Papers – Monetary Policy after the Global Crisis

General comments

monetarypolicyconferenceadmin — Fri, 09 Feb 2018 17:31:46 +0000

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What can we learn from Divisia and simple-sum monetary indexes? Structural stability in frequency domain from time-frequency analysis

monetarypolicyconferenceadmin — Fri, 09 Feb 2018 17:26:49 +0000

What can we know from different monetary indexes, such as simple-sum and DIvisia index? What information in monetary policy analysis. In 1985- 1988, we discovered empirical and theoretical evidence of economic chaos from monetary indexes M2, DDM2, DDM3, DML, and DSM2. The existence of monetary chaos implies that monetary dynamics is endogenous rather than exogenous mechanism in nature. After 2009 financial crisis, we analyzed cyclic pattern of monetary indexes through HP filter by means of time-frequency (TF) analysis, which is a non-parametric approach in non-stationary time series analysis. We found out that MB (monetary base) did reveal the short-term effect of monetary policy during crisis period (2007-2015), but other indexes, including DM4T, DM4T-, DM3, M2, and M2M from CFS (Center for Financial Stability), show remarkable resilience of frequency pattern in time. This is a further evidence of nonlinear and coherent nature of monetary dynamics that is beyond the scope of the Frisch model of noise-driven business cycles in macro econometrics. Its implication in monetary policy is still an open issue for future study.

The role of the government in enhancing sustainable entrepreneurships

monetarypolicyconferenceadmin — Fri, 09 Feb 2018 16:54:18 +0000

This paper aims to provide the evidence about the role of the government in fostering the framework for enhancing the sustainable development and growth of entrepreneurships. The study, based on literature review, investigates the significance of government public policies for creating conditions for entrepreneurship development and growth, with special emphasis on sustainable entrepreneurship. The Authors discuss the instruments used by governments to stimulate entrepreneurship, while taking into consideration the main threats and obstacles that deteriorate the entrepreneurships’ development and growth. The key public policies and tools that minimize obstacles and barriers mentioned above are discussed, while taking into account the assessment of efficiency and sufficiency of those instruments that are commonly implemented in public policies. The crucial part of the analysis is the assumption that the size of government matters, and this determines the efficiency of public polices and government actions towards entrepreneurship, especially regards to ensure sustainability requirements.

The goal of this paper is to point out the role of government in fostering the framework for sustainable entrepreneurship, with special emphasis on the public policy instruments supporting this scope and provide evidence that the size of government matters in creating the space for entrepreneurships’ sustainable development and growth. The paper argues the main hypothesis is to test the relationship between the government size and sustainable entrepreneurship development and growth. The government’s size is proportionate to the development and growth of entrepreneurships. This paper is built on the analysis and synthesis of scientific literature to describe the phenomenon of government role in enhancing entrepreneurships’ sustainable development and growth.

The research sample is composed of OECD countries in the period of 2007- 2015. The empirical part based on the estimation of VAR.

This paper has already been published as:

Zioło, M. and Ben Ghoul, M. (2018) The role of the government in enhancing sustainable entrepreneurship: Does a bigger government always mean less entrepreneurship?. International Journal of Business and Globalisation, Forthcoming

According to the authors and leaders, the presentation of this paper at the conference does not violate copyright laws. Copyright of all papers and articles remains with the author and publisher, and s/he can reuse their papers in their future printed work without referring to WEA.

Does financial sector constrain economic growth: The case of Macedonia

monetarypolicyconferenceadmin — Fri, 09 Feb 2018 16:51:47 +0000

The main aim of the paper is to investigate whether financial sector is binding constraint to economic growth in Republic of Macedonia by applying adjusted growth diagnostic approach. The results of the analysis shows that the high cost of finance might be one of the most binding constraint to economic growth. There are at least three factors:
1) the small banking sector and low stock market liquidity;
2) low banking competition and ineffective banking intermediation; and
3) high credit risk.
The addressed drawbacks of financial sector limited the bank credit activities to private sector and as a result have negative impact on economic growth. To test this conclusion based on the results of the comparative benchmark analysis we use ARDL (Autoregressive Distributed Lag) model where the determinants of banking credit activities have been investigated by applying quarterly data form 2004 (Q4) to 2016 (Q3). The estimated results indicate that economic growth has positive significant impact on banking private credit activities through the household consumption and private investment. Additionally, the banking deposits and capital adaqusy ratio as a banking specific factors (supply- side factors) have significant influence on banking private credit activities. Finally, the paper found a significant negative impact of non-performing credits on banking credit activities to private sector indicating that ineffective banking intermediation constraints economic growth.

Where macroeconomic instability meets economic growth?

monetarypolicyconferenceadmin — Fri, 09 Feb 2018 16:45:24 +0000

Long-term macroeconomic stability is the most important objective of benevolent decision-makers. Moreover, the link between economic growth and macroeconomic stability becomes very intriguing for the scholars during and after the moments of the Great Recession. Our research of the volatility-growth nexus in the case of Macedonia has resulted in different and consistent remarks. First, we can agree with the authors that the concept of macroeconomic stability is too comprehensive and complex and therefore it is challenging to provide a suitable proxy. The break-down of the concept to financial, economic and price stability is one possible way to address and capture important features of macroeconomic stability. Further, we have documented that the Macedonian economy remained relatively immune to the occurrence of crises during the period of distress in the wake of and during the Great Recession from 2007 to 2009, although it signalled warnings about the risks for potential banking and financial crises. Also, the period of restoring and maintaining of financial stability after Q2 2010 has been marked by overly conservative behaviour by Macedonian banks, lack of investor confidence and absence of robust growth. This confirmed that the financial stability reached a state at which any additional increase would further sterilise the economy. Finally, our results show that the lagged values of growth variable as well as the growth volatility and the financial stability indicator all have negative relationship with the growth rate. Regarding the price volatility, our findings suggests that the immediate effect is negative, yet positive after one quarter considering that the producers will likely have enough time to include price volatility in the calculations and thereby mitigate the adverse effects.

Crisis as unexpected transition . . .to a greed-based economic system

monetarypolicyconferenceadmin — Fri, 09 Feb 2018 16:43:30 +0000

Analyzing how the post-Soviet transition interacts with the crisis of market finance exhibits a new “greed-based economic system” in the making. Asset grabbing is at its core and hinders capital accumulation. All the various privatization schemes have triggered off asset grabbing, asset stripping, and asset tunneling. A global contagion of such behavior has spread the power and cohesion of managers/shareholders (oligarchs) worldwide. Financial asset grabbing is less straightforward, though much widespread, and operates in financial markets through new financial products, securitization, firms buying their own shares, hedge funds, stock price manipulation, short selling, and the distribution of stock options.Shadow banking, and more generally a global informal economy, results from grabbing strategies in financial markets that breach the formal rules of capitalism. In alleviating and circumventing the rules, the oligarchy paves the way for economic malpractices and crime, calling capitalist laws into question.In such context, systemic greed underlies unconstrained maximization of relative wealth, for which asset grabbing is a rational means, in a winner-take-all economy. At the present stage of our research, a greed-based economy cannot yet be theoretically defined as a transition either to a new phase of capitalism or to another different system.

This paper has already been published as:
Andreff, W. (2013). Crisis as unexpected transition… to a greed-based economic system.In Contradictions: Finance, Greed, and Labor Unequally Paid (pp. 1-48). Emerald Group Publishing Limited.

What can we learn from history – global economy in review

monetarypolicyconferenceadmin — Fri, 09 Feb 2018 16:41:48 +0000

In this paper critical developments that shaped the global economy from 1987 until 2017 were analyzed. The globalization process was addressed from the perspectives of convergence or divergence paths and outcomes. The lessons learned were presented. The need for historical perspective is emphasized. Instead of “superior or inferior model” qualifications, the plurality of ideas is recognized. The arrogance of perceived, yet fragmented knowledge proved to be devastating in the number of economic episodes.

Bank strategy and governance

monetarypolicyconferenceadmin — Fri, 09 Feb 2018 16:40:19 +0000

The global financial crisis of 2007–2009 had the effect of making all participants in the banking industry, from regulators, central banks and governments to bank boards, directors and trade associations, undertake a fundamental review of the principles of banking. Issues such as capital and liquidity management, and systemic risk, became the subject of renewed focus. In practical terms, legislators realised that they needed to address the issue of the too-big-to-fail bank; this issue remains unresolved, and ultimately the realisation will dawn that the global economy simply cannot withstand certain financial institutions failing. But instead of this being taken to mean that banks can operate perpetually in an environment in which their profits are privatised and losses are socialised, it should be apparent that these institutions will have to be run on principles that ensure that they survive throughout the business cycle. This will call for more enlightened strategy and management, as well as an inherent conservatism. If bankers wish to run a proprietary trading outfit, or wish to maximise market share and return on capital, or outperform their peers, then they should go and work at a hedge fund. Those who manage a retail deposit-taking institution will need to remain aware of the responsibilities they bear.

From the point of view of bank practitioners, the most important task is to address the issues of capital, liquidity and risk management, and work them into a coherent strategy that is designed to produce sustainable returns over the business cycle. In this chapter we introduce these topics as part of a wider discussion on formulating bank strategy, and consider how this strategy should

This paper has already been published as:

Choudhry, M. (2012). The principles of banking. New York: Wiley.

Effects of foreign capital entry on the Macedonian banking industry: Two-edged sword

monetarypolicyconferenceadmin — Fri, 09 Feb 2018 16:38:53 +0000

In this paper we investigate the effects of foreign capital entry on bank performance in the Republic of Macedonia for the 2004-2012 period. We develop a theoretical model of foreign bank and foreign capital entry, followed with an empirical model in which we use the return on average assets (ROAA), the net-interest margin (NIM) and the overhead ratio as dependent variables, and the foreign capital factors combined with other control variables on the side of independent variables. The estimation results from the panel regression analysis indicate to a positive effect on the return on average assets (ROAA)and negative implications on the net- interest margin (NIM) and the overhead ratio.

This paper has already been published as:

Fidanoski, F., Sergi, B. S., Simeonovski, K., Naumovski, V. and Sazdovski, I. (2018). Effects of foreign capital entry on the Macedonian banking industry: Two-edged sword. In B. S. Sergi, F. Fidanoski, M. Zioło and V. Naumovski (Eds.). Regaining global stability after the financial crisis (Forthcoming). IGI Global.

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Banking regulation and post crisis approach to bankruptcies: An analysis through shadow banking, moral hazard and too big to fail

monetarypolicyconferenceadmin — Fri, 09 Feb 2018 16:36:22 +0000

The work starts analyzing the pre and post 2007-2009 crisis banking regulation to later on deepen including mathematical finance and economic policy concepts and models into the application of the regulation among the US, Eurozone and Asia Pacific markets. The aim of the work is to analyze the application of the banking regulation in a bankruptcy or bailout scenario, through an empirical study of the authorities and consequently market agents. The model, based on the CAPM assumptions, is tested via the VaR implications and via the Black and Scholes application. The output of the analysis is to empirically demonstrate how the Moral Hazard concept and the speculative behaviours affect financial markets through the 2007-2009 crisis effects study, to then conclude with the inadequacy of the Too Big To Fail concept within the current financial system: if it is Too Big To Fail, then it is also Too Big To Exist.