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A special issue of Economies (ISSN 2227-7099).

Deadline for manuscript submissions: closed (30 April 2022) | Viewed by 58708

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Prof. Dr. Robert Czudaj

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Department of Economics, Chemnitz University of Technology, Chemnitz, Germany
Interests: applied econometrics; time series analysis; Bayesian econometrics; financial markets; exchange rates
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Special Issue Information

Dear Colleagues,

The global financial crisis plunged the global economy into a great recession. Many central banks responded with unconventional monetary policies such as quantitative easing, negative policy rates, and forward guidance to calm down financial markets. The COVID-19 pandemic led the global economy, financial markets, and central banks to face even more severe problems. Especially, the ECB set up the pandemic emergency purchase programme (PEPP) to complement the asset purchase programmes that have been in place since 2014 to help the economy to absorb the COVID-19 shock. The new crisis has increased the importance of preserving financial stability through the international cooperation of central banks around the globe. Managing the expectations of market participants plays a crucial role in the context of financial stability. Therefore, the aim of this Special Issue is to disseminate important empirical and theoretical research questions concerning the connection between monetary policy and international financial markets, which might include (but is not limited to):

Monetary policy transmission in times of uncertainty;
QE effects on financial markets;
Negative interest rates and bank lending growth;
Contagion and spillovers;
Monetary policy in times of pandemic;
International coordination of monetary policy.

Prof. Dr. Robert Czudaj
Guest Editor

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Published Papers (14 papers)

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Research

14 pages, 961 KiB

Open AccessArticle

Money Supply and Inflation after COVID-19

by Orkideh Gharehgozli and Sunhyung Lee

Economies 2022, 10(5), 101; https://doi.org/10.3390/economies10050101 - 28 Apr 2022

Cited by 12 | Viewed by 15589

Abstract

The core personal consumption expenditure (PCE) price index, the Federal Reserve’s preferred inflation gauge, rose to 5.2 percent on January 2022, which is the highest rate of increase since 40 years ago. Our estimates show that the annualized quarterly core PCE prices could reach 5.45% in the second quarter of 2022 and are as high as 8.57% in a longer time horizon unless corrected with restrictive monetary policies. Thus, the inflation shock since COVID-19 is not transitory, but it is persistent. As economists expect the Federal Reserve to tighten the money supply in March 2022, the insufficient policy responses may be attributed to a failure to incorporate a unique macroeconomic shock to unemployment during the pandemic. We propose a modified vector autoregression (VAR) model to examine structural shocks after COVID-19, and our proposed model performs well in forecasting future price levels in times of a pandemic. Full article

(This article belongs to the Special Issue International Financial Markets and Monetary Policy)

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23 pages, 603 KiB

Open AccessFeature PaperArticle

The Impact of Commodity Price Shocks on Banking System Stability in Developing Countries

by Nicholas Ngepah, Margarida Liandra Andrade da Silva and Charles Shaaba Saba

Economies 2022, 10(4), 91; https://doi.org/10.3390/economies10040091 - 12 Apr 2022

Cited by 4 | Viewed by 3400

Abstract

This study examines the impact of commodity price shocks on the banking sector stability of 18 African commodity-exporting economies using an unbalanced panel dataset spanning a 16-year period from 2000–2015. The study on the impact of commodity price shocks on African commodity-exporting economies’ banking sectors was estimated using a panel fixed effects model. The empirical findings indicate that commodity price shocks increase bank credit risk (non-performing loans) and, thus, pose a risk to the banking sector stability of African commodity-exporting economies. The results for the disaggregated shocks reveal that both positive and negative shocks weaken banking sector stability. In addition, commodity price shocks are discovered to decrease credit extension to the private sector, highlighting an additional channel through which the impact of commodity price shocks may be perpetuated to the real economy. Full article

(This article belongs to the Special Issue International Financial Markets and Monetary Policy)

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14 pages, 467 KiB

Open AccessArticle

Cryptocurrencies and Tokens Lifetime Analysis from 2009 to 2021

by Paul Gatabazi, Gaëtan Kabera, Jules Clement Mba, Edson Pindza and Sileshi Fanta Melesse

Economies 2022, 10(3), 60; https://doi.org/10.3390/economies10030060 - 09 Mar 2022

Cited by 6 | Viewed by 2805

Abstract

The success of Bitcoin has spurred emergence of countless alternative coins with some of them shutting down only few weeks after their inception, thus disappearing with millions of dollars collected from enthusiast investors through initial coin offering (ICO) process. This has led investors from the general population to the institutional ones, to become skeptical in venturing in the cryptocurrency market, adding to its highly volatile characteristic. It is then of vital interest to investigate the life span of available coins and tokens, and to evaluate their level of survivability. This will make investors more knowledgeable and hence build their confidence in hazarding in the cryptocurrency market. Survival analysis approach is well suited to provide the needed information. In this study, we discuss the survival outcomes of coins and tokens from the first release of a cryptocurrency in 2009. Non-parametric methods of time-to-event analysis namely Aalen Additive Hazards Model (AAHM) trough counting and martingale processes, Cox Proportional Hazard Model (CPHM) are based on six covariates of interest. Proportional hazards assumption (PHA) is checked by assessing the Kaplan-Meier estimates of survival functions at the levels of each covariate. The results in different regression models display significant and non-significant covariates, relative risks and standard errors. Among the results, it was found that cryptocurrencies under standalone blockchain were at a relatively higher risk of collapsing. It was also found that the 2013–2017 cryptocurrencies release was at a high risk as compared to 2009–2013 release and that cryptocurrencies for which headquarters are known had the relatively better survival outcomes. This provides clear indicators to watch out for while selecting the coins or tokens in which to invest. Full article

(This article belongs to the Special Issue International Financial Markets and Monetary Policy)

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13 pages, 330 KiB

Open AccessArticle

Financial Inclusion Indicators Affect Profitability of Jordanian Commercial Banks: Panel Data Analysis

by Ghaith N. Al-Eitan, Bassam Al-Own and Tareq Bani-Khalid

Economies 2022, 10(2), 38; https://doi.org/10.3390/economies10020038 - 31 Jan 2022

Cited by 9 | Viewed by 5013

Abstract

Previous literature supports the view that the financial inclusion leads to economic growth and helps alleviate poverty; however, it is still unclear whether financial inclusion increases bank profitability. The study assumes that financial inclusion is significant in enhancing the economy and minimizing loan accounts, and along with this assumption, the deposit size decreases the Jordanian banks’ profitability despite the fact that the financial services and access to them have no significant influence upon such profitability. The major profitability drivers examined in this study comprised financial inclusion and financial leverage. In this study, 13 Jordanian banks’ data from 2009 to 2019 were examined to determine the above issue. The study applied fixed effects on a panel data regression model. The findings indicated that the number of loan accounts and size of deposits negatively and significantly impacted the profitability of the commercial banks in Jordan. However, the number of branches and ATMs had no significant effect on the bank’s profitability. In sum, both leverage and bank size were the top two determinants of commercial banks’ profitability in Jordan. Based on the findings, Jordanian policymakers can shift their focus to offering affordable financial services that support SMEs’ loans and start-ups. Full article

(This article belongs to the Special Issue International Financial Markets and Monetary Policy)

16 pages, 301 KiB

Open AccessArticle

Power Theory of Exchange and Money

by Yaroslav Stefanov

Economies 2022, 10(1), 24; https://doi.org/10.3390/economies10010024 - 12 Jan 2022

Cited by 1 | Viewed by 3090

Abstract

Modern exchange theories model a large market, but do not explain single exchanges. This paper considers the phenomenon of single exchange and formulates the general exchange problem in the form of a system of two equations, subjective and objective. Subjective equilibrium is given by the Walras–Jevons marginal utility equation. Objective equilibrium equations by Walras and Jevons are averaged over all transactions in the market and can only give a rough general picture without explaining the specific price of an individual exchange. An exchange micro-condition must be found that, when averaged, will give the Walras market equilibrium macro-condition. The study of the internal structure of exchange leads to the need to consider power. The concept of generalized power is introduced. It is generalized power that serves as the primary comparable and measurable objective basis of exchange. The power theory of exchange provides the objective price-equation. It is demonstrated that money is a measure of generalized power in exchange and a certification of generalized power in subsequent exchanges. This methodology is based on an interdisciplinary analysis of an abstract exchange model in the form of a system of equations. The proposed theory is able to uniformly explain any exchange, including a single one, which is impossible with the existing theories of exchange. Full article

(This article belongs to the Special Issue International Financial Markets and Monetary Policy)

13 pages, 805 KiB

Open AccessArticle

Price Index Modeling and Risk Prediction of Sharia Stocks in Indonesia

by Hersugondo Hersugondo, Imam Ghozali, Eka Handriani, Trimono Trimono and Imang Dapit Pamungkas

Economies 2022, 10(1), 17; https://doi.org/10.3390/economies10010017 - 06 Jan 2022

Cited by 3 | Viewed by 3060

Abstract

This study aimed to predict the JKII (Jakarta Islamic Index) price as a price index of sharia stocks and predict the loss risk. This study uses geometric Brownian motion (GBM) and Value at Risk (VaR; with the Monte Carlo Simulation approach) on the daily closing price of JKII from 1 August 2020–13 August 2021 to predict the price and loss risk of JKII at 16 August 2021–23 August 2021. The findings of this study were very accurate for predicting the JKII price with a MAPE value of 2.03%. Then, using VaR with a Monte Carlo Simulation approach, the loss risk prediction for 16 August 2021 (one-day trading period after 13 August 2021) at the 90%, 95%, and 99% confidence levels was 2.40%, 3.07%, and 4.27%, respectively. Most Indonesian Muslims have financial assets in the form of Islamic investments as they offer higher returns within a relatively short time. The movement of all Islamic stock prices traded on the Indonesian stock market can be seen through the Islamic stock price index, namely the JKII (Jakarta Islamic Index). Therefore, the focus of this study was predicting the price and loss risk of JKII as an index of Islamic stock prices in Indonesia. This study extends the previous literature to determine the prediction of JKII price and the loss risk through GBM and VaR using a Monte Carlo simulation approach. Full article

(This article belongs to the Special Issue International Financial Markets and Monetary Policy)

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11 pages, 250 KiB

Open AccessArticle

Dynamic Linkages among Saudi Market Sectors Indices

by Farouq Altahtamouni, Hajar Masfer and Shikhah Alyousef

Economies 2022, 10(1), 16; https://doi.org/10.3390/economies10010016 - 04 Jan 2022

Cited by 3 | Viewed by 2337

Abstract

This study aims to test the causal relationship between Saudi stock market index (TASI) and sectoral indices throughout the period from 2016–2020. The study data were extracted through the main index of the Saudi market and the indices of the available data of 19 sectors out of 21 sectors. The unit root test was used along with the Granger causality test, in addition to multiple regression tests in order to analyze the study hypotheses. The study shows that all index series were stationary at the zero level I (0), and the results also show that there were bidirectional and unidirectional causal relationships between TASI and sectoral indices, and that TASI effectively mirrors all the changes that occur in the Saudi stock market. Full article

(This article belongs to the Special Issue International Financial Markets and Monetary Policy)

11 pages, 1089 KiB

Open AccessArticle

What Does Vietnam Gain When Its Currency Depreciates?

by Nguyen Thi Thanh Binh

Economies 2021, 9(4), 185; https://doi.org/10.3390/economies9040185 - 19 Nov 2021

Viewed by 6311

Abstract

The study investigates how the depreciation of the Vietnam dong (VND) against the US dollar (USD) affected export turnover and the stock market in Vietnam during the period from 2000 to 2020. A Markov triple regime-switching model is developed for time-series data involving multistructural breaks. Empirical results reveal that the impact of exchange rates on export turnover and stock price existed both in the long and short run. In the short run, the depreciation of VND led to (i) an increase in export turnover after 12 months; (ii) a decrease in export turnover of the high-growing regime in the short term; (iii) a reduction in stock returns in most cases. In addition, the common cycle from order receipt, preparation, production, and export is about 12 months for all states. The high volatility of export turnover was associated with high export growth. The commonly used phrase of “high risk, high return” seems to not be true for Vietnam’s stock market. The results of this study suggest the feasibility of a slight appreciation of VND against USD, which is the key to escape from being labeled a currency manipulator by the US Treasury. Full article

(This article belongs to the Special Issue International Financial Markets and Monetary Policy)

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19 pages, 743 KiB

Open AccessArticle

Regional Stock Exchange Development and Economic Growth in the Countries of the West African Economic and Monetary Union (WAEMU)

by Babatounde Ifred Paterne Zonon

Economies 2021, 9(4), 181; https://doi.org/10.3390/economies9040181 - 17 Nov 2021

Viewed by 2429

Abstract

This study used panel data covering 27 years to investigate the causality between regional stock exchange development and economic growth in the West African Economic and Monetary Union (WAEMU) countries. We performed a homogeneous Granger non-causality with an autoregressive distributed lag model (ARDL) and Markov-switching analysis, using six indicators for the stock and financial market and six for control. The results showed a close economic relationship between WAEMU countries and causality from the regional stock exchange, which supports the supply leading hypothesis. The causality was confirmed in the short and long run, depending on the variable. The causal relationships that support the demand-driven hypothesis were recorded from the economic growth for four market measurements. Full article

(This article belongs to the Special Issue International Financial Markets and Monetary Policy)

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20 pages, 3385 KiB

Open AccessArticle

The Influence of Global Financial Liquidity on the Indonesian Economy: Dynamic Analysis with Threshold VAR

by Mahjus Ekananda and Tulus Suryanto

Economies 2021, 9(4), 162; https://doi.org/10.3390/economies9040162 - 28 Oct 2021

Cited by 3 | Viewed by 2134

Abstract

Empirical studies of the global liquidity spillover on Indonesia’s economy are still relatively limited. Most of the global contagion literature on Indonesia’s economy focuses only on the effects of real shock (on output) due to financial shock. We assert that the effect of global output on Indonesia macroeconomic conditions is a fairly relevant issue to be studied. This research aims to investigate the interdependent relationships between world GDP, world commodity prices, world inflation, trade flows, capital inflow, capital account transactions, reserve accumulation, global liquidity (e.g., global broad money), and monetary aggregates, with regard to Indonesia’s GDP variables and inflation. This paper uses threshold vector autoregression (TVAR) to capture regime changes in the variables of the world economy. World economic data and Indonesia’s economic data were utilized to prove different responses to the world economic situation in two different regimes. This research identified two groups of upper regime and lower regime world variables—namely, world inflation, world GDP, and world commodity prices. TVAR estimation resulted in a smaller residual sum of squares compared to VAR estimation. Different regimes resulted in differences in Indonesia’s economic responses due to the shock of world economic variables. The findings generated by this research are expected to be insightful to monetary policymakers in Indonesia. Full article

(This article belongs to the Special Issue International Financial Markets and Monetary Policy)

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20 pages, 857 KiB

Open AccessArticle

Regime-Switching Determinants of Mutual Fund Performance in South Africa

by Richard Apau, Peter Moores-Pitt and Paul-Francois Muzindutsi

Economies 2021, 9(4), 161; https://doi.org/10.3390/economies9040161 - 22 Oct 2021

Cited by 3 | Viewed by 2162

Abstract

This study assesses the effect of fund-level and systemic factors on the performance of mutual funds in the context of changing market conditions. A Markov regime-switching model is used to analyze the performance of 33 South African equity mutual funds from 2006 to 2019. From the results, fund flow and fund size exert more predictive influences on performance in the bearish state of the market than in the bullish state. Fund age, fund risk, and market risk were found to be the most significant factors driving the performance of active portfolios under time-varying conditions of the market. These variables exert more influence on fund performance under bearish conditions than under bullish conditions, emphasizing the flight-to-liquidity assets phenomenon and risk-aversion behavior of fund contributors during unstable conditions of the market. Consequently, fund managers need to maintain adequate asset bases while implementing policies that minimize dispersions in fund returns to engender persistence in performance. This study provides novel perspectives on how the determinants of fund performance change with market conditions as portrayed by the adaptive market hypothesis (AMH). Full article

(This article belongs to the Special Issue International Financial Markets and Monetary Policy)

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30 pages, 2822 KiB

Open AccessArticle

Short-Term Event-Driven Analysis of the South-East Asia Financial Crisis: A Stock Market Approach

by Gerardo Alfonso Perez

Economies 2021, 9(4), 150; https://doi.org/10.3390/economies9040150 - 12 Oct 2021

Viewed by 1873

Abstract

A systematic short-term event review of the major events in the South-East Asia Financial crisis is presented in this article. This analysis adds to the existing literature by focusing on the equity market, rather than on the foreign exchange market where there is already abundant literature, as well as going to a granular level with the hope that the analysis of the short-term market reactions can help policy-maker make appropriate decisions understanding the likely implications on the stock market. Short-term movements in the equity market might have very substantial economic impacts on investors and on the broad economy. The existing literature tends to focus on longer time horizons but from an equity investor point of view short-term fluctuations might be equally important or even more. When analyzing longer time horizons these short-term fluctuations, which might cause investors to fully unwind their positions or even bankruptcies, might be average out, underestimating the potential impact on the investor. Given these practical considerations it seems important to carry out a short-term event driven analysis of this crisis. Full article

(This article belongs to the Special Issue International Financial Markets and Monetary Policy)

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17 pages, 1622 KiB

Open AccessArticle

The Twin Deficit Hypothesis in the MENA Region: Do Geopolitics Matter?

by Sarah El-Khishin and Jailan El-Saeed

Economies 2021, 9(3), 124; https://doi.org/10.3390/economies9030124 - 01 Sep 2021

Cited by 2 | Viewed by 3085

Abstract

This paper examines the relationship between fiscal and external balances in MENA oil versus non-oil countries in the context of the twin deficits hypothesis (TDH) using Panel Vector Autoregression- Generalized Methods of Moments PVAR GMM estimation, Granger Causality and IRFs. The essence of this analysis is to assess the vulnerability of fiscal and external balances to oil price dynamics and regional geopolitics in the region. Results show that a twin-deficit problem exists in MENA oil-rich countries only while the problem does not exist in non-oil ones. This affirms the hypothesis that oil dependence results in high fiscal vulnerability to geopolitical shocks that automatically transmits to external balances. While a TDH isn’t proven to exist in non-oil countries, fiscal and external balances problems result from longstanding structural factors. A high reliance on tourism revenues and remittances as main sources of foreign currency receipts (together with poor tax administration and enlarged current spending bills) makes those countries more vulnerable to domestic and external shocks; reflected in both growing fiscal and current account deficits. A large imports sector and relatively poor exporting capacity also contribute to weakening external accounts. The main policy recommendations for MENA oil-rich countries rely in the importance of strengthening the non-oil sector in order to diversify domestic sources of revenues. Adopting flexible exchange rates is recommended to decrease the vulnerability of the external shocks to oil price dynamics. For non-oil MENA regions, fiscal consolidation, reforming current spending and strengthening tax administrations are crucial to improve fiscal performance. Export-led growth strategies and inclusive growth policies would also contribute to improving external accounts in the examined economies. Full article

(This article belongs to the Special Issue International Financial Markets and Monetary Policy)

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27 pages, 781 KiB

Open AccessArticle

Application of Taylor Rule Fundamentals in Forecasting Exchange Rates

by Joseph Agyapong

Economies 2021, 9(2), 93; https://doi.org/10.3390/economies9020093 - 21 Jun 2021

Cited by 4 | Viewed by 4005

Abstract

This paper examines the effectiveness of the Taylor rule in contemporary times by investigating the exchange rate forecastability of selected four Organisation for Economic Co-operation and Development (OECD) member countries vis-à-vis the U.S. It employs various Taylor rule models with a non-drift random walk using monthly data from 1995 to 2019. The efficacy of the model is demonstrated by analyzing the pre- and post-financial crisis periods for forecasting exchange rates. The out-of-sample forecast results reveal that the best performing model is the symmetric model with no interest rate smoothing, heterogeneous coefficients and a constant. In particular, the results show that for the pre-financial crisis period, the Taylor rule was effective. However, the post-financial crisis period shows that the Taylor rule is ineffective in forecasting exchange rates. In addition, the sensitivity analysis suggests that a small window size outperforms a larger window size. Full article

(This article belongs to the Special Issue International Financial Markets and Monetary Policy)

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