Monetary Approach Research Articles

Exchange Market Pressure and Monetary Policy: The Turkish Case

The purpose of this study is to determine the relationship between monetary policy and the exchange market pressure index in Turkey for the 2002–2018 period with monthly data. To obtain the foreign exchange market pressure index, this study uses the model developed by L. Girton and D.E. Roper and is based fundamentally on the monetary approach to exchange rate determination and the balance of payments. The calculated exchange market pressure index is in accordance with the developments lived in financial markets and changes in monetary policy during the period under investigation. As for the relation between exchange market pressure index and monetary policy, a VAR model was set up and a Granger type causality analysis was carried out. According to Granger causality test results, there is a unidirectional causality running from domestic credit expansion to exchange market pressure and from domestic credit expansion to interest rate differential while there is a bidirectional causality between exchange market pressure and interest rate differential. Since increasing exchange market pressure means a depreciation of the Turkish Lira, the estimated VAR model’s results support the view that the Central Bank will increase the interest rate to temper the exchange market pressure.

Test of Monetary Approach to Balance of Payments in West Africa Monetary Zone

This research tested the monetary approach to Balance of Payment in developing countries of West Africa in order to affirm whether the specified relationship in the approach depicts correctly the actual behaviour of the economies. Time series and cross-sectional data that ranges from 1970 – 2016 were used. The empirical results of the fixed effect model established a significant positive relationship between net domestic credit, interest rate and exports; an insignificant positive relationship between capital movements, imports, income and the dependent variable. Exchange rate, however, had a significant negative relationship with the net foreign assets, while inflation had an insignificant but negative relationship with net foreign assets. The pairwise causality tests indicated a unidirectional relationship between exchange rate, net domestic credit and net foreign assets while the other variables move independently and cannot granger cause net foreign assets. Hence, the study concludes that the Polak model is valid in the West Africa Monetary Zone despite the fact that they are no more operating a fixed exchange rate system. The study suggests that the attention of the monetary authorities and the governments should not only be on decreasing the money supply in the economy, since an increase in net domestic credits has a positive impact on the net foreign assets provided it is channeled towards domestic production.

The Dynamics of the Exchange Rate and Extension of Monetary Trilemma

Simultaneous making policy of interest rates, exchange rates and capital accounts can be extended to trilemma theory, contrary to its earlier theories, provided that the imbalances of the private sector, the government and the capital account adjusted through the policy variables such as the government expenditures, the interest rates on domestic deposits, the interest rates on domestic loans, effective exchange rates, foreign prices and foreign interest rates. On the other hand, the components of the extension of trilemma theory in the form of internal and external imbalances affect the exchange rate. In other words, if the real sector markets of the economy are not cleared through the aforementioned trilemma components, and policy variables, internal and external imbalances will be affected by opposite direction of net domestic assets (ΔNDA) and net foreign assets (ΔNFA) of the banking system. This is in accordance with the fundamental principles of the monetary approach balance of payments and exchange rate. Policy variables do not put pressure on the unofficial exchange rate as long as they have the same effect on the net changes in the domestic and foreign assets of the banking system. The purpose of this study is to consider the effect of internal and external imbalances on exchange rate through the simultaneous equations system, generating impulses in policy variables, and examining reactions in Iranian economy. In this paper, the monetary exchange rate determination model is analyzed and examined by using the extension of trilemma theory for macroeconomic data of Iran in the form of internal and external imbalances. The results of this study suggest that policy variables can stabilize the unofficial exchange rate (with other conditions being constant) through trading off internal and external imbalances. Thus, the economic policymaker can, while independently policing interest rates, capital accounts and government expenditures and other policy variables in this research, maintain exchange rate stability as a strategic variable and anchor the general level of prices.

La valeur au croisement du rapport salarial et de l’ordre monétaire. Propositions à partir du cas allemand (1974-1999)

Les approches monétaires de la valeur peinent à saisir la dimension symbolique de la monnaie comme équivalent général. Cette dimension se comprend comme la capacité de la monnaie à faire référence à un collectif qui lui donne sa force sociale comme médium de la valeur. À partir de l’analyse de l’ordre monétaire allemand entre 1974 et 1999, nous formulons l’hypothèse que la forme monétaire d’équivalent général ne peut se comprendre sans réintroduire la relation salariale et nous proposons des pistes de recherche pour articuler valeur, monnaie et rapport salarial.

Embedded finance: the shadow banking system, sovereign power, and a new state–market hybridity

ABSTRACT With the rise of the shadow banking system, a new form of state–market hybridity has emerged, challenging existing monetary approaches to financial stability. A stable financial system today has essentially come to depend on a stable shadow banking system. Central banks are in the process of adapting to this new development. To secure the logic of laissez-faire market liberalism, the sovereign must resort to unprecedented measures and radically intervene in the financial markets. This new form of state–market hybridity forces central banks to provide ample reserves, to act as a dealer of last resort, and to give shadow banking actors access to their balance sheets. Such policies, however, produce new contradictions and fragilities. Based on Foucault's concepts of sovereignty and security, this paper argues that in today's world, the rationality of the laissez-faire security dispositif has become flanked by the rationality of sovereignty to a much greater extent than previously. Without losing its dominant status, the security dispositif is currently adapting so as to operate in crisis mode based on a post-laissez-faire rationality. The repo crisis of 2019 has demonstrated that central banks are still in the process of searching for ways to handle this new constellation.

Is It So Early to Discard Phillips Curve as a Policy Guide? Insights from Bangladesh

The famous economic idea that describes the inverse relationship between inflation and unemployment is Phillips curve. The usual trade-off relationship that inflation shares with unemployment has recently become questionable as the behavior of the Phillips curve across different economies appears to be baffling. This has made the relevance of including Phillips curve as a policy guide quite doubtful. Against this backdrop, the study attempts to examine the existence of Phillips curve in Bangladesh. Employing autoregressive distributed lag (ARDL) bound testing approach to cointegration, the study has observed that Phillips curve is indeed existent in Bangladesh with its usual trade-off relationship. The findings on Phillips curve are robust as the curve has been observed to be existent in different sampling period using the same theoretical and econometric arrangement. The findings bear a good deal of weight to the central bank in Bangladesh as, sooner or later, it may have to adopt inflation-targeting monetary approach to rein in the inflation persistence in the country. Keywords: inflation, unemployment, Phillips curve, NAIRU, ARDL, bound testing, Bangladesh DOI: 10.7176/DCS/10-4-05 Publication date: April 30 th 2020

Macroeconometric Assessment of Monetary Approach to Balance of Payments in a Small Open Economy: The Nigeria Experience

Monetary approach to balance of payment establishes a link between foreign reserve assets and money supply. This link is important for managing balance of payment disequilibrium through adjustment of monetary aggregates. This study relies on the (Polak, 1957;1997) monetary model with data from 2007:Q1 to 2018:Q4 to examine the link between monetary factors and balance of payment in Nigeria. To circumvent simultaneity, the reduced form coefficients of the structural form of the Polak model are estimated using Two Stage Least Squares (TSLS) technique, while the structural parameters are recovered from the estimated reduced form coefficients. The results are enriching and robust. The Johansen cointegration procedure suggests a long run relationship among the macroeconomic variables in the balance of payment function. The estimated balance of payment model reveals that domestic credit is statistically significant and negatively related to foreign reserve assets, implying that balance of payment is a monetary phenomenon in Nigeria. The velocity of money circulation and the marginal propensity to import are approximately 120 percent and 14 percent, respectively. The study therefore recommends that the monetary authority should consider the use of domestic credit for management of balance of payment disequilibrium. It is also pertinent to increase domestic credit to grow the economy since such action will marginally decrease external reserve assets through increase in import, however, the net effect will enhance the overall economy.

ANALISIS PENGARUH KEBIJAKAN PEMERINTAH TERHADAP NILAI TUKAR RUPIAH SETELAH KRISIS EKONOMI GLOBAL 2008

At the end of 2008 there was a financial crisis in America that impacted the global economy including Indonesia. This condition causes the movement of the rupiah to weaken following the global economy. The weakening of the rupiah causes, the economic conditions in Indonesia participate weakened. This study aims to determine the effect of money supply, gross domestic income, inflation and interest rates on the rupiah against the US dollar after the 2008 global economic crisis.The basic theory used in this research is the monetary approach theory was developed by Frenkel (1984). The analysis model used is ARCH/GARCH model with Maximum Likelihood estimation method. The empirical result of these research shows that the variable which have positive and significant influence is variable of money supply, and interest rates. Real GDP have negative and significant influence to the exchange rate. While inflation has no effect.

Endogenous monetary approach to optimal inflation–growth nexus in Swaziland

PurposeThe purpose of our study is to examine the inflation–growth nexus relationship for Swaziland between 1975 and 2016 with the intention of estimating an optimal level of inflation, which maxims economic growth or minimizes growth losses.Design/methodology/approachWe estimate on an endogenous monetary model of economic growth augmented with a credit technology using a smooth transition regression (STR) model, which allows us to estimate an optimal inflation rate characterized by smooth transition between different inflation regimes.FindingsOur empirical results point to an inflation threshold estimate of 7.64 per cent at which economic growth gains are maximized or similarly growth losses are minimized. In particular, we find that above this threshold economic agents may be able to protect themselves from inflation through credit technology and a more urbanized population and yet such high inflation adversely affects the influence of exports on economic growth. This noteworthy since a majority of government revenues is from trade activity via the country's affiliation with the Southern African Customs Union (SACU).Originality/valueThe major contribution of this paper is that it becomes the first to draw directly from endogenous growth theory to estimate the inflation threshold for any African country, which will hopefully pave a way for similar studies on other African countries.

Implementation of metric approach in human capital management of the company

The subject of this research is the development and implementation of the key metrics for estimation of efficiency of investments into the human capital in corporate management. The object of this research is the human capital of “Network Company” JSC of the Republic of Tatarstan. The metric approach is applied as a method for analyzing integrated monetary and non-monetary metrics used in management and investment planning into human capital of the company. Usage of metric approach in human capital management allows quantifying the value of human capital, determining its contribution to rise in the value of the company, as well as identifying potential risks and losses in the modeled chain of creating value. The author offers the modernization of methodological approach of Saratoga Institute towards human capital management  by using the concept Activity Based Costing. The effectiveness of application of control metrics in integrated corporate reporting, which implement monetary approach towards human capital management is substantiated. The author develops the scheme of digital app “Human Capital Return on Investment (HCROI)”, which is recommended to use in preparation of the integrated annual report for 2020 of “Network Company" JSC. The presented in digital app conversion of costs and investments into human capital by assessing the key metrics demonstrates the compliance of human capital management with expectations of the corporate management and the strategy for increasing the value of the company. It also establishes the link between non-financial and financial metrics of human capital management, as well as provides assessment of impact of the factors of human capital upon the achievement of strategic goals and value of the company.

Hacia un enfoque sostenible de retribución que incluya las expectativas de la población trabajadora

La guerra por el talento está sofisticando las estrategias de las empresas para atraer y fidelizar a los mejores profesionales. En este contexto, la retribución desempeña un papel destacado. Pero igualmente relevante es su significado cuando se habla de crear y/o aumentar la tasa de empleo decente, como enuncia el objetivo de desarrollo sostenible número 8, definido por Naciones Unidas para el 2030. Por ello, se hace pertinente revisar el concepto de retribución para que contribuya a un crecimiento económico más sostenible e inclusivo. Así, teniendo en cuenta las expectativas que la población tiene sobre un trabajo decente, el concepto sobre la retribución se ha ido ampliando desde un enfoque puramente monetario hasta adquirir un significado más amplio que abarca todos los beneficios percibidos por los trabajadores en su relación laboral. En línea con los resultados de algunos estudios realizados al efecto, este trabajo argumenta la conveniencia de incluir dichas expectativas en la definición de las políticas de retribución y, tenerlas en cuenta también, en las decisiones laborales, pues resultan ser altamente motivadoras contribuyendo al aumento de la productividad. Así, tras el análisis de la toma de decisiones en distintas situaciones laborales como la expatriación o, la decisión de cursar un MBA, se argumenta que las expectativas de los trabajadores desempeñan un papel relevante debiendo formar parte de una definición moderna, sostenible e inclusiva de retribución.

Monetary Policy and Exchange Rate Dynamics: Does the Turkish Lira Overshoot?

This study aims to identify exogenous shocks in monetary policy and to investigate the impact of these shocks on the exchange rate in the Turkish economy using a VAR model including structural restrictions, referred to as structural VAR (SVAR) model. The empirical model used in the study was developed based on the monetary approach to exchange rate determination and was estimated using monthly data for the period between January 2003 and October 2019. Contrary to past studies conducted for Turkey, this study uses European Union data instead of U.S. data to represent foreign variables. The impulse response functions and variance decompositions obtained as a result of the SVAR model confirm the existence of a strong and almost instant overshooting effect on the Turkish economy for the period in question.

Are Banks Technologically Obsolete? A New Monetarist Approach

Are Banks Technologically Obsolete? A New Monetarist Approach

The monetary approach to exchange rate determination: empirical observations from the Pacific Basin economies

The monetary approach to exchange rate determination: empirical observations from the Pacific Basin economies

The Main Cause of Exchange Rate Increasing (US Dollar) in Iran

This paper determine the main cause of exchange rate increasing (U.S. Dollar) in Iran. The price of one dollar rose by about 17414% and 24566% in official and non-official market last three decades. We use systems of simultaneous equations (SSE) approach to test the hypotheses of the monetary approach of exchange rate (MAER) with the budget deficit financing equation, to discern how financing budget deficits increase exchange rate. The sample of data has been since 1978 to 2012. Results of estimation confirm the MAER theory. And, led us to conclusion that sustained budget deficit caused by government is the crucial factor in increasing nominal exchange rate.

A Relationship between Natural Disaster and Poverty

This paper aims to discuss the impact of a disaster on the lives and livelihood and how it contributes to poverty. For this purpose, two major disasters in recent history were taken as reference. The common approach in defining and measuring poverty is the monetary approach; often disaster has seen only a matter of humanitarian importance. Nepal as a prone to different kinds of natural disasters has a significant impact on lives and livelihood as well. Despite this fact, poverty is narrowly defined. As there is a significant linkage between disaster risk and poverty, the poverty-related discussions must incorporate the impact and risk of disaster while formulating poverty reduction related policies.

Money versus Value?

Abstract Even after the demise of the influential Uno School in the 1980s, Japanese economists have been continuously engaged in the categorial reconstruction of Marx’s Critique of Political Economy, especially the theory of value and money. Writing in the 1980s–2000s, authors of the ‘post-Uno School’, such as Ebitsuka Akira, Mukai Kimitoshi, Kataoka Kōji etc., broadened the value-theoretical views of Uno School orthodoxy to include, among others, the Neue Marx-Lektüre (predominantly H.-G. Backhaus and M. Heinrich) and the French economists C. Benetti and J. Cartelier. This paper will confront the ‘post-Uno School’s’ reading of Marx’s theory of value, which poses the theories of value and money as unreconcilable, leading them to discard the theory of value in favour of a ‘monetary approach’. We show that the dismissal of value theory leads to an introduction of Baileyan and neoclassical elements into Marx’s theory, which we believe to be both theoretically and practically precarious.

Nature affinity and willingness to pay for urban green spaces in a developing country

Urban green spaces (UGS) provide multiple ecosystem services to city residents and are often their only places to spend time in a natural environment. Rapid urbanisation poses difficult choices for city planners who frequently decide to prioritise built infrastructure over retaining or enhancing green spaces, not least because the value of green spaces is rarely recognised in policy and planning processes. This is particularly true in developing countries which face rapidly growing populations and trade-offs between the growing demand for built infrastructure and access to nature. We address the value of public UGS using both a monetary approach and a non-monetary approach. A Contingent Valuation (CV) survey was used to elicit householderś willingness-to-pay (WTP) for three different scenarios to enhance public UGS provision in Bishkek, Kyrgyzstan. Scenarios were based on ongoing public debates on how to address the degradation and loss of existing park areas and on current plans to build new parks. The same survey also employed the Nature Relatedness (NR) scale, which measures individual cognitive attachment to nature, as a non-monetary valuation approach. Our findings showed that a high attachment to nature does not necessarily lead to higher WTP for improved provision of public UGS as WTP is constrained by household characteristics such as income, education and household size. We concluded that monetary valuation techniques could potentially underestimate the value attached to UGS by some population groups (e.g. rural migrants and pensioners) that attach great importance to UGS but whose values are not reflected in a high WTP. Thus, we argue that the assessment of the value of UGS would benefit from combining monetary and non-monetary approaches under various institutional contexts; and that this would be particularly important for cities in developing countries.

Maintaining Stable Macroeconomic Conditions

Executive SummaryThe UK economy faces more than usually uncertain times. Outside the European Union, and in an increasingly challenging global environment characterised by ageing populations, climate change, populism, protectionism, and more, the country needs to chart a new course. This may well require policymakers to consider unconventional approaches to monetary and fiscal policy and, at the very least argues for important modifications of the current policy regime, including the autonomous mandate of the Bank of England.At some point, there will be a major slowdown in economic activity. Yet the Bank of England has very little leeway to respond by cutting interest rates, and it has already adopted an armoury of unorthodox tools that may be decreasing in effectiveness. More radical monetary approaches would be likely to be politically controversial; and are not without risks. In these circumstances it would be a mistake to rely solely, or even largely, on monetary policy to maintain demand. It would be better to conduct monetary and fiscal policy in tandem, and for discretionary fiscal policy to be required to play a much more active role in demand management than hitherto. This would, for example, imply major extension of the automatic stabilisers and efforts better to calibrate discretionary initiatives with the business cycle.But given the long-term pressures on the public finances, more fundamental changes in the structure of spending and taxation are needed, along with a redrawing of fiscal rules and targets, under independent budgetary oversight. The current, historically low, share in GDP of public spending is itself unsustainable in light of the demand for services of an ageing population; plans should be made to raise it closer to the European average. In the most extreme circumstances it might become necessary to waive the fiscal rules entirely and for the Bank of England directly to underwrite fiscal stimulus in order to sustain aggregate demand. It would be wise for the authorities to consider the options in detail now, while the environment is still relatively stable.

European experience in measuring poverty and social exclusion: AROPE index

Evolution of poverty measurement methodology is moving away from a monetary approach as the one and the only towards the extended technique that combines different definitions of poverty. One of the approaches is to combine monetary indicator (income poverty) and non-monetary poverty assessment through deprivations. This approach gave birth to a comparative methodology for assessing poverty and social exclusion (AROPE index) which was adopted by EU countries in 2010. According to the AROPE methodology, population at risk of poverty or social exclusion is defined as those who are poor in terms of income poverty, suffer severe deprivations or living in households with a very low work intensity among members of household in working age (or without the employed). Analysis of the AROPE index and its components for the EU countries shows their extreme heterogeneity in terms of this index. However, despite the criticism, the methodology will remain unchanged until 2020, so that poverty dynamics in EU countries can be studied. According to the Statistical Survey of Income and Participation in Social Programs conducted by the Russian Federal State Statistics Service (Rosstat), AROPE rate in Russia (2016) is slightly higher than in EU (2017) but the proximity of the AROPE rates in Russia and EU raises doubts about the adequacy of the real standard of living reflection through this index. In 2017, the European Commission decided to modify the part of AROPE methodology related to material deprivation evaluation by expanding the list of deprivations and excluding those household goods that are already included in the consumption standard in European countries.