Jana Hromcová

A note on income velocity of money in a cash-in-advance economy with capital

A stochastic growth model with money introduced via a cash-in-advance constraint is used to analyze the behaviour of the income velocity of real monetary balances. Agents can purchase consumption goods only using government issued money and capital is a credit good. The cash-in-advance constraint may become nonbinding because of the uncertainty about the realization of the state of the economy. Changes in the income velocity of money due to a precautionary money demand are studied. We find that despite the precautionary money demand does not introduce significant changes into the volatility of the income velocity, its presence can alter the relationship between the growth rate of money supply and the income velocity.

Effects of institutional environment and technology development on payment choice

The purpose of this paper is to analyze the combination of institutional factors and technology advances as determinants of payment systems choice. The theoretical set up suggests that countries entering into a new institutional environment approach accepting group attitudes towards payment choices as a consequence of institutional pressure and technology development. We apply the results of the model to 2004 European Union enlargement process. Results confirm the relevance of both institutional environment and technology development in retail payment system decisions of newly acceded countries.

Bubble Economics and Structural Change: The Cases of Spain and France Compared

This paper delves into the recent events that led to the formation of the housing bubble in Spain and the resulting structural change that is arguably needed to put the economy back into the right track. For this purpose, we calibrate a model with different equilibria descriptive of the labor markets in Spain and France, where the unemployment rates went from the same initial spot to very different levels. In addition to this, we run a counterfactual analysis that throws some more light on the performance of the Spanish labor market and the housing bubble. Our results suggest that the unemployment rate in Spain has jumped to much higher levels while switching between equilibria or, what is the same, because of structural change. Moreover, our counterfactuals indicate that, first, there has been an important misdirection of resources into the construction industry mainly fueled by excessively low real interest rates and, second, the Spanish labor reform has fallen short of its own goals.

Defence Spending, Institutional Environment and Economic Growth: Case of NATO

This paper analyses the impact of participating in a military alliance on the nexus between defence spending and economic growth. In particular, we study how the process of gradual association to a military organization influences the defence spending of newcomers, and consequently their economic growth. Conclusions from the theoretical model are tested empirically for countries in the North Atlantic Treaty Organization. Results show that the prospect of intensified military alliance partnership and membership has a positive effect on economic growth. In addition, increased security and stability gained by closer military cooperation reinforces the positive link with economic growth. Empirical evidence supports theoretical priors.