Abstract Following the subprime crisis, most of the European central banks implemented several unconventional monetary instruments. As a result of the late quantitative easing, there was a shift from stimulating lending to the immediate stimulation of the securities market in the monetary policy of the European Central Bank (ECB) and of the smaller central banks, too. These securities purchase programs, first and second-market transactions, and asset purchases have led to an increase in the stock of securities held by the central banks, whose spill-over effects have not been fully explored yet. The aim of our research is to identify the spill-over effects of the central banks’ unconventional instruments and quantitative easing on currency volatility while considering the relative size of the issuing central bank and the situation of small open economies. By running an adapted version of gravity models, we analyzed a sample of six European central banks and the ECB. Based on our results, the high volatility levels of European currencies around the eurozone have come from their relative smallness and unconventional monetary policy, and considerations about safe havens have a reducing power on F X volatility.
{"title":"Gravity Among Central Bank Balance Sheets: Monetary Policy Spill-Over on FX Volatility","authors":"G. Kiss, Mercédesz Mészáros","doi":"10.2478/erfin-2020-0003","DOIUrl":"https://doi.org/10.2478/erfin-2020-0003","url":null,"abstract":"Abstract Following the subprime crisis, most of the European central banks implemented several unconventional monetary instruments. As a result of the late quantitative easing, there was a shift from stimulating lending to the immediate stimulation of the securities market in the monetary policy of the European Central Bank (ECB) and of the smaller central banks, too. These securities purchase programs, first and second-market transactions, and asset purchases have led to an increase in the stock of securities held by the central banks, whose spill-over effects have not been fully explored yet. The aim of our research is to identify the spill-over effects of the central banks’ unconventional instruments and quantitative easing on currency volatility while considering the relative size of the issuing central bank and the situation of small open economies. By running an adapted version of gravity models, we analyzed a sample of six European central banks and the ECB. Based on our results, the high volatility levels of European currencies around the eurozone have come from their relative smallness and unconventional monetary policy, and considerations about safe havens have a reducing power on F X volatility.","PeriodicalId":33177,"journal":{"name":"Econometric Research in Finance","volume":"5 1","pages":"33 - 57"},"PeriodicalIF":0.0,"publicationDate":"2020-01-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47598643","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-09-29DOI: 10.33119/erfin.2019.4.2.2
Rahman Olanrewaju Raji
This paper tests the validity of the triple deficit hypothesis in Nigeria by examining the causal relationship among current account deficit, financial account deficit, and fiscal deficit within a five-variate ARDL framework complemented with GMM framework for the period 2008-2017 using quarterly data. The paper obviates the variable omission bias that characterizes most existing studies. The ARDL-bound testing technique confirms that there is the presence of a long-run bi-causal relationship between current account and financial account deficits in Nigeria. The results based on the model and empirical outputs suggest that authorities of this economy must put in place a fully fiscal and monetary discipline policy that should ensure the drastic curtailment of fiscal deficit and create a conducive environment to attract foreign remittances and foreign investment, which would help to generate healthy external balances. In addition, exchange rate stability can promote the export sector and minimize external imbalances through creating critical surpluses in current accounts, including related comprehensive discipline policies that may be pursued, which enable the external sector, financial and fiscal sectors, and monetary sector to perform without creating adverse imbalances in this economy.
{"title":"Testing the Validity of the Triple Deficit Hypothesis for Nigeria","authors":"Rahman Olanrewaju Raji","doi":"10.33119/erfin.2019.4.2.2","DOIUrl":"https://doi.org/10.33119/erfin.2019.4.2.2","url":null,"abstract":"This paper tests the validity of the triple deficit hypothesis in Nigeria by examining the causal relationship among current account deficit, financial account deficit, and fiscal deficit within a five-variate ARDL framework complemented with GMM framework for the period 2008-2017 using quarterly data. The paper obviates the variable omission bias that characterizes most existing studies. The ARDL-bound testing technique confirms that there is the presence of a long-run bi-causal relationship between current account and financial account deficits in Nigeria. The results based on the model and empirical outputs suggest that authorities of this economy must put in place a fully fiscal and monetary discipline policy that should ensure the drastic curtailment of fiscal deficit and create a conducive environment to attract foreign remittances and foreign investment, which would help to generate healthy external balances. In addition, exchange rate stability can promote the export sector and minimize external imbalances through creating critical surpluses in current accounts, including related comprehensive discipline policies that may be pursued, which enable the external sector, financial and fiscal sectors, and monetary sector to perform without creating adverse imbalances in this economy.","PeriodicalId":33177,"journal":{"name":"Econometric Research in Finance","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-09-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44122401","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-09-24DOI: 10.33119/erfin.2019.4.2.1
M. R. Sarkandiz, Robabeh Bahlouli
In empirical studies of the efficient market hypothesis using a classic approach, attention has generally been paid to the weak form of performance; other aspects of efficiency, such as informational efficiency, have not been addressed. Also, the study of alternative theories, such as behavioral hypotheses, is neglected. This article seeks to investigate not only the weak and informational forms of the efficient market hypothesis, but also to test the adaptive and fractal market hypotheses as two alternative theories by conducting an empirical study on the Warsaw Stock Exchange.
{"title":"The Stock Market between Classical and Behavioral Hypotheses: An Empirical Investigation of the Warsaw Stock Exchange","authors":"M. R. Sarkandiz, Robabeh Bahlouli","doi":"10.33119/erfin.2019.4.2.1","DOIUrl":"https://doi.org/10.33119/erfin.2019.4.2.1","url":null,"abstract":"In empirical studies of the efficient market hypothesis using a classic approach, attention has generally been paid to the weak form of performance; other aspects of efficiency, such as informational efficiency, have not been addressed. Also, the study of alternative theories, such as behavioral hypotheses, is neglected. This article seeks to investigate not only the weak and informational forms of the efficient market hypothesis, but also to test the adaptive and fractal market hypotheses as two alternative theories by conducting an empirical study on the Warsaw Stock Exchange.","PeriodicalId":33177,"journal":{"name":"Econometric Research in Finance","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-09-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45661613","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-06-20DOI: 10.33119/ERFIN.2019.4.1.3
George-Jason Siouris, D. Skilogianni, A. Karagrigoriou
In this paper we introduce adjustments for standard evaluation measures appropriate for the analysis of data with asymmetrical importance. In risk analysis, it is understood that the returns of an asset do not all provide the same amount of information. This asymmetry of information is crucial for choosing the most appropriate model and evaluating its forecasting ability. In risk analysis, measures like value at risk (VaR) and expected shortfall (ES) concentrate on the left tail of the distribution of returns so that failures in fitting a model on the right tail are not important. Therefore, when we estimate the VaR of an asset, the days of violations are more important than the days of non-violations. The proposed adjustments take into consideration the asymmetry in importance and are filling the gap in the theory of evaluation of percentiles measures. The measures are divided into fixed partition, based on prior information or the goal of forecasting, and non fixed partition, based on the time proximity of the model failure. The performance of the proposed measures is illustrated with the use of a stock from the industrial metals and minerals index of the American Stock Exchange (NYSE MKT), as well as a warrant, from the Athens Exchange (ATHEX).
{"title":"Adjusted Evaluation Measures for Asymmetrically Important Data","authors":"George-Jason Siouris, D. Skilogianni, A. Karagrigoriou","doi":"10.33119/ERFIN.2019.4.1.3","DOIUrl":"https://doi.org/10.33119/ERFIN.2019.4.1.3","url":null,"abstract":"In this paper we introduce adjustments for standard evaluation measures appropriate for the analysis of data with asymmetrical importance. In risk analysis, it is understood that the returns of an asset do not all provide the same amount of information. This asymmetry of information is crucial for choosing the most appropriate model and evaluating its forecasting ability. In risk analysis, measures like value at risk (VaR) and expected shortfall (ES) concentrate on the left tail of the distribution of returns so that failures in fitting a model on the right tail are not important. Therefore, when we estimate the VaR of an asset, the days of violations are more important than the days of non-violations. The proposed adjustments take into consideration the asymmetry in importance and are filling the gap in the theory of evaluation of percentiles measures. The measures are divided into fixed partition, based on prior information or the goal of forecasting, and non fixed partition, based on the time proximity of the model failure. The performance of the proposed measures is illustrated with the use of a stock from the industrial metals and minerals index of the American Stock Exchange (NYSE MKT), as well as a warrant, from the Athens Exchange (ATHEX).","PeriodicalId":33177,"journal":{"name":"Econometric Research in Finance","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-06-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45847165","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-04-01DOI: 10.22233/9781910443699.fm1
{"title":"Prelims","authors":"","doi":"10.22233/9781910443699.fm1","DOIUrl":"https://doi.org/10.22233/9781910443699.fm1","url":null,"abstract":"","PeriodicalId":33177,"journal":{"name":"Econometric Research in Finance","volume":"17 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83463976","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-03-07DOI: 10.33119/ERFIN.2019.4.1.2
L. Tariffi
This paper shows fiscal multipliers, considering levels of public debt with multivariate threshold models. Non-linear behavior in sovereign debt-to-GDP ratio time series determine the relationship between output and government expenditure. The debt-to-GDP ratio has been selected optimally as an endogenous threshold variable to evaluate non-linearities; it has been useful for identifying estimators in a multivariate threshold autoregressive model; and it has been an important tool to observe how the multiplier changes during good times and bad. Expansionary fiscal policies seem to be counterproductive in this framework. This result highlights the link between real and financial variables.
{"title":"A Threshold Multivariate Model to Explain Fiscal Multipliers with Government Debt","authors":"L. Tariffi","doi":"10.33119/ERFIN.2019.4.1.2","DOIUrl":"https://doi.org/10.33119/ERFIN.2019.4.1.2","url":null,"abstract":"This paper shows fiscal multipliers, considering levels of public debt with multivariate threshold models. Non-linear behavior in sovereign debt-to-GDP ratio time series determine the relationship between output and government expenditure. The debt-to-GDP ratio has been selected optimally as an endogenous threshold variable to evaluate non-linearities; it has been useful for identifying estimators in a multivariate threshold autoregressive model; and it has been an important tool to observe how the multiplier changes during good times and bad. Expansionary fiscal policies seem to be counterproductive in this framework. This result highlights the link between real and financial variables.","PeriodicalId":33177,"journal":{"name":"Econometric Research in Finance","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-03-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42284289","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-12-09DOI: 10.33119/ERFIN.2018.3.2.3
Tihana Škrinjarić
Herding investment behavior on stock markets has consequences for practitioners, theorists, and policy makers. Thus, empirical research on this topic in the last couple of years has grown exponentially. However, there exist only a few papers dealing with herding behavior that consider the Croatian stock market. This study employs the quantile regression approach of estimating several herding investor behavior models of this market for the first time in the literature. Based upon daily data for the 37 most liquid stocks in the Zagreb Stock Exchange (ZSE) for the period September 22, 2014 to May 8, 2018, several model specifications are determined using quantile regression. Because the quantile regression approach deals with specific characteristics of financial data (stylized facts) better than the OLS method, more robust results can be achieved for evaluating if herding behavior is present in the Croatian market. The results indicate very weak to almost nonexistent evidence of herding behavior in the ZSE. Moreover, market volatility does not have any effect on herding behavior. Finally, the economic and political crisis (regarding concern Agrokor) in 2017 was controlled for in the model and the crisis was found insignificant. It seems that herding behavior does not need to be taken into account when tailoring investment strategies on the ZSE.
{"title":"Revisiting Herding Investment Behavior on the Zagreb Stock Exchange: A Quantile Regression Approach","authors":"Tihana Škrinjarić","doi":"10.33119/ERFIN.2018.3.2.3","DOIUrl":"https://doi.org/10.33119/ERFIN.2018.3.2.3","url":null,"abstract":"Herding investment behavior on stock markets has consequences for practitioners, theorists, and policy makers. Thus, empirical research on this topic in the last couple of years has grown exponentially. However, there exist only a few papers dealing with herding behavior that consider the Croatian stock market. This study employs the quantile regression approach of estimating several herding investor behavior models of this market for the first time in the literature. Based upon daily data for the 37 most liquid stocks in the Zagreb Stock Exchange (ZSE) for the period September 22, 2014 to May 8, 2018, several model specifications are determined using quantile regression. Because the quantile regression approach deals with specific characteristics of financial data (stylized facts) better than the OLS method, more robust results can be achieved for evaluating if herding behavior is present in the Croatian market. The results indicate very weak to almost nonexistent evidence of herding behavior in the ZSE. Moreover, market volatility does not have any effect on herding behavior. Finally, the economic and political crisis (regarding concern Agrokor) in 2017 was controlled for in the model and the crisis was found insignificant. It seems that herding behavior does not need to be taken into account when tailoring investment strategies on the ZSE.","PeriodicalId":33177,"journal":{"name":"Econometric Research in Finance","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-12-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47273163","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-11-07DOI: 10.33119/ERFIN.2018.3.2.2
E. F. Oteng-Abayie, A. Affram, Henry Kofi Mensah
Corporate governance crises that occur in the banking sector normally cripple economies and bring many hardships to individuals, corporate entities, communities, and the nation at large. In this study, we sought to examine the level of technical efficiency and productivity growth of rural and community banks (RCBs) and the impact of corporate governance indicators on the RCBs' efficiency performance in Ghana. A sample of 70 out of 140 RCBs was selected based on the ARB Apex Bank's performance ratings and data availability. Data envelopment analysis (DEA) was used to determine the technical efficiency scores of the selected RCBs. In the second stage of the analysis, these computed efficiency scores were regressed on the corporate governance variables to assess the effects of the latter. The findings from the DEA approach show that 11% to 20% of the sampled RCBs in Ghana operate close to the efficiency frontier, whereas the majority - about 65% to 81% - underperformed within the study period of 2007 to 2013. The study further established that the number of board members, frequency of board meetings, and corporate social responsibility have significant influence on RCB efficiency.
{"title":"Corporate Governance and Efficiency of Rural and Community Banks (RCBs) in Ghana","authors":"E. F. Oteng-Abayie, A. Affram, Henry Kofi Mensah","doi":"10.33119/ERFIN.2018.3.2.2","DOIUrl":"https://doi.org/10.33119/ERFIN.2018.3.2.2","url":null,"abstract":"Corporate governance crises that occur in the banking sector normally cripple economies and bring many hardships to individuals, corporate entities, communities, and the nation at large. In this study, we sought to examine the level of technical efficiency and productivity growth of rural and community banks (RCBs) and the impact of corporate governance indicators on the RCBs' efficiency performance in Ghana. A sample of 70 out of 140 RCBs was selected based on the ARB Apex Bank's performance ratings and data availability. Data envelopment analysis (DEA) was used to determine the technical efficiency scores of the selected RCBs. In the second stage of the analysis, these computed efficiency scores were regressed on the corporate governance variables to assess the effects of the latter. The findings from the DEA approach show that 11% to 20% of the sampled RCBs in Ghana operate close to the efficiency frontier, whereas the majority - about 65% to 81% - underperformed within the study period of 2007 to 2013. The study further established that the number of board members, frequency of board meetings, and corporate social responsibility have significant influence on RCB efficiency.","PeriodicalId":33177,"journal":{"name":"Econometric Research in Finance","volume":" ","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-11-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45646431","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-10-15DOI: 10.33119/erfin.2018.3.2.1
R. Gonzales Martínez
The sensitivity of the wage curve to sample-selection and model uncertainty was evaluated with Bayesian methods. More than 8000 Heckit wage curves were estimated using data from the 2017 household survey of Bolivia. After averaging the estimates with the posterior probability of each model being true, the wage curve elasticity in Bolivia is close to -0.01. This result suggests that in this country the wage curve is inelastic and does not follow the international statistical regularity of wage curves.
{"title":"The Wage Curve, Once More with Feeling: Bayesian Model Averaging of Heckit Models","authors":"R. Gonzales Martínez","doi":"10.33119/erfin.2018.3.2.1","DOIUrl":"https://doi.org/10.33119/erfin.2018.3.2.1","url":null,"abstract":"The sensitivity of the wage curve to sample-selection and model uncertainty was evaluated with Bayesian methods. More than 8000 Heckit wage curves were estimated using data from the 2017 household survey of Bolivia. After averaging the estimates with the posterior probability of each model being true, the wage curve elasticity in Bolivia is close to -0.01. This result suggests that in this country the wage curve is inelastic and does not follow the international statistical regularity of wage curves. ","PeriodicalId":33177,"journal":{"name":"Econometric Research in Finance","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-10-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"69504117","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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