Contemporary Economics supports GIKA


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Volume 10 (2016) Volume 9 (2015) Volume 8 (2014) Volume 7 (2013) Volume 6 (2012) Volume 5 (2011) Volume 4 (2010) Volume 3 (2009) Volume 2 (2008) Volume 1 (2007)

Volume 10 Issue 2 (2016)

Costs of corporate bond issue in coal mining companies original article

pp. 99-112 | First published in 30 June 2016 | DOI:10.5709/ce.1897-9254.202

Agata Sierpińska-Sawicz, Patrycja Barbara Bąk


In Poland, more than 90% of electricity production is based on coal fuel. Meanwhile, the financial situation of the mining industry is quite challenging. Companies in this sector are in debt, generating losses caused by a sharp drop in coal prices and a simultaneous increase in extraction costs that result from descending into lower levels of coal deposits. At the same time, banks are reluctant to loan money because of the risk of a borrowing entity’s default. Increasingly, companies are turning to bond issue to maintain their liquidity and finance development projects. However, bondholders impose conditions in the form of covenants that are often difficult to satisfy, and the strictest relate to the level of a company’s indebtedness and ability-to-repay-debt financial ratios. This article discusses bond issue costs. The authors analyze the bond issue programs of three of the four mining companies operating in Poland. The fourth company did not issue any bonds. Bond issue costs are composed of interest payable to investors, issue preparation and support costs, collateralization costs, and the cost of recording and organizing the sale. The main cost involved in bond issuance is the coupon cost, which depends on the company’s financial health and its level of indebtedness, the purpose of the issue, its volume, and the type and quality of the safeguards against the risk of loss of funds invested by bondholders. Bonds issued by coal mining companies are assumed mainly by banks, which demand high interest due to the poor financial condition of the issuers. In addition to interest, companies also pay a capital commitment fee, an arrangement fee and a fee for early redemption. Altogether, in relation to the costs of capital raised through a bank loan, the bond issue results in significantly higher costs of raising capital.

Keywords: level of issue, bond rates, cost of bonds, collateral

The Mega Distributed Lag Model original article

pp. 113-122 | First published in 30 June 2016 | DOI:10.5709/ce.1897-9254.203

Mario Arturo Ruiz Estrada, Evangelos Koutronas, Ross Knippenberg


This paper attempts to describe the graphical behavior of the distributed lag model in an infinite coordinate space. The “mega distributed lag model” (MDL) is a mathematical framework that can examine the simultaneous interrelationships between all involved variables. The multidimensional graphical setting simultaneously reveals all non-linear exposure—response dependencies and delayed effects between lagged and dependent variables—which two-dimensional figures overwhelmingly fail to capture. Under the Omnia Mobilis assumption, each distribution lag function is indexed with respect to time and space. The Mega distributed lag model observes multiple trends in full motion, the final output (determinant) of which is called “the JIM-coefficient”. Hence, this paper tries to analyze different approaches of lag distribution models that can help in the construction of our new model. The mega distributed lag model” (MDL) is moving from the uses of the classic 2-dimensional and 3-dimensional graphical modeling to a multidimensional graphical modeling in Econometrics. Finally, this model is an extension of those explored earlier in the field of econographicology.

Keywords: Econographicology, Distributed lag model, Multi-Dimensional graphs and Multi-Dimensional geometry

An Allocation Analysis of Polish Household Savings Invested in Financial Assets, 2003 – 2014 original article

pp. 123-136 | First published in 30 June 2016 | DOI:10.5709/ce.1897-9254.204

Wiesław Dębski, Bartosz Świderski


This article addresses the allocation of Polish household savings that are invested in financial assets. As an economic category, these savings are very important in every country because they determine investments in the national economy, thereby influencing a country’s further economic growth and development. From this point of view, investigating both the allocation of personal savings and their structure is essential because they change due to changing economic circumstances, changing situations in the world’s financial markets, especially in the stock exchange markets, and the development of financial markets. The main purpose of this article is to analyze the changes in the allocation of savings in Polish households and the structure of their investment in financial assets. These changes, which are empirically observed, result from the circumstances of the national economy, which affect the behavior of investors in the stock market and determine the interest rate levels. The analysis is conducted on the basis of trend models with variations of parameters. The analysis has been carried out for the period Q4 2003 – Q3 2014.

Keywords: savings of the Polish households, financial assets, analysis of allocation and its structure, trend models with variations of parameters

Time-Varying Linkages of Economic Activities in China and the Stock Markets in ASEAN-5 original article

pp. 137-152 | First published in 30 June 2016 | DOI:10.5709/ce.1897-9254.205

Kee Tuan Teng, Siew Hwa Yen, Soo Y. Chua, Hooi Hooi Lean


This study attempts to investigate the evolution of dynamic linkages and volatility spillover between the five countries of the Association of Southeast Asian Nations (ASEAN-5) stock markets and China’s economic activities. By using the movements and structural breaks of the time-varying correlation and Granger causality test, a suitable destination for equity portfolio diversification can be determined among the studied markets. This study covers monthly data from January 1991 to March 2015. The DCC-MGARCH model shows that the studied countries are time-varying correlated, while the structural break observed by Bai and Perron test coincided with major economic shocks, policy changes and the establishment of regional trade policies. The VAR model Granger causality test observed no volatility spillover from Chinese economic activities to the ASEAN-5 stock markets, except for Malaysia and the Philippines. However, the ASEAN-5 stock markets’ volatility exerts a significant influence on China’s economy, except for Singapore’s stock market volatility. This study reveals that ASEAN-5 has gradually became the preferred destination for diversifying equity portfolios for investors in China.

Keywords: ASEAN, China, financial integration, volatility spillover

Valuation of Contractual Assets Using Statistical Simulation original article

pp. 153-162 | First published in 30 June 2016 | DOI:10.5709/ce.1897-9254.206

Jan Vlachý


This paper develops a dynamic option-based model for the valuation of rental and other similarly structured lease contracts under the conditions of uncertainty that is then solved by statistical simulation (Monte Carlo). The motivation, research background and methodology of the paper follow up on a previously published general firm-theoretical approach by the author, who takes an interdisciplinary approach to apply the model in this particular context. It is shown that due to the path dependency of the problem, Monte Carlo is an appropriate and practical tool for analyzing embedded options, incident in most rental and lease relationships, and can be used as a major determinant of their value. In addition to its basic valuation function, exploitable for business acquisition or lease contracting purposes, this Monte Carlo model is very well disposed for various microeconomic analyses. Accordingly, we demonstrate the particular impacts and sensitivities of contractual party-specific, as well as environmental, factors including parties’ transaction costs, information asymmetry and enforceability of legal claims.

Keywords: intangibles valuation, rental contracts, embedded options

Financial Systems and Economic Growth: Empirical Evidence from Australia original article

pp. 163-174 | First published in 30 June 2016 | DOI:10.5709/ce.1897-9254.207

Sheilla Nyasha, Nicholas M. Odhiambo


This paper examines the dynamic impact of both bank- and market-based financial development on economic growth in Australia during the period from 1980 to 2012. The study uses the autoregressive distributed lag (ARDL) bounds testing approach to examine this linkage. Unlike certain previous studies, this study uses both bank- and market-based financial development indices to measure the level of financial sector development in Australia. These indices were computed using the means-removed average method. The empirical results of this study show that while bank-based financial development has a short-run positive impact on economic growth in Australia, market-based financial development has no significant impact on economic growth, both in the short run and in the long run. These results imply that, in Australia, it is of paramount importance to concentrate on pro-banking sector policies, at least in the short run, to stimulate growth.

Keywords: Australia, bank-based financial development, market-based financial development, economic growth

Developing Countries as New Growth Poles of Post-Crisis Global Economy original article

pp. 175-186 | First published in 30 June 2016 | DOI:10.5709/ce.1897-9254.208

Elena Popkova, Svetlana Meshkova, Evgeniya Karpunina, Elena Karpushko, Marina Karpushko


This article is devoted to the search for a solution to overcoming the consequences of the global financial and economic crisis and the development of a post-crisis global economy. The purpose of this article is to determine perspectives and directions for the development of new growth poles in a post-crisis global economy and to develop tools for overcoming the consequences of the crisis and facilitating the global economic system entry into a new level of economic growth. The article uses the proprietary methodology for the calculation of “underdevelopment whirlpools,” which analyzes the dynamics of economic growth of the most prominent countries in this group and their ability to overcome “underdevelopment whirlpools” and transform into new growth poles for the global economy following the global financial crisis. The use of calculation tools for “underdevelopment whirlpools” determines the prospective of developing countries’ transformation into new growth poles in a post-crisis global economy. China, Japan, Brazil, Russia, and India are such poles at present, and they will strengthen their positions in the near future. For this, the research offers the following perspective and directions for the development of new growth poles in a post-crisis global economy for the increase in rates and quality (stability and sustainability) of economic growth: an emphasis on the real sector development of the economy, realization of transnational cluster initiatives, and active creation and implementation of innovations into production. As tools for overcoming the consequences of the crisis and the global economic system entering a new level of economic growth, the author developed the mechanism of post-crisis global economy development.

Keywords: growth poles, global financial and economic crisis, post-crisis phenomena, innovations, global economy