Monetary Variables Research Articles

The impact of changes in monetary aggregates on exchange rate volatility in a developing country: Do structural breaks matter?

Theoretical models of exchange rate determination predict that increases in monetary aggregates lead to depreciation. However, several empirical studies do find exchange rate response anomalies to innovations in monetary policy. In this paper, we show that accounting for major structural break points in monetary variables leads to empirical results that are statistically consistent with predictions from theoretical monetary models of exchange rate determination.

Snowball Effect of Interest Rate as a Control Instrument On Inflation Framework Targetingin Indonesia

Afterthe monetary crisisthe government changes its monetary policy strategyby using a new paradigm that Inflation Targeting framework. This new paradigm has been confirmed in Law No.23 of 1999and UUNo3 of 2004as the basis forthe application of Inflation Targeting Framework inIndonesia The purpose ofthis studywas to determine whether interest rates only impact on inflation or even cause greater impact on other monetary variables. It is very important to knowthe impact,by knowing the impact it can avoid unwanted conditions Data of research is collected since 1970 to 2013, hypothesis testing is used econometric models. The main advantages of econometric models for being able to handle the mutual dependence (interdependence). Beside that econometric model is an invaluable tool for understanding the workings of the economic system and so to test and evaluate policy alternatives andhypothesis testing using multiple regression. The result of this study showed that this study indicate the interest rate turns out not only as an instrument of control of Inflation Targeting Framework but cause a snowball effecton other monetary variables that further strengthen themechanismonInflationTargetingFramework

Financial Stability, Monetary Policy, and Economic Growth: Panel Data Evidence from Developed and Developing Countries

This paper examines the relationship between financial stability, monetary policy, and economic growth in 40 developed and developing countries by using the annual panel data over the period of 1993–2015. Fixed and random effects panel data regression models were fitted to determine the impact of financial stability and monetary policy on economic growth. Our results indicate that trade openness, capital account openness, and foreign direct investment have positive impacts on economic growth with a high degree in developed countries. Our empirical results also indicate a positive and significant impact of research and development on financial development as well as economic growth in developed countries. Financial crises, bank liquid reserves, and bank nonperforming loans affect negatively financial stability, financial development, as well as economic growth. This impact essentially amounts to the sensitivity and fragility of the banking system. In addition, inflation continues to affect economic growth in a negative way. The main findings confirm the complementarity and the importance of real, financial, monetary variables and bank solidity as well their significant impacts on financial stability and economic development.

US inflation and output since the 1970s: a P-star approach

US inflation and output developments since the 1970s are considered using the P-star model and the VAR-based Diebold–Yilmaz spillover index approach. Shocks to monetary variables explain a substantial share of US GDP deflator inflation shocks over time, particularly in the late 1980s and early 1990s but also in recent years, a time when quantitative easing was employed by the Federal Reserve. Monetary factors, and not oil shocks, underlie price developments in the 1970s and early 1980s. Monetary shocks’ influence on oil prices has become noticeably stronger over the past ten years or so, supporting the greater attention being paid of late to the impact of the monetary environment on commodity markets. Shocks to the velocity-of-money variable affect output developments, with the exception of the 1970s and early 1980s when inflation shocks and, to a lesser extent, oil inflation shocks dominate the cross-variance share of output gap shocks. After the Volcker disinflation, the influence of both inflation and oil price shocks on the output gap wane and those of velocity gap shocks increase.

The relationship between gross domestic product and monetary variables in Romania. A Bayesian approach

For establishing the suitable monetary policy it is essential to know if there is a relevant relationship in practice between gross domestic product (G.D.P.) variations and monetary variables. The purpose of this study is to analyse the causality between output variation and money aggregate in Romania for quarterly data in the period 2000:Q1–2015:Q2. Moreover the impact on G.D.P. growth of other variables connected with money demand is assessed using Bayesian techniques. The results indicated a bidirectional relationship between G.D.P. variations and rate of real money demand in the mentioned period. The Granger causality test combined with stochastic search variable selection indicated that active interest rate and discount rata mostly explained G.D.P. variations. According to results based on Bayesian regime-switching models, contrary to expectations, the interest rate increases continued to generate higher output variations, the consumption being the engine of economic growth in Romania. In periods of economic recession, the lower interest rate stimulated the recovery of the economy.

Globalization, Stock Market Valuation, and Unemployment: A Dependent Economy Model

The interconnection between asset prices, inflation and unemployment has been central to the recent macroeconomic modelling of economic reforms in emerging market economies. In this paper we examine how effects of economic reforms are critically sensitive to interconnection between variety of real variables and monetary variables in terms of a dependent economy model consisting of a traded sector and a non-traded sector. The model has two necessary ingredients. One is slow adjustment in nominal wage in the sense that wage is rigid in the short run but changes overtime in response to short run unemployment. The second one is adjustment in asset price namely Tobin's q. The paper shows that both trade liberalization and capital account liberalization may generate short run unemployment. Moreover, the paper discusses macroeconomic implications of both fiscal policy and monetary policy.

Monetary Policy Impact on Output

The monetary policy of any country uses various monetary policy tools in order to achieve a balance between price stability and higher growth. The aim of this paper is to study the impact of the monetary policy on the output level of the country. It analyses the high interest rate policy of monetary authority. The literature provides ample evidence of a positive or no impact of interest rate on output level. The paper thus explores these possibilities and accordingly justifies the high interest rate policy of the RBI, especially post global financial crisis. The Autoregressive Distributed Lag (ARDL) bounds testing approach to cointegration is employed for studying short-run dynamics and long-run cointegration of the output to the other macroeconomic and monetary variables. The results suggest, the high interest rate monetary policy is not anti-growth.

Multivariate Granger causality between macro variables and KSE 100 index: evidence from Johansen cointegration and Toda & Yamamoto causality

The pursue of this article is to scrutinise the long-haul relationship between stock returns of the KSE 100 index and monetary indicators such as rate of exchange, inflation, and interest rates. Month-to-month data from the KSE 100 index and monetary variables were extracted for the period January 1992 to November 2015. We transformed the data series into a stationary form by employing the augmented Dickey–Fuller method. The Johansen cointegration approach reinforces the long-haul association between equity prices and monetary indicators, for instance the rate of exchange, inflation, and interest rates. Results of the Granger and Toda and Yamamoto causalities demonstrate the unidirectional causal relationship between interest rate and KSE 100 index; the one-way causation existed from interest rate to equity returns for the KSE100 index. The analysis of the impulse response function concludes that the changes in the KSE 100 index happened due to its own shocks. However, changes in exchange and inflation rates were experienced because of the interest rate. The outcome of variance decomposition demonstrated that most of the changes in the KSE 100 index are because of its own shocks. Thus, it is concluded that the predictability of the equity prices for the KSE 100 heavily relied on exchange rate, inflation, and interest rate variations.

Transcending the new macroeconomic orthodoxy in the Eurozone: a Post-Keynesian view

The main aim of this paper is to empirically test the endogenous money hypothesis for the Eurozone. Based on data on loans to private sector, deposits, monetary aggregates, prices and GDP we use three empirical approaches to test the hypothesis: (i) moving correlation ; (ii) Granger causality tests and (iii) original framework for the analysis based on the structural VAR model. The empirical results confirm our main hypothesis on the endogeneity of money in the Eurozone as they show that the commonly accepted neoclassical relations between monetary variables, inflation and economic activity are reversed in case of Eurozone and that the direction of influence goes from loans to deposits and from real sector of the economy towards the monetary sector. The basic conclusion from carried out research is that ECB should implement measures directly aimed at stimulation of domestic demand (monetary-supported tax cut).

A hybrid data envelopment analysis approach to analyse college graduation rate at higher education institutions

ABSTRACTCollege graduation rates have become a primary focus in measuring institutional performance and accountability in higher education. In 2009, President Obama set a goal for the United States to have the highest proportion of college graduates in the world by 2020. With the heightened focus on transparency and accountability in higher education today, university administrators are developing internal strategies to improve graduation rates. In fact, it is not only significantly important to institutions, but also to individuals and to the nation as a whole to increase college graduation rates. In this paper, a hybrid data envelopment analysis (DEA) approach is implemented for the very same purpose by combining with the cross industry standard process for data mining (CRISP-DM) methodology. The approach is illustrated by a case study at a U.S.-based four-year public university. We identify the most important predictors of graduation which help improve graduation rates by the CRISP-DM method. It shows that Fall term grade point average (GPA), Housing status, High school and Spring term GPA were the four highest determinative factors while monetary variables and the ethnic background of the student were revealed to be the least important ones. The results also indicated that students living on campus were more likely to complete within six years. For the detailed improvement strategies for increasing college graduation rate, we use the hybrid DEA methodology (an input-oriented bounded-and-discrete-data DEA model and context-dependent DEA) to evaluate the performance of college undergraduate students. These analyses provide potentially useful information and policy support for university administrators.

Prioritising culvert removals to restore habitat for at‐risk salmonids in the boreal forest

AbstractIn the boreal forests of Canada, industrial development has resulted in the installation of thousands of culverted road crossings that act as barriers to fish movement and degrade habitat for native freshwater fishes. In view of culvert removals being expensive, prioritisation methods have been developed, but the efficacy of such methods has not been thoroughly investigated nor have they been tested on low‐gradient boreal forest watersheds containing at‐risk salmonids. The management utility of a novel GIS‐based optimisation‐planning tool to prioritise fish barrier remediation was tested in two highly developed watersheds. Region‐specific parameter estimates of monetary variables (e.g. budget, individual barrier remediation costs), barrier passability and biologically relevant information for species on conservation concern (e.g. habitat suitability, dispersal ability) were incorporated. Results indicate that for Arctic grayling, Thymallus arcticus Pallas, and bull trout, Salvelinus confluentus Suckley, a large proportion (~61–83%) of currently isolated habitat can be reconnected with low investment (~$200–$500 K). This study demonstrates the management utility of barrier optimisation methods for use in boreal watersheds, particularly as it significantly reduces the technical expertise needed to perform relatively complex optimisation analyses.

Assessing the Values of Archaeological Heritage

The main aim of this paper involves contributing to the discussion around the value of archaeological heritage through the lens of an economist. The path taken to achieve this main goal included three objectives. Firstly, there is the contribution towards clarifying the concept of archaeological heritage benefits by highlighting the complexity that stems directly from its holistic characteristic. Secondly, this also contributes to assessments of archaeological heritage economic and social benefits and values by demonstrating how they may be captured by means of a single variable measured in monetary units. Furthermore, and thirdly, this then helps explain how such a monetary variable may prove of use both to cultural heritage management for sustainable preservation and conservation improvement, and to the appraisal of the total private and public benefits arising out of preservation and conservation archaeologic heritage programs.

Exploring exchange rate based policy coordination in SADC

Purpose This paper explores the possibilities for policy coordination in the Southern African Development Community (SADC) as well as real effective exchange rate (REER) stability as a prerequisite towards sensible monetary integration. The underlying hypothesis goes with the assertion that countries meeting optimum currency area conditions face more stable exchange rates. Design/methodology/approach The quantitative analysis encompasses 12 SADC member states over the period 1995-2012. Correlation matrixes, dynamic pooled mean group (PMG) and mean group (MG) estimators and real effective exchange rate (REER) and real exchange rate (RER) equilibrium and misalignment analysis are carried out to arrive at the conclusions. Findings The study finds that the structural variables used in the PMG model show that there are common fiscal and monetary policy variables that determine REER/RER in the region. However, the exchange rate equilibrium misalignment analysis reveals that SADC economies are characterised by persistent overvaluation at least in the short term. This calls for further sustained policy coordination in the region. Practical implications The findings in this paper have important policy implications for economic stability and for the attempt of policy coordination in SADC region for the proposed monetary integration to proceed. Originality/value This study is the first attempt that relates the exchange rate as a policy coordination instrument among SADC economies.

Effect of Monetary Policy on Nigerian Stock Market Performanc

The study investigated the effect of monetary policies on stock market performance in Nigeria. The study covered a period of 28 years (1986 – 2013). Data were generated from the Central Bank of Nigeria Statistical Bulletin, 2013 edition. The ex post facto research design was adopted. The method of data analyses used are b the Johansen co-integration, OLS and granger causality tests. All Share Index was used as the indicator of stock market performance (ASI) while the explanatory variables included Monetary Policy Rate (MPR), Treasury bill rate (TBR), Lending interest rate (INT), Liquidity ratio (LR) and deposit rate (DR). The co-integration result indicates that there is long run relationship between monetary policy and stock market performance in Nigeria. The OLS regression result showed that monetary policy significantly explains 53% of changes stock market performances in Nigeria. However, Monetary Policy Rate (MPR) has insignificant positive effect on All Share Index (ASI) while Lending Rate (INT) has significant positive effect on All Share Index (ASI). Furthermore, Treasury Bill Rate (TBR) and Liquidity Ratio (LR) have insignificant negative effect on All Share Index (ASI) in Nigeria; and Deposit Rate (DR) has a significant negative effect on All Share Index (ASI) in Nigeria. The granger causality analyses showed that All Share Index (ASI) has no causal relationship with monetary policy rate (MPR), Treasury bill rate (TBR), and liquidity ratio (LR) in Nigeria. However, All Share Index (ASI) has causal relationship with lending and deposit rates in Nigeria. This indicate that monetary policy has the potential (53%) to influence the stock market, but the causality analyses showed that monetary policy cannot influence stock market performance but rather stock market performance has influenced the direction of monetary policy in Nigeria through lending and deposit rates. Among others, the study recommended that policy makers in Nigeria must be mindful of the unidirectional causality from stock market to the monetary policy variables in formulating monetary policies. This will enable them to sufficiently and timely adjust Nigerian stock market to economic conditions in the country.

Did the expectations channel work? Evidence from quantitative easing in Japan, 2001–06

The Japanese economy experienced a prolonged period of quantitative easing (QE) over the five years from March 2001 to March 2006. The purpose of this paper is to evaluate the direct and exclusive effects of this rather unconventional monetary policy on financial markets, economic activity, and labor markets in Japan empirically by employing exactly the same testing period with the QE period in most of our examinations. Using a range of variables, we first estimate vector error correction models (VECMs) that consider the cointegrating relations between the Japanese monetary base and other variables in our data-set. We also use Markov-switching dynamic regression (MSDR) models, Bayesian vector autoregressive (VAR) models, and causality analyses to test for robustness. Together, all the above analyses consistently provide a number of interesting findings. First, QE lowered short- and medium-term credit spreads and improved Japanese credit market conditions. Second, QE increased stock prices in Japan and imp...

The Effects of the Resource Curse Indices and Good Governance on Health Expenditures in Different Income Deciles

The views on health have gained a broader perspective today, so that according to these views, in addition to economic factors, non-economic factors (political, cultural and social ones) also affect health expenditures. Therefore, in this study the effect of 9 economic and non-economic indicators (indicators of good governance and resources curse) on the level of health expenditures in different income classes was studied using the XLSTAT software. The results of this study revealed that, indicators of inflation and employment (economic factors) most accounted for variations of health expenditures in different income classes. Also, it was revealed that economic and non- economic factors in higher and lower income deciles increased healthcare spending and in the middle deciles it had a negative impact on this expenditure; however, according to the authors, the positive nature of effect of factors on upon low and high deciles is different. From the view of researchers, in the lower deciles increased spending was generally due health problems (essential goods), but in higher income deciles increase in expenses was generally due to increased spending on health and beauty (luxury). According to the results, it was observed that variables of employment, economic growth and political stability in different income classes had a negative impact on health expenditures and other indicators had positive impact on health spending in income deciles. In other words, based on the results, real variables (growth and employment) had more effect than monetary variables (inflation) and non-economic variables (indicators of good governance and resource curse) on reducing health care costs among different income classes. DOI: 10.5901/mjss.2016.v7n4S2p203

An elementary model of money circulation

This paper investigates money circulation for a system, consisting of a production system, the government, a central bank, commercial banks and many customers of the commercial banks. A set of equations for the system is written; the theory determines the main features of interaction between production and money circulation. Investigation of the equations in a steady-state situation reveals some relationship among output of the production system and monetary variables. The relation of quantity theory of money is confirmed, whereas a new concept of the efficiency of the system is introduced.

Recommender system based on customer segmentation (RSCS)

Purpose– Recommender systems are techniques that allow companies to develop sales and marketing and as a result, attract more customers. There are several different types of recommender systems which collaborative filtering (CF) method is more popular and is used in various fields. However, similar to other recommender systems, this system has its own limitations. Nowadays, recommender systems are combined with other systems to enhance the quality and precision. The purpose of this paper is to present a new method to increase the accuracy and quality of recommendations associated with filtering systems.Design/methodology/approach– First, the recency, frequency, and monetary (RFM) variables of the clients are extracted and variables’ weights are calculated. Then, using weighted RFM and expectation maximization clustering algorithms and their combination with the closest K-neighbors, recommendations for each cluster is independently extracted. Finally, the results are compared with the outcome of conventional CF techniques. Remarkably, sale transactions of a big distribution and sale of goods centers are used in this study.Findings– The results indicated that the proposed method has higher accuracy compared to the conventional CF method. Likewise, the clusters which have higher values were received more accurate recommendations. Another point was that the proposed method was faster on obtaining the results than the conventional method as the recommendations were performed with respect to the customers of the same cluster, while all clients were assessed in the conventional method and as a result, the calculation speed is reduced as the number of customers increases in this method.Originality/value– The results indicated that the proposed method has higher accuracy compared to the conventional CF method. Likewise, the clusters which have higher values were received more accurate recommendations. This is very important for businesses and trade centers as more than 80 percent of their profits come from valued customers and hence, recommendations with higher accuracy to these valued customers lead to more profits to sales centers. Since the valued customers were calculated in the proposed method and the value of each customer was distinguished for sales representatives, the accomplished recommendations can be coordinated with sales’ strategies to make it more targeted.

A big data study on emitting companies' performance in the first two phases of the European Union Emission Trading Scheme

As CO2 emissions are quantified by allowances and traded in markets, wise trading strategies will bring emitting companies higher profits or lower costs. Based on the big data of Community Independent Transaction Log (CITL), this article hereby presents a micro study on the emitting companies' efforts in increasing profits and saving costs during the allowances trading in the first two phases of the European Union Emission Trading Scheme (EU ETS). The efforts are measured by an after-action factor of trading performance, which is built on a series of behaviour and monetary variables. By comparison, demanders of the emitting companies are more inclined to reach a higher trading performance, while that inclination is heterogeneous among the suppliers. In addition, emitting companies with lower emission levels had a better trading performance. With a higher proportion of low-emitting companies, the manufacturing sector had a better trading performance than the energy sector. The effect of the trading requirement on trading performance are investigated via a quantile regression mode. Results suggest that: (1) the selling requirement of suppliers has a positive effect on their trading performance, while the effect becomes weaker when the selling requirement increases; (2) the buying requirement has a positive effect on the demanders' trading performance only when the requirement is high, and the effect becomes stronger as the requirement increases; and (3) when the buying requirement is at a lower level, demanders' trading performance becomes worse as the requirement grows. The conclusion is that the emission level, industrial sector and trading requirement do have influences on the trading performance of emitting companies in emission trading.

Monetary Policy Disturbance in Nigeria: What Puzzles? Price or Output

This study examined empirically the relationships between money, price and output in Nigeria. Time series data for monetary policy variables (BM, MPR, M1 and M2), Inflation (GDP deflator and CPI inflations) and real GDP was collected from Central Bank of Nigeria’s statistical bulletin from 1981:Q1 to 2013:Q4. The study was carried out in three folds: firstly, the estimation of the short run relationship between money, price and output using correlation coefficient. The evidence shows a positive and significant correlation between money and output but negative and insignificant relation between money and price. Secondly, the study examined the nature of the short run causation between output and money using Granger causality test. The result reveals that money cause output and not the other way. Finally, the impact of monetary policy shock on price and output was estimated using structural vector autoregressive model (SVAR), the empirical evidence reveals the existence of puzzling relationship between monetary policy shock and output in Nigeria.