Volume 12 (2023): Issue 1 (January 2023)

This study first investigates the short and long-run effects of exchange rate, output gap and output gap volatility on inflation volatility in Turkey by using the ARDL bounds testing approach. Second, we also examine the causal relationship among these variables by using Toda-Yamamoto and frequency domain causality tests developed by Breitung and Candelon. The results of the ARDL estimates indicate that the exchange rate, output gap and output gap volatility have statistically significant effects on inflation volatility. Also, causality tests results indicate that changes in the exchange rate, output gap volatility, and output gap will have permanent and temporary causal effects on inflation volatility. The policymakers should carefully consider these results to implement appropriate policies to reduce inflation volatility. The finding that the shocks are of temporary nature will have particularly important implications on the policies fighting against the inflation.

This study contributes to the empirical inflation literature by identifying both short run and long run effects of the exchange rate and output gap volatility and output gap together, as well as by providing evidence about the structure of the shocks created by these variables on inflation volatility. This study also identifies the sources of temporary and permanent shocks of inflation volatility.

Numerous turbulent events in the recent past have raised the issue of an asset that could play the role of safe haven. Although for many years it was considered that gold has the role of a safe haven, an increasing number of recent works challenge such a point of view. The emergence of cryptocurrencies after the Global financial crisis has opened up numerous questions, one of them being whether cryptocurrencies, as an asset (money) independent of governments, can play the role of safe haven. Therefore, the paper examines whether gold and bitcoin, the latter as the best representative of crypto-currencies, can play the role of safe haven in relation to European indices. In the paper, this hypothesis was confirmed for gold and rejected for bitcoin.

Numerous research studies of the various companies’ business practices indicate a strong relationship between customer satisfaction, as an overall positive response generated after the use of the specific product or service, and their intention to continue using the products/services of the company. As a rule, satisfied and particularly delighted customers show intention to return and become loyal, whereas dissatisfied and disappointed customers have switching intentions. Therefore, the objective of this study is to empirically test to which extent the intention to switch banks in Montenegro depends on customer satisfaction or dissatisfaction. With this regard, we have posed a question inquiring about the level of consumers satisfaction/dissatisfaction with banking services in Montenegro, what their intentions are regarding the continuation of using services of the chosen bank (customer retention & defection), and to what extent customer satisfaction and dissatisfaction determine their intention to change the bank. The analysis has established a statistically significant correlation between satisfaction, dissatisfaction, and intentions of leaving the bank. Findings has shown a relatively high level of customer satisfaction with banking services in Montenegro, as well as confirming that dissatisfaction usually leads to the intention to leave and change the bank, while satisfaction leads to the continued use of the bank’s services. A high level of competition in the banking services market as well as the struggle for each consumer makes this topic undeniably current and this research represents a significant input for the bank management in Montenegro regarding the identification of the real situation with customer satisfaction and their intention to switch banks in accordance with their level of satisfaction.

Monetary policy and balance of payments (BoP) are the key parameters in any country’s economy performance. This study is an attempt to re-explore the impact of domestic credit provided by the financial sector, real interest rate, real GDP growth, inflation rate, and exchange rate on the balance of payments by net foreign assets (NFA) in 17 developing countries over 1982–2019. The most appropriate empirical strategy has been implemented to obtain robust empirical results. The results indicate that domestic credit, interest rate, inflation and exchange rate have a significantly negative, while real GDP growth has a significantly positive impact on NFA. The results of Granger causality test reveals a bidirectional causality between domestic credit and NFA, between exchange rate and NFA. Furthermore, in the case of individual country analysis, overall empirical estimates of three estimators are acceptable for 17 individual countries although some dissimilarities are found between the countries in the magnitude of estimated coefficients of variables and level of significance. Empirical findings suggest that to correct the disequilibrium in BoP, central banks (monetary authorities) need to give equal consideration to other policy measures along with the monetary instruments to accomplish stability in a country’s BoP account.

This study examines the effect of GDP per capita on the Gini index, which measures income concentration, in Colombia. The methodology used is an econometric analysis of time series with data extracted from the Inter-American Development Bank and the World Bank. The econometric results suggest that, at least during the period studied here, there is no evidence that GDP per capita has been an explanatory variable of the behaviour of income distribution in Colombia. The results also align with the understanding that the problem of inequality in the distribution of income is not merely economic but concerns persistent matters such as political and historical issues.

This paper examines how fiscal transparency is linked to bank development. It also hypothesizes that the effect is mediated by reasonable channel(s). Drawing upon a panel dataset of emerging and developing economies, we find that fiscal transparency is positively related to the private credit and to the ratio of liquid assets, implying that more transparent policies enhance bank development. Our panel regressions and the mediation analysis also suggest that the effect of fiscal transparency on private credit is significantly transmitted through the control of corruption, while it has a direct effect on the ratio of liquid assets.

The Currency Board in Bosnia and Herzegovina (BiH) uses the euro as a reserve currency in the conditions of a negative nominal interest rate on deposits with the ECB. In this paper, we investigated the impact of negative interest rates on deposits and negative yields on bonds denominated in euro on the general advantages of the currency board and the consequences for the functioning of the currency board in BiH. The impact of negative interest rates was measured by the currency board coverage index (IC). A negative nominal interest rate on the reserve currency creates a negative seigniorage in the country of the currency board, increases the costs of issuing domestic money and reduces the competitiveness of the economy. The monetary policy of the ECB in the conditions of the COVID-19 crisis generates negative influences on the functioning of the currency board. The COVID-19 crisis poses a threat to currency board coverage in BiH. Technically, a currency board can also function in terms of negative interest on the invested reserve currency as long as it can cover the costs of its business.

This paper discusses the dynamics of bank regulation in the Sub-Saharan African (SSA) region during the period before the 1990s and post 1990s and describes the trends in bank regulatory measures between 1995 and 2017 using the updated databases of the World Bank’s Bank Regulation and Supervision Surveys. Before the 1990s, bank regulation in the majority of SSA countries was inadequate and that led to multiple occurrences of banking crises. As a result, many countries introduced the financial sector reforms from the late 1980s that included major adjustments in the banking regulatory and supervisory frameworks. In both low-income and middle-income SSA economies, bank regulatory environment became more stringent over time, driven by increased restrictions on bank entry barriers and ownership structure, as well as the introduction of macroprudential policies in the case of the former, while in the case of the latter, it was influenced by more restrictions on bank ownership structure and capital regulation requirements, as well as the adoption of macroprudential policies. Overall, the bank regulatory environment was slightly more stringent in middle-income than in low-income SSA countries over the period under review.

This study examines the effectiveness of non-linear monetary policy interest rate channel shocks for the Turkish economy using the threshold VAR analysis in the period of 2006-2019. The interest channel is examined with the two models for both consumption transfer and investment transfer models. The results show that the interest rate channel is effective in the high regime (high macroeconomic instability) for the consumption transfer model, and it is partially effective in the low regime (low macroeconomic instability). On the other hand, for the model with investment expenditures flow, the interest rate channel is partially effective in both high and low regimes.

The present study aims to identify the internal and external factors that affect the profitability of banks operating in Turkey. For this purpose, the study used data from 23 public, private, and foreign banks, covering the period from 2007 to 2020. Two dependent variables were used as the profitability indicators of banks, namely, the Return on Equity (ROE) and the Return on Assets (ROA). In order to increase the reliability of the models developed during the study, Dynamic Generalized Method of Moments (GMM) and Fixed Effect Model (FEM) were applied. Results of the analysis indicate a positive and statistically significant relation between inflation rate and GDP growth rate, and ROA and ROE. According to the results of GMM, there was a positive relation between ROA and ROE, and 1-year and 2-year lagged ROA and ROE. This situation may be explained by the fact that profits acquired in the Turkish banking sector are steady. ROA and ROE were observed to have a positive relation with inflation rate and economic growth rate. In other words, the increase in inflation rate and GDP growth rate positively affect profitability of public, private, and foreign banks.

This study re-investigates the money supply determination process for Japan. The methodology of this study, which differs from previous studies, is constructed on the assumption of potential nonlinear (asymmetric) relations between money supply and monetary base via money multiplier. To this aim, the nonlinear autoregressive distributed lag (ARDL) model by Shin, Yu and Greenwood-Nimmo, (2014) is applied. This model allows us to examine the endogeneity and exogeneity of the money supply determination process via the linkage of the money multiplier under expansionary and contractionary monetary policies of the Bank of Japan (BOJ) separately in a nonlinear manner. The main findings of the study indicate that the money supply determination process is endogenous with an unstable money multiplier for Japan for M1. However, this endogeneity in the BOJ’s contractionary monetary policy is more than its expansionary policy. This can be interpreted that the BOJ’s expansionary monetary policy has more of a determining role on money supply determination than its contractionary monetary policy. Additionally, the same findings indicate that the BOJ has more power to determine M1 than M2. This result can be interpreted that when the measure of money broadens the BOJ’s controllability on money supply decreases. In contrast, in our Canadian study (Ongan and Gocer, 2019) with the same nonlinear ARDL model, we concluded that the Canadian central bank (BOC) was able to determine money supply exogenously for M1, unlike the Japanese central bank (BOJ), and the money multiplier was stable for Canada.