Interesting Changes Research Articles

МЕХАНІЗМ РЕГУЛЮВАННЯ ІНФЛЯЦІЙНИХ ПРОЦЕСІВ ЗА ДОПОМОГОЮ ІНСТРУМЕНТІВ ФІНАНСОВОГО РИНКУ

The article is devoted to topical issues of the impact of the central bank's monetary policy on the economy, including its financial sector (financial markets) and inflation through the transmission mechanism. Its purpose is to study the essence and the effectiveness of the implementation of the monetary policy of the central bank from the point of view of its impact on inflation and the development of the financial market in Ukraine. Attention is focused on the wide use of inflation targeting policy and its components in the world. The transmission mechanism of the influence of monetary policy on the economy and inflation is considered. The approaches to the transmission mechanism of monetary policy and its main channels through which it affects the activation of the functioning of the financial market, the economy and inflation is considered. It is noted that the main channel for the transmission of monetary policy in Ukraine is the interest rate channel. Its action is based on changes in interest rates. Such changes contribute to a wider placement and attraction of funds by business entities. As a result of effective placement and attraction of funds, they can solve the issues of consumption, accumulation and investment. Thus, they affect the level of aggregate demand, economic activity, the development of financial markets and inflation. Statistics from the central bank of Ukraine confirm the effectiveness of the transmission mechanism of its monetary policy in resuming the development of the financial market and controlling inflation. The "de-dollarization" of loans and deposits has been steadily progressing in Ukraine in recent years. It contributes to weakening the influence of external factors on the domestic financial sector and increases the importance of domestic interest rates in decision-making by households and enterprises. The continuation of this trend in the future, which will be facilitated, among other things, by maintaining price and financial stability, will have a positive impact on the effectiveness of the monetary policy transmission mechanism. At the same time, it was concluded that it is necessary to take into account non-monetary factors influencing inflation and take them into account in changing the operating procedure of monetary policy. This will effectively limit the impact of the changing liquidity situation in the banking sector on the cost of resources in the financial market, and therefore on all other rates in the economy.

ПІДХОДИ ДО УПРАВЛІННЯ РИЗИКАМИ ФАРМАЦЕВТИЧНОЇ КОМПАНІЇ

The study of approaches to the classification of types of risks revealed a significant range of groups and categories according to which the risks of economic activity of the enterprise are classified. In order to determine the frequency of mention of different groups and types of risks, a content analysis was conducted. According to the results of this analysis, authors concluded that the most common are financial, innovative, industrial, commercial risks. The frequency of mentioning certain types of risks within the information sources in each group was also revealed. According to the results of the content analysis, it was found that among the financial risks, the following risks have the greatest number of mentions: changes in exchange rates; change in interest rates; non-fulfillment of financial obligations to external agents; reduction of profitability; unstable financial condition. The most mentioned types of innovation risks were the risks of introducing new technology and interrupting research funding. The key types of production risks are cost growth; inefficient work of staff; equipment wear. The most mentioned types of commercial risks are the decline in sales due to reduced demand and supply. According to the most significant types of risks, the indicators that characterize them were selected on the example of a pharmaceutical company. The calculated losses from the impact of risks and the probability determined by the expert method are the basis of the developed matrix of risk assessment. The coefficient of variation is used as an indicator of the degree of influence of a particular type of risk on the results of the research enterprise, namely the revenue from sales of the company's products. Multiplying the coefficient of variation for each of the types of risks on the company's sales revenue made it possible to determine the projected losses due to the impact of risks. To form a matrix of risk assessment and risk level, the experience of Bayer Group was used with the appropriate adaptation of the amount of costs to the realities of the studied enterprise. Risk reduction measures are also proposed. The developed recommendations for risk management of the pharmaceutical company's business activities allow to reasonably assessing the level of the most significant types of risks, respond in a timely manner to their potential impact, minimizing the loss of budget, time and resources.

Interest Rate Skewness and Biased Beliefs

Conditional yield skewness is an important summary statistic of the state of the economy. It exhibits pronounced variation over the business cycle and with the stance of monetary policy, and a tight relationship with the slope of the yield curve. Most importantly, variation in yield skewness has substantial forecasting power for future bond excess returns, high-frequency interest rate changes around FOMC announcements, and consensus survey forecast errors for the ten-year Treasury yield. The COVID pandemic did not disrupt these relations: historically high skewness correctly anticipated the run-up in long-term Treasury yields starting in late 2020. The connection between skewness, survey forecast errors, excess returns, and departures of yields from normality is consistent with a theoretical framework where one of the agents has biased beliefs.

Analysis of the Repricing Practice of Newly Disbursed Housing Loans

In the Hungarian banking system, newly disbursed, fixed-rate housing loans are typically repriced with a lag of several months after a change in the interbank rates, which can be viewed as the cost of funds for institutions. This paper examines the number of months it takes for a change in the interbank rates to pass through to the interest rates of newly disbursed housing loans with an initial interest rate period of over one year. The two-step analysis looks at the repricing practices observed for Certified Consumer-Friendly Housing Loans (CCFHLs) employing a descriptive approach, and then a vector autoregressive model is used to estimate the speed at which interbank rates pass through to aggregate housing loan rates. Based on the authors’ estimate drawing on aggregate interest rate statistics, the changes in interbank rates are incorporated into the mortgage rates applied by Hungarian banks in approximately four months; however, according to the interest rate condition data of institutions’ CCFHL announcements, banks’ repricing practices vary, leading to differences in the speed and extent of the interest rate changes following a shift in the cost of funds.

Эконометрический анализ влияния монетарной политики на отрасли российской промышленности

This paper presents the econometric analysis of the heterogenous effects of monetary policy on industrial output and producer prices in manufacturing sector in Russia. The estimation of the differences in the impulce responses to the interest rate shock is conducted using structural VAR-models, the analysis of key industrial characteristics, explaining differences through monetary transmission channes, is based on principal components and correlations. Our findings reveal the strongest response to monetary policy in such industries as manufacture of rubber and plastic products, manufacture of non-metallic mineral products, manufacture of pulp and paper, manufacture of machinery nd equipment, manufacture of electrical, electronic and optical equipment and manufacture of motor vehicles and equipment. Besides, in these industries the response is usually deffered to 2–3 months after the shock. Our findings also show that the impact of monetary shocks on output is particulary strong in industries producing capital goods and supplies for construction but particularly weak in industries with high concentration and high profits. That means that differences in industrial responses to monetary policy can be described by two key channels of monetary transmission — interest rate channel (due to high demand sensitivity to interest rate changes) and bank lending channel (due to important role of bank loans in fi rms’ financing).

THEORETICAL AND METHODOLOGICAL BASIS OF MANAGEMENT OF THE BANK INVESTMENT PORTFOLIO IN THE CONDITIONS OF THE RUSSIA-UKRAINE WAR AND AFTER THE QUARANTINE VIRAL PANDEMIC OF COVID-19

The types of investments used in the formation of the investment portfolio were supplemented and expanded. The principles of formation and use of the foundations of managing the investment portfolio of a commercial bank and the purpose of its strategic management were studied and augmented. It is justified that in the process of forming an investment portfolio in commercial banks, their investment attractiveness growths, which also leads to an raise in financial stability and makes it possible to increase their assets. It is noted that the efficiency and profitability of using the investment portfolio depends on the quality of performance of such functions of its management, namely: stabilization of the bank profits regardless of the phases of the business cycle; reduction of credit risk in the portfolio of bank loans; diversification of such loans taking into account the geographical coverage of clients; maintaining the level of liquidity; using a portfolio as collateral; insurance of banking activity against losses as a result of changes in exchange rates and interest rates; ensuring the flexibility of the bank portfolio of assets; increasing the financial indicators of the bank balance thanks to the quality of securities. The main goal of the formation and use of the commercial bank investment portfolio is determined, which is to ensure the implementation of its investment strategy by selecting the most effective and safe investment projects and financial instruments. It was established that the investment portfolio should be formed considering their current profitability; rates of capital cost growth; the risk of their value changing over time; financial instruments for managing such a portfolio. It has been proven that the effectiveness of the formation and use of an investment portfolio depends on the choice of its management strategy; influence of internal and external factors; an innovative approach to the speed of reaction of management personnel to such changes and the ability to constantly adjust the strategic management process; getting out of crisis situations with the least losses in the process of managing the investment portfolio.

Introduction to the Inclusion of the Real Interest Rate with other factors in Phillips Curve Analysis

This paper summarizes the arguments and counterarguments within the scientific discussion on the issue regarding the Inclusion of the Real Interest Rate with other factors in Phillips Curve Analysis. The main purpose of the article is to cause economists to consider the inclusion of the real interest rate in Philips Curve analysis. Earlier economists have examined the Phillips Curve, including Irving Fisher (1926). Later Phillips (1958, 1961) made enough of impression to give the Phillips Curve its appellation (1958, 1961). Further work has been done by Freidman, Phelps Lucas, Rapping and others. Shifts from the Short Run Phillips Curve (SRPC) to the Long Run Phillips Curve (LRPC) have been explained primarily through workers not realizing their real wage has decreased until some time has passed. Also, this shifting from the SRPC to the LRPC is due to producers thinking that demand for their products has had a real, sustained increase, producers finally realize that is not true. This article agrees with those factors being present but also posits the idea of changes in the real interest rate affecting the shift form the SRPC to the LRPC. This brief article summarizes the conclusions of five econometric papers that suggest that the real interest rate should be included in Phillips Curve Analysis. The research empirically confirms and theoretically proves that the five articles with econometric evidence suggest that the real interest rate be included in Phillips Curve Analysis. Though Austrian economists consider capital in their theories, Austrian economists do not use Phillips Curve analysis but instead employ Hayekian Triangles. The results of the research shows that inflation and unemployment have a stable and inverse relationship. These results can be useful for economic analysts, government, financial experts, policymakers.

Эмпирический анализ гипотезы перманентного дохода на данных постсоветской России

The paper tests the hypothesis of permanent income on modern (2007– 2019) data of aggregated income indicators and expenditure of the Russian households. To test the hypothesis, we use John Shea’s methodology. According to his approach, the values of the predicted indicators of the current change in income and interest rates are determined using several sets of variables. The empirical analysis carried out by these authors shows that the behavior of households in Russia does not follow Milton Friedman’s permanent income hypothesis, but is consistent with Christopher Carroll’s “buffer stock” model. Fluctuations in income have a statistically significant effect on fluctuations in consumption. This means that Russian consumers are not inclined to smooth future consumption over the entire life cycle, but tend to maintain a certain level of savings for several periods in advance as a safety net in the event of a fall in permanent income. This conclusion is logical for the post-Soviet Russian space. As the studies show, in developing countries and with less developed financial institutions and markets, individuals have difficulties in planning their behavior. They face a narrow planning horizon with a high degree of uncertainty about the future.

Macroeconomic Variables and Financial Performance of Commercial Banks in South Sudan

The banking institutions in South Sudan have been experiencing challenges due to various factors affecting their performances. There has been little research on the causes of bank profitability in South Sudan, and since different studies elsewhere demonstrate disparities in the impact of macroeconomic variables on bank performance, this study has been taken.The primary purpose of this research was to determine the effect of Macroeconomic Variables on the financial performance of commercial banks in South Sudan: Specifically, the study aimed: toassess the effect of exchange rate on the financial performance ofcommercial banks in South Sudan; to examine the influence of interest rate on the financial performance of commercial banks in South Sudan; to examine the effect of inflation rate on the financial performance of the commercial bank in South Sudan. The study was anchored onthe International Fisher Effect (IFE) theory. The target population for this study were the 30 commercialbanks in South Sudan. A purposive sampling method was used to select 28 out of the 30 commercial banks for the study. The researcher considereda longitudinal cohort research design. A panel of data for the period of 2014 to 2020 collected from the Central Bank of South Sudan, the world bank data bank, and the commercial bank’s websites were used in the study. Face validity was used for the measurement of the validity of the data. To show the reliability of the data, the researcher used data source triangulation to incorporate various sources of the data in an investigation. Data analysis included descriptive statistics and multiple regression analysis. The Pooled OLS with Panel Correlated Standard Error results suggested that of the macroeconomic factors analyzed, the exchange rates had no significant effect on the financial performance of commercial banks at a 5% level of confidence ( = -1.862119, p-value = 0.212 > 0.05) . The interest rate had a significantly positive influence on commercial banks performance in South Sudan at a 5% confidence level(β = 41.31904, p-value = 0.000 < 0.05). The inflation rate had no significant effect on the financial performance of commercial banks in South Sudan at a 5% level of confidence (β = 2.256533, p-value = 0.116 > 0.05). The following recommendations were made in the context of the results and conclusions.Commercial banks should pay special attention to interest rate changes, which have a significant impact on the financial success of South Sudanese commercial banks.The government should implement regulations and an exchange rate regime that would allow banks to profit from the exchange rate sector. The inflation rate should be monitored to ensure that it is always within control.

Differential equation model of financial market stability based on big data

Abstract The financial system is a complex, nonlinear chaotic dynamic system caused by its operating mechanism. Therefore, the application of previous forecasting models cannot explain the existence of various interference factors in the financial market and the chaotic characteristics of the financial system. With the help of financial market stability, the article establishes a series of differential equation models that reflect changes in interest rates in the financial system. The article introduces the factor of macro-control on the premise of respecting market regulation to regulate and intervene in economic relations and economic operation status. We apply the Logistic model and stability theory to analyse the positive equilibrium point characteristics of the system and obtain the interest rate liquidity equation with a time-lag financial network.

Transmission of Monetary Policy through Credit Interest Rates in Turkey: A Microeconomic Perspective

This study aims to examine the monetary policy transmission through the credit channel from a microeconomic perspective by using the fixed effect dynamic panel model. It is estimated to what extent policy interest rate changes are transferred to the short-term interest rate depending on the type of loan. Results confirm that there is a high degree of inertia in both the commercial and consumer loan interest rates. In terms of the transmission of monetary policy, changes in policy interest rates are transferred to commercial loan interest rates by 11% and consumer loan interest rates by 15% in the short term. These values reveal that policy interest rate changes are gradually transmitted to market interest rates. Variables representing bank size, leverage, and market power in terms of distinctive characteristics have a limited impact on both commercial and consumer loan interest rates in the analyzing period. However, the market share of a bank has a significant impact on both commercial and consumer loan rates.

The impacts of Uncertainty on the Industrial Product: Empirical Evidence with the PVAR Model

The interest rates and uncertainty are supposed to play an important role on the agents' decisions. This study has two main objectives. First, we verify the impact of industrial output to the investments and real interest rates shocks in mercusur countries using the PVAR model through the GMM system (1997-2016). The results of the estimates show, on the one hand, that industrial production responds positively and statistically significant to changes in investments and, on the other one, it responds negatively to changes in real interest rates. Granger's causality test suggests that investments and interest rates Granger-cause the industrial product. Second, we present empirical evidence of the role of uncertainties in the agents' investment decision-making process, considering only the case of Brazil (2002-2016). We find that the industrial product and investments increase with the agents' confidence on the federal government future behavior but decrease when uncertainties raise.

Law of interest rate changes in financial markets based on the differential equation model of liquidity

Abstract The paper establishes a related differential equation model about changes in financial interest rates. It uses information related to liquidity to feedback the law and stability of differential equations in interest rate changes. The article applies stochastic processes and partial differential equations to complex financial networks to confirm node yields in financial market networks. It confirms the existence of interest rate stickiness in Chinese financial markets. The advantage of this interest rate model is that when the external economic environment changes, the state of interest rates will also change accordingly.

Law of interest rate changes in financial markets based on the differential equation model of liquidity

Abstract The paper establishes a related differential equation model about changes in financial interest rates. It uses information related to liquidity to feedback the law and stability of differential equations in interest rate changes. The article applies stochastic processes and partial differential equations to complex financial networks to confirm node yields in financial market networks. It confirms the existence of interest rate stickiness in Chinese financial markets. The advantage of this interest rate model is that when the external economic environment changes, the state of interest rates will also change accordingly.

Mathematical simulation experiment based on optimisation of heat treatment process of aluminium alloy materials

Abstract The paper establishes a related differential equation model about changes in financial interest rates. It uses information related to liquidity to feedback the law and stability of differential equations in interest rate changes. The article applies stochastic processes and partial differential equations to complex financial networks to confirm node yields in financial market networks. It confirms the existence of interest rate stickiness in Chinese financial markets. The advantage of this interest rate model is that when the external economic environment changes, the state of interest rates will also change accordingly.

Independent Accountant’s Review Report

Independent Accountant’s Review Report

INFLATION, CENTRAL BANK AND SHORT-TERM INTEREST RATES: A NEW MODEL WITH CALIBRATION TO MARKET DATA

In this paper, we propose a new model for the joint evolution of the inflation rate, the Central Bank official interest rate and the short-term interest rate. Our model takes into account the fact that the Central Bank interest rate changes at random times, inflation is measured at fixed, regular times, while the short-term interest rate evolves essentially continuously. We derive the valuation equation for a contingent claim and show that it has a unique solution. The payoff may depend on all three economic factors of the model and the discount factor is allowed to include inflation. Our model is not an affine model. Although in some special cases the solution of the valuation equation might admit a closed form, in general it has to be solved numerically. This can be done efficiently by the algorithm that we provide. Taking as a benchmark the model of [H. W. Ho, H. H. Huang & Y. Yildirim (2014) Affine model of inflation-indexed derivatives and inflation risk premium, European Journal of Operational Research 235, 159–169], we show that our model performs better on European market data from 2008 to 2015. Our model uses many fewer parameters than the benchmark model: This is advantageous from the numerical point of view and suggests that our model describes the behavior of the economic factors more closely.

АНАЛИЗ СОСТОЯНИЯ ФИНАНСОВОГО РЫНКА РОССИИ В УСЛОВИЯХ ПАНДЕМИИ

Scientific approaches to the interpretation of the concept of "financial market" and its sig-nificance in the redistribution of capital are considered. The analysis of the state of the Russian financial market in the context of the pandemic and the global economic crisis is carried out, the main segments and features of their interaction are considered. The as-sessment of the credit and currency mar-kets, the securities market and the gold mar-ket as the main indicators of the state of the country's economic system is given. The dynamics of changes in the key interest rate is shown, its impact on changes in all segments of the financial market in the con-text of a pandemic is shown.

The Future is Near: On the Prospects of Central Bank Digital Currency Adoption in Central and Eastern European Countries

Central banks around the world have started exploring the possibility of issuing Central Bank Digital Currencies (CBDC). A CBDC would be similar to digital cash and could, in theory, substitute for commercial bank deposits as the money used by households and businesses. This paper explored the potential implications for financial stability and monetary policy stemming from potential CBDC adoption in Central and Eastern European countries (CEEs). We conducted an empirical analysis using publicly available data from the European Central Bank’s database to assess how introducing a CBDC could impact the business models of the largest CEE banks. Our findings indicated that a CBDC could support financial stability by accelerating the adoption of digital payments in CEEs, improving anti-money laundering, and thus supporting banks’ ability to finance the economy. We found that the impact of a CBDC on the profitability of commercial banks would be impacted more by any change in interest rates than by the quantity of CBDC replacing stable bank funding. Furthermore, a CBDC could be beneficial for monetary policy by improving the control over inflation and accelerating the implementation of countercyclical instruments when classical monetary policy instruments are no longer effective. Hence, non-Euro CEE countries would benefit the most from the introduction of a CBDC.
 Keywords: central bank digital currencies; financial stability; monetary policy; financial institutions

Words speak as loudly as actions: Central bank communication and the response of equity prices to macroeconomic announcements

While the literature has already widely documented the effects of macroeconomic news announcements on asset prices, as well as their asymmetric impact during good and bad times, we focus on the reaction to news based on the description of the state of the economy as painted by the Federal Open Market Committee (FOMC) statements. We develop a novel FOMC sentiment index using textual analysis techniques, and find that news has a bigger (smaller) effect on equity prices during bad (good) times as described by the FOMC sentiment index. Our analysis suggests that the FOMC sentiment index offers a reading on current and future macroeconomic conditions that will affect the probability of a change in interest rates, and the reaction of equity prices to news depends on the FOMC sentiment index which is one of the best predictors of this probability.