The Review of Austrian Economics, 16:2/3, 253–269, 2003.
2003 Kluwer Academic Publishers. Manufactured in The Netherlands.
Big Players in Slovenia
ROGER KOPPL firstname.lastname@example.org
Department of Economics and Finance, Fairleigh Dickinson University, Madison, NJ 07940, USA
DUSAN MRAMOR email@example.com
Minister of Finance, Ministry of Finance, Zupanciceva 3, 1502 Ljubljana, Slovenia
Abstract. The subjectivism of Austrian economics helps to explain the statistical fact of long memory in asset
prices. The theory of Big Players is an Austrian approach to understanding the effects of discretionary policymaking
in markets. It leads to implications that can be tested with statistics. In particular, Big Players induce herding and,
thereby, an increase of persistence in asset prices. A recent episode in Slovenian monetary theory provides a case
study. This case study adds to a set of similar studies, all tending to support the theory of Big Players.
Key Words: Big Players, Slovenia, herding, R/S analysis, monetary policy
JEL classiﬁcation: E58, G12, E42.
One of the principal goals of ﬁnancial research is to describe the statistical properties of the
time-series data generated by asset markets. Persistent dependence in asset prices (explained
below) is one such statistical property.
Somewhat ironically, perhaps, the subjectivism of
Austrian economics helps to explain this statistical fact. The theory of Big Players (explained
below) is an Austrian approach to understanding the effects of discretionary policymaking
But it leads to implications that can be tested with statistics.
In particular, Big
Players induce herding and, thereby, an increase of persistence in asset prices. (As we shall
see, this Big Player effect operates through reputation effects in the labor market.) A recent
episode in Slovenian monetary theory provides a case study.
Koppl and his co-authors have argued that “Big Players” induce herding in ﬁnancial
markets. This herding increases persistent dependence. They have produced several empir-
ical studies supporting the claim (Ahmed et al. 1997, Gilanshah and Koppl 2001, Koppl
and Yeager 1996, Koppl and Sarjanovic 2003). Our study adds to this list. (Broussard and
Koppl 1999 and Koppl and Nardone 2001 address different but related questions.) Each of
these studies, including ours, combines statistical analysis with qualitative empirical work.
In this group of studies, qualitative empirical work is a prerequisite to statistical testing. It
bolsters the view that the statistical test and its interpretation are both appropriate. In this
paper, our examination of interviews conducted by Draˇsko Veselinoviˇc, together with his
own analysis, allow us to identify with some conﬁdence key features of the mental models
guiding market participants during the episode we study. Attention to such “agent theories”
(Koppl 2002) is characteristic of Austrian economics.
Section 1 reviews the statistical concept of persistent dependence and past explanations
for it. Section 2 reviews the theory of Big Players and shows how it offers an alternative