Search results
1 – 10 of over 1000Helder Ferreira de Mendonça and Cristiane Nascimento de Lima
This paper aims to contribute to the analysis concerning how inflation forecasts from different economic agents (professional forecasters and consumers) lead to varying levels of…
Abstract
Purpose
This paper aims to contribute to the analysis concerning how inflation forecasts from different economic agents (professional forecasters and consumers) lead to varying levels of central bank credibility and how it affects the monetary policy interest rate and its expectations.
Design/methodology/approach
Based on the Brazilian economy data from June 2007 to May 2022, the authors provide evidence that is useful for search mechanisms that improve the conduct of monetary policy through the management of inflation expectations. The authors perform several ordinary least squares and generalized method of moments regressions inspired by the Taylor rule principle. In brief, the benchmark model considers that the monetary policy interest rate and its expectations respond to departures of inflation expectations to the target (a proxy for central bank credibility) and the level of economic activity.
Findings
The main result of the analysis is that inflation expectations from professional forecasters and consumers imply different perceptions of central bank credibility that affect the monetary policy interest rate and expectations for horizons until one year ahead.
Originality/value
The novelty that the authors bring from the analysis is that the authors calculate central bank credibility by taking into account the “public beliefs” of different economic agents. Furthermore, the authors analyze the effect of central bank credibility from professional forecasters and consumers on the monetary policy interest rate and its expectations.
Details
Keywords
Veli Yilanci and Ugur Korkut Pata
This study aims to investigate the impact of the rise in coronavirus disease 2019 (COVID-19) cases on stock prices, exchange rates and sovereign bond yields in both Brazil and…
Abstract
Purpose
This study aims to investigate the impact of the rise in coronavirus disease 2019 (COVID-19) cases on stock prices, exchange rates and sovereign bond yields in both Brazil and India.
Design/methodology/approach
The authors employ the wavelet transform coherence (WTC) and continuous wavelet transform (CWT) techniques on daily data from March 17, 2020 to May 8, 2021.
Findings
The findings show that COVID-19 has no impact on exchange rates but slightly increases sovereign bond yields from 2021 onwards. In contrast, the effect of COVID-19 on stock prices is quite high in both countries. There is a considerable consistency between COVID-19 cases and stock prices across different time–frequency dimensions. The rise in COVID-19 cases has an increasing effect on stock prices in Brazil and India, especially in the high-frequency ranges.
Originality/value
As far as the authors know, no prior study has simultaneously analyzed the effects of the COVID-19 pandemic on exchange rates, stock prices and sovereign bonds in Brazil and India.
Details
Keywords
Alexandre Tombini, the governor of the Central Bank of Brazil, faced a difficult situation in July 2015. Inflation was in the double digits, well above the target rate of 4.5%…
Abstract
Alexandre Tombini, the governor of the Central Bank of Brazil, faced a difficult situation in July 2015. Inflation was in the double digits, well above the target rate of 4.5%, and unemployment had increased from around 4.5% a year prior to nearly 8%. Any actions Tombini took to control inflation would most likely exacerbate unemployment, at least in the short run. To further complicate matters, Tombini's office was not independent of the executive branch of Brazil's government, and Tombini faced the possibility that any of his actions that were not aligned with the priorities of the current administration could cost him his job.
This case follows classes on fiscal and monetary policy in normal times and is the first class in a sequence on macroeconomic challenges–in this case, stagflation–high inflation and high unemployment. Students are pushed to consider why macroeconomic stabilization involves such acute and unpleasant tradeoffs during episodes of high inflation and unemployment. Students use the IS/LM AD/AS model as a reference.
Details
Keywords
Gabriel Caldas Montes and Raime Rolando Rodríguez Díaz
Business confidence is crucial to firm decisions, but it is deeply related to professional forecasters' expectations. Since Brazil is an important inflation targeting country…
Abstract
Purpose
Business confidence is crucial to firm decisions, but it is deeply related to professional forecasters' expectations. Since Brazil is an important inflation targeting country, this paper investigates whether monetary policy credibility and disagreements in inflation and interest rate expectations relate to business confidence in Brazil. The study considers the aggregate business confidence index and the business confidence indexes for 11 industrial sectors in Brazil.
Design/methodology/approach
The authors run ordinary least squares and generalized method of moments regressions to assess the direct effects of disagreements in expectation and monetary policy credibility on business confidence. The authors also make use of Wald test of parameter equality to observe whether there are “offsetting effects” of monetary credibility in mitigating the effects of both disagreements in expectations on business confidence. Besides, the authors run quantile regressions to analyze the effect of the main explanatory variables of interest on business confidence in contexts where business confidence is low (pessimistic) or high (optimistic).
Findings
Disagreements in inflation expectations reduce business confidence, monetary policy credibility improves business confidence and credibility mitigates the adverse effects of disagreements in expectations on business confidence. The sectors most sensitive to monetary policy credibility are Rubber, Motor Vehicles, Metallurgy, Metal Products and Cellulose. The findings also suggest the effect of disagreement in inflation expectations on business confidence decreases as confidence increases, and the effect of monetary policy credibility on business confidence increases as entrepreneurs are more optimistic.
Originality/value
While there is evidence that monetary policy credibility is beneficial to the economy, there are no studies on the effects of disagreements in inflation and interest rate expectations on business confidence (at the aggregate and sectoral levels). Besides, there are no studies that have investigated whether monetary policy credibility can mitigate the effects of disagreements in inflation and interest rate expectations on business confidence (at the aggregate and sectoral levels). Therefore, there are gaps to be filled in the literature addressing business confidence, monetary policy credibility and disagreements in expectations. These issues are particularly important to inflation targeting developing countries.
Details
Keywords
Emerson Wagner Mainardes and Neudson Peres de Freitas
This study aims to verify the influence of perceived value dimensions on customer satisfaction and loyalty in the banking sector, comparing these relationships between traditional…
Abstract
Purpose
This study aims to verify the influence of perceived value dimensions on customer satisfaction and loyalty in the banking sector, comparing these relationships between traditional banks and fintechs. Also, it was verified whether satisfaction mediates the relationships between the dimensions of perceived value and customer loyalty to traditional banks and fintechs, comparing them.
Design/methodology/approach
Data were collected through two online questionnaires with 792 total respondents, 411 from traditional banks and 381 from fintechs. For data analysis, the authors used the Partial Least Squares - Structural Equation Modeling (PLS-SEM) and PLS-SEM multigroup analysis (PLS-MGA).
Findings
The influence of customer satisfaction on loyalty tends to be greater in traditional banks than in fintechs; the effect of reliability on satisfaction tends to be greater in fintechs than in traditional banks and the effect of price on satisfaction tends to be greater in traditional banks than in fintechs. Indirectly, empathy, price and competence influence loyalty through satisfaction, and in all these relationships, the strength of the effect is significantly greater in traditional banks when compared to fintechs.
Research limitations/implications
The findings, on the one hand, indicate that banks' investments in customer satisfaction, empathy, price and competence tend to generate positive results by expanding customer loyalty in addition to the return on similar investments made by fintechs. On the other hand, when fintechs invest in reliability, they tend to capture better results in increasing customer satisfaction compared to traditional banks.
Originality/value
The comparison of the effect of the dimensions of perceived value on satisfaction and loyalty between traditional banks and fintechs stands out, which is a novelty in the literature. This comparison can support strategies that aim to strengthen relationships with customers and increase the recurrence of business, both for traditional banks and fintechs.
Details
Keywords
Cengiz Tunc and Ali Gunes
This study aims to focus on two-way interaction between monetary policy and house prices in emerging economies.
Abstract
Purpose
This study aims to focus on two-way interaction between monetary policy and house prices in emerging economies.
Design/methodology/approach
This study uses panel structural vector autoregressive model.
Findings
The results show that real house prices decrease in response to a contractionary monetary policy shock. However, relative to advanced economies, the reaction of the prices is limited in emerging economies, pointing out the structural differences in emerging economies including the small size of the mortgage market and the lack of a well-functioning secondary market in housing finance. This study further finds that monetary policy is tightened in response to a positive shock to house prices. However, this response is also weak when compared to that response in advanced economies.
Research limitations/implications
These findings suggest that house price developments should not be prior target for monetary policies in emerging economies unless they become problem for financial stability or inflationary concerns.
Originality/value
Using a sample of inflation targeting emerging countries, this study contributes to the literature by conducting both panel setting and single-country analysis to explore the two-way dynamic relationships between the monetary policy and housing market in emerging economies.
Details
Keywords
Solomon Yemidi, Grace Nkansa Asante and Paul Owusu Takyi
The purpose of this research is to examine the impact of alterations in the path of monetary policy rates on inflation via the supply side of an emerging economy.
Abstract
Purpose
The purpose of this research is to examine the impact of alterations in the path of monetary policy rates on inflation via the supply side of an emerging economy.
Design/methodology/approach
The study employed semi-annual data covering the period 2007S1 to 2020S2 on the inflation rate, the combined outputs of industry and agriculture, the lending rate, and the monetary policy rate. The vector autoregression model was estimated and counterfactual simulation exercises were conducted.
Findings
The study revealed that a move from a higher to a lower monetary policy rate regime resulted in a shift in inflation from a higher to a lower regime. In particular, a 200-basis point reduction in the monetary policy rate over the simulation horizon produces a 1.3% fall in the inflation rate over the same period.
Research limitations/implications
The study has a limitation due to the unavailability of a long-span dataset on all relevant variables. As a result, it is important to exercise caution when interpreting the study's findings. A potential area for further research is to explore how changes in interest rates impact inflation in the real economy by utilising other multiple-variable time series techniques.
Practical implications
It is the opinion of the authors that for inflation in Ghana to move to a lower regime, conscious efforts should be made by the monetary authorities to gradually move from a regime of a high monetary policy rate to a lower one.
Social implications
In particular, a 200-basis point reduction in the MPR over the simulation horizon produces a 1.3% fall in the inflation rate over the same period.
Originality/value
This study enhances the authors' knowledge of how monetary policy can affect inflation in developing countries through the supply-side channel.
Details
Keywords
Sérgio Kannebley Júnior, Diogo de Prince and Daniel Quinaud Pedron da Silva
Brazil uses the dollar as a vehicle currency to invoice its exports. This fact produces a tendency toward equalizing the prices of products in dollars in the international market…
Abstract
Purpose
Brazil uses the dollar as a vehicle currency to invoice its exports. This fact produces a tendency toward equalizing the prices of products in dollars in the international market and reducing the ability of firms to practice pricing-to-market (PTM). This study aims to evaluate the hypothesis by estimating error correction models in panel data, obtaining estimates of PTM for 25 manufacturing products exported by Brazil between 2010 and 2020.
Design/methodology/approach
This study uses the correlated common effect estimator proposed by Pesaran (2006) and Chudik and Pesaran (2015b) to estimate the PTM coefficients.
Findings
Results of this study indicate that exporters practice local-currency pricing stability for dollar prices. This study obtains that Brazilian exporters tend to stabilize their dollar price for exports, reducing heterogeneity between destination markets. The results are in agreement with the hypothesis of the prevalence of the coalescing effect of Goldberg and Tille (2008) and lower sensitivity of the markup adjustment to the specific market, as pointed out by Corsetti et al. (2018). The pricing of Brazilian exports in dollars reflects a profit maximization strategy that considers an international price system based on global demand for products.
Originality/value
In addition to analyzing the dollar role in the pricing of Brazilian exports through the triangular decomposition, this study also shows the importance of examining the cross-section dependence of errors, considering the heterogeneous cointegration in export pricing models and producing PTM estimates for short-term and long-term.
Details