Monetary Authorities Research Articles

Politik Anggaran: Hubungan Keuangan Antara Pemerintah Pusat dan Pemerintah Daerah

This study discusses the financial relationship between the central government and regional governments. It examines the pattern of monetary authority in the implementation of regional autonomy to know the system of implementing regional autonomy and reviewing financial regulations related to the performance of regional autonomy. The results of this study show that regional autonomy can be fully implemented if the central government explicitly decentralizes financial authority and state financial laws are adjusted to the concept of autonomy. The relationship between central and regional financial controls in the context of autonomy still requires regulation. The results of this study become a reference to realize sustainable central and regional economic relations

The endogeneity of monetary policies of emerging market economies

ABSTRACT We analyse the responses of the monetary policy of five (Brazil, Chile, Mexico, India, and South Africa) emerging market economies (EME) to domestic and external (U.S.) shocks. We argue that the domestic policy rate is sensitive to risk premiums, financial markets, and the world economy, showing that Taylor’s Rule can benefit from the inclusion of these variables to understand the behaviour of the monetary authority. Therefore, our results suggest the following: i) policy rates are affected by risk premiums, ii) domestic monetary policy is affected by exchange rates, stock markets, and the U.S. and iii) there is heterogeneity in the factors explaining the behaviour of central banks.

Money Market and Economic Growth in Nigeria: An Autoregressive Distributed Lag Approach

This study investigated the impact of money market on the economic growth in Nigeria, 1991- 2020. The ex-post facto research design was adopted for the study. The Gross domestic product (GDP) was used as proxy for economic growth while Treasury bills, Commercial papers (CP) and Bankers’ acceptances (BA) were used as proxy for the money market variables. Tests such as descriptive analysis, unit root, bounds test for cointegration, ARDL, serial correlation, heteroskedasticity and granger causality tests were conducted. The results revealed that there is a significant but positive impact of TB, CP, BA on the GDP. The study recommended that that the Monetary authority should initiate policies that would encourage Money market operations while CBN surveillance role should be proactive in order to check practices that could undermine or sabotage market integrity and soundness

Term premia and short rate expectations in the euro area

Identifying the components of yields is a challenging task for monetary authorities. We use a term structure model with stochastic volatility and eurozone global macro factors to estimate time-varying term premia and short rate expectations for ten countries in the euro area. Unlike previous studies, we explicitly disentangle from these components the convexity effects that have substantial impact on long-term yields in turbulent times. The empirical evidence shows that term premia are significantly positively related to yield volatility across all countries, while term premia and expected short rates react in opposite directions to shocks in eurozone inflation and GDP growth expectations. A connectedness analysis based on variance decomposition suggests that there exist significant cross-country interconnections for the yield components, with the size of the links varying substantially over time and across countries.

Inflation Threshold in the Context of Structural Breaks: Evidence from Egypt Using the Logistic Smooth Transition Regression Approach

The disparities in structure and nature of developing economies, in terms of their level of development, yield mixed results on the linear/nonlinear relationship between inflation and real GDP (i.e., the inflation threshold), which should be revisited. No study examined the effects of inflation on real GDP in Egypt, particularly after the 2011 revolution and the November 2016 exchange rate floating. This study empirically investigates the inflation threshold in Egypt over the period 1976-2019. In other words, it seeks to determine the optimal level of an inflation rate such that beyond it, inflation becomes a destructive element to economic growth. To this end, the logistic smooth transition regression (LSTR) has been performed. Considering structural breaks, this study checked the stationarity of the variables with the Kapetanios unit root test. Results of the LSTR technique highlight a statistically significant positive relationship between inflation and GDP growth in the lower regime at 9.32%. Beyond this threshold, inflation harms GDP growth, indicating an asymmetric relationship between the two variables. Such a specified estimated inflation threshold could assist monetary authorities in setting their inflation target to be below that threshold. This study recommends that policymakers restrict inflation and keep it below the estimated threshold, considering that inflation in the Egyptian economy is derived from the aggregate supply, demand factors and the production apparatus's inelasticity.

Fiscal and Monetary Policies Interactions in Nigeria and South Africa: Dynamic Stochastic General Equilibrium Approach

The interaction between fiscal and monetary policies in achieving macroeconomic goals has been a subject of debate, particularly on whether they complement or substitute each other. This issue arises when both policy authorities are independent of each other. This study aims to revisit the interaction of fiscal and monetary policies in Nigeria and South Africa using a dynamic stochastic general equilibrium model (DSGE) and calibration technique. The model consists of 20 equations that illustrate the behaviour of endogenous variables. The parameters are obtained from relevant DSGE literature and economic intuitions about the two economies. The findings reveal that fiscal and monetary policy variables interact in both economies. Inflation responds to fiscal policy shocks such as government spending, revenue and borrowing shocks. Monetary authorities’ decisions such as interest rates and inflation also affect fiscal policy variables. However, the performance of monetary and fiscal policy variables is better in South Africa than in Nigeria. The study recommends closer coordination between the monetary and fiscal authorities in both economies to resolve policy design and implementation issues. Government monitoring and assessment units should also be strengthened to track the implementation and delivery of policies decided upon at coordination meetings.

An Empirical Analysis of the Influencing Factor of International Reserve

International reserve refers to the assets that a country 's monetary authority can use to intervene in the foreign exchange market and pay the balance of payments at any time. With the development of China 's foreign economy, China 's foreign exchange reserves have grown rapidly since 1995, reaching a peak of $ 3.84 trillion in 2014.For a long time, international reserves have become one of the important academic topics actively studied and discussed by many economists at home and abroad. The purpose of this paper is to study the impact of various macroeconomic indicators on the scale of international reserves, in order to find out the most significant indicators that affect the scale of international reserves, and to provide a theoretical basis for optimizing international reserve management. By using Eviews to conduct a regression analysis on the data of the China statistic yearbook from 1981 to 2021, this paper attempts to find out the factor that influences the international reserve and put forward advice for improving international reserve management. According to the investigation of international reserves, economic scale, average import tendency and exchange rate, the final conclusion is that the impact of economic scale and average import tendency on the scale of international reserves is significant.

Global Financial Crisis: Causes and Reactions

This paper examines the reasons behind the financial crisis of 2008, its effects, and the subsequent developments. At that time, the federal government's monetary policy promoted subprime loans, and credit default swaps were derived based on subprime loans. This series of reasons led to a huge bubble in the real estate market and directly caused the subprime mortgage crisis. Companies are closing one after another, unemployment and inflation are rising, and people's lives are getting more complex. To survive this crisis, the government passed pertinent legislation to support economic growth, and banking regulators corrected these laws to stop a repeat of the subprime mortgage crisis. Nowadays, the outbreak of the COVID-19 epidemic and the conflict in Ukraine have brought the world economy into trouble again. As a result, the 2008 financial crisis study is crucial to understanding modern society because it can be used to prevent future financial crises and effectively address economic problems.

The Impacts of the Feds Interest Rate Hike on Canada: Financial Markets and Prospect of International Companies

Canada is not only a geographic neighbor of the United States, but also one of its most important trading partners. The Fed's interest rate hike has had many effects on Canada, not only in terms of its impact on financial markets, but also in terms of its impact on international trade. This paper will discuss the perspective of financial markets, the impacts of the Fed's interest rate hike on the exchange rate market, the stock market and the bond market. In terms of international trade, Cenovus Energy Inc. will be taken as an example to study the impacts on international trade between the two countries based on the existing background from 2020 to 2022 because during the past three years, there were the period that the Fed did not adjust interest rates and the period that the Fed raised interest rates suddenly. Finally, conclusions will be drawn from the above analysis, and some recommendations for Canadian monetary authority, multinational corporations, and investors will be given.

Cryptocurrency and central bank digital currency: an insight from the regulatory perspective

The scope of direct transactions globally with almost zero transaction cost and keeping transactions anonymous without facing any centralized control has caused a huge demand for cryptocurrency worldwide whereas its excess volatility, no underlying backings, no centralized control, and anonymity behind transactions have contributed significant risk for the entire financial system. Unlike cryptocurrency, Central Bank Digital Currency, being a virtual currency backed by the central bank or the monetary authority of a country serves all the functions of money, such as a store of value, a unit of account, and a medium of exchange, facilitates the attainment of macroeconomic goals and financial stability. To ensure the safeguarding of the interest of the people, business enterprises, and the financial system of a country from a broader perspective, adequate regulatory measures regarding cryptocurrency are a must. There should be proper harmonization and coordination among the countries regarding the regulatory approach as the markets of cryptocurrency are integrated globally.

Monetary Stability under Dual Banking System before Covid-19 Pandemic in Indonesia

The Indonesian monetary authority or the Central Bank of Indonesia has established a policy in accordance with the constitution No. 3 in 2004, the monetary policy taken by Central Bank of Indonesia is the inflation targeting framework (ITF). To achieve this, Central Bank of Indonesia established intermediary policies which are regulating the volume of the money supply, stipulating the minimum reserves banking and regulating credit or financing. From some of these intermediary policies, the authors are interested in researching monetary policy in the dual monetary system in Indonesia, where the instruments used by each monetary system are different, so which system is the most stable and sustains Indonesia's growth and which system is the best to achieve ITF goals. The method used is Autoregressive Distributed Lag (ARDL) with data from 2010-sep 2018. The results show that the instruments used in conventional monetary systems based on interest rates have no influence on economic growth, whereas instruments in the Islamic monetary system have an influence on economic growth.

An Investigation of the Impact of Financial Liberalization Reforms on Credit to the Private Sector in Nigeria

This study examines the effects of financial liberalization on credit to the private sector in the Nigerian economy from 2000 to 2021. This was aimed at ascertaining how DEP representing banking sector deposits, IRS representing interest rate spread and MPR representing monetary policy rates has stimulated the credit to the private sector in Nigeria. Historical data was collated and estimated employing the ARDL form of Ordinary Least Squares (OLS) technique. The empirical results indicate that bank deposits was positively significant to private sector credits while monetary policy rates were negatively significant. On the contrary, interest rate spread had negative impact but not statistically significant. On the basis of the findings of this study, the following recommendations are made.The monetary authorities have to regularly review their monetary policy direction to bring monetary policy rates lower than it is. Policies that reduce interest rate spread be pursued to enhance the performance of the credit to the private sector.

Macroeconomic Variables and Stock Market Development in Africa: Evidence from Nigeria

This study examines the macroeconomic determinants of stock market development in the Nigerian economy. This was aimed at ascertaining how INF representing real interest rate, GDP representing gross domestic product per capita, and BMS representing broad money supply has stimulate the stock market development in Nigeria. Historical data was collated and estimated employing the ARDL form of Ordinary Least Squares (OLS) technique. The empirical results indicate that only inflation had a negative and significant impacts on stock market development while real output and money supply exerted positive but insignificant impacts. On the basis of the findings of this study, the following recommendations are made: The monetary authorities have to regularly review their monetary policy direction to bring inflation lower than it is; Regulatory authorities and policy makers should ensure that there is general stability in money supply and exchange rates, while trying to put the inflationary trends under control and at the same time maintain a stable interest rate regime in the economy in order to achieve improvements in stock market performance to bring about desired economic growth and national development.

Монетарна безпека національної економіки в умовах зростання невизначеності та ризиків недовіри

Introduction. The growing uncertainty of financial and economic dynamics leads to changes in the level of trust in subjects and institutions of the monetary sphere, which undermines the foundations of stability and provokes crises. This forces us to look for new approaches to ensuring the stability of the monetary unit and monetary security. Problem Statement. The main problem is the lack of scientific knowledge regarding the mechanisms of the impact of growing uncertainty and mistrust on the behavior of business entities, and the monetary sphere, which is especially sensitive to such changes, to find effective means of counteracting the negative impact of these processes and maintaining monetary security. Purpose. To identify a basic tool for ensuring confidence and monetary security, which could become the basis for building a safe monetary system in conditions of growing uncertainty and risks of increasing the level of mistrust associated with pandemics, crises, military actions and other destabilizing factors. Methods. The research is based on the application of the method of ascent from the abstract to the concrete, which combines logical operations, theoretical reproduction and ascent to find out directions of the practical implementation of the obtained theoretical results. Results. The relationship between trust and monetary stability and its features in conditions of growing uncertainty and risks are revealed. The internal structure of trust and its external manifestations in trust in subjects, institutions and objects are clarified. The approach to the interpretation of monetization is substantiated, which made it possible to distinguish between inclusive and segregative monetization. The use of the regime of targeting the stability of the monetary unit in conditions of growing uncertainty and risks is proposed and its content is disclosed. Conclusions. The growth of uncertainty significantly affects the dynamics of trust and its relationship with macroeconomic, monetary and fiscal parameters. An important role in maintaining the trust of the population and business entities in the conditions of increased risks and uncertainty of economic development is played by the actions of power structures, in particular, the monetary authority. Even the growing general disproportionality of the economy can be combined with the preservation of trust, if the economic parameters directly affecting people's lives remain relatively stable, and the authorities demonstrate to society the ability to control the situation. In order to ensure monetary stability and security, monetization, which must be inclusive and not segregative, is essential. An adequate basic tool for ensuring trust and monetary security in the conditions of growing uncertainty and monetary and fiscal risks is the unfolded targeting of the stability of the monetary unit, in which inflation (internal stability) is controlled in relation to the dynamics of the exchange rate (external stability).

Effect Of Monetary Policy Regimes On Output Growth In West Africa

This paper examines the effect of monetary policy regimes on output growth in West Africa. This was undertaken given that countries in the region require output growth, but are pursuing different monetary policy regimes and are yet to witness adequate output growth. So this set the objective of the study. The study made use of a longitudinal research design that obtained cross-section data from the secondary sources of the Central Banks of the selected countries, the World Bank Development Indicator, the International Monetary Fund as well as the International Financial Statistics database for the period from 2000 to 2021. The data analysis method involved using both descriptive and inferential statistics. The Panel Autoregressive Distributed Lag (ARDL) using a Pooled Mean Group (PMG) regression was used for the estimation. The results obtained indicate that the monetary policy rate was only effective in the short run to exert a significant effect on output growth, while the money supply was significant in both the short run and long run. So, the study makes the following recommendations; money supply is an effective tool for achieving output growth and this should be effectively managed to curb inflationary trends that may arise as a result of increased money supply in order not to reverse economic growth. Monetary authorities should promote activities in all sectors of the economy, particularly in the high-growth sectors. There should be cooperation between the monetary and fiscal authorities in West Africa to ensure smooth coordination and consistency in monetary and fiscal pursuits.

Кредитний портфель українських банків: аналіз впливу воєнного стану

In 2022 and at the beginning of 2023, the financial system of Ukraine proved its institutional capacity. The results of the banks' activities in 2022 confirm their significant contribution to its stabilization during the period of full-scale Russian aggression. The measures of the monetary authority were more balanced and effective compared to the events of 2014-2015. The current state of the banking system proved the integration of Ukrainian banks into the European financial space. Problem Statement. Systematization of problems and approaches to the strategic development of the banking system in the period of post-war economic recovery and its impact on the general security of money circulation in the country.The given calculations and graphs make it possible to compare the trends in the main markets of banking operations in 2014–2023. Purpose. To assess the current state of dynamics of active and passive operations of Ukrainian banks after the pandemic crisis and in the midst of full-scale Russian aggression, as well as the impact of their activities on the development of the real sector. Methods. General scientific and special methods are used: analysis, synthesis, grouping, description, comparison, theoretical generalization and abstract-logical. Results. The dynamics of changes in the resource base of banks at the expense of legal entities and individuals, as well as their credit and investment portfolios, are presented. The main macroeconomic strategies of monetary policy, which influenced the development of banks in 2014–2023, were considered. The importance of resuming the cooperation of the Government of Ukraine with international financial organizations in 2023 and further institutional development of the banking system was emphasized. Conclusions. The quality of management of the financial sector and the banking segment, in particular in 2022, is higher than in 2014. The bank-centric financial system that has developed in Ukraine should have a long-term strategy for the development of institutions along with a transparent mechanism for evaluating the quality of their management. For the development of the banking system in order to improve the resource provision of the economy, it is necessary to return to the idea of creating a national reconstruction and development bank, a bank of assets damaged and destroyed by the war.

Does negative interest rate policy impact carbon emissions? Evidence from a quasi-natural experiment

Financial policy is an essential tool for achieving sustainable economic development and has been extensively studied in the environmental economics literature. This study employs panel data of 45 countries from 2007 to 2019 and a multi-period difference-in-differences (DID) method to investigate the mechanism and transmission path of negative interest rate policy on carbon dioxide emissions. The results indicate that the implementation of negative interest rate policy can significantly reduce CO2 emissions, and various robustness tests substantiate this result. Mechanism tests show that when the interest rate breaks the zero lower bound constraint, CO2 emissions can be reduced through the exchange rate channel, while the credit channel is blocked. Furthermore, the mitigation effect of negative interest rate policy varies with country heterogeneity, and countries with low comprehensive development, high economic growth, and high investment levels have more potential to control environmental degradation. The study evaluates the effects of negative interest rate policy from an environmental perspective, providing useful policy insights for monetary authorities to formulate effective policies to promote coordinated economic and environmental development.

Endogenous growth and monetary policy: How do interest-rate feedback rules shape nominal and real transitional dynamics?

Monetary authorities have followed interest-rate feedback rules in apparently different ways over time and across countries, with the literature distinguishing, in particular, between active and passive monetary policies. We address the transitional-dynamics implications of these different types of monetary policy, in the context of a monetary growth model of R&D and physical capital accumulation. In this setup, well-behaved saddle-path transitional dynamics occurs under both active and (sufficiently) passive monetary policies – a relevant result little emphasised in the literature. We carry out our study from the perspective of a one-off shift in the structural stance of monetary policy (i.e., a change in the long-run inflation target) and a one-off shift in real industrial policy (i.e., an R&D or a manufacturing subsidy). We uncover a new channel through which institutional factors (the characteristics of the monetary-policy rule) influence the economies' convergence behaviour and through which monetary authorities may leverage (transitional) growth triggered by structural shifts.

Asymmetries in multi-target monetary policy rule and the role of uncertainty: Evidence from China

Have monetary policies asymmetrically responded to targets besides output and inflation? Multiple targets have been found to exist for monetary authority, and uncertainty is having a growing impact on monetary policy in China. Using the nonlinear autoregressive distribution lag (NARDL) model and data from China from 2001Q1–2022Q3, we build a multi-target monetary policy rule with uncertainty and verify the monetary authority’s asymmetric reactions to the exchange rate, housing price, and uncertainty. Specifically, the Monetary authority of China responds more to a decline than increase in the output gap, and responds more to an increase than decrease in the inflation gap, exchange rate gap, housing price gap, and uncertainty. This practice supports the view of expanding the targets of the Taylor rule, while also providing innovative ideas for asymmetric monetary policy responses for countries with an economic structure or population density comparable to China.

Reconstructing lease-to-own contracts: A contemporary approach to Islamic banking standards

The Palestinian Monetary Authority issued decision No. 15 of 2019 demanding Islamic banks to act according to Islamic standards set by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). Among the essential financial services, Islamic banks offer Ijārah Muntahiyah bi-t-tamlīk contracts (lease-to-own), which share a similar purpose with financial leasing contracts. This decision places Islamic banks in a challenging predicament, caught between the modern doctrinal orientations of AAOIFI standards and the traditional orientations provided in Al-Majjahllah Code. The formation of Ijārah Muntahiyah bi-t-tamlīk contracts relies on a promise of sale issued by the bank to the tenant, contingent on the complete payment of agreed-upon installments. The first challenge arises because the general rules do not recognize the unilateral promise as a source of legal obligations, thus rendering it without legal value. The second issue stems from several contract clauses that contravene AAOIFI standards by burdening the tenant with most of the bank's obligations. Despite the importance of resolving these contradictions, no comprehensive review has been undertaken to date. This research introduces specific recommendations to ensure the consistency of these transactions with Islamic standards and relevant legislative provisions as provided in national law. By bridging this gap, the study seeks to enhance the effectiveness and compliance of lease-to-own contracts in Palestinian Islamic banks, fostering a more robust and Sharia-compliant financial system.