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1 – 10 of 67Shasnil Avinesh Chand, Ronald Ravinesh Kumar and Peter Josef Stauvermann
This study aims to examine the determinants of bank stability based on three measures of bank stability while accounting for key bank-specific, macro-finance and structural…
Abstract
Purpose
This study aims to examine the determinants of bank stability based on three measures of bank stability while accounting for key bank-specific, macro-finance and structural variables. The aim is to underscore key indicators of stability that can be tracked by analysts, bank managers and regulators, especially in small economies such as Fiji.
Design/methodology/approach
The sample comprises a balanced panel of seven banking and financial institutions over the period 2000-2018. For consistency of data and similar functions in terms of deposit and loans, this paper considers five commercial banks and two credit institutions in Fiji. A fixed-effect method of regression is applied, to control for bank heterogeneity. The dependent variable is bank stability, which is based on three measures – the Z-score, the risk-adjusted return on assets and the risk-adjusted equity to assets ratio.
Findings
It is noted that bank size, funding risk, credit risk and Herfindahl-Hirschman index are positively associated with bank stability. In the extended model, both inflation and economic growth are positively associated with bank stability, although only inflation is statistically significant. Moreover, factors having a negative association with bank stability are the liquidity risk, the net interest margin and the remittances inflow. Additionally, the domestically generated political crises of the years 2000 and 2006 and the global financial crisis of 2007–2008 are negatively associated with bank stability.
Originality/value
This study empirically examines the determinants of bank stability in Fiji’s banking sector. Unlike previous studies, this study considers three measures of stability, with z-score as the dominant measure and as explanatory variables, bank-specific, macro-finance and structural variables. The bank-specific data used in the study were hand-picked from the disclosure statements of banks and macro-finance data were extracted from the World Bank Indicators. The study underscores pertinent factors associated with bank stability in the small island economy of Fiji, which can be of interest to analysts, bankers, regulators and researchers in this domain.
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Woon Wook Jang and Jaehoon Hahn
This paper examines the interaction between monetary policy and the macroeconomy using a macro-finance term structure model of Joslin, Priebsch, and Singleton (2012), in which…
Abstract
This paper examines the interaction between monetary policy and the macroeconomy using a macro-finance term structure model of Joslin, Priebsch, and Singleton (2012), in which macroeconomic risks are not assumed to be spanned by information about the shape of the yield curve. For model estimation, we apply the Kalman filter to a large number of macroeconomic time series data grouped into output, inflation, and market stress categories and extract three common factors. For the factors determining the shape of the yield curve, we use the call rate, the spread between 10-year government bond yield and the call rate, and a combination of the call rate, 2- and 10-year government bond yields as proxies for the level, slope, and curvature factors. We interpret the call rate as a proxy for both the short rate and the instrument of monetary policy. Empirical results show that the macroeconomic factors have a significant impact on the risk premium associated with monetary policy shocks. Furthermore, we find that monetary policy shocks increase the term premium, which in turn affects the factors determining the yield curve, and such effects on the shape of the yield curve feeds back into the macroeconomic factors. Taken together, empirical findings in this paper can be interpreted as evidence supporting the term premium channel (Ferman, 2011) of monetary policy transmission mechanism.
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In this chapter I characterize the relationship between macroeconomic variables and the terms structure of interest rates using the recent macro-finance approach adapted to the…
Abstract
In this chapter I characterize the relationship between macroeconomic variables and the terms structure of interest rates using the recent macro-finance approach adapted to the case of an emerging economy and applying it to Brazil. I find that macro variables help to explain the dynamics of the yield curve in emerging markets, specially in periods of high volatility. Moreover, the notion of great external vulnerability of emerging economies is confirmed by the strong role of the nominal exchange rate change, which explains up to 37% of the variation in yields in Brazil. However, the model does a poor job in forecasting yields during the financial crisis of 2008. This fact seems to be related to the strong fall in international commodity and industrial goods prices (in dollar terms), which limited the passthrough from the strong depreciation of the exchange rate to inflation.
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The growing displacement of theory and other forms of wide-ranging knowledge of social phenomena by empirical research methods in economics is widely noted by economists and…
Abstract
The growing displacement of theory and other forms of wide-ranging knowledge of social phenomena by empirical research methods in economics is widely noted by economists and historians of economic knowledge. Less attention has been devoted, however, to understand the materialization of such changes in the scientific practices. This article studies the recent transformations in the epistemological practices at CEDE, a research center in Colombia. I use a machine learning technique called Topic Modeling, interviews to CEDE researchers, and exegesis of papers to characterize a shift in the production of knowledge in microeconometrics at CEDE during the years 2000 and 2018. I explain this shift by characterizing two sets of epistemological practices that implies a recent tendency to disdain research that cannot make a “strong” causal inference.
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Noureddine Benlagha and Wael Hemrit
The present work endeavors to explore the potential nonlinear and asymmetric effects of supply fundamental properties of Bitcoin mining process (velocity, size and stock of…
Abstract
Purpose
The present work endeavors to explore the potential nonlinear and asymmetric effects of supply fundamental properties of Bitcoin mining process (velocity, size and stock of Bitcoins, cost of production and mining revenue), DJIA, VIX, economic policy uncertainty and Google Trend on the price of Bitcoin (PB).
Design/methodology/approach
The authors apply the Nonlinear Autoregressive Distributed lag (NARDL) approach for the period from November 31, 2013 to December 30, 2020.
Findings
The asymmetric effects of inflation, the size of Bitcoin economy, reveal a positive impact on the PB in the short and long run. In the short run, Bitcoin price shows negative statistically significant sensitivity to positive (negative) changes in DJIA (VIX) index. In addition, Google Trends have an impact on Bitcoin prices indicating that the Bitcoin market is also driven by investors' sentiments. In the long run, negative policy uncertainty shocks increase the PB while in the short run, negative shocks decrease it.
Originality/value
The authors give credence to the best ways of understanding the existence of asymmetries in the link between the PB and a number of influential macro-finance variables to improve the appropriate asset allocation and portfolio management.
The purpose of this paper is to present a discussion on the idea of “policy rationing”. Policy rationing refers to constraining impacts on farm credit through policy action or…
Abstract
Purpose
The purpose of this paper is to present a discussion on the idea of “policy rationing”. Policy rationing refers to constraining impacts on farm credit through policy action or inaction. To present the ideas the author discusses ten themes in policy rationing, ranging from macro‐finance policies to smart lending and financial inclusion.
Design/methodology/approach
The paper is developed as a narrative on agricultural credit policies based largely on existing literature.
Findings
This paper argues that the various critiques of rural credit policy in favor of free market principles have generally not worked in developing economies. Large numbers of farmers do not have access to formal credit. It is argued that there is a role for government and credit programs.
Research limitations/implications
The opinions expressed in this paper are based on existing literature and not all ideas hold with general agreement across researchers and practitioners. The discussion is not exhaustive and in some cases the ideas might have been parsed further.
Practical implications
In this paper the author discusses ten themes that he thinks are relevant for a balanced discussion of farm credit in a development context. These themes illustrate a variety of complexities with respect to rural credit policy. The author ends by restating the themes in the form of ten questions that should be asked in whole, or in part, before any farm credit policy is field‐implemented.
Social implications
This paper deals with a broad range of issues on rural credit policy. It is directed towards a reformation of ideas about credit policy, especially in developing economies. It is argued that, all things considered, on balance there is a role for government in rural credit policy.
Originality/value
There is much discourse amongst development economist about the role of government and credit policy in agricultural development. By thinking of government action or inaction as a form of policy rationing, some clarification is brought to the policy debate.
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Zhiwu Hong, Linlin Niu and Gengming Zeng
Using a discrete-time version of the arbitrage-free Nelson–Siegel (AFNS) term structure model, the authors examine how yield curves in the US and China react to exchange rate…
Abstract
Purpose
Using a discrete-time version of the arbitrage-free Nelson–Siegel (AFNS) term structure model, the authors examine how yield curves in the US and China react to exchange rate policy shocks as China introduces gradual reforms to make its exchange rate regime more flexible. The paper aims to discuss this issue.
Design/methodology/approach
The authors characterize the specification of the discrete-time AFNS model, prove the uniqueness of the solution for model identification, perform specification analysis on its canonical form and detail the MCMC estimation method with a fast and reliable prior extraction step.
Findings
Model decomposition reveals that in the US yield responses, changes in risk premia for medium- to long-term yields dominate changes in yield expectation for short- to medium-term yields, indicating that the portfolio rebalancing effect due to varying risk perception is stronger than the signaling effect due to policy rate expectation.
Practical implications
The results are helpful in diagnosing market sentiment and exchange rate risk pricing as China further internationalizes its currency.
Originality/value
The methodology can be easily extended to study yield curve responses to other scenarios of policy shocks or regime changes.
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Alessandro Bressan, Abel Duarte Alonso, Oanh Thi Kim Vu and Daniel Borer
The purpose of this study is to examine factors contributing to family firms’ survival in the ongoing COVID-19 crisis; in this endeavour, the study espouses the underpinnings of…
Abstract
Purpose
The purpose of this study is to examine factors contributing to family firms’ survival in the ongoing COVID-19 crisis; in this endeavour, the study espouses the underpinnings of social exchange theory and entrepreneurial resilience.
Design/methodology/approach
The views of 128 Italian family micro and small-sized firm owners/managers operating in different industries were gathered through an online questionnaire.
Findings
The analysis uncovers 12 fundamental factors contributing to firms’ survival; these are encapsulated in three dimensions and presented in two theoretical frameworks. The “beneficiary” dimension stresses the support from various internal and external stakeholders, while the “benefactor” dimension illustrates the commitment to extend the family tradition and be responsive to stakeholders. Finally, the “immersion/embeddedness” dimension denotes firms’ entrepreneurial behaviour, agility, decision-making and drive.
Originality/value
Firstly, and from a practitioner perspective, this study addresses recognised knowledge and research gaps in contemporary family business research, including how family firms are confronting the current unprecedented crisis. This response to current extant gaps provides first-hand empirical findings that could be primarily considered by industry stakeholders. Secondly, and from a theoretical angle, the aforementioned dimensions revealed through the analysis, coupled with the development of a theoretical framework, contribute to conceptual rigour and, therefore, a deeper understanding of family firms’ journey through an unprecedented event.
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Stephanos Papadamou, Dionisis Philippas, Batnini Firas and Thomas Ntitoras
This paper aims to examine the relationship between abnormal loan growth and risk in Swedish financial institutions by type and borrower using three indicators as proxies for…
Abstract
Purpose
This paper aims to examine the relationship between abnormal loan growth and risk in Swedish financial institutions by type and borrower using three indicators as proxies for risks related to loan losses, the ratio of interest income to total loans and solvency perspectives.
Design/methodology/approach
Using a large sample of different types of Swedish financial institutions, this paper uses a panel framework to examine the relationships between abnormal loan growth rates and loan losses, interest income as a percentage of total loans, changes in the equity to assets ratio and changes in z-score.
Findings
The findings show two important points of evidence. First, abnormal lending to retail customers increases loan losses and interest income in relation to total loans. Second, abnormal lending to other credit institutions decreases loan losses and significantly changes the capital structure by increasing the reliance on debt funding and significantly improves the z-score measure.
Research limitations/implications
The findings provide useful implications for the management of loan portfolios for a wide range of Swedish financial institutions, identifying two components: abnormal lending to households may increase loan losses and increase interest income in relation to total loans, and excessive lending to other credit institutions may reduce solvency risk and allow more debt financing for the financial institution.
Originality/value
This is the first study to use a panel framework in analyzing the behavior of different types of Swedish financial institutions in relation to loans granted to retail customers and other credit institutions.
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Benjamin Amoah, Kwaku Ohene-Asare, Godfred Alufar Bokpin and Anthony Q.Q. Aboagye
The purpose of this paper is to investigate the factors that tend to influence credit union efficiency, specifically examining cost efficiency (CE) and technical efficiency.
Abstract
Purpose
The purpose of this paper is to investigate the factors that tend to influence credit union efficiency, specifically examining cost efficiency (CE) and technical efficiency.
Design/methodology/approach
Using a two-stage method, the authors first estimate CE using Tones’ SBM data envelopment analysis method and technical efficiency in a variable returns to scale setting during the period 2008–2014. The authors estimate a mixed-effects and two-limit Tobit regression to examine the effect of credit union specific characteristics, banking industry and macroeconomic conditions, on efficiency.
Findings
Credit unions’ CE averaged 38.9 percent compared to 54.4 percent for technical efficiency. The authors find that technical efficiency does not translate into CE and vice versa.
Practical implications
The authors suggest that when targeting CE, credit union managers would have to make technical efficiency a priority. A monopolized and inefficient banking sector does not challenge efficiency improvement in the credit unions industry.
Originality/value
This study employs data from a frontier market.
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