International Journal of Monetary Economics and Finance (15 papers in press)

Regular Issues

• Central Bank Independence and Monetary Policy Outcomes in Ghana: A Bayesian Structural Time Series Approach  
  by Isaac Bentum-Ennin, Paul O. Takyi 
  Abstract: The paper examines the impact of central bank independence (CBI) on monetary policy outcomes in Ghana using annual data from 1985 to 2019 and the novel Bayesian structural time series approach. The results reveal that the granting of autonomy to the Bank of Ghana has increased economic growth by about 43% in relative terms and 1.9% in absolute terms. In absolute terms, the CBI has increased the value of the Ghana cedi to the US dollar by 1.8. Relatively, the loss in value of the local currency during the CBI period is about 400%. Also, although CBI resulted in a reduction in inflation by 10% and 41% in absolute and relative terms respectively, these effects are not statistically significant. From a policy perspective, strengthening the operations of the Bank of Ghana is necessary to achieve its desired objectives of lower inflation, higher economic growth, and strong local currency.
  Keywords: Central Bank Independence; Bayesian Structural Time Series; Monetary Policy; Inflation; Exchange Rate; Ghana.
  DOI: 10.1504/IJMEF.2023.10061003
   
  
• Nexus between Monetary Policy, Net Foreign Assets and Exchange Rate: Fresh insight from Lao PDR  
  by Sorphasith Xaisongkham, Liu Xia, Muhammad Saeed Meo, Phetphongphanh Savangchakavane, Somchith Sompaseuth 
  Abstract: This research aims to discover the nexus between monetary policy, net foreign assets and exchange rate in Lao PDR by applying an Autoregressive Distributed Lag (ARDL) model and a modified version of Toda & Yamamoto approach to Granger causality relationship. The findings aver the presence of cointegration when exchange rate and monetary policy were utilized as response variables, and corroborated a feedback effect between exchange rate with currency in circulation and monetary policy. Similarly, the article found a negative effect of net foreign assets on exchange rate, while monetary policy was a major cause of depreciation for domestic currency against US dollar in Lao PDR. The results confirmed a bidirectional causality between exchange rate and currency in circulation, whilst there was one-way causality running from currency in circulation to monetary policy and net foreign assets, which policy recommendations are essential tools to exploit in practical application for Laos and other small developing countries.
  Keywords: Exchange Rate; Net Foreign Assets; Monetary Policy; ARDL model; Toda & Yamamoto Approach.
  DOI: 10.1504/IJMEF.2024.10061324
   
  
• How does organisational capital influence firm value? Moderating effect of tax haven utilisation  
  by Elisa Tjondro, I. Made Narsa, Heru Tjaraka 
  Abstract: This study investigates whether organisational capital and tax haven utilisation through subsidiaries are associated with firm value. We use 705 observations of Indonesia-listed firms from the agriculture and manufacturing sectors as the main contributors to the gross domestic product (GDP). The sample has been analysed using the weighted least square (WLS) panel regression technique over the period 20152019. The findings suggest that the positive association between organisational capital and firm value is stronger when tax haven subsidiaries are utilised. High organisational capital (OC) firms are often linked to limited access to financing since intangible assets are difficult to use as collateral. Tax haven subsidiaries can serve as a risk trade-off for OC firms. Our study provides novel empirical evidence supporting social tax justice and stakeholder theory and encourages the cooperation of all stakeholders to resolve the recognition and assessment of intangible capital in financial reports.
  Keywords: Organisational capital; intangible capital; tax haven utilisation; firm value; tax audit; sustainable tax behaviour.
  DOI: 10.1504/IJMEF.2024.10062537
   
  
• Bibliometric and Statistical Approaches to Examining Non-performing Loans in the Eurozone  
  by Adriana Novotna 
  Abstract: Being part of an integration of countries offers advantages such as shared benefits among nations, but also exposes economies to the potential unfavourable effects across the entire region. In the context of the Eurozone, non-performing loans play a crucial role as they reflect the health of member countries' banking sectors under a shared monetary policy. This study delves into the multifaceted determinants influencing non-performing loans within the dynamic landscape of Euro area countries during the period from 1999 to 2021. To conduct a comprehensive examination of this issue, we employ bibliometric analysis of co-occurring keywords using the VOSviewer software to explore which determinants were relevant to the topic. Then, we examine selected bank-specific and macroeconomic determinants through panel data analysis. By compiling four different models, the results indicate interest rates as key indicator influencing the non-performing loan ratio, with other determinants explored and compared to findings from other studies.
  Keywords: non-performing loans; bank-specific determinants; macroeconomic determinants; Eurozone; banks; bibliometric analysis; statistical analysis; VOSviewer; co-occurring keywords; panel data.
  DOI: 10.1504/IJMEF.2024.10063923
   
  
• Estimating the Effects of FDI on the Performance of Jordan’s Banks Listed on the Amman Stock Exchange  
  by Mohamed Ibrahim Mugableh  
  Abstract: The current paper estimates the effects of foreign direct investment (FDI) on the financial performance (return on equity and the size of deposits) of Jordan’s banks listed on the Amman Stock Exchange over the (2015
  Keywords: Foreign Direct Investment; Financial Performance; Amman Stock Exchange; Commercial Banks.
  DOI: 10.1504/IJMEF.2024.10064870
   
  
• A VAR analysis of the macroeconomic shocks on the non-performing loans ratio in Slovakia  
  by Kristina Kocisova 
  Abstract: This paper presents the key findings of our research on the relationship between selected variables (macroeconomic and banking sector-specific) and the ratio of non-performing loans to total loans (NPL) in the Slovak banking sector. Our analysis spans from 2006:Q1 to 2022:Q4 and uses a vector autoregressive model (VAR), the unit root technique, Granger causality, impulse response functions, and forecast variance decomposition. We focus on significant macroeconomic variables such as gross domestic product growth rate, inflation rate, unemployment rate, 3M EURIBOR, monetary aggregate M3, and banking sector-specific variables, including return on assets and capital adequacy. Our research assesses the resilience of the Slovak banking sector to shocks from these variables, providing insights into the impact of macroeconomic and banking variables on the non-performing loan ratio. We also offer a projection of NPL trends for the upcoming year.
  Keywords: Macroeconomic analysis; Non-performing loans; Vector autoregressive model; Granger causality; Impulse response analysis; Decomposition of dispersion.
  DOI: 10.1504/IJMEF.2024.10064871
   
  
• Investigating the dynamic relationship of the Indian stock market with global crude oil and bitcoin price movement.  
  by Ajit Kumar Dash, AMRITKANT MISHRA, Reeta Tomar, Lopamudra Hota 
  Abstract: The current pragmatic investigation strives to estimate the dynamic conditional correlation and conditional volatility of the Indian stock exchange with respect to global crude oil and bitcoin price movements. To accomplish the relevant aim, this investigation utilises the GARCH DCC approach for the period with daily time series data ranging from April 4, 2015, to July 31, 2023. The empirical outcome reveals the presence of volatility clustering in the return series of crude oil, bitcoin, and the Indian stock market. Secondly, the outcome of dynamic conditional correlation manifests that there is a short-run volatility spillover from crude oil to the Indian stock market; however, there is no such short-run spill existing from bitcoin to the Indian stock market. Finally, our investigation documents the long-term volatility spillover from crude oil and bitcoin price movements to the Indian stock market. Lastly, based on the outcome of conditional variance, it can be concluded that there was an increase in the return volatility of stock exchanges during the period of the COVID-19 pandemic.
  Keywords: Crude Oil; Bitcoin; Indian Stock Market; GARCH DCC and Volatility.
  DOI: 10.1504/IJMEF.2024.10064872
   
  
• Institutional Distance and Thai Outward Foreign Direct Investment  
  by Siwapong Dheera-aumpon, Piyaphan Changwatchai 
  Abstract: Outward foreign direct investment (OFDI) is critical for source countries' competitiveness and economic growth. Analysis of FDI determinants is required to promote OFDI. Thus, the objective of this research is to analyze the determinants of Thai OFDI with a focus on institutional distance. This study focuses on the factors that promote FDI, which can broaden the scope of international finance. This study covers 28 host economies using secondary data from 2006 to 2020. The findings show that the factors that have positive effects on the stock of Thai OFDI are Thailand’s GDP and trade openness between Thailand and host countries, while the physical distance between Thailand and host nations has a negative effect. The higher institutional distances in terms of voice and accountability; and corruption control lead to higher Thai OFDI. Conversely, the institutional distances in terms of political stability; and rule of law have negative effects. Thailand's government should provide information about host countries' institutional environments, improve domestic institutional environments, and promote trade openness.
  Keywords: Institutional Distance; FDI; Outward; OFDI; Corruption; Thailand.
  DOI: 10.1504/IJMEF.2024.10064953
   
  

Special Issue on: ACFA2021 Financial Markets and Stabilisation Policies in Turbulent Times

• The Effect of Demographic Changes on Real Interest Rates: Theory and Empirical Evidence from the OECD.  
  by Kristine Gevorgyan 
  Abstract: Do demographic changes a_ect the real interest rates? Using an analytical three-period overlapping generation model we show that the equilibrium real interest rate increases when the fertility and the mortality rates are higher. A larger share of younger population in the economy increases the demand for loans which subsequently increases the real interest rate. We empirically con_rm these relationships using cross-country regressions with data on long-term real interest rates, fertility, and mortality rates from the OECD.
  Keywords: Real Interest Rates; Demographics; Aging Population; Overlapping Generations Model; Cross-Country Regressions.
  DOI: 10.1504/IJMEF.2023.10060999
   
  
• The effects of COVID-19 pandemic on the exchange rate: an empirical analysis for turkey as an emerging economy  
  by Fatih Ayhan 
  Abstract: The COVID-19 pandemic has deeply affected all economies, especially the macroeconomic indicators of developing countries. There have also been changes in all economic indicators in Turkish economy since COVID-19 cases appeared in March 2020. The USD/TRY exchange rate (EXC) also fluctuated in this period. In this study, the determinants of the USD/TRY exchange rate were empirically tested for 11/03/202006/11/2020 when the cases of COVID-19 increased. This research investigated the relationship between the daily number of COVID-19 cases (COVID), oil prices (OIL), and gold prices (GOLD) in Turkey. The findings of the residual augmented least squares (RALS) regression model showed that COVID, GOLD, and OIL have a statistically significant and negative effect on EXC. According to the regression model results, the increase in the COVID, GOLD, and OIL variables decrease the USD/TRY exchange rate, respectively. The most influential factor in determining the USD/TRY appears to be the rate of oil prices during the pandemic period. The most effective tool for policymakers to control exchange rate volatility seems to seek solutions for oil and energy prices.
  Keywords: exchange rate; oil prices; COVID-19; RALS; residual augmented least squares; Turkish economy.
  DOI: 10.1504/IJMEF.2022.10050901
   
  
• The Markov-switching drivers of foreign exchange rate comovements in the case of CEE countries  
  by Mercédesz Mészáros, Dóra Sallai, Gabor David Kiss 
  Abstract: Significant foreign exchange market turbulences have emerged in recent years, which makes it worthwhile to monitor the co-movements of the exchange rates which are influenced by the variables of macroeconomic and financial environment. Regarding the effects of market contagion after exogenous shocks, it is also essential to capture the less examined elements linked to this like the measures of unconventional monetary policy. Fitting a Dynamic Conditional Correlation and Markov-Switching models to the sample of the Czech, Hungarian and Polish foreign exchange markets we analyzed whether their currencies moved together with their euro area benchmarks between 2007 and 2020. Our results showed the heterogeneity of the regional currencies. In addition, the research finding is that regime-changes revealed more similarities in case of the Polish and Hungarian currencies than what we were able to identify in the case of CZK.
  Keywords: contagion; CEE; foreign exchange markets; unconventional monetary policy; Markov-Switching.
  DOI: 10.1504/IJMEF.2023.10057736
   
  
• Recovery Theorem and the Risk Aversion. Evidence from the Czech Republic.  
  by Martin ?asta 
  Abstract: The main goal of this study is to obtain expectations regarding the future development of the exchange rate using derived option probabilities and based on them to calculate the perception of risk by investors. More specifically, this study deals with the application of the Ross recovery theorem in the FOREX market using the CZK/EUR exchange rate. From a theoretical point of view, I offer an expression of the Ross recovery theorem using different Numeraire and I also apply a novel approach to the calculation of the implied risk premium. The results show that both subjective and risk-neutral densities are not unbiased probability estimates of a future exchange rate. However, the results show a significant increase in the implied risk aversion during the Covid19 pandemic.
  Keywords: Risk Aversion; Ross Recovery Theorem; Risk-neutral densities; Risk aversion; Risk premium; Covid19; FX options; Czech Republic; Czech Koruna.
  DOI: 10.1504/IJMEF.2023.10057737
   
  

Special Issue on: Islamic banking Novel topics and challenges

• Dynamic Behavior of Islamic Banking Financing in the Real Sector  
  by Faizul Mubarok, M. Nur Rianto Al Arif, Abdul Hamid 
  Abstract: One of the activities of Islamic banking is channeling financing to the real sector, comprising different characteristics, therefore appropriate management of the distribution process is needed. The purpose of this study is to analyze the effect of real sector financing on non-performing Islamic banking in the short and long terms and analyzes its response in facing real sector financing shocks. This study uses a Vector Error Correction Model with data collected monthly from Islamic commercial banks and business units from 2007 to 2020. The results showed no effect in the short term, with a significant effect in the long term on the industrial sector. Islamic banking stabilized the fastest when it responded to the agricultural sector financing shock. Furthermore, the transportation, warehousing, and communication sectors dominate the non-performing financing of Islamic banking, therefore a reserve fund is needed to create a portfolio and a priority scale.
  Keywords: Financing; Non-Performing Financing; Real Sector; Islamic Bank.
  DOI: 10.1504/IJMEF.2024.10057738
   
  

Special Issue on: Monetary Policy and Financial Stability in the Post-COVID-19 Economies

• A Correspondence Analysis on Dynamics of Local Gold Price among Major Consumer Economies During the Pre-Covid Period and the Pandemic Period  
  by SREEJITH S, Hareesh Ramanathan 
  Abstract: Gold is known as one of the precious metals The largest consumers of physical gold are China and India The consumer's attitude towards gold in these emerging markets for both consumption and investment is linked with their culture The price of gold in Indian and Chinese local markets mostly differs from International markets, either at a premium or at a discount price The recent economic slowdown during the outbreak of the covid19 also affected the investment preferences of investors, especially towards safe-haven investments However, due to the global pandemic, the demand for physical gold dropped to its lowest quarterly total since 2009 Social restrictions, economic slowdown, and strong gold-price are contributed to the same The premium or discount offered to gold prices in the local market also gives leverage for the economy to perform The study compares the strategies adopted by the largest consumer markets of gold.
  Keywords: Gold Price; Premium Gold Price; Discount Gold Price; Pandemic; Covid19; Correspondence Analysis.
  DOI: 10.1504/IJMEF.2024.10059847
   
  

Special Issue on: SIBR 2023 Post-pandemic Business Strategies and Policies in Emerging Markets

• Conservatism Culture, Earnings Management, and Corporate Governance: Studies on Asia Pacific Countries  
  by Anna Purwaningsih 
  Abstract: This study aims to investigate the effect of conservatism culture on earnings management practices, both accrual and real earnings management. In addition, this study also investigates corporate governance to the relationship between conservatism culture and earnings management. The research samples were eleven Asia Pacific countries from 2010 to 2019. The data were taken from the Bloomberg and Thomson Reuters databases. Hypothesis testing was done with Multiple Linear Regression. The results provide empirical evidence that: (1) the conservatism culture has a positive effect on accrual (real) earnings management, and (2) corporate governance weakens the positive relationship between conservatism culture and accrual (real) earnings management practices. Therefore, these test results confirmed consistency-built hypotheses.
  Keywords: conservatism; accrual earnings management; real earnings management; corporate governance.
  DOI: 10.1504/IJMEF.2024.10062536