Journal of Financial Economic Policy最新文献

Purpose

The challenge of predicting changes in aggregate income and stock prices is one that has occupied the research agendas of economists. This paper aims to use the consumption–income ratio and the dividend–price ratio to predict future income and stock prices.

Design/methodology/approach

To examine the stability of the consumption–income ratio and the dividend–price ratio, the authors run a two-variable, two-lag reduced-form VAR in the vein of Cochrane (1994), using a lag of each respective ratio as exogenous to the VAR. Additionally, the authors estimate an AR(4) model for income and prices.

Findings

The consumption–income ratio and the dividend–price ratio remain key to understanding future movements in income and stock prices. The consumption–income ratio significantly predicts future income in the USA, and aggregate income is easier to predict than consumption in the VAR model. The dividend–price ratio does not significantly predict future price growth. Consumption and dividend shocks have lasting impacts on income and prices.

Originality/value

The consumption–income ratio and the dividend–price ratio are still key to understanding future movements in income and stock prices. The consumption–income ratio significantly predicts future income in the USA, and aggregate income is easier to predict than consumption in the VAR model. However, the dividend–price ratio does not significantly predict future price growth, a change from previous research from the 1990s, despite the increasing complexity of stock markets. Consumption and dividend shocks have lasting impacts on income and prices and appear to be significant drivers in both the short- and long-run variance in income and prices.

Purpose

This paper aims to measure the trade price impact of a recent regulatory disclosure intervention in municipal securities secondary markets, which required broker-dealers to disclose securities trading information on a near-real-time and continuing basis.

Design/methodology/approach

The author analyzes trade price outcomes in the preintervention and postintervention regimes using a suite of time series estimations that give heteroskedasticity-robust standard errors (Prais–Winsten and Cochrain–Orcutt), accommodate higher-order lag structure in the error term (autoregressive integrated moving average) and account for volatility clustering in the time series (generalized autoregressive conditional heteroskedasticity).

Findings

Results show that regulatory disclosure intervention significantly improved trade price efficiency in municipal securities secondary markets as daily trade price differential and volatility both declined market-wide after the disclosure intervention.

Research limitations/implications

The sample consists of trades in State of California general obligation bonds; therefore, empirical findings may not be generalizable to other states, local governments and different types of bonds.

Practical implications

The findings highlight voluntary information disclosure as a practical and effective mechanism in disclosure regulation of municipal securities secondary markets.

Originality/value

Only a small body of work exists that examines information disclosure regulation in municipal securities secondary markets; therefore, this paper expands knowledge on the topic and should provide renewed impetus for regulatory efforts aimed at improving the efficiency of municipal capital markets.

Purpose

This study aims to investigate the influence of economic policy uncertainty (EPU) and geopolitical risk (GPR) on the relationship between internal cash flow and external financing in an emerging market, Saudi Arabia. It also examines the role of asset tangibility and financial crisis in establishing this relationship.

Design/methodology/approach

The sample was taken from non-financial sector companies listed on the Saudi Stock Exchange between 2002 and 2019. The data were analyzed using panel data regression analysis, including ordinary least squares and fixed effects model. The author addresses potential endogeneity through the generalized method of moments.

Findings

This study found that both EPU and GPR reduce the sensitivity of external financing to internal cash flow. This implies that firms depend more on internally generated funds during periods of increased EPU and GPR. Besides, this study found that the influence of EPU and GPR on the sensitivity of external financing to internal cash flow is more (less) negative for more tangible firms (during the financial crisis period). This result implies that Saudi firms boasting a higher level of tangibility are more flexible when it comes to seeking external financing. However, the presence of uncertainty during the crisis period makes the external financing costly, and therefore, firms will be less likely to raise funds from external sources.

Practical implications

This study has important implications for managers, policymakers and regulators. First, the paper findings provide insights for corporate decision-makers in helping them to focus on internal funds to finance their investment during uncertain times. Second, the findings help managers to understand the role of asset tangibility in raising external funding when firms face financial constraints due to uncertainty. Third, this study also helps corporates to focus on internal funds to finance their investment during the crisis period because EPU and GPR increase the cost of external finance. Finally, the results provide guidelines for policymakers and regulators to make appropriate policy measures to increase the easy availability of external finance during periods of increased EPU and GPR.

Originality/value

This paper is the first to shed light on the impact of internal funds on external financing while paying close attention to the role of EPU and GPR.

Purpose

This study aims to examine the interrelationship between financial stability and economic growth with a comprehensive analysis.

Design/methodology/approach

The panel Granger causality testing approach is carried out to the panels of the Fragile Five (F5) and the Group of Seven (G7) countries for the period 1998–2020. To capture the different aspects of financial stability the authors use eight different indicators.

Findings

The findings reveal some important implications: the relationship between financial stability and economic growth is sensitive to the financial stability indicators for both the F5 and G7 countries. The stability indicators related to the credit market contain much more causality relationship with economic growth than the indicators related to the stock market. Z-score and provisions to nonperforming loans (NPLs) are among the two variables with the highest causality relationship with economic growth. The least number of causality link is found for the Regulatory Capital Ratio and Stock Price Volatility in F5 countries and Credit Ratio, NPLs and Stock Price Volatility in G7 countries. Economic growth affects financial stability through credit market stability indicators and mostly for the F5 countries. No causal relationship is found for any of the financial stability indicators of Canada, the UK and the USA from economic growth to financial stability.

Originality/value

Since the linkages between financial stability and economic growth may vary due to country/group specific differences, apart from the previous studies, the authors select two different groups of countries in terms of financial stability and economic size.

Purpose

Financial inclusion is measured by the number of people who use the formal financial system and banks in particular. Limited access to formal banking services and the existence of unbanked households is a main policy concern. The authors evaluate how the use of prepaid (reloadable) debit cards by unbanked households affects financial inclusion and specifically the potential for these households to participate in the formal financial system and open a bank account.

Design/methodology/approach

The authors apply matching models to analyze survey data from the Federal Deposit Insurance Corporation National Survey of the Unbanked and Underbanked Households from 2009 to 2019 and evaluate how prepaid cards use affects plans to open a bank account.

Findings

Unbanked households who use prepaid cards are 5% less likely to open a bank account compared to the matched nonusers of prepaid cards. In addition, prepaid card users are 12% more likely to use nonbanks to transfer money/transact online and 18% more likely to have obtained loans from alternative financial services providers compared to the matched unbanked nonusers of prepaid debit cards.

Originality/value

No previous work has estimated the causal impact of use of prepaid cards on financial inclusion.

Purpose

The paper aims to analyse the impact of economic and governance factors on remittance inflows to India from the UK, USA and UAE. India is globally recognised as the largest recipient of remittances.

Design/methodology/approach

Using a comprehensive time series data set spanning 1996 to 2022, the authors use an innovative non-linear autoregressive distributed lag model approach to examine the influence of economic growth, corruption control and employer availability in the three source countries on remittance inflows to India.

Findings

The results indicate that in the UAE, changes in economic growth and corruption control directly affect remittance outflows. However, the presence of employers in the UAE has minimal impact on remittance outflows to India. Regarding the UK, fluctuations in economic growth primarily drive remittance outflows to India. The effect of corruption control and employment opportunities on remittance outflows is marginal. In the USA, economic growth does not notably impact remittance outflows, whereas corruption control and employment opportunities significantly influence the outflows to India.

Originality/value

These findings have important implications for policymakers. Analysing macroeconomic factors from key remittance-sending nations offers valuable insights for Indian policymakers and their international counterparts to enhance remittance inflows. The study focuses on three countries that collectively contribute to about 50% of India's remittances, providing a unique contribution compared to the usual country-specific or regional focus in existing literature. Finally, leveraging these findings, NITI Aayog, an organisation dedicated to achieving India's sustainable development goals, can effectively monitor macroeconomic indicators related to significant remittance-sending countries.

Purpose

This paper aims to measure the extent of digital financial inclusion (DFI) and examine the effect of socioeconomic characteristics on using government remittances and the adoption of digital financial services (DFS) during the COVID-19 pandemic.

Design/methodology/approach

The World Bank Global Financial Inclusion (Global Findex) database 2021 is used in this study, with a sample size of 3,000 Indian individuals. The study measured the demand-side analysis of DFI, namely, accessibility and usage of DFS with selected socioeconomic characteristics such as gender, age, income, education, being in the workforce and residential status of respondents. The dependent variable is binary in nature; therefore, the logistic regression model is used for the data analysis.

Findings

The results of the study reveal that individuals’ socioeconomic factors, such as female, all the age groups, tertiary education, third- and fourth-income quintile and workforce, are found to have a significant association with “accessibility,” an exogenous variable of DFS. Besides, respondents’ socioeconomic attributes, namely, female, tertiary education, income for all quintiles and workforce, are more likely to use DFSs in the COVID-19 pandemic. The study also finds the residential status of individuals is influencing the accessibility and usage of DFS.

Practical implications

The findings of the study provide valuable insights to the service providers and policymakers regarding the rapid expansion of DFS by digital infrastructure, simplifying the banking procedures and highlighting the importance of digital financial literacy to accomplish government goals through serving the unbanked population and also design strategies for achieving the objectives of Digital India: “Faceless, Paperless, and Cashless” of DFI across the country.

Originality/value

Notable studies used World Bank Findex survey data to explore the determinants of financial inclusion in general. This research is one among the few studies to explore the determinants of India’s DFI. Moreover, this study measured the effect of individual socioeconomic attributes on the adoption of DFSs during the COVID-19 pandemic, which has not been included in prior studies. Therefore, this study has added value to the existing literature on financial technology innovation and DFS for the sustainable development of emerging nations.

Purpose

The purpose of this paper is to study the impact of the 2016 presidential election polls on the stock market.

Design/methodology/approach

The empirical model includes daily stock returns as the dependent variable and past asset prices, 10-year treasury rates, opinion polls and VIX (market uncertainty) as explanatory variables with a one-year lag. The model was estimated using two sets of daily polling data: from July 1, 2015, to November 8, 2016, and from June 1, 2016, to November 8, 2016. Additional descriptive statistics, such as means and standard deviations, were also calculated.

Findings

The estimated results did not reveal any statistically significant effects of opinion polls in favor of one candidate over another on stock returns. Simple statistical tests, however, show that the market performed better when Trump held a polling advantage over Clinton.

Originality/value

To the best of the authors’ knowledge, this is the only study that has examined the effects of the 2016 presidential election polls on the US stock market. This study adds value to the understanding of the relationship between election polls and the stock market in the USA.

Purpose

Given the relevance of entrepreneurship in nation-building, studies geared towards the promotion of new businesses are crucial. This study aims to contribute to the finance and entrepreneurship literature by providing empirical evidence on the role ease of doing business plays in promoting new business establishments amidst financial stability.

Design/methodology/approach

The study used the fixed and random effect estimation techniques as well as the impulse response function to analyse annual panel data covering 53 African countries.

Findings

The results indicate that regulatory quality and access to electricity promote new business establishments. Also, to experience the direct effect of financial stability on new business establishments or entrepreneurship in Africa, the role of the ease of doing business cannot be isolated. The policy implication is that the creation of an enabling business environment is crucial for new business establishments.

Research limitations/implications

The sample only includes countries in Africa. Future or further studies may want to expand the sample size and also consider a comparative analysis where this analysis will be done plus another region so that the differences in findings can be known.

Originality/value

To the best of the authors’ knowledge, this is the first study to investigate the role of ease of doing business on new business establishments in the presence of financial stability in Africa.

Purpose

This paper aims to explore the spillover impacts that domestic or global aspects of geopolitical risk generate on uncertainty. The latter is derived from a spectrum of different sources in the USA (economic policy, monetary policy, fiscal policy, national security, government spending, taxation) from 1985 up to November 2022.

Design/methodology/approach

Vector autoregressive schemes are used to detect causality and reverse causality between each aspect of geopolitical risk and each source of US uncertainty.

Findings

Notably, national security generates higher geopolitical risk by almost 8% in the first month but decreases GPR by 2% in the third month after the shock. USA is found to constitute a cornerstone as regards global peace and that the overall economic or monetary conditions or war status in the USA are remarkably more influential toward domestic and global geopolitical uncertainty than separate strands of fiscal policymaking. Reverse causality displays sizably weaker effects overall.

Originality/value

This study sheds light on the determinants of geopolitical risk and domestic instability by an international perspective and provides a compass for better decision-making for fiscal and monetary policymakers and market participants.