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Forthcoming in the next issue 5(3)

21/10/2011

Dimension of Political Contestation: Voting in the Council of European Union before the 2004 Enlargement

M. O. Hosli, M. C. J. Uriot

Abstract: Studies of voting patterns in the Council of the European Union (EU) have increased since voting records in this institution have become more readily available. This paper builds on earlier work and explores coalition-formation and voting in the Council of the EU for the EU-15 (i.e., between 1995 and 2004), by analyzing cleavage patterns based on voting records for this institution. Focusing on the pre-enlargement phase, the paper provides new insights into earlier member state voting behavior in the Council on the basis of a range of independent variables, including governments' absolute and relative positions on the left-right policy dimension, pro-integration sentiments among domestic publics, governments’ positions as either net beneficiaries or net payers into the EU budget and finally, number of votes in the Council. In methodological terms, we treat vote decisions as panel data and report adjusted standard errors for country-based clusters, using ordered probit regression to explain the propensity of EU member states to vote ‘yes’, abstain from voting, or vote ‘no’ in the Council. The ordered probit analysis used to explore the potential relevance of these dimensions provides insights that at times confirm, but also partially contradict, earlier findings on this topic. We notably find strong evidence for a North-South cleavage pre-enlargement, and moderate evidence for the relevance of government relative left-right positioning in Council voting behavior.

Keywords: European integration, Council of the European Union, voting, coalition-formation, policy dimensions
JEL classification: C7, H1 

Coalitions in the EU Council: Pitfalls of Multidimensional Analysis

B. Plechanovova

Abstract: The paper identifies the main problems, which are encountered in the statistical analysis of the patterns of decision-making of the EU Council. Compared to most legislative bodies in democratic political systems, in the EU Council decision-making we only see a scarce occurrence of contested legislation and in these cases, only few dissenting positions of the legislators are recorded. Consequently, when analysing the dimensionality of the Council policy space, we have to deal with extremely lopsided data, which may pose serious problems to standard multivariate methods. The paper aims to identify these problems and discuss the implications for the inference on the coalition formation in the EU Council. The assessment is done based on: distribution of the data on voting in the EU Council and results of multivariate methods which are available.

Keywords: Council of the EU, factor analysis, cluster analysis, multidimensional scaling
JEL classification: C38 

Power and Responsibility in Environmental Policy Making

M. J. Holler, W. Wegner

Abstract: Given the challenges facing the world in the field of environmental policy, research on complex interdependencies in world politics and transnational policy-making has intensified. Several institutions have came into existence in response to the increasing concerns about global climate change. This paper analyzes the structure of the parties involved in regulating chmate conventions and treaties, and designs instruments for allocating responsibility to them. In order to point out the possibilities of allocating responsibility, the relationship between power and responsibility is examined. By applying power measures, we estimate the impact of the various agents in these contractual or instrumental arrangements taking a priori unions into consideration. We examine the United Nations Framework Convention on Climate Change and the United Nations Convention to Combat Desertification. Depending on the decision topics, developing countries can hold more power and responsibility than developed countries. Both conventions refer to responsibilities of the parties as common but differentiated responsibilities. The primary responsibilities and thus power should fall to the industrial countries which is not reflected in our calculations.

Keywords: Climate change, environmental policy, collective decision making, responsibility, power
JEL classification: D7, C7 

Embedding Classical Indices in the FP Family

M. Chessa, V. Fragnelli

Abstract: Recently, a new family of power indices, the FP, was introduced by Fragnelli, Ottone and Sattanino (2009), requiring that the parties of a majority are ideologically contiguous along a left-right axis. The different choices of some parameters allow representing various situations, resulting in different indices in this family. In this paper we analyze how to select the parameters with the aim of transferring some properties of classical power indices. We start by relaxing the hypothesis of contiguity. Then, we reduce the relevance of non-contiguous coalitions, defining a sequence of indices that converges to a modified version of the classical indices. The method is applied to the Italian lower chamber. Finally, we extend our approach to situations in which the parties are not necessarily ordered according to the left-right axis, expressing their relations by a graph, following the idea of Myerson (1977).

Keywords: Weighted majority games, power indices, contiguous coalitions
JEL classification: C70, D72 

Optimizing Efficiency of Weighted Voting Games

P. Dolezel

Abstract: Having a group of voters endowed with weights: The simple weighted voting game (or system) represents a system of approving propositions in which the approved is only a proposition that is accepted by voters weighted to a number that is at least equal to a prescribed number called a quota. We call the system simple if there is only one set of weights and one quota, as opposed to the multi-rule systems that have more weights assigned to each voter and with more quotas. This paper presents an analysis of the efficiency of simple weighted voting systems. It assumes the Impartial Anonymous Culture (the probability of a single voter voting for a proposition is 1/2 and voters act independently). This culture is used for the general evaluation of voting systems, when no specific information about propositions and voters' preferences are known, or when the voters' preferences and proposition characteristics are not willing to be reflected in the voting system itself, keeping in mind its non-pragmatics, fairness and generality. The efficiency of a simple weighted voting system is defined as the probability of a proposition being approved. This paper focuses on efficiency maximization and minimization with respect to weights. We prove a theorem which enables the computing of the efficiency maximum and efficiency minimum with respect to weights given the number of voters and quota in linear time.

Keywords: Weighted voting game, integer programming, efficiency of voting, IAC models
JEL Classification: D71, D72 

Voting Experiments: Measuring Vulnerability of Voting Procedures to Manipulation

J. Palguta

Abstract: A minimal reduction in strategic voter’s knowledge about other voters’ voting patterns severely limits her ability to strategically manipulate the voting outcome. In this paper I relax the implicit assumption made in the Gibbard-Satterthwaite‘s impossibility theorem about strategic voter‘s complete information about all other voters‘ preference profiles. Via a series of computation-based simulations I find that vulnerability to strategic voting is decreasing in the number of voters and increasing in the number of alternatives. Least vulnerable voting procedures are Condorcet-consistent procedures, followed by elimination procedures, while most prone to manipulation are the simplest rules. Strategic voting is vulnerable both to an absolute and relative reduction in amount of information.

Keywords: Voting, manipulation, information, computation-based simulations
JEL classification: C72, D72, D81 


The Czech Economic Review, Vol. 5, No. 2

17/08/2011

A new issue of the Czech Economic Review is available online. See table of contents:

Articles

Inflation Convergence and the New Keynesian Phillips Curve in the Czech Republic
K. Daniskova, J. Fidrmuc
The Czech Economic Review 5 (2), 99-115

Tax Morale, Entrepreneurship, and the Irregular Economy
G. Lisi, M. Pugno
The Czech Economic Review 5 (2), 116-131

Quest for the Best: How to Measure Central Bank Independence and Show its Relationship with Inflation
A. Maslowska
The Czech Economic Review 5 (2), 132-161

Equilibrium Solution in a Game between a Cooperative and its Members
C. Bertini, G. Gambarelli, A. Scarelli, Z. Varga
The Czech Economic Review 5 (2), 162-171

Estimating the Efficiency of Voting in Big Size Committees
P. Dolezel
The Czech Economic Review 5 (2), 172-190

Skill and Chance in Insurance Policies
V. Fragnelli, M. E. Marina
The Czech Economic Review 5 (2), 191-202

Existence of Equilibrium Prices for Discontinuous Excess Demand Correspondences
V. Scalzo
The Czech Economic Review 5 (2), 203-210

Let Me See You! A Video Experiment on the Social Dimension of Risk Preferences
W. Güth, M. Vittoria Levati, M. Ploner
The Czech Economic Review 5 (2), 211-225

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Forthcoming in the next issue

29/07/2011

Inflation Convergence and the New Keynesian Phillips Curve in the Czech Republic

K. Daniskova, J. Fidrmuc

Abstract: The New Keynesian Phillips Curve has become an important part of modern monetary policy models. It describes the relationship between inflation and real marginal cost, which is derived from micro-founded models with rational expectations, sticky prices, and forward and backward looking behaviour. This answers the previous critique of the Phillips Curve. We estimate several specifications of the New Keynesian Phillips Curve for the Czech Republic between 1996 and 2009. We show that the GMM suffers under the problem of weak instruments leading to biased estimates. In turn, the FIML is robust and yields significant estimates of structural parameters implying a strong forward looking behaviour.

Keywords: Inflation, New Keynesian Phillips Curve, marginal costs, output gap, real unit labour costs
JEL classification: E31, E52, C32 

Tax Morale, Entrepreneurship, and the Irregular Economy

G. Lisi, M. Pugno

Abstract: This paper incorporates tax morale into a search and matching model of equilibrium unemployment, with on-the-job search, extended to both the irregular sector and entrepreneurship. Tax morale is modelled as a social norm for tax compliance which renders evasion costly. The moral cost of tax evasion (the strength of the social norm) is negatively related to the fraction of entrepreneurs that evades taxes. Precisely, if the relationship is non-linear, multiple equilibria may emerge, thus accounting for differences in-between regions and countries in the size of the irregular sector. The ``good'' equilibrium is in fact characterised, with respect to the ``bad'' one, by a smaller irregular sector and a stronger tax morale.

Keywords: Entrepreneurship, tax evasion, tax morale, job search theory, irregular/shadow/hidden/underground economy
JEL classification: E26, H26, J64, L26, K42 

Quest for the Best: How to Measure Central Bank Independence and Show its Relationship with Inflation

A. Maslowska

Abstract: The objective of this paper is to check measures for explanatory power of central bank independence (CBI) in a series of econometric tests. Measures of central bank autonomy offer a useful expression of the extent to which a central bank is able to keep the government away from influencing a change in the inflation rate. The more a measure represents this idea, the easier one can find a relation between the CBI value and the inflation rate. Results of estimations show that proxies by Grilli et al. (1991) are strong regressors of inflation rate, contrary to those by Cukierman et al. (1992). Moreover, estimation results challenge the belief that divergences in CBI-inflation rate estimations are due to differences in institutional features across samples of countries, not to differences in legal proxies of central bank independence. Already results from a homogenous group of industrial countries indicate that some indices perform ``better'' than others.

Keywords: central bank independence, political autonomy, economic autonomy, institution, estimation
JEL classification: E58, E52

Equilibrium Solution in a Game between a Cooperative and its Members

C. Bertini, G. Gambarelli, A. Scarelli, Z. Varga

Abstract: In the paper a game-theoretical model is set up to describe the conflict situation in which the members of a marketing cooperative may take advantage of an external market price, higher than that offered by the cooperative. Under appropriate conditions on the penalty strategy of the cooperative, the faithfulness of all members will provide a Nash equilibrium for the considered game, which at the same time also is an attractive solution, with the cooperative as a distinguished player.

Keywords: Cooperatives, Game Theory, Nash equilibria
JEL classification: C02, C70, Q13

Estimating the Efficiency of Voting in Big-Size Committees

P. Dolezel

Abstract: In a simple voting committee with a finite number of members, in which each member has a voting weight, the voting rule is defined by the quota (a minimal number of voting weights is required to approve a proposal), and the efficiency of voting in the committee is defined as the ratio of the number of winning coalitions (subsets of the set of members with total voting weights no less than the quota) to the number of all possible coalitions. A straightforward way of calculating the efficiency is based on the full enumeration of all coalitions and testing whether or not they are winning. The enumeration of all coalitions is NP, a complete problem (the time required for computations is the exponential function of the size of the committee) and is unusable for very large committees. In this paper we are developing three algorithms (two exact and one heuristic) to compute the efficiency for committees with high number of voters within a reasonable timeframe. Algorithms are applied for evaluating the voting efficiency in the Lower House of the Czech Parliament, in the European Parliament and in the Council of Ministers of the EU.

Keywords: efficiency of voting, committee, European Parliament, Council of Ministers of the EU
JEL Classification: D71, D72 

Skill and Chance in Insurance Policies

V. Fragnelli, M. E. Marina

Abstract: In a game theoretical setting it is possible to assign a relative measurement of the skill required to each player for maximizing his payoff in a casino game; according to this approach we analyze the relevance of skill and chance in an insurance contract, both for the insurance company and for the customer.

Keywords: skill, casino game, insurance
JEL classification: C72, G22, J24 

Existence of Equilibrium Prices for Discontinuous Excess Demand Correspondences

V. Scalzo

Abstract: The aim of the paper is to obtain the existence of equilibrium prices in economies where the excess demand correspondences - differently from the usual condition - are not necessarily upper semicontinuous. So, in our setting, we cannot use the Gale-Debreu-Nikaido Lemma. The existence of equilibrium prices is obtained for discontinuous excess demand correspondences which obey to a condition like of the weak axiom of reveled preferences.

Keywords: discontinuous excess demand correspondences, existence of equilibrium prices, weak axiom of revealed preferences.
JEL classification: C62, D51


Statistics

07/04/2011

Vol. 4 (2010)
  • 17 accepted articles (12 international, 5 local)
  • 14 rejected articles (10 international, 4 local)
  • Acceptance rate is 55% (17/31); not significantly different for international articles (54%, 12/22) and local articles (56%, 5/9).
  • The ratio of international to local articles (for accepted articles) is 71:29 (12/17 vs. 5/17).
Vol. 2-4 (2008-2010)
  • 50 accepted articles (37 international, 13 local)
  • 36 rejected articles (26 international, 10 local)
  • Acceptance rate is 58% (50/86); not significantly different for international articles (59%, 37/63) and local articles (56%, 13/23).
  • The ratio of international to local articles (for accepted articles) is 74:26 (37/50 vs. 13/50).

Notes: The list does not include articles that are currently under review (15 international articles, 4 local articles). We consider a paper to be local if affiliation of any author is institution located in the Czech Republic. Otherwise, it is classified as an international article. In the statistics, we do not include the pilot year 2007 (Vol. 1).


The Czech Economic Review, Vol. 5, No. 1

08/03/2011

A new issue of the Czech Economic Review is available online. See table of contents:

Editorial

Editorial to the special issue on Political Economy of Financial Crisis
Fidrmuc, Jarko; Horváth, Roman
AUCO Czech Economic Review 5 (1), 5-5

Special issue: Political economy of financial crisis

Welfare Improving Coordination of Fiscal and Monetary Policy
Hughes Hallett, Andrew; Libich, Jan; Stehlík, Petr
AUCO Czech Economic Review 5 (1), 7-26

Economic and Financial Integration of CEECs: The Impact of Financial Instability
Albulescu, Claudiu T.
AUCO Czech Economic Review 5 (1), 27-45

The Outbreak of the Russian Banking Crisis
Fidrmuc, Jarko; Süss, Philipp J.
AUCO Czech Economic Review 5 (1), 46-63

Foreign Bank Presence and Bank Spreads: Evidence from Turkey
Yalcinkaya Koyuncu, Julide
AUCO Czech Economic Review 5 (1), 64-75

Discussions

Is the Political Economy Stable or Chaotic?
Schofield, Norman
AUCO Czech Economic Review 5 (1), 76-93

To view, download, or recommend a single article, click on the article title. To unsubscribe, please fill in the form in the left column (Table of Contents Alert) on the journal homepage


Special issue "Political economy of financial crisis" in print

28/02/2011

Editorial

Jarko Fidrmuc, Oesterreichische Nationalbank, Osteuropa-Institut and Comenius University
Roman Horváth, Charles University

Welfare Improving Coordination of Fiscal and Monetary Policy

Andrew Hughes Hallett, George Mason University and University of St Andrews
Jan Libich, La Trobe University and CAMA
Petr Stehlík, University of West Bohemia

Abstract: Should independent monetary and fiscal policies coordinate their actions and/or targets? To examine this question the paper considers a simple reduced-form model in which monetary and fiscal policies are formally independent, but still interdependent - through their mutual spillovers. The analysis shows that the medium-run equilibrium levels of inflation, deficit, and output depend on the two policies’ (i) potency (elasticity of output with respect to the policy instruments); (ii) ambition (the level of their output target); and (iii) conservatism (inflation vs output volatility aversion). What matters is however the relative degrees of these characteristics across the two policies rather than the absolute degrees for each policy. This implies that coordination of monetary and fiscal policy is superior to non-cooperative Nash behaviour. In particular, we find that ambition-coordination is more important than conservatism-coordination in terms of avoiding medium-run imbalances due to a tug-of-war between the policies. For this reason, and perhaps surprisingly, ambition-coordination can be welfare improving even if the policymakers’ objectives are idiosyncratic, and their coordinated output targets differ from the socially optimal value.

Keywords: coordination, interaction, monetary policy, .scal policy, central bank, government, inflation, deficit
JEL classification: E61, E63

Economic and Financial Integration of CEECs: The Impact of Financial Instability

Claudiu Tiberiu Albulescu, “Politehnica” University of Timişoara and Poitiers University

Abstract: The recent financial crisis had a powerful impact upon the European countries’ economies, in particular on those from Central and Eastern Europe, with some small exceptions. Thus, applying a panel data approach for a large sample of CEECs, we demonstrate that financial instability negatively influences these countries economic and financial integration. If instability is measured by means of a financial instability index, we have used two classical indicators for the economic integration, namely trade openness and trade intensity index. Indicators such as the interest rates co-movement and the asset share of foreign-owned banks were chosen to calculate financial integration. We highlight the fact that the crisis events hinder the process of CEECs’ integration into the EU, deepening the economic gaps between more and less developed EU members.

Keywords: Financal instability, financial instability index, economic and financial integration, CEECs
JEL classification: C33, F15, F36, G01

The Outbreak of the Russian Banking Crisis

Jarko Fidrmuc, Oesterreichische Nationalbank, Osteuropa-Institut and Comenius University
Philipp Johann Süß, University of Munich

Abstract: Owing to a combination of domestic, regional and international factors, Russian banks have been strongly influenced by the worldwide financial crisis which started in the second half of 2008. In this paper, we estimate an early warning model for the Russian banking crisis. In a first step, we identify 47 Russian banks which failed after September 2008. Using the Bankscope dataset, we then show that balance sheet indicators were informative as early as in 2006 and 2007 about possible failures of these banks. Especially equity, net interest revenues, return on average equity, net loans, and loan loss reserves are identified as the early indicators with high predictive power.
Keywords: Banking and financial crisis, early warning models, Russia, logit
JEL classification: G33, G21, C25

Foreign Bank Presence and Bank Spreads: Evidence from Turkey

Julide Yalcinkaya Koyuncu, Bilecik University

Abstract: Using bank-level data for Turkey, this paper examines whether foreign banks are able to operate with lower spreads and whether the overall level of foreign bank participation in the banking system lowers spreads among domestic banks. Empirical analysis yields that foreign banks are able to charge lower spreads than domestic banks in Turkey. However, findings indicate that the overall level of foreign bank participation in the Turkish banking system does not affect spreads of domestic banks directly. Instead, the overall level of foreign bank participation in the banking system affects the spreads indirectly through its effects on overhead expenses. Overhead expenses of all banks decrease as foreign bank participation increases.

Keywords: Foreign banks, Turkey, emerging markets
JEL classification: G32, N25


Forthcoming discussion article

28/02/2011

Is the Political Economy stable or chaotic?

Norman Schofield, Washington University

Abstract: Recent events in the global economy have caused many writers to argue that the market is driven by animal spirits, by irrational exuberance or speculation. At the same time, the economic downturn has apparently caused many voters in the United States, and other countries, to change their opinion about the proper role of government. Unfortunately, there does not exist a general equilibrium model of the political economy, combining a formal model of the existence, and convergence to a price equilibrium, as well as an equilibrium model of political choice. One impediment to such a theory is the so-called chaos theorem which suggests that existence of a political equilibrium is non-generic. This paper surveys results in the theory of dynamical systems, emphasizing the role of structural stability and chaos. We consider models of celestial mechanics where the notion of chaos first developed, and then examine applications in models of climate change and economics. There is discussion of the past influences of climate on human society, and particularly how agriculture developed during the “holocene”, the past ten thousand years of benign climate. The recent period of globalization is likened to the holocene, and the question is raised whether future climate change may bring economic and political chaos.

Keywords: Economic uncertainty, climate change, political disorder
JEL classification: H10


The Czech Economic Review, Vol. 4, No. 3

14/11/2010

A new issue of the Czech Economic Review is available online. See table of contents:

Editorial

Editorial to the special issue on Econophysics of Markets and Economic Networks
Vošvrda, Miloslav
AUCO Czech Economic Review 4 (3), 234-235

Articles

Keynesian Macrodynamics: Convergence, Roads to Instability and the Emergence of Complex Business Fluctuations
Chiarella, Carl; Hung, Hing; Flaschel, Peter
AUCO Czech Economic Review 4 (3), 236-262

Nonlinear Inflation Expectations and Endogenous Fluctuations
Gomes, Orlando
AUCO Czech Economic Review 4 (3), 263-280

Tail Behavior of the Central European Stock Markets during the Financial Crisis
Baruník, Jozef; Vácha, Lukáš; Vošvrda, Miloslav
AUCO Czech Economic Review 4 (3), 281-294

Forecasting the Quantiles of Daily Equity Returns Using Realized Volatility: Evidence from the Czech Stock Market
Bubák, Vít
AUCO Czech Economic Review 4 (3), 295-314

Rescaled Range Analysis and Detrended Fluctuation Analysis: Finite Sample Properties and Confidence Intervals
Krištoufek, Ladislav
AUCO Czech Economic Review 4 (3), 315-329

Dynamics of Stock Market Correlations
Kenett, Dror Y.; Shapira, Yoash; Madi, Asaf; Bransburg-Zabary, Sharron; Gur-Gershgoren, Gitit; Ben-Jacob, Eshel
AUCO Czech Economic Review 4 (3), 330-340

Book review

Book review: L. E. Calvet & A. J. Fisher, Multifractal Volatility: Theory, Forecasting, and Pricing
Baruník, Jozef
AUCO Czech Economic Review 4 (3), 341-343

Reports

Workshop: Voting, Power, and Manipulation
Doležel, Pavel
AUCO Czech Economic Review 4 (3), 344-345

To view, download, or recommend a single article, click on the article title. To unsubscribe, please fill in the form in the left column (Table of Contents Alert) on the journal homepage.


Scopus

01/11/2010

The independent reviewers of the Content Selection and Advisory Board (CSAB) have completed the year-long review of our journal, and the Board has advised that the AUCO Czech Economic Review will be accepted for inclusion in Scopus. The articles shall be available in this database once Source Collection Department sets up subscriptions for this title.


Citations tracker

09/08/2010

We have used Scopus, CitEc and Google Scholar to map the network of citations to our journal:

Journals

Journal of Applied Mathematics and Decision Sciences, Group Decision and Negotiation, Control and Cybernetics, Post-Communist Economies, Central European Journal of Operations Research, Czech Journal of Economics and Finance, Economics Bulletin, Financial Theory and Practice, Studies and Scientific Researches - Economic Edition, Theoretical and Applied Economics, Politicka ekonomie, Ekonomický časopis, AUCO Czech Economic Review

Working paper series

European Investment Bank, CESifo Working Paper Series, Fondazione Eni Enrico Mattei Working Papers, IZA Discussion Papers, Center in Political Economy of Washington University, Seoul National University, Universite de Saint-Etienne, Ecole Polytecnique, Austrian Institute for Family Studies, Czech National Bank Research Department

Book series and theses

Theory and Decision Library (Springer), University of California, Berkeley (Undergraduate Honors Thesis), Högskolan Dalarna (Master Thesis)


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