Causal relations between nominal exchange rates and monetary fundamentals in Central and Eastern European countries

The purpose of this paper is to investigate the causal relations between nominal exchange rates and monetary fundamentals. The analysis is conducted using panel quarterly data from the period 2001–12 for Central and Eastern European countries (including Turkey) with relatively flexible exchange rate regimes. The paper reconnects the empirical literature on exchange rates in Central and Eastern European countries with the most recent findings on exchange rate determination in advanced economies. Kóyna's approach, which accounts for linkages between countries, is used in the study. The main findings indicate the existence of causal relations running from both nominal exchange rates to monetary fundamentals and in the opposite direction as well as the existence of a relatively strong link between exchange rates and differentials in the relative price of non‐tradables.     

Can We Prevent Boom-Bust Cycles During Euro Area Accession?

Euro-area accession caused boom-bust cycles in several catching-up economies. Declining interest rates and easier financing conditions fuelled spending and borrowing from abroad. Over time inflation deteriorated external competitiveness, turning the boom into a bust. We ask whether such a scenario can be avoided using macroeconomic tools that are available in the period of joining a monetary union: central parity revaluation, fiscal tightening or increased taxation. We find that exchange rate revaluation is the most attractive option. It simultaneously trims the expansion of output and domestic demand, reduces the cost pressure and ranks first in terms of welfare.     

Entrepreneurs’ creativity and firm innovation: the moderating role of entrepreneurial self-efficacy

There are several studies in entrepreneurship investigating determinants of innovation outcomes in SMEs. Although entrepreneurs’ entrepreneurial creativity is often seen as a prerequisite, previous research indicates it is not an exclusive determinant of innovation. We use theoretical logics of social cognitive theory and innovation theory to develop a conceptual model of entrepreneur’s creativity, self-efficacy, and innovation outcomes. The model is then tested on a large sample of small and medium firms from two distinct economies: the United States and Slovenia. Empirical findings partially support the proposed moderation effects of entrepreneurial self-efficacy, but with the same variations between countries. The implications of these results in relation to entrepreneurship theory and practice are discussed.     

ICT modernization in Central and Eastern Europe: a Schumpeterian catching up perspective

The paper characterizes main trends in ICT implementation and diffusion in the CEE countries in terms of market volume, economic development and ICT trade integration within the EU market. The analysis reveals a gradual closing up of the technology gap in ICT sector between the CEE and the ‘old’ EU countries. The focus is on the relationship between ICT expenditure, NRI index, vs GDP per capita, competitiveness and productivity. The evolution of ICT development trajectory is traced analysing the changing pattern of ICT trade between the CEE countries and the EU. The impact of the current crisis on the structural adjustment of the CEE ICT sector is assessed from the perspective of Schumpeterian technology gap and catching up.     

Optimality and efficiency of incomplete split-block designs

In this paper, a balanced incomplete split-block design (BISBD) is shown to be universally optimum for the estimation of the interaction effects with respect to each of the intra-plot stratum estimation and the GLSE. Furthermore, the efficiency factor of an optimal design is investigated.     

Stochastic ordering and schur-convex functions in comparison of linear experiments

The usual ordering of linear experiments is defined by quadratic risk of attainable linear estimators. It is shown that under normality assumption this ordering can be introduced in a risk-free way by stochastic ordering of the estimators. Moreover an application of Schur-convex functions to design of experiments is presented. Partly supported by CPBP 0.1.02.     

On methods of optimal portfolio construction

The transition from a centrally planned economy to a market economy in Poland has caused dynamic changes in the number and structure of potential investors of the stock exchange market. This phenomenon, unknown in the past, needs a new approach to statistical methods of stock market analysis. The paper presents two methods of optimal portfolio construction. The first one leads to the square programming problem. Applying the Lagrange multipliers, we obtain a system of algebraic equations which can be solved by the special algorithm proposed in the paper. The second method reduces the mentioned above square program to the linear programming problem which can be solved using the simplex method.     

Risk Diversification on the Polish Capital Market

The basics of portfolio management theory and methods of efficient selection of assets and their financing have been created by Markowitz and Sharpe. They propose that risk diversification consists, generally speaking, of the increase in the number of securities in a portfolio. So, authors try to answer the question of how many securities have to be bought on a given market to assure a well-diversified portfolio, where the increase in the number of securities does not lead to a significant decrease in portfolio risk. To evaluate such a purpose on the Polish capital market, 20 companies were surveyed that are included in the WIG20 index in the period January 2–October 10, 2001. The returns were estimated on a weekly basis. The research shows that a portfolio of securities constructed, according to the Sharpe Model, has a wide application to the Polish capital market.*University of Szczecin—Poland. This paper was presented at the Fifty-Eighth InternationalAtlantic Economic Conference, October 6Y9, 2005, Chicago, U.S.A.     

Portfolio optimisation under non-linear drawdown constraints in a semimartingale financial model

A drawdown constraint forces the current wealth to remain above a given function of its maximum to date. We consider the portfolio optimisation problem of maximising the long-term growth rate of the expected utility of wealth subject to a drawdown constraint, as in the original setup of Grossman and Zhou (Math. Finance 3:241–276, 1993). We work in an abstract semimartingale financial market model with a general class of utility functions and drawdown constraints. We solve the problem by showing that it is in fact equivalent to an unconstrained problem with a suitably modified utility function. Both the value function and the optimal investment policy for the drawdown problem are given explicitly in terms of their counterparts in the unconstrained problem.