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Special issue "Political economy of financial crisis" in print



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


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


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


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


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


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

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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


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


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)

The AUCO Czech Economic Review, Vol. 4, No. 2


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


Co-determination and Merger Incentives from Transfers of Wealth: Firm Owners vs. Workers
Coscollá, M. Paz; Granero, Luis M.
AUCO Czech Economic Review 4 (2), 123-138

Monetary Policy Transmission in Italy: A BVAR Analysis with Sign Restriction
Migliardo, Carlo
AUCO Czech Economic Review 4 (2), 139-167

Risk-Sharing Externalities and Its Implications for Equity Premium in an Infinite-Horizon Economy
Ohno, Hiroaki
AUCO Czech Economic Review 4 (2), 168-188

Interval Values for Multicriteria Cooperative Games
Pieri, Graziano; Pusillo, Lucia
AUCO Czech Economic Review 4 (2), 189-200

The Uncertainty in Voting Power: The Case of the Czech Parliament 1996–2004
Mielcová, Elena
AUCO Czech Economic Review 4 (2), 201-222

Book review

M. Luptáčik (2009): Mathematical Optimization and Economic Analysis
Doležel, Pavel
AUCO Czech Economic Review 4 (1), 223-229

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.

Access statistics by source


We have compiled lifetime access statistics to our journal articles, using three sources that constantly monitor the use of articles in their depositories.

Total downloads
Source/Year (or Volume) 2007 2008 2009 2010
Journal homepage  1,745 3,631 4,687  704
RePEc  31  308  515  259
CEEOL  58 62 61 3
Total abstract views
Source/Year (or Volume) 2007 2008 2009 2010
Journal homepage  8,162 17,849 8,563  1,333
RePEc  158  1,480  2,137  1,118

Call for book reviews


We are currently seeking book reviews in all fields of economics covered in our Aims and Scope. We intend to publish approximately 700-word reviews in each issue of AUCO, which appears three times a year. Prior to submitting a book review, the writers are welcome to submit proposals for book reviews to our editorial office. A proposal should consist of a brief statement about the significance of the book in question, basic information about its publisher and publication date, and a brief summary of the review author's background and reasons for interest in the book. We promise careful and impartial consideration for each submission.

Featured article of the forthcoming issue


Risk-Sharing Externalities and Its Implications for Equity Premium in an Infinite-Horizon Economy

Hiroaki Ohno
Tokyo International University

Abstract: This paper examines asset prices when risk-sharing externalities are incorporated into an infinite-horizon model where consumers are exposed to the endogenous income risks. It is shown that there exist multiple types of equilibria depending on the degree of market participation. Under incomplete participation, income risks cannot be fully diversified as they induce higher precautionary savings, which are conducive in turn to higher asset prices. However, the exposure to additional dividend risks can lead at the same time to a lower demand for risky assets. The aggregate effect is an increase in the equity risk premium and a decrease in the risk-free rate. Thus, the evidence suggests that the equity premium and risk-free rate puzzles can be partly explained by infinite-horizon models with incomplete market participation.

Keywords: Risk-sharing externalities, endogenous income risks, incomplete market participation, asset prices
JEL classification: D11, E21, E44, G12



The most downloaded articles at this webpage are as follows:

Volume 4 (2010)

Volume 3 (2009)

Volume 2 (2008)

Volume 1 (2007)

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