Estimation of the equilibrium exchange rate: The CHEER approach

The paper presents the results of an investigation where the concept of a steady-state level of the exchange rate is equated with the capital market equilibrium based on the CHEER approach. The empirical analysis concentrates on Poland, because in this case the assessment of the equilibrium exchange rate is of vital importance. The prospect of the Polish currency joining the ERM2 provokes controversies and requires research into the economic consequences of accession to the EMU. The international transmission mechanisms affecting the Polish economy are identified within the VEqCM framework. The calculations indicate that in the last years of the analyzed sample (i.e. up to December 2006) the zloty/euro exchange rate was slightly overvalued, and the steady-state level was found to have been adjusting to the value of 4.1 zlotys.     

Economic and Monetary Union – Current Fiscal Disturbances and the Future

At the moment of its setting up the Economic and Monetary Union did not meet the criteria of the optimum currency area. Neither does it today. The crisis of public finance in the eurozone results from the abandonment public finance reforms, lack of consistency in enforcing the decision of the Stability and Growth Pact and, additionally, economic recession and financial crisis. Further functioning of the eurozone will depend on radical reforms of public finance and structural reforms enhancing efficiency of the market as an adjustment mechanism, and competitiveness of economies. The very establishment of the European Stabilization Mechanism and European Financial Stability cannot make up for the above mentioned necessary undertakings. It is important to change the socioeconomic model existing in the EU member countries.     

Social strategies that work

Although most companies have collected lots of friends and followers on social platforms such as Facebook, few have succeeded in generating profits there. That's because they merely port their digital strategies into social environments by broadcasting their commercial messages or seeking customer feedback. To succeed on social platforms, says Harvard Business School's Piskorski, businesses need to devise social strategies that are consistent with users' expectations and behavior in these venues--namely, people want to connect with other people, not with companies. The author defines successful social strategies as those that reduce costs or increase customers' willingness to pay by helping people establish or strengthen relationships through doing free work on a company's behalf. Citing successes at Zynga, eBay, American Express, and Yelp, Piskorski shows that social strategies can generate profits by helping people connect in exchange for tasks that benefit the company such as customer acquisition, marketing, and content creation. He lays out a systematic way to build a social strategy and shows how a major credit card company he advised used the method to roll out its own strategy.     

A look into the factor model black box: Publication lags and the role of hard and soft data in forecasting GDP

We derive forecast weights and uncertainty measures for assessing the roles of individual series in a dynamic factor model (DFM) for forecasting the euro area GDP from monthly indicators. The use of the Kalman smoother allows us to deal with publication lags when calculating the above measures. We find that surveys and financial data contain important information for the GDP forecasts beyond the monthly real activity measures. However, this is discovered only if their more timely publication is taken into account properly. Differences in publication lags play a very important role and should be considered in forecast evaluation.     

Usage‐based insurance and its acceptance: An empirical approach

This study aims to explore the motor insurance market's attitude towards usage‐based insurance (UBI), and thus its readiness for a launch in the near future. Data on client perception was collected using a structured questionnaire. On the basis of this, an initial selection of factors, other than income, that could influence the declared attitude of drivers was demonstrated showing that it is primarily dependent on certain demographic characteristics like their age, sex, or place of residence. A strong relationship was also demonstrated with respect to the intensity of the vehicle's use, to the amount of the insurance premium they have paid, and to the self‐assessment of the respondents' driving skills. Clients are likely to accept the concept of UBI once implemented, but that they are not ready yet to give up the traditionally used methods of premium calculation. Their attachment to discounts granted can be very strong in particular to the no‐claims bonus.     

Taxonomy methods in credit risk evaluation

In their bid for integration with the European Union, the countries of Central and Eastern Europe are faced with the need to introduce numerous significant improvements to their economic systems. A highly important role in this process is to make changes in the existing banking systems. The credit risk evaluation method presented here, using taxonomic measures to plot so-called credit risk maps, may be used to develop sound principles of credit policies. It is a proposition that could solve one of the many problems arising in the course of adaptation of banking systems in Central and Eastern Europe to conditions of market economy.     

Poland and the euro zone enlargement: Monetary policy,ERM II,and other issues

In this paper, Poland's preparations to introduce the euro and discussions surrounding them are briefly analyzed. Its first part deals with legal and macroeconomic developments before Poland's accession to the EU in May 2004. The second part considers Poland's official position and possible future scenarios. The main conclusions are twofold. Firstly, it is argued that after finishing successfully the disinflation process, Poland's monetary integration is above all subject to fiscal and exchange rate developments. In both cases, they are a function of the economy's structural changes. Secondly, as a consequence, fulfilling the Maastricht Treaty nominal convergence criteria by Poland will imply enough degree of real convergence for its successful participation in the euro zone. The opinions expressed in the paper are of the author and should not be attributed to any institution he is working for. He would like to expresshis gratitude to Witold Grostal and Robert Woreta for providing the graphs. Helpful comments were made by Michal Brzoza-Brzezina, Tomasz Chmielewski, and by Eduard Hochreiter. Language assistance was provided by Barton D. Raven. Any remaining errors are solely the author's responsibility.     

On Hypothesis about the Second Eigenvalue of the Leontief Matrix

If an arbitrarily positive eigenvector is repeatedly premultiplied by a positive matrix, then the result tends towards a unique, positive (Frobenius) eigenvector. Brady has demonstrated that the expected absolute magnitude of the estimate of the second largest eigenvalue of a positive random matrix (with identically and independently distributed entries) declines monotonically with the increasing size of the matrix. Hence, the larger the system is, the faster is the convergence. Molnár and Simonovits examined Brady's conjecture in the case where entries of a stochastic matrix are close to 1/n. We prove this hypothesis for any stochastic and positive matrix.     

Resolvable semi-balanced incomplete split-block designs

A method for constructing some new incomplete split-block designs with desirable properties is given. The new class of the designs is characterized with respect to the general balance property. Moreover, the efficiency factors of the designs proposed are given.Received: July 2003 / Revised: November 2003