Open Access. Powered by Scholars. Published by Universities.®
- Discipline
- Keyword
-
- ARIMA (1)
- Ageing; demographics; equity; pensions; pension reform; fiscal policy; sustainability (1)
- Algeria; Data Envelopment Analysis; Efficiency; Domestic banks; Foreign banks (1)
- Applied accounting; quantitative methods; empirical corporate finance (1)
- Arbitrage; stock; earning yields; Fed model (1)
-
- Artificial intelligence; peer-to-peer lending; credit risk assessment; credit scorecards; logistic regression; machine learning. (1)
- Asset bubbles; asset pricing; market efficiency; macroprudential policy (1)
- Asset quality; GDP growth; macroeconomic cycle; non-performing loans (1)
- BRIC; financial stress; frontier markets; transmission (1)
- Bank Stability; Prudential behaviour; LLP (1)
- Bank efficiency; Bank profitability; Economy of scale (1)
- Bank equity capital; bank profitability; commercial banks (1)
- Bank levy (1)
- Bank liquidity; profitability; causality; public and private banks; Bangladesh (1)
- Bank loans (1)
- Bank management model (1)
- Bank-led digital; digital-transaction; bKash; Voluntary Insurance; digital-banking; percived risk-factor (1)
- Banking and insurance; corporate governance; financial holding company; remuneration policy; quality index of the remuneration policy (1)
- Banking sector (1)
- Banking sector; efficiency; business cycle; risk (1)
- Banks (1)
- Banks; Egyptian Banking Sector; Egyptian Revolution; Arab Spring (1)
- Banks; euro area; capital ratios; credit supply; partial adjustment model (1)
- Banks’ interest margins; Commercial banks; Panel corrected standard errors (PCSE) (1)
- Beneish model; Roxas model; Warsaw Stock Exchange; logistic regression (1)
- Beta coeffi cient (1)
- Bitcoin; digital currencies; currency competition; money; evolution; replicator dynamics; cryptocurrencies; central bank digital currencies (1)
- Bootstrap; confidence intervals; Sharpe ratio; TailVaR; stock market index (1)
- Borrowing intentions; financial literacy; instrumental variables; quantile regression (1)
- Business cycles; microsimulations; distributional analysis; Uruguay (1)
Articles 1 - 30 of 112
Full-Text Articles in Entire DC Network
Employment Effects Of Minimum Wage Changes Across Regions, Age Groups, And Sectors, Aleksandra Majchrowska, Pawel Strawinski
Employment Effects Of Minimum Wage Changes Across Regions, Age Groups, And Sectors, Aleksandra Majchrowska, Pawel Strawinski
Journal of Banking and Financial Economics
Increases in minimum wages in many developed and developing economies in recent years raise the question of whether and how they impact employment. We analyze the employment effects of minimum wage increases for different age groups of workers simultaneously. We construct a panel using three-dimensional cells formed by three age groups, two economic sectors, and 16 regions, separately for each year. We use individual data on employee and employer characteristics from the Structure of Earnings Survey and aggregated data from the Local Data Bank in Poland. The research period covers 2006–2020. Our results confi rm the differences in employment elasticity …
Cross Country Heterogeneity Of Procyclicality Of Bank Loans: Evidence From Oecd Countries Using The Sure Model, Mateusz Pipień, Abhisek Anand
Cross Country Heterogeneity Of Procyclicality Of Bank Loans: Evidence From Oecd Countries Using The Sure Model, Mateusz Pipień, Abhisek Anand
Journal of Banking and Financial Economics
Procyclicality of credit supply, which refers to the simultaneous movement of credit issued to the non-financial sector alongside economic activity indicators, can create a destabilizing feedback loop between the banking system and the real economy. The impact of credit supply on the financial and real sectors may vary across different economies, and the interconnectedness between countries can magnify the effect. We conducted research examining procyclicality of loans provided by banks, analyzing data at the country level for 13 OECD countries for over 16 years (2005–2020). Our research findings indicate that the parameters measuring the procyclical effect are statistically insignificant when …
Comparison Of The Financial Market Conditions In Poland And Selected Countries During The Pandemic And The Russian-Ukrainian War, Dorota Żebrowska-Suchodolska, Andrzej Karpio
Comparison Of The Financial Market Conditions In Poland And Selected Countries During The Pandemic And The Russian-Ukrainian War, Dorota Żebrowska-Suchodolska, Andrzej Karpio
Journal of Banking and Financial Economics
The initial period of the COVID-19 pandemic and the outbreak of the Russian-Ukrainian war had a significant impact on financial markets. The aim of the work is to analyse the behaviour of selected segments of the Polish financial market in the initial period of the pandemic and war. The research is based on two measures of risk, relative and absolute. The research covers the period from 24 February 2022 to 22 August 2022. The research focuses on segments of the Warsaw Stock Exchange through the analysis of the following indices: WIG, WIG20, mWIG40, sWIG80, NCIndex, industry indices, and the TBSP …
Corporate Philanthropy In Shaping The Financial Efficiency Of Cooperative Banks In Poland – Empirical Research, Marta Idasz-Balina, Rafał Balina, Adam Zając, Krzysztof Smoleń
Corporate Philanthropy In Shaping The Financial Efficiency Of Cooperative Banks In Poland – Empirical Research, Marta Idasz-Balina, Rafał Balina, Adam Zając, Krzysztof Smoleń
Journal of Banking and Financial Economics
The aim of the study is to establish and analyze the relationship between expenditure on corporate philanthropy and fi nancial performance of cooperative banks in Poland. The study covered 70 cooperative banks, where the level of expenditure on social activities was above the average in the sector. The research was carried out using the Generalized Method of Moments for the years 2013–2020. Studies have shown positive importance of corporate philanthropy in shaping fi nancial effi ciency. The research also indicated a signifi cant shift in the time between spending on social activities and the fi nancial results obtained. The obtained …
Long-Term Relationship Of Kghm Share Prices And The Market Value Of High Grade Copper, Rafał Zbyrowski
Long-Term Relationship Of Kghm Share Prices And The Market Value Of High Grade Copper, Rafał Zbyrowski
Journal of Banking and Financial Economics
The aim of the article is to try to explain the long-term price volatility of KGHM shares. Therefore the paper presents the relationship between KGHM stock prices and High Grade copper prices. The empirical part of the paper uses econometric cointegration analysis. Based on the estimated models, the thesis of the existence of a long-run relationship between the studied variables was confi rmed. Within the framework of econometric analyses, Johansen and Engle- Granger procedures and the Granger test of causality were applied. The study was conducted using monthly data covering quotes from August 2012 to April 2021. In the end, …
Optimization Of Banks’ Value – Practical Challenges, Jan Koleśnik, Jacek Nadolski
Optimization Of Banks’ Value – Practical Challenges, Jan Koleśnik, Jacek Nadolski
Journal of Banking and Financial Economics
The aim of the article is to verify the conceptual model of integrated optimization of a bank’s value, which enables the integration of the risk management process with business processes while maintaining compromise between the safety (stability) of a bank’s operations and striving to maximize its value. The model is an attempt at a comprehensive solution to such dilemmas as shaping a bank’s value ex ante, not ex post. Verifi cation of the model has shown that the model works in accordance with the adopted assumptions and leads to the achievement of the basic goal for which it was constructed. …
Application Of Chow, Cusum And Rolling Window In Testing Stability Of Systematic Risk Of Companies Listed In Wig-Esg In 2019–2022, Magdalena Mikołajek-Gocejna
Application Of Chow, Cusum And Rolling Window In Testing Stability Of Systematic Risk Of Companies Listed In Wig-Esg In 2019–2022, Magdalena Mikołajek-Gocejna
Journal of Banking and Financial Economics
The aim of the article is to analyze the stability of beta coeffi cients of companies listed in WIG-ESG. There are many studies on the stability of companies’ systematic risk, but the literature and research lack an analysis of the stability of the beta coeffi cient for ESG companies. We examined beta coeffi cients for 57 companies listed in WIG-ESG, established for sets of daily rates of return between September 3, 2019, to June 6, 2022 (period including COVID-19 crisis and asset price infl ation, Russian invasion of Ukraine). We estimate the beta coeffi cient for the whole as a …
Feedback To The Ecb’S Monetary Analysis: The Bank Of Russia’S Experience With Some Key Tools, Alexey Ponomarenko, Elena Vasilieva, Franziska Schobert
Feedback To The Ecb’S Monetary Analysis: The Bank Of Russia’S Experience With Some Key Tools, Alexey Ponomarenko, Elena Vasilieva, Franziska Schobert
Journal of Banking and Financial Economics
The paper investigates to what extent some basic tools of the ECBs monetary analysis can be useful for other central banks given their specific institutional, economic and financial environment. We take the case of the Bank of Russia in order to show how to adjust methods and techniques of monetary analysis for an economy that differs from the euro area as regards, for instance, the role of the exchange rate, the impact of dollarization and the functioning of sovereign wealth funds. A special focus of the analysis is the estimation of money demand functions for different monetary aggregates. The results …
Household Money Holdings In The Euro Area: An Explorative Investigation, Franz Seitz, Julian Von Landesberger
Household Money Holdings In The Euro Area: An Explorative Investigation, Franz Seitz, Julian Von Landesberger
Journal of Banking and Financial Economics
In this paper we analyse household holdings of the broad monetary aggregate M3 in the euro area from 1991 until 2009. Households are the largest money-holding sector in the euro area. We develop four models, two in nominal, two in real terms, with satisfactory economic and statistical properties. The main determinants are a transactions variable, wealth considerations, opportunity costs and uncertainty. In particular housing wealth is found to play an important role. The models are robust to different estimation strategies, samples considered and a multitude of misspecification tests. According to our analysis, it is quite apparent that in equilibrium, households …
Gravity Chains: Estimating Bilateral Trade Flows When Parts And Components Trade Is Important, Daria Taglioni, Richard Baldwin
Gravity Chains: Estimating Bilateral Trade Flows When Parts And Components Trade Is Important, Daria Taglioni, Richard Baldwin
Journal of Banking and Financial Economics
Trade is measured on a gross sales basis while GDP is measured on a net sales basis, i.e. value added. The rapid internationalisation of production in the last two decades has meant that gross trade flows are increasingly unrepresentative of the value-added flows. This fact has important implications for the estimation of the gravity equation. We present empirical evidence that the standard gravity equation performs poorly by some measures when it is applied to bilateral flows where the parts and components trade is important. We also provide a simple theoretical foundation for a modified gravity equation that is suited to …
Deep Roots Of Fiscal Behavior, Serhan Cevik, Katerina Teksoz
Deep Roots Of Fiscal Behavior, Serhan Cevik, Katerina Teksoz
Journal of Banking and Financial Economics
This paper investigates the determinants of fiscal policy behavior and its time-varying volatility, using panel data for a broad set of advanced and emerging market economies during the period 1990–2012. The empirical results show that discretionary fiscal policy is influenced by policy inertia, the level of public debt, and the output gap in both advanced and emerging-market economies. In addition, the paper finds that macro-financial factors (such as real exchange rate, financial development, interest rates, asset prices, and natural resource rents) and demographic and institutional factors (such as the old-age dependency ratio, the quality of institutions, and policy anchors such …
Euro Area Labour Markets: Different Reaction To Shocks?, Beatrice Pierluigi, Jan Bruha
Euro Area Labour Markets: Different Reaction To Shocks?, Beatrice Pierluigi, Jan Bruha
Journal of Banking and Financial Economics
A small labour market model for the six largest euro-area countries (Germany, France, Italy, Spain, the Netherlands and Belgium) is estimated in a state space framework. The model entails, in the long run, four driving forces: trend labour force, trend labour productivity, long-run inflation rate and trend hours worked. The short run dynamics is governed by a VAR model including six shocks. The state-space framework is convenient for the decomposition of endogenous variables in trends and cycles, for shock decomposition, for incorporating external judgment, and for running conditional projections. The forecast performance of the model is rather satisfactory. The model …
Global Liquidity Determinants Across Emerging And Advanced Countries, Renata Karkowska
Global Liquidity Determinants Across Emerging And Advanced Countries, Renata Karkowska
Journal of Banking and Financial Economics
The paper explores the concept of global liquidity and its determinants, focusing on the banking system in advanced and emerging markets. We explore the implications of the interaction between liquidity and its local, global and financial markets determinants. We also analyze the global liquidity channels, i.e. whether foreign banks play a significant role in the country’s financial system. The study focuses on the investigation of banks’ liquidity determinants in 42 countries (advanced and emerging/developing countries) over the 2000–2011 period. The results show the significance of the differences in global liquidity depending on the country’s level of development. We find support …
Financial Deepening, Property Rights, And Poverty: Evidence From Sub-Saharan Africa, Raju Jan Singh, Yifei Huang
Financial Deepening, Property Rights, And Poverty: Evidence From Sub-Saharan Africa, Raju Jan Singh, Yifei Huang
Journal of Banking and Financial Economics
Recent studies on the relationship between financial development and poverty have been inconclusive. Some claim that, by allowing more entrepreneurs to obtain financing, financial development improves the allocation of capital, which has a particularly large impact on the poor. Others argue that it is primarily the rich and politically connected who benefit from improvements in the financial system. This paper looks at a sample of 37 countries in sub-Saharan Africa from 1992 through 2006. Its results suggest that financial deepening could widen income inequality and increase poverty, if not accompanied by stronger property rights. Similarly, interest rate and lending liberalization …
Risk, Capital Buffers And Bank Lending: The Adjustment Of Euro Area Banks, Laurent Maurin, Mervi Toivanen
Risk, Capital Buffers And Bank Lending: The Adjustment Of Euro Area Banks, Laurent Maurin, Mervi Toivanen
Journal of Banking and Financial Economics
This paper estimates euro area banks’ internal target capital ratios and investigates whether banks’ adjustment to the targets affects their credit supply and securities holdings during the financial crisis in 2005–2011. Based on data on listed banks and country-specific macro-variables, a partial adjustment model is estimated in a panel context. The results indicate, first, that an increase in the riskiness of banks’ balance sheets positively influences banks’ target capital ratios. On the euro area level, we find banks’ undercapitalisation in terms of Tier 1 capital ratio to be close to 2 percentage points in the middle of 2008. While median …
The Role Of Foreign Firm Characteristics, Absorptive Capacity And The Institutional Framework For Fdi Spillovers, Thomas Farole, Deborah Winkler
The Role Of Foreign Firm Characteristics, Absorptive Capacity And The Institutional Framework For Fdi Spillovers, Thomas Farole, Deborah Winkler
Journal of Banking and Financial Economics
A vast set of empirical evidence has been amassed over the past decade on the existence and direction of foreign direct investment (FDI)-generated horizontal and vertical spillovers. Overall, the results are mixed, and suggest that the theoretical postulated spillover effects often do not automatically materialize just because a country is able to attract FDI in the first place. As a result, more and more research has been devoted to understanding the various conditions that may explain these mixed results. Using a cross-section of more than 25,000 domestic manufacturing firms in 78 low-and middle-income countries from the World Bank’s Enterprise Surveys …
A Global Perspective On Inflation And Propagation Channels, Luca Gattini, Huw Pill, Ludger Schuknecht
A Global Perspective On Inflation And Propagation Channels, Luca Gattini, Huw Pill, Ludger Schuknecht
Journal of Banking and Financial Economics
This paper revisits the evidence on monetary policy transmission. It extends the existing literature in three dimensions. First, we attempt to internalise potential international channels of transmission by taking a global perspective. More specifically, we explore global aggregates covering a broader set of countries (ca. 70% per cent of the world economy) and a longer time span (from 1960 to 2013) than previous studies. Second, we broaden the set of transmission channels considered, notably by exploring interactions among monetary variables, inflation and asset prices (including residential property prices). Third, we look at the potential role of public debt in driving …
Wage-Setting Behavior In France: Additional Evidence From An Ad-Hoc Survey, Jeremi Montornes, Jacques-Bernard Sauner-Leroy
Wage-Setting Behavior In France: Additional Evidence From An Ad-Hoc Survey, Jeremi Montornes, Jacques-Bernard Sauner-Leroy
Journal of Banking and Financial Economics
We investigate the wage-setting behavior of French companies using an ad-hoc survey specifically conducted for this study. Our main results are the following. i) Wages are changed infrequently. 75% of firms change their wages once a year. Wage changes occur at regular intervals during the year and are concentrated in January and July. ii) We find a lower degree of downward real wage rigidity and nominal wage rigidity in France compared to the European average. iii) About one third of companies have an internal policy to grant wage increases according to inflation. iv) When companies are faced with adverse shocks, …
The Validity And Time-Horizon Of The Fed Model For Equity Valuation: A Co-Integration Approach, Fabien Mercier
The Validity And Time-Horizon Of The Fed Model For Equity Valuation: A Co-Integration Approach, Fabien Mercier
Journal of Banking and Financial Economics
Investors do arbitrage between bonds and stocks. The so-called “Fed model” asserts that comparing the level of the earnings yields of stocks to the nominal government bond yields is relevant when assessing the relative values of the two asset classes, and their prospective returns. A conceptual problem with this model is that it compares a real quantity, the earning yield, to a nominal one, the government bond yield, thus implying that economic agents suffer from money-illusion. The merits of the Fed model as an indicator of stock returns is still very controversial. In this article we try to quantify the …
The Effect Of The Introduction Of A »Pay Per Use« Option Within Motor Tpl Insurance, Stefan Trappl, Karl Zehetner, Robert Pichler
The Effect Of The Introduction Of A »Pay Per Use« Option Within Motor Tpl Insurance, Stefan Trappl, Karl Zehetner, Robert Pichler
Journal of Banking and Financial Economics
In this paper the effects of the introduction of the so called “pay per use” -insurance products are examined. These products collect data of kilometers driven by policy holders. As a result of this data, policy holders can get a refund on the insurance-premium paid. Since there is a positive correlation between mileage and the risk of causing an accident the refund is granted to low-mileage drivers, so in theory the “pay per use” product is more attractive to low-mileage drivers than to long-distance drivers. The authors examine empirical evidence to find out whether or not it is mainly low-mileage-drivers …
Do Institutional And Political Factors Matter For The Efficiency Of Banking Sectors?, Małgorzata Anna Olszak, Patrycja Chodnicka
Do Institutional And Political Factors Matter For The Efficiency Of Banking Sectors?, Małgorzata Anna Olszak, Patrycja Chodnicka
Journal of Banking and Financial Economics
This paper investigates the relevance of banking- sector- specific and macroeconomic determinants of profitability of 21 banking sectors over the years 1995-2009. In the analysis we apply the Arellano and Bond GMM-estimator to aggregated data collected in a harmonized way by the OECD, to find out whether banking-sector-specific and macroeconomic determinants which significantly affect the efficiency of individual banks, are also of great importance to the profitability (proxied by ROA and ROE ratios) of banking sectors. Our results suggest that banking-sector-specific determinants affect the efficiency of banks in the anticipated way. Macroeconomic variables have a statistically-significant impact on both ROA …
Volatility Transmission Between Stock And Foreign, Emenike Kalu
Volatility Transmission Between Stock And Foreign, Emenike Kalu
Journal of Banking and Financial Economics
The direction of volatility transmission between stock and foreign exchange markets is important for hedging strategy, portfolio management and financial market regulation. This paper examines volatility transmission between stock and foreign exchange markets by applying the multivariate GARCH model in the BEKK framework to Nigerian stock returns and the Naira/USD exchange rate data from January 1996 to March 2013. Results of the empirical analysis show evidence of volatility clustering in both stock and foreign exchange markets. The results also show bi-directional shock transmission between stock and foreign exchange markets, suggesting that information flow in the foreign exchange market impact the …
Macroprudential Banking Regulation: Does One Size Fit All?, Doris Neuberger, Roger Rissi
Macroprudential Banking Regulation: Does One Size Fit All?, Doris Neuberger, Roger Rissi
Journal of Banking and Financial Economics
The macroprudential regulatory framework of Basel III imposes the same minimum capital and liquidity requirements on all banks around the world to ensure global competitiveness of banks. Using an agent-based model of the financial system, we find that this is not a robust framework to achieve (inter)national financial stability, because efficient regulation has to embrace the economic structure and behaviour of financial market participants, which differ from country to country. Market-based financial systems do not profit from capital and liquidity regulations, but from a ban on proprietary trading (Volcker rule). In homogeneous or bank-based financial systems, the most effective regulatory …
Access To Credit As A Growth Constraint, Matjaž Volk, Polona Trefalt
Access To Credit As A Growth Constraint, Matjaž Volk, Polona Trefalt
Journal of Banking and Financial Economics
From a sample of 75,854 Slovenian firms in the period 1995-2011, we examine the effects of a firm's access to bank credit on its growth. The results suggest that as the external financing constraint relaxes and firm gets access to credit, the reliance on internal funds to finance growth decreases. By exploring the role of available collateral in gaining access to bank credit, we find that collateral only helps larger firms to obtain credit more easily. On the other hand, collateral does not reduce micro firms' dependence on internal funds to finance growth, which suggests that even if they have …
Risks And Opportunities Of Participation In Global Value Chains, Gary Gereffi, Xubei Luo
Risks And Opportunities Of Participation In Global Value Chains, Gary Gereffi, Xubei Luo
Journal of Banking and Financial Economics
Risk is inherent to the pursuit of opportunity. This paper draws on the recent literature and looks at the risks and opportunities firms and their workers face in the global value chains. First, it examines the sharing mechanisms that firms provide from the national and global perspectives; second, it takes a closer look at the new opportunities and challenges for firms and individuals in the global arena; third, it discusses the role of economic upgrading and social upgrading; and finally it sheds light on how the government can help people manage risks and reap the benefits of participation in global …
Is Uruguay More Resilient This Time? Distributional Impacts Of A Crisis Similar To The 2001–02 Argentine Crisis, Oscar Barriga Cabanillas, Maria Ana Lugo, Carlos Rodríguez-Castelan, Hannah Nielsen, María Pía Zanetti
Is Uruguay More Resilient This Time? Distributional Impacts Of A Crisis Similar To The 2001–02 Argentine Crisis, Oscar Barriga Cabanillas, Maria Ana Lugo, Carlos Rodríguez-Castelan, Hannah Nielsen, María Pía Zanetti
Journal of Banking and Financial Economics
The 2001–02 Argentine crisis had a profound impact on Uruguay’s economy. Uruguay’s gross domestic product shrank by 17.5 percent, and the proportion of people living below the poverty line doubled in only two years. It took almost 10 years for the poverty rate to recover to its precrisis level. This paper uses a macro-micro simulation technique to simulate the impact of a similar crisis on the current Uruguayan economy. The simulation exercise suggests that Uruguay would now be in a better place to weather such a severe crisis. The impact on poverty would be considerably more moderate; inequality would not …
The Day After Tomorrow: Designing An Optimal Fiscal Strategy For Libya, Carlos Caceres, Serhan Cevik, Ricardo Fenochietto, Borja Gracia
The Day After Tomorrow: Designing An Optimal Fiscal Strategy For Libya, Carlos Caceres, Serhan Cevik, Ricardo Fenochietto, Borja Gracia
Journal of Banking and Financial Economics
Libya is highly dependent on exhaustible and volatile hydrocarbon resources, which constitute the bulk of government revenues. Although resource wealth provides the means to promote socio-economic development, procyclical fiscal policies threaten macroeconomic stability as well as fiscal sustainability and intergenerational equity. This paper provides an assessment of the cyclically adjusted fiscal stance, analyzes fiscal sustainability according the permanent income framework, and simulates various fiscal policy rules with the objective of developing a rulebased fiscal strategy that would delink the economy from oil price fluctuations, improve the management of resource wealth, and safeguard macroeconomic stability. The empirical results suggest that an …
Financial And Sovereign Debt Crises: Some Lessons Learned And Those Forgotten, Carmen M. Reinhart, Kenneth S. Rogoff
Financial And Sovereign Debt Crises: Some Lessons Learned And Those Forgotten, Carmen M. Reinhart, Kenneth S. Rogoff
Journal of Banking and Financial Economics
Even after one of the most severe multi-year crises on record in the advanced economies, the received wisdom in policy circles clings to the notion that high-income countries are completely different from their emerging market counterparts. The current phase of the official policy approach is predicated on the assumption that debt sustainability can be achieved through a mix of austerity, forbearance and growth. The claim is that advanced countries do not need to resort to the standard toolkit of emerging markets, including debt restructurings and conversions, higher inflation, capital controls and other forms of financial repression. As we document, this …
Asset Choice In British Central Banking History, The Myth Of The Safe Asset, And Bank Regulation, William A. Allen
Asset Choice In British Central Banking History, The Myth Of The Safe Asset, And Bank Regulation, William A. Allen
Journal of Banking and Financial Economics
The paper describes the use of commercial bills in Bank of England open-market operations from the earliest days of central banking in the 19th century, when, it is suggested, the Bank of England’s main objective was what would now be called macro-prudential, until the 1980s, when commercial bill purchases were an essential feature of contemporary anti-inflationary policy. It explores the relationship between government securities, central bank assets and bank liquidity regulation, exposes as a myth the belief that government securities are perfectly safe assets, and challenges the idea that central banks should confine their asset holdings to government securities. In …
The Relationship Between Distance-To-Default And Cds Spreads As Measures Of Default Risk For European Banks, Kim Ristolainen
The Relationship Between Distance-To-Default And Cds Spreads As Measures Of Default Risk For European Banks, Kim Ristolainen
Journal of Banking and Financial Economics
CDS spreads are often seen as the ’leading’ market based, default risk measure. There is no popular alternative to CDS spreads except perhaps for the distance-to-default (D2D) measure based on Merton (1974), which comes very close to it. In this paper, we investigate the correlation and short-term dynamics between these two measures for large European banks with a data panel spanning from 1/2006 to 12/2013. The analysis makes use of conventional Granger causality test statistics for individual banks and for the whole panel data. As regards the results, we found that the lead-lag relationship between these highly related variables varies …