Research project is (co)funded by the Slovenian Research Agency and by Ministry of Finance.

Project

Member of University of Ljubljana

School of Economics and Business

Code

J5-8231

Project

When is blockholding growth enhanced?

Period

1.5.2017-30.4.2020

Range on year

1,82 FTE

Head

Prof. dr. Janez Prašnikar

Research activity

Social sciences/Economics

Research Organisation

sicris.si

Abstract

Private ownership and a free market are the two core pillars of a capitalist economy. In a normative sense their role is best described by the Arrow-Debreu world of perfect markets, where prices play the central role of ensuring economic efficiency. In a simple model of a capitalist economy money should grow at a fixed rate (monetarism), or as claimed by modern monetary theories, the central bank should focus on only one mechanism (the interest rate) to ensure price stability (low inflation), while the market mechanism would ensure that the economy would automatically move towards full employment. “The Great Moderation,” the period at the end of the 20th century and the first decade of the 21st century, represents a trend that we would also in practice move towards this model, while the so-called “Washington consensus” represents a list of rules of how to achieve this in a global context. This applies in particular to transitional countries.

The current crisis (2008), also known as the “Great Recession,” calls into question the functioning of the above-described mechanism. In addition to price stability, it brings other social goals to the forefront such as: stable economic growth, employment, financial stability, and also the distribution of income and wealth. In order to achieve so-called macroeconomic stability, a country can use different instruments (macroprudential regulation) from which all are not envisioned by the mechanism of the free market economy. Which instruments a country will use depends on how far it is from achieving the above-defined social objectives (Stiglitz, 2016).

Slovenia is one of the victims of the current crisis in a global context (Bole, Prašnikar, Trobec, 2014) and in 2013 it barely avoided the intervention of the so-called “troika.” In 2016 Slovenia is recognized as a successful country on the path to recovery, mainly due to the successful operation of its export economy (Bole, 2016, OECD, 2016). The key question is which macroprudential policy instruments to use for the recovery to be robust. The research project addresses three areas that are crucial for achieving macroeconomic stability (not only in Slovenia) and fall within the framework of macroprudential regulation (Stiglitz, Greenwald, 2014). These areas are: 1) blockholding as the predominant ownership form of companies; 2) reduction of bank loans to new corporate investments; 3) state subsidies. An analysis of the past developments will therefore be the basis for the debate on instruments of macroprudential regulation. The debate does not concern only the Slovenian economy, but it has a broader context, both in terms of upgrading the current economic theory and managing an effective macroprudential policy in practice.

Keywords: blockholding, the current crisis, macroeconomic stability, instruments of macroprudential regulation, bank loans to new corporate investments, state subsidies

Researchers

sicris.si

The phases of the project and their realization

Subproject A:

Aims:

  • (1) developing a theoretical model of an effective minimum control coalition (A1) (50%).
  • (2) analysing differences in total factor productivity (TFP) between firms with different types of minimum controlling coalitions and also firms with dispersed ownership in Slovenia in the period 2006-2016 (A2) (20%).
  • (3) Analysing debt (de)accumulation between firms with different types of minimum controlling coalitions in Slovenia in 2006-2016 (A3) (0%).

Subproject B:

Aims:

  • (1) to develop a theoretical model based with the inclusion of banks as the intermediaries (B1) (20%);
  • (2) to identify the role of massive capital inflows in the boom period and massive reversal of capital (B2) (100%);
  • (3) to identify the main drivers of excessive bank lending by analysing supply-side factors as well as demand-side factors (B3) (20%);
  • (4) to identify the supply-side factors’ effects, demand-side factors’ effects, and specific country effects on firm and household credit growth focusing on Slovenia in comparison to Croatia and Montenegro (B4) (20%);
  • (5) to discuss how to stabilize the capital flows in all phases of the business cycle and to discuss suitable measures (B5) (0%).

Subproject C:

Aims:

  • (1) analysing state subsidies efficiency of Slovenian firms in the period 1994-2014 (C1);(40%)
  • (2) comparison with international studies in this field (C2); (30%).
  • (3) to explore the impact of subsidization on adapting employment during the economic cycle, in order to understand the importance of subsidies in its various periods (C3) (0%).

Citations for bibliographic records

sicris.si

Na vrh strani