Financial Cycle Research Articles

ASSESSMENT OF THE IMPACT OF STATE SUPPORT MEASURES ON THE FINANCIAL STABILITY OF ENTERPRISES

The article presents the results of assessing the impact of state support measures on the financial stability of enterprises. The object of the analysis was LLC "Manufactory "Traditions of Knitwear" (Cheboksary). Various methods were used in the course of the study: correlation and regression analysis, comparison, systematic approach, graphical method. The main problem of the enterprise caused by the COVID-19 pandemic was the stagnation of sales, overstocking, and an increase in the duration of the financial cycle, which significantly reduced the cash flows of the enterprise and led to its financial instability. However, the negative impact of the pandemic has been mitigated by government support measures. To assess the impact of these measures on the financial stability of the enterprise, a model was developed for the dependence of revenue as the indicator most sensitive to changes in the macroeconomic environment on the value of short-term loans and the average number of employees. It showed that the attraction of loans within the framework of state support allowed LLC "Manufactory "Traditions of Knitwear" to increase revenue by 40086.86 thousand rubles. The retention of more than 80% of the number of employees, which was stipulated by the loan agreement, provided the company with the opportunity to contain the decline in revenue at the level of 1413.03 thousand rubles. As recommendations for the further use of state support measures for small businesses, there is regular monitoring of official information resources on the assistance provided to enterprises in the context of a pandemic, monitoring compliance with the requirements for recipient enterprises and the use of other forms of state support.

Monetary policy reaction function and the financial cycle

We examine whether the systematic response of monetary policy to financial imbalances matters for financial stability. We measure how responsive the Federal Reserve's policy is to imbalances in the equity, housing and credit markets. We find that changes in these policy sensitivities predict the subsequent development of financial imbalances. When monetary policy responds more counter-cyclically to market overheating, imbalances tend to decline over time. This effect is distinct from that of current and anticipated interest rate levels – the risk-taking channel. The evidence highlights the importance of the systematic component of monetary policy reaction function in shaping the financial cycle.

Совершенствование моделей циклов Кондратьева в экономической динамике

The modeling of Kondratiev cycles in economic dynamics in the form of Fourier series has been improved. Models have been developed that allow, by varying the reference points and the duration of the periods, to obtain estimates of these parameters with high accuracy and give estimates of accuracy in the form of dispersion. On the basis of the obtained models and algorithms, estimates of the beginnings of the formation of the duration of the periods of Kondratiev cycles in developed countries were obtained and models of the productivity of technological structures in the developed countries of the modern world were built. The productivity of the fourth technological order was determined by the per capita income of 2,500 US dollars in 1990. The productivity of the fifth technological order was determined by the per capita income of 12,200 US dollars in 1990. The productivity of the sixth technological order was determined by the per capita income of 25,300 US dollars in 1990. Modeling made it possible to predict the end of the downward wave of the modern Kondratiev cycle in world economic dynamics, the systemic global economic crisis associated with the transition to the dominance of the sixth technological order in 2049–2055. Intensification of crises associated with business cycles, financial and investment cycles associated with the downward half-wave of the Kondratiev cycle is predicted starting from 2024-2027.

Financial condition indices for emerging market economies: Can Google help?

We compare alternative approaches to construct financial condition indices (FCIs) for major emerging market economies (EMEs). We further test whether measures of web-search intensity for keywords related to financial tensions can complement the informative content of traditional financial variables. We find that an index constructed as a simple average of key financial variables augmented with data from google searches outperforms several alternative definitions of FCIs to explain business cycle fluctuations and capital flows episodes. These results survive when controlling for proxies of the global financial cycle, highlighting that local financial markets conditions are important for the macroeconomic performance in EMEs.

The Global Financial Cycle and Capital Flows During the COVID-19 Pandemic

The Global Financial Cycle and Capital Flows During the COVID-19 Pandemic

Impact of COVID-19 Induced Lockdown to Sustain Employee Performance Management Systems in NCR Corporates

All hell broke loose in the corporate world in March 2020 when India went under total lockdown in a matter of days. The equation between work (what), worker (who), and workplace (where) was altered at the fastest pace in human history. This paradigm shifts also coincided with the appraisal/year end cycle. Most of the Indian corporates follow the financial year cycle (April to March) for their annual performance appraisal/management process. The human resources department was at the forefront of every board room’s agenda within the corporates of the National Capital Region (NCR) of India. The challenging and interesting part about life of an HR professional is to help business take the hard decisions in the most objective yet humane way possible. Therefore, perhaps rightfully, there wasn’t one single solution or a clear thought process emerging across participating organizations. And to borrow from Gabriel Garcia Marquez, “Our code of ethics supposes that we doctors are made of wood.” There is similar thinking on HR as well. Hopefully this time it will not be so. This paper presents an overview of the changes to the PMS system and its outcomes undertaken by HR managers in corporates of NCR. HR managers of 117 corporates were surveyed through a structured questionnaire between the period 5th April, 2020 through 15th April, 2020. The main objective of this publication is to document and contribute to the body of knowledge changes that were introduced due to an unforeseen calamity.

Spillover effects of banking systemic risk on firms in China: A financial cycle analysis

This paper investigates the spillover effects of banking sector risk on firms in China and explores the risk transmission channels from the perspective of financial cycle. We use the banking risk-taking and systemic risk as the proxies of financial booms and busts. Our study yields four main findings. First, the banking risk-taking reduces firm risk in financial booms. Higher financing costs and constraints, larger firm size and financing scale, and state ownership inhibit the spillover effects. Second, the banking systemic risk increases firm risk during financial busts. Higher financing costs and constraints, larger firm size and financing scale, and state ownership facilitate the spillover effects. Third, the magnitudes of banking risk spillovers vary across industries, and this effect is more pronounced in the manufacturing industry. Fourth, bank risk-taking affects firm risk differently through various channels in different leading periods. When leading 1 to 3quarters, banking risk-taking reduces firm risk, and channel variables inhibit the spillover effects. However, when leading 4 to 8 quarters, the rising bank risk-taking eventually increases firm risk, and channel variables amplify its spillover effects. Our study offers important policy implications for risk assessment and mitigation in the Chinese loan market.

Mitigasi Risiko Siklus Pengeluaran Gereja XYZ Di Tigarunggu, Sumut (XYZ Church Expenditure Cycle Risk Mitigation in Tigarunggu, North Sumatera)

The financial cycle is the main activity for an organization. One of them is the cash disbursement cycle. Recording of organizational expenditure cycles is required for both for-profit and not-profit organizations. The purpose of this research is to know the importance of a risk-based audit approach in the expenditure cycle of non-profit organizations. This study uses qualitative analysis techniques. The object of this research is XYZ Church located in Tigarunggu Village, North Sumatra. The results showed that the level of inherent risk, control, and detection in XYZ Church was high. This is due to discrepancies in recording, the potential for fraudulent use of cash, discrepancies between cash and physical records, and rationalization of fraud. Internal control can be one of the Church's efforts to control the risks that occur. The implementation of low or inappropriate internal control has a high level of risk compared to the implementation of good internal control.

United Kingdom: Financial Sector Assessment Program-Select Issues in Systemic Risk Oversight and Macroprudential Policy

The United Kingdom’s macroprudential policy framework has proven its effectiveness. After the Global Financial Crisis (GFC) of 2007–09, the United Kingdom assigned the Bank of England (BOE) a clear financial stability mandate, created a new Financial Policy Committee (FPC) to set macroprudential policy, and shifted to a “twin peaks” model of financial oversight. The 2016 Financial Sector Assessment Program (FSAP) concluded that the new framework appeared appropriate for effectively conducting macroprudential policy. However, the framework was then relatively new. The 2021 FSAP represents an opportunity to review its performance in building systemic resilience through the financial cycle, including the market volatility resulting from the Brexit vote and the COVID-19 pandemic.

The Volatility of the Stock Market and Financial Cycle: GARCH Family Models

The Volatility of the Stock Market and Financial Cycle: GARCH Family Models

The Climate Changes in Banking Credit to The Financial Cycle During the Covid-19 Pandemic in Indonesia

The Covid-19 Pandemic changed the banking credit climate that affected financial stability and Indonesia's economic growth, as measured using the development of the Ed Waves Index model through time series data from the Financial Statements of Bank Indonesia in 1950 – 2021, which found that the banking credit climate Pre-Covid-19 Pandemic was pressure between 1.4 Amplitude to 3.5 Amplitude and the financial cycle wave was pressure between 2.0 Amplitude to -0.3 Amplitude, while during Covid-19 Pandemic, the banking credit climate was pressure between -1.1 Amplitude to -2.1 Amplitude, while the financial cycle wave was pressure between - 2.0 Amplitude to -2.7 Amplitude, with different implications for financial stability and economic growth in Indonesia.

The Climate Changes in Banking Credit to The Financial Cycle During The Covid-19 Pandemic in Indonesia

The Covid-19 Pandemic changed the banking credit climate that affected financial stability and Indonesia's economic growth, as measured using the development of the Ed Waves Index model through time series data from the Financial Statements of Bank Indonesia in 1950 – 2021, which found that the banking credit climate Pre-Covid-19 Pandemic was pressure between 1.4 Amplitude to 3.5 Amplitude and the financial cycle wave was pressure between 2.0 Amplitude to -0.3 Amplitude, while during Covid-19 Pandemic, the banking credit climate was pressure between -1.1 Amplitude to -2.1 Amplitude, while the financial cycle wave was pressure between - 2.0 Amplitude to -2.7 Amplitude, with different implications for financial stability and economic growth in Indonesia.

Credit, output and financial stress: A non‐linear LVSTAR application to Brazil

AbstractWe estimate a bi‐variate LVSTAR model to investigate the non‐linear interplay between Brazil’s credit, output and financial cycles between 1999 and 2017. We use financial stress as the regime‐switching variable to assess how it impacts economic performance. We find evidence of a lengthy transition between regimes. Moreover, Granger Causality tests indicate statistical precedence of credit growth through financial intermediaries. After credit shocks, we find non‐mean‐reverting trajectories and that financial stress worsens the economic downturn. Counterintuitively, total credit growth increases after adverse output shocks. This appears to be caused by elevated public credit provision relative to private credit flows, triggered by anticyclical policy.

Global financial cycle and the predictability of oil market volatility: Evidence from a GARCH-MIDAS model

This study examines the predictive power of the global financial cycle (GFCy) over oil market volatility using the GARCH-MIDAS framework. The GARCH-MIDAS model provides an appropriate setting to forecast high frequency oil market volatility using global predictors that are only available at low frequency. We show that the global financial cycle carries significant predictive information over both oil market volatility proxies, both in- and out-of-sample. The predictive relationship is found to be positive, more strongly during the pre-GFC period, suggesting that rising global asset prices coupled with improved cross-border capital flows and risk appetite are associated with rising volatility in the oil market. Further economic analysis suggests that the GARCH-MIDAS-GFCy model yields economic gains compared to the conventional GARCH-MIDAS-RV specification for a typical mean-variance investor, especially in the pre-GFC period, and the stance is found to be robust to risk aversion and leverage ratio. The economic gains observed from the GARCH-MIDAS-GFCy model, particularly during the pre-GFC period when world markets experienced a steady rise in global asset prices and cross-border capital flows, underline the potential role of risk appetite (or behavioural factors) in commodity market forecasts. Overall, our results suggest that global asset market conditions can provide significant forecasting gains for energy market models, with significant implications for both investors and policymakers.

Characterizing India’s Financial Cycle

The severity of the effects of global financial crisis resuscitates the need for assessing the macro-financial linkages and measuring financial cycle to prevent the economy from major financial shocks. Our article measures financial cycle by using turning point analysis, spectral analysis and band-pass filter and provides the evidence on the existence of financial cycle in India. We find the length and duration of cycles in financial variables are much greater as compared to the business cycle. While both credit and equity prices drive financial cycles over time, the contribution of house prices has increased since mid-2000s. We find that the expansionary phase of the financial cycle provides an early warning signal about stress build-up in the banking sector and impending depress in the economy. JEL Codes: C22, E30, E44, E58, G18

DETECTING AND MEASURING FINANCIAL CYCLES IN HETEROGENEOUS AGENTS MODELS: AN EMPIRICAL ANALYSIS

This paper proposes a macroeconometric analysis to depict and measure possible financial cycles that emerge due to the dynamic interaction between heterogeneous market participants. We consider two-type heterogeneous speculative agents: Trend followers tend to follow the price trend while contrarians go against the wind. As agents’ beliefs are unobserved variables, we construct a state-space model where heuristics are considered as unobserved state components and from which the conditions for endogenous cycles can be mathematically derived and empirically tested. Further, we specifically measure the length of endogenous financial cycles. The model is estimated using the equity price index for the 1960–2020 period for the UK, France, Germany, Italy, Ireland, and the USA. We find empirical evidence of endogenous financial cycles for all countries, with the highest frequencies in the USA and the UK.

SOSIALISASI PENTINGNYA MANAJEMEN KEUANGAN PERSONAL TENAGA PENDIDIK SD NEGERI No. 104274

This activity aims to help teachers at SD Negeri No. 104274 Pematang Kasih, Pantai Cermin District, Serdang Regency understands the importance of personal financial planning as well as practical things and basic principles that can be carried out in the context of these activities. Activities carried out in the form of lectures or seminars attended by 20 teachers at the school. Through this activity, it is hoped that it can provide benefits where teachers have a new understanding of the importance of financial planning process, understanding financial goals at every phase of life, financial planning life cycle, personal finance principles in planning

How Global is the Domestic Financial Cycle? Evidence from Romania and 3 other EEMS

This paper provides an analysis of the potential common influences behind the synchronicity of financial cycles in four EEMS: Romania, Hungary, Poland and the Czech Republic. We checked if the common movements in these EEMS appear under the influence of the global financial cycle measured in terms of quantities - through capital flows - risk premiums and global risk aversion for investors.

Measuring financial cycles: Empirical evidence for Germany, United Kingdom and United States of America

This study contributes to the literature by identifying the most appropriate factor to detect and measure Financial Cycles, similar to Gross Domestic Product (GDP) for Business Cycles. Four financial variables were included in the study: Credit, House Prices, Share Prices and Interest Rates. The filter used to estimate and extract the cycles from the original time series was the Christiano and Fitzgerald (2003)'s one. Then, three methods, namely the Concordance Index, the Granger Causality Test and the AUROC Test, were used to identify which of the four variables is the most accurate proxy to measure and estimate financial cycles. In all of them, the results pointed to the same variable: Share Prices. A comparison between Share Prices and GDP shows a higher capacity of the financial variable to predict financial and economic crises than GDP, which justifies the recent increasing interest of macroprudential policymakers on Financial Cycles. Our conclusions are robust to different time periods and alternative filtering procedures.

Spillovers at the extremes: The macroprudential stance and vulnerability to the global financial cycle

The effects of macroprudential policy on portfolio flows vary considerably across the global financial cycle. A tighter ex-ante macroprudential stance amplifies the impact of global risk shocks on bond and equity flows, increasing outflows significantly more during risk-off episodes and increasing inflows significantly more during risk-on episodes. These amplification effects are more prominent at the “extremes,” especially for extreme risk-off periods and for regulations that target specific risks instead of generalized cyclical buffers. This paper estimates these relationships using a policy-shocks approach that corrects for reverse causality by combining high-frequency risk measures with weekly data on portfolio investment and a new measure of macroprudential regulations that captures the intensity of policy stances. Overall, the results support a growing body of evidence that macroprudential regulation can reduce the volume and volatility of bank flows but shift risks in ways that aggravate vulnerabilities in other parts of the financial system.