Showing papers by "University of Ljubljana, Faculty of Economics published in 2001"

Real Exchange Rate Dynamics in Transition Economies

Abstract: Real exchange appreciation has been a common feature in transition economies since the launching of stabilization and reform programs at the beginning of the 1990s. Previous literature has described this phenomenon as an equilibrium adjustment that followed a sharp undervaluation at the start of the reforms. This Paper argues that real appreciation had different sources over time and across countries. Building on a simple analytical framework, the Paper disentangles these differences and stresses the role of structural reforms and factor reallocation in determining the behavior of the real exchange rate. The empirical results show that the nature of the real appreciation was significantly different in the countries of the Former Soviet Union (FSU), except for the Baltic countries, and in Central and Eastern Europe. The role of structural change and transitional reallocation of resources across sectors diminishes through time, and stabilizes around the fifth or sixth year into the transition. The dynamics of the real exchange rate in several Central-Eastern European countries (CEE) in the process of accession to the European Union, can be now assimilated to that of previously acceding countries such as Spain, Portugal, and Greece, with the Harrod-Balassa-Samuelson effect playing a dominant role at later stages of transition. The Paper concludes by discussing the implications for exchange rate policy for transition economies and potential drawbacks of the Maastricht criteria once CEEs enter the European Union.

A comparison of the purchasing and consumption behaviour of Slovenian and other Eastern European consumers

Abstract: Formation of a single market within the EU and democratisation and development of a market economy in Eastern Europe undoubtedly enhance standardisation of marketing in the European area. Multinational companies planning to enter the Eastern European market frequently assume that this region is culturally and economically undifferentiated. The purpose of the study is to analyze whether the purchasing and consumption behaviour of Slovene consumers is similar to that of consumers from other Eastern European countries. The attention is focused on the following five dimensions: orientation towards domestic brands versus Western brands, experimentation with unknown brands and new products; brand loyalty; quality orientation and quality indicators; and price sensitivity.

The Role of Consumer Characteristics and Attitudes in Purchase Behavior of Domestic versus Foreign Made Products

Abstract: The aim of this study was to investigate the role of factors underlying consumer choice of domestic vs. foreign products on a sample of consumers in a less traditional post-socialist economy of Slovenia. Empirical results confirmed the postulated relationships among the protectionism dimension of ethnocentric attitudes, familiarity with global brands and consumer domestic purchase decisions for the product categories examined in this study. However, findings did not lend support for theoretical propositions related to demographic variables. Implications for domestic and global brand managers are outlined in the conclusions.

Testing Nonlinear Relationships between Excess Rate of Return on Equity and Financial Ratios

Abstract: Models that use financial ratios proved to be helpful in decision making of an equity investor. Commonly these models assume linear relationships between a ratio and the rate of return. In this paper the authors test the hypotheses of specific industry independent nonlinear relationships between financial ratios and excess rate of return on equity as defined in Mramor, Mramor Kosta (1996). Mramor, Mramor Kosta tested their hypotheses on financial data of Slovenia for the years 1992 and 1994 and their results were encouraging. However, their tests had three main data problems which may have altered the results: they used proxies for market rates of return on equity of Slovenian companies, they used proxies for risk adjustment of the rates of return and they used data for an economy in transition, where all the market structure and its functioning is not yet developed and stable.In this paper data is used for the stable market economies of the U.S.A. and Japan and direct market measures of the rate of return and risk (CAPM model) were obtained through extensive calculations and adjustments. With this data the second hypothesis of Mramor, Mramor Kosta is tested and the best functional relationships for each financial ratio (within each industry) are determined. The results of the simple regression tests confirm the theoretically assumed relationships and assumed quite strong industry independence of the functional forms of these relationships.

When Maximizing Shareholders' Wealth Is Not the Only Choice

Abstract: This article presents an empirical analysis of the financial behavior of Slovenian firms. It focuses on the goal of the firm, capital budgeting, capital structure, and dividend-payout decisions. Three theories of financial behavior, neoclassical, post-Keynesian, and employee governance, with three different goals of the firm, maximization of share value, maximization of long-term probability of survival, and maximization of wages, provide the theoretical background. A sample of fifty-one important Slovenian firms is analyzed using the data from a questionnaire for chief financial officers and from financial statements. Two additional samples of listed and privatized firms are analyzed through financial statements only. We conclude that the average investigated Slovenian firm is still governed by employees, as it was before privatization, its primary goal is maximization of wages, it does not have net capital investment, it is financed predominantly by equity, and it pays very low dividends.

Empirical Estimation of the Term Structure of Implicit Discount Rates in Security Valuation

Abstract: In this paper we use a reformulation of the residual income (RI) valuation model to generate estimates of the term structure of discount rates (cost of capital) implicit in security prices. We use future realisations of residual income as proxies of their present day expectations and reduce the impact of measurement error in the forecast values by transforming them into a current value plus a series of change variables. Different lengths of the forecast window lead to the coefficients on the current realisations of earnings and book value incorporating different combinations of implicit discount rates. By comparing the coefficients on these two variables for different forecast windows estimates of implicit discount rates can be generated. Terminal values are incorporated within the coefficients on current realisations of earnings and book value. As our estimates of cost of capital are made from comparisons of the earnings and book value coefficients from valuation models of different forecast length we are able to eliminate the impact of terminal value assumptions from our cost of capital estimates. The results indicate no specific pattern to implicit discount rates that would indicate either short termism or excessive optimism about future earnings growth.

Estimation of asset accumulation of the proposed slovenian, mandatory-funded pension pillar

Abstract: This paper analyses the impact of the introduction of a proposed mandatory earnings-related fully-funded pension scheme, named as the second pillar, on the accumulation of pension-funds assets and possibly on the capital market development in Slovenia. First, the dynamic simulation model is developed to estimate the accumulated pension-funds assets as a percentage of GDP in each future time period under the assumption of certainty. It is followed by the assumptions and estimates of the data used for independent variables and the results obtained by implementing the model for the period of 25 years. Relaxing the assumption of certainty, the paper proceeds with estimations of accuracy of the results with three methods. It is concluded, that the estimated level of accumulated pension-funds assets in GDP 25 years after the introduction of the reform will be approximately 40% and comparable to the level in countries with developed capital markets. Also, the accuracy of the estimate is surprisingly good. It is ...