E44 - Financial Markets and the MacroeconomyReturn

The comparative method is one of the methods of assessment of equity securities in theory and practice. The practical application of the comparative method is arranged in MS Decree No. 492/2004 Coll. on the establishment of the universal value of property and in Act No. 431/2002 Coll. on accounting, as amended by later regulations. According to this method, internal (general, real) value is derived from information on specific prices or values of shares of similar companies. The comparative method can be applied without serious problems only provided that the differences between the companies are small; otherwise, its use has been problematic. To find a comparable public limited company on a mature capital market, where the number of traded comparable companies is high, is not a problem. It is very difficult for a small market such as Slovakia's stock market. This paper discusses the application of comparative methods to the non-standard Slovak capital market.

The paper deals with a transmission mechanism of monetary policy under the regime of inflation targeting. It focuses on the expectations channel, the credit view and the cost channel. These channels work side by side and may amplify effects of the traditional view of transmission mechanisms of monetary policy, which emphasises adjustments on the demand side.

Financial innovations should be regarded as a substantial element in the functioning of modern economies and financial sectors. However, their general impact is to be assessed from the present perspective, essentially depending on their particular behaviour and the role they play in the economy. Most importantly, this text follows both the Post-Keynesian and the Regulation School logic, trying to clarify business cycle volatility with respect to the intensity of innovative activities in the financial sector. The article also discusses some hypothetical causal relationships between the 2007-2008 financial and economic crisis and financial innovation activities, largely accelerated in intensity over the preceding two decades. As it is clearly demonstrated, the "Great Moderation" argument has not been entirely confirmed and a number of mainstream economists have ultimately been forced to adjust their respective approaches towards the functioning of modern economies.

This paper focuses on the current issues of the new banking regulation and its expected impact on the banking sector in the Czech Republic. Its aim is to provide current information on the basic regulatory proposals issued under Basel III and their potential impact on the functioning of the banking sector in the CR and then on real economic development in the Czech Republic. The paper will analyze the basic characteristics of the banking sector in the CR and the current situation with regard to the stability of the European banking sector, which are relevant for setting regulatory measures. Finally, the paper will examine the potential effects of the essential elements of the new banking regulation on the functioning of the banking sector in the CR. More detailed research shows that the CR's banking sector is ready for adopting the new banking regulation and a fundamental change in its operation with significant impacts on the economy is not expected.

Over the past few years, the Value at Risk indicator (VaR) has evolved, without doubt, into the most frequently used comprehensive tool for assessment of potential losses caused by adverse changes in market rates. However, the common models used for VaR assessment are based only on mid prices and do not take into account the existence of time-varying bid-ask spreads. In addition, they assume that any amount of instruments can be sold almost immediately without an adverse impact on prices. Thus, they focus only on pure market risks without taking into account the market liquidity. As a consequence, they underestimate the total risk.
This paper focuses on the importance of market liquidity and describes ways to integrate it into the VaR calculation.

The purpose of this paper is to study a price level dynamics in a simple fourequation model. A basis of this model is developed from dynamical Kaldorian model which could be noticed very frequently in works of non-linear economic dynamics. Our approach is traditional. The difference is observed in a choice of an investment function. The investment function depending on the difference of logarithm of production and logarithm of capital (logarithm of the productivity of capital) is in a form of the logistic function. These two equations create relatively closed sub-model generating both production and capital stock trajectories. Two other equations describe the price level dynamics as a consequence of money market disequilibrium and continuously adaptive expectation of inflation. Our investigation is firstly aimed to core model dynamics, i.e., a dynamics of the production and capital stock. Secondly is to analyze dynamics of the model as a whole, i.e., to the first part is superadded the price dynamics and expected inflation dynamics depending on both an adaptation parameter of the commodity market and a parameter of the expectation. Thirdly, we compute Lyapunov exponents for simple model of closed economy showing its chaotic behavior.

This paper reviews the theoretical concept of "Effecient Market Hypothesis" and introduces new concept of "Fractal Market Hypothesis". According to this hypothesis the returns follow a biased random walk called a Hurst persistent process which is characterized as long memory process. Testing this concept on Czech stock market index PX50, the (R/S) analysis was carried out and the Hurst exponent was calculated. It finds out that stock returns of PX50 follows a persistent Hurst process with Hurst exponent of 0,662. This is significantly different from the value for a random walk and it is corresponding to results of other researches done before.

The purpose of this paper is to study a three-equation dynamic model. The first equation describes the commodity market. The second one demonstrates the dynamics of the money market and the third equation is the interest rate parity. The aim is to investigate the conditions of more complex behaviour of the model. The more complex dynamic behaviour, i.e., limit cycles, could appear when nonlinear investment function is used in the model, for example. Furthermore the nonlinear function of money supply depending on interest rate is used in the model.