|
on Banking |
| By: | Mohammed Mikou |
| Abstract: | This paper estimates the social costs and benefits of the Basel III banking regulation application to Moroccan banks, which, inter alia, imposed higher capital requirements. The paper quantifies the impact of higher capital requirements on (i) lending rates, (ii) bank refinancing costs, and (iii) banking system resilience. Our findings indicate that the increase in capital requirements for Moroccan banks has a limited impact on lending and refinancing costs. The benefit of greater banking system resilience in terms of systemic risk appears to be more significant in expectations. |
| Date: | 2023–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp10-2023&r=ban |
| By: | Ozili, Peterson K |
| Abstract: | Credit markets around the world are undergoing digital transformation which has led to the rise in Fintech and Bigtech lending. Fintech and Bigtech lending is the provision of credit by Fintech and Bigtech providers who have more capital, cutting-edge IT systems, worldwide recognition, greater online presence and are able to handle more big data on computers and mobile phones than traditional banks. Fintech and Bigtech lending is growing in importance, but the determinants of Fintech and Bigtech lending have received little attention in the literature. This study investigates the determinants of Fintech and Bigtech lending. The study focused on the effect of financial inclusion and financial development on Fintech and Bigtech lending. Using data for 18 countries from 2013 to 2019 and employing the difference-GMM and 2SLS regression methods, the findings reveal that financial inclusion and financial development are significant determinants of Fintech and Bigtech lending. Financial development is a positive determinant of Fintech and Bigtech lending while financial inclusion has a significant effect on Fintech and Bigtech lending. Also, Fintech and Bigtech lending lead to greater banking sector stability and also poses the risk of rising nonperforming loans. There is also a significant positive correlation between financial development and Fintech and Bigtech lending. These findings add to the emerging literature on the role of Fintech and Bigtech in financial intermediation. This research is significant because it provides insights into the role of financial inclusion and financial development in digital transformation of credit markets. |
| Keywords: | financial inclusion, financial development, Fintech, Bigtech, lending, ATM, bank branch, access to finance |
| JEL: | G21 G23 |
| Date: | 2023–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:117465&r=ban |
| By: | Amina Enkhbold |
| Abstract: | I study the impact of banking market concentration and wholesale funding reliance on the transmission of monetary policy shocks to mortgage rates. I empirically demonstrate that in the United States, banks with higher reliance on wholesale funding in concentrated (competitive) deposit markets transmit monetary policy shocks less (more) to mortgage rates. I study this imperfect transmission through the lens of a New Keynesian model with monopolistically competitive banks and costly access to wholesale funding. I find that high market power banks with greater wholesale funding transmit monetary policy less to deposit rates, generating lower liability. This leads to lower mortgage lending, house prices, and borrower consumption. If monetary policy shocks become persistent, this negative effect is amplified with banks shifting away from deposits more towards wholesale funding. |
| Keywords: | Financial institutions; Inflation targets; Monetary policy transmission; Wholesale funding |
| JEL: | E44 E52 G21 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:23-35&r=ban |
| By: | Eiblmeier, Sebastian |
| Abstract: | Did the Eurosystem's quantitative easing from 2015 to 2018 have differential effects regarding the bank lending volume to different institutional sectors, industry sectors, or types of loans? To investigate this question, this paper employs linked microdata of the German banking system. These allow for computing the volume of bond redemptions at bank level as a measure of banks' exposure to QE. Because when a bond matures, the bank is faced with the decision of whether to reinvest the proceeds into bonds or whether to rebalance into another asset such as loans. When the central bank squeezes bond yields through large-scale purchases, banks with more redemptions have a stronger incentive to rebalance. However, a fixed effects model reveals no significant difference between banks with a high exposure compared to the control group regarding their overall loan growth. Neither can any of the mentioned differential effects be observed. While these findings are at odds with some of the previous empirical literature, they are in line with theories that argue that lending is purely demand-led and any central bank action geared towards the supply side of the loan market merely constitutes 'pushing the string'. |
| Keywords: | Unconventional monetary policy; portfolio rebalance; differential effects; panel regression |
| JEL: | C23 E51 E52 G11 G21 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:han:dpaper:dp-707&r=ban |
| By: | Ochen, Ronald; Bulime, Enock Will Nsubuga |
| Abstract: | Digital Financial Services such as mobile money provides immeasurable benefits for financial inclusion and intermediation in East Africa. In this paper, we use a Fixed Effects panel model and annual data collected from 2007 to 2021 to examine the evolution of Digital Financial Services regulatory frameworks and their effects on conventional banking and Financial Inclusion in East African countries - Kenya, Tanzania, and Uganda. Results indicate that digital financial services regulations positively and significantly affect conventional banking services and mobile money (financial inclusion). Also, during the COVID19 pandemic period when the different governments instituted COVID19 policy response measures in the digital payments space to circumvent the use of cash and physical contact, positively affected digital financial services, thereby enhancing financial inclusion in the region. Also, an increase in lending rates and the consumer price index causes mobile money to decline. Therefore, digital financial services regulations are pivotal in advancing financial inclusion and intermediation through mobile money and conventional banking services in East Africa. Also, Central Banks should be concerned with mobile money in the economy because it forms part of the loanable funds by banks thus, stabilizing lending rates and prices in the economy is crucial for financial inclusion. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kbawps:73&r=ban |
| By: | Sebastian Doerr; Leonardo Gambacorta; Luigi Guiso; Marina Sanchez del Villar |
| Abstract: | We find that, following the introduction of the CCPA, loan applications to fintechs increase by significantly more than those to traditional banks, leading to an increase in fintechs' market share by up to 19%. This increase can be attributed to applicants' increased willingness to share their data. Fintechs, taking advantage of this data, expand their utilisation of information beyond traditional credit scores during the application process. Consequently, they engage in more personalised pricing and reject a larger proportion of applications. These findings suggest that fintechs enhance their screening process, leading to an improvement in the quality of their average borrower. As a result, fintechs are able to offer significantly lower loan rates than banks can following the CCPA's implementation. In sum, the CCPA has benefited consumers by providing fintech lenders, equipped with advanced screening technology, with improved access to data. |
| Keywords: | data privacy, data sharing, fintech, privacy regulation, CCPA |
| JEL: | G21 G23 G28 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:1103&r=ban |
| By: | Yuanyuan Chang; Dena Firoozi; David Benatia |
| Abstract: | This paper aims to investigate the impact of large banks on the financial system stability. To achieve this, we employ a linear-quadratic-Gaussian (LQG) mean-field game (MFG) model of an interbank market, which involves one large bank and multiple small banks. Our approach involves utilizing the MFG methodology to derive the optimal trading strategies for each bank, resulting in an equilibrium for the market. Subsequently, we conduct Monte Carlo simulations to explore the role played by the large bank in systemic risk under various scenarios. Our findings indicate that while the major bank, if its size is not too large, can contribute positively to stability, it also has the potential to generate negative spillover effects in the event of default, leading to increased systemic risk. We also discover that as banks become more reliant on the interbank market, the overall system becomes more stable but the probability of a rare systemic failure increases. This risk is further amplified by the presence of a large bank, its size, and the speed of interbank trading. Overall, the results of this study provide important insights into the management of systemic risk. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.17830&r=ban |
| By: | Egemen Eren; Andreas Schrimpf; Dora Xia |
| Abstract: | We document that the sectoral composition and marginal buyers of government debt differ notably across jurisdictions and have evolved significantly over time. Focusing on the United States, we estimate the yield elasticity of demand across sectors using instrumental variables constructed from monetary policy surprises. Our estimates point to a 11% increase in the demand by non-central-bank players for a 1 percentage point increase in long-term yields. Hence, a hypothetical reduction in the central bank balance sheet of around $215 billion increases longterm yields by 10 basis points. We find commercial banks, foreign private investors, pension funds, investment funds, and insurance companies to be the sectors whose demand is most sensitive to changes in long-term yields, but to varying degrees. Heterogeneous elasticities imply compositional shifts in the holders of government debt as central banks normalize balance sheets, which has policy implications. |
| Keywords: | government debt, demand, yield elasticity, quantitative easing, quantitative tightening |
| JEL: | E58 G11 G21 G23 H63 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:1105&r=ban |
| By: | Tiriongo, Samuel; Josea, Kiplangat; Mulindi, Hillary |
| Abstract: | Globally, credit scoring adoption has been on the rise on account of increased access to data, computing power, and the need for efficient credit allocation that is supportive of entrenching financial inclusion and economic growth. Relatedly, the adoption of risk-based pricing has gained traction, and, in this paper, we use annual bank level and macroeconomic data spanning the period 2003-2021, to estimate a panel model assessing the drivers of price of credit. Credit pricing in Kenya is affected by the bank size, credit risk, and efficiency among others. In particular, the larger the size of the bank, the lower the price of credit. Overall, the results reveals that the implementation of riskbased pricing will be heterogenous and dependent on bank-specific characteristics and internal policies, while the macroeconomic environment will have a negligible role on the credit prices determined by the banks. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kbawps:64&r=ban |
| By: | Pavel Jankulár; Zdeněk Tůma |
| Abstract: | We contribute to literature on banks´ strategies to increasing capital requirements in the period of 2017-2021. We analyze a sample of 85 European banks and differentiate between subgroups according to bank's size, capitalization and riskiness. We examine their responses to higher capital requirements following the issuance of finalized Basel III reforms and increased regulatory and supervisory scrutiny after the COVID-19 outbreak. We found evidence that banks´ adjustments in the direction of higher capital ratio were more pronounced and faster in the COVID-19 period, and that they depended on banks´ specific characteristics and positions. Identified variances between banks and periods resulted mainly from different treatment of risk on banks' books. In particular, higher capitalization and lower risk profile enabled banks to take on the risk regardless of period, while banks with increased risk rather limited their balance sheets to manage their capital ratios. |
| Keywords: | capital ratio, Basel capital requirements, COVID-19 pandemic, global financial crisis |
| JEL: | C33 G21 G28 |
| Date: | 2023–05–02 |
| URL: | http://d.repec.org/n?u=RePEc:prg:jnlwps:v:5:y:2023:id:5.004&r=ban |
| By: | Osoro, Jared; Cheruiyot, Kiplangat Josea |
| Abstract: | This paper seeks to examine the effect of Fintech credit on bank stability using an unbalanced panel dataset of 37 commercial banks in Kenya between 2013 and 2020. The recent evolution of Fintech comes with the promise of being both revolutionary and disruptive. The temptation of a unidirectional expectation that effects of Fintech will only be positive masks the potential destabilization effects, hence the motivation to examine possibility of its being a source of fragility in the banking sector in Kenya. We employ both static panel models and a dynamic panel of System Generalized Method of Moments (GMM) that lead us to the conclusion that Fintech credit has not occasioned concerns of market fragility. If anything, the empirical results reveal that the FinTech credit is associated with higher bank stability in the sense that FinTech intermediated credit is associated with a higher Z-score suggesting higher overall bank stability. The relationship is however nonlinear, with the squared term of the FinTech credit being negative and statistically significant. We infer that the influence of FinTech on bank stability is inverted "U" type relationship. Bank-specific factors such as equity to assets, asset quality and cost-to-income rations having a strong influence on bank stability. That is a pointer to the possibility of the current magnitude of Fintech credit - the possible conduit of instability - not being associated with fragility, with the likelihood of that changing as the its share of bank assets grows with time. |
| Keywords: | Bank Stability, FinTech, Kenya |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kbawps:69&r=ban |
| By: | Odongo, Maureen; Misati, Roseline Nyakerario; Kageha, Caren; Wamalwa, Peter Simiyu |
| Abstract: | This study analyses the impact of climate risk indicators on bank stability in Kenya based on descriptive and quantitative approaches on quarterly data covering thirtyfive banks over the period 2009 to 2021. The analysis reveals a distinct warming trend, variable rainfall pattern and an increasing trend in greenhouse gas emissions especially in the agriculture and transport sectors. Banks' climate financing for sustainable projects remains low. Empirical findings using dynamic panel estimation reveals adverse impact of temperature changes and rainfall variability on bank stability and credit risk arising from non-performing loans. The stress testing results reveal vulnerability of the banking sector to climate change as the probability of defaulting increases in moderate, severe, and extreme temperature changes. The results affirm banks' important role in managing financial stability risks while providing sustainable climate financing and the need to strengthen synergies between private and public sustainable financing for target priority sectors. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kbawps:71&r=ban |
| By: | Solikin M. Juhro (Bank Indonesia) |
| Abstract: | This paper elaborates the theoretical and practical perspectives of future central bank policy in emerging market economies (EMEs). With salient thoughts presented to expand broader horizons, a special overview is presented on the experiences and practices of central bank policies in EMEs. For EME central banks, complex challenges are inevitable considering the current state of economic progress, economic endowments, and institutional capacity. Several theoretical assumptions that underlie policy thinking are also substantively not the case for EMEs. These conditions, however, provide broad opportunities and space for central banks in EME countries to deliver policy innovations and breakthroughs, not only from a practical level, but also a theoretical perspective. The implementation of flexible inflation targeting framework (ITF) and the central bank policy mix, as well as the policy trilemma management of an open economy are among many examples of how central bank policy has evolved towards a more integrated framework. Eventually, to become a relevant regulator, the central bank must put extra effort into strengthening policy coordination and institutional arrangements, fostering new sources of growth to support a broader scope of welfare amelioration, while reinforcing the central bank policy mix in the new era |
| Keywords: | central bank policy mix, integrated policy framework, inflation targeting, central bank in emerging markets |
| JEL: | E02 E31 E52 E58 E61 F62 G01 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:idn:wpaper:wp012023&r=ban |
| By: | Ndwiga, David M. |
| Abstract: | The study seeks to determine how the bank credit allocation has evolved in pre - covid, covid and post covid era amid possible uncertainties. Study focused on credit risk, liquidity risk, industry competition and operating efficiency for 2010 - 2021 period. Panel Autoregressive Distributed Lag and panel Generalized Method of Moments were applied for bank level data while sectoral level Autoregressive Distributed Lag models were applied for sectoral analysis. The study found credit, liquidity, covid are all negatively related to bank credit allocation. In addition, interaction of covid with credit and liquidity risks reveal that the effect of liquidity risk is more pronounced. Recovery era simulation posits that personal household sector would register the highest allocation with real estate sector allocation being last. The study calls for more vigilance in the post pandemic times as credit risk is likely to reveal itself amid relaxation in loan reclassification. Further, a more proactive monetary policy is advocated for to address the liquidity distribution challenges. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kbawps:74&r=ban |
| By: | António Afonso; André Teixeira |
| Abstract: | This paper investigates the impact of banking prudential regulation on sovereign risk. We show that prudential regulation reduces sovereign risk and induces governments to spend more. As a result, countries with tight prudential regulation have lower primary budget balances and accumulate more government debt over time. We find that prudential regulation reduces private debt, while paradoxically increasing government debt. We explore several explanations for this paradox. Our results suggest that prudential regulation enables governments to accumulate debt because they improve the nation’s credit rating and its borrowing conditions in sovereign bond markets. |
| Keywords: | banking regulation, fiscal policy, macroprudential policy, sovereign debt, sovereign risk |
| JEL: | E52 E58 E62 H30 G28 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10434&r=ban |
| By: | Michael Dinerstein; Constantine Yannelis; Ching-Tse Chen |
| Abstract: | We evaluate the effects of the 2020 student debt moratorium that paused payments for student loan borrowers. Using administrative credit panel data, we show that the payment pause led to a sharp drop in student loan payments and delinquencies for borrowers subject to the debt moratorium, as well as an increase in credit scores. We find a large stimulus effect, as borrowers substitute increased private debt for paused public debt. Comparing borrowers whose loans were frozen with borrowers whose loans were not frozen due to differences in whether the government owned the loans, we show that borrowers used the new liquidity to increase borrowing on credit cards, mortgages, and auto loans rather than avoid delinquencies. The effects are concentrated among borrowers without prior delinquencies, who saw no change in credit scores, and we see little effects following student loan forgiveness announcements. The results highlight an important complementarity between liquidity and credit, as liquidity increases the demand for credit even as the supply of credit is fixed. |
| Keywords: | debt moratoria, student loans |
| JEL: | G51 I22 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10422&r=ban |
| By: | Ochenge, Rogers Ondiba |
| Abstract: | Cognizant of the recent revolution in financial technology (FinTech), this paper explores the effect of FinTech development on bank risk-taking behavior in Kenya over the period 2008 to 2021. The study first develops a FinTech index using text mining technology and then relates this index to bank-risk taking in a dynamic panel regression model. The study uncovers the following empirical results: (i) The impact of FinTech on bank's risktaking shows a "U" shape, first falling bank risk and then rising. That is, at early stage of development, FinTech reduces risk-taking, but as key technologies mature and FinTech companies directly compete with traditional commercial banks, FinTech exacerbates risktaking. (ii) The impact of FinTech is heterogeneous across bank sizes. Specifically, large banks appear to be more sensitive to changes in FinTech development compared to small and medium-sized banks. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kbawps:72&r=ban |
| By: | Kimani, Stephanie |
| Abstract: | This study examined the impact of the COVID-19 pandemic on bank lending across various sectors in Kenya. Using a multivariate Vector Autoregressive (VAR) model within a time series data framework, the study established the existence of both direct and indirect COVID induced shocks on credit allocation to various sectors in the Kenyan economy. The main finding of the study was that the credit allocation response to the COVID-19 pandemic was through the demand channel. Therefore, any policy aimed at minimizing pandemicinduced economic damage by stimulating demand was not sufficient in catering for emerging supply distortions. Additionally, given that the COVID-19 pandemic induced uncertainty, resulting in a lagged response as revealed by the IRFs, most commercial banks would require to be incentivized, through prudential and supervisory bank regulations to extend and sustain positive credit allocation to the private sector. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kbawps:67&r=ban |
| By: | Githu, Jackson Macharia |
| Abstract: | This paper reviews the legal and regulatory framework governing digital financial services in Kenya including some of the unanswered questions by the current regulatory framework. The paper focusses on the question of the statutory definition of the rapidly evolving payment services, the architecture of the regulatory framework of the digital financial services and the regulation of digital credit providers. The paper identifies that there are risks and opportunities in the current regulatory framework and the regulatory regime should strike the required balance. The paper concludes by recommending that Parliament amends the definition of payment services in the National Payment Services Act. Further, even though the digital lenders regulatory framework has just come into force, the paper calls for its continued enhancement. The paper also calls for some minimum regulatory guidelines to be issued for the currently unregulated non digital lenders on areas such as interest rates and consumer protection. The paper also urges reconsideration of the regulatory framework to consolidate the regulators, laws and regulations on the area. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kbawps:68&r=ban |
| By: | Kodongo, Odongo |
| Abstract: | We examine the effect of the fintech ecosystem on the consumption of formal financial services such as savings, credit and use of capital markets instruments in Kenya. We deploy Probit regression on data from FinAccess Survey for 2016 and 2021. Findings suggest that the fintech ecosystem facilitates credit evaluation and fosters credit use, offer financial products and services that better match users' needs hence fostering usage of those services, but does not mitigate the distance barrier. Second, the probability of an individual enjoying fintech ecosystem services falls by at least 19% if the individual resides in Northern Kenya. Third, the fintech ecosystem increases the probability of usage of traditional services of financial institutions by at least 5.2%. Fourth, the financial inclusion gains of the fintech ecosystem are not uniform across all user categories. We recommend several policy actions such as improved provisioning of physical infrastructure in remote areas, fiscal policy incentives, and affirmative action on financial inclusion. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kbawps:70&r=ban |
| By: | Makoto WATANABE; Tarishi Matsuoka |
| Abstract: | This paper studies the role of a lender of last resort (LLR) in a monetary model where a shortage of a banks monetary reserves (a liquidity crisis) occurs endogenously. We show that discount window lending by the LLR is welfare improving but reduces banks ex-ante incentive to hold monetary reserves, which increases the probability of a liquidity crisis, and can cause moral hazard in capital investment. We also analyze the combined effects of monetary and extensive LLR policies, such as a nominal interest rate, a lending rate, and a haircut. |
| Keywords: | Monetary Equilibrium, Liquidity Crisis, Lender of Last Resort, Moral Hazard JEL Classification Number:E40 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:cnn:wpaper:23-010e&r=ban |
| By: | Florentina Şoiman (CASC - Calcul Algébrique et Symbolique, Sécurité, Systèmes Complexes, Codes et Cryptologie - LJK - Laboratoire Jean Kuntzmann - Inria - Institut National de Recherche en Informatique et en Automatique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes, CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes, Cybersecurity Institute - Université Grenoble Alpes); Jean-Guillaume Dumas (CASC - Calcul Algébrique et Symbolique, Sécurité, Systèmes Complexes, Codes et Cryptologie - LJK - Laboratoire Jean Kuntzmann - Inria - Institut National de Recherche en Informatique et en Automatique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes); Sonia Jimenez-Garces (CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes) |
| Abstract: | Decentralized Finance (DeFi) is a nascent set of financial services, using tokens, smart contracts, and blockchain technology as financial instruments. We investigate 3 possible drivers of DeFi returns: exposure to the cryptocurrency market, the network effect, and the valuation ratio. As DeFi tokens are distinct from classical cryptocurrencies, we designed a new dedicated market index, denoted iDeFiX. We compare our index with the one created by Nasdaq and obtain similar results. First, we show that DeFi tokens returns are driven by their own network variables and the cryptocurrency market. We construct a valuation ratio for the DeFi market by dividing the Total Value Locked (TVL) by the Market Capitalization (MC). Our findings do not support the assumption regarding TVL/MC exposure. Overall, our empirical study shows that the impact of the cryptocurrency market on DeFi returns is stronger than any other considered driver and provides superior explanatory power. |
| Abstract: | La finance décentralisée (DeFi) est un ensemble naissant de services financiers, utilisant les jetons, les contrats intelligents et la technologie blockchain comme instruments financiers. Nous étudions trois moteurs possibles des rendements de DeFi : l'exposition au marché des crypto-monnaies, l'effet de réseau et le ratio de valorisation. Les jetons DeFi étant distincts des crypto-monnaies classiques, nous concevons un nouvel indice de marché dédié, dénommé DeFiX. Tout d'abord, nous montrons que les rendements des jetons DeFi sont déterminés par l'attention de l'investisseur sur des termes techniques tels que "finance décentralisée" ou "DeFi", et sont exposés à leurs propres variables de réseau et au marché des crypto-monnaies. Nous construisons un ratio de valorisation pour le marché DeFi en divisant la valeur totale bloquée (TVL) par la capitalisation boursière (MC). Nos résultats ne confirment pas l'hypothèse du pouvoir prédictif de la TVL/MC. Dans l'ensemble, notre étude empirique montre que l'impact du marché des crypto-monnaies sur les rendements du DeFi est plus fort que tout autre facteur considéré et fournit un pouvoir explicatif supérieur. |
| Keywords: | DeFi token, index, asset pricing, financial return |
| Date: | 2023–05–20 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03625891&r=ban |
| By: | KANAGUCHI Takehisa (Bank of Japan); KAWAKAMI Takehito (Bank of Japan); HASEBE Akira (Bank of Japan); OGAWA Yoshiya (Bank of Japan) |
| Abstract: | The funds see an increase in their financing demand, depending on their own investment stage, as the inflow into private equity funds and other funds continues. Under these circumstances, financial institutions promote their businesses based on the high profitability of Fund Finance. In addition, they have established a risk management system that pays attention to the risk characteristics associated with such finance. On the other hand, the funds lengthen loan terms and increase the leverage of Fund Finance in order to boost investment returns to investors, and increasing risks associated with Fund Finance have been identified. Therefore, it is important to understand the real picture of Fund Finance and carefully monitor its potential risks. |
| Date: | 2023–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojrev:rev23e05&r=ban |
| By: | Donato Masciandaro (Department of Economics, Bocconi University); Davide Romelli (Department of Economics, Trinity College Dublin); Gaia Rubera (Department of Marketing, Bocconi University) |
| Abstract: | Monetary policy announcements of major central banks trigger substantial discussions about the policy on social media. In this paper, we use machine learning tools to identify Twitter messages related to monetary policy in a short-time window around the release of policy decisions of three major central banks, namely the ECB, the US Fed and the Bank of England. We then build an hourly measure of similarity between the tweets about monetary policy and the text of policy announcements that can be used to evaluate both the ex-ante predictability and the ex-post credibility of the announcement. We show that large differences in similarity are associated with a higher stock market and sovereign yield volatility, particularly around ECB press conferences. Our results also show a strong link between changes in similarity and asset price returns for the ECB, but less so for the Fed or the Bank of England. |
| Keywords: | monetarypolicy, centralbankcommunication, financialmarkets, socialmedia, Twitter, USFederalReserve, EuropeanCentralBank, BankofEngland. |
| JEL: | E44 E52 E58 G14 G15 G41 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:tcd:tcduee:tep1023&r=ban |
| By: | Raza Ali Kazmi; Duc-Phong Le; Cyrus Minwalla |
| Abstract: | Digital payments and decentralized systems enable the creation of new financial products and services for users. One core challenge in digital payments is the need to protect users from fraud and abuse while retaining privacy in individual transactions. We propose a pseudonymous credential scheme for use in payment systems to tackle this problem. The scheme is privacy-preserving, efficient for practical applications, and hardened against quantum computing attacks. We present a constant-round, interactive, zero-knowledge proof of knowledge (ZKPOK) that relies on a one-way function and an asymmetric encryption primitive—both of which need to support at most one homomorphic addition. The scheme is implemented with SWIFFT as a post-quantum one-way function and ring learning with errors as a post-quantum asymmetric encryption primitive, with the protocol deriving its quantum-hardness from the properties of the underlying primitives. We evaluate the performance of the ZKPOK instantiated with the chosen primitive and find that a memory footprint of 85 KB is needed to achieve 200 bits of security. Comparison reveals that our scheme is more efficient than equivalent, state-of-the-art post-quantum schemes. A practical and interactive credential mechanism was constructed from the proposed building blocks, in which users are issued pseudonymous credentials against their personally identifiable information that can be used to register with financial service providers without revealing personal information. The protocol is shown to be secure and free of information leakage, preserving the user’s privacy regardless of the number of registrations. |
| Keywords: | Central bank research; Digital currencies and fintech; Payment clearing and settlement systems |
| JEL: | E4 E42 G2 G21 O3 O31 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:23-33&r=ban |
| By: | Mohammad Heydari; Matineh Moghaddam; Habibollah Danai |
| Abstract: | In this study, the relationship between burnout and family functions of the Melli Iran Bank staff will be studied. A number of employees within the organization using appropriate scientific methods as the samples were selected by detailed questionnaire and the appropriate data is collected burnout and family functions. The method used descriptive statistical population used for this study consisted of 314 bank loan officers in branches of Melli Iran Bank of Tehran province and all the officials at the bank for >5 years of service at Melli Iran Bank branches in Tehran. They are married and men constitute the study population. The Maslach Burnout Inventory in the end internal to 0/90 alpha emotional exhaustion, depersonalization and low personal accomplishment Cronbach alpha of 0/79 and inventory by 0/71 within the last family to solve the problem 0/70, emotional response 0/51, touch 0/70, 0/69 affective involvement, roles, 0/59, 0/68 behavior is controlled. The results indicate that the hypothesis that included the relationship between burnout and 6, the family functioning, problem solving, communication, roles, affective responsiveness, affective fusion there was a significant relationship between behavior and the correlation was negative. The burnout is high; the functions within the family will be in trouble. |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2306.05867&r=ban |
| By: | Martin Brown (Study Center Gerzensee, University of St. Gallen); Jan Schmitz (Radboud University); Christian Zehnder (University of Lausanne) |
| Abstract: | We study the impact of pre-contractual communication on market outcomes when economic relationships are subject to hidden action. Our experiment is framed in a credit market context and borrowers (second movers) can communicate with lenders (first movers) prior to entering the credit relationship. Communication reduces moral hazard (strategic default) and increases trust (credit provision) in an environment where opportunistic behavior by borrowers is revealed ex-post to lenders. By contrast, in an environment where strategic defaults are hidden behind a veil of uncertainty, we find a substantially weaker impact of communication. Borrowers are more likely to renege on repayment promises when they can hide opportunistic behavior from lenders. As a consequence, lenders extend less credit to borrowers who promise to repay. Hidden action undermines the positive e ect of communication on market outcomes. Our findings have implications for the design of contracts and how to structure relationships with a risk of hidden action: for precontractual communication to unfold its full potential it needs to go hand-in-hand with post-contractual monitoring. |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:szg:worpap:2302&r=ban |
| By: | Andrea Gabrielli; Valentina Macchiati; Diego Garlaschelli |
| Abstract: | The structure of many financial networks is protected by privacy and has to be inferred from aggregate observables. Here we consider one of the most successful network reconstruction methods, producing random graphs with desired link density and where the observed constraints (related to the market size of each node) are replicated as averages over the graph ensemble, but not in individual realizations. We show that there is a minimum critical link density below which the method exhibits an `unreconstructability' phase where at least one of the constraints, while still reproduced on average, is far from its expected value in typical individual realizations. We establish the scaling of the critical density for various theoretical and empirical distributions of interbank assets and liabilities, showing that the threshold differs from the critical densities for the onset of the giant component and of the unique component in the graph. We also find that, while dense networks are always reconstructable, sparse networks are unreconstructable if their structure is homogeneous, while they can display a crossover to reconstructability if they have an appropriate core-periphery or heterogeneous structure. Since the reconstructability of interbank networks is related to market clearing, our results suggest that central bank interventions aimed at lowering the density of links should take network structure into account to avoid unintentional liquidity crises where the supply and demand of all financial institutions cannot be matched simultaneously. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.17285&r=ban |
| By: | Michael Weber; Bernardo Candia; Olivier Coibion; Yuriy Gorodnichenko |
| Abstract: | Using repeated large-scale surveys of U.S. households, we study the cryptocurrency investment decisions and motives of households relative to other financial assets. Cryptocurrency holders tend to be young, white, male and more libertarian relative to non-crypto holders. They expect much higher rates of returns for crypto and perceive it as relatively safer than do other households. They also view it as a better hedge against inflation. For those holding cryptocurrencies, changes in Bitcoin prices translate into their purchases of durable goods. Finally, exogenously-provided information about historical returns of cryptocurrencies leads individuals to increase their desired crypto holdings and makes them more likely to actually purchase cryptocurrency subsequently. We compare these views and behaviors to those of households toward other financial assets and argue that cryptocurrency is unique in many of these respects. |
| JEL: | D8 E4 G5 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31284&r=ban |
| By: | Talam, Camilla C.; Maru, Lucy |
| Abstract: | Against the backdrop of climate-mitigation and green growth policies as well as regulations to account for climate-related risks in the financial sector, this study employs the Computable General Equilibrium model and Merton's Distance to Default model to study the implications of Kenya transitioning to a low carbon economy through introduction of a carbon tax on a carbon intensive sector. The study finds that a carbon tax would result in rise in general prices, and lower investment to GDP. These adverse effects are offset by a rise in real GDP and narrower fiscal and current account balances supported by a rise in government revenue and higher exports in low-carbon intensive sectors. A carbon tax policy would have adverse effects of declining output and income of firms in carbon intensive sectors. These adverse effects are varied which hedges the probability of default of a bank portfolio and allows for natural diversification to mitigate the adverse effects of such a policy for the banking sector. The carbon tax may also increase resilience in low carbon intensive firms where a bank may have exposures thus mitigating the environmental risks for these banks' exposures. From the findings, the paper persuades policymakers to consider a carbon tax rather than an emission trading system as a key carbon mitigation policy. |
| Keywords: | Green finance, Transition Risks, Carbon Pricing, Probability of Default |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kbawps:65&r=ban |
| By: | Kimundi, Gillian; Wambui, Reuben |
| Abstract: | This paper offers a climate change vulnerability assessment of the Kenyan banking sector by examining the time-varying linkages of climate risk drivers, economic sectors that get impacted by a disorderly low-carbon transition (climate policy relevant sectors (CPRSs)), and banking sector stability. We use temperature and precipitation climate data, identify 5 CPRSs and their quarterly outputs, construct a banking sector stability index, and examine the time-varying linkages of these variables. Effectively, we assess the response of banking sector stability to sectoral output shocks arising from physical and transition risks. Three important findings emerge: First, the agriculture sector is the sole channel of physical climate risk transmission. Second, manufacturing and utilities sectors are becoming increasingly critical/significant channels for transmitting transition risks. Third, during the COVID-19 era, all CPRSs have become increasingly linked to banking sector stability, effectively exacerbating the transmission of climate risks to the banking sector. |
| Keywords: | climate change, climate risk drivers, climate policy relevant sectors (CPRS), banking sector, stability |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kbawps:66&r=ban |
| By: | Diouf, Awa; Carreras, Marco; Santoro, Fabrizio |
| Abstract: | Many people argue that mobile money has the potential to increase financial inclusion and improve the livelihoods of poor people in Africa. However, while many African governments impose specific taxes on mobile money transactions, very little is known about their effect on the use of mobile money services. This study assesses the short- and long-term impact of the tax on money transfer fees that the Kenyan government introduced in 2013. The tax, more specifically an excise duty, was imposed on fees incurred in all money transactions, including mobile money. It was introduced at 10 per cent and increased to 12 per cent in 2018. Our analysis has two parts. We use country-level data to see if the tax affected the use of mobile money – transaction values and volume – and the number of active mobile money agents. In addition, we use four rounds of nationally representative survey data to estimate changes in the use of mobile money after introduction of the tax. We find that the excise duty did not have a significant impact on different aggregated indicators relating to the use of mobile money. However, survey data shows that the tax may have reduced the rate of increase in use of mobile money services affected by the changes in tax, such as sending and receiving money, compared to services that were not, like savings and paying bills. Importantly, while the amounts transacted may not change, users send and receive money within households less regularly. In addition, the tax seems to have a more detrimental impact on poorer households, which were less likely to be financially included before the tax was introduced. Larger households also show more negative effects after the tax. |
| Keywords: | Finance, |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:idq:ictduk:18005&r=ban |
| By: | Vegard Høghaug Larsen; Nicolò Maffei-Faccioli; Laura Pagenhardt |
| Abstract: | This paper examines how news coverage of the European Central Bank (ECB) affects consumer inflation expectations in the four largest euro area countries. Utilizing a unique dataset of multilingual European news articles, we measure the impact of ECB-related inflation news on inflation expectations. Our results indicate that German and Italian consumers are more attentive to this news, whereas in Spain and France, we observe no significant response. The research underscores the role of national media in disseminating ECB messages and the diverse reactions among consumers in different euro area countries. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:bny:wpaper:0115&r=ban |
| By: | Cars Hommes; Julien Pinter; Isabelle Salle |
| Abstract: | We conduct an experiment within a large-scale household survey on public finance in France, the Netherlands and Italy. We elicit prior beliefs via open-ended questions and introduce a measure of macroeconomic policy literacy. An educational blog post from a central bank (CB) that opposes monetary-financed policies preceded by a short video on public finance can induce less support for monetary-financed proposals and more support for fiscal discipline and CB independence, no matter the respondent’s level of literacy. However, prior beliefs matter, and contradictory information may be polarizing. Information affects the respondents’ views by shifting their inflation and tax expectations associated to these policies. |
| Keywords: | Central bank research; Fiscal policy; Monetary policy |
| JEL: | E70 E60 E62 E58 G53 H31 C83 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:23-36&r=ban |
| By: | Yerushalmi, Erez; Paladini, Stefania |
| Abstract: | Blockchain-enabled cryptocurrency instruments have gradually filtered into financial intermediation, disrupting traditional institutions. This paper discusses the benefits of blockchain to household welfare, focusing on financial intermediation services (FIS). Its main aim is to highlight points of incompatibility with current institutional frameworks and outlines the greatest barriers for its widespread adoption (i.e., regulatory, technological, and environmental). To support our discussion, we develop a stylized general equilibrium model with two competing FIS technologies (i.e., traditional and blockchain). We show that removing these barriers could displace traditional institutions with blockchain technology and raise welfare. Finally, we argue that the 2022 and 2023 cryptocurrency scandals and the ongoing calls for comprehensive, cross-country, institutional changes will be remembered as a turning point in terms of serious efforts to integrate this new technology and make it more mainstream. |
| Keywords: | Blockchain; Institutional Barriers; Fintech; Cryptocurrencies; Financial Intermediation |
| Date: | 2023–06–14 |
| URL: | http://d.repec.org/n?u=RePEc:akf:cafewp:22&r=ban |
| By: | Chang Liu; Yinxi Xie |
| Abstract: | This paper studies the impact government expenditure has on inflation by examining an augmented Phillips curve implied from a structural New Keynesian model. Our estimation results, based on external instruments, show that the augmented Phillips curve has a flatter slope than the canonical specification and that government expenditure has a negative coefficient. Changes in government expenditure account for a substantial portion of inflation variations and provide new insights into the “missing disinflation” puzzle. We also find that inflation and inflation expectations respond negatively to fiscal spending shocks, reaffirming the supply-side channel through which inflation responds to fiscal expansions. |
| Keywords: | Central bank research; Fiscal policy; Inflation and prices |
| JEL: | E3 E63 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:23-30&r=ban |
| By: | Ryoji Ohdoi (School of Economics, Kwansei Gakuin University) |
| Abstract: | In some classes of macroeconomic models with financial frictions, an adverse financial shock successfully explains a decrease in real activity but simultaneously induces a stock price boom. The latter theoretical result is not consistent with data from actual financial crises. This study aims to develop a simple theory to explain both prolonged recessions and stock price declines. I develop a simple macroeconomic model featuring a banking sector, financial frictions, and R&D-based endogenous growth to examine the impacts of an adverse financial shock to banks on firms' R&D investments and stock prices. Both the analytical and numerical investigations show that endogenous R&D investment and a shock hindering banks' financial intermediary function can be key to generating both a prolonged recession and a drop in firms' stock prices. |
| Keywords: | Banks; Endogenous growth, Financial frictions, Financial shocks |
| JEL: | E32 E44 G01 O31 O41 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:250&r=ban |
| By: | Santiago Camara (Northwestern University) |
| Abstract: | This paper shows that disregarding the information effects around the European Central Bank monetary policy decision announcements biases its international spillovers. Using data from 23 economies, both Emerging and Advanced, I show that following an identification strategy that disentangles pure monetary policy shocks from information effects lead to international spillovers on industrial production, exchange rates and equity indexes which are between 2 to 3 times larger in magnitude than those arising from following the standard high frequency identification strategy. This bias is driven by pure monetary policy and information effects having intuitively opposite international spillovers. Results are present for a battery of robustness checks: for a sub-sample of “close” and “further away” countries, for both Emerging and Advanced economies, using local projection techniques and for alternative methods that control for “information effects”. I argue that this biases may have led a previous literature to disregard or find little international spillovers of ECBrates |
| Keywords: | ECB monetary policy; Information Effects; International Spillovers; Emerging Markets; Advanced Economies. |
| JEL: | F1 F4 G32 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:aoz:wpaper:250&r=ban |
| By: | De Grauwe, Paul; Foresti, Pasquale |
| Abstract: | In this article we study fiscal and monetary policies interaction under the assumption that agents have limited cognitive capabilities. To this aim, we employ a behavioral New Keynesian model in which agents’ beliefs generate endogenous waves of optimism and pessimism. The role of such waves is studied under three alternative policy setups: fiscal dominance, monetary dominance and no dominance. Output, inflation, government spending and public debt result to be strongly linked to the agents’ beliefs irrespectively of the policy regime. However, under fiscal dominance the system is characterized by more persistent waves of optimism and pessimism. The consequent higher volatility of the system under fiscal dominance also undermines the central bank’s credibility. We show that in order to minimize these negative effects of fiscal dominance, under such a regime governments should focus on public debt stabilization and leave the stabilization of output and inflation to the monetary authority. |
| Keywords: | monetary policy; fiscal policy; beliefs; heuristics; animal spirits; Elsevier deal |
| JEL: | E52 E61 F33 F36 |
| Date: | 2023–06–13 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:119452&r=ban |
| By: | Simone Emiliozzi (Bank of Italy); Concetta Rondinelli (Bank of Italy); Stefania Villa (Bank of Italy) |
| Abstract: | This study analyzes high-frequency data on credit cards to identify the impact of the COVID-19 pandemic on Italian consumer transactions. Using an event study approach, it finds that during the national lockdown total transactions fell by over 50%. The decline was particularly severe in high-contact sectors such as restaurants and travel, reflecting the impact of containment measures. The analysis uncovers a strong heterogeneity also in the responses of different regions, with larger contractions recorded in the Northern regions due to early government restrictions. Overall, this dataset can be particularly useful given the publication lag of official data on household consumption both at the national and regional level. |
| Keywords: | consumption, transaction data, Covid-19 |
| JEL: | D12 E21 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_769_23&r=ban |
| By: | Rodney Garratt; Maarten van Oordt |
| Abstract: | The exchange rates of cryptocurrencies are highly volatile. This paper provides insight into the source of this volatility by developing the concept of a "crypto multiplier, " which measures the equilibrium response of a cryptocurrency's market capitalization to aggregate inflows and outflows of investors' funds. The crypto multiplier takes high values when a large share of a cryptocurrency's coins is held as an investment rather than being used as a means of payment. Empirical evidence shows that the number of coins held for the purpose of making payments is rather small for major cryptocurrencies suggesting large crypto multipliers. The analysis explains why announcements by large investors, celebrity endorsements or financial crises can result in substantial price movements. |
| Keywords: | Bitcoin, cryptocurrency, exchange rates, monetary economics, risk management |
| JEL: | E42 E51 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:1104&r=ban |
| By: | Goran Petrevski |
| Abstract: | This paper surveys the empirical literature of inflation targeting. The main findings from our review are the following: there is robust empirical evidence that larger and more developed countries are more likely to adopt the IT regime; the introduction of this regime is conditional on previous disinflation, greater exchange rate flexibility, central bank independence, and higher level of financial development; the empirical evidence has failed to provide convincing evidence that IT itself may serve as an effective tool for stabilizing inflation expectations and for reducing inflation persistence; the empirical research focused on advanced economies has failed to provide convincing evidence on the beneficial effects of IT on inflation performance, while there is some evidence that the gains from the IT regime may have been more prevalent in the emerging market economies; there is not convincing evidence that IT is associated with either higher output growth or lower output variability; the empirical research suggests that IT may have differential effects on exchange-rate volatility in advanced economies versus EMEs; although the empirical evidence on the impact of IT on fiscal policy is quite limited, it supports the idea that IT indeed improves fiscal discipline; the empirical support to the proposition that IT is associated with lower disinflation costs seems to be rather weak. Therefore, the accumulated empirical literature implies that IT does not produce superior macroeconomic benefits in comparison with the alternative monetary strategies or, at most, they are quite modest. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.17474&r=ban |
| By: | Rodríguez Pasmiño, Valentina; Berrones-Flemmig, Claudia Nelly |
| Abstract: | The lack of financial literacy in SMEs is one of the main obstacles to SMEs finance (Zavatta, 2008). This problem is even greater in developing countries where the informal economy, the low levels of education and the low bancarization rates are known to be high in this region. One of the relevant trends in SME Finance are innovative financial instruments in "capacity building" mainly financial literacy campaigns (or financial education offerings) from financial institutions (Imanbaeva et al., 2017). The main research question of the present study is: Do financial literacy campaigns (or financial educational offerings) provide an adequate level of financial education for SMEs in Colombia? This research project was carried out applying a qualitative methodology. The primary data has been obtained through different types of 11 indepth interviews from the perspective of the financial institutions and also from Chambers of Commerce that provide the trainings. From the assessment and analysis of the financial literacy campaigns, the main results show that the programs that are designed for rural areas of the country do not have all the necessary components that the OECD recommends for a person to be considered financially educated. The financial education offerings carried out in the big cities (offered by the Banco de Bogota, the Chamber of Commerce of Bogota and Cali) provide SMEs with key mechanisms in financial education of great value, according with the components that the OECD recommends. Other important aspects from the results show that the financial education trainings are very short, so that it is not possible to cover all the required topics from the OECD to consider someone financial educated. Furthermore, several participants of the financial trainings are not able to finish due to her/his responsibilities as entrepreneur. Besides, for most of the offerings, there is not an impact evaluation (post-evaluation) about the effect of the trainings regarding the application of the knowledge in financial matters. |
| Keywords: | SME Finance, financial literacy campaigns, financial education, financial inclusion |
| JEL: | M O |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iubhbm:3june2023&r=ban |
| By: | Kian Tehranian |
| Abstract: | This paper assesses the link between central bank's policy rate, inflation rate and output gap through Taylor rule equation in both United States and United Kingdom from 1990 to 2020. Also, it analyses the relationship between monetary policy and asset price volatility using an augmented Taylor rule. According to the literature, there has been a discussion about the utility of using asset prices to evaluate central bank monetary policy decisions. First, I derive the equation coefficients and examine the stability of the relationship over the shocking period. Test the model with actual data to see its robustness. I add asset price to the equation in the next step, and then test the relationship by Normality, Newey-West, and GMM estimator tests. Lastly, I conduct comparison between USA and UK results to find out which country's policy decisions can be explained better through Taylor rule. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.13930&r=ban |
| By: | Giampiero M. Gallo; Demetrio Lacava; Edoardo Otranto |
| Abstract: | Central Banks interventions are frequent in response to exogenous events with direct implications on financial market volatility. In this paper, we introduce the Asymmetric Jump Multiplicative Error Model (AJM), which accounts for a specific jump component of volatility within an intradaily framework. Taking the Federal Reserve (Fed) as a reference, we propose a new model-based classification of monetary announcements based on their impact on the jump component of volatility. Focusing on a short window following each Fed's communication, we isolate the impact of monetary announcements from any contamination carried by relevant events that may occur within the same announcement day. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.12192&r=ban |
| By: | Barry Quinn |
| Abstract: | This paper explores the journey of AI in finance, with a particular focus on the crucial role and potential of Explainable AI (XAI). We trace AI's evolution from early statistical methods to sophisticated machine learning, highlighting XAI's role in popular financial applications. The paper underscores the superior interpretability of methods like Shapley values compared to traditional linear regression in complex financial scenarios. It emphasizes the necessity of further XAI research, given forthcoming EU regulations. The paper demonstrates, through simulations, that XAI enhances trust in AI systems, fostering more responsible decision-making within finance. |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2306.02773&r=ban |