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May 2010

May 2010

Zagreb International Review of Economics and Business
Volume XIII, Number 1 (May 2010)



Switching to the Inflation Targeting Regime: The Case of Egypt
Ibrahim L. Awad

Abstract: The purpose of this paper is to answer the question of whether the switching to the Inflation Targeting (IT) regime is necessary for the Egyptian case or not? Our judgment of applying IT regime in the Egyptian economy is established on doubled criterion. That is, the practical experience of the inflation targeters, and the efficiency of Monetary Targeting Regime (MTR) in the case of Egypt. Defining the efficiency of a monetary policy regime by the efficiency of the embedded nominal anchor to send the right message to all practitioners about the potential behavior of the price level, I assessed the efficiency of MTR in Egypt by measuring; whether there is a relationship between money and prices, the stability of the velocity of circulation, and the stability of the demand for money function. The study concluded that MTR is not efficient to tie down individuals expectations about the future path of inflation in Egypt. Taking into account that IT regime is a way to reform monetary policy and it does not worsen economic performance it becomes necessary for Egypt to switch to the IT regime once the prerequisites for IT regime have been met.

Keywords: inflation targeting, demand for money function, monetary policy in Egypt

JEL Classification: E310, E410, E510, E520, E580, E590

The Relationship between GDP and Unemployment: Evidence from MENA Countries
Mehdi Haririan
Mehmet Huseyin Bilgin
Gokhan Karabulut

Abstract: This paper investigates the long-run relationship between GDP growth and unemployment for the following selected MENA countries: Turkey, Egypt, Israel, and Jordan. Although the results of previous studies in this area are somewhat ambiguous, the literature has traditionally shown a negative relationship between GDP growth and unemployment. In this paper, we expect a negative long-run relationship between GDP growth and unemployment to exist. Therefore, we predict that high rates of GDP growth will lead to a reduction in unemployment. The results of our cross-country comparison model support a negative relationship between these variables.

Keywords: growth, unemployment, Okun’s Law, MENA, Turkey

JEL Classification: E24, J69, O49, O53, O57

Explaining and Testing Structural Break of Relative Trade of Turkey with European Union Countries
Mustafa Akal

Abstract: This study explains and tests structural break of Turkey’s relative trade with the European Union countries for the period of 1982-2007. As a result, the data indicated the evidence of structural break and alternating elasticities’ signs in estimations based upon error component model. After (Before) Turkey being the member of the ECU a percentage increase in all the relative foreign income, Turkish TOT, real exchange simultaneously and a unit increase in trend is found improving (decreasing) the relative trade about 0.135 (0.78) percentage in total. However, the dynamic fixed effect model did not validate the evidence of structural break. This implies individual differences matter in relative trade not to face structural break.

Keywords: relative trade, elasticity, Turkey and EU, panel data, testing structural break

JEL Classification: F1, F13, O24, C23, F41, C51

Inventories in a Labour-Managed Economy
Kazuhiro Ohnishi

Abstract:This paper considers a two-period model in which two labour-managed firms can use inventory investment as a strategic device. In the first period, each firm simultaneously and independently chooses how much it sells in the current market and the level of inventory it holds for the second-period market. The paper shows the reaction curves in the model with inventories. The paper finds that inventories may be used by labour-managed firms to facilitate tacit collusion.

Keywords: labour-managed firm, inventory investment, two-period model

JEL Classification: C72, D21, L13, L31

An Empirical Study of the Relationship between Ownership Structure and Firm Performance: Evidence from Iran
Mahdi Salehi*
Godratallah Talebnya
Hashem Valipour
Shahram Shafiee

Abstract: The study of effective factors seems essential since, the operation of profiting entities is very important in the decision of internal and external organization users. The effect of various factors on the assessment scale of operation was measured in different researches, e.g. the structure of ownership. In this study, the relationship between three kinds of various structures of ownership including the structure of shareholder’s ownership and other firms and the structure of state ownership Q Tobin’s operation scale of listed firms in TSE was considered. The effect of firm’s age and size has considered as two control variables on the Q Tobin’s operation scale. In this study, the statistical population is listed firms in Tehran Stock Exchange (TSE).

Keywords: ownership, shareholders, investment organizations, State ownership, Tobin's Q

JEL Classification: L2

Determinants of Capital Structure: Case of Companies Listed on Zagreb Stock Exchange
Fitim Deari
Media Deari

Abstract: In this article we sought to analyze some factors influencing companies’ leverage. To examine such factors, we have selected a sample of companies registered on Zagreb Stock Exchange. The sample is from non-financial companies covering the period of 2002-2006 and comprised 89 listed companies. Tangibility, profitability, size, and growth were confirmed as relevant determinants, and only the non-debt tax shield was confirmed as irrelevant determinant in capital structure decisions. Companies’ features as capital origin structure, business industry, and company age were confirmed to play roles in capital structure composition.

Keywords: capital structure, listed companies, leverage

JEL Classification: G320