Journal of Economics - Obsahy ročníkov

Economic development of Slovakia in 2010 was marked by the decline of recession symptoms. Recession was replaced by a recovery, strongly differentiated by sectors. The economy has responded well to the signs of recovery in external demand. Change of government has also brought economic policy changes, their impact was not shown fully in the same year. More significant were the effects of external environment. The labour market responded to the renewed performance growth with delay. The outlook reflects the expectation of continuing economic policy changes, including fiscal consolidation. The performance of the economy in 2011 will return to prerecession levels, but some indicators will remain on unfavourable level: the inflation revives, high unemployment rate will remain, the public debt will grow, and the wage growth will be probably weak. In 2012 should be the higher growth associated with a better state of balance. Very likely it will strengthen the catching-up process. Keywords: economic growth, economic policy, post recession development, country study – Slovakia, forecast, production, balance of payments, external trade, labour market, public finance, monetary policy JEL Classification: D11, E23, E37, E52, E62, F14, F32, J20, L60, O10, O52

The effects of nominal exchange rate fluctuations on profitability of domestic private firms and foreign-owned firms which operate in the Czech Republic are separately examined in the period from 1998 to 2006. We find out that exchange rate changes have diverse effects on the two sectors. Specifically, domestic private firms absorb exchange rate changes in their profit margins while foreign-owned firms are resistant against exchange rate changes. We ascribe the resistance of foreign-owned firms to transfer pricing strategies of multinationals. One determinant of a multinational company price strategy is different taxation in countries of its operation. That is the reason for concentration of gross profits in low taxed countries by manipulating intrafirm prices. As a result these optimization strategies have adverse effects on a macroeconomic level causing ineffectiveness of the exchange rate adjustment mechanism and distortions in both foreign trade and GDP statistics. Keywords: branding, exchange rate fluctuations, multinational company-related trade, operational profitability, tax optimization JEL Classification: F23; L11