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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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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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Why should the Czech Republic reform its current policy of financing higher education?
Kadlecová, Pavlína ; Pertold-Gebicka, Barbara (advisor) ; Břízová, Pavla (referee)
The Czech Republic has traditionally financed higher education out of general taxation and in the form of per capita funding. This system has led to inef- ficient allocation of funds, long-term underfunding and decreasing quality of education. We present three alternative financing schemes which rely on larger contribution from students: pure student loan, risk-sharing income-contingent loan and risk-pooling income-contingent loan. By using a theoretical model and calibrating it to the Czech reality, we show that financing schemes have significant impact on higher education participation and the quality of accepted students. While pure loan and risk-pooling induce optimal participation, in- ternational experience suggests that risk-sharing is the more feasible option. Keywords Financing schemes for higher education, tax-subsidy funding, income-contingent loans, higher education participation Author's e-mail kadlecova.paja@gmail.com Supervisor's e-mail gebicka@fsv.cuni.cz Abstrakt Česká republika financuje vysoké školství tradičně ze státního rozpočtu a ve formě dotací na studenta. Tento systém způsobil, že zdroje nejsou alokovány efektivně, vzdělání je dlouhodobě podfinancováno a jeho kvalita se snižuje. Práce se věnuje třem alternativním způsobům financování: prosté...
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Czech Republic and the optimum currency area criteria
Kadlecová, Pavlína ; Plchová, Božena (advisor) ; Kopecký, Jan (referee)
The goal of this bachelor thesis is to use the theory of optimum currency area to assess whether the Czech Republic is prepared to enter the Eurozone. Comparing the costs and benefits of monetary integration, this theory establishes economic and political criteria that should be met by the participating countries in order to assure that giving up the possibility to devaluate currency is still beneficial. In terms of labor mobility, the Czech Republic is far behind the Eurozone's average, but the future prospects remain positive. The degree of production diversification does not speak in favour of an early adoption of the euro either. Czech industry is too dependent on the machinery sector, which translates into a significant risk of asymmetric shocks. On the other hand, the Czech Republic performs better than most euro countries with regard to the degree of economic openness. Strong business links with Germany reduce the effectiveness of currency devaluation, making the Czech Republic a good candidate to enter the EMU. For such ambiguous cases, the theory recommends creating a system of fiscal transfers, which would allow countries to compensate for the negative effects of economic shocks. Consequently, the best approach for the Czech Republic seems to be achieving stronger real convergence and deeper political integration.
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