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Extending Romer's IS-MP-IA model to include foreign trade and exchange rates and applying the GARCH method, the study came to the conclusion that real gross domestic product is negatively associated with the inflation rate, exchange rate depreciation, and the foreign interest rate and positively affected by government deficit spending and world output. Therefore, inflation targeting is an appropriate monetary policy, and the depreciation of the koruna would be harmful to the Czech economy even though it would help the export sector.

Migration studies cannot explain a paradox why migrations from regions or countries with lower economic performance to regions or countries with higher economic performance remain low even though the economic incentives of emigration are high. This gives EU stakeholders solid reasons for building serious administrative barriers and introducing "transition periods" for free movement of labour from EU-8. It is generally believed that removing barriers would cause mass labour migration. However, it might be that the problem lies elsewhere and labour migration might remain low with or without barriers. This paper analyses the pattern of Czechoslovak migrations in 1993-2004. After the split-up of Czechoslovak Federation citizens of both countries could reside and work in another country without any restrictions. This was even more simplified by the common cultural background and unique language proximity. Although the Slovak Republic was generally less successful in its economic growth than the Czech Republic, the analysis of the model of Czechoslovak migrations specified in this paper does not leed to the conclusion that economic differences between the two countries influence migration between Slovakia and the Czech Republic. It might be that economic disparities might influence migration however it happens only after they reach some critical level.

In this paper, we apply the aggregate production function to approximate the path of potential output and decompose it into its determinants. Based on the decomposition we evaluate the supply side performance from a macroeconomic perspective. We use a time-varying NAIRU to derive the amount of potential labour and a newly developed measure of capital services to account for the productive impact of capital. In addition, trend total factor productivity is estimated. During 1995-2000, the growth in potential output was constrained by a gradual increase in the NAIRU, a temporary drop in investment activity and, most importantly, by only a modest rise in total factor productivity. For the period 2001-2005, we observe substantial improvements in the supply-side performance, except for the functioning of the labour market.

The new EU-entrants face double challenge on the Lisbon road to knowledge-based competitiveness. On the one hand, higher expenditure is required to improve the quality of research and education input and infrastructure, on the other hand, the innovation system changes are necessary to increase efficiency of expenditures. The example of the Czech Republic within EU-25, as to the export performance, productivity and R&D intensity of the so-called hi-tech activities, presents a more detailed analysis of competitive advantage sources and challenges in the less developed EU members. The analysis emphasizes the criterion of (in)completeness of the multinational value chain, which continues to consist mainly of segments with lower quality intensity (assembly operations) in these countries. This aspect plays a crucial role in international comparison of competitiveness within EU-25, and in assessment of success and political support of transition to knowledge-based economy.

This article examines the main current account balance determinants in order to assess the potential excessiveness of current account deficits in selected transition countries. For this purpose, dynamic panel-regression techniques are used to characterise the properties of current account variations across the transition regions. The results are chiefly consistent with the theoretical and previous empirical analysis, indicating a moderate level of current account deficits persistency and negative effects of economic growth, real appreciation and worsening of terms of trade on the external balances. Furthermore, the validity of the stages of development hypothesis and twin deficit hypothesis, as well as the significance of demographic factors is confirmed in the regions. Finally, the results suggest that most transition countries are justified in running relatively high current account deficits.

The paper is concerned with pension reform in the Czech Republic and abroad. It argues against two opinions: on the one hand, it is not necessary to do anything, and on the other hand, that a mandatory funded system should be implemented. Both approaches are false because of creating overwhelming explicit debts. The author recommends an evolutionary approach based on decreasing PAYG in combination with voluntary savings.

This article addresses the restructuration of the utilities sector/industry, a process generally described as deregulation. At the core of deregulation processes, not only in the EU, but also in the US, lies the replacement of old-fashioned forms of state regulation based on ownership control by new forms of regulation based on the operation of an independent regulatory body. In Central and Eastern European countries undergoing economic transition, surviving communist-type behavior, along with half-implemented EU deregulation directives, have led to specifically re-regulated utility markets. The new forms of regulation applied in the process of deregulation have served only to preserve the market protection of former state monopolies. Regulators who manage deregulation processes in the EU style allocate benefits across organized producer and consumer groups, so that the regulators' total utility is maximized.

This theoretical paper maps the transition experience of the financial sector using evidence from the Czech money market. Especially, the respect is paid to the structure of interest rates during the period from 1993 to 2001. The main components of the money market that mostly determine the term structure are the interbank deposit market and the market for short-term securities. The study abstains from interbank market survey and provides a detailed description of the default-free short-term securities market and its impact on past interest rate movements.

The article presents an empirically tested assessment of the Bank of Slovenia (BS), national central bank, adjustment policy to surges in capital flows during the last decade. Exchange rate appreciation, undeveloped banking sector, immoderate money market oscillation, unstable economic trends (all phenomena that can also be found in other transition countries) are just some of the detrimental effects that can be provoked by surges in capital flows if the national economy is faced with some fundamental sectoral deficiencies. Empirical results indicated that BS quite successfully mitigated listed effects of excessive foreign currency inflows during the last decade. With the suitable combination of direct and indirect adjustment methods, BS succeeded in preventing, still vulnerable Slovenian economy from a major form of financial crisis and stronger nominal tolar appreciation (this was not the case in some other countries like Hungary, Poland, Czech Republic, Croatia) although there was some real appreciation.

This paper discusses the determinants of export propensity of foreign firms in the Slovenian manufacturing sector relative to domestic firms. Using panel framework we show that superior export propensity of foreign firms is significant due to the foreign ownership and that differences in fundamental operational characteristics between domestic and foreign firms significantly affect their export propensity.

In 2004, the Czech economy continued in solid growth. Slight acceleration of economic growth was driven in particular by strong investment demand and improving performance of the foreign trade with goods. On the other hand, due to slowdown in real wages, consumer demand weakened. 2004 was the year of turnover in foreign trade which has reported the best results since 1994. The EU entry was an important factor behind the improvement of trade balance - the foreign trade exchange significantly accelerated after the EU accession. The EU entry opened new chances to the exporters, especially small and medium-sized companies could fully use the advantage of the Single Market. With the trade balance improving, the reason for permanently high current account deficit is the growing deficit of income balance as a consequence of strong FDI inflow. January and May changes in the Value Added Tax brought a temporary speed-up of consumer prices. After the absorption of this increase, since the last quarter of 2004, headline inflation has been declining. Similar to previous years, inflation fell under the CNB target corridor. Record high world prices of oil and metals caused a strong increase of industrial producer prices, however, strong competition between both producers and traders has prevented the spillover to consumer prices.

On the occasion of the 50th anniversary of establishment of the Politická ekonomie economic periodical six articles were published in 2003 reviewing the history, rise and fall of this journal in 1953 - 1989. This review presents to foreign readers a brief outline of economic thinking in this country in the period concerned that was reflected in articles published by Czech and Slovak economists in Politická ekonomie.

EU enlargement is hardly to be seen as the major push factor for migration. There are mainly economic factors that influence the migration decisions. Besides it seems that there is a migration potential, unique for every country, that pre-determines the migration or labour mobility. In our paper we (i) analyze the impact of internal economic factors, such as GDP growth, unemployment and wages on the emigration rate and (ii) compare the migration potential for the country distinguished by the high ratio of outward migrations (represented by Ireland) with those of the post-communist economy as well as the ""new"" EU member (represented by the Czech Republic). We come to conclusions that economic factors have the decisive role on pre-determining the migrations and that migration potential and the propensity to migrate as a reaction to worsening of the economic conditions at home are highly correlated. These can explain why there was no mass emigration from the EU ""new"" Member States to the ""old"" Member States after the recent enlargement, as far as it comes to migration potential needed for inducing such labour moves. The potential emigrants from new EU Member States are simply not ready to go to wealthier Member States in search of better wage and employment opportunities.

This essay describes the Czech pension system, provides a brief history of its modern transformation and mentions some of its drawbacks which should be the subject of a future policy debate. Particular attention is devoted to the third pillar and to the importance of a well-functioning capital market as one of the key conditions for the further development of funded pillars. The question of the timing of the enhancement of the funded pillars in a robustly growing economy with a limited capital market is opened. A lack of new private shares and bonds issues on the domestic capital market may be one of the arguments for postponement of the funded pillars' strengthening. A focus of policymakers who will set up the pension system reform strategy should be concentrated on comparing transitional and transaction costs of each reform alternative and on the building of an efficient regulatory and supervisory infrastructure. They should, instead of enforcing involuntary savings in pension funds, seek measures that will help to create a savings-friendly and growth-oriented economic environment.

The fiscal deficits in the majority of transition countries continue to deteriorate and pose risks for the sustainability of public finances in the longer time horizon. Due to short time span and data limitation (1993 - 2003) I concentrate on the short-run dynamics using fixed-effect model with panel data. I found a very small effects of fiscal deficits on inflation for the group of Visegrad countries (the Czech Republic, Hungary, Poland, Slovakia) with slightly better results after the exclusion of Poland. The perspective of adopting the euro in the horizon of several years has prevented until now the use of surprise inflation to reduce the real burden of servicing the increasing public debt. In the periods of social conflicts which are likely to characterize times of delayed fiscal reforms the temptation to resort to seignorage may become more stronger than nowadays.

Computed fundamental real exchange rates in four new EU members point to difficulties in jointly entering the ERM II soon after the EU entry. Three currencies out of the four were overvalued prior to EU entry. Computations suggest that it is unlikely that the Czech, Hungarian and Polish economies will maintain low inflation during 2004 - 2010 and at the same time keep their currencies within the ERM II easily. Moreover, the experience of Greece, Portugal and Spain - viewed through fundamental real exchange rate goggles - indicates more stable real exchange rate paths and smaller currency misalignments prior to euro adoption than can be expected from the newcomers in the forthcoming years. If the newcomers sail too fast towards the euro, their sailing may not be as smooth as that of the front runners.

The paper investigates both the impact of domestic and import competition on performance of manufacturing industries in the Czech Republic in 1998 - 2002. Using panel data we found a strong increasing non-linear (diminishing) relationship between performance of manufacturing industries and domestic competition measured by the Herfindahl-Hirschman Index. Import competition measured by an import penetration ratio is negatively related to performance of Czech industries, while foreign direct investments are positively correlated with performance.

In this paper there are analysed the characteristics of various important macroeconomic variables in the Slovenian economy and compared with the macroeconomic development in the Czech Republic, Germany, Greece and Ireland in two periods of 1997-1999 and 2000-2002. The main objectives of the paper are to observe changes in the macroeconomic variables of the analysed countries during the observed periods, to determine the sources of any differences in macroeconomic characteristics between Slovenia and the other analysed countries and, finally, to suggest some steps and measures to improve the macroeconomic situation of these countries. Data from national accounts are used in the analysis. In terms of methodology, the paper is based on post-Keynesian economic theory and its long-term economic model of a market economy with private ownership. Based on the analysis it was concluded that in all analysed countries there should be a greater emphasis on tax policy to create an incentive for investing and saving, on incomes policy to control the dynamics of nominal wages, and on technological policy as a prerequisite for improved economic efficiency.

This study is focused on relationship between external and internal impact on decisionmaking influencing international business strategies in transitional economy. Drawing from secondary and primary interview data on international business activities of 18 startups and 20 enterprises operating in the Czech Republic (including firms controlled by both domestic and foreign investors), respectively, the authors propose five strategies. In general, the findings suggest that strategies developed by domestically owned niche-focused or recent startups and those carefully guided by inbound foreign direct investors are more successful. Moreover, the more successful ( i.e., those experiencing significant domestic and international sales growth) are those who develop unique marketing strategies. Uncontrollable externalities do not appear to have an impact on firms' success or failure. The regionally oriented exporting tends to be the dominant strategy. Globally oriented export activities are relatively modest whereas outbound direct investment strategies are very minor compared with inbound foreign direct investment activities.

Health care reforms in the Czech Republic and in Slovakia are based on the implementation of market-based instruments into the system, namely on privatization and health insurance. Such changes, especially the change of the system of financing of health care from ""socialist"" taxation-based system to ""modern"" insurance-based one, were supported by many arguments, showing expected positive outcomes. However, after more than ten years from starting the change, health care system performance criteria in both countries have not been improved as expected. In our paper we try to examine some potential purposes of such trends, with focus on rhetoric and reality of potential of health insurance to improve the performance of health systems in transitional countries.

This paper analyzes development of the ownership structures in Czech voucher-privatized firms during 1996 - 1999. The period can be characterized by increasing ownership concentration uniformly across all categories of owners with exception of banks. Within frequent changes uncovered by cluster analysis, higher ownership concentration was found to preserve itself. In general, investment funds and portfolio companies recorded the highest average concentration increase. Industrial companies and individual owners were found to be the most stable type of owner. Sector perspective shows that while in 1996 the firms do not exhibit excessive differences among sector specific attributes with respect to the proportion of stake held, in 1999 they do.

This paper examines sustainability of current account for Turkey during the period 1987:Q1 - 2002:Q4. Using the usual intertemporal borrowing constraint, I have tested for a long-run relationship between Turkey exports and imports (measured in real terms to real gross domestic product) using quarterly data. In my empirical analysis of the sustainability of current account for Turkey, cointegration approaches have been used. Empirical results suggest that there exists a unique long-run or equilibrium relationship among real exports and imports and their percentage to real GDP and their estimated cointegration factor (b) is very close to 1. The empirical findings suggest that the current account of Turkey is sustainable in the long-run.

This article aims at revealing the effectiveness of Turkish monetary policy in controlling inflation rate and the stability of exchange rate using the rational expectation framework that incorporates the fiscal role of exchange rate. Based on quarterly data covering the period between 1983: Q4 and 2003: Q4, the analysis affirms that the effort of the Turkish monetary policy at influencing the finance of government fiscal deficit through the determination of the inflation-tax rate, to some extent, affects both the rate of inflation and the real exchange rate, thereby causing volatility in their rates. Moderate evidence emerges that inflation affects volatility of its own rate as well as the rate of real exchange.

This paper empirically examines the determinants of economic growth and convergence in transitive economies of Central and Eastern Europe in the 1990s. While the cross-section regression suggests the absence of a significant convergence across the EU15 and other transitive economies, the Visegrad four (Slovakia, the Czech Republic, Hungary and Poland) dummy being positive and significant indicates that this group of countries has done relatively better than the other group of transitive economies. Moreover, the results indicate that there was an income per capita convergence within Visegrad countries. Switching to a panel data approach, and controlling for macroeconomic stability, financial development, human and physical capital accumulations and other policy variables, the results seem to suggest that there was a conditional convergence across EU15 and transitive economies in the 1990s.

In 2003, the economic growth moderately accelerated. The main factor of this acceleration was massive household consumption accompanied by the revival of fixed capital formation. Gradual narrowing of the gap between consumer and investment demand was one of major achievements of 2003, supporting the long-term sustainability of Czech economic growth. In 2003, both imports and exports accelerated, the trade deficit remaining at the same level as in 2002. Considering acceleration of Czech economic growth in 2003, stagnating level of trade deficit is favourable. The reason for continuously high current account deficit is growing deficit of income balance and declining surplus of service balance. The deficit of the current account in the last two years was not provoked by growing imports (as in the nineties), but has been predominantly the price for the massive foreign direct investment inflows in the past decade.

This paper deals with the Czech economy supply side performance from the macroeconomic point of view. In order to evaluate the supply side behaviour we calculate the potential output dynamic path and contribution of its particular determinants using the production function method. The results show that the potential output growth was rather slow around 2 per cent. This implies that e. g. even 3 per cent growth can cause macroeconomic imbalances. Increase of the non-accelerating-inflation-rate of unemployment (NAIRU), weak growth of the capital stock and weak growth of total factor productivity appear to be the reasons for the constrained ability of the Czech economy to grow steadily and converge to EU level.

This paper deals with present situation and future development of pension reform in the Czech Republic. A comparison with neighboring country - Austria, has been done. Parametrical reforms of pay as you go systems in both countries are compared and evaluated. Pretensions to introduce the multi-pillar pension system are commented and appraised. Some opacities in current definitions of private pension systems are mentioned. Specific risks of different pillars are introduced, together with the necessity to monitor costs of the pension administrative itself. Aging of the society and public budgets deficit are very important circumstances influencing the pension policy, however, the main aim of reforms should be the creation of a modern system, supporting the maintenance of the living standard of the elderly. Well functioning labour market and developed financial market for a modern pension system are indispensable.

This paper describes the development and the current state of debt management in the Czech Republic. The basic principles on which it was built during the1990s and the importance of the monetary and fiscal policy co-ordination in effective debt management implementation are discussed. The authors try to explain the main factors that are behind the substantial state debt increases in the course of several recent years and to discuss some of the topical issues connected to the debt management targets and procedures. The paper provides a basic description of the instruments used and the conceptual and institutional framework of the Czech Republic debt management system with a particular emphasis on the role of the central bank.

The paper discusses the prospects for capital inflows to the Czech Republic before Economic and Monetary Union accession. It reviews the potential costs and benefits of capital flows and the history of capital flows to the Czech Republic, before turning to future capital inflows. It notes that different theoretical models provide different predictions about future capital inflows. To get further insight, the paper discusses the future capital inflows from the perspective of nonresidents' supply of external savings and residents' demand for external borrowing and from the perspective of external vulnerability related to large foreign direct investment (FDI) inflow. It concludes that FDI is likely to decline somewhat in the future, but increasing sovereign borrowing needs could lead to higher inflow of portfolio capital. The final section discusses the potential for capital inflows resulting from the so-called convergence plays and concludes that there is presently little incentive for convergence-play related capital inflows.

The paper offers a preliminary analysis of possible spontaneous euroization in the Czech economy. After a brief general introduction of the issue of currency substitution it specifically discusses two things. First, the transmission channels of potential spontaneous euroization, through which the process could possibly complicate the implementation of domestic monetary policy. Second, it analyses the degree of euroization. Among the transmission channels, attention is paid to interest rate and exchange rate channels. The circumstances under which the transmission would be sub-optimal are discussed. Besides the impact on the monetary policy transmission, another risk of progressive spontaneous euroization is seen in the shift of the exchange rate risk from bigger to smaller enterprises in the economy. The available data do not allow a precise measurement of the degree of euroization. Nevertheless, both the ratio of euro-denominated over koruna-denominated deposits and the CNB's survey in 2003 suggest that euroization is not an obstacle for the Czech monetary policy at the moment.