The Effectiveness of Fiscal Policy Over the Business Cycle: A CEE Perspective

In this article we analyze the effectiveness of fiscal policy—for a group of four Central and Eastern European countries. The recent literature shows that fiscal multipliers in the developed economies are higher during recession than expansion. So far, similar empirical analyses have been lacking for CEE countries. The results presented in this article show that fiscal multipliers in CEE countries differ with respect to the phase of the business cycle. Based on the SVAR methodology in which we allow for deterministic regime switching, we show that the government spending multipliers are significantly higher when the output gap is negative.     

Minimum Wage in Poland and Youth Employment in Regional Labor Markets

The aim of this article is to analyze the effect of a uniform minimum wage in Poland on youth employment in regional labor markets and to determine in which of the regions the effect is significant. The analyses are based on NUTS2 level in 1999–2012. The results point to a statistically insignificant parameter of minimum wage variable for the whole sample. However, after allowing the minimum wage parameter to vary across regions, we find that the relatively high ratio of minimum to average wages could be the factor limiting youth employment growth in less-developed regions in the southeast of Poland.     

Long-Run Performance Persistence of Investment Funds

This article analyzes the long-run persistence of returns and risk of investment in the assets of money, bound, and stock funds recorded on the Polish market in 2000–12. Portfolios of safe, hybrid, and stock classes are formed on the basis of tested funds. The persistence of returns and the Sharpe ratio are investigated in rolled five-year sub-periods, with one year step. Also, persistence in performance is assessed using classic CAPM and Fama and French models, which allow for evaluating management skills. We find the occurrence of the Sharpe ratio long-run persistence of money and bound funds. The study does not explicitly show long-run persistence in hybrid and stock fund portfolios. The CAPM and Fama and French models simulations of returns on stock and hybrid funds indicate varying management skills during five-year periods.     

Perceptions of older consumers regarding food packaging as a prerequisite for its improvement: A case study of Polish market

In many societies, the scale of demographic change associated with increased longevity has the potential to influence the market for consumer goods. As a result, continuous improvement in packaging design that takes into account the needs of older people should become an important challenge for both packaging producers and product manufacturers. Due to the fact that there is limited research concerning the design of food packaging for older people, the aim of the study was to identify the expectations of this group of consumers in this respect. Milk packaging was selected as a model subject of study. Factors influencing older consumers and their buying patterns when purchasing milk have been thoroughly examined. The research was conducted among people over the age of 60 with the use of three methods: a questionnaire (600 subjects), an in‐depth interview (60 subjects) and eye tracking (30 subjects). The results of the study show that older consumers have specific preferences regarding packaging type and design. When considering milk packaging, for example, they prefer glass bottles, simple graphics and font and subdued colours. They most frequently look for information concerning the product's expiration date, its producer's name and its composition. Eye tracking revealed that the older the consumers are, the more problems with finding expiration date they have. The time required to find such information, however, strongly depends on where exactly the expiration date is printed on the packaging. The preferred place in this case is the top of the bottle. Older consumers identify product's brand with the name of the producer. Moreover, the absence of the term ‘ingredients’: on the milk packaging oftentimes causes confusion among older people, who are concerned about potential food additive content.     

Is the Income Elasticity of the Willingness to Pay for Pollution Control Constant?

How willingness to pay for environmental quality changes as incomes rise is a central question in several areas of environmental economics. This paper explores both theoretically and empirically whether or not the willingness to pay (WTP) for pollution control varies with income. Our model indicates that the income elasticity of the marginal WTP for pollution reduction is only constant under very restrictive conditions. Our empirical analysis tests the null hypothesis that the elasticity of the WTP for pollution control with respect to income is constant, employing a multi-country contingent valuation study of eutrophication reduction in the Baltic Sea. Our findings reject this hypothesis, and estimate an income elasticity of the WTP for eutrophication control of 0.1–0.2 for low-income respondents and 0.6–0.7 for high-income respondents. Thus, our empirical results suggest that the elasticity is not constant but is always less than one. This has implications for how benefits transfer exercises, and for theoretical explanations of the environmental Kuznets curve.     

Forecasting household debt with latent transition modelling

Latent transition modelling (LTM) was used to forecast household debt patterns. A model based on three waves (2011, 2013 and 2015) and over 36,000 responses from the biennial panel study of Polish households – Social Diagnosis – provided data for these forecasts. Based on the fact that transitions between latent states are shaped by previous latent states and socio-economic covariates – age of household head, income and number of household members – we were able to demonstrate LTM as a tool to generate aggregate predictions for both medium- and long-term evolution of the household credit market. The declining tendency for household credit participation rates in Poland is expected in the longer term. In particular, the trend should be supported by decline in the proportion of mortgage debtors. The groups of households indebted for the consumption of durables and those seeking credit outside the banking sector are the groups predicted to remain stable or increase in size.     

Financial contagion,spillovers and causality in the Markov switching framework

In this paper, we introduce the concept of causality in the Markov switching framework into the analysis of financial inter-market dependencies. We extend the methodology of testing for financial spillovers between capital markets by explicitly defining contagion, spillovers and independence, and providing statistics to test for the existence of causality. We apply the methodology to stock index returns on the Japanese (Nikkei 225) and the Hong Kong (HSI) markets during the Asian crisis and find no evidence of contagion between the markets, but strong evidence of feedback spillovers between them.     

Applying free random variables to random matrix analysis of financial data. Part I: The Gaussian case

We apply the concept of free random variables to doubly correlated (Gaussian) Wishart random matrix models, appearing, for example, in a multivariate analysis of financial time series, and displaying both inter-asset cross-covariances and temporal auto-covariances. We give a comprehensive introduction to the rich financial reality behind such models. We explain in an elementary way the main techniques of free random variables calculus, with a view to promoting them in the quantitative finance community. We apply our findings to tackle several financially relevant problems, such as a universe of assets displaying exponentially decaying temporal covariances, or the exponentially weighted moving average, both with an arbitrary structure of cross-covariances.     

Measuring the natural yield curve

We generalize the concept of the natural rate of interest (Laubach and Williams, 2003; Woodford, 2003) by defining and estimating the natural yield curve (NYC) – the term structure of natural interest rates. Our motivation stems i.a. from the observation that at times when central banks attempt to directly affect long-term interest rates (e.g. via quantitative easing) the gap between the short-term real and natural rate is no more a good indicator of the monetary policy stance. We estimate the NYC on US data, document its main properties and show i.a. that in the period 2008 to 2011 the NYC allows to better capture the US monetary policy stance than the short-term natural rate.