|
on Banking |
| By: | Laura Alfaro; Guillermo Calvo; José de Gregorio; Augusto de la Torre; Pablo Guidotti; Enrique Mendoza; Ernesto Talvi; Liliana Rojas-Suarez (Chair); Andrés Velasco |
| Abstract: | This paper addresses a critical flaw in the international financial system: the failure to address the inherent asymmetry between countries that issue reserve currencies and those that do not, leaving the latter vulnerable during systemic liquidity crises. We propose an IMF-managed Emerging Market Fund (EMF) to confront these crises in emerging markets and developing economies. The EMF would be able to make temporary purchases of sovereign debt in secondary markets when financial contagion is not justified by economic fundamentals. Unlike typical IMF tools, the EMF focuses on stabilizing bond markets rather than providing country-specific loans. The EMF would independently determine when and how to intervene, as well as which basket or index of countries would be subject to intervention. Crucially, countries would not need to request activation, avoiding the stigma of seeking IMF support. At the end of the paper, we answer “Frequently Asked Questions” to clarify key elements of the proposal. |
| Keywords: | emerging markets, international financial architecture, International Monetary Fund, financial crisis, financial contagion |
| JEL: | F33 F34 E44 G15 O16 O19 |
| Date: | 2024–10–15 |
| URL: | https://d.repec.org/n?u=RePEc:cgd:ppaper:345 |
| By: | Thomas Ferguson (Institute for New Economic Thinking); Servaas Storm (Delft University of Technology) |
| Abstract: | This paper analyzes claims that the Federal Reserve is principally responsible for the decline of inflation in the U.S. We compare several different quantitative approaches. These show that at most the Fed could plausibly claim credit for somewhere between twenty and forty percent of the decline. The paper then examines claims by central bankers and their supporters that a steadfast Fed commitment to keeping inflationary expectations anchored played a key role in the process. The paper shows that it did not. The Fed's own surveys show that low-income Americans did not believe assurances from the Fed or anyone else that inflation was anchored. Instead, what does explain much of the decline is the simple fact that most workers nowadays cannot protect themselves by bargaining for higher wages. The paper then takes up the obvious question of why steep rises in interest rates have not so far led to big rises in unemployment. We show that recent arguments by Benigno and Eggertson that shifts in vacancy rates can explain this are inconsistent with the evidence. The biggest factor in accounting for the strength in the economy is the continuing importance of the wealth effect in sustaining consumption by the affluent. This arises, as we have emphasized in several papers, from the Fed's quantitative easing policies. Absent sharp declines in wealth, the continuing importance of this factor is likely to feed service sector inflation in particular. |
| Keywords: | Inflation; wage-price spiral; inflation expectations; effectiveness of monetary tightening; Phillips curve; central bank credibility; labor market tightness; real earnings growth; earnings uncertainty; the Beveridge ratio; wealth; wealth effect on consumption; affluent consumption; services inflation. |
| JEL: | E0 E5 E6 E62 O23 I12 J08 |
| Date: | 2024–09–25 |
| URL: | https://d.repec.org/n?u=RePEc:thk:wpaper:inetwp227 |
| By: | Dautović, Ernest; Hsieh, Robin |
| Abstract: | The phenomenon of political populism and its financial determinants have proved elusive. We utilise the sudden and uneven change in credit conditions during the COVID-19 pandemic and the unprecedented government credit guarantee programme in France to investigate whether liquidity support to firms affects political preferences. Drawing on credit registry data – which provides the universe of loans and credit lines to firms – we build a postcode-municipality-level dataset and show that government-guaranteed credit reduced the support for the far right but increased it for the incumbent. The underlying economic channel shows that credit guarantees preserved employment, which in turn influenced political preferences. Effects are driven by microenterprises, predominantly self-employed businesses in which the employee-owner-voter is fully aware of the government financial support, i.e., where government support is more salient. This study does not aim to evaluate policies to address the popularity of populist politics. JEL Classification: D72, E44, G18, G21, H81 |
| Keywords: | credit, firms, fiscal policy, government guarantees, populism |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20242993 |
| By: | Kitov, Ivan |
| Abstract: | A strict linear proportionality between the CPI inflation and the actual interest rate defined by the Board of Governors of the Federal Reserve System is studied. During the last 70 years, the cumulative CPI is just the cumulative interest rate times 1.37. There are periods when the Fed interest rate deviates from the long term inflation trend driven by the CPI. In this paper, we use the observational dataset provided by the Economic Resources & Data of the Federal Reserve Bank of St. Louis. The difference between the cumulative curves of the CPI and the Fed rate divided by 1.37 is periodic. The recessions observed after 1955 are well synchronized with the kinks and turns in the difference curve. The most recent recession as related to the peak in the difference was expected in 2020, but was likely mixed with the COVID-19 induced recession. The current Fed rate is not high enough to return the difference to the zero line in before 2030-2040. |
| Keywords: | FRS, Fed rate, CPI, recession |
| JEL: | E30 |
| Date: | 2024–09–24 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122192 |
| By: | Lukas Berend; Jan Pr\"user |
| Abstract: | We use a FAVAR model with proxy variables and sign restrictions to investigate the role of the euro area common output and inflation cycles in the transmission of monetary policy shocks. We find that common cycles explain most of the variation in output and inflation across member countries, while Southern European economies show larger deviations from the cycles in the aftermath of the financial crisis. Building on this evidence, we show that monetary policy is homogeneously propagated to member countries via the common cycles. In contrast, country-specific transmission channels lead to heterogeneous country responses to monetary policy shocks. Consequently, our empirical results suggest that the divergent effects of ECB monetary policy are due to heterogeneous country-specific exposures to financial markets and not due to dis-synchronized economies of the euro area. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.05741 |
| By: | Tatiana Kirsanova; Campbell Leith; Ding Liu |
| Abstract: | We develop a New Keynesian model augmented with a rich description of fiscal policy, including debt maturity structure, where two policymakers- an independent inflation-averse central bank and a (potentially) populist fiscal authority- interact strategically. Central bank independence initially improves inflation outcomes, but this results in reduced fiscal discipline and increased debt. Eventually this leads to inflation lying above pre-independence levels. Introducing a ‘flight-to-safety’ regime, which suppresses the interest rates households require to hold government debt, and a conventional regime, where their time preferences return to normal, allows us to explore how changes in the natural rate can dramatically affect debt dynamics and inflation outcomes. The model offers an explanation of the buildup of government debt since the financial crisis and the subsequent emergence of significant inflation |
| Keywords: | New Keynesian Model; Central Bank Independence; Government Debt; Monetary Policy; Fiscal Policy; Time Consistency. |
| JEL: | E31 E43 E62 E63 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:gla:glaewp:2024_10 |
| By: | Kozo UEDA |
| Abstract: | This study investigates whether information provision on inflation influences household inflation expectations and actual spending in Japan. Using a randomized controlled trial with approximately 2, 500 bank account holders, I find that information provision significantly shapes inflation expectations, with respondents adjusting their expectations in line with the information received. However, this adjustment in expectations does not translate into changes in actual spending behavior, as observed through outflow transactions. These findings underscore the challenge of managing inflation expectations. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:cnn:wpaper:24-021e |
| By: | Martine Warren; Bill Laur; Ted Garanzotis; Sebastian Hernandez |
| Abstract: | Research into a hypothetical Digital Canadian Dollar has largely focused on public policy, financial technology innovations and public opinion. In this study, we explore the consumer value proposition of a hypothetical Digital Canadian Dollar, considerations for its adoption and the users who would benefit most from this potential new payment method. We employ a design-thinking consultation methodology, allowing participants to interact with research prototypes of increasing complexity to reveal user preferences, constraints, and adoption influences. Qualitative insights are corroborated using quantitative, large-population surveys and contrasted with results from a Bank of Canada open online public consultation. We find that most participants would support the issuance of a hypothetical Digital Canadian Dollar, and we identify the segments most likely to be early adopters. However, broad early adoption is unlikely given that available payment methods meet the needs of most users. Financially vulnerable segments often have the most to gain from this new payment method but are most resistant to adoption. Important considerations for appeal and adoption potential include universal merchant acceptance, low costs, easy access, simplified online payments, shared payment features, budgeting tools, and customizable security and privacy settings. Participants cited these features far more often than offline functionality and the ability to make anonymous payments. Our results also show that cash remains an important method of payment and that certain groups may strongly resist a Digital Dollar if they conflate its launch with the end of cash issuance. We find a hypothetical Digital Canadian Dollar requires the support of an information campaign to be understood, valued and adopted. |
| Keywords: | Accessibility; Bank notes; Central bank research; Digital currencies and fintech |
| JEL: | C9 D12 E42 E58 O3 O33 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocadp:24-16 |
| By: | Matthias Fleckenstein; Francis A. Longstaff |
| Abstract: | We study the relation between bank funding costs and the financial sophistication of bank customers. In doing this, we make use of a natural experiment that allows us to identify banks that—either intentionally or unintentionally—price time deposits in a way that can result in financially-unsophisticated customers essentially being shortchanged. We find that these banks have significantly lower deposit funding costs. These results provide evidence that having financially-unsophisticated customers may provide banks with substantial market power and be an important component of the value of a bank's deposit franchise. |
| JEL: | G2 G21 G51 G53 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33049 |
| By: | Vassilios G. Papavassilioua (University College Dublin and UCD Geary Institute for Public Policy); Fan Dora Xiab (Bank for International Settlements (BIS)) |
| Abstract: | We study the liquidity of the euro-area sovereign bond market during the March 2020 dash for cash. We provide evidence that liquidity was signif- icantly impaired across the three core euro-area countries. We note that the liquidity deterioration was not as severe as that during the euro-area sovereign debt crisis. Spikes in illiquidity are reversed in the period imme- diately following the dash for cash episode. We also document strong com- monalities in liquidity that are reduced after the dash for cash. This result indicates that variation in liquidity exhibits a strong common component highlighting the systemic risk that comes as a result. |
| Keywords: | Liquidity, Sovereign bond markets, COVID-19 outbreak, Common factors |
| JEL: | C5 G01 G10 G15 |
| Date: | 2024–10–21 |
| URL: | https://d.repec.org/n?u=RePEc:ucd:wpaper:202406 |
| By: | Javier Bianchi; Alisdair McKay; Neil Mehrotra |
| Abstract: | A persistent rise in rents has kept inflation above target in many advanced economies. Optimal policy in the standard New Keynesian (NK) model requires policy to stabilize housing inflation. We argue that the basic architecture of the NK model—that excess demand is always satisfied by producers—is inappropriate for the housing market, and we develop a matching framework that allows for demand rationing. Our findings indicate that the optimal response to a housing demand shock is to stabilize inflation in the non-housing sector while disregarding housing inflation. Our results hold exactly in a version of the model with costless search and quantitatively in a version with housing search costs calibrated to match US data on housing tenure, vacancy rates, and the size of the real estate sector. |
| Keywords: | Housing; Monetary policy; Stabilization policy; Inflation |
| JEL: | E24 E30 E52 |
| Date: | 2024–10–24 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedmwp:99022 |
| By: | Yudai Hatayama (Bank of Japan); Yuto Iwasaki (Previously Bank of Japan); Kyoko Nakagami (Bank of Japan); Tatsuyoshi Okimoto (Bank of Japan and Keio University) |
| Abstract: | This paper quantitatively examines the effect of globalization on the natural rate of interest in developed economies, including Japan, the US, and the euro area. By incorporating into the model the variables that capture global economic and financial trends, such as demand and supply of safe assets and cross-border spillovers, with a smooth-transition framework, we account for the existence of non-linear regime change of their coefficients, driven by globalization. Our findings indicate that along with the progress of globalization, (i) the impact of global factors rapidly increased around 2000, and (ii) the commonly observed decline in the natural rate of interest can be largely attributed to these global factors. These findings underscore the importance of incorporating global factors such as demand and supply of safe assets and global spillovers, with their increasing impact, alongside the domestic factors such as productivity and demographics, when investigating developments in the natural rate of interest. |
| Keywords: | Natural Rate of Interest; Globalization; Smooth Transition Model |
| JEL: | E43 E52 F41 |
| Date: | 2024–11–01 |
| URL: | https://d.repec.org/n?u=RePEc:boj:bojwps:wp24e13 |
| By: | Davydiuk, Tetiana (Johns Hopkins U); Erel, Isil (Ohio State U and ECGI); Jiang, Wei (Emory U and ECGI); Marchuk, Tatyana (Nova School of Business and Economics) |
| Abstract: | This paper examines the dual role of Business Development Companies (BDCs) as creditors and shareholders in the private direct lending market. Utilizing a comprehensive deal-level database, our analysis shows that dualholder BDCs are more effective monitors than sole lenders, benefiting from enhanced tools for information access and governance. This effectiveness allows them to charge higher loan spreads, while simultaneously reducing credit risk and lowering the borrowing cost of portfolio firms from other lenders. We rule out alternative explanations attributing higher loan spreads to mere compensation for capital injection or to hold-up by a dominant financier. Our findings highlight a critical mechanism through which BDCs serve a market segment — mid-sized firms with low (or even negative) cash flows and a lack of collateral but high growth potentials — that is typically undesired by traditional bank lenders. |
| JEL: | G20 G21 G23 G28 G32 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:ecl:ohidic:2024-21 |
| By: | Lars Hornuf; Maximilian Meiler |
| Abstract: | We examine the technological and socioenvironmental factors influencing the adoption of humanoid service robots in Austrian, German, and Swiss banks. We integrate the technology acceptance model and the technology–organization–environment framework, and employ structural equation modeling to analyze data from the top management of 106 banks. We find that the relative advantage of the innovation, top management support, competitive pressure, and customer acceptance drive the perceived usefulness of humanoid service robots. Moreover, customer acceptance significantly enhances perceived ease of use by the bank. Together, perceived usefulness and perceived ease of use significantly increase banks’ intention to adopt humanoid service robots. However, the actual adoption rate of humanoid service robots in banks remains low, indicating the presence of underlying barriers to adoption such as lack of organizational readiness, technical limitations, and regulatory concerns, which are especially relevant for smaller banks with limited resources. Furthermore, some banks perceive humanoid service robots as fascinating novelties rather than essential operational tools. As a result, banks are actively exploring alternatives such as digital avatars, chatbots, and voice bots for certain tasks while continuing to prioritize human-to-human interactions for non-online customer services. |
| Keywords: | humanoid service robots, technology adoption, banking industry |
| JEL: | L84 O32 O33 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11366 |
| By: | Mistak, Jakub; Ozkan, F. Gulcin |
| Abstract: | This paper examines the asymmetry in global spillovers from Fed policy across tightening versus easing episodes several examples of which have been on display since the global financial crisis (GFC). We build a dynamic general equilibrium model featuring: (i) occasionally binding collateral constraints in the financial sector with significant cross-border exposure; and (ii) global supply chains, allowing us to match the asymmetry of spillovers across contractionary versus expansionary monetary policy shocks. We find clear asymmetries in the transmission of US monetary policy, with significantly larger spillovers during contractionary episodes under both conventional and unconventional monetary policy changes. Our results also reveal that the greater the size of international credit and supply chain networks and the policymakers’ aversion to exchange rate fluctuations in the rest of the world, the greater the spillover effects of US monetary policy shocks. JEL Classification: E52, F41, E44 |
| Keywords: | capital flows, emerging markets, monetary policy, spillovers, supply chains |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20242995 |
| By: | Mehdi Hosseini Chagahi; Niloufar Delfan; Saeed Mohammadi Dashtaki; Behzad Moshiri; Md. Jalil Piran |
| Abstract: | Detecting credit card fraud (CCF) holds significant importance due to its role in safeguarding consumers from unauthorized transactions that have the potential to result in financial detriment and negative impacts on their credit rating. It aids financial institutions in upholding the reliability of their payment mechanisms and circumventing the expensive procedure of compensating for deceitful transactions. The utilization of Artificial Intelligence methodologies demonstrated remarkable efficacy in the identification of credit card fraud instances. Within this study, we present a unique attention-based ensemble model. This model is enhanced by adding an attention layer for integration of first layer classifiers' predictions and a selection layer for choosing the best integrated value. The attention layer is implemented with two aggregation operators: dependent ordered weighted averaging (DOWA) and induced ordered weighted averaging (IOWA). The performance of the IOWA operator is very close to the learning algorithm in neural networks which is based on the gradient descent optimization method, and performing the DOWA operator is based on weakening the classifiers that make outlier predictions compared to other learners. Both operators have a sufficient level of complexity for the recognition of complex patterns. Accuracy and diversity are the two criteria we use for selecting the classifiers whose predictions are to be integrated by the two aggregation operators. Using a bootstrap forest, we identify the 13 most significant features of the dataset that contribute the most to CCF detection and use them to feed the proposed model. Exhibiting its efficacy, the ensemble model attains an accuracy of 99.95% with an area under the curve (AUC) of 1. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.09069 |
| By: | Lorenzo Carbonari (Dipartimento di Economia e Finanza, Università degli Studi di Roma “Tor Vergata”, Italy; CEIS); Alessio Farcomeni (Dipartimento di Economia e Finanza, Università degli Studi di Roma “Tor Vergata”, Italy); Cosimo Petracchi (Dipartimento di Economia e Finanza, Università degli Studi di Roma “Tor Vergata”, Italy); Giovanni Trovato (Dipartimento di Economia e Finanza, Università degli Studi di Roma “Tor Vergata”, Italy; CEIS) |
| Abstract: | e present a model for data reduction and provide time-fixed indicators for macroprudential policies. Using a panel of 119 countries from 2000 to 2015, we empirically assess the effectiveness of macroprudential policies in reducing volatility in private credit. Unobserved heterogeneity among countries is an important factor. We employ an econometric model that accounts for this heterogeneity and document that the impact of macroprudential policies on financial stability varies, leading to either deterioration or improvement, depending on the macroeconomic conditions of the country in which they are implemented. |
| Keywords: | Macroprudential policies, Financial cycles, unobserved heterogeneity, Generalized additive models for location, scale and shape |
| JEL: | E43 E58 G18 G28 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:rim:rimwps:24-16 |
| By: | Heng Chen; Daneal O’Habib; Hongyu Xiao |
| Abstract: | This paper introduces a subjective measure of cash accessibility in Canada, complementing existing distance-based metrics developed by Chen, O’Habib and Xiao (2023). Analyzing data from the 2023 Methods-of-Payment Survey, this study explores how Canadians perceive their ease of accessing cash from automated banking machines (ABMs) and financial institution branches. The results reveal strong alignment between subjective perceptions and distance-based metrics, with most Canadians reporting easy access to cash sources. Those who reported lower perceived cash accessibility need to travel longer distances and tend to be young, university-educated, low-income, unemployed or cashless. |
| Keywords: | Financial services; Regional economic developments |
| JEL: | O1 J15 R51 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocsan:24-24 |
| By: | Jolien Noels; Mark Bemhofen; Raphaël Jachnik; Simon Touboul |
| Abstract: | Adapting to growing climate change risks and achieving climate resilient development requires making finance consistent with this goal, as called for by Article 2.1c of the Paris Agreement. To assess progress and help inform policies to increase the climate resilience of finance flows and stocks, major conceptual and data gaps need to be filled. This paper explores possible methods, data and metrics to help fill those gaps. It takes stock of existing approaches and data to assess physical climate risks in finance, and then identifies complementary analytical dimensions, data and information needed for assessing the alignment of finance flows and stocks with climate resilience policy goals. In this context, the paper proposes actions that policymakers, researchers and market players can take to support credible and comparable assessments, as well as identifies the need for pilot studies to help adjust and refine the approach while identifying feasible and practical indicators. |
| JEL: | G23 G24 Q54 Q56 |
| Date: | 2024–10–24 |
| URL: | https://d.repec.org/n?u=RePEc:oec:envaaa:251-en |
| By: | Daniel Liebau |
| Abstract: | This study explores the potential future impact of Decentralized Finance (DeFi) on the financial services industry and the competencies financial professionals will require in a decade from now, in 2034. Using a survey of 109 experts from industry, academia, and regulatory bodies, the research highlights growing confidence in DeFi's potential to reshape critical areas such as risk management and operations. Over 40% of respondents anticipate high levels of DeFi adoption by 2034, with industry practitioners expressing the greatest optimism. However, the study identifies critical issues that need to be addressed, particularly in the areas of data management & privacy, and security. These concerns, alongside regulatory challenges, underscore the need for financial institutions to prepare carefully. The findings also suggest that strategic competencies, sector-specific domain expertise, and technological skills will become increasingly vital. The insights offered are valuable for regulators, policymakers, and industry professionals, emphasizing the need for continuous upskilling to remain competitive in an evolving financial services landscape. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.14173 |
| By: | Alfred Duncan; Joao Pedro De Camargo Mainente; Charles Nolan |
| Abstract: | We present a model with macroprudential externalities emerging from market allocation of aggregate risks. The model predicts a paradox of safety: an increase in household risk aversion increases the volatility of output and consumption. Optimal monetary and macroprudential policies are designed to stabilise the economy whilst not exacerbating moral hazard in future periods. There is typically a macroprudential role for monetary policy, sometimes a dominant role, even when macroprudential policies are set optimally. But there are limits too. A monetary policy that focuses overly on financial stability loses control of inflation. |
| Keywords: | Macroeconomics, Incomplete Markets, Monetary Policy. |
| JEL: | D52 E32 E52 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:gla:glaewp:2024_12 |
| By: | Jérémie Bertrand (IÉSEG School Of Management [Puteaux]); Paul-Olivier Klein (Laboratoire de Recherche Magellan - UJML - Université Jean Moulin - Lyon 3 - Université de Lyon - Institut d'Administration des Entreprises (IAE) - Lyon); Fotios Pasiouras (Groupe Sup de Co Montpellier (GSCM) - Montpellier Business School) |
| Abstract: | High secrecy cultures are characterized by a preference for confidentiality and non-disclosure of information. This study documents the impact of cultural differences in secrecy on firms' access to credit. We use data from the World Bank Enterprise Surveys for a large sample of firms operating in 35 countries from 2010 to 2019. We show that firms operating in countries with higher levels of secrecy are less likely to apply for credit when they need it—they are more discouraged—and also less likely to receive credit when they do apply—they are more rationed. The underlying economic channels are greater opacity and corruption in cultures with high secrecy. The effect of cultural secrecy on credit discouragement and credit rationing is moderated by trust in banks, interpersonal trust, and firms' financial dependence on external sources. We control for several potential alternative drivers and conduct several robustness tests. The results confirm that firms have better access to credit in cultures that promote transparency and information disclosure. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04691594 |
| By: | García-Lembergman, Ezequiel; Hajdini, Ina; Leer, John; Pedemonte, Mathieu; Schoenle, Raphael |
| Abstract: | Using a novel dataset that integrates inflation expectations with information on social network connections, we show that inflation expectations within one's social network have a positive, causal relationship with individual inflation expectations. This relationship is stronger for groups that share common demographic characteristics such as gender, income, or political affiliation and when salient information disseminates through the network. In a monetary union New-Keynesian model, socially determined inflation expectations induce imperfect risk-sharing and can affect the inflation and real output propagation of local and aggregate shocks. To reduce welfare losses due to socially determined expectations, monetary policy should optimally put more weight on the inflation rate of socially more connected regions. |
| Keywords: | Inflation expectations;Social network;Monetary union |
| JEL: | E31 E71 C83 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:13787 |
| By: | Chiad, Faycal; GHERBI, Abdelhalim |
| Abstract: | The aim of this research is to provide a suitable empirical framework for the interaction between Islamic finance, financial stability and economic development. Additionally, it is an attempt to empirically evaluate how the levels of financial system stability and economic growth in an oil-rich nation are affected by the financing provided by the Islamic banks. Employing fully modified ordinary least squares (FMOLS) and quantile regression (QR) based on quarterly data for the years 2013 to 2022. The paper explores strong evidence that Islamic banking finance supports economic growth (coefficients ranging from 0.14 to 0.22) and improves financial system stability, as indicated by the coefficients ranging from 0.25 to 0.32. Moreover, the study highlights that this positive relationship is negatively affected by inflation rates and levels of economic policy uncertainty. Financial inclusion has an important positive impact on both dependent variables, which reinforces this link. Furthermore, oil rents in Saudi Arabia contributed to improving economic development and supporting the financial sector's development to achieve economic diversification aimed by Saudi Vision 2030. These findings confirm the necessity of paying attention to developing Islamic banking and increasing its market share by creating products and services that achieve economic efficiency in accordance with suitable policies for making the financial sector a strategic sector that supports economic development in KSA. |
| Keywords: | Islamic Banks, Financial Stability, Economic Growth, Quantile Regression |
| JEL: | C21 G21 G32 O47 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122409 |
| By: | Cândida Ferreira |
| Abstract: | This study uses Data Envelopment Analysis to analyse the evolution of the efficiency of the European Union banking sector with different concepts and measures of bank efficiency, as well as the results provided by the Malmquist index to measure different efficiency changes, and the total productivity changes considering a panel of 784 relevant banks from all the 27 European Union countries, between 2006 and 2021. Banks are assumed to produce three outputs: loans, other earning assets, and non-earning assets using three inputs: interest expenses, non-interest expenses, and equity, overall, the findings of the paper point to the existence of inefficiencies which are mainly justified by non-optimal combinations of the considered inputs and outputs, and not by the scale of the production. The results obtained also reveal that the EU banks included in the sample have room to improve their choices of the combinations of inputs to produce the desired outputs at minimum costs. The values of the computed Malmquist index indicate overall progress, except during the period of the global financial crisis, and to some extent also between the years 2015-2017, corresponding to a turbulent period of the EU banking sector with the advancements of the European Banking Union and two relevant initiatives: the European Banking Supervision and the Single Resolution Mechanism. |
| Keywords: | Data Envelopment Analysis; European Union banking sector; bank efficiency; Malmquist index. |
| JEL: | C33 D53 F36 G21 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:ise:remwps:wp03542024 |