Exchange rate parities and Taylor rule deviations

This paper investigates the PPP and UIP conditions by taking into account possible nonlinearities as well as the role of Taylor rule deviations under alternative monetary policy frameworks. The analysis is conducted using monthly data from January 1993 to December 2020 for five inflation-targeting countries (the UK, Canada, Australia, New Zealand and Sweden) and three non-targeting ones (the USA, the Euro Area and Switzerland). Both a benchmark linear VECM and a nonlinear Threshold VECM are estimated; the latter includes Taylor rule deviations as the threshold variable. The results can be summarized as follows. First, the nonlinear specification provides much stronger evidence for the PPP and UIP conditions, the estimated adjustment speed towards equilibrium being twice as fast. Second, Taylor rule deviations play an important role: the adjustment speed is twice as fast when deviations are small and the credibility of the central bank is higher. Third, inflation targeting tends to generate a higher degree of credibility for the monetary authorities, thereby reducing deviations of the exchange rate from the PPP- and UIP-implied equilibrium.

Russia’s banking sector during the pandemic

Quarantine and self-isolation have become a new challenge for the Russian economy, changed many areas of our life, revealed new weaknesses in the banking system and monetary regulation of the economy, and also become a good test for the post-crisis financial system. In this article using a systematic approach to the study of information, analytical and graphical methods the dynamics of the Russian banking sector during the development of the coronavirus pandemic and the specifics of recovery from the crisis have been investigated. The innovations and improvements brought about by the pandemic have been studied. The Central Bank of Russia’s monetary policy instruments used to mitigate the impact of the pandemic on the real economy in general and on the banking sector in particular have been reviewed. The features of anti-crisis measures taken by the monetary authorities in our country have been revealed.

ONCE AGAIN ABOUT THE NEGATIVE SYNERGY OF THE DESTRUCTIVE POLICY OF THE RUSSIAN MONETARY AUTHORITIES

The article discloses an interconnected set of strategic defects in the regulatory activities of the Bank of Russia in cooperation with the Ministry of Finance, which predetermine the significant contribution of the neoliberal financial and credit policy pursued by them both to the development of an autonomous recession and the aggravation of the coronary crisis in our country. Based on a comparative analysis of the post-default and post-sanction devaluation of the ruble, a conclusion is made about the predominantly negative impact of the latter on the dynamics of Russian GDP and on inflationary processes in the country. The premature transition of the central bank to inflation targeting and, especially, to the free-floating ruble regime, the leading beneficiaries of which are disclosed commodity exporters, financial speculators and the Ministry of Finance, have been critically examined. The continued dominance of the foreign exchange channel in the Bank of Russia’s issuing activities over the credit channel and the inability of the financial authorities to cover the budget deficit through monetary financing are regarded as decisive factors preventing overcoming the coronavirus crisis on the way to a reasonable diversification of the domestic economy. The unjustified transition already in 2021 to a super-tight monetary and fiscal policy, which does not fit into the global practice of anti-crisis regulation, is seen as a kind of renaissance of the false monetarist approach in the activities of leading Russian regulators, their traditional reliance on the quantitative theory of money and the ensuing desire to overcome cost inflation using methods characteristic of combating demand inflation. As the end result of the noted manifestations of the fiasco of the Russian state in the money market, an extremely low coefficient of monetization of the domestic economy is considered, which prevents its breakthrough high-quality growth in the foreseeable future.

The Impact of Financial Liberalization on the Value of the Bank: An Applied Study on Private Iraqi Banks for the Period 2011-2017

These aim to measure the impact of financial liberalization on the bank’s value for a sample of Iraqi banks listed on the financial market for the period (2011-2017). Quarterly data was used for a sample consisting of 20 banks to form a dashboard with a total of 560 views per variable. In return, five were used. Variables: (credit growth rate and deposit growth rate) are independent variables that express financial liberalization, (traded value, market value and book value) as dependent variables that express the bank’s accounting and market value, and by using the Panel Least Squares model, it was concluded that financial liberalization has an effect Positive for the value of the bank, and the study recommends that the monetary authorities implement more liberalization accompanied by the use of more stringent supervision tools.

Assessing the future prospects for cryptocurrencies

Cryptocurrencies are attracting considerable attention around the world because of the various advantages that they offer. On the other hand, they also carry some inherent risks. Although monetary authorities broadly agree that cryptocurrencies do not engender an immediate threat to national and global financial systems, the future is full of unknowns. In this regard, drawing a framework based on the current drivers of demand for cryptocurrencies would help visualize the prospects for these assets and create a roadmap to avoid or manage any disruptive risks. This discussion paper aims to contribute to the literature by examining the key factors that will determine the future performance of cryptocurrencies. The main conclusion derived from the discussion is that national regulations will potentially affect the direction of cryptocurrencies, as well as the need for any special efforts in the domain of monetary policy

Testing Housing Markets for Episodes of Exuberance: Evidence from Different Polish Cities

In the study we use the right-tail unit root test to analyse the presence of mild explosive dynamics (exuberance) in housing prices of the 17 largest Polish cities in the period 2006–2021 (for quarterly data). In terms of real prices from the secondary market, we were able to demonstrate the existence of episodes of mild explosive dynamics for 13 of the 17 cities studied. When we changed the context of the study and performed the same tests for the price-to-income ratio, we found that episodes of price exuberance could be indicated only in the case of two cities. The overall conclusion is that rising average incomes tend to mitigate the explosive dynamics and change the context in which the whole issue of housing bubbles is viewed. The answer to the question of whether there is indeed already a situation of price bubbles in local housing markets in Poland is of course crucial for those interested in buying or selling a housing unit (i.e., the participants of this market), but it must also remain important for the monetary authorities implementing monetary and macroprudential policies in Poland.

Financial sector sustainability and performance – Policy Imperative for the monetary authorities'

PurposeThe objective of this study is to ascertain whether financial sector sustainability had any correlation with financial sector performance in Nigeria and recommend appropriate policy directions.Design/methodology/approachThe study selected four major Nigerian banks namely Zenith Bank Guaranty Bank United Bank for Africa and First Bank of Nigeria as its sample and covered 2010 to 2019. Secondary panel data were obtained from the published financial Statements of the banks and subjected to analytical techniques of panel unit root tests descriptive statistics panel least square and Co-integration statistical techniques at the 5% level of significance.FindingsThe findings revealed that the exogenous variables (SUST) have significant Impact on the endogenous variable (ROA, ROE) in the short-run but insignificant in the long run.Research limitations/implicationsThe period covered was limited to 10 years and has an African development focus with emphasis on West Africa, Nigeria. However, the implication could be general to most or all economic and financial landscape. It shows that there is a correlation between financial sector sustainability and return on assets and returns on equity.Practical implicationsMonetary authorities should develop applicable annual performance sustainability framework for all banks; and set performance targets, that will be measured and monitored by appropriate regulatory unit periodically.Social implicationsThe financial sector survival is directly related to its contribution towards the survival and development of its host community and operating environment.Originality/valueThis approach is novel in the sense that its approach is practical and measurable, which most research work have not focused on.

Dating Structural Changes in UK Monetary Policy

The UK historical monetary policy experience is rich of institutional changes, but it remains unclear which of these many events dominated the policy actions and what timing characterised the inception of different policy regimes. We develop a new empirical approach to answer these questions and we identify in particular the historical institutional events that effectively translated into a shift of the systematic actions of the UK monetary authorities. We find that not all institutional events triggered a contemporaneous change in the actual policy conduct, although a coherent evolution in phases is evident since 1978, when a significant monetary policy rule emerges. These occasional but not sporadic regime changes explain a considerable share of the movements in the official interest rate, as well as an overstatement of the importance of policy inertia.

Central Banks’ Monetary Policy in the Face of the COVID-19 Economic Crisis: Monetary Stimulus and the Emergence of CBDCs

This article analyzes the monetary policy of major central banks during the economic crisis generated by the COVID-19 pandemic. Rising public debt in many countries is being financed through asset purchases by monetary authorities. Although these stimulus policies predate the pandemic, they have been significantly boosted as many governments face large financing needs. We have been in a low interest rate environment for years and some governments have issued debt securities at negative rates. In addition, the rise of decentralized cryptocurrencies, based on blockchain technology, has created greater competition in the international monetary system and many governments have considered the creation of centralized virtual currencies, known as central bank digital currencies (CBDCs). We will analyze some relevant cases, with an emphasis on the digital euro project. The methodology is based on the analysis of the evolution of monetary variables. Pearson’s correlation will be used to establish some relationships between them. There is a strong similarity in the expansionary monetary policies of central banks. Although the growth of the money supply has not been passed on to the CPI, it has been passed on to the financial markets and the price of assets such as Bitcoin or gold.

The Modern Money Theory in the Time of COVID-19.

This paper critically analyzes the use of Modern Money Theory as a key policy to the economic recovery post covid-19. The gradual evolution of this health crisis and its economic impacts inevitably pushes fiscal and monetary policy in a new direction. In addition to price stability, monetary authorities place a priority for reducing the rate of unemployment for economic and social outcomes. In order to stabilize the economy in this unprecedented time, policy makers now face new economics challenges in term of response to the current crisis. Modern Money Theory (MMT) has become relevant in the current crisis, where money supply matters particularly for sustaining full employment as an important condition in the political economy of money. This consideration allowing us to first question the MMT logic and its effectiveness in term of interventionist state that stabilize the economy. The core theoretical concept of MMT is that government can finance social public needs with money financed deficits, specifically when the economy is away from the full employment.