H30 - Fiscal Policies and Behavior of Economic Agents: GeneralReturn

The paper deals with Czech and Slovak budget policy during the covid-19 pandemic. Due to extensive expansionary measures implemented as part of the budget policy, the Czech and Slovak public finances were disrupted. Deviations in the implementation of the Czech and Slovak state budgets are assessed using a combination of actual values and own forecasts based on SARIMA-based econometric models applied to the 2010–2020 time series. The main goal of the text is to determine the overall impact of the covid-19 pandemic on the management of the Czech and Slovak state budgets caused by increasing public expenditures and a decrease in public revenues. Special attention is paid to the related additional expenses and reduced budget revenues. The results of the most suitable models are used as input data for the autonomous development of the state budgets of the Slovak Republic and the Czech Republic without the influence of the covid-19 pandemic.

Since the Miller and Modigliani (1958, 1963) theory of capital structure the literature struggles to include cost of financial distress in the cash flow theories of capital structure. Besides that most of the recent models are static. Let us just remind the contributions by Cooper, and Nyborg (2006), Farber, Gillet, and Szafarz (2006), Qi, Liu and Johnson (2012) or Fernández's (2004, 2007) analysis of their predecessors' work. This paper brings dynamic, and risk consistent (in the meaning of return being purely growing function of risk), although regarding the quantification of financial distress cost somewhat simplified model. His advantage is simplicity and observability of all its exogenous (input) variables. However, the clarification of relationship between face and market value of debt, and empirical test of model are needed.