Žan Jan Oplotnik

The CDS and the Government Bonds Markets During the Last Financial Crisis

Abstract Financial market had developed a special instrument to insure the buyers of bonds. This instrument is so called Credit Default Swap (CDS). The CDS price is a kind of insurance premium that the buyer of CDS pays to the seller of CDS in exchange for compensation of possible loss in operation. Paper analyses causality between CDS price and dynamics of bond yields and influence of macroeconomic factors on it in four selected countries during the last financial crisis. Analysis results show that there is no important macroeconomic variable included in the analysis that preceded the CDS prices connected with German government bonds. Sellers of CDS were apparently aware of the systemic nature of the financial crisis in the euro area. In the case of the United Kingdom, Russia and Slovenia we can observe the unemployment rate as the most important macroeconomic variable that preceded the CDS prices for government bonds.

An Analysis of the Applicable System of Financing the Municipalities in Slovenia

This paper examines the compliance of the system of financing the local self-government in Slovenia with the basic principles of the theory of decentralisation, and with the guidelines of the European Charter of Local Self-Government, thereby focusing primarily on the level of coverage of costs within the municipal competence by using the allocated appropriate expenditure resources. We ascertained that, overall, during the observed period from 2007 to 2009, the Slovenian municipalities were adequately supported financially because average expenditures were around 9% lower than the appropriate expenditure resources. Major system anomalies were detected in a micro-analysis of selected groups of municipalities, especially through a relatively large range between the lowest and highest costs. The range was between €319 and €1,167 per capita (an average of €527). A similarly great range was perceived also in the appropriate expenditure amount (between €416 and €1,196 with an average of €558), and in the index of resource coverage with expenditures where the range was between 0.50 and 1.75 (an average is 1.09). In spite of the fact that there were fewer than 15% of the municipalities that fell under the threshold categories, the sustainability of the entire system worsened due to the cross-impact effect when a relatively small amount of appropriate expenditure belonged to some municipalities with high costs. This was especially evident in the case of urban municipalities. Thus, urban municipalities recoded, on average, up to +13% more costs with an average of 26-percent smaller value of the appropriate expenditure amount.