The pro-cyclical effect of provision is generally agreed and widely discussed in the context of the current financial crisis. The new model of the dynamic provisions applied in Spain showed countercyclical effects on the credit and business cycle. We simulate development of the dynamic provisions during the financial crisis and discuss the possible consequences. We apply a panel data model of the past credit cycle to calibrate the parameters following the same approach as in the Spanish dynamic provision. Our contribution is in the application of dynamic provisions on the banking systems for the V4 countries.
Authors:Vlasta Kašparovská, Jana Laštůvková and Luboš Střelec
The effect of the exchange rate is often discussed in connection with economic performance, net export and inflation rate. Within the context of current discussions, we aim to examine the influence of the CZK/EUR exchange rate on changes in liquid assets in the Czech banking sector. The scope of our examination also covers the effects of GDP, CPI, one-month PRIBOR rate and the effects of ten-year government bond yield. The selected period is 2003–2014; monthly data taken from the CNB ARAD database is used. To verify the effect of the monitored variables on liquid assets in the Czech banking sector, we employed the regression analysis methods applied on financial and economic time series. The results show the effect of the CZK/EUR exchange rate and PRIBOR on changes in the liquid assets of Czech banks. The paper analyzes the identified causes and connections, and discusses possible consequences.