Rapid credit growth has been one of the most pervasive developments in recent years in Central and Eastern Europe. Our estimates support the hypothesis that the growth of credit and the amount of available finance might harm banking performance and deteriorate nonperforming loans (NPL) dynamics, most probably due to the overheating of economies in the five NMSs. The procyclicality of banking sector performance and high economic activities growth is a signal of an economy overheating and therefore a slowdown in economic activity is likely to accelerate the growth of the NPL ratio.
COBISS.SI-ID: 30481709
Because of growing awareness of financial needs for public pensions, attention has been focused on privatization of the pension systems. While the privatization of pension funds can encourage development of capital markets in NMS, equity investment in transition economies are even more volatile than in the "old" capitalist countries. Privatized pension system coincides with investment risks, higher administrative costs, and inability of private markets to provide retirees with affordable, indexed and certain annuities. Namely, private sector may not provide enough investment projects to efficiently absorb mandated pension savings and the expected pension income is subject to a number of risks: poor and volatile investment returns, longevity, and inflation eroding the purchasing power of pensions. Indeed, the PAYG system appears to be the only viable system to perform well in terms of risk and volatility of returns.
COBISS.SI-ID: 10121756
This article presents an analysis of economic implications of the major EU enlargement in 2004. The research is based on sigma (s) and beta (b) convergence of per capita GDP among the 10 countries which joined the European Union in 2004. Our results confirm the existence of both types of convergence in the second half of the 1990s and the 2000s. Generally, the poorer new EU member states grew faster than the richer new EU member states. As a result, the income gap between these two groups of countries has narrowed although it still remains quite large. The convergence occurred at the rate of 4.2% during the period 1992-2006 and 7.0% and 9.6% during the sub-periods 1995-2006 and 2002-06 respectively.
COBISS.SI-ID: 10465564
Stock market comovements between developed (represented in the article by markets of Austria, France, Germany, and the UK) and developing stock markets (represented here by three Central and Eastern European (CEE) markets of Slovenia, the Czech Republic, and Hungary) are of great importance for the financial decisions of international investors. From the point of view of portfolio diversification, short-term investors are more interested in the comovements of stock returns at higher frequencies (short-term movements), while long-term investors focus on lower frequencies comovements. As such, onehas to resort to a time-frequency domain analysis to obtain insight about comovements at the particular time-frequency (scale) level. The empirical literature on the CEE and developed stock markets interdependence predominantly apply simple (Pearsons) correlation analysis, Granger causality tests, cointegration analysis, and GARCH modeling. None of the existent empirical studies examine time-scale comovements between CEE and developed stock market returns. By applying a maximal overlap discrete wavelet transform correlation estimator and a running correlation technique, we investigated the dynamics of stock market return comovements between individual Central and Eastern European countries and developed European stock markets in the period from 1997-2010. By analyzing the time-varying dynamics of stock market comovements on a scale-by-scale basis, we also examined how major events (financial crises in the investigated time period and entrance to the European Union) affected the comovement of CEE stock markets with developed European stock markets. The results of the unconditional correlation analysis show that the developed European stock markets of France, the UK, Germany and Austria were more interdependent in the observed period than the CEEs stock markets. The later group of countries exhibited a lower degree of comovement between themselves as well as with the developed European stock markets during all the observed time period. The Slovenian stock market was the least correlated with other stock markets. By using the rolling wavelet correlation technique, we wanted to answer the question as to how the correlation between CEE and developed stock markets changed over the observed period. In particular, we wanted to examine whether major economic (financial) and political events in the world and European economies (the Russian financial crisis, the dot-com financial crisis, the attack on the WTC, the CEE countries joining the European union, and the recent global financial crisis) have influenced the dynamics of CEE stock market comovements with developed European stock markets. The results show that stock market return comovements between CEE and developed European stock markets varied over time scales and time. At all scales and during the entire observed time period the Hungarian and Czech stock markets were more interconnected to developed European stock markets than the Slovenian stock market was. The highest comovement between the investigated CEE and developed European stock market returns was normally observed at the highest scales (scale 5, corresponding to stock market return dynamics over 32-64 days, and scale 6, corresponding to stock market return dynamics over 32-64 and 64-128 days). At all scales the Hungarian and Czech stock markets were more connected to developed European stock markets than the Slovenian stock market. We found that European integration lead to increased comovement between CEE and developed stock markets, while the financial crises in the observed periodled only to short-term increases in stock market return comovements.
COBISS.SI-ID: 11011868
This paper examines the systematic risk and validity of the basic capital asset pricing model of Sharpe (1964), Lintner (1965) and Mossin (1966) in three Central and Eastern European stock markets (i.e. Slovenia, Hungary and Czech Republic). The CAPM is tested on a multiscale basis, building on the Fama and MacBeth (1973) methodology and applying two modern econometric techniques - wavelet analysis and generalized method of moments estimation. Empirical results indicate that the systematic risk and validity of CAPM implications are multiscale phenomena. Empirical evidence in support of CAPM implications in the investigated Central and Eastern European stock markets is found to be weak. The most commonly violated CAPM hypotheses are the zero Jensen's alpha condition, positive market premium, and the non-systematic influence of non-observable variables on the excess returns of stocks in these stock markets.
COBISS.SI-ID: 11386908