Fiscal federalism in Bosnia and Herzegovina is characterized by multi-level asymmetric architecture of government sector and a high degree of fiscal decentralization. Reform of indirect taxation has resulted in centralization of the major part of the revenues in B&H and induced a high degree of fiscal interdependence of governments. In the absence of national economic and fiscal goals and fiscal coordination required during the global economic crisis, strong autonomous activities of the Entities and District have been expressed. Uncoordinated and divergent responses to the crisis in addition to distorting the achieved degree of tax harmonization within B&H has led to a widening fiscal deficit and the rapid growth of borrowing at all levels of government. The aim of this paper is to propose a new model of fiscal coordination in B&H that would mitigate the negative effects of fiscal decentralization on macroeconomic management. The key hypothesis is that, in given political constraints, only a concept of fiscal federalism that includes comprehensive, institutionalized and obligatory fiscal coordination can ensure a coherent response to the crisis.
{"title":"Multi-level fiscal system in Bosnia and Herzegovina: evolution and coping with economic crisis","authors":"Dinka Antić","doi":"10.3326/FINTP.37.3.3","DOIUrl":"https://doi.org/10.3326/FINTP.37.3.3","url":null,"abstract":"Fiscal federalism in Bosnia and Herzegovina is characterized by multi-level asymmetric architecture of government sector and a high degree of fiscal decentralization. Reform of indirect taxation has resulted in centralization of the major part of the revenues in B&H and induced a high degree of fiscal interdependence of governments. In the absence of national economic and fiscal goals and fiscal coordination required during the global economic crisis, strong autonomous activities of the Entities and District have been expressed. Uncoordinated and divergent responses to the crisis in addition to distorting the achieved degree of tax harmonization within B&H has led to a widening fiscal deficit and the rapid growth of borrowing at all levels of government. The aim of this paper is to propose a new model of fiscal coordination in B&H that would mitigate the negative effects of fiscal decentralization on macroeconomic management. The key hypothesis is that, in given political constraints, only a concept of fiscal federalism that includes comprehensive, institutionalized and obligatory fiscal coordination can ensure a coherent response to the crisis.","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2013-09-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"72857625","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}
Tax havens are not recent phenomena. However, in contrast to historical precedents, tax havens in the age of mobile capital allow for non-consensual transfers and are not profitable for every citizen. We discuss the four main groups of tax havens (former Western possessions, sovereign nations, countries controlled by cartels, and emerging economies). This article also synthesizes the history of tax havens and describes their current heterogeneity, discussing the main methods available to regulate tax haven flows. Some of the most efficient methods involve unilateral measures (such as the Fiscal Transparency of Outland Societies) but also encompass multilateral measures (such as Tax Harmonization and the Request for Information).
{"title":"Tax havens or tax hells? A discussion of the historical roots and present consequences of tax havens","authors":"Ana Raposo, P. Mourão","doi":"10.3326/FINTP.37.3.4","DOIUrl":"https://doi.org/10.3326/FINTP.37.3.4","url":null,"abstract":"Tax havens are not recent phenomena. However, in contrast to historical precedents, tax havens in the age of mobile capital allow for non-consensual transfers and are not profitable for every citizen. We discuss the four main groups of tax havens (former Western possessions, sovereign nations, countries controlled by cartels, and emerging economies). This article also synthesizes the history of tax havens and describes their current heterogeneity, discussing the main methods available to regulate tax haven flows. Some of the most efficient methods involve unilateral measures (such as the Fiscal Transparency of Outland Societies) but also encompass multilateral measures (such as Tax Harmonization and the Request for Information).","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2013-09-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86066627","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 a global economy, foreign direct investment (FDI) represents the main form of international business activities. More than the mere cross-border movement of capital, FDI includes transfer of technology and know-how, thus contributing to competitiveness, employment and trade, and consequently, economic growth and the development of the local economy. The recent drop in international capital flows resulting from global financial and economic crisis has caused concerns regarding growth prospects for the world economy in general and that of less advanced transition countries in particular. By hypothesizing that Croatia, as the next member of the EU, has realized sub-optimal effects in attracting FDI, and that international competition in this field is expected to grow further, the aim of the paper is to find out determining factors behind inward FDI to transition countries, in order to detect the capacities of Croatia in hosting new foreign investment. Statistical analysis, focusing on bilateral FDI-flows and country-specific characteristics, proved the importance of typical â€Ygravityâ€?-type variables, as well as those based on increasing returns to scale, while showing that at present Croatia has exhausted its potentials in hosting new FDI.
{"title":"Determinants of FDI in transition countries and estimation of the potential level of Croatian FDI","authors":"Dražen Derado","doi":"10.3326/FINTP.37.3.1","DOIUrl":"https://doi.org/10.3326/FINTP.37.3.1","url":null,"abstract":"In a global economy, foreign direct investment (FDI) represents the main form of international business activities. More than the mere cross-border movement of capital, FDI includes transfer of technology and know-how, thus contributing to competitiveness, employment and trade, and consequently, economic growth and the development of the local economy. The recent drop in international capital flows resulting from global financial and economic crisis has caused concerns regarding growth prospects for the world economy in general and that of less advanced transition countries in particular. By hypothesizing that Croatia, as the next member of the EU, has realized sub-optimal effects in attracting FDI, and that international competition in this field is expected to grow further, the aim of the paper is to find out determining factors behind inward FDI to transition countries, in order to detect the capacities of Croatia in hosting new foreign investment. Statistical analysis, focusing on bilateral FDI-flows and country-specific characteristics, proved the importance of typical â€Ygravityâ€?-type variables, as well as those based on increasing returns to scale, while showing that at present Croatia has exhausted its potentials in hosting new FDI.","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2013-09-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87300679","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":"Financiranje velikih gradova / Tereza Rogić Lugarić. Faculty of Law: Study Centre of Public Administration and Public Finances, Zagreb, 2012.","authors":"Hrvoje Šimović","doi":"10.3326/FINTP.37.2.5","DOIUrl":"https://doi.org/10.3326/FINTP.37.2.5","url":null,"abstract":"","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2013-06-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73154590","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 risk assessment system was introduced in the Republic of Croatia in 2009, as a result of harmonization with international standards, especially the Directive 2005/60/EC on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing. Risk assessment is an extensive concept which requires not only a legislative framework, but also the application of numerous criteria for its effective implementation in practice. Among these criteria are suspicious transactions, closely related to the assessment of the customer, transaction, product or service.The undeniable contribution of suspicious transactions to the quality of the risk assessment system will be confirmed by a statistical analysis of a number of West and East European countries. A combination of strict, but sufficiently flexible legal provisions governing the system for prevention of money laundering and terrorist financing and a statistical analysis of reported suspicious transactions will lead to conclusions that either support or represent criticism of the efficiency of application of the risk assessment system in practice.The aforementioned statistical analysis will show whether suspicious transactions are a reliable criterion for the risk assessment analysis, and whether they can be considered the only such criterion. There is a possibility that the findings of the analysis will be contradictory to those of some international studies.
{"title":"Money laundering: correlation between risk assessment and suspicious transactions","authors":"S. Cindori","doi":"10.3326/FINTP.37.2.3","DOIUrl":"https://doi.org/10.3326/FINTP.37.2.3","url":null,"abstract":"The risk assessment system was introduced in the Republic of Croatia in 2009, as a result of harmonization with international standards, especially the Directive 2005/60/EC on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing. Risk assessment is an extensive concept which requires not only a legislative framework, but also the application of numerous criteria for its effective implementation in practice. Among these criteria are suspicious transactions, closely related to the assessment of the customer, transaction, product or service.The undeniable contribution of suspicious transactions to the quality of the risk assessment system will be confirmed by a statistical analysis of a number of West and East European countries. A combination of strict, but sufficiently flexible legal provisions governing the system for prevention of money laundering and terrorist financing and a statistical analysis of reported suspicious transactions will lead to conclusions that either support or represent criticism of the efficiency of application of the risk assessment system in practice.The aforementioned statistical analysis will show whether suspicious transactions are a reliable criterion for the risk assessment analysis, and whether they can be considered the only such criterion. There is a possibility that the findings of the analysis will be contradictory to those of some international studies.","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2013-06-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77719511","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 presents an overview of theoretical and empirical research on the interaction between political institutions and economic variables. Using the dynamic panel model, the paper also investigates the indirect effects of electoral systems on the size of general government spending. The analysis is performed on a panel dataset of 26 countries (25 member states of the European Union and Croatia) for the period between 1995 and 2010. The results show that government fragmentation and political stability affect the dynamics of budgetary expenditures in line with theoretical assumptions. Regarding the implications of this research for Croatia, it has been shown that a higher degree of government fragmentation leads to an increase in government spending which is a significant result since Croatia has generally had some form of coalition government.
{"title":"The effect of political institutions on the size of government spending in European Union member states and Croatia","authors":"V. Vučković, M. Sertic","doi":"10.3326/FINTP.37.2.2","DOIUrl":"https://doi.org/10.3326/FINTP.37.2.2","url":null,"abstract":"This paper presents an overview of theoretical and empirical research on the interaction between political institutions and economic variables. Using the dynamic panel model, the paper also investigates the indirect effects of electoral systems on the size of general government spending. The analysis is performed on a panel dataset of 26 countries (25 member states of the European Union and Croatia) for the period between 1995 and 2010. The results show that government fragmentation and political stability affect the dynamics of budgetary expenditures in line with theoretical assumptions. Regarding the implications of this research for Croatia, it has been shown that a higher degree of government fragmentation leads to an increase in government spending which is a significant result since Croatia has generally had some form of coalition government.","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2013-06-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78292786","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 global financial crisis and the problems in peripheral EU countries resulted in increased attention to fiscal developments and their impact on borrowing costs for both public and private sector. Existing theoretical literature suggests that worsening of current and expected budget balances as well as an increase of public debt lead to a rise in short and long term interest rates for sovereign debtors. However, empirical results are inconclusive, especially for emerging market countries. This paper analyzes the factors that determine the dynamics of government bond spreads, with special emphasis on fiscal indicators. The survey covered 17 European countries, of which 9 are developed and 8 are emerging market economies, all of them members of the EU except Croatia. The empirical part of the paper employs dynamic panel data method and uses the Arellano and Bond estimator to get consistent estimates of parameters of interest. The results show that in the period 2004-2011 fiscal balance and public debt projections had a significant impact on the differences in government bond yields for emerging market countries, with the effect being much stronger during the period after the onset of financial crises. On the other hand, it seems that sovereign spread dynamics in developed countries is driven mostly by the global market sentiment.
{"title":"Fiscal determinants of government borrowing costs: do we have only ourselves to blame?","authors":"Alen Bobetko, Mirna Dumičić, Josip Funda","doi":"10.3326/FINTP.37.2.1","DOIUrl":"https://doi.org/10.3326/FINTP.37.2.1","url":null,"abstract":"The global financial crisis and the problems in peripheral EU countries resulted in increased attention to fiscal developments and their impact on borrowing costs for both public and private sector. Existing theoretical literature suggests that worsening of current and expected budget balances as well as an increase of public debt lead to a rise in short and long term interest rates for sovereign debtors. However, empirical results are inconclusive, especially for emerging market countries. This paper analyzes the factors that determine the dynamics of government bond spreads, with special emphasis on fiscal indicators. The survey covered 17 European countries, of which 9 are developed and 8 are emerging market economies, all of them members of the EU except Croatia. The empirical part of the paper employs dynamic panel data method and uses the Arellano and Bond estimator to get consistent estimates of parameters of interest. The results show that in the period 2004-2011 fiscal balance and public debt projections had a significant impact on the differences in government bond yields for emerging market countries, with the effect being much stronger during the period after the onset of financial crises. On the other hand, it seems that sovereign spread dynamics in developed countries is driven mostly by the global market sentiment.","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2013-06-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74714439","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 effectiveness of corruption control depending upon whether the bribe taker or the bribe giver initiates the corrupt interaction. The probability of corrupt exchanges depends upon the bribe and the corrupt market structure. The probability of apprehension is set but punishment can be influenced via bribes. Results show that the effectiveness of apprehension hinges on whether higher bribes invite harsher fines. Competition for favors intimidates the bribe giver into offering lower bribes, while greater agency competition has a similar effect on the bribe demanded. Consistent with intuition, better paid bureaucrats demand smaller bribes. Some implications for anti-corruption policy are discussed.
{"title":"Initiation of Corrupt Exchanges and Severity of Corruption","authors":"R. Goel","doi":"10.3326/FINTP.37.2.4","DOIUrl":"https://doi.org/10.3326/FINTP.37.2.4","url":null,"abstract":"This paper examines the effectiveness of corruption control depending upon whether the bribe taker or the bribe giver initiates the corrupt interaction. The probability of corrupt exchanges depends upon the bribe and the corrupt market structure. The probability of apprehension is set but punishment can be influenced via bribes. Results show that the effectiveness of apprehension hinges on whether higher bribes invite harsher fines. Competition for favors intimidates the bribe giver into offering lower bribes, while greater agency competition has a similar effect on the bribe demanded. Consistent with intuition, better paid bureaucrats demand smaller bribes. Some implications for anti-corruption policy are discussed.","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2013-06-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90894803","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}
Upon accession to the European Union, the New Member State’s budget undergoes significant structural changes due to the appearance of new categories of revenues and expenditures. The aim of this paper is to estimate the possible effects of Croatian membership in the EU on changes in the structure and size of budget revenues and expenditures upon the country’s accession to the EU in the second half of 2013, as well as to indicate the possibilities for utilization of EU funds in the new financial perspective up to 2020. It is shown that in 2013 Croatia might realize a positive net financial position in transactions with the EU budget in the amount of approximately 0.28% of GDP, i.e. EUR 136 m. The total net financial position of Croatia due to EU accession, which includes some additional costs and benefits like different harmonization and the need for project co-financing at state and local levels, is also positive in 2013 and amounts to approximately 0.15% of GDP or equivalently EUR 72 m. Total amount of all funds that Croatia might receive in the new EU financial perspective covering the period from 2014 to 2020 amounts to EUR 6.34 bn, whereby annual amounts increase from EUR 0.7 bn in 2014 up to EUR 1.2 bn in 2020. By using exponential regression analysis it is estimated that in 2020 Croatia should be a net recipient of funds from the EU budget in total amount of 1.72% of GDP, i.e. EUR 1.13 bn.
{"title":"Budget perspective in Croatia after accession to the European Union","authors":"Petar Sopek","doi":"10.3326/FINTP.37.1.2","DOIUrl":"https://doi.org/10.3326/FINTP.37.1.2","url":null,"abstract":"Upon accession to the European Union, the New Member State’s budget undergoes significant structural changes due to the appearance of new categories of revenues and expenditures. The aim of this paper is to estimate the possible effects of Croatian membership in the EU on changes in the structure and size of budget revenues and expenditures upon the country’s accession to the EU in the second half of 2013, as well as to indicate the possibilities for utilization of EU funds in the new financial perspective up to 2020. It is shown that in 2013 Croatia might realize a positive net financial position in transactions with the EU budget in the amount of approximately 0.28% of GDP, i.e. EUR 136 m. The total net financial position of Croatia due to EU accession, which includes some additional costs and benefits like different harmonization and the need for project co-financing at state and local levels, is also positive in 2013 and amounts to approximately 0.15% of GDP or equivalently EUR 72 m. Total amount of all funds that Croatia might receive in the new EU financial perspective covering the period from 2014 to 2020 amounts to EUR 6.34 bn, whereby annual amounts increase from EUR 0.7 bn in 2014 up to EUR 1.2 bn in 2020. By using exponential regression analysis it is estimated that in 2020 Croatia should be a net recipient of funds from the EU budget in total amount of 1.72% of GDP, i.e. EUR 1.13 bn.","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2013-03-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78426931","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 research analyzes the main determinants of the net interest margin of banks operating in Central and Eastern European (CEE) countries in the period from 1999 to 2010. The results reveal several main drivers of net interest margins in the CEE. Prior to 2008 the net interest margins declined primarily due to strong capital inflows and stable macroeconomic environment. In the crisis period, significant rise in government debt accompanied by the increase in macroeconomic risks and abating capital inflows were pushing margins up while other factors such as low credit demand, higher capitalization and significantly increased share of non-performing loans pressured banks’ margins down. The results also confirm the important contribution of higher efficiency to lowering banks’ margins.
{"title":"Determinants of banks’ net interest margins in Central and Eastern Europe","authors":"Mirna Dumičić, Tomislav Rizdak","doi":"10.3326/FINTP.37.1.1","DOIUrl":"https://doi.org/10.3326/FINTP.37.1.1","url":null,"abstract":"This research analyzes the main determinants of the net interest margin of banks operating in Central and Eastern European (CEE) countries in the period from 1999 to 2010. The results reveal several main drivers of net interest margins in the CEE. Prior to 2008 the net interest margins declined primarily due to strong capital inflows and stable macroeconomic environment. In the crisis period, significant rise in government debt accompanied by the increase in macroeconomic risks and abating capital inflows were pushing margins up while other factors such as low credit demand, higher capitalization and significantly increased share of non-performing loans pressured banks’ margins down. The results also confirm the important contribution of higher efficiency to lowering banks’ margins.","PeriodicalId":30016,"journal":{"name":"Financial Theory and Practice","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2013-03-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75042601","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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