This paper examines the major determinants of foreign direct investment (FDI) inflows in 26 European Union (EU) countries using panel data. Our empirical study takes a different approach by separating European countries into two groups: Western (EU-15) countries and Central and Eastern European (CEE) countries. The results from the panel data analysis of FDI inflows to 26 EU countries for the period 1994-2012 show that: (1) traditional location variables such as market size, trade openness, unemployment, infrastructure, tax rate and unit labour costs are able, to a large extent, to explain FDI flows to both groups of countries; (2) there are country-specific factors such as economic growth, unit labour costs and credit risk that contribute to the differences in FDI patterns across EU-15 and CEECs; and (3) policy and institutional quality factors are found to play an important role for both groups of countries. When analyzing host countries based on their relative level of performance, we find that the top ten FDI performers are able to attract a significant amount of FDI because of their macroeconomic stability and high level of institutional development, while for EU countries with low FDI dominance, policy and institutional risk factors play a more important role.
{"title":"Are there any top FDI performers among EU-15 and CEE countries? A comparative panel data analysis","authors":"Miroslav Mateev, I. Tsekov","doi":"10.3326/FINTP.38.3.4","DOIUrl":"https://doi.org/10.3326/FINTP.38.3.4","url":null,"abstract":"This paper examines the major determinants of foreign direct investment (FDI) inflows in 26 European Union (EU) countries using panel data. Our empirical study takes a different approach by separating European countries into two groups: Western (EU-15) countries and Central and Eastern European (CEE) countries. The results from the panel data analysis of FDI inflows to 26 EU countries for the period 1994-2012 show that: (1) traditional location variables such as market size, trade openness, unemployment, infrastructure, tax rate and unit labour costs are able, to a large extent, to explain FDI flows to both groups of countries; (2) there are country-specific factors such as economic growth, unit labour costs and credit risk that contribute to the differences in FDI patterns across EU-15 and CEECs; and (3) policy and institutional quality factors are found to play an important role for both groups of countries. When analyzing host countries based on their relative level of performance, we find that the top ten FDI performers are able to attract a significant amount of FDI because of their macroeconomic stability and high level of institutional development, while for EU countries with low FDI dominance, policy and institutional risk factors play a more important role.","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2014-09-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90586454","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The goal of this research is to analyze developments in employment and employment characteristics during the current crisis in Croatia. The main findings can be summarized as follows: (1) The primary (aggregate) mode of adjustment to the crisis was a decline in employment. There are, however, considerable differences in adjustment patterns across economic activities. (2) During the crisis, jobs were lost in the, more dynamic, private sector, while the number of jobs in the public sector (entities in state ownership) slightly increased. (3) Economic activities with comparatively larger shares of women in employment have experienced fewer employment cuts and the aggregate employment share of women rose during the crisis, especially in activities with a larger share of public sector workers.(4) There has been a declining share of younger workers during the crisis, justifying policy actions to facilitate their employment. (5) Employees with comparatively lower educational attainment face severe challenges in the labor market, which is a longer term trend, not specific to the crisis period. There are indications that this group of employees enjoys a higher level of protection in the public sector. (6) Analysis also shows a rising significance of more flexible forms of employment: increasing shares of fixed term employees (during the last two observed years), and of part time workers. (7) Working hours do not exhibit any strong trends specific to the crisis, except for the diminishing number of overtime hours per worker.
{"title":"Employment and employment conditions in the current economic crisis in Croatia","authors":"Goran Vukšić","doi":"10.3326/FINTP.38.2.1","DOIUrl":"https://doi.org/10.3326/FINTP.38.2.1","url":null,"abstract":"The goal of this research is to analyze developments in employment and employment characteristics during the current crisis in Croatia. The main findings can be summarized as follows: (1) The primary (aggregate) mode of adjustment to the crisis was a decline in employment. There are, however, considerable differences in adjustment patterns across economic activities. (2) During the crisis, jobs were lost in the, more dynamic, private sector, while the number of jobs in the public sector (entities in state ownership) slightly increased. (3) Economic activities with comparatively larger shares of women in employment have experienced fewer employment cuts and the aggregate employment share of women rose during the crisis, especially in activities with a larger share of public sector workers.(4) There has been a declining share of younger workers during the crisis, justifying policy actions to facilitate their employment. (5) Employees with comparatively lower educational attainment face severe challenges in the labor market, which is a longer term trend, not specific to the crisis period. There are indications that this group of employees enjoys a higher level of protection in the public sector. (6) Analysis also shows a rising significance of more flexible forms of employment: increasing shares of fixed term employees (during the last two observed years), and of part time workers. (7) Working hours do not exhibit any strong trends specific to the crisis, except for the diminishing number of overtime hours per worker.","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2014-06-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81636931","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
According to business climate and competitiveness indicators published by international organisations, Croatia is a country with a rigid labour market and a high level of the legal protection of employees. Given that an Act on Amendments to the Labour Act (OG 73/13) entered into force in Croatia in June 2013, this paper examines changes in employment protection legislation in Croatia and Central and Eastern European (CEE) countries, as well as in Croatia's main trading partners during the period between 2008 and 2013. A cross-country comparison shows a strong downward trend in legal employment protection in most CEE countries during the observed period, primarily as concerns individual dismissal in the cases of regular employment contracts, while in the case of temporary employment the protection strengthened slightly. On the other hand, despite the adoption of amendments to the Labour Act (LA), Croatian labour legislation governing employment protection for regular employment contracts remains relatively inflexible compared to that in other countries.
{"title":"Employment protection legislation in Croatia","authors":"Marina Kunovac","doi":"10.3326/FINTP.38.2.2","DOIUrl":"https://doi.org/10.3326/FINTP.38.2.2","url":null,"abstract":"According to business climate and competitiveness indicators published by international organisations, Croatia is a country with a rigid labour market and a high level of the legal protection of employees. Given that an Act on Amendments to the Labour Act (OG 73/13) entered into force in Croatia in June 2013, this paper examines changes in employment protection legislation in Croatia and Central and Eastern European (CEE) countries, as well as in Croatia's main trading partners during the period between 2008 and 2013. A cross-country comparison shows a strong downward trend in legal employment protection in most CEE countries during the observed period, primarily as concerns individual dismissal in the cases of regular employment contracts, while in the case of temporary employment the protection strengthened slightly. On the other hand, despite the adoption of amendments to the Labour Act (LA), Croatian labour legislation governing employment protection for regular employment contracts remains relatively inflexible compared to that in other countries.","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2014-06-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74958074","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Book review: The Economics of European Integration","authors":"Tomislav Globan","doi":"10.3326/FINTP.38.2.5","DOIUrl":"https://doi.org/10.3326/FINTP.38.2.5","url":null,"abstract":"","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2014-06-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76088966","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper investigates fiscal multipliers in Croatia in the period 1996Q1-2011Q4. For this purpose, a Blanchard Perotti three variable baseline SVAR is employed as a no regime-switch model, along with a four variable baseline STVAR as a regime-switch model. Results show that during recessions fiscal multipliers in Croatia tend to be much larger and move in line with Keynesian assumptions, i.e. a positive government spending shock increases output, private consumption and private investment, while oppositely a positive tax shock worsens the same macroeconomic variables. Moreover, during recession times government spending for purchases of goods and services seems to be the most effective fiscal instrument for boosting economic activity.
{"title":"The power of fiscal multipliers in Croatia","authors":"Ana Grdović Gnip","doi":"10.3326/FINTP.38.2.3","DOIUrl":"https://doi.org/10.3326/FINTP.38.2.3","url":null,"abstract":"This paper investigates fiscal multipliers in Croatia in the period 1996Q1-2011Q4. For this purpose, a Blanchard Perotti three variable baseline SVAR is employed as a no regime-switch model, along with a four variable baseline STVAR as a regime-switch model. Results show that during recessions fiscal multipliers in Croatia tend to be much larger and move in line with Keynesian assumptions, i.e. a positive government spending shock increases output, private consumption and private investment, while oppositely a positive tax shock worsens the same macroeconomic variables. Moreover, during recession times government spending for purchases of goods and services seems to be the most effective fiscal instrument for boosting economic activity.","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2014-06-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89457870","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines the existence of the political budget cycle (PBC) at the local unit level in Croatia. The research was focused on a sample of 19 county centres, the City of Zagreb and Pula in the period from 2002 to 2011. During that time three parliamentary (in 2003, 2007 and in 2011) and two local elections (in 2005 and in 2009) were held and all the results are calculated at the level of the selected cities. The results do not confirm the existence of opportunistic PBCs, either when the analysis takes in all five elections or when it considers only the parliamentary polls. They do however indicate the restructuring of total expenditures based on second-best strategies and institutional constraints. Analysis of local elections alone indicates the existence of Rogoff’s model of information asymmetry. The paper also presents various theoretical models of the PBC together with a survey of empirical research regarding the existence of PBCs in the developed, transitional and developing countries.
{"title":"Political budget cycles at the municipal level in Croatia","authors":"Velibor Mačkić","doi":"10.3326/FINTP.38.1.1","DOIUrl":"https://doi.org/10.3326/FINTP.38.1.1","url":null,"abstract":"This paper examines the existence of the political budget cycle (PBC) at the local unit level in Croatia. The research was focused on a sample of 19 county centres, the City of Zagreb and Pula in the period from 2002 to 2011. During that time three parliamentary (in 2003, 2007 and in 2011) and two local elections (in 2005 and in 2009) were held and all the results are calculated at the level of the selected cities. The results do not confirm the existence of opportunistic PBCs, either when the analysis takes in all five elections or when it considers only the parliamentary polls. They do however indicate the restructuring of total expenditures based on second-best strategies and institutional constraints. Analysis of local elections alone indicates the existence of Rogoff’s model of information asymmetry. The paper also presents various theoretical models of the PBC together with a survey of empirical research regarding the existence of PBCs in the developed, transitional and developing countries.","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2014-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88648230","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Statistical methods based on Benford’s distribution, Z- and I‡2-statistics are being successfully applied to detect likely accounting and reporting fraud, for example in the daily usage of the Internal Revenue Service in the USA, and in historical analysis of Greek macroeconomic reporting. We adapt and apply the methodology to the analysis of the reporting of some leading Croatian public companies. We find indications of reporting fraud in several of the companies analyzed. In particular we find correlation between the likelihood of reporting fraud, measured as a deviation from Benford’s law, and reported net income losses, for companies large enough (with a revenue of at least 1 billion kuna). Finally, we suggest application of the methodology to improve the internal processes, efficiency and effectiveness of the State Auditing Office.Data availability: The data used in the study are corporate data in the public domain. For legal reasons, however, the identities of the companies are disguised. Contact the first author for the sanitized data sets that can be used to verify and replicate the analysis.
{"title":"Statistical detection of fraud in the reporting of Croatian public companies","authors":"S. Slijepčević, Branimir Blašković","doi":"10.3326/FINTP.38.1.4","DOIUrl":"https://doi.org/10.3326/FINTP.38.1.4","url":null,"abstract":"Statistical methods based on Benford’s distribution, Z- and I‡2-statistics are being successfully applied to detect likely accounting and reporting fraud, for example in the daily usage of the Internal Revenue Service in the USA, and in historical analysis of Greek macroeconomic reporting. We adapt and apply the methodology to the analysis of the reporting of some leading Croatian public companies. We find indications of reporting fraud in several of the companies analyzed. In particular we find correlation between the likelihood of reporting fraud, measured as a deviation from Benford’s law, and reported net income losses, for companies large enough (with a revenue of at least 1 billion kuna). Finally, we suggest application of the methodology to improve the internal processes, efficiency and effectiveness of the State Auditing Office.Data availability: The data used in the study are corporate data in the public domain. For legal reasons, however, the identities of the companies are disguised. Contact the first author for the sanitized data sets that can be used to verify and replicate the analysis.","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2014-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75612225","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper analyses the determinants of the changes in the non-performing loan (NPL) ratio in selected European emerging markets. The model was estimated on a panel dataset using a fixed effects estimator for seven Central and Eastern European (CEE) countries between Q3:2007 and Q3:2012. The countries analyzed are Bulgaria, Croatia, Czech Republic, Hungary, Latvia, Romania and Slovakia. Although the literature on NPLs is quite extensive, this is the first empirical research on the countries of CEE region using aggregate, country-level data on problem loans. The results suggest that the primary cause of high levels of NPLs is the economic slowdown, which is evident from statistically significant and economically large coefficients on GDP, unemployment and the inflation rate.
{"title":"Determinants of non-performing loans in Central and Eastern European countries","authors":"Bruna Škarica","doi":"10.3326/FINTP.38.1.2","DOIUrl":"https://doi.org/10.3326/FINTP.38.1.2","url":null,"abstract":"This paper analyses the determinants of the changes in the non-performing loan (NPL) ratio in selected European emerging markets. The model was estimated on a panel dataset using a fixed effects estimator for seven Central and Eastern European (CEE) countries between Q3:2007 and Q3:2012. The countries analyzed are Bulgaria, Croatia, Czech Republic, Hungary, Latvia, Romania and Slovakia. Although the literature on NPLs is quite extensive, this is the first empirical research on the countries of CEE region using aggregate, country-level data on problem loans. The results suggest that the primary cause of high levels of NPLs is the economic slowdown, which is evident from statistically significant and economically large coefficients on GDP, unemployment and the inflation rate.","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2014-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88659820","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Fostering an enhanced relationship between the tax administration and taxpayers is a promising approach for transforming traditional vertical relationships into a partnership based on trust and close, proactive cooperation. This article examines an example of such efforts, based on a pilot project in Slovenia called Horizontal Monitoring. After two years of operation, the project has justified its existence and represents a solid basis for extension to a larger group of taxpayers.
{"title":"Some evidence for implementing an enhanced relationship in Slovenia","authors":"M. Verbič, Mitja Cok, Darija Šinkovec","doi":"10.3326/FINTP.38.1.3","DOIUrl":"https://doi.org/10.3326/FINTP.38.1.3","url":null,"abstract":"Fostering an enhanced relationship between the tax administration and taxpayers is a promising approach for transforming traditional vertical relationships into a partnership based on trust and close, proactive cooperation. This article examines an example of such efforts, based on a pilot project in Slovenia called Horizontal Monitoring. After two years of operation, the project has justified its existence and represents a solid basis for extension to a larger group of taxpayers.","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2014-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73308456","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In order to shape tax reform it is necessary objectively to assess the current stateof-the-art of and of the outlook for the tax system. After having reviewed all previous reforms in the light of the consumption-based (interest-adjusted) concept of direct taxation, which was almost systematically implemented in Croatia in 1994, we present the results of a broad expert opinion survey about the Croatian tax system. The most interesting results suggest the maintenance/(re)introduction of different tax incentives and reduced VAT rates, rejection of a flat tax as well as decrease of tax brackets, an increase in alcohol and tobacco duties, the introduction of a financial activities tax, a further shift from income to consumption, a decrease of the tax share in GDP and a belief in the behavioral responsiveness of tax decreases/exemptions, as well as a firm commitment to the principle of equity. The last three economic views/values are important predictors of other tax attitudes.
{"title":"Perspectives of tax reforms in Croatia: expert opinion survey","authors":"Hrvoje Šimović, Helena Blažić, A. Štambuk","doi":"10.3326/FINTP.38.4.2","DOIUrl":"https://doi.org/10.3326/FINTP.38.4.2","url":null,"abstract":"In order to shape tax reform it is necessary objectively to assess the current stateof-the-art of and of the outlook for the tax system. After having reviewed all previous reforms in the light of the consumption-based (interest-adjusted) concept of direct taxation, which was almost systematically implemented in Croatia in 1994, we present the results of a broad expert opinion survey about the Croatian tax system. The most interesting results suggest the maintenance/(re)introduction of different tax incentives and reduced VAT rates, rejection of a flat tax as well as decrease of tax brackets, an increase in alcohol and tobacco duties, the introduction of a financial activities tax, a further shift from income to consumption, a decrease of the tax share in GDP and a belief in the behavioral responsiveness of tax decreases/exemptions, as well as a firm commitment to the principle of equity. The last three economic views/values are important predictors of other tax attitudes.","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2014-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86610704","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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