Search results
1 – 10 of 15Because systemically important banks' takeovers in the US were expected to contain the 2008 global financial crisis (GFC) but were found to have imposed large cost on…
Abstract
Purpose
Because systemically important banks' takeovers in the US were expected to contain the 2008 global financial crisis (GFC) but were found to have imposed large cost on shareholders, this paper examines the effectiveness of these acquisitions during the GFC and investigates what went wrong with the market for corporate control of large banks.
Design/methodology/approach
This paper presents a model of the disciplinary takeover based on the efficient market hypothesis which provides appropriate measures for it to examine the financial performance of acquiring banks after takeover.
Findings
The results indicate that the takeover market for large banks was ineffective in two aspects: the market did not distinguish strong banks from weak banks before the crisis and acquirers performed worse after takeover. Such ineffectiveness reflects the fundamental deficiencies of large bank takeovers arising from some key distinguishing characteristics of large banks.
Research limitations/implications
The sample size of systemically important banks' takeovers is small so large-sample standard statistical inferences cannot be used.
Practical implications
The deficiencies of large bank takeovers need to be rectified in order to aid in resolving future crises.
Originality/value
This paper provides rare and detailed insight based on case studies of large US bank takeovers during the GFC.
Details
Keywords
This study examined the roles of public spending and population moderating characteristic structure of selected African economies on bank-based financial development through…
Abstract
Purpose
This study examined the roles of public spending and population moderating characteristic structure of selected African economies on bank-based financial development through credit to private sector.
Design/methodology/approach
The study sampled 37 selected African economies for the years 1991–2018, and it applied a pooled mean group (PMG) estimator to account for short-run and long-run causal effects, and confirmed short-run adjustments towards the long-run convergences between the variables. Specific suitable tests were also applied.
Findings
Evidence confirms positive impacts of both capital formation and final consumption expenditures on financial development in the short run and long run. The moderation of population structures on expenditure structures help to speed up convergences.
Originality/value
This work attests its innovation by accounting for the separate effects of the expenditure types, the moderation effects of young and mature populations for capital and final consumption expenditure on financial development among selected economies in Africa.
Details
Keywords
Sherine Al-shawarby and Mai El Mossallamy
This paper aims to estimate a New Keynesian small open economy dynamic stochastic general equilibrium (DSGE) model for Egypt using Bayesian techniques and data for the period…
Abstract
Purpose
This paper aims to estimate a New Keynesian small open economy dynamic stochastic general equilibrium (DSGE) model for Egypt using Bayesian techniques and data for the period FY2004/2005:Q1-FY2015/2016:Q4 to assess monetary and fiscal policy interactions and their impact on economic stabilization. Outcomes of monetary and fiscal authority commitment to policy instruments, interest rate, government spending and taxes, are evaluated using Taylor-type and optimal simple rules.
Design/methodology/approach
The study extends the stylized micro-founded small open economy New Keynesian DSGE model, proposed by Lubik and Schorfheide (2007), by explicitly introducing fiscal policy behavior into the model (Fragetta and Kirsanova, 2010 and Çebi, 2011). The model is calibrated using quarterly data for Egypt on key macroeconomic variables during FY2004/2005:Q1-FY2015/2016:Q4; and Bayesian methods are used in estimation.
Findings
The results show that monetary and fiscal policy instruments in Egypt contribute to economic stability through their effects on inflation, output and debt stock. The monetary policy Taylor rule estimates reveal that the Central Bank of Egypt (CBE) attaches significant importance to anti-inflationary policy and (to a lesser extent) to output targeting but responds weakly to nominal exchange rate variations. CBE decisions are significantly influenced by interest rate smoothing. Egyptian fiscal policy has an important role in output and government debt stabilization. Additionally, the fiscal authority chooses pro-cyclical government spending and counter-cyclical tax policies for output stabilization. Again, past values of the fiscal instruments are influential in the evolution of the future fiscal policy-making process.
Originality/value
A few studies have examined the interaction between monetary and fiscal policy in Egypt within a unified framework. The presented paper integrates the monetary and fiscal policy analysis within a unified dynamic general equilibrium open economy rational expectations framework. Without such a framework, it would not be easy to jointly analyze monetary and fiscal transmission mechanisms for output, inflation and debt. Also, it would be neither possible to contrast the outcome of monetary and fiscal authorities commitment to a simple Taylor instrument rule vis-à-vis optimal policy outcomes nor to assess the behavior of monetary and fiscal agents in macroeconomic stability in context of an active/passive policy decisions framework.
Details
Keywords
Dhulika Arora and Smita Kashiramka
Shadow banks or non-bank financial intermediaries (NBFIs) are facilitators of credit, especially in emerging market economies (EMEs). However, there are certain risks associated…
Abstract
Purpose
Shadow banks or non-bank financial intermediaries (NBFIs) are facilitators of credit, especially in emerging market economies (EMEs). However, there are certain risks associated with them, such as their unchecked leverage and interconnectedness with the rest of the financial system. In light of this, the present study analyses the impact of the growth of shadow banks on the stability of the banking sector and the overall stability of the financial system. The authors further examine the effect of the growth of finance companies (a type of NBFIs) on financial stability.
Design/methodology/approach
The study employs data of 11 EMEs (monitored by the Financial Stability Board (FSB)) for the period 2002–2020 to examine the above relationships. Panel-corrected standard errors method and Driscoll–Kray standard error estimation are deployed to conduct the analysis.
Findings
The results signify that the growth of the shadow banking sector and the growth of lending to the shadow banking sector are negatively associated with the stability of the banking sector and increases the vulnerability of the financial system (overall instability). This implies that the higher the growth of the shadow banks, the higher the financial fragility. Finance companies are also found to negatively affect financial stability. These findings are validated by different estimation methods and point out the risks posed by the NBFI sector.
Originality/value
The extant study builds a composite index (Financial Vulnerability Index (FVI)) to measure financial stability; thus, the findings contribute to the evolving literature on shadow banks.
Details
Keywords
The authors introduce non-Ricardian (“hand-to-mouth”) myopic agents into an otherwise standard real-business-cycle (RBC) setup augmented with a detailed government sector. The…
Abstract
Purpose
The authors introduce non-Ricardian (“hand-to-mouth”) myopic agents into an otherwise standard real-business-cycle (RBC) setup augmented with a detailed government sector. The authors investigate the quantitative importance of the presence of nonoptimizing households for cyclical fluctuations in Bulgaria.
Design/methodology/approach
The authors calibrate the RBC model to Bulgarian data for the period following the introduction of the currency board arrangement (1999–2018).
Findings
The authors find that the inclusion of such non-Ricardian households improves model performance along several dimensions and generally provides a better match vis-a-vis data, as compared to the standard model populated with Ricardian agents only.
Originality/value
This is a novel finding in the macroeconomic studies on Bulgaria using modern quantitative methods.
Details
Keywords
Lindokuhle Talent Zungu and Lorraine Greyling
This study aims to test the validity of the Rajan theory in South Africa and other selected emerging markets (Chile, Peru and Brazil) during the period 1975–2019.
Abstract
Purpose
This study aims to test the validity of the Rajan theory in South Africa and other selected emerging markets (Chile, Peru and Brazil) during the period 1975–2019.
Design/methodology/approach
In this study, the researchers used time-series data to estimate a Bayesian Vector Autoregression (BVAR) model with hierarchical priors. The BVAR technique has the advantage of being able to accommodate a wide cross-section of variables without running out of degrees of freedom. It is also able to deal with dense parameterization by imposing structure on model coefficients via prior information and optimal choice of the degree of formativeness.
Findings
The results for all countries except Peru confirmed the Rajan hypotheses, indicating that inequality contributes to high indebtedness, resulting in financial fragility. However, for Peru, this study finds it contradicts the theory. This study controlled for monetary policy shock and found the results differing country-specific.
Originality/value
The findings suggest that an escalating level of inequality leads to financial fragility, which implies that policymakers ought to be cautious of excessive inequality when endeavouring to contain the risk of financial fragility, by implementing sound structural reform policies that aim to attract investments consistent with job creation, development and growth in these countries. Policymakers should also be cautious when implementing policy tools (redistributive policies, a sound monetary policy), as they seem to increase the risk of excessive credit growth and financial fragility, and they need to treat income inequality as an important factor relevant to macroeconomic aggregates and financial fragility.
Details
Keywords
This paper aims to analyse trends and determinants of NPAs in India's banks. It has empirically examined the bank-specific determinants of NPAs.
Abstract
Purpose
This paper aims to analyse trends and determinants of NPAs in India's banks. It has empirically examined the bank-specific determinants of NPAs.
Design/methodology/approach
An FE panel estimation of a sample of 44 banks was carried out for the post-crisis time period, from 2010 to 2020 to identify the bank-specific determinants of NPAs. The sample of 44 banks includes 20 PSBs, 19 private banks and 5 foreign banks. Separate FE estimation was also carried out to identify the drivers of NPAs in PSBs.
Findings
The determinant of NPAs during the post-crisis period suggests that faulty earning management and deterioration in loan quality have resulted in high NPAs in India's banks. The result is similar for PSBs as well.
Research limitations/implications
The findings of the study suggest that the banks, especially the Public Sector Banks (PSBs) need to revisit their earning management strategies to maximise income and improve their loan quality in order to reduce the incidence of loan failure.
Originality/value
The paper contributes by empirically analysing the determinants of NPAs during the recent decade, between 2010 and 2020. Separate estimations have been carried out to understand whether the drivers of NPAs differ in the case of PSBs.
Details
Keywords
The effectiveness of fiscal policy is an interesting field in literature of macroeconomics. The purpose of this paper is to investigate the effects of fiscal policy on economic…
Abstract
Purpose
The effectiveness of fiscal policy is an interesting field in literature of macroeconomics. The purpose of this paper is to investigate the effects of fiscal policy on economic growth under contributions from the differences in institutions and external debt levels.
Design/methodology/approach
The authors use panel data from 2002 to 2014 from 20 emerging markets and use GMM estimators for unbalanced panel data.
Findings
The results show positive growth effects of fiscal policy across emerging markets in the examined periods. Notably, the improvement in institutions promotes higher crowding-in effects of fiscal policy. In addition, this paper finds interesting evidences that the external debt has non-linear effects on economic growth, whereas the heterogeneous effects of fiscal policy on economic growth as positive effects in low indebted level and negative effect in high indebted level may explain the mechanism of this non-linear relationship.
Originality/value
This study proposes the non-linear relationship of fiscal growth effects in emerging economies under the dynamic of debt levels.
Details