Volumen 9 (2020): Heft 1 (January 2020)

For governments who want to improve their economies via fiscal, monetary, trade or exchange rate policies, the tradeoff between the inflation rate and the unemployment rate is extremely important. This tradeoff has become known as the Phillips curve. Among economists there is no consensus on how to model and estimate the Phillips curve. Ideally, all the factors that could affect the Aggregate Supply and Aggregate Demand curves should be included in the model including exchange rates, transportation costs, infrastructure, weather, income distribution, etc. No researcher has created a model that could not be criticized for omitting some important variables. This paper use Bi-Directional Reiterative Truncated Least Squares, a statistical technique that solves the omitted variables problem, to estimate the tradeoff between inflation and unemployment for 34 countries between 2002 and 2017. I find that this tradeoff varies noticeably from country to country in a given year, but that many of these tradeoffs move in the same direction over time. This common direction of movement implies that the international context for the vast majority of the countries studied is affecting the inflation versus unemployment tradeoff.

This study examines the performance of fifty global exchanged-traded funds (ETFs) traded on US stock exchanges. Specififcally, it refers to the period following the end of quantitative easing, which took place in 2014. Therefore, the data, on which the study is based, refer to the period from 24/10/2014 to 24/09/2018 and they are expressed in a weekly frequency. By employing the Capital Asset Pricing Model (CAPM), we evaluate the performance of fifty ETFs according to their rating by the MorningStar. Their performance was measured using Sharpe and Treynor ratios as well as Jensen’s alpha and the betas and a/b measures. The results of the study indicate that the examined ETFs show selectivity skills and present bearish behaviour in relation to the market during QE-tapering.

Serbian local state-owned enterprises (SOEs) owed in excess of EUR 220mn in late 2015, with estimates reaching a much higher figure. According to the national Fiscal Council, underinvestment by local governments amounted to some EUR 250mn annually. This paper looks at insufficient commercial borrowing by local SOEs trying to identify the causes of this financing gap by looking at two aspects: on one hand, we look at quantitative and qualitative inputs provided by local SOEs for credit analysis that may cause significant information asymmetries, and, on the other, we consider the possibility that bank credit analyses, even if done properly, could reveal that these firms are unable to borrow from banks.

The research has revealed that the length and efficiency of the bank credit approval process is dictated by: the need to properly organise qualitative and quantitative SOE information and ensure that it reflects the actual state of affairs; the poor quality of financial statements of SOEs and their pro forma annual business planning and reporting; a common lack of appropriate revaluation of future income; and an existent drawback related to ownership over fixed assets that are considered as a public property in Serbia (rather than as a property of the SOE that uses them).

On the other hand, banks do not distinguish sufficiently between private firms and SOEs. This does not allow banks to account for issues specific to SOEs such as the spillover of fiscal risk, corporate governance, relationships between the owner and its SOEs, economic and social objectives, and the like. The frequent inability of local SOEs to provide mortgages as collateral, coupled with the restriction on guarantees from local governments, nearly completely preclude lending for large-scale and long-term investment.

We conclude that local SOEs have a limited access to finance due to information asymmetries caused by unsuitable qualitative and quantitative inputs made by SOEs in the credit analysis process. Nevertheless, appropriate credit analyses reveal that these companies can be able to borrow commercially, especially in lower amounts and at shorter maturities which could mitigate underinvestment by local SOEs.

Inflation expectations are very important when it comes to monetary policy and its decisions. In countries which are applying inflation targeting, inflation expectations reflect prediction of economic agents of movement of inflation rate in mid and long term. Anchored inflation expectations and their movements within target tolerance band are pointing to effectiveness of the inflation targeting strategy. Consistent with the best international practice, after introducing the inflation targeting regime in January 2009, the National Bank of Serbia began monitoring and analysing inflation expectations of economic agents (financial sector, corporate sector, trade unions, and households). The aim of this paper is to analyse inflation expectations in Serbia, but also to give a comparative analysis of inflation expectation of other countries which are using inflation targeting and floating exchange rate, as is the case of the National Bank of Serbia.

The effect of bank heterogeneity on the transmission of monetary policy is capturing an increasing attention, and the debate on how bank specific characteristics may determine their reaction to monetary actions is mounting. This paper participates in this flow of research by studying the reaction of 40 banks operating in Lebanon between 1994 and 2017, to a change in lending interest rate, taking into consideration: size, market power, capitalisation, credit risk, and liquidity. The empirical results show that the impact of a change in interest rate on loan supply depends on bank market power and bank liquidity only. Consequently, interest rate channel in Lebanon operates through banks with high market power and banks with high liquidity stocks.

There is a long tradition in literature that banks can play a special role in the propagation of economic fluctuations. Theory suggests many channels through which financial system affects, and is affected by, economic growth. One of the most important empirical studies on this topic shows a strong positive relation between financial development and economic growth. However, the hypothesis that credit expansion is the main development instrument was challenged in the Asian crisis in the second half of the 1990s, and then even more strongly in the crisis after 2008 which was followed by almost a decade of economic stagnation. Development of the banking sector in Southeast European countries in the pre-crisis period was characterized by relatively high credit growth rates and, consequently, with an increase of the credit-to-GDP ratio. Some authors argue that the marginal effect of financial depth on economic growth becomes negative when credit to the private sector reaches about 100% of GDP. Taking into account relatively low level of credit-to-GDP ratio, we may assume that there is still enough room for finance to contribute to economic growth in Southeast European countries.

This research aims to analyse the response of the Bank Indonesia (BI rate) to the Indonesian economic stability. The data analysis is stationarity test, model stability test, lag determination, Structural Vector Autoregression (SVAR), Impulse Response Function (IRF), and Variance Decomposition (VD). The research data is obtained from the publication provided by the Federal Reserve Data (FRED), the Bank Indonesia, and the Central Bureau of Statistics. The data used is since the third quarter of 2005 to the first quarter of 2017. The research results showed that the variable of the federal funds rate (FFR) significantly influences the exchange rate and the Consumer Price Index (CPI), but it does not significantly affect the BI rate, the amount of the money supply (M2), and Gross Domestic Product (GDP). The result of the IRF test showed that the BI rate, the amount of money supply, exchange rate (IDR/USD), GDP, and CPI positively and negatively respond the FFR change. The result of VD test indicated that the variation of the BI rate, the currency exchange rate, and CPI are mostly caused by the FFR variation.

Ghana’s economy is characterised by acute exchange rate volatility alongside persistent and high consumer inflation. This places the economy among the sub-Saharan African countries with the highest inflation over the years. Therefore, we explore in-sample and out-of-sample macro-volatility spillovers to determine the effectiveness of monetary policy and also ascertain the relevance of the exchange rate in Ghana’s interest rate setting at both time and multiscale domains. The study reveals scale-dependent interconnectedness among the macro-variables as their causal linkages broadly intensify at the longer time-scale. We find the real policy rate and the exchange rate to be net transmitters of shocks, while inflation and output gaps are net receivers of shocks from the system. Output gap, however, is the largest net receiver of shocks from the system. The empirical findings generally buttress the prerequisite to uphold exchange rate stability in order to inure general macroeconomic stability in Ghana. In addition, the extent of spillover dynamics from policy interest rate to and from the targeted macro-variables (particularly output gap and inflation) appears to be moderate even in the long run, surmising less effective monetary policy transmission in Ghana.

The subject of this research is to analyze a number of factors that impact the quality of public finances in the selected post-socialist South East countries (SEE). In the theoretical part of the paper we have selected and analyzed the factors (variables). The following key factors of influence (as independent variables) were included: socialist heritage, politicization as an abuse of macroeconomic policies, instability of institutional environment, human capital deficits in the area of public finances, and financial accountability deficits.

In the quantitative part, the level of selected factors was assessed on the quality level of public finances in the observed countries. The hypothesis was that the factors selected had a very significant impact on the quality of public finances.

Mathematical model based on multiple linear regression analysis was created in order to explain the functional relationship between the dependent variable: the quality level of public finances and the selected independent variables. The goal is to estimate the expected mean of the dependent variable (Y) based on individual estimates of the respondents.

Regarding the respondent’s perception, the Likert scale (1.0, 0.5, 1.0, 1.5, 2.0, 2.5, 3.0, 3.5, 4.0, 4.5, 5,0) was used, where 1.0 indicates the lowest impact and 5.0 indicates the highest impact. Based on their best knowledge, experience, and (or) intuition, the respondents were asked to assess the dependent variable in the model and independent variables. The empirical data obtained, qualitative and quantitative, have confirmed the hypothesis.

This paper examines the opportunity of exchange rate regime flexibilization in Morocco under the policy of capital account liberalization. Basing on our findings in Ezzahid and Maouhoub (2014), we develop a new theoretical game model with four economic agents, namely: monetary authorities, government, foreign firms and domestic firms. We explore the optimal exchange rate regime for Morocco under new conditions such as the presence of a compensation fund effect, restrictions on capital outflows, etc. Starting with a first simulation based on current economic parameters, the results show that losses under a flexible exchange rate regime are lower than losses under a fixed exchange rate regime. Varying different parameters allow discovering the ‘appropriate level’ from which monetary authorities should move toward the flexible exchange rate.