Electronic Library of Scientific Literature


Volume 47 / No. 3 / 1999



Michal OLEXA – Ján HALUŠKA – Tomáš KLEIN – Judita ORSÁGOVÁ

The EMSE 2.0 econometric model of the Slovak economy represents the second version of the initial experimental model developed in 1996, being gradually improved and updated. Individual versions of the model are differed both in length of time series in their data bases and a number of individual regression equations and identities included.

This model version has been estimated by using the data base of annual time series of relevant macroeconomic indicators within the period of time from 1985 to 1996, i.e. on the basis of 12 observations at most in every time series.

While constructing presented model, we were guided especially by practical experiences obtained in developing the previous version of the model (EMSE 1.0) [5]. In addition, EMSE 2.0 model is not only the updated version of EMSE 1.0, it also contains some new relations and feedbacks. The extended time horizon of the data base enabled to estimate them.

The given econometric model of the Slovak economy is a simultaneous system of 82 dynamic, linear and non-linear equations and identities (25 regression equations and 57 identities) expressing relations among 113 variables.

By means of individual model equations, there are described and modelled the main macroeconomic aggregates typical for the market economy. The main endogenous variables of the model are as follows: gross domestic product (GDP), private consumption, government consumption, fixed investments, inventories, exports, imports, trade balance, employment and unemployment, deflators of GDP and its components, nominal and real average wages, households incomes and expenditures, foreign capital inflows etc.

Key exogenous variables expressing major tools of macroeconomic policy include the exchange rate and the state budget balance. As truly exogenous variables can be considered import volumes into the EU’s member countries as well as price index of given import.

A system of the model regression equations and identities might be divided into the following blocks under their economic content:

· consumption and investments,
· foreign trade in constant prices,
· foreign trade in current prices,
· GDP,
· price indices and deflators,
· employment, unemployment and labour productivity,
· wages and incomes of households,
· state budget,
· money supply, interest and exchange rates.

Complete data base of the given econometric model of the Slovak economy involves 113 time series of model variables (82 endogenous and 31 exogenous ones) totally. The data base time horizon covers the period from 1985 up to 1996, i.e. 12 annual observations.

Comparing results of the static and dynamic ex-post simulations we can see that in the case of the dynamic simulation the average deviation SER is higher. The average deviation SER is 8.39% in the static simulation and 8.54% in the dynamic one. The difference between static and dynamic simulations is, despite the considerable number of dynamic relations in the model, very small, i.e. the model can be used for the ex-ante simulations.

The ex-post simulations should be evaluated to be of a very good quality, the EMSE model reproduces the behaviour of the Slovak economy in 1986–1996 satisfactorily and it is also possible to use this model in simulation analyses for the future years.


Ladislav BORS – Viliam PÁLENÍK

The transition economies in their first decade of existence had to tackle the problem of not balanced public budgets. Developed countries and also international institutions have frequently focused their criticism to the state budget deficit in the countries in transition, despite the fact that a question of state budget deficit has been present also in their economies during recent 25 years. The revenues generated from taxation has not in many cases matched an increases public consumption. There are reasons and reflections of this phenomenon which, we think, should be analyzed in more details.

An analysis of a deficit as an indicator of an excessive state consumption includes three aspects:

1) A different impact of various taxation and expenditure groups against the demand,

2) An endogenity of tax revenues – which illustrates the dependency between tax re-venues and the economic activity level in a particular country,

3) An impact caused because of financing the deficit from different sources.

The objective of this article is the second one from the above mentioned aspects, i. e. endogenity of tax revenues. We described it with the help of the empiric model for tax revenues of the state budget and of the components of the GDP use.

The estimated equation of behaviour comprise factors dominantly determining revenues of the respective types of state budget tax revenues, but include also changes in tax payors preferences, quality of tax selection as well as the state statistics. For equation assessment we used the ISWE98q4 model database containing time sequences from the years 1993q1 to 1998q2. The database used information sources provided by the Statistic office of the SR, the National Bank of Slovakia and of the Ministry of Finance of the SR. The equations of behaviour together with the respective identities formed an inter-de-pendent econometric model. The following equation of behaviour were used:

Personal income tax

LTW = (– 5.056) + 1.692*LYW{– 1} + .012*DYW + .144*T2


LTW – logarithm of the personal income tax, bn SKK;
LYW – logarithm of work income of inhabitants, bn SKK;
DYW – change in work income of inhabitants, bn SKK;
T2 – seasonal variable (Q2 = 1, otherwise 0).

Corporate income tax

TYZ = 8.396 + (– .0281)*DFKP+.115*DACEH + (– 3.960)*UTYZ


TYZ – logarithm of the corporate income tax, bn SKK;
DFKP – formation of gross fixed capital, bn SKK, c. p.;
ACEH – SKK corporate loans and household loans, bn SKK;
DACEH – change in corporate loans and household loans, bn SKK;
UTYZ – adapting variable.

Value added tax

TVAT = 6.271 + .473*TVAT{– 1} + 0.141*DYD + 4.869*U952


TVAT– VAT revenues, bn SKK;
YD – available incomes of inhabitants, bn SKK;
DYD – change in available incomes of inhabitants, bn SKK;
U952 – artificial variable (199q2 = 1, otherwise 0).

Excise taxes

TC = 3.169 + 0.304*TC{– 1} + 0.0810*DYD + 0.979T3+*1.622*U981


TC – excise income tax, bn SKK;
DYD – change in available income of inhabitants, bn SKK;
T3 – session variable;
U981 – artificial variable (1998q1 = 1, otherwise 0).

Customs duty

TDU = 2.80 + .00988*MGSP + .00432+DYD + (.075)*RE + (– .210)*U982 + (– .150)U981


TDU – revenues from customs duty, bn SKK;
MGSP – imports of goods and services in c. p., bn SKK;
DYD – change in available income of inhabitants c. p., bn SKK;
RE – exchange rate SKK/USD;
U982 – artificial variable (1998q2 = 1, otherwise 0);
U981 – artificial variable (1998q1 = 1, otherwise 0).

Final households’ consumption

C = 61.648 + 0.153*YRD95 + (– 0879)*IRTH{– 2} + (– 2.842)*T4 + 6.715*U982


YRD95 – real available income of inhabitants, s. p. 1995;
IRTH – time deposit interest rate for inhabitants;
T4 – seasonal variable (Q41, otherwise 0);
U982 – artificial variable (1998Q2 = 1, otherwise 0).

Formation of gross fixed capital in c. p.

DFKPRP = (– 101.336) + 15.244*WR95 + .0837*ACEH{– 1} + invex


DFKPRP – private investment, c. p.;
WR95 – average real monthly wage, in thousands SKK;
ACEH – corporate loans and household loans, bn SKK;
invex – artificial variable;
(substitution: state investment – private investment).

Deflator of formation of gross fixed capital

PDFK = 0.242 + 0.794*PU95


PDFK – deflator of formation of gross fix capital;
PU95 – consumer price index (1995 = 1).

The analysis confirmed a different impact of tax and expenditure groups to demand components and a great degree of endogenity of particular types of the state budget tax revenues. That is why, from this point of view, it is also proper to consider an appropriate state budget deficit for the economic growth support. During the recent years the Slovak economy has been performing under a slightly restrictive monetary policy conditions and financing the state budget deficit from domestic sources opened a field for crowding-out effect. From additional state budget expenditures created by the state budget deficit cove-red from foreign sources, if efficiently used, favourable multiple effects can be expected which are suitable for the macroeconomic policy during a slow-down period up to a full stoppage of the economic growth, and alternatively.


Michal FENDEK – Michal HATRÁK – Vladimír MLYNAROVIČ

This article is describing a set of models used for analyses, modelling and for creating alternative prognoses for various types of public funds income development in the Slovak Republic. The set of econometric models enables to identify and quantificate the depen-dency of incomes on the development of macroeconomic indicators during 1993 till 1997, thus giving a background for preparing public funds income development prognoses for the years 1998 through 2000.

A small macroeconomic model of the Slovak economy is a core of the above introduced set of models since macroeconomic environment through some macro indicators has effected incomes of single public funds (health insurance and medical care insurance, old pension fund, unemployment insurance fund). The model represents 22 equations mapping basic macroeconomic relationship. Of a total number, there are 16 stochastic equations and 6 equations representing identities. The equations pose a inter-dependent set of relations between basic macroeconomic variables.

Three public fund models are associated with the macroeconomic model:

· income and number of payers model for the health care fund
· income and number of payers model for the social insurance fund
· income and number of payers model for the unemployment insurance fund

Endogenous variables of those models (incomes of a respective category of funds and a number of payees within a category) are functions of some endogenous variables of the macroeconomic model and of some specific exogenous variables. The macroeconomic model, as well as three above named public funds models were estimated with the help of SORITEC system based on quarterly data covering 1993– 1997. The prognosis of public funds income and of the number of payers within particular categories comes from macroeconomic prognosis generated by the econometric model of Slovakia. The results of the prognoses are stores in four output files which are formatted into excel submodels (charts and tables). The application itself (variant prognoses, scenarios, etc.) is subsequently made in the user friendly EXCEL system which offer immediate recalculation of impacts if parameters of a particular scenario have changed. Final results are presented as tables and charts including basic prognosis of public funds incomes as well as alternative prognoses based on scenarios created by a user.

The prognosis and analyses of incomes for health insurance funds social funds and unemployment funds is offered for users in the form of a “notebook“ created in Excel 7.0 environment. The notebook makes use of prognosis application results created in SORITEC which are stored in specific outputs files in a predefines structure and contain the prognosis of development of selected macroeconomic indictors, the prognosis of incomes and of the number of health insurance payers, the prognosis of incomes and of the number of unemployment insurance payers. All is Excel supported and composed of the following submodels:

· macroeconomic characteristics,
· health insurance,
· social insurance – medical care,
· social insurance – old pensions,
· unemployment insurance,
· public funds - incomes,
· public funds – budget,
· health insurance – charts,
· medical insurance – charts,
· old pensions insurance – charts,
· public funds – charts.

Two ways are available for applying the created system of econometrical models and submodel mapped in Excel:

1. Creating a new variant of econometrical prognoses. The user specifies his/her image on the exogenous variable values development of econometric models and through their subsequest prognostic application would generate new prognosis alternatives and based on that will obtain a new content of output files. Thus the model created in Excel makes new prognoses in corresponding submodels accessible. This variant offers formation of new prognosis requires a database update, modification and subsequent implementation of the whole system of econometric models.

2. Modification of basic prognoses in the scenario regime. Except for accessing the prognoses which were created as a result after applying the macroeconometric model and a subsequent econometric models for single public funds, the Excel model immediately enables the user to analyze his/her own vision of some economic development parameters and of modifications of the formation rules regarding public funds, developing new scenarios (modifying the rates of healts and medic care insurance, the ratio of the so called measuring base which is taken for insurance payment calculation and for assumed values of success coefficient in collecting the insurance payments, of the share of above standard payers or rate of sickness leave etc.).

We can see that the presented set of public funds development models enables to generate classical prognoses as well as interactively evaluate effects which are initiated by alternative measures adopted on a particular decision-making level (analysis of a type: “what would happen if…”).

3. The article also attempted to present some results applying one set of models. It has considered the outcomes of the prognosis on public funds incomes which resulted from the essential prognosis on the macroeconomic environment development under assumption that the development tendencies which had performed up to the year 1997 would persist, and, the results of the prognosis on public funds incomes which was built on exogenous images about the gross domestic product development and the rate of unemployment by quarters of the years 1998–2000.



The paper briefly characterizes the early contributions to the modern portfolio theory and presents a static approach to the optimal portfolio choice in a complete market without transaction costs and a incomplete market with transaction costs.

Mean-variance portfolio theory addresses the investor’s asset selection problem for an investment horizon of one period. Progress in portfolio theory came as financial economists relaxed this restrictive assumption. In so doing they faced two interrelated consumer or household problems that are known as the consumption – saving decision and the portfolio selection problem. The relaxation of the single period assumption proceeded along two lines: firstly, in discrete time multiperiod models, and secondly, in continuous time models. In the paper the discrete, time intertemporal portfolio selection problem is treated. The focus here is on the optimal portfolio choice behaviour of an individual investor who takes as given an arbitrage-free process for asset prices.

The presented approach to the optimal portfolio choice problem of an investor who maximizes the expected utility of his lifetime consumption do not use the traditional dy-namic programming approach to characterize a solution to this problem, but reduces the dynamic problem to a static one and leads to an elegant characterization of the optimal portfolio choice problem. The paper shows that the finite state framework is quite useful in bringing forward important economic insights related to the portfolio choice question.



The author of the study analyzed the structure of the Slovak economy :

a) in production and services sphere;
b) in demand production (focused on household consumption, state administration consumption, investments, stock increases, exports and imports);
c) from the point of view of the supply in the industrial structure.

The economy structure development in the sphere of services and production is keeping line with overall world development tendencies. At the beginning of economic transformation during nineties services in Slovakia were growing faster due to the shift from the central economy to the market economy where establishing various services to satisfy the needs of the market economy was a must, e.g. banking and insurance services, auditing and legal counselling, etc. In subsequent years the volume of services in the economic structure has been growing affected by similar motivation like in western economies. This tendency has been strengthened mainly due to informatization which had penetrated into all segments of the economy and has still been accelerating. A possible distortion in the volume of services may be linked with pricing. A considerably high volume of service prices have not been market driven, these prices are too high to compare with production prices affected by market conditions. However, the range of such distortion is not very high to reverse the ratio of GDP volume created in production / in services.

The demand structure of our economy has been so far strongly growth oriented. It can be seen on the whole demand structure, but mainly on the ratio of investments or gross fix capital increases or households’ consumption. Houseuseholds’ consumption in our economy is less than 50% of GDP, investments represent more than 40% of GDP. To compare these data with industrially developed countries there is a paradox and the author of the article attempted to provide explanation on investment and household consumption evaluating process.

Pro-growth orientation of our economy was supported by foreign loans and their total volume reached as of the end of 1998 USD 12,2 bn. These loans flew not only to promote investment, but were also used for household consumption. A consumption in personal cars raised (74 583 cars were sold in 1996) at the expense of household construction. Increasing the loan burden for the future should not develop at this rate thus creating a constrain in the pro-growth structure of our economy.

Our analyses attempted to explain the pro-growth orientation of the Slovak economy structure from the point of view of GDP distribution where more resources have been oriented to economic activities supporting the economic growth. This tendency, however, mainly due to the investment structure, has not been bringing an acceleration of the economic growth, and, since the efficiency of investment had been low, the growth rate decreased.

The economy structure was negatively hit due to the geographical division and politically oriented layout of various institution, especially because of faculties of the Slovak universities which increased state budget expenditures and did not bring relevant compensation on social or economic levels. The negative impact of such decision will be long lasting.

The author analyzed demand structure in seventeen industrial sections comparing ratio of some indicators as: added value/production of goods, exports / production of goods, % of investment growth / % of exports growth. With the help of those indicators he will define industries where we are close to the external equilibrium of the Slovak economy and will ease the structure of the economy.

In addition, the author also included his evaluation of efficiency by industries using DEA (Data Envelopment Analysis) analysis. In his calculations the author extended the range of outputs and inputs. The following can be found as output: production of goods, added value, exports. Among inputs there are: movable investment property, human resources and the pace of investment growth in %.

It should be understood that the respective efficiency indicators do not comply with the evaluation of industries based on ratio indicators since a different set of inputs and outputs was introduced. Despite of the fact, these calculations offer inspiring material for further thinking. Foreign investors could be contributional in further fundamental changes in our economic structure. In projects evaluation, their criteria will be different from our criteria. In the fields where these criteria will match a positive turn in our economic structure may be expected, if not evaluation the existing deviation should be considered and appropriate solutions with the least danger for our economy should be adopted. The most important at the current stage is to attract foreign investors.

Finally, it is important to underline that a change in the economic structure is a long lasting process. To do away with bad structures is extremely difficult since many conflicts between state central and regional aspects or conflicts between the state and international institution interests may be encountered. However, there is no other solution than to go further following this road since it will bring profit for all of us in a long term.



The Council for Economic Cooperation in the Pacific and Asia was established on 5 November 1989 and the treaty was signed in Canberra. Originally the APEC members represented 12 Asian and American states and in 1998 they were joined by further 9 states from both continents. At present, there are 21 Asian and American states creating the membership base. The APEC secretariat is based in Singapore. The APEC is a regional association compliant with the General Agreement on Tarriffs and Trade aiming to create a free trade zone and promote a global economic development in the Pacific area.

During the first 5 years of its existence, i.e. since 1989 till 1994, noncommital discussions were taking place during the APEC summits. Up to 1993 the activity of this organization was more or less formal. The summit in 1993 presented the goal to intensify the USA economic contacts with Asian countries. The Seattle summit put real fundaments for building a free trade zone. USA representatives presented their idea on higher importance of the cooperation with Asian economies to European countries both for the present and future development. The USA policy marked a shift from the “Atlantic Era” into a so called “Pacific Era”. The Pacific region is the most important business partner for the USA. The volume of goods exchange between them is significantly larger than the trade between the USA and the European Union. The APEC top representatives in Seattle appealed to businessmen operating in the region to unite in a Pacific business forum. The APEC economically strong member countries in the 1994 summit pushed away the prio-rity of building a free trade zone and voted for 12 paragraphs of an investment codex with the aim to leave minimum conditions for foreign investors who mainly invest into technologies or employ domestic managers. The priority in the region was to prepare conditions for investment activities with no barriers.

Asian Pacific Economic Cooperation summit in 1995 in Osaka brought a dramatic change concerning activities of the Council. This summit approved an Action Plan for Liberalization and Support of Trade and Investment in the region. It included 9 paragraphs thus giving a background for liberalization of mutual trade and investment within the APEC. Energy will be the key to the economic growth in the Asian and Pacific region in the next century. The ability to satisfy the growing demand for energy will be essential for speeding up the economic growth and this will prove if this region can be a leader of the economic growth in the world economy after the year 2000.

In November 1996 the APEC summit was held in Manila. The summit approved the “Manila Action Plan” (MAPA) which till the year 2020 should remove any barriers within the trade among the APEC member countries sharing 46% of the world trade and 56% of the world gross domestic product (source: Hospodářské noviny 22. 11. 1996).

The summit in Vancouver in 1997 approved accession of new members – Russia, Peru and Vietnam. Russia’s membership was considered to be the most important achievement of the summit. The second achievement of the summit was the solidarity shared for fighting financial crises with joined powers.

The latest summit so far, was held in 1998 in Kuala Lumpur. The majority of the APEC member countries wanted to solve their own economic problems and did not show much interest for trade liberalization and opening their markets to foreign competitors. Further cooperation within the APEC countries has been found in a rather complicated political and strategic situation. China has become a phenomenon affecting the economic and also military situation in Asia.

The idea of creating a free trade zone within APEC does not receive a positive response. The opponents of liberalization predominantly attack the attempts of multinational companies for removal of any barriers allowing their investments wherever freely.

An important field for the cooperation is human resources development. The APEC member countries agreed on creating an information network mapping the labour market to increase flexibility of labour within the region. After its completion the APEC will become the largest free trade zone.

The integration within the APEC put the western Europe countries into a non favou-rable position. We should remind that the APEC is not only an economic, but also a political forum.