Monetary Conditions Research Articles

The Future of the CFA Franc: A Game Theory Approach

Aims: Based on the theory of non-cooperative games, this paper aims to determine whether the African Franc Zone (AFZ) countries should leave or remain in monetary cooperation with France. Methodology: Empirically, we implement a non-cooperative game pitting France against the AFZ countries. The strategies defined for the two players are "Maintain (M)" and "Exit (E)." The potential benefit is the preservation of the pooling of 50% of the AFZ countries' foreign exchange reserves in the French Treasury. Results: Using Nash equilibrium, the study analyzes strategic decisions in monetary cooperation. At the end of technical manipulations, we obtain two results based on two assumptions: (i) Assuming that the AFZ is the first player, and the decision being taken by political leaders without consulting the other sociological components, the optimal solution would be (M, M), reflecting the preservation of 50% of foreign exchange reserves within the French Treasury; (ii) Then, when the leaders of the AFZ countries incorporate the will of the people and the aspirations of the African Union, we arrive at two Nash equilibria, (E, E) and (E, M) respectively, giving gains of 50% for the AFZ and 0% for the French Treasury, significantly implying an exit decision for AFZ countries. These results show that, beyond the positions of technocrats and leaders, the people's will is a determining factor in the economic and monetary conditions of a country or group of countries. Conclusion: However, these equilibria could be sensitive to the order of the game (who plays first), political shocks such as coups d'état, types of threat, grouped or solitary exit strategies, but also to the bargaining power of the players, mixed-strategy equilibrium and external geopolitical influences. The countries of the AFZ need to strengthen their monetary sovereignty by reforming cooperation mechanisms with France, while also incorporating the aspirations of their populations into the decision-making process. This will promote a more legitimate and contextually relevant monetary policy that aligns with current economic and social realities.

BANK INDONESIA’S ROLE IN MITIGATING ISSUES OF MONETARY ECONOMIC SOVEREIGNTY AND HUMAN RIGHTS

Bank Indonesia has strategic authority to maintain the stability of monetary conditions in Indonesia through monetary policy. One concern is the risk is the emergence of shadow banking where fintech companies channel funds from the public. In the long term, this situation can impact the operational conditions of the banking system. One of Bank Indonesia’s mandates is to supervise the provision of services by fintech companies (peer-to-peer lending) to align with the national financial and payment vision and mission, including establishing interlinks between fintech and banking to avoid risks posed by shadow banking. Interlinking works if each party is willing to share customer data. If Bank Indonesia requires fintech companies to share customer or user data, it must be based on clear and specific legislation. This is crucial because user data falls under personal data, and the state must guarantee the protection of its citizens’ personal data. This article discusses the importance of legislation regarding the legitimacy of Bank Indonesia’s authority to regulate interlinks between fintech companies and Bank Indonesia, as well as banking institutions, to avoid shadow banking. The article employs a normative legal approach using literature and legal sources.

A Macroeconomic View on Banks’ Deposits after Monetary Interventions

Abstract We study the evolution of bank deposits in response to monetary policy shocks. The objective is to assess whether a significant deposit channel, that is, an outflow of deposits when monetary conditions tighten (Drechsler et al. 2017), emerges at the macro level. The analysis relies on the estimation of a large Bayesian structural VAR for the USA, and monetary policy shocks are identified with Arias et al. (2019)’s method. We find some elements of the deposit channel, but our results suggest that its relevance for the transmission of monetary policy at the macro level is limited.

Characteristics and Development Trends of the Digital Assets Segment in Modern Practice in Russia and Abroad

The paper aims to identify the key trends and risks associated with the introduction and spread of digital assets, including the digital ruble, in the Russian financial market. This study is timely due to the rapid growth of market capitalization for digital financial assets based on blockchain technology in both international and Russian financial markets, as more and more countries prepare to launch their own national digital currencies. However, there is a dearth of information in scientific and practical literature regarding the prospects, challenges, and risks associated with introducing digital financial assets, including the digital ruble, into Russia. The data for the analysis included official statistics and analytics from the Bank ofRussia and central banks of countries considering introducing digital national currencies. It also included the content of key Russian legislative acts related to digital currencies, as well as examples of the implementation of digital financial assets from Russian and international practices. The main research methods employed were a systematic approach, analysis of fundamental theoretical propositions in the literature, and case analysis. The paper discusses the existing types of digital financial assets, both internationally and in Russia, and assesses the demand for these assets in the Russian capital market, as well as their potential for lending to small and medium-sized businesses. It also considers the most common problems associated with the development of this segment and possible solutions, including regulatory measures. The second part ofthe paper explores the prospects and challenges of introducing a digital ruble into the Russian financial system. It assesses the potential impact of this new currency on the stability of domestic banks and monetary conditions in Russia, including inflation. Future research could focus on quantifying a wide range of risks associated with the introduction of digital financial assets, as well as modelling supply and demand for these assets.

Analysis of Theil Comparative Decomposition Index to Measure Regional Inequality Due to Industrialization Residues

The Industrial sector in Kendal County, Indonesia, is one of the national strategic projects aimed at promoting investment accumulation and job creation. Unfortunately, the rapid development of this Industrial sector has resulted in income inequality compared to other sectors. This research aims to examine and measure the contribution of the Industrial sector in Kendal County to aggregate inequality. Methodologically, this research uses a quantitative descriptive approach, which involves indexing inequality to reveal economic phenomena. The inequality indices include the Gini ratio index, the Williamson index, and the Theil index. In Kendal County, inequality is at a moderate to high level, as evidenced by a Gini ratio index of 0.411 and a Williamson index of 0.775. On the other hand, the Theil index reaches 0.519, placing it in between the Gini ratio and the Williamson index. The high inequality in Kendal County is attributed to the Industrial sector, accounting for 41.19%. The Industrial sector significantly contributes to the widening of inequality in Kendal County. This is due to the Industrial sector attracting production input factors such as investments, resources, human capital, monetary conditions, and technological innovation. However, the trickle-down effect does not occur between the Industrial sector and other economic sectors such as agriculture, food and beverages, trade, services, and accommodation.

The effect of fragmentation risk on monetary conditions in the euro area

This paper measures the output effects of financial fragmentation in the euro area by estimating an extended IS curve. Using a panel approach, we find that two fragmentation measures are significantly related to the output gap: sovereign spreads and spreads in the long-term cost of borrowing of the private sector. We use these output effects to construct a Monetary Conditions Index (MCI) for euro area countries. This index summarizes the combined effect of the monetary policy stance and financial fragmentation. We show that the MCI approach is well-suited to capture cross-country differences in a fragmentation-enhanced measure of the monetary policy stance. Using this metric, we find that during the sovereign debt crisis, the cross-country dispersion of MCI's based on sovereign spreads was much larger than that based on the private cost of borrowing. We also show that convergence is slower for MCI's based on sovereign spreads. We conclude that the causes of fragmentation in monetary conditions may change over time, and that this has implications for the appropriate policy response.

Determinants of bank efficiency in developed (G7) and developing (E7) countries: role of regulatory and economic environment

AbstractEfficiency is one of the key factors promoting the long-term performance and sustainability of the banking industry. In this context, this paper investigates the implications of the regulatory environment, macroeconomic factors, monetary conditions, and uncertainty for the banking sectors’ operating as well as investment efficiencies. Using data from G7 and E7 countries from 2001 to 2020, we employ a set of empirical techniques, including Fixed Effects, Random Effects, Panel Fully Modified Least Squares, Panel Dynamic Least Squares and Generalized Method of Moments. Our key findings show that leverage, capital adequacy, monetary conditions, economic growth, price stability as well as exchange rate stability and uncertainty have substantial effects on bank efficiency, with notable differences between impact on operational and investment efficiencies and developed (G7) and developing (E7) economies.

Interrelationships and Dynamics of Asian Currencies: A Comprehensive Analysis of Exchange Rate Trends and Implications for Investment

This study endeavors to offer a profound insight into the dynamics and interrelationships of Asian currencies vis-à-vis the US dollar. The analysis begins by juxtaposing the macroeconomic and trade backdrops of distinct currency pairs: the Chinese Yuan (CNY) and Singapore Dollar (SGD), the Thai Baht (THB) and Philippine Peso (PHP), the Japanese Yen (JPY) and Korean Won (KRW), and finally the Vietnamese Dong (VND) with the Indian Rupee (INR). These juxtapositions, accompanied by recent trade and economic data, outline the fluctuations in exchange rates against the US dollar. Various angles of exploration unravel the relationships of these currencies with their economic partners – China with ASEAN nations, Japan and Korea with their primary trading allies, and Vietnam and India post the 2008 financial crisis. Moreover, the study showcases how global and regional economic factors impact the monetary conditions of these nations. Subsequent correlation analyses uncover the intricate relationships both amongst these currencies and against the US dollar. Specifically, findings highlight the strong positive correlation between the Singapore Dollar and the Chinese Yuan, and the negative correlations of both the Vietnamese Dong and the Indian Rupee with the Chinese Yuan. The conclusion of this study accentuates the importance of understanding the dynamic relationships and macroeconomic settings of these Asian currencies for both investors and policymakers. Such an understanding offers invaluable guidance and insights for future investment decisions. Moreover, these revelations furnish valuable data and observations for further economic studies.

Alternative Monetary Policy Commitments and the Yield Curve*

We present a simple model to characterise central bank forward guidance, large‐scale asset purchases and yield curve control. Endogenous yield curve reactions to policy shocks are a key determinant of monetary conditions and can support or offset policy intentions. Alternative monetary policy tools allow the central bank to signal central bank private information to investors when the policy rate is at the effective lower bound, shaping yield curve reactions. Commitments to these tools offer policy certainty but can become time‐inconsistent if the economy recovers sooner than expected. If commitments become time‐inconsistent, endogenous yield curve tightening can offset excess stimulus. The strength of this offset, and the optimality of monetary conditions, improves with the precision of investor inferences of central bank private information.

The effect of macro variables on Indonesian stock exchanges in pandemic COVID-19

During the COVID-19 pandemic, it is crucial for stock traders inside a specific nation to conscientiously examine and assess the current monetary conditions and macroeconomic data. This study examined the influence of macroeconomic factors, namely unemployment, inflation, interest rates, and exchange rates, on the Indonesian stock market index within the framework of the COVID-19 pandemic. This research employs quantitative approaches, notably autoregressive distributed lag (ARDL) analysis, to evaluate the dynamics of time series data. The current analysis shows that a variety of factors, such as inflation, interest rates, and exchange rates, have an impact on the stock price index. Furthermore, the results of this study indicate that the deviation from the long-term equilibrium in the short term is rectified at a monthly rate of 33.47%. As a result of completing an exhaustive analysis of this study, it is of the utmost importance for the Indonesian government to concentrate its attention on the issues of unemployment, inflation, interest rates, and currency rates during the COVID-19 epidemic. This is done with the intention of achieving stability on the stock exchange. In addition, it is strongly suggested that investors do a comprehensive analysis of the volatility of stock prices by incorporating a variety of macroeconomic elements.

The Economy of Poverty-stricken Countries is Largely Dependent on the Economic Development of the United States

This case study investigates the multifaceted relationship between poverty-stricken countries and the economic development of the United States. At its middle, the survey hopes to see the value in how much nations grappling with poverty rely upon the money related prosperity and techniques of the US to help and move their own monetary conditions. The investigation spreads out against the setting of a globalized economy, where interconnectedness is a fundamental quality. The assessment uses a mixed techniques approach, solidifying quantitative examination and emotional encounters. On the quantitative front, the survey explores financial markers all through a specific time span to notice examples and models. At the same time, abstract evaluations are made through all around interviews with key accomplices, including policymakers, monetary investigators, and specialists from desperation stricken countries. This twofold method framework means to give a thorough cognizance of the various parts of the financial relationship under a magnifying instrument. The disclosures uncover a huge association between's the monetary bearing of the US and the thriving of dejection stricken nations. The audit recognizes fundamental variables like monetary agreements, new aide courses of action, and overall monetary components that basically influence this dependence. Furthermore, it reveals information into the inadequacies and impels looked by these countries because of their dependence on the cash related tirelessness of the US. In sensible terms, this assessment holds relevance for policymakers, monetary well-informed authorities, and by and large affiliations. It incorporates the principal for disheartening stricken countries to confine their money related frameworks, thusly decreasing their shortcoming to external monetary shocks. The outline sets commonsense outcomes that can prepare the improvement concerning versatile strategies, organizing nations toward certifiable money related progress that is less reliant upon the monetary sufficiency of a singular country. No matter what its liabilities, the clever appraisal sees unequivocal impediments. It highlights the unpredictability of money related affiliations, seeing that the evaluation, while broad, may not get the phenomenal nuances of individual country experiences. The rapidly creating commonly money related circumstance gives burdens in expecting broadened length considerations full affirmation. According to a social point of view, the coherent assessment snares the existences of people in destitution stricken nations. Cash related approaches and choices made by the US give fundamental weight in outlining the everyday certifiable components of those living in these countries. Understanding these parts becomes indispensable for enabling in general participation and chasing after fair money related new turn of events. To the extent that development and worth, the context oriented examination stays as a significant obligation to the ongoing composition. By offering a comprehensive assessment of monetary circumstances, it gives a foundation to extra ask for and technique improvement in the space of overall financial unevenness. The encounters got from this assessment are instrumental for scholastics, policymakers, and overall components attempting to investigate the complexities of a globalized financial scene with an eye toward empowering sensible and fair turn of events.

Employment and social trends by region

AbstractChapter 2 presents labour market trends by broadly defined regions. Headline indicators show an improvement in most regions, with a slight deterioration for 2024 and considerable downside risk. Employment is growing in all regions, although often driven by growth in the working‐age population. Employment‐to‐population ratios are also approaching pre‐pandemic (2019) levels in most regions. Unemployment rates are also recovering to pre‐pandemic levels, with similar subregional exceptions, including non‐GCC Arab States and East Asia, for which ratios remain above 2019 levels. Considerable heterogeneity remains across subregions and different labour market dimensions. Weaker job growth is expected in 2024 owing to various geopolitical tensions and tighter global monetary conditions.

Analysis of the Impact of Monetary Policy on the Housing Market

Monetary policy, a pivotal tool in macroeconomic management, wields significant influence over the intricate interplay of supply and demand within the housing market. This study aims to dissect the repercussions of monetary policy on this crucial dynamic. By synthesizing insights and case studies from diverse global contexts, and employing a spectrum of analytical models, this article endeavor to elucidate the outcomes stemming from both expansive and restrictive monetary approaches. Notably, the ebb and flow of interest rates instigate distinctive effects on housing supply and demand. This research scrutinizes the intricate relationship between monetary policy and the real estate market. Under loose monetary conditions, a surge in home purchases is anticipated, paralleled by an expansion in real estate investments by astute investors. Conversely, as monetary policy tightens, the propensity to buy homes wanes, with a corresponding contraction in investment activity. This shift inevitably reverberates through the real estate sector, precipitating a discernible downturn.

Monetary Conditions and Community Redistribution through Mortgage Markets

Monetary Conditions and Community Redistribution through Mortgage Markets

Analisis Pengaruh Risiko Kredit Dan Risiko Operasional Terhadap Profitabilitas Bank Umum Bumn Terdaftar Di Bei Untuk Periode 2021-2022

The global economy is still having an impact on the banking industry. Financial and monetary conditions this year are better than the previous year. Several domestic factors support the expansion of the banking industry. The aim of this research is to see the influence of credit risk and operational risk on profitability in state-owned commercial banks listed on the IDX for the 20212022 period. This research method is multiple linear regression, using tools in the form of SPSS software. The results of this research show that credit risk and operational risk simultaneously influence profitability for state-owned commercial banks registered on the IDX in the 2021-2022 period, partially using Return on Assets (ROA).

The Role of Central Banks in Managing Monetary Policy and its Effects on the Economy

This paper examines the crucial role of central banks in managing monetary policy and its profound effects on the economy. It provides an in-depth analysis of the objectives, tools, and strategies employed by central banks to regulate monetary conditions, control inflation, and promote economic stability. Additionally, it explores the transmission mechanisms through which monetary policy decisions impact various sectors of the economy, including interest rates, exchange rates, investment, consumption, and employment. The paper also highlights the challenges and limitations faced by central banks in conducting effective monetary policy, particularly in an era of economic globalization and financial interconnectedness. Overall, this research contributes to a comprehensive understanding of the intricate relationship between central bank actions, monetary policy, and macroeconomic outcomes.

Multi-faceted US uncertainty connectedness with domestic and global geopolitical risk

PurposeThis paper aims to explore the spillover impacts that domestic or global aspects of geopolitical risk generate on uncertainty. The latter is derived from a spectrum of different sources in the USA (economic policy, monetary policy, fiscal policy, national security, government spending, taxation) from 1985 up to November 2022.Design/methodology/approachVector autoregressive schemes are used to detect causality and reverse causality between each aspect of geopolitical risk and each source of US uncertainty.FindingsNotably, national security generates higher geopolitical risk by almost 8% in the first month but decreases GPR by 2% in the third month after the shock. USA is found to constitute a cornerstone as regards global peace and that the overall economic or monetary conditions or war status in the USA are remarkably more influential toward domestic and global geopolitical uncertainty than separate strands of fiscal policymaking. Reverse causality displays sizably weaker effects overall.Originality/valueThis study sheds light on the determinants of geopolitical risk and domestic instability by an international perspective and provides a compass for better decision-making for fiscal and monetary policymakers and market participants.

INTERACTION OF MACRO-MANAGEMENT POLICIES TO REDUCE LENDING GROWTH

This paper examines whether capital flow management (CFM) and monetary policies effectively reduce lending growth in emerging market economies (EMEs) in the presence of conventional and unconventional monetary policy actions undertaken by advanced economies. We apply a dynamic panel model with fixed effects to a sample of 24 emerging market economies for 2000–2021 using quarterly data and more continuous variables than in other studies rather than limiting the variability using proxies. Capital controls and macroprudential regulation, as CFM policy tools, moderate lending growth. This effect is particularly shown in countries with tighter monetary conditions. Our main findings highlight the useful role of coordinating CFM and monetary policies. This role stands for both fixed and flexible exchange rate regimes. Lastly, we find capital flow management and monetary policies manage to control lending in normal periods, but their coordination is less effective during crises and high volatility periods.

Estimating shadow policy rates in a small open economy and the role of foreign factors

Shadow monetary policy rates (SMPRs) are useful to evaluate the monetary stance when interest rates are at their lower bounds and unconventional policies are implemented. We present a methodology to estimate an SMPR for the case of a small open economy based on a structural dynamic factor model, which allows to consider the impact of foreign monetary conditions on domestic ones and identify their respective role for the domestic monetary stance. An application to Chile shows that unconventional policies drove the estimated domestic SMPR to negative levels during crisis episodes, with an important role for foreign factors. Alternative specifications that neglect small open economy dimensions yield noisy and less robust results, and imply very different conclusions about the level and drivers of the estimated SMPR.

Currency as an Imprint of the Nation-State: Monetary Conditions in the Ottoman Empire at the Beginning of the Nineteenth Century and the Transition from Ottoman Currencies to the Phoenix of the Hellenic State (1828)

Abstract: The economic decline of the Ottoman Empire was fundamental in various ways to the outbreak and progress of the Greek Revolution. The first attempts to create a national currency during the Greek Revolution reflect efforts to craft a modern state, and the eventual introduction of the phoenix by the first governor of the Hellenic State, Ioannis Capodistrias, underscores the shift to a newborn nation-state. The contradictions of Capodistrias’s monetary policy, however, reflected social antagonisms within Greece.