Monetary Measures Research Articles

ROLE OF FINANCIAL INSTRUMENTS IN ENSURING LIQUIDITY AND STABILITY OF THE CURRENCY MARKET OF UKRAINE IN THE CONDITIONS OF MILITARY CONFLICT

In the conditions of military actions, liquidity of the currency market is of critical importance for the financial stability and security of the state, which stipulates significant relevance of the issue of instruments of liquidity provision. The research aims to identify the influence of the instruments of the National Bank of Ukraine (NBU) on the liquidity of the currency market of Ukraine within the context of long-term military conflict.The methods of regression analysis, correlation analysis, and analysis of variance were used in the study to determine the leading factors that influence the liquidity of the currency market in Ukraine in the conditions of military conflict.The study of the liquidity of the currency market through the prism of linear regression reveals the relation between the core economic indicators and the level of liquidity of the currency market during the military conflict. The model with a coefficient of determination 0,774 was found to effectively describe 77,4% of liquidity variability, underlining the significant influence of such factors as central bank policies and macroeconomic conditions. Significant coefficients for central bank interventions (1,7867), regulatory measures (59,8199), volume of international aid (-1,5684) and inflation (-99,9780) indicate their influence on the liquidity of the currency market in the conditions of military conflict. The influence of regulatory measures with a correlation of 0,59 is especially important.The article emphasises the necessity for minimising dependence on external financing and inflation control through monetary measures to ensure price stability. Further study perspectives involve consideration of the influence of digital currency of central banks on the liquidity of the currency market.

The ECB's Solution to the Inflation Caused by the Russia-Ukraine Conflict

Abstract: The Russian-Ukrainian War saw a major escalation on February 24, 2022, when Russia invaded Ukraine, sparking the biggest battle in Europe since World War II. In addition to negatively affecting international relations, this lengthy conflict has had a significant negative influence on world markets, especially those in the Eurozone. The ongoing conflict has intensified inflationary pressures, necessitating the implementation of strong fiscal and monetary measures by the European Central Bank (ECB). This study analyzes the inflationary effect of the Russia-Ukraine crisis on the economies of the Eurozone and assesses the ECB's policies using macroeconomic models, such as the IS-PC-MR model. It explores the complex economic fallout, which includes unstable energy supply, higher industrial prices, and a decline in consumer confidence. The economy has stabilized largely because of the ECB's initiatives, which have included coordinated fiscal policies, interest rate hikes and asset purchase adjustments. Despite these initiatives, problems still exist, such as controlling the growing public debt and striking a balance between inflation management and economic growth. In order to strengthen economic resilience, the conclusion highlights the need for ongoing adaptation and international cooperation. Investments in integrated fiscal measures, diverse supply chains, and renewable energy are suggested as being crucial for long-term stability. The purpose of this study is to provide insights for future economic crisis management and to contribute to policy-making conversations.

Volatility Index, Exchange Rate, Economic Growth On Stock Indexes

This study aims to analyse the effect of economic growth on the stock price index in Indonesia and Malaysia during the COVID-19 pandemic. Using regression analysis, this study measures the relationship between economic growth and the stock price index, focusing on both countries' fiscal and monetary policies. The results show that economic growth has a positive and significant effect on the stock price index in Indonesia and Malaysia, reflecting investors' optimism towards the economic outlook. Economic stimulus policies and monetary measures the government and central bank take are essential in supporting economic recovery and stock market stability. This research provides important insights for investors in making more informed investment decisions based on economic growth indicators. This study also emphasises the importance of responsive and coordinated economic policies to support economic growth and stock market stability in times of crisis.

Inflation-threshold effect on current account imbalance in Tunisia: new evidence from a nonlinear approach

PurposeIn this article, we assess the impact of inflation on the current account balance in the case of Tunisia, covering the period 1976–2022.Design/methodology/approachThe study utilizes a threshold regression approach proposed by Hansen (2001) in a bid to identify inflation threshold values.FindingsThe results show two inflation threshold values (3.87% and 8.41%), which determine three inflation regimes in the case of Tunisia. In lower inflation regimes, inflation has a positive and statistically significant impact on the current account balance. However, in higher inflation regimes, where inflation rates exceed 3.87%, there is a negative and statistically significant correlation with the current account balance, resulting in a deficit.Originality/valueThe research suggests the need for a new policy approach that considers these threshold levels to address high inflation rates, which currently stand at approximately 11%, and aims to restore them to the targeted rate of 4%. This necessitates coordinated monetary and fiscal measures.

Top Management Team Heterogeneity, Top Management Incentives, and ESG Performance: Evidence from Chinese Listed Companies

The challenge of balancing economic and social benefits has emerged as a critical issue for corporate sustainable development. Environmental, social, and governance (ESG) criteria are key considerations for enterprises aiming to enhance both social and economic benefits simultaneously. Based on the upper echelons theory, differences in cognitive foundations and values brought about by top management team heterogeneity can influence corporate decisions. Taking A-share listed companies in China from 2011 to 2022 as samples, we construct a two-way fixed-effects model by firm and year to explore the impact of top management team heterogeneity on corporate ESG performance, and we introduce top management incentives as a moderating variable to further analyze the underlying mechanisms. Our results demonstrate that the gender heterogeneity, functional background heterogeneity, and overseas background heterogeneity of top management teams have significant positive impacts on corporate ESG performance, and monetary compensation incentives and control incentives to top management teams play a positive moderating role, while equity incentives exhibits a negative moderating effect. These findings remain robust across alternative measures of corporate ESG ratings and monetary and control incentives, and through the SYS-GMM model test and instrumental variable approach to address endogeneity. This research contributes to the literature on corporate ESG by validating and extending the understanding of how top management team characteristics affect organizational outcomes, and it provides practical guidance for enhancing corporate ESG practices. The implications of this study suggest that to enhance corporate ESG performance, enterprises should prioritize the promotion of top management team heterogeneity and tailor their incentive mechanisms accordingly.

Unconventional Monetary Policy Response to Covid-19 and Its Impact on Inflation in Morocco

This study explores the impact of unconventional monetary policy on Morocco’s economy during the Covid-19 pandemic. We used a hybrid model combining a financial dynamic stochastic general equilibrium (DSGE) model with a standard epidemiology model, enabling us to consider both economic and epidemiological factors. Our results indicate that unconventional monetary policy cannot fully mitigate the adverse effects of a pandemic, except for an exogenous increase in Central Bank claims. We also found that Morocco’s high inflation is partly due to Bank Al-Maghrib’s unconventional monetary measures in response to the pandemic. Our research underscores the importance of monetary authorities balancing the benefits and risks of unconventional monetary policy. While it can stimulate the economy during crises, it should be used judiciously to avoid long-term negative effects. Incorporating epidemiological factors into macroeconomic models is crucial for understanding the intricate interplay between the economy and public health crises.

Non-standard monetary policy measures and bank systemic risk in the Eurozone

Non-standard monetary policy measures and bank systemic risk in the Eurozone

Default Risk, Risk Premium, and Corporate Resilience: The Role of Regulatory and Stabilization Policies

This study investigates the interaction between monetary and macroprudential policy measures and evaluates whether policymakers should address financial disruptions. To achieve this goal, we developed a dynamic stochastic general equilibrium model that incorporates frictions in financial markets and financial shocks alongside traditional macroeconomic shocks. One of the main focuses of macroprudential policies is to stabilize credit cycles. We used Moroccan data to estimate the model and assess various policy actions to counter imbalances in financial markets, including adjustments to the interest rate tool. Our findings highlight the benefits of addressing financial disruptions, the extent depending on the shock characteristics. While acting on interest rates in response to financial variables may stabilize some economic factors, it has the potential to increase the volatility of others substantially. The results confirm that the use of optimal regimes can reduce default processes and ensure companies stabilize risk premiums. Implementing such regulations leads to greater opening of the companies’ capital to external financing sources. JEL Classification C11, D53, D58, E52, E58

Why Survey-Based Subjective Expectations Are Meaningful and Important

For decades, households’ subjective expectations elicited via surveys have been considered meaningless because they often differ substantially from the forecasts of professionals and ex-post realizations. In sharp contrast, the literature we review shows that household characteristics and the ways in which households collect and process economic information help us understand previously considered puzzling facts about their subjective expectations. In turn, subjective expectations contribute to explain heterogeneous consumption, saving, investment, and debt choices as well as different reactions by similar households to the same monetary and fiscal policy measures. Matching microdata on households’ characteristics with the price signals the same households observe, their subjective expectations, and their real-world economic decisions is crucial to establishing these facts. Our growing understanding of households’ subjective expectations inspires several theoretical and empirical research directions and begets the design of innovative and more effective policy instruments.

Varieties of central banking: the Nordic Model beyond a fiscal-centric approach

ABSTRACT Since policymakers and scholars coined the term in the 1930s, the Nordic Model has often been considered to denote a homogeneous political entity in which the constituent countries are ostensibly interchangeable. As a result, seldom attention has been afforded to what fundamentally differentiates Denmark, Finland, Norway, and Sweden. By going beyond traditional ‘fiscal-centric’ accounts of the Nordic model, and instead focusing on the role of central banks and monetary policy, we show that each country bares far less similarities than has often been assumed in the literature. We trace this heterogeneity back to variegated responses to the 1970s crises of Fordist capitalism and draw on growth model theory to explain this divergent trajectory. We show how these differences shaped how each country responded to the Global Financial Crisis and the COVID-19 pandemic, where a variegated array of monetary measures was employed to uphold their own distinct growth model. By accounting for the role of central banks within the Nordic Model, we propose that it is better understood as a series of models, drawing attention to the function of monetary policy within the growth models perspective in the political economy literature.

An unconventional FX tail risk story

We examine how the tail risk of currency returns over the past 20 years were impacted by central bank monetary and liquidity measures across the globe with an original and unique dataset that we make publicly available. Using a standard factor model, we derive theoretical measures of tail risks of currency returns which we then relate to the various policy instruments employed by central banks. We find empirical evidence for the existence of a cross-border transmission channel of central bank policy through the FX market. The tail impact is particularly sizeable for asset purchases and swap lines. The effects last for up to 1 month, and are proportionally higher for joint QE actions. This cross-border source of tail risk is largely undiversifiable, even after controlling for the U.S. dollar dominance and the effects of its own monetary policy stance.

THE ROLE OF THE MONETARY POLICY IN STABILIZING INFLATION IN THE EUROPEAN MONETARY UNION DURING THE ENERGY CRISIS

<p>Monetary policy, together with fiscal policy, are key policies in stabilizing economies from shocks that come from offers and demands. The monetary policy, with the application of its instruments and channels of transmission, among other things, aims to maintain a stable level of prices, that is, a low level of inflation by permanently creating targeted measures and establishing a target corridor in which inflation should move towards.The emergence of the Corona crisis in 2020 indirectly through the governments' health care measures, which included the ban on movement, implied the disruption of global supply chains, the reduction of aggregate demand, and the depletion of state budgets, in addition to this, the beginning of the Russian-Ukrainian conflict and the imposition of sanctions on banning trading in Russian oil and gas on the world stock exchanges caused a rapid increase in the prices of energy in Europe, this reflected in the prices of almost all products and services, and the same resulted in a characteristically high or double-digit inflation rate within the Eurozone.</p> <p><i>The subject of the research is the analysis of the role of monetary policy in the stabilization of inflation in the Eurozone through monetary measures, instruments of the European Central Bank and transmission channels. The scientific goal of the research is to examine the impact of monetary measures on the stabilization of inflation in the Eurozone by applying a theoretical-methodological basis and quantitative analysis.</i><i></i></p> <p><i>From the research it can be concluded that with a high inflation</i><i> rate</i><i>, </i><i>the </i><i>monetary policy has a significant role in creating policies and measures for stabilization and reduction of inflation precisely because a significant correlation has been identified between inflation and the variables that can be affected by monetary measures, it can also be concluded that the Eurozone, </i><i>even though known as a</i><i> complicated optimal currency area due to the fact that different countries are in different business cycles, the ECB's measures had a stabilizing role and contribute to the reduction of inflation and macroeconomic stability as a whole.</i></p>

Тенденции развития социальной защиты в разрезе отдельных категорий населения

The relevance of the work is due to the need to systematize modern changes in the field of social protection in relation to certain categories of beneficiaries. The empirical basis of the study consists of materials from an expert online survey of 28 representatives of academic science from 19 Russian cities. The analysis made it possible to draw a number of conclusions. In recent years, priority beneficiary categories have included families with children, elderly citizens, and people with disabilities. Social assistance/support and social services have become the predominant social protection mechanisms that have seen active development in recent years. The urgent need to increase the birth rate has given priority to monetary measures based on the mechanism of social assistance and support implemented at the federal level in relation to families with children. The state has identified social services at the regional level as the key mechanism for meeting the needs of elderly citizens and people with disabilities. Solving the problem of low pensions for elderly citizens and people with disabilities, based on the application of mechanisms of social insurance and social security, requires additional financial resources and changes in legal regulations at the federal level, which are currently unattainable in the near future. Conclusion dwells upon the fact that the development of social protection measures in recent years has been oriented not only towards the needs of beneficiaries but also towards the necessity of swiftly addressing issues relevant to the state. This necessitates the selection of appropriate social protection mechanisms and sources of resource provision for the measures undertaken.

The Unforeseen Results of Unconventional Monetary Dominance

This empirical study investigates the implications of the substantial size of central banks’ balance sheets and the potential risks of their gradual normalization. Following the global financial crisis of 2008, central banks worldwide implemented unprecedented monetary stimulus measures, including large-scale asset purchases and unconventional policy tools like quantitative easing (QE). As a result, central bank balance sheets expanded significantly, reaching historically unprecedented levels in size and composition. While these measures played a crucial role in stabilizing financial markets and supporting economic recovery, concerns have arisen regarding the eventual reduction of these balance sheets and the possibility of disruptive market dynamics. This research examines the challenges and risks of normalizing central bank balance sheets. Furthermore, it explores the potential occurrence of “hard landing” scenarios, where sudden reductions in balance sheets could trigger financial market turmoil and economic downturns. By analyzing historical precedents and theoretical frameworks, this paper offers valuable insights into the intricate relationship between central bank balance sheets and the dynamics of financial markets. It provides policymakers and market participants with valuable perspectives on navigating the path toward monetary policy normalization.

Interconnectedness of Health and Economy in Post-COVID-19: A Systems Thinking Approach to Synergies, Trade-Offs, and Policy Responses in Nepal.

This study addresses the economic challenges posed by the Coronavirus Disease 2019 (COVID-19) pandemic, with a specific focus on Nepal. Employing a Systems Thinking approach, the study develops a comprehensive model that integrates macroeconomic interventions, exploring the trade-offs and synergies among various economic sectors. The interconnectedness of health, economic, and policy domains highlights the need for a holistic understanding of the pandemic's effects. An exploratory research design was used. The model introduces three primary subsystems-import, local demand, and local production-illustrating their interdependence. The causal loop diagram depicts the implications of fiscal and monetary policies on the economy, emphasizing the synergy and trade-offs resulting from policy interventions. Findings reveal the significant economic impact of the pandemic on Nepal, leading to its negative growth rate in FY 2020/21, the first time Nepal has experienced this in the last two decades. The results show that both intended and unintended consequences are observed following the adoption of fiscal and monetary policy that aimed at minimizing the spread of virus suggesting a complex nature of relationship among the policy variables. The fiscal policy induced negative consequences on the increasing loan, slow revenue growth, while positive feedbacks are observed on increased investment opportunities, and boosting of local economy. The monetary measures yielded unintended consequences on the rising land prices, surge in share market. The study concludes by emphasizing the crucial role of informed policymaking in navigating the complex landscape, offering insights for creating a resilient and sustainable post-pandemic future.

Are reference measures of law-invariant functionals unique?

A functional defined on random variables f is law invariant with respect to a reference probability if its value only depends on the distribution of its argument f under that measure. In contrast to most of the literature on the topic, we take a concrete functional as given and ask if there can be more than one such reference probability. For wide classes of functionals – including, for instance, monetary risk measures and return risk measures – we demonstrate that this is not the case unless they are (i) constant, or (ii) more generally depend only on the essential infimum and essential supremum of the argument f. Mathematically, the results leverage Lyapunov's Convexity Theorem.

Examining Monetary Policy Measures and Their Impacts during and after the COVID Era: OECD Perspectives

Governments worldwide implemented various fiscal and monetary measures to address the adverse impacts of COVID-19 on their economies. The paper aims to examine the changes in the monetary policy measures due to COVID-19 and their impact on macroeconomic variables. To explore this relationship, this study utilizes fortnightly data from 2020 to 2023 on the OECD (Organisation for Economic Co-operation and Development) countries. The study employs a Panel Autoregressive Distributed Lag (ARDL) model to analyze the effects of the monetary policy responses of the OECD governments, and the obtained results reveal that within OECD countries, the prevailing trend of lower interest rate policies emerged during the pandemic. This policy approach yielded a dual effect: lowering both output growth and inflation rates, while concurrently exacerbating unemployment rates throughout the COVID-19 period. Consequently, it is clear that monetary policies have played a pivotal role in facilitating the recovery from a profound economic shock such as the COVID-19 pandemic. Given the significant economic repercussions of a pandemic and the crucial role that monetary policy plays in sustaining economic stability, the apparent lack of attention underscores the urgent necessity for additional discourse on this vital subject.

An Empirical Analysis of the Asymmetric Association of Public Investment with Private Investment: Revisiting Crowding-In/Out Effect

The crowding-in/out effect of government spending on private investment has been a much-debated topic. As the controversy surrounding this topic persists, the subject is revisited using an improved nonlinear autoregressive distributed lag model for the Indian economy using the sample period 1980–2022. In the framework of the flexible accelerator model, the present study considers the positive and negative shocks in the two public investment series and positive and negative shocks in other macroeconomic variables (such as FDI, lending rate and credit availability to the private sector) as determinants of private investment. The results depict strong nonlinear short-run and long-run cointegrating linkages establishing the tendency of the Indian economy to converge to a long-run and short-run equilibrium threshold. The long-run estimation shows that private investment decreases at a much higher rate when public investment falls as compared to its tendency to rise when public investment increases. Further, contrary to our expectations, public investment in the non-infrastructure sector crowds in private investments, while public investment flowing into the infrastructure crowds out private sector investments, possibly because of the long gestation period of public investments. An important policy implication is to channel investments in the non-infrastructure and infrastructure segments of the public sector that boost private investments aligned with sustainable development goals. Efficient qualitative fiscal and monetary policy measures are recommended to encourage private investments.

Adapting To The Global Economic Downturn In Indonesia: Harnessing Fiscal And Monetary Instruments

The study evaluates the efficiency of fiscal and monetary measures mitigating the worldwide economic downturn impacted Indonesia's economy. During the crisis, Indonesia faced challenges such as trade disruptions, decreased export demand, and financial sector experiences liquidity issues. Bank Indonesia implemented accommodative monetary policies, including interest rate adjustments, to stabilize financial markets and support economic recovery. The Indonesian government pursued an expansive fiscal policy, increasing government spending on infrastructure and social welfare programs to stimulate economic activity and mitigate social unrest. Tax incentives and relief measures were introduced to support businesses and stimulate investment, while targeted subsidies were provided to specific industries. Despite challenges such as fiscal constraints and external shocks, these policy measures contributed to reducing the crisis's impact, promoting economic resilience, and fostering sustainable development in Indonesia. Continuous evaluation and adaptation of policy frameworks are recommended to address emerging challenges effectively in the future.

Static and Dynamic Comparison of Monetary and Non-monetary Multidimensional Poverty: Evidence from Morocco

This paper compares monetary and non-monetary poverty in Morocco from 2013 to 2019 using Enquete Panel des Ménages (EPM) data. It finds that while the incidence of poverty has fallen substantially during this period, there exists an important mismatch between both measures that is not resolved when taking a dynamic lens. On a static level, while displaying similar headcounts, the two measures identified different populations as poor and had different poverty determinants. Taking a dynamic lens, we find that the level of mismatch between the two measures does not improve: Despite similar levels of mobility, transitions in poverty status in one measure are not accompanied by simultaneous transitions in the other measure. We thus suggest the concomitant use of both monetary and multidimensional measures when targeting the poor.