Journal of Economics - Obsahy ročníkov

This paper tries to identify early warning indicators for the Slovak banking sector. The aim of the early warning indicators is to predict a build-up of imbalances or rising risks in the banking sector, using the credit-to-GDP gap as a proxy. Based on quarterly data from 1Q2003 to 4Q2023, we apply Bayesian model averaging (BMA) to explore the potential predictive power of 38 variables over a horizon of 4 to 12 quarters. The advantage of the BMA is that it accounts for uncertainty in the selection and combination of potential indicators. The results indicate the importance of both traditional early warning indicators – such as the unemployment rate, inflation, and interest rates – and uncertainty indicators, including sentiment-based survey data and media-derived policy uncertainty measures. Notably, the construction confidence indicator and the German Policy Uncertainty Index appear to indicate the potential for an increase in risk within the banking sector. Furthermore, our findings also underline the vulnerability of the Slovak banking sector to external shocks such as the COVID-19 pandemic, and highlight the role of household indebtedness in identifying emerging imbalances. These insights are relevant for macroprudential policy, particularly in the calibration of the countercyclical capital buffer.

The paper aims to investigate local indebtedness determinants in a sample of Slovak municipalities using machine learning methods based on decision trees. The sample covers all 2,926 municipalities listed by the Ministry of Finance of the Slovak Republic in 2005 – 2022. Using the QUEST, CRT, CHAID, and exhaustive CHAID growing methods, our results point to a significant effect of current expenditure, subsidies, size category, and crises on local indebtedness. Based on the results of decision trees, significant variables are treated as regressors in logit and probit econometric estimations, to check their statistical significance. The results of the estimations correspond to the results of decision trees and provide us with a further view of the determinants of local indebtedness in Slovakia.

This paper examines the relationship between public debt and economic growth in 11 EU new member states (NMS) from Central and South Eastern Europe during the period 2000 – 2021. We explore the potential non-linear (quadratic) nature of this relationship in the context of these diverse countries with varying economic, institutional, and financial backgrounds. To account for their heterogeneity, we divide them into three more homogeneous sub-groups: South Eastern European, Baltic, and Visegrad countries. The findings suggest the existence of a "U"-inverted relationship, indicating that public debt has a positive effect on growth up to a certain threshold, beyond which a negative effect prevails. The estimated debt-to-GDP tipping point ranges from 58.5% to 73.5% of GDP, depending on the sub-group. These results contribute to a deeper understanding of the implications of high public debt levels in NMS and provide valuable insights for the ongoing discussions on the design of a new EU fiscal rules framework.

For 37 regions of four Visegrád Group (V4) countries that used to be part of the Socialist Bloc, the paper studies the interaction between self-employment (as a proxy of entrepreneurial capital) and per-capita real gross domestic product (as a measure of economic performance or prosperity). A system of two simultaneous spatial panel data equations is applied to aggregate regional data for a period of 20 years from 2001 to 2020 in order to explore the links between entrepreneurial activity and performance and to identify determinants of this relationship. Mutual positive correlation is found between self-employment and regional economic performance, and a number of regional labor-market, demographic or socio-economic characteristics are identified to be factors of the entrepreneurship-development nexus. Only Hungarian regions deviate from this generally established pattern. The present study complements the research agenda that has been so far pursued exclusively for Western and developing countries.