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Vol.3 No.2
June 2015

 Page Number

 Article Information

1-11

Dollarization and External Sustainability of Turkey

Amira Karimova, Ahmet Caliskan, and Jamshid Karimov

DOI: 10.15604/ejef.2015.03.02.001

Abstract

In this paper, we attempt to explain that expanding current account deficit of Turkey can be a highlighting signal of its dependency on foreign capital inflows. When private non-financial firms borrow in foreign currency, they face currency mismatch in their balance sheets. Statistical analyses of aggregated balance sheet data of non-financial sector revealed that the negative gap between firms’ dollarized assets and liabilities has been increasing considerably in Turkey. This creates financial exposure by private non-financial sector. Given a high level of liability dollarization by firms in Turkish economy, it is exposed dramatically to the changes in external and domestic conditions.  

Keywords: Dollarization, Balance Sheets, Capital Flows, External Exposure

12-22

The Impact of the Economic Transition on the Development of Economic Freedom – Case of Poland

Anna Stepniak-Kucharska

DOI: 10.15604/ejef.2015.03.02.002

Abstract

The changes in the Polish socio-economic system, initiated at the turn of 1989 and 1990, led to a systematic increase in the liberalization of economy and thereby the rise of the level of economic freedom. The aim of this paper is to examine the impact of the economic transition on the development of economic freedom in Poland. The analysis, carried out in the period 1995-2015, was conducted on the basis of the chain-linked Economic Freedom Index by the Fraser Institute and the Index of Economic Freedom of the Heritage Foundation and the Wall Street Journal. The analysis indicates that: (1) Poland cannot be considered as a country that is fully free economically, but the transition of its economic system has resulted in a rapid growth of economic freedom. (2) The impact of transition varies for different areas (sub-indices) of the economy. (3) The European economic integration stimulated the increase of EFI, but the economic crisis did not decrease the level of economic freedom.

Keywords: Economic Freedom, Economic Transition, Economic Liberalization, Poland

23-29

Fiscal Efficiency of VAT in EU Member States

Adam Adamczyk

DOI: 10.15604/ejef.2015.03.02.003

Abstract

Value added tax (VAT) in the countries of European Union is one of the most important sources of tax revenues. During the recent financial crisis, the importance of this tax has increased significantly. Despite of the fact that VAT is the best harmonized tax in the EU, the construction of VAT in member states may significantly differ. The differences may relate to issues such as the number and the level of applicable tax rates and the range of goods and services covered by the preferential VAT rates. The aim of the article is to evaluate the functioning of VAT in the EU member states. The evaluation will be carried out with the use of the synthetic measure of development. The criteria for evaluation will be provided by performance parameters such as VAT revenue ratio (VRR) and the relation of VAT revenues to GDP. The carried out analysis will specify in which VAT works best. It will be also possible to identify the factors that determine the fiscal efficiency of this tax.

Keywords: VAT, Efficiency, Policy Gap, Non-Compliance Gap

30-41

The Analysis and Modeling of The Profitability Feedback Process –  A Dynamic Model on Portugal’s National Economy

Bianca-Ioana Popescu and Emil Scarlat

DOI: 10.15604/ejef.2015.03.02.004

Abstract

The aim of the present paper is to underline the influence of the profitability process at macro-economic level will exert on real economy. Until now relevant literature has been focused on firms, banks and industries but only with the objective of comparing past profitability of the studied entity or comparison to other competitors on the market and with microfoundation cal-culus – profitability being calculated for a panel of firms in the studied industry. The model of the Profitability Feedback Process is capable of surprising the influences the concept of prof-itability will have at macroeconomic level as being considered to be one of the auto-regulation processes of a national economy. The simulations have been made on EUROSTAT’s official stats of Portugal between 2005 and 2012 annual data and the simulations have revealed robust behavior of the system in relation to the profitability and the economic context and sustain the rationality of our attempt.

Keywords: Cybernetics, Dynamic Model, Feedback Process, Macroeconomy, Profitability, Regulating Process, Investment Decisions, Adjustments and Exclusions

42-61

Pension Fund Performance in East Asia: A Comparative Study

Zamri Ahmad and Eliza Nor

DOI: 10.15604/ejef.2015.03.02.005

Abstract

This paper discusses and analyzes asset allocation and performance of the major pension funds in four East Asia countries, namely Malaysia, Singapore, Hong Kong and South Korea. The respective funds for these countries are Employee Provident Fund (EPF), Central Provident Fund (CPF), Mandatory Pension Fund (MPF) and National Pension Service (NPS). The impact of some economic crises on the fund performance will also be assessed. Besides looking at the individual countries, a comparison of the performance among all the funds will also be done. From the analyses, it is found that the CPF is the most conservative pension fund as it invested most of its funds in fixed income and the investments were made in the local markets, while MPF is the most aggressive pension fund as most of its funds were invested in equities.  Performance of the funds was measured in terms of return on investment (ROI). All funds recorded the lowest ROI during the subprime crisis in 2008. Besides the subprime crisis, these funds were also affected by the Japanese earthquake as lower ROI were also observed in 2011.

Keywords: Pension Funds, Asset Allocation, Performance, East Asia

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