<abstract xmlns="http://www.w3.org/1999/xhtml">

In this ever-changing environment of technological innovations central banks are strongly committed to fulfilling their key objectives of preserving monetary and financial stability, but also make efforts to adapt to new market requirements. On the path of technological transformation of financial systems, central banks face many challenges stemming from, inter alia, new less regulated and decentralized financial innovative services, cyberattacks, and endangered cyber security. Central banks need strong project management to successfully address these processes and that should be done in line with the highest international standards.
The paper analyses the implementation of project management in central banks according to the international standards. The authors present possible division of roles and responsibilities in the project organization structure in central banks based on these international standards. The standardized integrated project management activities and associated practices are described and presented in the context of project management in central banks. The authors conclude that the application of international standards is crucial for successful project management in central banks in order to ensure that the projects are implemented on time and within the envisaged scope and budget, thereby ensuring high quality results, efficient deployment of human resources, benefits realization and value creation for the organization.
</abstract>

Project Management in Central Banks

<abstract xmlns="http://www.w3.org/1999/xhtml">

We put our hypothesis very straightforward, considering the euro area and the whole European Economic and Monetary Union (EMU) banking sector. The paper’s central hypothesis that capital adequacy of the EMU banking sector influenced credit growth and activities in the nonfinancial sector was confirmed; however, not entirely in all respects expected. We proved that, in general, there was a dependency between banks’ capital adequacy and loan growth in the euro area for the observed period Q1 1999 until Q1 2022; yet the correlation coefficient of 0.48 shows a middle positive relationship of variables. At the same time, more than 23% of loans’ variability might be explained by variability in capital adequacy. All significance tests proved our results valid.
Nevertheless, we saw two very different and slightly controversial dynamics in loan growth and capital ratio during the observed period. Therefore, we were forced to separately continue with an analysis for both time frames: the period before the big financial and economic crisis (Q1 1999 - Q4 2008) and the period starting with the big financial and economic crisis (Q1 2009 - Q12022). The linear regression in the pre-crisis period was almost flat. In contrast, a simple linear regression during the crisis showed a relatively high negative correlation at around -0.6. Therefore, the sub-hypothesis that higher capital adequacy resulted in negative credit growth was supported for the crisis period. We believe that this paper offers the main originality and scientific contribution for this particular finding within the data time series deployment.
</abstract>

Does Credit Growth in the EMU Banking Sector Follow its Capital Adequacy?1

<abstract xmlns="http://www.w3.org/1999/xhtml">

In this paper we apply the Contingent Claims Analysis (CCA) to the banking sector in Greece with a particular focus on the years of the Greek debt crisis. Greece was selected primarily because its banking sector was hit hard due to the country’s government debt default and its large exposure to domestic loans. The results obtained on the SIB’s level and on the banking sector level gave us particular insight into the benefits of CCA for micro- and macroprudential policy reasons. The Distance-to-Distress (DtD) risk metric produced is particularly useful for detecting banks’ vulnerabilities and resilience before they are revealed in the market. Moreover, the reduced volatility of DtD time series makes it an ideal candidate for tool predictions purposes and ultimately for policy reasons.
</abstract>

Importance of the Contingent Claims Analysis in Detecting Banking Risks: Evidence from the Greek Bank Crisis

<abstract xmlns="http://www.w3.org/1999/xhtml">

This paper delves into the relationship between the issuance of Central Bank Digital Currencies (CBDC) and the likelihood of banking panic. The issuance of CBDC acts as a disturbing shock that incentivizes depositors to withdraw all/part of their deposits from the commercial banks, to swap it for CBDC which are offered by the central bank. We determine a variety of tools that central banks can use in order for the issuance of CBDC to act as a stabilizing factor of the banking system (by reducing the likelihood of banking panic).
</abstract>

Could the Issuance of CBDC Reduce the Likelihood of Banking Panic?1

<abstract xmlns="http://www.w3.org/1999/xhtml">

The use of cashless payment instruments has been on an increase over many years now. At the same time, demand for cash has been on the rise as well and we can observe a particularly high level of growth demand for banknotes during crisis times. The increase in demand for cash known as the “banknote paradox” is a phenomenon observed in many economies. It results from the existence of two streams of demand for cash - transactional and precautionary, and the differences in the directions of their changes from the point of view of the central bank and other entities involved in cash transactions, since it enables the optimization of cash supply management, which allows, on the one hand, to reduce the costs of cash processing and, on the other hand, to improve the effectiveness of monetary policy. This paper estimates the share of the transaction demand for cash with the aggregate demand. The strength and direction of the impact of selected macroeconomic and behavioural factors (uncertainty caused by the Global Financial Crisis and the Pandemic Crisis) on transaction and precautionary demand for cash were also assessed. A novel approach to the problem of demand for cash is based on considering the impact of macroeconomic shocks in the form of crises on the demand for cash.
</abstract>

Demand for Cash and its Determinants - a Post-Crisis Approach1

<abstract xmlns="http://www.w3.org/1999/xhtml">

Exchange rate volatility has emerged as a significant challenge for Asian emerging markets since the adoption of the liberalization process. This study examines the influence of central bank transparency on exchange rate volatility using a sample of ten important Asian emerging markets. The study uses a fixed effect regression model covering the Asian financial crisis, global financial crisis, banking crisis, and taper tantrum episodes. Results show that an increase in central bank transparency has a stabilizing effect on exchange rate volatility, and this effect remains even after controlling for various internal and external factors. The uncertainty of US monetary policy increases exchange rate volatility, while US economic policy uncertainty contributes only during the global financial crisis. Interestingly, central bank transparency buffers the effects of the global financial crisis, indicating that it plays a facilitating role in maintaining financial stability. Studies that examine the role of central bank transparency in curbing exchange rate volatility, which is a crucial issue in these markets, are rare in emerging markets’ context. This research offers interesting findings by using a variety of robustness checks.
</abstract>

Does Central Bank Transparency Deter the Exchange Rate Volatility? New Evidence from Asian Emerging Markets

<abstract xmlns="http://www.w3.org/1999/xhtml">

The study investigates effectiveness of selected credit related macro prudential instruments in reducing the correlation between economic and credit growth in European emerging countries between 2000 and 2017. Two GMM (Generalized Method of Moments) estimators are used to empirically investigate the validity of tightening policy actions. Although greater attention to MMPs is found in both European regions the study finds some differences as well. On the level of full sample, the findings confirm our expectation about effectiveness of the selected credit related macroprudential instruments in reducing credit growth.
More specifically, the European transition countries proved to be more successful in using macroprudential tools in curbing credit growth than European post-transition countries. It is confirmed that all three employed credit related macroprudential instruments play a key role in curbing credit growth in the expansive stage of business cycle in the European transition countries. It means that a lower economic growth leads to lower effects of credit related macroprudential instruments on credit growth. However, empirical evidence from European post-transition countries shows mixed results followed by the lack of robustness of economic results, but with expected theoretical sign. In fact, introduction of CG limits and FC limits reduce the correlation between GDP growth and credit growth only in one step S-GMM estimator, while a variable of caps on debt-to-income ratio (DTI) not.
</abstract>

Can Credit Related Macroprudential Instruments Be Effective in Reducing the Correlation Between Economic and Credit Growth? Cross-Country Evidence

<abstract xmlns="http://www.w3.org/1999/xhtml">

Green finance is the basis for the development of sustainable financing of environmental projects with the aim of respecting environmental and social aspects in making investment decisions. The development of green finance enables a green transition towards economic growth that will be sustainable in the long run because it is based on the principles of preserving the environment and reducing the risk of climate change. This creates a basis for preserving macroeconomic stability based on the development of new alternative sources of financing. The aim of this paper is to present green finance, with special reference to Serbia. The paper covers the regulation of green finance, but also the analysis of green finance instruments in terms of types and features and their development.
</abstract>

Green Finance: Regulation and Instruments1

<abstract xmlns="http://www.w3.org/1999/xhtml">

The Taylor (1993) rule for determining interest rates is generalized to account for three additional variables: The money supply, money velocity, and the unemployment rate. Thus, five parameters, i.e. weights assigned to the deviation in the inflation rate, the deviation in real GDP (Gross Domestic Product), the deviation in money supply, the deviation in the money velocity, and the deviation in unemployment rate, are introduced and estimated. The article explores and tests various combinations of the Taylor rule, the Quantity Equation (Friedman, 1970), and the Phillips (1958) curve. The monthly US January 1, 1959 to March 31, 2022 data are adopted to test the optimal parameter values. Estimating the parameters with the least squares method gives better results than the Taylor rule. The optimal parameter values involve a relatively high weight to the deviation in unemployment rate, and moderate weights are assigned to the deviation in the inflation rate, the deviation in real GDP, the deviation in money supply, and the deviation in the money velocity. The corresponding sum of squares decreases by 42.95% when compared with the Taylor rule.
</abstract>

Modeling which Factors Impact Interest Rates

<abstract xmlns="http://www.w3.org/1999/xhtml">

This study provides robust evidence on how the choice of the policy instrument for monetary policy influences its impact on economic activity. We study the case of South Korea for the period 1980-2017. We use FAVAR models that allow a comprehensive exploration of different areas of economic activity by overcoming limitations on a number of variables that can be included in the analysis in a traditional VAR model. Following the actual use of instruments, we test the effectiveness of monetary policy in two separate periods: 1980-1999, when the Bank of Korea mostly used M2 as the policy instrument; and then 2000-2017, when interest rate was the policy instrument. Our results show that monetary policy that uses interest rate as the policy instrument is markedly more effective in economic activity than M2. This is observable in the reaction from prices as well as variables that measure industrial production. In contrast, the impact of M2 mostly occurs in prices and it is short lived. We use robustness checks that switch the use of instrument for each subperiod and also test the use of each policy instrument for the entire period of analysis. The results hold, interest rates as policy instrument of monetary policy are more effective than M2.
</abstract>

Does the Effectiveness of Monetary Policy Depend on the Choice of Policy Instrument? Empirical Evidence from South Korea

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Journal of Central Banking Theory and Practice

 The Journal of Central Banking Theory and Practice is a scientific and professional journal that the Central Bank of Montenegro publishes thrice a year. The journal has been published since 2012. The most stringent international standards are followed in the publication of papers and reviews which imply "double-blind" review.Journal of Central Banking Theory and Practice is a scientific journal dedicated to publishing quality papers and disseminating original, relevant and applicable economic research. Scientific and professional papers that are published in the Journal of Central Banking Theory and Practice cover theoretical and practical aspects of central banking, monetary policy, including the supervision issues, as well as banking and management in central banks.The purpose of the journal is to educate the general public about the key issues that the central bankers globally face, as well as about contemporary research and achievements in the field of central banking theory and practice.  Archiving  Sciendo archives the contents of this journal in Portico - digital long-term preservation service of scholarly books, journals and collections.  Plagiarism Policy  The editorial board is participating in a growing community of Similarity Check System's users in order to ensure that the content published is original and trustworthy. Similarity Check is a medium that allows for comprehensive manuscripts screening, aimed to eliminate plagiarism and provide a high standard and quality peer-review process. 

Journal of Central Banking Theory and Practice

Volume 12 (2023): Issue 2 (May 2023)

Project Management in Central Banks

Does Credit Growth in the EMU Banking Sector Follow its Capital Adequacy?¹

Importance of the Contingent Claims Analysis in Detecting Banking Risks: Evidence from the Greek Bank Crisis

Could the Issuance of CBDC Reduce the Likelihood of Banking Panic?¹

Demand for Cash and its Determinants - a Post-Crisis Approach¹

Does Central Bank Transparency Deter the Exchange Rate Volatility? New Evidence from Asian Emerging Markets

Can Credit Related Macroprudential Instruments Be Effective in Reducing the Correlation Between Economic and Credit Growth? Cross-Country Evidence

Green Finance: Regulation and Instruments¹

Modeling which Factors Impact Interest Rates

Does the Effectiveness of Monetary Policy Depend on the Choice of Policy Instrument? Empirical Evidence from South Korea

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