Pub Date : 2023-07-10DOI: 10.1108/jfep-02-2023-0046
M. Ganić
Purpose This study aims to explore the short-run and long-run relationships and causality between economic growth and financialization in the new member states (NMS-11) and to provide some policy implications drawn from the empirical findings. Design/methodology/approach The autoregressive distributed lag (ARDL) bounds test approach to cointegration with the vector error correction model and the cumulative sum of squares (CUSUMQ) test for stability of functions is used between 1995q1 and 2021q4 to examine the existence of cointegration, relationships and causality between economic growth and financialization. Findings The findings of the ARDL bounds test demonstrate that the variables included in the models are bound together in the long run, as confirmed by the associated equilibrium correction. The estimated models indicate that the association between selected variables and economic growth is stronger and more statistically significant in the short run compared with the long run. Also, for NMS-11 understudied countries, short-run causality prevails over long-run causality. The changes in the level of financialization have a significant negative effect on the growth rates in the short run, which aligns with findings from previous empirical studies. Originality/value This study extends the existing very limited literature about short-run and long-run relationships and causality among economic growth and financialization, including inflation and unemployment variables, to determine their link in the NMS-11. Specifically, the present study reveals that the current level of financialization hampers economic growth and promoting such economic policies further can have adverse effects on the overall economic growth.
{"title":"Financialization and growth nexus in the EU new member states (NMS): an ARDL bounds testing approach and Granger causality analysis","authors":"M. Ganić","doi":"10.1108/jfep-02-2023-0046","DOIUrl":"https://doi.org/10.1108/jfep-02-2023-0046","url":null,"abstract":"\u0000Purpose\u0000This study aims to explore the short-run and long-run relationships and causality between economic growth and financialization in the new member states (NMS-11) and to provide some policy implications drawn from the empirical findings.\u0000\u0000\u0000Design/methodology/approach\u0000The autoregressive distributed lag (ARDL) bounds test approach to cointegration with the vector error correction model and the cumulative sum of squares (CUSUMQ) test for stability of functions is used between 1995q1 and 2021q4 to examine the existence of cointegration, relationships and causality between economic growth and financialization.\u0000\u0000\u0000Findings\u0000The findings of the ARDL bounds test demonstrate that the variables included in the models are bound together in the long run, as confirmed by the associated equilibrium correction. The estimated models indicate that the association between selected variables and economic growth is stronger and more statistically significant in the short run compared with the long run. Also, for NMS-11 understudied countries, short-run causality prevails over long-run causality. The changes in the level of financialization have a significant negative effect on the growth rates in the short run, which aligns with findings from previous empirical studies.\u0000\u0000\u0000Originality/value\u0000This study extends the existing very limited literature about short-run and long-run relationships and causality among economic growth and financialization, including inflation and unemployment variables, to determine their link in the NMS-11. Specifically, the present study reveals that the current level of financialization hampers economic growth and promoting such economic policies further can have adverse effects on the overall economic growth.\u0000","PeriodicalId":45556,"journal":{"name":"Journal of Financial Economic Policy","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2023-07-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45738595","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 : 2023-06-28DOI: 10.1108/jfep-02-2023-0036
Amsalu Bedemo Beyene
Purpose The main purpose of this study is to examine the political economy of financial development in Ethiopia, specifically, to test the empirical relevance of the interest group theory of financial development in the context of Ethiopia. Design/methodology/approach The autoregressive distributive lag model to co-integration is applied to Ethiopia’s time series data from 1990 to 2020 to identify the long- and short-run effects of the political regime characteristics on financial development of the country. Findings The findings reveal that the degree of democracy in the political system (a proxy for narrow elites) was found to have a significant positive effect on financial development in the long run but has negatively affected financial development in the short run. Similarly, the political regime durability indicator shows a positive and statistically significant effect both in the long run and short run. The macroeconomic policy indicators which are used as control variables in this study reveal significant effects on the financial development of Ethiopia. Generally, the finding supports the interest group theory of financial development. Originality/value This paper is the original work on the effect of political regime characteristics on financial development in Ethiopia. Thus, it brings substantial value to studying determinants of financial development as it goes beyond the conventional determinants by considering the role of political power in the process of financial development.
{"title":"Political economy of financial development: empirical evidence from Ethiopia","authors":"Amsalu Bedemo Beyene","doi":"10.1108/jfep-02-2023-0036","DOIUrl":"https://doi.org/10.1108/jfep-02-2023-0036","url":null,"abstract":"\u0000Purpose\u0000The main purpose of this study is to examine the political economy of financial development in Ethiopia, specifically, to test the empirical relevance of the interest group theory of financial development in the context of Ethiopia.\u0000\u0000\u0000Design/methodology/approach\u0000The autoregressive distributive lag model to co-integration is applied to Ethiopia’s time series data from 1990 to 2020 to identify the long- and short-run effects of the political regime characteristics on financial development of the country.\u0000\u0000\u0000Findings\u0000The findings reveal that the degree of democracy in the political system (a proxy for narrow elites) was found to have a significant positive effect on financial development in the long run but has negatively affected financial development in the short run. Similarly, the political regime durability indicator shows a positive and statistically significant effect both in the long run and short run. The macroeconomic policy indicators which are used as control variables in this study reveal significant effects on the financial development of Ethiopia. Generally, the finding supports the interest group theory of financial development.\u0000\u0000\u0000Originality/value\u0000This paper is the original work on the effect of political regime characteristics on financial development in Ethiopia. Thus, it brings substantial value to studying determinants of financial development as it goes beyond the conventional determinants by considering the role of political power in the process of financial development.\u0000","PeriodicalId":45556,"journal":{"name":"Journal of Financial Economic Policy","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2023-06-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47361010","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 : 2023-06-27DOI: 10.1108/jfep-04-2023-0100
Priyanka Goyal, P. Soni
Purpose This study aims to investigate the impact of FTX bankruptcy on the global stock markets, including both the developed and emerging markets, as per the Morgan Stanley Capital Investment (MSCI) country classification. Design/methodology/approach Using the daily closing prices for leading stock market indices of all 47 countries in the MSCI market classification, comprising 23 developed markets and 24 emerging markets, the event study methodology is used to examine the impact of the event on developed markets, emerging markets and overall global equity markets. Findings The study finds heterogeneous effects of the event on different countries. Results indicate that overall global equity markets experienced a statistically significant positive cumulative average abnormal returns of 15.8533% in the complete event window of 28 days from t − 7 to t + 20. The authors conclude that traditional global equity markets can be used as a hedge against potential financial risk posed by unfavorable events in the cryptocurrency markets and have safe haven properties. Practical implications The study emphasizes the global financial system’s interconnectedness and the potential of traditional equity markets to hedge risks in the cryptocurrency market. The findings are relevant for investors seeking portfolio diversification and mitigating their exposure to potential risks in the cryptocurrency market. Originality/value To the best of the authors’ knowledge, the present study is the earliest attempt to comprehensively examine the impact of the bankruptcy of the world’s fourth largest cryptocurrency exchange, FTX, on the global equity markets.
{"title":"FTX fiasco and global equity markets: evidence from event study approach","authors":"Priyanka Goyal, P. Soni","doi":"10.1108/jfep-04-2023-0100","DOIUrl":"https://doi.org/10.1108/jfep-04-2023-0100","url":null,"abstract":"Purpose This study aims to investigate the impact of FTX bankruptcy on the global stock markets, including both the developed and emerging markets, as per the Morgan Stanley Capital Investment (MSCI) country classification. Design/methodology/approach Using the daily closing prices for leading stock market indices of all 47 countries in the MSCI market classification, comprising 23 developed markets and 24 emerging markets, the event study methodology is used to examine the impact of the event on developed markets, emerging markets and overall global equity markets. Findings The study finds heterogeneous effects of the event on different countries. Results indicate that overall global equity markets experienced a statistically significant positive cumulative average abnormal returns of 15.8533% in the complete event window of 28 days from t − 7 to t + 20. The authors conclude that traditional global equity markets can be used as a hedge against potential financial risk posed by unfavorable events in the cryptocurrency markets and have safe haven properties. Practical implications The study emphasizes the global financial system’s interconnectedness and the potential of traditional equity markets to hedge risks in the cryptocurrency market. The findings are relevant for investors seeking portfolio diversification and mitigating their exposure to potential risks in the cryptocurrency market. Originality/value To the best of the authors’ knowledge, the present study is the earliest attempt to comprehensively examine the impact of the bankruptcy of the world’s fourth largest cryptocurrency exchange, FTX, on the global equity markets.","PeriodicalId":45556,"journal":{"name":"Journal of Financial Economic Policy","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2023-06-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47060027","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 : 2023-06-27DOI: 10.1108/jfep-02-2023-0035
Emna Trabelsi, Asma Ben Khaled
Purpose The implementation of monetary policy by the central bank is an ongoing topic of discussion. This paper aims to explore monetary policy transmission shocks in times of uncertainty using the new World uncertainty index (WUI). The authors investigate the impact of crises, wars and pandemic shocks on selected macroeconomic variables. Design/methodology/approach The authors use unit root tests, structural vector autoregressive model and the Granger causality test according to Toda–Yamamoto with quarterly data over 1999–2022. Findings The results of this study show that in the short run, there is a unidirectional relationship between the money market rate and WUI, while the relationship between the latter and the money supply (M2) is bidirectional. The short-term effect runs from WUI to inflation. In the long run, the variance decomposition shows that global uncertainty explains around 12% of inflation pressures. The uncertainty caused by special events in the world creates positive shocks on inflation in Tunisia, which decreases the ability of the central bank to control inflation. Research limitations/implications The results have implications over necessary and urgent actions to be implemented for a progressive economic recovery but point to a necessary transition to an inflation-targeting regime. Originality/value Examining monetary policy under uncertainty is a recent phenomenon. The authors purposely use a novel WUI by Ahir et al. (2022) that is unexploited in literature.
中央银行货币政策的实施是一个持续讨论的话题。本文旨在利用新的世界不确定性指数(WUI)探讨不确定时期的货币政策传导冲击。作者调查了危机、战争和流行病冲击对选定宏观经济变量的影响。设计/方法/方法作者使用单位根检验、结构向量自回归模型和Granger因果检验，根据Toda-Yamamoto对1999-2022年的季度数据进行了检验。本研究结果表明，短期内货币市场利率与WUI之间存在单向关系，而后者与货币供应量(M2)之间存在双向关系。短期影响从WUI到通货膨胀。从长期来看，方差分解表明，全球不确定性解释了约12%的通胀压力。世界特殊事件造成的不确定性对突尼斯的通货膨胀产生了积极的冲击，这降低了中央银行控制通货膨胀的能力。研究的局限性/意义研究结果表明，为了逐步实现经济复苏，必须采取必要和紧急的行动，但也指出了向通胀目制化制度的必要过渡。在不确定性下审视货币政策是最近出现的一种现象。作者故意使用Ahir et al.(2022)的小说WUI，该小说在文学中未被利用。
{"title":"Monetary policy and inflation targeting under global uncertainty: a SVAR approach for Tunisia","authors":"Emna Trabelsi, Asma Ben Khaled","doi":"10.1108/jfep-02-2023-0035","DOIUrl":"https://doi.org/10.1108/jfep-02-2023-0035","url":null,"abstract":"\u0000Purpose\u0000The implementation of monetary policy by the central bank is an ongoing topic of discussion. This paper aims to explore monetary policy transmission shocks in times of uncertainty using the new World uncertainty index (WUI). The authors investigate the impact of crises, wars and pandemic shocks on selected macroeconomic variables.\u0000\u0000\u0000Design/methodology/approach\u0000The authors use unit root tests, structural vector autoregressive model and the Granger causality test according to Toda–Yamamoto with quarterly data over 1999–2022.\u0000\u0000\u0000Findings\u0000The results of this study show that in the short run, there is a unidirectional relationship between the money market rate and WUI, while the relationship between the latter and the money supply (M2) is bidirectional. The short-term effect runs from WUI to inflation. In the long run, the variance decomposition shows that global uncertainty explains around 12% of inflation pressures. The uncertainty caused by special events in the world creates positive shocks on inflation in Tunisia, which decreases the ability of the central bank to control inflation.\u0000\u0000\u0000Research limitations/implications\u0000The results have implications over necessary and urgent actions to be implemented for a progressive economic recovery but point to a necessary transition to an inflation-targeting regime.\u0000\u0000\u0000Originality/value\u0000Examining monetary policy under uncertainty is a recent phenomenon. The authors purposely use a novel WUI by Ahir et al. (2022) that is unexploited in literature.\u0000","PeriodicalId":45556,"journal":{"name":"Journal of Financial Economic Policy","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2023-06-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48329569","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 : 2023-05-19DOI: 10.1108/jfep-01-2023-0020
N. Nguyen, Nguyen Hanh Luu, Anh T. P. Hoang, Mai Thi Tuyet Nguyen
Purpose This paper aims to investigate the impacts of green bond issuance on the environment while taking into account the moderating role of issuing countries’ institutional quality. Design/methodology/approach The analysis is based on a longitudinal data set covering 171 countries and territories during 2007–2018. The authors rigorously account for endogeneity issues using two-stage least squares estimation and a set of instrumental variables for green bond issuance volume. Findings The overall results confirm the positive environmental impacts of green bonds in reducing carbon dioxide and greenhouse gas emissions, enhancing renewable energy consumption rate and accelerating the progress towards sustainable development goals (SDGs). However, these effects are contingent upon the levels of institutional development of the issuing countries in a way that green bond issuance only benefits the environment when the institutional quality has reached a minimum level. Practical implications The results provide important policy implications for countries in their efforts to prevent environmental degradation and achieve SDGs. Originality/value This paper contributes to the existing literature by providing a macro-level evaluation of the environmental impact of green bonds, hence, enabling policy implications to be drawn for countries to achieve their SDGs. The analysis is more comprehensive using a wide range of indicators for environmental performance. To the best of the authors’ knowledge, this paper is also one of the first attempts to examine the moderating effect of institutions on the environmental impact of green bonds.
{"title":"Environmental impacts of green bonds in cross-countries analysis: a moderating effect of institutional quality","authors":"N. Nguyen, Nguyen Hanh Luu, Anh T. P. Hoang, Mai Thi Tuyet Nguyen","doi":"10.1108/jfep-01-2023-0020","DOIUrl":"https://doi.org/10.1108/jfep-01-2023-0020","url":null,"abstract":"\u0000Purpose\u0000This paper aims to investigate the impacts of green bond issuance on the environment while taking into account the moderating role of issuing countries’ institutional quality.\u0000\u0000\u0000Design/methodology/approach\u0000The analysis is based on a longitudinal data set covering 171 countries and territories during 2007–2018. The authors rigorously account for endogeneity issues using two-stage least squares estimation and a set of instrumental variables for green bond issuance volume.\u0000\u0000\u0000Findings\u0000The overall results confirm the positive environmental impacts of green bonds in reducing carbon dioxide and greenhouse gas emissions, enhancing renewable energy consumption rate and accelerating the progress towards sustainable development goals (SDGs). However, these effects are contingent upon the levels of institutional development of the issuing countries in a way that green bond issuance only benefits the environment when the institutional quality has reached a minimum level.\u0000\u0000\u0000Practical implications\u0000The results provide important policy implications for countries in their efforts to prevent environmental degradation and achieve SDGs.\u0000\u0000\u0000Originality/value\u0000This paper contributes to the existing literature by providing a macro-level evaluation of the environmental impact of green bonds, hence, enabling policy implications to be drawn for countries to achieve their SDGs. The analysis is more comprehensive using a wide range of indicators for environmental performance. To the best of the authors’ knowledge, this paper is also one of the first attempts to examine the moderating effect of institutions on the environmental impact of green bonds.\u0000","PeriodicalId":45556,"journal":{"name":"Journal of Financial Economic Policy","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2023-05-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43294723","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 : 2023-05-16DOI: 10.1108/jfep-06-2023-318
F. G. Mixon
{"title":"Editorial: Yu Hsing: in memoriam","authors":"F. G. Mixon","doi":"10.1108/jfep-06-2023-318","DOIUrl":"https://doi.org/10.1108/jfep-06-2023-318","url":null,"abstract":"","PeriodicalId":45556,"journal":{"name":"Journal of Financial Economic Policy","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2023-05-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47611976","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 : 2023-05-11DOI: 10.1108/jfep-11-2022-0275
Wee‐Yeap Lau, Tien-Ming Yip
Purpose This study aims to examine to what extent the Japanese financial markets are affected by the four periods of unconventional monetary policies (UMP) implemented by the Bank of Japan from 2013 to 2020. Design/methodology/approach Using the daily 10-year term spread as a proxy for monetary easing policy, this study uses four sub-sample periods from 2013 to 2020 to look into the effectiveness of UMP on the Japanese financial markets. Findings Our result shows that not all of the Bank of Japan's unconventional monetary policies are equally effective in influencing the Japanese financial markets. In particular, the QQE policy implemented from April 2013 to October 2014 effectively influenced the stock market, banking sector and foreign exchange market. However, the financial market impact of monetary policy is muted during the QQE expansion period. Likewise, the QQE with a negative interest rate policy influences only the banking sector. Finally, the QQE with its yield curve control policy effectively impacts the financial markets. Research limitations/implications This research can be expanded by studying the international spillover effect of the Bank of Japan's UMP on the financial markets in Asian countries. Practical implications The findings of this study enable investors to understand the causal relationship between the Bank of Japan's UMP and the financial market indicators, thereby helping them to position their portfolio investments. From the policy perspective, the finding is useful to inform the Bank of Japan on which policy is relatively effective in affecting the financial markets. In light of the empirical finding, the Bank of Japan should continue to pursue the QQE YCCP or revert to the initial QQE policy, as the two policies are relatively more effective than the QQE expansion and QQE NIRP in affecting the Japanese financial markets. Social implications The empirical finding highlights the importance of controlling for the impact of different QQE policies in the model. Future research may consider conducting sub-sample analysis to cater to the different QQE policy regimes. This approach provides a clearer picture and valid inferences on the financial market impact of each QQE policy. Originality/value This study provides a comprehensive analysis of the impact of Bank of Japan's QQE on the Japanese financial markets. For the market participants, the findings of this study suggest that investors should closely gauge the development of the unconventional monetary policies of the Bank of Japan because the monetary easing policy influences the decision-making process of commercial banks, pension funds, mutual funds, retail investors and other stakeholders in the financial markets. The policy twist will have future ramifications for their loan, investment and retirement fund portfolios.
{"title":"The effect of different periods of unconventional monetary policies on Japanese financial markets","authors":"Wee‐Yeap Lau, Tien-Ming Yip","doi":"10.1108/jfep-11-2022-0275","DOIUrl":"https://doi.org/10.1108/jfep-11-2022-0275","url":null,"abstract":"\u0000Purpose\u0000This study aims to examine to what extent the Japanese financial markets are affected by the four periods of unconventional monetary policies (UMP) implemented by the Bank of Japan from 2013 to 2020.\u0000\u0000\u0000Design/methodology/approach\u0000Using the daily 10-year term spread as a proxy for monetary easing policy, this study uses four sub-sample periods from 2013 to 2020 to look into the effectiveness of UMP on the Japanese financial markets.\u0000\u0000\u0000Findings\u0000Our result shows that not all of the Bank of Japan's unconventional monetary policies are equally effective in influencing the Japanese financial markets. In particular, the QQE policy implemented from April 2013 to October 2014 effectively influenced the stock market, banking sector and foreign exchange market. However, the financial market impact of monetary policy is muted during the QQE expansion period. Likewise, the QQE with a negative interest rate policy influences only the banking sector. Finally, the QQE with its yield curve control policy effectively impacts the financial markets.\u0000\u0000\u0000Research limitations/implications\u0000This research can be expanded by studying the international spillover effect of the Bank of Japan's UMP on the financial markets in Asian countries.\u0000\u0000\u0000Practical implications\u0000The findings of this study enable investors to understand the causal relationship between the Bank of Japan's UMP and the financial market indicators, thereby helping them to position their portfolio investments. From the policy perspective, the finding is useful to inform the Bank of Japan on which policy is relatively effective in affecting the financial markets. In light of the empirical finding, the Bank of Japan should continue to pursue the QQE YCCP or revert to the initial QQE policy, as the two policies are relatively more effective than the QQE expansion and QQE NIRP in affecting the Japanese financial markets.\u0000\u0000\u0000Social implications\u0000The empirical finding highlights the importance of controlling for the impact of different QQE policies in the model. Future research may consider conducting sub-sample analysis to cater to the different QQE policy regimes. This approach provides a clearer picture and valid inferences on the financial market impact of each QQE policy.\u0000\u0000\u0000Originality/value\u0000This study provides a comprehensive analysis of the impact of Bank of Japan's QQE on the Japanese financial markets. For the market participants, the findings of this study suggest that investors should closely gauge the development of the unconventional monetary policies of the Bank of Japan because the monetary easing policy influences the decision-making process of commercial banks, pension funds, mutual funds, retail investors and other stakeholders in the financial markets. The policy twist will have future ramifications for their loan, investment and retirement fund portfolios.\u0000","PeriodicalId":45556,"journal":{"name":"Journal of Financial Economic Policy","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2023-05-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49112459","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 : 2023-05-11DOI: 10.1108/jfep-12-2022-0290
Mukesh Kumar, Muna Ahmed Al-Romaihi, Bora Aktan
Purpose The current study aims to investigate the determinants of nonperforming loans (NPLs) in the GCC economies during the period spanning 2000 to 2018. It also examines whether the worldwide financial crisis of 2007–2008, which brought the issue of non–performing loans to the greater attention of academics and policymakers, had a substantial impact on NPLs in this region. Design/methodology/approach The sample consists of 53 conventional banks from GCC countries, and the basic data for the study is obtained from various sources such as Bankscope, IMF World Economic Outlook, World Bank and Chicago Board of Options Exchange Market Volatility Index. The estimations were done by dynamic panel data regression modeling using system generalized methods of moments. Findings The findings reveal that both, the non-oil real GDP growth rate and inflation have favorable effects on NPLs. On the other hand, domestic credit to the private sector and the volatility index have an adverse effect on NPLs. Furthermore, the period-wise analysis shows that the relevance and significance of the determinants of NPLs vary between the precrisis and postcrisis periods. It is also reflected through the intercept dummy, which is found to be significant, indicating that the financial crisis, as a global economic factor, had a significant impact on NPLs. A number of robustness tests are applied, which indicate that the results are mostly robust and consistent in terms of the significance of the explanatory variables and the direction of their relationship with the dependent variable. Practical implications Policymakers and bank authorities must strive to maintain a healthy economy and implement macroprudential policies to improve the financial stability of banks and reduce credit risk. Originality/value To the best of the authors’ knowledge, this is likely the first study that empirically investigates the influence of the financial crisis on NPLs in the context of GCC economies. In addition, the research spans 19 years to produce more conclusive results.
{"title":"Do the macro and global economic factors drive the nonperforming loans in GCC economies?","authors":"Mukesh Kumar, Muna Ahmed Al-Romaihi, Bora Aktan","doi":"10.1108/jfep-12-2022-0290","DOIUrl":"https://doi.org/10.1108/jfep-12-2022-0290","url":null,"abstract":"\u0000Purpose\u0000The current study aims to investigate the determinants of nonperforming loans (NPLs) in the GCC economies during the period spanning 2000 to 2018. It also examines whether the worldwide financial crisis of 2007–2008, which brought the issue of non–performing loans to the greater attention of academics and policymakers, had a substantial impact on NPLs in this region.\u0000\u0000\u0000Design/methodology/approach\u0000The sample consists of 53 conventional banks from GCC countries, and the basic data for the study is obtained from various sources such as Bankscope, IMF World Economic Outlook, World Bank and Chicago Board of Options Exchange Market Volatility Index. The estimations were done by dynamic panel data regression modeling using system generalized methods of moments.\u0000\u0000\u0000Findings\u0000The findings reveal that both, the non-oil real GDP growth rate and inflation have favorable effects on NPLs. On the other hand, domestic credit to the private sector and the volatility index have an adverse effect on NPLs. Furthermore, the period-wise analysis shows that the relevance and significance of the determinants of NPLs vary between the precrisis and postcrisis periods. It is also reflected through the intercept dummy, which is found to be significant, indicating that the financial crisis, as a global economic factor, had a significant impact on NPLs. A number of robustness tests are applied, which indicate that the results are mostly robust and consistent in terms of the significance of the explanatory variables and the direction of their relationship with the dependent variable.\u0000\u0000\u0000Practical implications\u0000Policymakers and bank authorities must strive to maintain a healthy economy and implement macroprudential policies to improve the financial stability of banks and reduce credit risk.\u0000\u0000\u0000Originality/value\u0000To the best of the authors’ knowledge, this is likely the first study that empirically investigates the influence of the financial crisis on NPLs in the context of GCC economies. In addition, the research spans 19 years to produce more conclusive results.\u0000","PeriodicalId":45556,"journal":{"name":"Journal of Financial Economic Policy","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2023-05-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42033037","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 : 2023-05-11DOI: 10.1108/jfep-01-2023-0021
M. Khan, Zulfiqar Khan, Sardar Fawad Saleem
Purpose This study aims to explore the impact of monetary policy on bank lending rate with the moderating effects of financial sector development for eight Asian developing economics. Design/methodology/approach This study uses panel autoregressive distributed lag/pooled mean group estimation over the period ranging from 1980 to 2020. Findings The empirical results exhibit an inverse link between monetary policy measured by broad money supply on the bank lending rate, indicating that the increase in the money supply by the central bank lowers the demand for loans and thereby lowers the cost of loan. Moreover, financial sector development decreases the lending rate and thus lowers cost of loan. It is also noted that the interactive term of monetary policy by lending broad money supply and financial sector development showed a positive impact on the lending rate in selected Asian developing countries during the period under the study. Practical implications The outcomes have many relevant policy implications that stronger financial development sector contributes to the efficiency of monetary policy. Regulators and policymakers are therefore recommended to pursue greater financial sector development to lower the cost for fund searchers and to lower the cost of loans, money supply increase is suggested. Originality/value This study contributes to the extant literature on the factors affecting lending rate with the prime aims of monetary policy effectiveness. This study also included financial sector development with some other variables and an interactive term of monetary policy with financial development to have new insight impact of both on the lending rate in developing Asian economies.
{"title":"Monetary policy effectiveness in Asian developing economies: the moderating role of financial sector development","authors":"M. Khan, Zulfiqar Khan, Sardar Fawad Saleem","doi":"10.1108/jfep-01-2023-0021","DOIUrl":"https://doi.org/10.1108/jfep-01-2023-0021","url":null,"abstract":"\u0000Purpose\u0000This study aims to explore the impact of monetary policy on bank lending rate with the moderating effects of financial sector development for eight Asian developing economics.\u0000\u0000\u0000Design/methodology/approach\u0000This study uses panel autoregressive distributed lag/pooled mean group estimation over the period ranging from 1980 to 2020.\u0000\u0000\u0000Findings\u0000The empirical results exhibit an inverse link between monetary policy measured by broad money supply on the bank lending rate, indicating that the increase in the money supply by the central bank lowers the demand for loans and thereby lowers the cost of loan. Moreover, financial sector development decreases the lending rate and thus lowers cost of loan. It is also noted that the interactive term of monetary policy by lending broad money supply and financial sector development showed a positive impact on the lending rate in selected Asian developing countries during the period under the study.\u0000\u0000\u0000Practical implications\u0000The outcomes have many relevant policy implications that stronger financial development sector contributes to the efficiency of monetary policy. Regulators and policymakers are therefore recommended to pursue greater financial sector development to lower the cost for fund searchers and to lower the cost of loans, money supply increase is suggested.\u0000\u0000\u0000Originality/value\u0000This study contributes to the extant literature on the factors affecting lending rate with the prime aims of monetary policy effectiveness. This study also included financial sector development with some other variables and an interactive term of monetary policy with financial development to have new insight impact of both on the lending rate in developing Asian economies.\u0000","PeriodicalId":45556,"journal":{"name":"Journal of Financial Economic Policy","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2023-05-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45175516","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 : 2023-05-10DOI: 10.1108/jfep-01-2023-0010
Nader Trabelsi
Purpose This study aims to uncover the main predictors of financial distress in the Gulf Cooperation Council (GCC) countries using a wide range of global factors and asset classes. Design/methodology/approach This study uses novel approaches that take into account extreme events as well as the nonlinear behavior of time series over various time intervals (i.e. short, medium and long term) and during boom and bust episodes. This study primarily uses the conditional value at risk (CoVaR), the quantile multivariate causality test and the partial wavelet coherence method. The data collection period ranges from March 2014 to September 2022. Findings US T-bills and gold are the primary factors that can increase financial stability in the GCC region, according to VaRs and CoVaRs. More proof of the predictive value of the oil, gold and wheat markets, as well as geopolitical tensions, uncertainty over US policy and volatility in the oil and US equities markets, is provided by the multivariate causality test. When low extreme quantiles or cross extreme quantiles are taken into account, these results are substantial and sturdy. Lastly, after adjusting for the effect of crude oil prices, this study’s wavelet coherence results indicate diminished long-run connections between the GCC stock market and the chosen global determinants. Research limitations/implications Despite the implications of the author’s research for decision makers, there are some limitations mainly related to the selection of Morgan Stanley Capital International (MSCI) GCC ex-Saudi Arabia. Considering the economic importance of the Kingdom of Saudi Arabia (KSA) in the region, the author believes that it would be better to include this country in the data to obtain more robust results. In addition, there is evidence in the literature of the existence of heterogeneous responses to global shocks; some markets are more vulnerable than others. This is another limitation of this study, as this study considers the GCC as a bloc rather than each country individually. These limitations could open up further research opportunities. Originality/value These findings are important for investors seeking to manage their portfolios under extreme market conditions. They are also important for government policies aimed at mitigating the impact of external shocks.
{"title":"Global hidden factors predicting financial distress in Gulf Arab states: a quantile–time–frequency analysis","authors":"Nader Trabelsi","doi":"10.1108/jfep-01-2023-0010","DOIUrl":"https://doi.org/10.1108/jfep-01-2023-0010","url":null,"abstract":"\u0000Purpose\u0000This study aims to uncover the main predictors of financial distress in the Gulf Cooperation Council (GCC) countries using a wide range of global factors and asset classes.\u0000\u0000\u0000Design/methodology/approach\u0000This study uses novel approaches that take into account extreme events as well as the nonlinear behavior of time series over various time intervals (i.e. short, medium and long term) and during boom and bust episodes. This study primarily uses the conditional value at risk (CoVaR), the quantile multivariate causality test and the partial wavelet coherence method. The data collection period ranges from March 2014 to September 2022.\u0000\u0000\u0000Findings\u0000US T-bills and gold are the primary factors that can increase financial stability in the GCC region, according to VaRs and CoVaRs. More proof of the predictive value of the oil, gold and wheat markets, as well as geopolitical tensions, uncertainty over US policy and volatility in the oil and US equities markets, is provided by the multivariate causality test. When low extreme quantiles or cross extreme quantiles are taken into account, these results are substantial and sturdy. Lastly, after adjusting for the effect of crude oil prices, this study’s wavelet coherence results indicate diminished long-run connections between the GCC stock market and the chosen global determinants.\u0000\u0000\u0000Research limitations/implications\u0000Despite the implications of the author’s research for decision makers, there are some limitations mainly related to the selection of Morgan Stanley Capital International (MSCI) GCC ex-Saudi Arabia. Considering the economic importance of the Kingdom of Saudi Arabia (KSA) in the region, the author believes that it would be better to include this country in the data to obtain more robust results. In addition, there is evidence in the literature of the existence of heterogeneous responses to global shocks; some markets are more vulnerable than others. This is another limitation of this study, as this study considers the GCC as a bloc rather than each country individually. These limitations could open up further research opportunities.\u0000\u0000\u0000Originality/value\u0000These findings are important for investors seeking to manage their portfolios under extreme market conditions. They are also important for government policies aimed at mitigating the impact of external shocks.\u0000","PeriodicalId":45556,"journal":{"name":"Journal of Financial Economic Policy","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2023-05-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44048165","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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