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Wage-Setting Behavior In France: Additional Evidence From An Ad-Hoc Survey, Jeremi Montornes, Jacques-Bernard Sauner-Leroy Mar 2024

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, …

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The Effect Of The Introduction Of A »Pay Per Use« Option Within Motor Tpl Insurance, Stefan Trappl, Karl Zehetner, Robert Pichler Mar 2024

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 …

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Volatility Transmission Between Stock And Foreign, Emenike Kalu Mar 2024

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 …

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Do Institutional And Political Factors Matter For The Efficiency Of Banking Sectors?, Małgorzata Anna Olszak, Patrycja Chodnicka Mar 2024

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 …

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Access To Credit As A Growth Constraint, Matjaž Volk, Polona Trefalt Mar 2024

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 …

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Macroprudential Banking Regulation: Does One Size Fit All?, Doris Neuberger, Roger Rissi Mar 2024

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 …

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Risks And Opportunities Of Participation In Global Value Chains, Gary Gereffi, Xubei Luo Mar 2024

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 …

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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 Mar 2024

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 …

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The Day After Tomorrow: Designing An Optimal Fiscal Strategy For Libya, Carlos Caceres, Serhan Cevik, Ricardo Fenochietto, Borja Gracia Mar 2024

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 …

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Financial And Sovereign Debt Crises: Some Lessons Learned And Those Forgotten, Carmen M. Reinhart, Kenneth S. Rogoff Mar 2024

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 …

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Asset Choice In British Central Banking History, The Myth Of The Safe Asset, And Bank Regulation, William A. Allen Mar 2024

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 …

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The Relationship Between Distance-To-Default And Cds Spreads As Measures Of Default Risk For European Banks, Kim Ristolainen Mar 2024

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 …

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What Drives The Volatility Of Firm Level Productivity In China?, Xubei Luo, Nong Zhu Mar 2024

What Drives The Volatility Of Firm Level Productivity In China?, Xubei Luo, Nong Zhu

Journal of Banking and Financial Economics

The enterprise reforms of the 1990s profoundly changed the structure of the economy in China. Using a rm-level dataset collected annually during the period of 1998–2007, this paper examines the variation of productivity volatility across rms of different characteristics as well as its evolution over time, and investigates the sources of productivity volatility at the rm level. The results suggest that in general, productivity volatility at the rm level declined over time in China. Large rms, old rms, foreign rms, and rms located in the coastal provinces are less volatile. Firm size and location are the two major factors that …

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External Factors In Debt Sustainability Analysis: An Application To Latin America, Gustavo Adler, Sebastian Sosa Mar 2024

External Factors In Debt Sustainability Analysis: An Application To Latin America, Gustavo Adler, Sebastian Sosa

Journal of Banking and Financial Economics

This paper develops a framework for debt sustainability analysis that integrates econometric estimates of the effect of global factors on a set of key domestic variables that determines public and external debt dynamics. The methodology is applied to assess debt sustainability in Latin America – a region highly sensitive to external conditions. Results suggest that, while some countries in the region are well placed to withstand moderate or even large foreign shocks, many would benefit from strengthening their fiscal positions to be able to deploy countercyclical policies under adverse scenarios, especially tail events. External sustainability, on the other hand, does …

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The Finance And Growth Nexus Re-Examined: Do All Countries Benefi T Equally?, Adolfo Barajas, Ralph Chami, Seyed Reza Yousefi Mar 2024

The Finance And Growth Nexus Re-Examined: Do All Countries Benefi T Equally?, Adolfo Barajas, Ralph Chami, Seyed Reza Yousefi

Journal of Banking and Financial Economics

A large theoretical and empirical literature has focused on the impact of financial deepening on economic growth throughout the world. This paper contributes to the literature by investigating whether this impact differs across regions, income levels, and types of economy. Using a rich data set for 150 countries for the period 1975–2005, dynamic panel estimation results suggest that the beneficial effect of financial deepening on economic growth in fact displays measurable heterogeneity; it is generally smaller in oil exporting countries; in certain regions, such as the Middle East and North Africa (MENA); and in lower-income countries. Further analysis suggests that …

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Intermediary Networks Under The Rule Of Equi-Repartition Of Profi Ts, Fabien Mercier Mar 2024

Intermediary Networks Under The Rule Of Equi-Repartition Of Profi Ts, Fabien Mercier

Journal of Banking and Financial Economics

This paper studies the stability, equilibrium and efficiency of directed networks of trade intermediaries under a rule of equi-repartition of profits. This equi-repartition rule, although simple and natural, introduces complex topologic considerations from players. Core-periphery structures can arise endogenously and result in stable networks even assuming complete homogeneity of all agents in the network. The concept of network partition is introduced to provide examples of networks that could be seen as arising from the linking up of a set of disjoint networks in an endogenous manner. From an aggregate welfare perspective as well as sometimes from an individual perspective, leaving …

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Trade Policy Barriers: An Obstacle To Export Diversification In Eurasia, Ana Paula Paula Cusolito, Claire H. Hollweg Mar 2024

Trade Policy Barriers: An Obstacle To Export Diversification In Eurasia, Ana Paula Paula Cusolito, Claire H. Hollweg

Journal of Banking and Financial Economics

Despite trade liberalization efforts made by Eurasian countries, the export structure of the region shows significant levels of concentration across export destinations. To shed light on this observation, this research analyzes trade policy barriers in Eurasia, East Asia and the Pacific, and the European Union. Using the most recent data from sources including the World Trade Organization, the United Nations, and the World Bank – including the Overall Trade Restrictiveness Indices, the Services Trade Restrictions Database, and the Temporary Trade Barriers Database – the role of tariffs, non-tariff measures, temporary trade barriers, trade agreements, and trade barriers in services are …

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Does It Pay To Be Good? An Analysis Of Vice And Virtue Stock Performance In The Eurozone, Toni Vide Mar 2024

Does It Pay To Be Good? An Analysis Of Vice And Virtue Stock Performance In The Eurozone, Toni Vide

Journal of Banking and Financial Economics

This paper provides a performance analysis of vice and virtue stocks in the Eurozone for the period between January 2005 and December 2014. In order to do so, a vice index consisting of listed Eurozone companies operating in selected vice industries is created and subsequently matched with a corresponding virtue index, which for the purpose of this analysis is represented by the DJSI Eurozone. The tools used to conduct the performance evaluation are the Sharpe ratio, the capital asset pricing model and the Carhart four-factor model. The analysis indicates no consistent outperformance or underperformance of one or the other index, …

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Spotting Bubbles: A Two-Pillar Framework For Policy Makers, Bradley A. Jones Mar 2024

Spotting Bubbles: A Two-Pillar Framework For Policy Makers, Bradley A. Jones

Journal of Banking and Financial Economics

In the aftermath of the global financial crisis, the issue of how best to identify speculative bubbles remains in flux. This owes to the difficulty of disentangling irrational investor exuberance from the rational response to lower risk, based on price behavior alone. In response, I introduce a two- pillar (price and quantity) approach for financial market surveillance. While asset pricing models comprise a valuable component of the surveillance toolkit, risk taking behavior, and financial vulnerabilities more generally, can also be reflected in subtler, non-price terms. Though policy makers will always encounter uncertainty when attempting to measure imbalances in financial markets, …

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Financial Inclusion, Growth And Inequality: A Model Application To Colombia, Izabela Karpowicz Mar 2024

Financial Inclusion, Growth And Inequality: A Model Application To Colombia, Izabela Karpowicz

Journal of Banking and Financial Economics

Financial inclusion has been one of the key pillars of Colombia’s development strategy for a number of years. Financial inclusion policies have aimed at channeling microcredit to poor, spreading formal banking system usage, fostering electronic payment acceptance, and making financial services more affordable. Using simulations from a general equilibrium model it is possible to identify the most binding financial sector frictions that preclude financial inclusion of enterprises, and study the effects on growth and inequality of efforts to remove these frictions. The study finds that lowering contraints on collateral promises higher growth while inequality is better tackled through measures that …

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Investigating Impact Of Us, Europe, Frontier And Bric Stock Markets On Indian Financial Stress Index, Amanjot Singh, Manjit Singh Mar 2024

Investigating Impact Of Us, Europe, Frontier And Bric Stock Markets On Indian Financial Stress Index, Amanjot Singh, Manjit Singh

Journal of Banking and Financial Economics

The emerging markets are slowly opening up their respective financial markets to foreign investments, thereby making the latter markets more sensitive to cross-market information transmissions. There are different transmission mechanisms ranging from trade related to financial linkages. However, statistically, both price discovery and conditional volatility act as transmission mechanisms, whereby information in one stock market has an impact on another. In this regard, the present study attempts to empirically analyse the impact of global information transmissions, i.e., stock market returns and conditional volatility on overall Indian financial stress and its various sub-components by employing different econometric models comprising Johanson Cointegration, …

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Foreign Investor Flows And Sovereign Bond Yields In Advanced Economies, Serkan Arslanalp, Tigran Poghosyan Mar 2024

Foreign Investor Flows And Sovereign Bond Yields In Advanced Economies, Serkan Arslanalp, Tigran Poghosyan

Journal of Banking and Financial Economics

Asset allocation decisions of international investors are at the core of capital flows. This paper explores the impact of these decisions on long-term government bond yields, using a quarterly investor base dataset for 22 advanced economies over 2004‒2012. We find that a one percentage point increase in the share of government debt held by foreign investors can explain a 6‒10 basis point reduction in long-term sovereign bond yields over the sample period. Accordingly, international flows to core advanced economy bond markets over 2008‒12 are estimated to have reduced 10-year government bond yields by 40‒65 basis points in Germany, 20‒30 basis …

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Comparing The Performance Of Logit And Probit Early Warning Systems For Currency Crises In Emerging Market Economies, Fabio Comelli Mar 2024

Comparing The Performance Of Logit And Probit Early Warning Systems For Currency Crises In Emerging Market Economies, Fabio Comelli

Journal of Banking and Financial Economics

We compare how logit (fixed effects) and probit early warning systems (EWS) predict in-sample and out-of-sample currency crises in emerging markets (EMs). We look at episodes of currency crises that took place in 29 EMs between January 1995 and December 2012. Stronger real GDP growth rates and higher net foreign assets significantly reduce the probability of experiencing a currency crisis, while high levels of credit to the private sector increase it. We find that the logit and probit EWS out-of-sample performances are broadly similar, and that the EWS performance can be very sensitive both to the size of the estimation …

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An Econometric Analysis For The Bid-Ask Spread In The Emerging Chilean Capital Market, David Cademartori-Rosso, Berta Silva-Palavecinos, Ricardo Campos-Espinoza, Hanns De La Fuente-Mella Mar 2024

An Econometric Analysis For The Bid-Ask Spread In The Emerging Chilean Capital Market, David Cademartori-Rosso, Berta Silva-Palavecinos, Ricardo Campos-Espinoza, Hanns De La Fuente-Mella

Journal of Banking and Financial Economics

The purpose of this paper is to show that different methods for calculating the spread (Bid-Ask) and the methods for annualizing intra-day data affect the results of econometric models. To achieve our goal, we analyze different econometric models in the context of: i) the International Financial Reporting Standards (IFRS) adoption, ii) the reduction of information asymmetry due to new corporate governance standards, and iii) the ownership concentration that characterize the Chilean Capital Market. We test the quality of the information delivered to the market using two information disclosure indices (DIS and Botosan). We find that the definition of spread and …

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Unstash The Cash! Corporate Governance Reform In Japan, Chie Aoyagi, Giovanni Ganelli Mar 2024

Unstash The Cash! Corporate Governance Reform In Japan, Chie Aoyagi, Giovanni Ganelli

Journal of Banking and Financial Economics

Japan’s high corporate savings might be holding back growth, by preventing a more efficient use of resources. Small and medium enterprises (SMEs) have been the main contributors to high corporate cash balances, but more recently larger companies have also increased cash holdings. This paper focuses on the causes and consequences of the current corporate behavior and suggests options for reform. In particular, Japan’s weak corporate governance – as measured by available indexes – might be contributing to high cash holdings. An empirical analysis on a panel of Japanese firms confirms that improving corporate governance would help unlock corporate savings. The …

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Global Thermoeconomics, Mario W. Cardullo, Manhong Mannie Liu Mar 2024

Global Thermoeconomics, Mario W. Cardullo, Manhong Mannie Liu

Journal of Banking and Financial Economics

This paper illustrates that basic global economic concepts can be directly related to the First and Second Laws of Thermodynamics. We believe that all economic returns are from nothing except from current and past human expenditure of human energy; this is the result of the First Law of Thermodynamics. It is shown that everything is a product of energy in the form of labor and that the basic principle of Labor Theory of Value is still valid and this principle is validated not relying on economics and finance models, rather on thermodynamic principles. This is illustrated by the development of …

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Inflation And Public Debt Reversals In The G7 Countries, Bernardin Akitoby, Ariel Binder, Takuji Komatsuzaki Mar 2024

Inflation And Public Debt Reversals In The G7 Countries, Bernardin Akitoby, Ariel Binder, Takuji Komatsuzaki

Journal of Banking and Financial Economics

This paper investigates the impact of low or high inflation on the public debt-to-GDP ratio in the G-7 countries. Our simulations suggest that if inflation were to fall to zero for five years, the average net debt-to-GDP ratio would increase by about 5 percentage points during that period. In contrast, raising inflation to 6 percent for the next five years would reduce the average net debt- to-GDP ratio by about 11 percentage points under the full Fisher effect and about 14 percentage points under the partial Fisher effect. Thus higher inflation could help reduce the public debt-to- GDP ratio somewhat …

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Determinants Of Banks’ Net Interest Margins In Honduras, Koffie Nassar, Edder Martinez, Anabel Pineda Mar 2024

Determinants Of Banks’ Net Interest Margins In Honduras, Koffie Nassar, Edder Martinez, Anabel Pineda

Journal of Banking and Financial Economics

This paper analyzes the determinants of banks’ net interest margins in Honduras during the years 1998 to 2013 – a period characterized by increasing banks’ net interest margins, foreign bank participation and consolidation. In line with findings in the previous literature, we find that operating costs are the most important drivers of banks’ net interest margins. We also find that competition among banks has led to higher concentration and that funding by parent banks positively impacts foreign banks’ net interest margins. Together, these results suggest that banks, particularly foreign banks, are under pressure to consolidate and reduce operating costs in …

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Bank Prudential Behaviour And Bank Stability – How Far Do They Go, Gerti Shijaku Mar 2024

Bank Prudential Behaviour And Bank Stability – How Far Do They Go, Gerti Shijaku

Journal of Banking and Financial Economics

This paper investigates how bank prudential behaviour affects bank stability, focusing only in the period after the global financial crisis. For this reason, we construct a new composite proxy as a measure for bank stability condition and another one for bank prudential behaviour. Then, we make use of a sample with a set of data for 16 banks operating in the Albanian financial sector over the period 2008–2015. The main results provide strong supportive evidence that there exist a strong positive relationship in the prudential – stability nexus, which confirms that prudential behaviour is a key fundamental contributor for bank …

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Assessing Countries’ Financial Inclusion Standing – A New Composite Index, André Mialou, Goran Amidzic, Alexander Massara Mar 2024

Assessing Countries’ Financial Inclusion Standing – A New Composite Index, André Mialou, Goran Amidzic, Alexander Massara

Journal of Banking and Financial Economics

This paper leverages the IMF’s Financial Access Survey (FAS) database to construct a new composite index of financial inclusion. The topic of financial inclusion has gathered significant attention in recent years. Various initiatives have been undertaken by central banks both in advanced and developing countries to promote financial inclusion. The issue has also attracted increasing interest from the international community with the G-20, IMF, and World Bank Group assuming an active role in developing and collecting financial inclusion data and promoting best practices to improve financial inclusion. There is general recognition among policy makers that financial inclusion plays a significant …

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