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Abstract

Details

Governing for the Future: Designing Democratic Institutions for a Better Tomorrow
Type: Book
ISBN: 978-1-78635-056-5

Article
Publication date: 28 March 2023

Salvatore Capasso, Oreste Napolitano and Ana Laura Viveros Jiménez

The idea of this study is to provide a solid Financial Condition Index (FCI) that allows the monetary transmission policy to be monitored in a country which in recent decades has…

Abstract

Purpose

The idea of this study is to provide a solid Financial Condition Index (FCI) that allows the monetary transmission policy to be monitored in a country which in recent decades has suffered from major financial and monetary crises.

Design/methodology/approach

The authors construct three FCIs for Mexico to analyse the role of financial asset prices in formulating monetary policy under an inflation-targeting regime. Using monthly data from 1995 to 2017, the authors estimate FCIs with two different methodologies and build the index by taking into account the mechanism of transmission of monetary policy and incorporating the most relevant financial variables.

Findings

This study’s results show that, likewise for developing countries as Mexico, an FCI could be a useful tool for managing monetary policy in reducing macroeconomic fluctuations.

Originality/value

Apart from building a predictor of possible financial stress, the authors construct an FCI for a central bank that pursues inflation targeting and to analyse the role of financial asset prices in formulating monetary policy.

Highlights

  1. We construct three FCIs for Mexico to analyse the role of financial asset prices in formulating monetary policy under an inflation-targeting regime.

  2. The FCIs are based on (1) a vector autoregression model (VAR); (2) an autoregressive distributed lag model (ARDL) and (3) a factor-augmented vector autoregression model (FAVAR).

  3. FCI could become a new target for monetary policy within a hybrid inflation-targeting framework.

  4. FCI could be a good tool for managing monetary policy in developing countries with a low-inflation environment.

We construct three FCIs for Mexico to analyse the role of financial asset prices in formulating monetary policy under an inflation-targeting regime.

The FCIs are based on (1) a vector autoregression model (VAR); (2) an autoregressive distributed lag model (ARDL) and (3) a factor-augmented vector autoregression model (FAVAR).

FCI could become a new target for monetary policy within a hybrid inflation-targeting framework.

FCI could be a good tool for managing monetary policy in developing countries with a low-inflation environment.

Details

Journal of Economic Studies, vol. 50 no. 8
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 7 July 2020

Caroline Heqing Zhu

The purpose of this paper is to examine the effectiveness of hedge fund activism (HFA) in preventing corporate policy deviations.

Abstract

Purpose

The purpose of this paper is to examine the effectiveness of hedge fund activism (HFA) in preventing corporate policy deviations.

Design/methodology/approach

This paper identifies HFA interventions through a hand-collected sample of Schedule 13D filings between 1994 and 2016, and uses mechanical mutual fund fire sales as the instrument variable (IV) for the likelihood of such interventions. Armed with the instrument, this paper estimates firm's distribution, managerial compensation and investment policies in response to a change in the perceived likelihood of HFA interventions.

Findings

An increase in the HFA intervention likelihood leads to increases in shareholder distribution, decreases in CEO pay and investments and increases in operating performance. Compared to the sample average, a one standard deviation increase in the intervention likelihood leads to a 9.29% increase in the firm's payout ratio, a 7.42% decrease in CEO compensation, a 2.67% decrease in capital expenditures and a 4.96% decrease in R&D expenses. These changes are consistent with the threat of intervention curbing managerial empire-building behaviors and improving firm operation. The relationships are causal, significant and robust to a variety of alternative specifications and sample divisions.

Originality/value

Results of this paper suggest that as a mechanism for corporate governance, the threat of HFA is effective in preventing corporate policy deviations. They also demonstrate a stronger and broader impact of HFA on corporate policy than previously documented. By showing that HFA is an effective and viable mechanism for corporate governance, this study allows policymakers to make more informed decisions to whether increase hedge fund regulations or not.

Details

International Journal of Managerial Finance, vol. 17 no. 3
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 19 April 2022

Xinping Huang, Jie Gao and Huantao Zhang

The rationality of the selection and application of policy instruments in current policy schemes for promoting the development of low-carbon eco-cities in China is examined and…

Abstract

Purpose

The rationality of the selection and application of policy instruments in current policy schemes for promoting the development of low-carbon eco-cities in China is examined and, in view of existing problems, effective suggestions for scientifically and reasonably organizing and designing policy instruments are proposed, which is of great significance to optimize the policy system for the development of low-carbon eco-cities in China and thereby promote sustainable urban development.

Design/methodology/approach

In the study, using 117 policy documents focusing on the development of low-carbon eco-cities issued by the Chinese central government as well as the relevant ministries and commissions between 2010 and 2019 and comprehensively adopting bibliometric and content analysis methods, the contents of policy documents are quantitatively analyzed from three dimensions: policy instrument, policy area and policy target.

Findings

The study finds the following. Ecological environment and low-carbon development are the focus of policy attention. Policy-promulgating institutions have formed a core subnetwork, that is, an “iron triangle.” There exists a structural imbalance in the use of policy instruments, and the distribution of policy instruments in different policy areas exhibits significant differentiating characteristics. Driven by different policy targets, the proportion of the policy instrument types adopted by the government is constantly changing. According to these findings, suggestions are put forward to optimize China's low-carbon eco-city development policy.

Originality/value

(1) A three-dimensional policy analysis framework is conducted from the perspective of policy instrument, which is innovative in theory. (2) This paper finds the selective utilization rationality and evolution rule of China's low-carbon eco-city development policy instruments. (3) Recommendations on optimizing China's low-carbon eco-city development policies are discussed systematically, which plays a theoretical guiding role in optimizing the development policies of low-carbon eco-cities in China.

Details

Kybernetes, vol. 52 no. 2
Type: Research Article
ISSN: 0368-492X

Keywords

Abstract

Details

Central Bank Policy: Theory and Practice
Type: Book
ISBN: 978-1-78973-751-6

Book part
Publication date: 18 October 2011

Lars Mjøset and Ådne Cappelen

Norway is a small nation state on the northernmost coastline of Western Europe, integrated in the Western world economy. For centuries Norway's integration in the world economy…

Abstract

Norway is a small nation state on the northernmost coastline of Western Europe, integrated in the Western world economy. For centuries Norway's integration in the world economy had been based on exports of raw materials such as fish and timber, as well as shipping services. In the early 20th century, furnace-based metals (made possible by cheap hydropower) were added to this export basket. Just as the world economy entered an increasingly unstable phase in 1970s, another natural resource was discovered in Norway: petroleum – that is, oil and natural gas from the North Sea. This chapter analyses the challenges and possibilities inherent in the Norwegian strategy of developing an oil economy in a world economic situation influenced by new and stronger forms of international integration through the four decades between 1970 and 2010.

Details

The Nordic Varieties of Capitalism
Type: Book
ISBN: 978-0-85724-778-0

Article
Publication date: 27 June 2023

Emna Trabelsi and Asma Ben Khaled

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…

Abstract

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.

Details

Journal of Financial Economic Policy, vol. 15 no. 4/5
Type: Research Article
ISSN: 1757-6385

Keywords

Content available
Book part
Publication date: 25 July 2019

Perry Warjiyo and Solikin M. Juhro

Abstract

Details

Central Bank Policy: Theory and Practice
Type: Book
ISBN: 978-1-78973-751-6

Article
Publication date: 27 September 2011

Riccardo Cristadoro and Giovanni Veronese

Indian monetary policy performed reasonably well in the past, while both strategy and operational framework were evolving on par with domestic financial and monetary markets. The…

2623

Abstract

Purpose

Indian monetary policy performed reasonably well in the past, while both strategy and operational framework were evolving on par with domestic financial and monetary markets. The purpose of this paper is to document how this good track record came to an abrupt stop in recent years as inflation rose sharply and, more worryingly, expected inflation followed suit.

Design/methodology/approach

This paper has analytical, empirical and policy dimensions. Given the recent surge in inflation in India, as well as in inflation expectations, a discussion of the role of monetary policy is needed. This is presented by resorting to survey evidence on expectations as well as to indirect evidence inferred from the market reactions to macroeconomic news.

Findings

The authors documented the unhinging of inflation expectations in India in the aftermath of the financial crisis. The evidence gathered leads to the conclusion that both the monetary policy strategy and framework of the Reserve Bank of India would benefit from further evolution in the direction of a precisely defined and overarching objective (price stability), instead of the present multiplicity of goals, and of a well‐defined operating target, enhancing the transparency, communication and signalling effect of policy moves. The authors suggest that embracing a flexible inflation targeting approach is a possible solution.

Originality/value

This is a highly topical issue that has attracted a great deal of attention in policy discussions, both in India and in the region. Very few papers combine the analytical and empirical considerations in this topic.

Details

Indian Growth and Development Review, vol. 4 no. 2
Type: Research Article
ISSN: 1753-8254

Keywords

Open Access
Article
Publication date: 19 June 2019

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…

6528

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

Review of Economics and Political Science, vol. 4 no. 2
Type: Research Article
ISSN: 2631-3561

Keywords

21 – 30 of over 117000