Monetary Tools Research Articles

How Effective are Monetary Policy Tools in Controlling Inflation in Nigeria? An Empirical Investigation

Abstract In applying the monetary policy in controlling inflation, the monetary authorities employ a mix of tools, which when varied, transfer their effects to the target outcome of inflation control. Despite monetary authorities having employed series of strategies including recently, inflation targeting, the Nigerian inflation rates have remained uncontrollable, thereby, suggesting that the question could, however, be of the effectiveness of tools being employed. This study thus, examines the effectiveness of monetary policy rates, treasury bills rates and liquidity ratio in controlling inflation in Nigeria using annual data covering the period between 1981 and 2019. Unlike most existing studies that employed a combination of policy tools and intermediate outcomes, this study employed only monetary policy tools in its analysis. Results obtained from the estimated ARDL (2, 2, 1, 2) model suggest that both in the long-run and short-run, monetary policy rates have insignificant impact on inflation rates, thus, implying that they have been ineffective in inflation control. More so, treasury bills rates were found to be effective only in the short-run as lagged treasury bills rates showed a significant negative impact on inflation in the short-run while liquidity ratio proved effective only in the long-run with an unfavourable effect on inflation control in the short-run. It is recommended, therefore, that the monetary authorities reduce the size of the informal financial system by strengthening the official financial system in a bid to make the monetary tools of choice more effective for inflation control.

Some Aspects of Fiscal and Monetary Tools of the Environmental Sustainability : Through the Case of Hungary

On the one hand, economic sustainability depends on an environmentally friendly and energy-saving economy, though it rather means the continuous functioning of businesses and the national economy, which is expressed in the balance of accounting, foreign trade and budget balances. On the regulatory side, monetary policy, alongside fiscal policy, serves ensuring economic sustainability, as the main objective of central banks is to ensure price stability and maintain financial equilibrium to underpin continued economic activity. However, in our energy crisis-ridden world, there is an increasing emphasis on energy-efficient, environmentally friendly management. The focus of our study is on the environmental sustainability context of Hungarian fiscal and central bank tools, with a particular focus on the legislative and programmatic elements of the green economy development of the Magyar Nemzeti Bank (Hungarian National Bank, hereinafter: MNB).

Makine Öğrenme Yöntemi ile Bitcoin Piyasasının Geleceğinin Araştırılması: Türkiye Örneğinde Uygulama

It is seen that money takes different forms in line with the changing needs and technological developments throughout the historical process. Recently, cryptocurrencies have been included in our lives with Bitcoin. Bitcoin is a digital currency that functions using cryptographic techniques and without the need for the control of a central authority. As a result of technological developments, it is seen that the interest in Bitcoin, which has entered our lives as a new monetary tool and is predicted to be an alternative to currencies, is increasing. In this article, the machine learning method, which is a branch of artificial intelligence, is used as a method. In the example of Turkey, the daily closing data of bitcoin for 2016 were used. The machine learning method is aimed to predict the closing prices of the bitcoin market.According to the analysis findings, it is seen that the closing prices realized in the 4th quarter are higher than the closing prices realized in the 1st quarter. If the volume USD is higher than 5517.34 then it is Q1. Some rules have been produced with the Machine Learning method.It is aimed to contribute to the literature by using themachine learning method for predicting Bitcoin closing prices.

The monetary policy instruments and inflation, analysis with a structural break: an application to Algeria

This paper aims to study the development of inflation in the Algerian economy through monetary policy in addressing this phenomenon, and the data includes annual data covering the period from 1970 to 2019., based on macroeconomic variables which expose the relationship between the inflation and monetary policy instruments , the econometric study based on structural break cointegration , using a structural break tests such as Zivot and Andrews(1992) and Gregory-Hansen(1996) to estimate this relationship we used the cointegration methods “ FMOLS, DOLS, CCR” these estimation methods had allowed us to note that the treatment of inflation in Algeria is not based not only on monetary tools

CEE EU Central Banks’ Policy during the First Wave of COVID-19

Abstract Faced with COVID-19 crisis, central banks have once again become one of the key players in the economies. The aim of this article is to analyse the actions of Central and Eastern European central banks within all their roles (monetary policy, micro-and macroprudential policy, deposit guaranteeing and resolution) during the first coronavirus wave. The analysis shows that they were active in various fields, not only those that were traditionally always assigned to central banks (i.e. monetary policy, although this was the major field of activity). Scope of the intervention naturally depended on the shape of the national financial safety net. At the same time, the use of monetary policy tools depended on the adopted monetary policy strategy. Practice of central banks’ actions shows that central banks with a wide range of monetary tools reacted later. It seems that the scope and intensity of the use of monetary policy tools was not influenced by the general role of the central bank in the financial safety net. The monetary toolkit used by banks was based on a standard set of instruments with modified conditions of application (scale, transaction parameters and their type, collaterals and counterparties). Although transactions with specific parameters were sometimes implemented for the first time, they can still be included in the framework of classic monetary policy tools. In areas other than monetary policy, central banks were much less active. The most disturbing seems to be the passivity in the field of macroprudential policy.

The ECB's asset purchase programme: Theory, effects, and risks

AbstractIn response to the Covid‐19 crisis, the European Central Bank (ECB) has relaunched a massive asset purchase programme within its combined‐arms monetary strategy. This paper surveys and discusses the theory and the evidence of the central bank's unconventional monetary tools for the euro area. It analyses the role of the asset purchase programmes in the ECB's toolkit and the associated risks, focusing specifically on the gradual unwinding of these unconventional initiatives. Finally, the paper offers some insight into the possible evolution of the ECB's monetary policy.

Stock market performance: Reaction to interest rates and inflation rates

This paper investigates the wealth effects of the consumer price index, interest rate, domestic credit and real economic activity on the Amman Stock Exchange performance. Over the period 1991–2020 using the autoregressive distributed lag (ARDL) bounds test. While the interest rate is a powerful monetary tool to fight inflation and recession, it can be detrimental to investors. The target variables, consumer price index (CPI) and interest rate (IDR), are both highly significant with the correct signs. An increase of 1 percent in CPI and IDR leads to a fall in stock prices by 1.6 percent and 5 percent, respectively. While the central bank is targeting inflation by raising interest rates, its actions reflect negatively on the stock market. The short-run model confirms the causality from the independent variables to the dependent variable. Moreover, the error correction term (ECT) is very high and significant at the 1 percent level amounting to 83.3 percent, which confirms the evidence of the long-run relationship. Monetary objectives are really important, but financial stability is also important.

Inflation: The problems for aquaculture

Inflation: The problems for aquaculture

USE OF MEANS OF MONEY-CREDIT REGULATION OF ECONOMIC PROCESSES: EXPERIENCE OF FOREIGN COUNTRIES WITH MARKET ECONOMY

The purpose of the article is to analyze the means of monetary regulation of economic processes in foreign countries with market economies. Monetary regulation acts both as an element of stabilizing the economic situation in the country and as one of the components of public policy. For banks, monetary regulation is considered as one of the methods of managing their activities by the central bank. It is determined that the study of improving monetary policy in the context of globalization remains relevant, especially during the implementation of anti-crisis economic policy of the state. The main goals and regulatory functions of individual tools are shown. The use of monetary policy instruments abroad in the aspect of development is analyzed. Development trends, problems of monetary policy regulation are considered. An analysis of the features of medium-term strategy and tactics in the use of instruments of monetary regulation by central banks of the United States and the European Union in the financial crisis have been done. The policy of central banks is fundamental in shaping the financial and credit and banking systems of EU member states and determines the stability of the euro and the main indicators of economic development. The monetary mechanism of economic processes regulation is considered, which includes a set of forms, tools and methods of economic activity intensification, relations and interaction between subjects and objects of regulation of economic processes and provides sustainable economic development. The basic strategies of monetary policy and broad monetary tools of monetary policy are analyzed. The main instruments of monetary policy are outlined: inflation targeting, interest rate policy, open market operations, reserve requirements regulation, and the impact on the national currency exchange rate. It is pointed out that the credit systems of leading foreign countries are quite similar in their structure, they have a number of similar features. It is noted that in accordance with the main priorities of economic policy, an important prerequisite for sustainable economic growth is the intensification of investment activities by economic means, among which the leading role belongs to monetary policy.

Exploring environment sensitivity to fiscal and monetary policies in China: using ecological footprints as a contemporary proxy.

This paper is a pioneer attempt using ecological footprints, the latest environment sensitivity proxy to be regressed, contributing to the scarce literature concerning one of the most burning global dilemmas of the era. For econometric analysis, fiscal and monetary tools, green energy consumption, and economic growth have been chosen as a set of regressors data spanning 1990-2020 in China facing the highest total ecological footpaths. And giving priority to the relevancy, reliability, and robustness autoregressive distributed lag (ARDL), fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) have been applied for instant and eternal sensitivities, followed by the widely used stationarity tests (augmented Dicky-Fuller and Phillips-Perron tests) and bounds test. Granger's ordeal has also noticed causal inferences. Cointegrating findings are robust across all techniques, and ARDL results remain consistent regardless of short and prolonged duration. We witness positive and statistically significant (at 10%) responsiveness of ecological footprints (EFP) to China's rapid gross domestic output (GDP) growth per capita fueled by fossil fuels (primarily coal). Contrarily, negative/inverse sensitivity to expansionary fiscal (higher government expenditures, GEx), contractionary monetary policies (higher policy rate, DR), and green energy use (REnC). Besides, EFP demonstrates statistically significant reciprocal interconnection with GDP and REnC but a unidirectional connection with DR (DR → EFP). GDP has effective collaboration with REnC and GEx whereas single-sided relationship DR as (GDP → DR). Finally, some policy choices are endorsed.

Is unconventional monetary policy mediated by banks’ liquidity and solvency ratios? Evidence from the European banking sector

We try to answer the following research question: Is unconventional monetary policy (UMP) mediated by European banks’ liquidity and solvency ratios? Starting from micro-prudential tools (unconventional monetary policy), this paper focuses on the micro-prudential perspective and contributes in different ways to the existing literature. First, using supervisory reporting data from European banks (European Central Bank (ECB), Statistical Data Warehouse), provides insights into the UMP (in terms of long term refinancing operation (LTRO)) during the first phase of the COVID 19 pandemic. Second, it empirically investigates the impacts of the LTRO on the liquidity and solvency of European banks, during the Q32016‒Q22021 period. We argue that the impacts of UMP (in terms of LTRO) are strictly related to banks’ solvency and liquidity, thus favouring the stability of the banking system. These results suggest that authorities may want to monitor the bank’s capital ratio and the liquidity position of financial institutions, also to better understand the effects of unconventional monetary tools on lending volume. The topic of our paper is scarcely explored by similar studies; therefore, we believe that our work may fill this gap and significantly contribute to enriching the related empirical literature.

Financial deepening and human development in Nigeria: A non-linear approach

Objective: The study investigated the effect of credit supply on GDP on Human Development and as well examined the impact of Money supply on GDP on human development. It equally assessed the link between bank penetration and human development and the link between financial intermediation and human development. Research Design & Methods: This study used ex-post facto research design and a Non-Linear Autoregressive Distributed Lag (Asymmetry ARDL) to estimate the effect of financial deepening on human development. Eview 11 was used for the analysis. Findings: This research work discovered that the positive contribution of credit supply and money supply to human development in Nigeria is weak and the relationship between financial deepening and development is not always linear. The study revealed that the effect of branch expansion in Nigeria is negative because of limited bank products or services. Implications & Recommendations: The implication of this study is that expansionary monetary policies have the most significant positive impact on human development in Nigeria. The expansionary policy can as well worsen human development through inflationary pressure while a contractionary policy is an anti- human development approach and its effects on human development are negative. The study therefore recommends that: The central bank of Nigeria should place more emphasis on expansionary monetary tools to drive development and be cautious of inflation. CBN and banks should monitor their credit to avoid loan diversion by the beneficiaries and to beat extreme poverty. Contribution & Value Added: The study used asymmetry ARDL model as an improvement over the conventional regressions that the previous authors have been using to examine the link between financial deepening and human development.

ВАЛЮТНО-ФИНАНСОВЫЕ ПОДХОДЫ В УСЛОВИЯХ САНКЦИЙ: НОВЫЕ РЕШЕНИЯ

Large-scale anti-­Russian sanctions, which are likely to be protracted, have created fundamentally new conditions–both inside and outside. To ensure economic growth in such environment, new approaches are needed. They should lay basis for stable and durable growth. Thera are a number of monetary tools which may be used to this end. A broad based economic activity, less susceptible by sanctions may emerge as a result.

Political risk and portfolio performance: Implications for Shariah-compliant ‎investors

The COVID-19 pandemic has forced the Malaysian economy into a recession, with GDP plummeting to negative growth for the first time since the 1998 Asian Financial Crisis. Fiscal and monetary tools are inevitable during this crisis. Businesses have been forced to close shops due to a series of Movement Control Orders (MCO), resulting in massive layoffs and a rise in the unemployment rate, which is a red flag for the economy. On the other hand, zakat has emerged as a poverty alleviation tool in the Islamic economy landscape and is particularly relevant during an economic crisis. However, there is a lack of literature discussing the impact of macroeconomic indicators on zakat. Therefore, this study was conducted to examine whether the unemployment rate explains the trend in zakat collection. Time series data from the period between 2006 and 2020 was utilized, and linear regression analysis was conducted. An interesting finding is that the zakat collection trend by State Islamic Religious Councils (SIRCs) and the movement of the unemployment rate are not statistically significant. This indicates that zakat collection is not affected by high unemployment in the labor force market and remains strong even during an economic slump, thanks to increased digitalization efforts and FinTech adoption.

Design of a rule based monetary policy in a Central Bank Digital Currency System

Aim: This paper presupposes a purely Central Bank Digital Currency (CBDC) based system. Its aim is to describe how such a system facilitates complete new possibilities to design a suitable monetary policy. More specifically, the purpose is to show that the available monetary tools can be used to design a rule-based monetary policy that guarantees stability of purchasing power and interest rates.
 Research methods: The paper is design oriented. It describes how the monetary system could function The important monetary variables are defined and their relationship is described. To illustrate these variables and their relationship, simulation results of their behavior are added.
 Conclusions: It is shown that it is indeed possible to design a monetary policy that is rule based and guarantees stability of purchasing power and interest rates. Crucial elements in the design are linking the balances of the CBDC-accounts to a proxy of the domestic product and replacing the use of government bonds by allowing the government to borrow from the Central Bank and giving households and businesses the opportunity to open a savings account at the Central Bank.
 Originality: The approach is completely new. It is the result of rethinking the possibilities of a complete transition of bank money to CBDC.
 Implications: The paper shows that a more absolute transition to the use of CBDC makes it possible to establish a clearer and more stable monetary practice, and that it is necessary therefore to revise monetary theory.

Central bank securities and foreign exchange market intervention in a developing economy

AbstractThe Bank of Papua New Guinea has maintained an active policy of foreign exchange (FX) market intervention. This monetary tool is associated with a depreciating currency and a worsening shortage of foreign currencies in the domestic market, suggesting that at most the policy instrument leans against existing FX‐market pressure. However, the one‐sided sales of central bank securities (or bills) engender an appreciation of the rate and an easing of the shortage in the domestic FX market. Supported by empirical evidence, we demonstrate that the one‐sided sales of central bank bills perform like an instrument of monetary policy for FX‐market stability in the presence of persistent nonremunerated excess bank reserves.

Does Financial Sector Development Hinders or Promotes Human Development in Nigeria? Asymmetric and Causality Analysis

This study examines the relationship between financial sector development and human development in Nigeria for the period of 1986 to 2018 using Non-linear Auto Regressive Distributed Lag (NARDL) and Toda Yamamoto Granger non-causality approaches. Empirical findings that emanated from the study reveal the existence of nonlinear relationship between financial sector development indices and human development in Nigeria. Further, feedback from the Toda Yamamoto Granger non-causality test shows that money supply constitutes the only variable exerting bidirectional nexus with human development. Conversely, bank deposit appeared to have a unidirectional relationship with human development whereas other indicators like domestic credit to GDP and bank penetration have no causal relationship with human development within the period of study. Prominent policy implication derivable from the empirical analyses suggests the need for the monetary policy authority to place more emphasis on quantity-based monetary tools such as liquidity ratio and reserve ratio for managing the economy.

Monetary Policy Variables Relevance on Balance of Payments Adjustment in Nigeria 1980-2020

This study examines monetary policy relevance on the Nigerian balance of payments adjustment, form 1980-2020. Objectives are; to examine the relevance of monetary policy variables such as Exchange rate, Inflation rate, Balance of trade, Real Gross Domestic Product and Domestic Credit on the Nigerian balance of payments adjustment. Evaluate the significant speed of adjustment of monetary policy variables such as Exchange rate, Inflation rate, Balance of trade, Real Gross Domestic Product and Domestic Credit on the balance of payments adjustment within the period under study. The study employed the following advanced econometric techniques; Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) tests, chow test, ECM model OLS model, statistical tests & Co-integration test. Based on the above econometric techniques conducted, it was observed that group unit root test result shows that variables used in the study became stationary after the first differenced at degree of order one I(I). There is Co-integration (long run relations) among variables used in the study. Our results indicated rejection of the two null hypotheses of this study and acceptation of the alternative three hypotheses that said; Nigerian monetary policy variables such as Exchange rate, Inflation rate, Balance of trade and Domestic Credit have significant relevance on the Nigerian balance of payments adjustment. Nigerian monetary policy variables used have significantly three years to adjust balance of payments adjustment in the Nigerian economy within the period of the study. The researcher recommends that; the need to manage domestic liquidity wisely in view of the tremendous pressure on the balance of payments of excess money. A determined effort to mobilize resources through private saving and the implementation of a prudent fiscal policy through efficient collection of tax revenues, rationalization of government expenditure towards growth enhancing and poverty reduction programmes will also enable the government to pursue its development programs without having to rely on the monetization of its budget deficit. Overall concentration on monetary tools solely should be reduced and employ other policy instruments to correct the balance of payment fluctuation. The government should also be cautious of budget deficit that are often time financed by internal borrowings.

The effectiveness of the post-Covid-19 recovery policies: Evidence from a simulated DSGE model for Turkey

This paper aims to explore the effectiveness of macroeconomic recovery policies implemented by fiscal and monetary authorities against Covid-19 pandemic in Turkey. A dynamic stochastic general equilibrium (DSGE) model, in which Turkey is defined as an open and small developing country, is built. The model contains eight groups of agents, which are two heterogeneous households, the firms producing intermediate, final and capital goods, the commercial bank, the central bank and the government. Stochastic simulations of the model reveal the propagation of Covid-19 shock, the impacts of fiscal and monetary tools on the selected economic variables. The simulations demonstrate that direct fiscal measures are more effective in mitigating negative economic impacts of Covid-19. This paper broadens existing literature on the macroeconomic impacts of Covid-19 by exerting the functioning of different fiscal and monetary measures in a comprehensive framework within a developing country context.

Anti-recessionary aspects of the modern monetary theory

The paper considers the modern monetary economic theory (MMT) from the point of view of the approaches to overcome the current economic crisis by recourse to fiscal and monetary tools. It is shown that its proposals are aimed at overcoming the crisis of the U.S. economy through an additional inflow of investment resources from other states with a simultaneous increase in social stability within the country with the support of a quantitative easing race. It also concludes that the level of taxation in developed states reaches the limit beyond which the economic activity is discouraged. The negative consequences for economic subjects of reducing the possibility of maneuvering between national jurisdictions for tax optimization, and the importance of this process for the preservation of U.S. leadership are demonstrated.