagion in Central and Easter European countries, namely in Czech Republic, Hungary, and Poland. From all possible propagation channels, it chooses to focus on exchange rates. The method of coexceedance with consequent quantile regression is employed. We find that coexceedance does occur but not as frequently as assumed. The coexceedance occurs more frequently during the depreciation of the currencies. The persistence effect is very significant and the coexceedances are ``continual'' rather than ``correcting'' for previous extremes. We found evidence for both asset class effect and volatility effect. These effects have different impact during the 2008 Financial Crisis most of the times. An evidence for both Hungarian and Polish government bond yields having influence on the coexceedance with Czech Republic. Surprisingly, we did not find evidence for oil market influence on coexceedance.
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The Determinants of Inflation Differentials across Central and Eastern European Countries
Gurbulea, Mihaela ; Horváth, Roman (advisor) ; Geršl, Adam (referee)
The thesis aims at identifying the reasons behind the heterogeneous inflation performance of countries across Central and Eastern Europe. The impact of a large number of variables is being assessed in a dynamic panel data model covering 20 countries over the period 2003-2013. The empirical results suggest that cross-country differences in inflation are attributed to the structure of the economy, to the capital deepening effects and openness. Along with the structural factors, cyclical positions also prove to be of particular importance in explaining inflation across the region, since during the last decade most of the Central and Eastern European countries have experienced fast GDP growth, a credit boom and increased domestic demand that in turn fueled inflation.
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Financial Stress in the Czech and Slovak Republic: Measurement and Effects on the Real Economy
Malega, Ján ; Horváth, Roman (advisor) ; Cingl, Lubomír (referee)
In the scope of this thesis, we estimate a financial stress index particularly for the Czech Republic with application for Slovakia, and examine its development during the period 2002-2014. The advantage of the index is primarily its ability to measure the current level of stress in the financial system incorporating information from various sectors of the economy and expressing it in a single-value statistic. We find a marked increase in financial stress at the beginning of the global financial crisis and European sovereign debt crisis with a decrease to nearly pre-crisis levels by the end of our study period. Next, we estimate vector autoregression models and find out that financial stress has systematic effects on unemployment, prices and interest rates, with the maximum response occurring approximately one to two years after the shock in the Czech Republic, and with a half-year delay in Slovakia. Specifically, an increase in financial stress is associated with higher unemployment, lower prices and lower interest rates, indicating its detrimental effects on the real economy. JEL Classification G17, G32 Keywords financial stress index, vector autoregression, impulse responses
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CEE stock market comovements: An asymmetric DCC analysis
Gjika, Dritan ; Horváth, Roman (advisor) ; Svoboda, Svatopluk (referee)
We investigate the interdependence among three CEE stock markets and be- tween CEEs vis-à-vis euro area, using daily data from 2001-2011. Initially, we estimate bivariate ADCC models. Then, OLS regressions are employed to understand the evolution of correlations in time and during the recent financial crises. Finally, we examine the relationship between correlations and volatilities using the simple OLS model and the rolling stepwise regression methodology. Our results indicate that 3 out of 4 series exhibit asymmetries in conditional variances, while only 1 pair out of 6 exhibit asymmetries in correlations. We found that correlations are increased over time and during the recent financial crises for both pairs (CEEs-CEEs and CEEs-eurozone). However, the highest increase is observed for CEEs-eurozone. Mainly, we found a positive rela- tionship between correlations and volatilities, even though this relationship is niether constant in time nor strictly positive or negative during all the sample period, but rather time-varying with periods of being higher or lower than zero.
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Interest rate pass-through in the euro area: The effect of financial crisis
Rybák, Jakub ; Horváth, Roman (advisor) ; Hayat, Arshad (referee)
In this study we analyze the impact of the financial crisis on interest rate pass-through in the euro area. By applying a wide range of econometric techniques, including both univariate and multivariate models to estimate cointegration relationships between retail and policy rates and related short-term adjustment processes we find out that the financial crisis has led to the increased spread between market and policy rates, which has not been corrected by central bank policies so far. We also find evidence of cross-country heterogeneity in both pre-crisis pass-through and crisis effects. In addition to this, for many retail rates we find an evidence of two-way Granger causality with respect to policy rates, indicating the accommodative policy of ECB following the market disruptions. We also estimate the timing of shocks to transmission mechanism and our results suggest that they are not distributed tightly around September 2008, but rather vary widely across the sample.
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Modelling of Financial Stress Index in the Czech Republic using Vector Autoregression Analysis
Malega, Ján ; Horváth, Roman (advisor) ; Cingl, Lubomír (referee)
This study constructs a financial stress index with a specific focus on the case of the Czech Republic. The advantage of the index is primarily its ability to measure the current level of stress in the financial system incorporating information from various sectors of the economy and expressing it in a single-value statistic. Our index successfully recorded and evaluated critical periods of elevated financial stress especially during the recent financial crisis. Furthermore, we examine a systematic interaction between financial stress and the macroeconomics using vector autoregression analysis along with method of impulse responses. Based on our results we observe a significant and positive response of unemployment due to the shock in financial stress. Conversely, a negative effect was examined on inflation and interest rates. JEL Classification G17, G32 Keywords financial stress index, vector autoregression, impulse responses
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