Prague Economic Papers, 2026 (vol. 35), issue 1

Volatility Modelling - What Drives Cee Currency Option Prices?

Piotr Mielus

Prague Economic Papers 2026, 35(1):1-27 | DOI: 10.18267/j.pep.906  

This paper investigates the drivers of foreign exchange implied volatility in Central and Eastern European (CEE) countries. Currencies in non-euro EU countries are particularly sensitive to changes in market sentiment. Risk aversion significantly impacts the implied volatility surface for FX options, making these options crucial for managing skew risk. By analysing option prices, this study identifies co-movements between spot rates, interest rates, and volatilities for specific option strategies. Empirical evidence reveals robust determinants of volatility levels, volatility smiles, and volatility term structures. Applying error correction models...

The Institutional-Economic Nexus in Driving Greenfield FDI to European Countries

Ľubica Štiblárová

Prague Economic Papers 2026, 35(1):28-55 | DOI: 10.18267/j.pep.903  

While theoretical perspectives often emphasize the role of high-quality institutions in attracting foreign investors, empirical findings remain rather mixed. This study advances existing research by exploring the interplay between quality of institutions and economic development in driving greenfield foreign direct investment (FDI) in European countries. The results do not suggest that better institutions alone directly help attract FDI in the selected European sample from 2003-2022. However, in more economically developed host countries, institutional quality plays a significant role, whether measured by real GDP per capita or GNI per capita. Further...

Technology Exports and Electricity Use in Turkey: Nonlinear Frequency Evidence

Mesut Alper Gezer

Prague Economic Papers 2026, 35(1):56-96 | DOI: 10.18267/j.pep.908  

This paper investigates the nexus between medium- and high-technology exports and electricity consumption from 2016M1 to 2025M05 in Turkey. Nonlinear features in the data lead the use of a Smooth Transition Regression model that shows entrepreneurial expansion which intensifies electricity demand, while technology exports further increase electricity consumption in the nonlinear regime. Foreign direct investment is observed to reduce energy demand in the high entrepreneurship regime. Both Bootstrap Toda-Yamamoto and Fourier Cumulative Frequency causality tests indicate unidirectional causality from technology exports to electricity use. Moreover, Wavelet...

The Reverse Banzhaf and Shapley - Shubik Index for SMEs in Slovak Medical Labs

Zuzana Čičková, Monika Ferenčáková, Peter Peťko

Prague Economic Papers 2026, 35(1):97-120 | DOI: 10.18267/j.pep.905  

This study examines the potential for cooperation between traditionally competitive small and medium-sized enterprises (SMEs) in the sector 86901 - Medical laboratory services in Slovakia as a strategy to enhance competitiveness in the face of large market players. By building coalitions, SMEs can overcome natural disadvantages, such as limited economies of scale, a lack of capital, or limited access to innovation. In this article, we will focus on the possibilities of applying the Banzhaf and Shapley - Shubik indices, as well as their reverse interpretation, to quantify the individual strength of a player within potential coalition groupings, with...

The impact of traditional and digital financial inclusion on bank profitability: Evidence from Ethiopian commercial banks

Mohammed Jatoro Arebo, Andualem Goshu Mekonnen

Prague Economic Papers 2026, 35(1):121-165 | DOI: 10.18267/j.pep.904  

While prior research emphasizes the socio-economic benefits of financial inclusion, its implications for bank profitability remain underexplored. This paper employs seven traditional and four digital indicators to create a financial inclusion index through principal component analysis (PCA). To capture potential nonlinearities, quadratic specifications are incorporated within a two-step system generalized method of moments (GMM) framework and validated using the Lind and Mehlum (2010) U-shape test, while Granger causality tests examine directional effects over the 2015-2023 period. Results indicate that traditional financial inclusion positively influences...