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The paper investigates the relationship between the financial distress of European privatecompanies identified by the Altman Z-score and real bankruptcy. We extend the traditionalZ-score with the asymmetric effect of economic activity. Our results show higher forecastingperformance of the Altman Z-score of large companies in a three-year projection. We arguethat our results differ from Altman (1968) because of specific market conditions in Europethat enable prolongation of activity after financial distress is identified. We also emphasizethe role of liquidity, size, performance and indebtedness in increasing financial distressforecasting performance. Finally, we extend our prediction model with selected indicatorsof quality and development of the institutional environment.
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Irresponsible behaviour practices of tax entities are becoming more sophisticated.In addition to repressive tools, the tax administrator may use a proactive approachto detect an entity’s illegal activity. The paper aims to identify the relevant factors andassess their impact on estimating the probability of irresponsible behaviour of companiestowards the tax administrator in individual sectors of the economy. Based on data fromfinancial statements, we monitored the characteristic features of tax-responsible andtax-irresponsible companies in the Slovak Republic in the period 2015–2018 in 15 sec-tors. We created predictive models of their irresponsible behaviour towards the taxadministrator for each industry using logistic regression. The results show that an analysisof the quantitative features of companies makes it possible to identify factors that alertthe tax administrator in advance to potentially illegal behaviour of tax entities.
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The article describes when and in what form the term “monopoly” appeared in theory.First, attention is paid to A. Smith’s classical political economy and the neoclassicalbinary model of competition and monopoly presented by A. Marshall. Robinson’s modelof imperfect competition and Chamberlin’s model of monopolistic competition of 1933were turning points in economic theory. The article not only highlights the elementsthat were adopted from Marshall and Pigou of the Cambridge Neoclassical School andare common to both theories, but also emphasizes the aspects in which the approachesof Robinson and Chamberlin differ and highlights their contribution to economic theoryand competition law.
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This paper examines the relationship between insurance market development and economic growth in EU member states in the period 1998–2018. Our results indicate that there is no causality between premium per capita and GDP per capita growth in the case of 11 out of the 23 analysed countries, including four countries classified as emerging markets. However, in the case of panel data covering all the countries, we determined a two-way causality between insurance market development and economic growth. In the short run, premium per capita has a positive and significant impact on the economic growth as proven in the data panel and in the case of individual countries, except in the case of Ireland and Luxembourg, where the applied model shows only error-correction coefficient values. Besides, our results indicate that premium per capita has a significant positive effect on economic growth in the long run in the case of Belgium, Cyprus, Bulgaria, Romania and Slovenia, i.e., insurance premium is a key determinant of long-term economic growth. The results show a statistically significant long-term positive relationship between premium per capita and GDP growth per capita in the case of a panel analysis of all the observed countries and countries classified as emerging markets. On the other hand, the panel data analysis of the countries classified in the category of developed markets showed a long-term positive relationship, but not a statistically significant one. Since that results indicate that the insurance market development could contribute to ensuring longterm economic stability and growth of observed countries, special attention needs to be paid to the strategy of insurance market development in a changing business environment.
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Monitoring of inflation rate dynamics is one of the most important tasks in order to identify the current economic conditions of the observed countries. The aim of this study is to examine the unit root properties of inflation in the Western Balkan countries. It also investigates the existence of structural breaks and nonlinearity. The time horizon encompasses the period 2006Q1–2020Q2. The results suggest that the inflation in Albania and Montenegro manifests a nonstationary process and structural breaks. The macroeconomic shocks will have more persistent effects on the inflation rate if it is characterized by nonstationarity. The inflation rates of Serbia and Bosnia and Herzegovina are characterized by nonlinear mean reverting behaviour. This implies less costly implementation of the proclaimed monetary strategy.
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Simulation of Systemic Risk as a Consequence of Fire Sales: Application to EU Banking SectorThe paper integrates elements of microstructural network models of the banking sector developed by Cont and Shaanning (2017) and Duarte and Eisenbach (2018) to simulate endogenously the fire sales contagion channel of systemic risk. The scale of the effect is illustrated on the EBA supervisory stress test results for 2018, based on which the secondary impact of fire sales increases aggregate losses by 69%. The model is used to identify banks with the highest contribution to systemic risk. Alternative systemicity predicators are proposed based on the results. The second section discusses the ability of the model to incorporate behavioural and regulatory aspects associated with the systemic risk, with the main focus on the impact of (i) calibration of regulatory leverage ratio limits, (ii) leverage ratio targeting, (iii) decrease in market liquidity, and (iv) change in the shape of the market price impact function on the dynamics of systemic losses due to the fire sales contagion
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This study is aimed to examine the relationship causality between energy security and growth for a total of 74 countries including 39 high-income countries, 23 upper-middleincome countries, and 12 lower-middle-income countries by using the Kónya´s (Kónya, 2006) Bootstrap Panel Granger Causality approach. According to the results obtained, it has been determined unidirectional causality relationship from energy security risk level to GDP for 14 countries and from GDP to energy security risk level for 20 countries. On the other hand, there is bidirectional causality between energy security risk level and GDP for 22 countries, while there is no causality between energy security risk level and GDP for 18 countries. Moreover, the results are also demonstrated that the rate of detection of a causality relationship increases as one moves from high-income group countries to lower-middle-income group countries. The results, which evidence the existence of a relationship between energy security risk level and economic growth for many countries, reveal the importance of the policies to be implemented in this direction.
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The overall impact of human activities on the Earth’s system and its key elements such as biodiversity or climate is so great that the contemporary era is called the Anthropocene, where globalization is overwhelming and the global influence of human action equals natural processes. This brings about many problems of global nature that are difficult to solve as adequate governance of global common goods is not satisfactorily developed. The various historical and contemporary attempts to provide some form of governance at the global level are presented, including the concept of common heritage of mankind or community approaches. An important contribution represents the concept of global public goods that was espoused bymany intergovernmental and international organizations, including the UN and the EU. The relationship with the global sustainable development goals and official development assistance is also mentioned.
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In the last few years, central banks have been exposed to new challenges and tasks that they need to face. One of those challenges is climate change, which directly affects the central bank‘s main goals, namely achieving and maintaining price and financial stability. In order to fulfill the goals defined by the Paris Agreement, it is necessary for central banks to take a more active part in the fight against the consequences of climate change. This means that central banks are expected to adopt policies and strategies that will guide the financial sector to successfully manage the risks of climate change and encourage them to direct investments in clean technologies and low-carbon infrastructure. This would achieve sustainable economic development in the long term, which is based on the principle of reducing the risk of climate change, while at the same time preserving the environment.
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The data revolution happening throughout the world has brought transformation in the financial services sector. This vast information has opened doors to understanding the needs of the customers, finding insights, and lowering risks. In addition, it helps the financial services industry to take actions to improve clients’ satisfaction at a faster rate than it was previously possible. Financial firms can develop new insights using BD because they can now collect a large volume of data about their customers, their spending pattern, and provide services that are beneficial, convenient, and quick for the customers. They can expand the use of those insights not only for their consumers but also for their internal process optimization, benefiting everyone in the process. While the impact of BDA on financial service companies is ubiquitous, not so many studies have been published to understand which aspects of the financial services industry could greatly benefit from the rise of technology and BDA. Few published studies address the challenges faced by banks in this technology era if they do not have BD tools implemented. This research covers data from banks from January 2019 to January 2022 to address that gap of a several banks from America and Europe that faced declining customer satisfaction. It uncovers the best methods used by financial firms globally to implement BDA to improve the services. This paper will also look at how BDA has been successfully used in the banking industry, regarding the following elements: consumer behavior, channels use, consumer spending pattern and profile creation, product cross-selling based upon user-profiling, analysis of feedback and sentiment, management of secure transactions, and fraud etc. This study helps find out and makes contributions on how the financial services industry, such as banks, could leverage BDA and provide superior services. Further research could be conducted across other players in the finance industry to learn about how they are impacted by the BDA.
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On February 1st 2016, the Republic of Serbia acquired the status of a full member of the European Union Convention on Common Transit Procedure, and joined the existing members: EU countries, EFTA countries, as well as individual members Turkey and the Republic of North Macedonia. In this way, Serbia put its particularly important geopolitical position in Europe, and its openness to support and acceptance of foreign direct investments, into the function of further dynamic improvement in the sphere of economy and overall economic development.
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In this work we look at one special case to provide a rational basis for the following assertion known as Statistical Law of Large Numbers: If an event E has a constant probability p of occurrence on any one trial, and has occurred m times in n trials, then, if the relative frequency of E, m/n, approaches the value of a limit point l and the accuracy of the approximation increases as the number of trials increases, we have l = p. The argument we propose is based on the concepts of \event" and \trial", formulated in a recent paper by the author himself, and their direct implications.
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Financial openness is introduced into a real-business-cycle setup augmented with a detailed government sector. The model is calibrated to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2020). The quantitative importance of financial openness is investigated for the stabilization of cyclical fluctuations in Bulgaria. The computational experiment performed in this paper reveals that greater financial openness increases the impact of technology shocks on output, investment, consumption, labor hours, and net exports. This amplification effect is due to the following mechanism: openness provides a cheap access to foreign funds. Unfortunately, the new results come at odds with a major empirical observation, i.e. that consumption and net exports strongly pro-cyclical; the model, however, produces a countercyclical consumption, as well as net exports. Thus, such a setup is not yet ready to be used for policy analysis.
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In this note we provide a closed form utility function for gains that is S-shaped around the origin and satisfies the Friedman-Savage hypothesis. We obtain the corresponding Arrow{Pratt measure of absolute risk aversion (ARA) as well as Arrow{Pratt measure of relative risk aversion (RRA) for it.
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The following contributions are hereby worked: one mathematically formalises Mundell's Impossible trio and Rodrik's Globalisation paradox, supplying the latter with a taxonomy in terms of the current account; by means of Kaldor's price endogeneity in output, one proves that external real money market disparity and trade generate external output mismatches and lead to autarky unless offset, using topology and dynamical systems; one characterises transfers and federalism and shows that all unitary states are federal polities and can merge into confederations; one demonstrates that the said external output mismatches can be only eluded via autarky or neutralisation, irrespective of federalism; one discerns (i) artificial currency areas guaranteeing inter-regional external output growth equality and (ii) modern protectionism as two Nash equilibria, to wit, the mercantile dilemma, especially rationalising the nexus between the Gold standard, the Industrial revolution and the Great divergence there through.
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