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on Banking |
| By: | Aneta Hryckiewicz (Kozminski University); Kinga Tchorzewska (Kozminski University); Marcin Borsuk (Narodowy Bank Polski; Polish Science Academy; University of Cape Town); Dimitrios Tsomocos (Saïd Business School and St. Edmund Hall, University of Oxford) |
| Abstract: | The recent development of technological innovation in the banking sector has the potential to bring numerous benefits, but it also raises concerns regarding financial stability, an aspect that has been relatively understudied in academic literature. Our research paper aims to explore the impact of banks' recent adoption of FinTech solutions on both individual and systemic risks within the banking sector. Specifically, we examine how banks' technological innovations influence non-performing loans (NPLs), asset correlation in the system, and measures of systemic risk. To accomplish this, we utilize a unique dataset generated through data mining techniques, which captures the scale, types, and sources of technological solutions implemented by the largest banks in 23 countries over an 11-year period. Our findings indicate that FinTech solutions implemented by banks reduce both individual and aggregated systemic risks in the banking sector, although there are certain areas where systemic risk increases. |
| Keywords: | Fintech, innovation, IT technology, IT providers, bank, systemic risk, NPLs |
| JEL: | G21 G23 G32 L13 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:nbp:nbpmis:367&r=ban |
| By: | Xolani Sibande; Alistair Milne |
| Abstract: | This study investigates the impact of the Basel III capital requirement on the supply of bank credit in South Africa. The literature offers greatly varying estimates of the impact of bank capital requirements on loan supply. Using a specification closely modelled on a related study of Peru by Fang et al. (2020), we report panel regressions using monthly balance sheet data for the four biggest banks in South Africa. We distinguish between three different categories of bank lending for household and corporate borrowers and report complementary local projection estimates to capture dynamic impacts. We find little evidence that the introduction of higher capital requirements under Basel III has reduced the supply of bank credit in South Africa. We surmise that this is mainly due to the large banks being well capitalised and operating with capital buffers that are larger than regulatory minimum requirements. |
| Date: | 2024–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:rbz:wpaper:11055&r=ban |
| By: | Tsagkanos, Athanasios; ANDRIAKOPOULOS, KONSTANTINOS |
| Abstract: | Bank firms try to improve their efficiency by offering credit to large firms which extent trade credit to those firms that are blocked from bank credit or faces high possibilities to not pay back their loans. This self-discipline helps banks to become more prudent when they lend risky firms such as small and medium size firms. So, the aim of this research is to empirically examine if both credit cycle of large lending and business cycle affect the ex-post credit risk (i.e. non-performing loans) in the banking system of USA. A unique data set is created by using the Statistics on Depository Institutions report compiled by the Federal Deposit Insurance Corporation covering the period between 2010Q1-2019Q4. The Credit Crunch of 2007 had its origin in US real estate market, but rapidly it is expanded worldwide because of banking system interconnection across countries. A crucial characteristic of the aforementioned crises was the defaults on subprime mortgages because of the lax lending practices and because the period covered by the low starter interest rate ended. Therefore, we carry out research on US NPLs considering a very important banking system for the global economy taking into account the pressure on south part pf Eurozone because of the Credit Crunch of 2007 as well as for the robustness of many European banks because of the interconnection of banks across counties. What we found, using the GMM as econometric methodology, is that both current credit cycle of large lending and current business cycle can influence negatively the US NPLs due to the self-discipline role of large lending and the adverse macroeconomic conditions respectively. In addition, we found that the credit cycle of large lending it can be associated positively with US NPLs with one period lag supporting the excess credit influence on NPLs. Moreover, we noticed that the US NPLs have not a symmetric sensitivity between both business cycle and credit cycle of large lending. Finally, the empirical result of our research can help policy makers as well as bankers to their effort to develop a more stable banking system when they design policies to deal effectively with NPLs. |
| Keywords: | Large Lending; Ex-post credit risk; Non -perfoming loans; Bysiness cycle; Credit cycle |
| JEL: | C23 C51 E32 G2 G21 |
| Date: | 2024–01–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119664&r=ban |
| By: | Martin Feldkircher; Viktoriya Teliha |
| Abstract: | In this paper, we employ a keyword-assisted topic model to quantify the extent of climate-related communication of central banks. We find evidence for a significant increase in climate-related speeches by central banks, which address the topic mostly in parallel with topics on financial stability, payment innovations, and the banking sector. Price stability concerns play a minor role. Finally, we examine factors that can explain the extent of green communication by central banks. Controlling for macroeconomic and climate-related variables, we identify two external factors that can prompt central banks to prioritize climate research on their agenda: First, peer pressure, measured by membership of a working group on green financing, increases green communication. Second, a high degree of governmental climate engagement, reflected by the extent of national climate laws, is positively related to green communication by central banks. Whether the central bank has an implicit or explicit sustainability mandate, however, does not explain the extent of green communication. |
| Keywords: | central banking, climate change, narrative analysis, topic modelling |
| JEL: | E58 E61 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2024-03&r=ban |
| By: | Fernández-Villaverde, Jesús; Schilling, Linda; Uhlig, Harald |
| Abstract: | This paper shows the existence of a central bank trilemma. When a central bank is involved in financial intermediation, either directly through a central bank digital currency (CBDC) or indirectly through other policy instruments, it can only achieve at most two of three objectives: a socially eÿcient allocation, financial stability (i.e., absence of runs), and price stability. In particular, a commitment to price stability can cause a run on the central bank. Implementation of the socially optimal allocation requires a commitment to inflation. We illustrate this idea through a nominal version of the Diamond and Dybvig (1983) model. Our perspective may be particularly appropriate when CBDCs are introduced on a wide scale. JEL Classification: E58, G21 |
| Keywords: | bank runs, CBDC, central bank digital currency, currency crises, financial intermediation, inflation targeting, monetary policy, spending runs |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20242888&r=ban |
| By: | Martin Hodula; Lukas Pfeifer; Ngoc Anh Ngo |
| Abstract: | We analyze how a large-scale easing of borrower-based measures affects residential mortgage credit and borrower characteristics. We exploit a case of the easing of the LTV limit and the complete abolition of DTI and DSTI limits in the Czech Republic in the first half of 2020. Our empirical evidence suggests that the households affected increased their borrowing and purchased more expensive houses while being able to decrease the collateral value. We also document a significant increase in borrowers' debt (service) but this was softened by the concurrent growth in borrowers' income. While exploring the heterogeneity in the transmission of the regulatory easing, we find that: (i) LTV-constrained borrowers showed signs of cash-retention behavior while DTI- and DSTI-constrained borrowers acted in line with the financial accelerator mechanism; (ii) relaxing the LTV limit had a larger effect in poorer districts while the abolition of DTI and DSTI limits affected borrowers in richer regions; (iii) younger borrowers were more affected by the easing of LTV and DTI limits, while the easing of the DSTI limit affected older borrowers; (iv) relaxing the LTV limit affected mostly first-time borrowers while abolishing the DTI and DSTI limits affected mostly second-time borrowers who obtained higher mortgages and purchased more expensive property. |
| Keywords: | Borrower-based measures, household finance, loosening, macroprudential policy |
| JEL: | E58 G21 G28 G51 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2023/18&r=ban |
| By: | Viral V. Acharya; Qian Jun; Yang Su; Zhishu Yang |
| Abstract: | The rise of shadow banking and attendant financial fragility in China can be traced to intensified deposit competition following the global financial crisis (GFC). Deposit competition intensified after the GFC because the GFC slowed down banks’ deposit growth from cross-border money inflows and simultaneously led to fiscal stimulus supported by banks’ credit expansion. Exploiting the fact that one big state-owned bank was particular affected by the GFC through these two channels, we document—by exploring small and medium-sized banks’ branch-level overlap with this big bank—that deposit competition increased banks’ reliance on shadow banking. In particular, exposed banks issued Wealth Management Products (WMPs)—short-maturity, off-balance-sheet substitutes for deposits—creating rollover risks for the issuers, as reflected by higher yields on new WMPs, higher borrowing rates in the interbank market, and lower stock-market performance during liquidity stress. |
| JEL: | E4 G20 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32034&r=ban |
| By: | Hoang Nguyen; Audron\.e Virbickait\.e; M. Concepci\'on Aus\'in; Pedro Galeano |
| Abstract: | In this paper, we employ Credit Default Swaps (CDS) to model the joint and conditional distress probabilities of banks in Europe and the U.S. using factor copulas. We propose multi-factor, structured factor, and factor-vine models where the banks in the sample are clustered according to their geographic location. We find that within each region, the co-dependence between banks is best described using both, systematic and idiosyncratic, financial contagion channels. However, if we consider the banking system as a whole, then the systematic contagion channel prevails, meaning that the distress probabilities are driven by a latent global factor and region-specific factors. In all cases, the co-dependence structure of bank CDS spreads is highly correlated in the tail. The out-of-sample forecasts of several measures of systematic risk allow us to identify the periods of distress in the banking sector over the recent years including the COVID-19 pandemic, the interest rate hikes in 2022, and the banking crisis in 2023. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.03443&r=ban |
| By: | Safwane Sadki (Laboratoire Universitaire de Recherche en Instrumentation et Gestion des Organisations - Faculté des sciences juridiques économiques et sociales de Oujda Université Mohammed Premier, Oujda, Maroc); Abdelmalek Bekkaoui (Laboratoire Universitaire de Recherche en Instrumentation et Gestion des Organisations - Faculté des sciences juridiques économiques et sociales de Oujda Université Mohammed Premier, Oujda, Maroc) |
| Abstract: | The financial landscape has undergone major changes in the wake of the financial crises. Rivalry between banks is intense, with customers having increasingly high expectations, conditions which have made technological innovation one of the main solutions. In today's financial world, technology is at the heart of every company's ability to offer new financial products and services. And thanks to the use of technological innovation, FinTech companies in particular are able to offer more efficient, faster and more accessible financial solutions to consumers. The aim of this article is to carry out a systematic literature review on the impact of technological innovation and its effect on the banking sector. More specifically, the article focuses on exploring the literature on technological innovation in the financial sector and the factors that give rise to it. The article also takes stock of the impact of new technological innovations used by Fintechs and banks. |
| Abstract: | Le paysage financier a subi d'importants changements suite au suivi des crises financières. La rivalité entre les banques est intense avec une clientèle qui a des attentes de plus en plus élevées, des conditions qui ont rendu l'innovation technologique comme l'une des principales solutions. Aujourd'hui dans le domaine financier, la technologie représente un noyau central de toutes les entreprises ont leur donnent la possibilité d'offrir de nouveaux produits et services financiers. On outre grâce à l'utilisation de l'innovation technologique, et plus particulièrement les entreprises FinTech sont capables de proposer des solutions financières plus efficaces, plus rapides et plus accessibles aux consommateurs. Cet article a pour objectif de réaliser une revue systématique de littérature sur l'impact de l'innovation technologique et de son effet sur le secteur bancaire. Plus spécifiquement, l'article se focalise sur l'exploration de la littérature relative à l'innovation technologique dans le domaine financier et les facteurs qui donnent naissance à cette dernière. L'article met aussi le point sur les retombées des nouvelles innovations technologiques utilisées par les Fintechs et les banques. |
| Keywords: | Innovation, Technology, Fintech, Banking sector., Technologie, Secteur bancaire. |
| Date: | 2023–12–31 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04377063&r=ban |
| By: | Benjamín García; Arsenios Skaperdas |
| Abstract: | We create a new measure of the political pressure faced by the Federal Reserve based on the analysis of transcripts of the Chairs’ testimonies to Congress. We find that the use of non-traditional policies at low interest rates led to increased political criticism and that criticism predicts legislative actions that threaten central bank independence. We develop a model where the probability of the monetary authority’s future loss of independence is increasing in the use of non-traditional instruments, leading to attenuated monetary responses and higher inflation volatility. We show that this attenuation can be mitigated under an institutional framework with clearly defined targets where the central bank is evaluated by how efficiently it achieves its goals. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:chb:bcchwp:1003&r=ban |
| By: | Drott, Constantin; Goldbach, Stefan; Nitsch, Volker |
| Abstract: | This paper examines the effect of financial sanctions at the most disaggregated level possible, individual bank accounts. Using data from the Eurosystem's real-time gross settlement system TARGET2, we provide empirical evidence that sanctions imposed by the European Union on Russian banks following Russia's aggression against Ukraine in 2014 and 2022 have sizably reduced financial transactions with sanctioned Russian bank accounts, both along the extensive and intensive margins. Among the various sanction measures taken, exclusion from SWIFT, a global provider of secure financial messaging services, turns out to have the largest effects. |
| Keywords: | financial flows, transactions, restrictions |
| JEL: | F38 F51 G28 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:darddp:281199&r=ban |
| By: | Ruimin Song; Tiantian Zhao; Chunhui Zhou |
| Abstract: | This paper takes the development of Central bank digital currencies as a perspective, introduces it into the Baumol-Tobin money demand theoretical framework, establishes the transactional money demand model under Central bank Digital Currency, and qualitatively analyzes the influence mechanism of Central bank digital currencies on transactional money demand; meanwhile, quarterly data from 2010-2022 are selected to test the relationship between Central bank digital currencies and transactional money demand through the ARDL model. The long-run equilibrium and short-run dynamics between the demand for Central bank digital currencies and transactional currency are examined by ARDL model. The empirical results show that the issuance and circulation of Central bank digital currencies will reduce the demand for transactional money. Based on the theoretical analysis and empirical test, this paper proposes that China should explore a more effective Currency policy in the context of Central bank digital currencies while promoting the development of Central bank digital currencies in a prudent manner in the future. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.06457&r=ban |
| By: | González, Beatriz; Nuño, Galo; Thaler, Dominik; Albrizio, Silvia |
| Abstract: | This paper analyzes the link between monetary policy and capital misallocation in a New Keynesian model with heterogeneous firms and financial frictions. In the model, firms with a high return to capital increase their investment more strongly in response to a monetary policy expansion, thus reducing misallocation. This feature creates a new time-inconsistent incentive for the central bank to engineer an unexpected monetary expansion to temporarily reduce misallocation. However, price stability is the optimal timeless response to demand, financial or TFP shocks. Finally, we present firm-level evidence supporting the theoretical mechanism. JEL Classification: E12, E22, E43, E52, L11 |
| Keywords: | capital misallocation, financial frictions, firm heterogeneity, monetary policy |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20242890&r=ban |
| By: | Poullikka, Agni |
| Abstract: | The policy responses to the Eurozone crisis were mainly driven by taxpayer funded bailouts and austerity packages, with the exception of Cyprus where a bail-out was supplemented with a bank bail-in for the first time in the Eurozone. This paper examines how voters assign blame for the 2013 Cypriot banking crisis. The results of an original public opinion survey that was conducted in Cyprus show that neither the incumbent government at the time of the bail-in nor the previous one are assigned primary responsibility. Instead, blame is dispersed towards two non-elected actors; the national central bank and the banking sector. The findings carry implications for democratic accountability at the domestic and European Union level. |
| Keywords: | European union; Eurozone crisis; Cyprus; small states; public opinion |
| JEL: | N0 E6 |
| Date: | 2024–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:121228&r=ban |
| By: | Döttling, Robin |
| Abstract: | How does the zero lower bound on deposit rates (ZLB) affect how banks respond to capital regulation? I study this question in a model in which households value the liquidity services of deposits yet do not accept negative deposit rates. When deposit rates are constrained by the ZLB, tight capital requirements disproportionately hurt franchise values and are therefore less effective in curbing excessive risk taking. The model delivers a novel rationale for "interest-dependent" capital regulation that is optimally laxer when the ZLB binds and tighter when the ZLB is slack but may bind in the future. |
| Date: | 2023–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:9dxzf&r=ban |
| By: | Del Prete, Silvia; Papini, Giulio; Tonello, Marco |
| Abstract: | We study the impact of a law, which required the increase of the proportion of women on boards of listed companies to at least one third. We look at its impact on listed banks, but also test whether it led to spillovers into non-listed banks belonging to listed groups or along other board diversity dimensions. Using administrative data, we compare diversity measures of boards of listed and non-listed banks in listed groups with those in non-listed groups, before and after the introduction of the law, in a difference-in-differences specifi- cation. We find that the imposition of the gender quota only changed the composition of the boards of listed banks, with no effect on their economic performance, nor spillovers on other non-listed banks in listed groups. The law enhanced diversity of boards of listed banks, also along individual characteristics other than gender. |
| Keywords: | bank boards, diversity, gender, corporate governance |
| JEL: | G21 G38 J48 J78 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:1368&r=ban |
| By: | Lopez-Gomez, Laura; Martinez-Rodrigue, Susana |
| Abstract: | Our results reinforce the thesis that the presence of women investors was not only pioneering by developed economies but was rather a reflection of a deeper phenomenon associated with institutions and modernization. We examine the feminization of shareholding employing data from Spanish commercial banks (1918-1948). We build a unique dataset of more than 30.000 women shareholders who took the opportunity to invest in stocks in well-established banks, drawn by the potential economic profitability. Family ties played a crucial role in explaining the presence of women and – specially – men shareholders. The profile of women differs from that of men in terms of their portfolio size, and volatility. Evidence indicates that the feminization of shareholding was a sing of modernization, not a cycle derived from a sternal shock. This paper aims to contribute to the current debate on gender financial gap, tracing women investors in assets and their rational behavior. |
| Keywords: | women shareholders, feminization of shareholding, commercial banks |
| JEL: | G21 J16 N24 |
| Date: | 2023–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119740&r=ban |
| By: | Timu, Anne G.; Shee, Apurba; Ward, Patrick S.; You, Liangzhi |
| Abstract: | Smallholder farmers in low- and medium-income countries lack sufficient access to agricultural production credit that can help them adopt new technologies and improve their farm production. Compared to men, women smallholder farmers face additional social, and economic barriers that further limit their credit access. Bundling agricultural credit with insurance, or risk contingent credit (RCC), provides a mechanism for addressing some of the credit access constraints and reducing credit rationing among smallholder farmers. In this paper, we evaluate the gendered determinants of credit rationing and the gender differences of the effects of RCC innovation on credit uptake decisions. We use three-wave panel data from a randomized control trial (RCT) in Kenya. We find that female-headed households (FHH) are significantly more risk rationed (or demand-side credit constrained) compared to male-headed households (MHH), however, the gender of the household head does not significantly determine the household quantity rationing status (supply-side constrained). We also find that farmers randomly assigned to be offered the RCC are up to four percent more likely to take up credit. RCC’s impacts on credit uptake decisions do not vary with the gender of the household head, however, RCC has a differential positive and significant impact on the credit uptake decisions of farmers that were previously (at baseline) risk rationed. Based on these findings, we suggest that policies should focus on reducing gendered demand-side barriers to credit access, especially among poorer women households. Climate financing innovations such as RCC should also be designed and delivered in a gender-inclusive manner to accommodate women farmers who face time, liquidity, and financial literacy barriers. |
| Keywords: | smallholders; agricultural production; credit; agricultural technology; gender; insurance; climate resilience; rural finance; risk contingent credit (RCC); credit rationing; KENYA; EAST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:2215&r=ban |
| By: | Samir Othmane (Université Hassan 1er [Settat]); Maimoun Ahmed (Université Hassan 1er [Settat]) |
| Abstract: | This article explores the complex relationship between securitization, International Financial Reporting Standards (IFRS), and financial results management. Securitization involves bundling financial assets like loans or mortgages to turn them into negotiable securities in the financial markets. This process enables banks to improve their liquidity and regulatory ratios by removing these assets from their balance sheet. However, this practice also creates incentives for companies to manipulate their accounts to present a more favorable financial situation. The IFRS standards have gradually evolved to better govern the accounting for securitization, particularly with IFRS 9 concerning the classification and valuation of financial assets, and IFRS 10 on consolidation. The aim is to enhance the transparency and reliability of the published financial information. Nevertheless, some studies indicate that certain companies have resorted to securitization practices to artificially smooth or inflate their results through methods like overvaluing assets or overly optimistic adjustments of accounting estimates. While securitization remains a useful tool for financial institutions, it requires a high level of transparency to avoid any accounting manipulation. The new IFRS standards bring more clarity to the accounting treatment, but questions remain about their ability to fully prevent such manipulations. Therefore, this article aims to critically analyze how the IFRS standards address this complex issue in connection with the challenges of securitization, results management, and financial transparency. |
| Abstract: | Cet article étudie la relation complexe entre la titrisation, les normes comptables internationales IFRS et la gestion des résultats financiers.La titrisation consiste à regrouper des actifs financiers comme des crédits ou hypothèques pour les transformer en titres négociables sur les marchés financiers. Ceci permet aux banques d'améliorer leur liquidité et leurs ratios réglementaires en sortant ces actifs de leur bilan. Cependant, cette pratique crée également des incitations pour les entreprises à manipuler leurs comptes afin de présenter une situation financière plus favorable.Les normes IFRS se sont progressivement développées pour mieux encadrer la comptabilisation de la titrisation, notamment avec les normes IFRS 9 sur la classification et l'évaluation des actifs financiers, et IFRS 10 sur la consolidation. L'objectif est de renforcer la transparence et la fiabilité des informations financières publiées.Néanmoins, certaines études montrent que certaines entreprises ont eu recours à des pratiques de titrisation pour lisser ou gonfler artificiellement leurs résultats au travers de méthodes telles que la surévaluation d'actifs ou des ajustements trop optimistes d'estimations comptables.Bien que la titrisation reste un outil utile pour les institutions financières, elle nécessite un haut niveau de transparence afin d'éviter toute manipulation comptable. Les nouvelles normes IFRS apportent plus de clarté dans le traitement comptable mais des questions subsistent sur leur capacité à totalement prévenir de telles manipulations.Cet article a donc pour objectif d'analyser de manière critique la façon dont les normes IFRS traitent cette problématique complexe en lien avec les enjeux de titrisation, de gestion des résultats et de transparence financière . |
| Keywords: | Results Management, Accounting Manipulation, Financial Information, Securitization, IFRS Standards, Titrisation ; Normes IFRS ; Gestion des résultats ; Manipulation comptable ; Information financière., African Scientific Journal, Titrisation, Normes IFRS, Gestion des résultats, Manipulation comptable, Information financière |
| Date: | 2023–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04363554&r=ban |
| By: | Khan, Haider |
| Abstract: | I argue that there is a need to create monetary sovereignty for the global south and generate adequate ex ante public investment for full employment. The governments should also be employers of the last resort. Since all existing accumulated evidence since the 2008-9 crisis indicates that we are not near the inflationary barrier, appropriate full employment generating government spending for public investment is a sensible functional finance option. For this to apply to the global south with any plausibility, first an appropriate global financial architecture must be created.This paper analyzes the problems of creating and expanding national macroeconomic policy space and economic governance for the global system which takes historical unevenness seriously and places both the developed and developing countries in the global system within a complex adaptive systems framework . With the recent developments towards the further expansion of BRICS-plus already achieved, accelerated dedollarization and assertion of sovereignty by many countries of the Global South, the creation of an alternative less asymmetric non-IMF based architecture for global financial governance has become a more realistic institutional possibility. |
| Keywords: | Multipolarity, The Global South, BRICS-plus, Accelerated Dedollarization, Modern Money Theory(MMT), Functional Finance in the Global South, dynamic complex adaptive economic systems, financial crises, global financial architecture, regional financial architectures, a hybrid GFA, regional cooperation, BASEL III reforms, the BIS proposals, Asia, BRICS Development Bank, BRICS financial facility, the IMF. |
| JEL: | E5 F5 F54 |
| Date: | 2024–01–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119650&r=ban |
| By: | Jackson, Emerson Abraham |
| Abstract: | This paper explores the intricate dynamics of fiscal dominance and its profound implications for monetary policy efficacy, contributing to the discourse on the interplay between fiscal and monetary policies. The theoretical foundation critically examines existing literature, integrating empirical evidence to construct a comprehensive understanding. Model blocks strategically elucidate the significance of fiscal variables in shaping monetary transmission mechanisms. The ensuing analysis scrutinises the disruptive potential of fiscal dominance on conventional monetary policy tools. The conclusion navigates policy recommendations, emphasising the necessity of coordinated fiscal-monetary strategies to effectively mitigate inflationary pressures. This research provides a nuanced perspective for policymakers, offering theoretical depth and empirical insights to guide decisions in addressing the complex challenges posed by fiscal dominance in economic governance. |
| Keywords: | Fiscal Dominance, Monetary policy, Inflationary Pressures, Economic Growth |
| JEL: | E31 H62 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:281440&r=ban |
| By: | Kim, Seung Woo (Department of Economic History, Uppsala University) |
| Abstract: | This article examines the case of South Korea, in which the external private debt management leveraged the symbiosis of the authoritarian regime and the neoliberal policies in a less-developed country. In the pursuit of post-war growthamship, against the meddling of allies with official loans, the military government turned to the Eurocurrency market, an offshore market for major currencies to meet the triple goal of diversifying foreign reserve sources, financing the heavy-chemical industrialization, and underpinning the diplomatic struggle against North Korea. The dependence on the Euro-capital empowered technocrats at the Economic Planning Board to manage the sovereign borrower’s external indebtedness. Against the neo-mercantilist policy, they introduced price stability measures and maintained low debt-service-ratio so as to appease international banks and international financial organizations. Their success enabled the military government to eschew the debt crisis of 1982 and bolstered the legitimacy of the military government. In return, the technocrats resorted to the authoritarian rule to implement market-oriented policies against the labor the neo-mercantilist interests. Drawing on multi-archival sources, this article engages to the burgeoning scholarship on the relations between international banks and authoritarian regimes by analyzing the external debt-driven neoliberal turn in the developing world. |
| Keywords: | authoritarian regime; Eurocurrency market; indebtedness; neoliberalism; South Korea; technocrats |
| JEL: | F34 N15 N25 O20 |
| Date: | 2024–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uuehwp:2024_014&r=ban |
| By: | Holm-Hadulla, Fédéric; Thürwächter, Claire |
| Abstract: | We study how shocks to corporate leverage alter the macroeconomic transmission of monetary policy. We identify leverage shocks as idiosyncratic firm-level disturbances that are aggregated up to a size-weighted country-level average to generate a Granular Instrumental Variable (Gabaix and Koijen, forthcoming). Interacting this instrumental variable with high-frequency identified monetary policy shocks, we find that transmission to the price level strengthens in the presence of leverage shocks, while the real effects of monetary policy are unaffected. We show that this disconnect can be rationalized with an internal devaluationchannel. Economies experiencing an increase in leverage exhibit a stronger monetary policy-induced contraction in domestic demand. This, however, is counteracted by a weaker contraction in exports, facilitated by their improved price competitiveness. JEL Classification: C36, E22, E52 |
| Keywords: | corporate leverage, granular instrumental variable, micro-to-macro analysis, monetary policy transmission |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20242891&r=ban |
| By: | Valeria Gargiulo; Christian Matthes; Katerina Petrova |
| Abstract: | Does the effect of monetary policy depend on the prevailing level of inflation? In order to answer this question, we construct a parsimonious nonlinear time series model that allows for inflation regimes. We find that the effects of monetary policy are markedly different when year-over-year inflation exceeds 5.5 percent. Below this threshold, changes in monetary policy have a short-lived effect on prices, but no effect on the unemployment rate, giving a potential explanation for the recent “soft landing” in the United States. Above this threshold, the effects of monetary policy surprises on both inflation and unemployment can be larger and longer lasting. |
| Keywords: | monetary policy; shocks; inflation; regime-dependence; outliers; nonlinear time series models |
| JEL: | C11 C12 C22 |
| Date: | 2024–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:97623&r=ban |
| By: | Makoto WATANABE; Yu Awaya; kohei Iwasaki |
| Abstract: | This paper examines how monetary expansion causes asset bubbles. Whenthere is no monetary expansion, a bubbly asset is not created due to a hold-upproblem. Monetary expansion increases buyers money holdings, and then, dealersare willing to buy a worthless asset from sellers, in hopes of selling it to buyers |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:cnn:wpaper:24-001e&r=ban |
| By: | Alicia Lloro; Ellen A. Merry; Anna Tranfaglia |
| Abstract: | Many surveys have measured people's financial literacy with a standard set of questions covering interest, inflation, and investment diversification. Results from these surveys have consistently shown that women are less likely than men to answer the financial literacy questions correctly – the so-called financial literacy gender gap. |
| Date: | 2024–01–02 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfn:2024-01-02&r=ban |
| By: | Samuel J. Hempel; Calvin Isley; R. Jay Kahn; Patrick E. McCabe |
| Abstract: | Between January 2021 and June 2022, money market funds' (MMFs') investments in the Federal Reserve's Overnight Reverse Repurchase (ON RRP) facility rose by $2 trillion, while their private repo lending fell by almost $500 billion. These sizable shifts give us an opportunity to examine how monetary policy implementation and the ON RRP facility interact with the private repo market. |
| Date: | 2023–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfn:2023-12-15-2&r=ban |
| By: | Yue Chen; Xingyi Andrew; Salintip Supasanya |
| Abstract: | Historically, the economic recession often came abruptly and disastrously. For instance, during the 2008 financial crisis, the SP 500 fell 46 percent from October 2007 to March 2009. If we could detect the signals of the crisis earlier, we could have taken preventive measures. Therefore, driven by such motivation, we use advanced machine learning techniques, including Random Forest and Extreme Gradient Boosting, to predict any potential market crashes mainly in the US market. Also, we would like to compare the performance of these methods and examine which model is better for forecasting US stock market crashes. We apply our models on the daily financial market data, which tend to be more responsive with higher reporting frequencies. We consider 75 explanatory variables, including general US stock market indexes, SP 500 sector indexes, as well as market indicators that can be used for the purpose of crisis prediction. Finally, we conclude, with selected classification metrics, that the Extreme Gradient Boosting method performs the best in predicting US stock market crisis events. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.06172&r=ban |
| By: | Nils Brouwer; Jakob de Haan |
| Abstract: | Using data from the Dutch Household Survey, we examine what individuals know about cryptocurrencies and how they acquire information about these assets. Our results suggest that higher-educated respondents with a stronger desire to be informed use more different information sources, which results in better knowledge. However, respondents relying on social media or friends for information on cryptocurrencies do not have better knowledge. We also observe that individuals who hold cryptocurrencies are better informed. Furthermore, the longer they own cryptocurrencies, the better knowledge respondents have. Finally, we find that individuals who acquire cryptocurrencies for investment purposes demonstrate a higher level of understanding than those who buy cryptocurrencies for other reasons. |
| Keywords: | cryptocurrencies; general public; information sources; knowledge |
| JEL: | D12 D14 G11 E41 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:799&r=ban |
| By: | Gabriele Di Filippo |
| Abstract: | This paper presents a new database of direct investment positions held through captive financial institutions (CFIs) in Luxembourg that are owned by (resident and non-resident) investment funds focusing on private equity or real estate. Compared to Di Filippo (2023), the new database is more comprehensive as it includes smaller CFIs with less than 500 million euros in total assets. Over 2011-2021, intra-Luxembourg investment positions were larger than foreign direct investment (FDI) positions (both inward and outward). Most of these intra-Luxembourg investment positions arise because investment funds use Luxembourg CFIs to structure their holdings and acquisitions across the globe. In 2021, only about 1% of the inward FDI position held through these CFIs is ultimately invested in targets located in Luxembourg. The outward FDI position held through these CFIs is invested in private companies (65%) or real estate assets (35%). While most investment fund sponsors are headquartered in the United States or in the United Kingdom, investment targets are mostly in Western Europe, with a focus on the euro area. Outward FDI in private equity targets companies that are quite dispersed across economic activities. In 2021, "Information, telecommunications and computer services" have the largest share (17%), followed by "Electricity, gas, water supply, recycling" (12%) and "Chemicals and non-metallic mineral products" (10%). Outward FDI in real estate is more concentrated by property type, with 45% in commercial buildings (office and retail properties), 24% in industrial buildings (in particular logistics properties) and 15% in residential properties. Targets in Luxembourg are mostly companies operating in finance and insurance activities (private equity) or office properties (real estate). |
| Keywords: | Foreign direct investment, Captive financial institutions and money lenders, Sector S127, Investment funds, Private equity, Real estate |
| JEL: | C80 C81 F23 F30 G23 G32 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:bcl:bclwop:bclwp181&r=ban |
| By: | Eilers, Yota (University of Oxford); Kluve, Jochen (KfW Development Bank); Langbein, Jörg (World Bank); Reiners, Lennart (Asian Development Bank) |
| Abstract: | In 2022, governments around the world committed USD 211 bn. to official development assistance. Despite these high contributions, systematic assessments of the determinants of success - or failure - of development aid projects remain limited, particularly for bilateral development aid. This paper provides such a systematic, quantitative analysis: we construct a unique database covering 5, 608 evaluation results - success ratings - for bilateral development aid projects financed through one of the biggest global donors, KfW Development Bank. Detailed data on project characteristics allow us to link success ratings to five clusters of key explanatory factors along the entire project life-cyle and context: (a) In terms of project financing, we find a statistically significant positive association between the financial budget volume of the project and its success ratings, ceteris paribus. Second, concerning the (b) project structure, the type of project partner - government, private sector, multilateral organizations - shows no significant association with project success, suggesting that project implementation works equally well with different partners. (c) Project complexity as measured by both technical complexity and longer implementation duration exerts a negative influence on success ratings. Regarding (d) project risks, a highly relevant and significant predictor for less successful projects is the share of ex-ante identified risks that eventually materialized - suggesting that project designs correctly identify the relevant risks in advance, but are not able to mitigate (all of) them during execution. Finally, concerning (e) the project context there is some indication that higher GDP growth rates are positively associated with project success. |
| Keywords: | development finance, OECD DAC evaluation criteria, meta analysis |
| JEL: | C40 F35 O10 O19 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16691&r=ban |
| By: | Anderson, Anders (Mistra Center for Sustainable Markets (Misum)); Robinson, David (Fuqua School of Business, Duke University; Swedish House of Finance; NBER) |
| Abstract: | In a nationally representative sample of Swedes, we find asymmetric updating of climate change expectations driven by extreme weather exposure and political polarization. We use the updating of beliefs to analyse the development of the Swedish retirement system that went from offering relatively few fossil fuel exclusion funds to being dominated by them. We find that the revision of climate beliefs translates into action only for the financially sophisticated and the politically motivated. |
| Keywords: | Household Finance; Carbon Emissions; Sustainability; Exclusions; Retirement Savings |
| JEL: | G51 |
| Date: | 2024–01–22 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hamisu:2024_015&r=ban |
| By: | Abonyi, George (Institute of Southeast Asian Studies) |
| Abstract: | This paper presents a case study of the Asian Development Bank's Financial Sector Governance Reforms Development Program Loan (the Program) to the Government of Indonesia. The case study focuses on the political economy dimension of policy reform and its implications, rather than on Program details. Launched in June 1998, the Program was part of a multi-donor effort led by the International Monetary Fund, to help Indonesia respond to the Asian economic crisis and undertake reforms in the financial sector. The design and implementation of the Program took place in an environment characterized by an unexpected, deep, and sustained economic crisis, accompanied by social instability, and political and institutional uncertainty and change. Against this backdrop, the case study examines the context of Indonesia's policy reforms in the financial sector and the general design of the Program. It touches on the implementation of selected reforms and sustainability of the reform process. The purpose is to draw lessons that can assist in the more effective preparation and implementation of such reforms, and design of policy-based lending. In order to help structure the case study, a framework is introduced for the analysis of the political economy dimension of policy reform. This framework is proposed as a useful general tool both for the ex post understanding of the political economy dimension of policy reform, as well as an analytic tool for assisting in the ex ante design of specific policy reform programs and related policy-based lending. |
| Keywords: | financial sector governance; Indonesia; development program loan; policy reform; political economy |
| JEL: | G28 O53 P16 |
| Date: | 2024–01–16 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbewp:0076&r=ban |