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1 – 10 of 211Inflation targeting has increasingly become a popular monetary framework since its first introduction in New Zealand at the beginning of 1990. However, the causality effects of…
Abstract
Purpose
Inflation targeting has increasingly become a popular monetary framework since its first introduction in New Zealand at the beginning of 1990. However, the causality effects of this policy on economic performance, particularly in periods of economic turmoil remain controversial. Thus, this paper re-examines the treatment effect of inflation targeting on two important macro indicators which are inflation rate and output growth with the focus on emerging market economies. The global financial crisis, which is known as the great recession since the last decade, is investigated as an exogenous shock to test for the effectiveness of this popular regime.
Design/methodology/approach
The difference-in-difference approach in the fixed-model is employed for this investigation using a balanced panel data of 54 countries with 15 inflation-targeting countries for the period 2002 to 2010.
Findings
The examination finds that there is no significant difference in terms of the inflation rate and gross domestic product growth over the whole research period between the treatment and control groups. However, the outcome suggests that emerging economies can control the increase in inflation rate when the economy has to cope with the exogenous uncertainties.
Research limitations/implications
This finding indicates important policy implications for central banks in many countries.
Originality/value
Inflation targeting can help emerging countries to reduce an increase in inflation rate in the crisis period without many trade-offs in the growth of output.
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Retselisitsoe I. Thamae and Nicholas M. Odhiambo
This paper aims to investigate the nonlinear effects of bank regulation stringency on bank lending in 23 sub-Saharan African (SSA) countries over the period 1997–2017.
Abstract
Purpose
This paper aims to investigate the nonlinear effects of bank regulation stringency on bank lending in 23 sub-Saharan African (SSA) countries over the period 1997–2017.
Design/methodology/approach
This study employs the dynamic panel threshold regression (PTR) model, which addresses endogeneity and heterogeneity problems within a nonlinear framework. It also uses indices of entry barriers, mixing of banking and commerce restrictions, activity restrictions and capital regulatory requirements from the updated databases of the World Bank's Bank Regulation and Supervision Surveys as measures of bank regulation.
Findings
The linearity test results support the existence of nonlinear effects in the relationship between bank lending and entry barriers or capital regulations in the selected SSA economies. The dynamic PTR estimation results reveal that bank lending responds positively when the stringency of entry barriers is below the threshold of 62.8%. However, once the stringency of entry barriers exceeds that threshold level, bank credit reacts negatively and significantly. By contrast, changes in capital regulation stringency do not affect bank lending, either below or above the obtained threshold value of 76.5%.
Practical implications
These results can help policymakers design bank regulatory measures that will promote the resilience and safety of the banking system but at the same time not bring unintended effects to bank lending.
Originality/value
To the best of the authors’ knowledge, this is the first study to examine the nonlinear effects of bank regulatory measures on bank lending using the dynamic PTR model and SSA context.
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Robert Mwanyepedza and Syden Mishi
The study aims to estimate the short- and long-run effects of monetary policy on residential property prices in South Africa. Over the past decades, there has been a monetary…
Abstract
Purpose
The study aims to estimate the short- and long-run effects of monetary policy on residential property prices in South Africa. Over the past decades, there has been a monetary policy shift, from targeting money supply and exchange rate to inflation. The shifts have affected residential property market dynamics.
Design/methodology/approach
The Johansen cointegration approach was used to estimate the effects of changes in monetary policy proxies on residential property prices using quarterly data from 1980 to 2022.
Findings
Mortgage finance and economic growth have a significant positive long-run effect on residential property prices. The consumer price index, the inflation targeting framework, interest rates and exchange rates have a significant negative long-run effect on residential property prices. The Granger causality test has depicted that exchange rate significantly influences residential property prices in the short run, and interest rates, inflation targeting framework, gross domestic product, money supply consumer price index and exchange rate can quickly return to equilibrium when they are in disequilibrium.
Originality/value
There are limited arguments whether the inflation targeting monetary policy framework in South Africa has prevented residential property market boom and bust scenarios. The study has found that the implementation of inflation targeting framework has successfully reduced booms in residential property prices in South Africa.
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David Boto-Garcia, Marta Escalonilla, Emma Zapico and Jose F. Baños
This paper aims to examine hotel guests’ satisfaction relative to room rates paying attention to the heterogeneity in the scale of satisfaction scores.
Abstract
Purpose
This paper aims to examine hotel guests’ satisfaction relative to room rates paying attention to the heterogeneity in the scale of satisfaction scores.
Design/methodology/approach
This paper studies guests’ post-purchase hotel evaluation using survey data from a sample of 14,879 tourists visiting a Northern Spanish region. This study estimates a Heteroskedastic Ordered Probit model in which both “cognitive” and “emotional” components of satisfaction are modelled. The model allows us to control for heterogeneity in the scale of the latent satisfaction scores.
Findings
This paper finds that satisfaction relative to rates (value for money) decreases with expenditure per person and day. Interestingly, this negative relationship mainly holds for those who do not prioritize prices at the time of choosing the hotel. Positive first impressions are positively associated with higher satisfaction. In addition, this study finds that the emotional component of satisfaction increases with hotel quality and hiring a full board, being also greater among women and elderly people.
Originality/value
Instead of using an overall measure of satisfaction, this paper uses one that gathers how the tourist assesses satisfaction in relation to cost (value for money).
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Fabrizia Sarto, Sara Saggese, Riccardo Viganò and Marianna Mauro
The purpose of this paper is to provide insights into the implications of board human capital heterogeneity for company innovation by focusing on the educational and the…
Abstract
Purpose
The purpose of this paper is to provide insights into the implications of board human capital heterogeneity for company innovation by focusing on the educational and the functional background of directors. Moreover, it examines the moderating effect of the CEO expertise-overlap within the innovation domain on the relationship between board human capital heterogeneity and firm innovation.
Design/methodology/approach
The hypotheses are tested through a set of ordinary least squares regressions on a unique dataset of 149 Italian high-tech companies observed between 2012 and 2015.
Findings
Findings show that the educational and the functional background heterogeneity of directors increase both the innovation input and output. However, results highlight that these relationships are negatively moderated by the CEO expertise-overlap within the innovation domain.
Practical implications
The paper emphasizes the importance of appointing directors with different and specific educational and functional backgrounds to foster the company innovation.
Originality/value
The paper fills a gap in the literature as it has devoted limited attention to the performance implications of board human capital heterogeneity in the high-tech industry where knowledge and skills are the primary sources of value. Moreover, the paper integrates the research on the CEO-board interface by shedding light on how the CEO expertise within the innovation domain affects the contribution of heterogeneous boards to company innovation.
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The purpose of this study is to examine the effect of bank-specific, industry-specific and macroeconomic determinants of bank profitability amongst domestic UK commercial banks.
Abstract
Purpose
The purpose of this study is to examine the effect of bank-specific, industry-specific and macroeconomic determinants of bank profitability amongst domestic UK commercial banks.
Design/methodology/approach
This study used an empirically driven single equation framework that incorporates the traditional structure–conduct–performance (SCP) hypothesis. A generalised method of moments technique was applied to a panel of UK banks covering the period 1998–2018 to account for profit persistence.
Findings
The estimation results show that all bank-specific determinants, with the exception of credit risk, significantly affect bank profitability in the anticipated way. However, no evidence was found in support of the SCP hypothesis. Interest rates, especially longer-term interest rates, and the rate of inflation has a significant effect on bank profitability, with the business cycle having a symmetric insignificant effect once other variables have been accounted for. Profitability persists to a moderate extent within the UK banking market, indicating that there exists a departure from a perfectly competitive market structure.
Originality/value
The literature that examines the actual underlying determinants of UK domestic bank profitability is limited.
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Małgorzata Iwanicz-Drozdowska and Bartosz Witkowski
The parent-subsidiary nexus has been explored since the mid-1990s, but the extent to which subsidiaries resemble their parents remains unclear. Therefore, this study examines the…
Abstract
Purpose
The parent-subsidiary nexus has been explored since the mid-1990s, but the extent to which subsidiaries resemble their parents remains unclear. Therefore, this study examines the performance drivers for subsidiary banks in emerging markets and their parents to determine the similarities between these groups. The findings could help identify key financial performance measures that should be included in global strategies for multinational banks operating in emerging markets.
Design/methodology/approach
The study uses data on subsidiaries from 32 countries, including 20 European transitioning countries and 49 parent companies operating internationally from 1996 to 2015. It considers several models that distinguish between units using individual bank effects and the stochastic structure. In a robustness analysis, EU- and non-EU-based institutions are distinguished and long-term historical links between parents' and subsidiaries' countries are considered.
Findings
Cost control, capital adequacy and asset quality policies have similar importance for parent banks and subsidiaries and are strictly coordinated, whereas the remaining policies allow more flexibility. Subsidiaries in the EU and in countries that were politically and/or militarily influenced by parent countries do not “fall far from the tree”, which signals their strong group-wide integration and coordination.
Research limitations/implications
This study covers a limited number of emerging market countries due to the limited availability of long-term series data. Future studies should include more countries.
Originality/value
This study identifies key financial measures used on a group-wide basis for performance management while accounting for long-term relations between host and home countries and the geopolitical characteristics of host countries.
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The purpose of this study is to analyze commercial bank-level data to examine a credit channel of the monetary policy transmission mechanism in emerging economies, such as South…
Abstract
Purpose
The purpose of this study is to analyze commercial bank-level data to examine a credit channel of the monetary policy transmission mechanism in emerging economies, such as South Africa from BRICS countries. Among the important questions that central banks, economists and policymakers have raised in this area are: Do bank characteristics and macroeconomic variables influence credit supply in South Africa? Do bank characteristics and macroeconomic variables interact to influence credit supply in South Africa?
Design/methodology/approach
Static panel data with pooled OLS, a random effect model and the fixed-effect model are used for data analysis. Using a sample of 50 commercial banks from South Africa over 10 years from 2009 to 2018. The statistical software Stata is utilized for data analysis.
Findings
The conclusion of this study shows that in South Africa, the loan amount has a strong and positive macroeconomic variable inflation effect. The outcomes of the study also revealed that in South Africa, there is a strong but negative association between interaction macroeconomic variables inflation and bank characteristic liquidity ratio on the loan amount.
Originality/value
The authors contribute to the existing literature by identifying the key determinants of monetary policy transmission channels through credit in South Africa and, furthermore, through a country-level data analysis and disaggregation at the commercial bank level, as well as economic conditions.
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Idris Abdullahi Abdulqadir, Soo Y. Chua and Saidatulakmal Mohd
The purpose of this paper is to investigate the optimal inflation targets for an appropriate exchange rate policy in 15 major oil exporting countries in Sub-Saharan African (SSA).
Abstract
Purpose
The purpose of this paper is to investigate the optimal inflation targets for an appropriate exchange rate policy in 15 major oil exporting countries in Sub-Saharan African (SSA).
Design/methodology/approach
Dynamic heterogeneous panel threshold techniques are used via threshold-effect test and threshold regression. This procedure is achieved through a grid search and bootstrapping replications method to stimulate the asymptotic distribution of the likelihood ratio test of the null hypothesis on no-threshold as against the alternative hypothesis. The p-values validate the threshold estimates.
Findings
Findings revealed that the optimal inflation target has a turning point and its impact on the real exchange rate is up to a threshold level of 14.47 per cent. Furthermore, the inflation rate above the threshold level overwhelmingly revealed its effect on real exchange regimes.
Research limitations/implications
It would have been a good idea to investigate optimal inflation targets for all African countries but due to inadequate data the selection criteria was narrowed to oil-exporting countries in Sub-Saharan Africa.
Practical implications
Inflation targeting beyond the threshold level would have serious implications on the monetary policy.
Originality/value
To the best of the knowledge, this is the first study to look at optimal inflation targets for 15 major oil exporting countries in general and SSA countries in particular. The findings provide a critical analysis of an inflation regime for a typical oil-producing country that oil exports being their source of revenue.
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Anthony Orji, Davidmac Olisa Ekeocha, Jonathan E. Ogbuabor and Onyinye I. Anthony-Orji
The market-based monetary policy framework has been favoured by Economic Community of West African States (ECOWAS) economies. Hence, this study aims to investigate the effect of…
Abstract
Purpose
The market-based monetary policy framework has been favoured by Economic Community of West African States (ECOWAS) economies. Hence, this study aims to investigate the effect of monetary policy channels on the sectoral value added and sustainable economic growth in ECOWAS. Data from the World Bank and International Monetary Fund over 2013–2019 were sourced for thirteen member countries. ECOWAS is found to have very high inflation level, interest and exchange rates.
Design/methodology/approach
The study adopted the Driscoll–Kraay fixed-effects ordinary least squares regression (OLS) estimator.
Findings
The findings revealed that while the effect of monetary policy channels on the agricultural sector value added is largely heterogenous and significantly in-elastic, the one on the industrial and services sectors are overwhelmingly homogeneous and negative, but insignificant for the services sector. Moreover, the effect of monetary policy channels on sustainable economic growth is also homogeneously asymmetric, with imminent stagflation, while the interactive effects of monetary policy channels are heterogeneous on sustainable economic growth and economic sectors. Therefore, an inflation targeting monetary policy stance is generally recommended with prioritised exchange rate stabilisation amid sufficient fiscal space.
Originality/value
This is amongst the first studies to investigate monetary policy channels, sectoral outputs and sustainable growth in the ECOWAS region with a rigorous analysis and found implications for policy.
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