The Bank of Japan has purchased long-term Japanese government bonds under the Quantitative and Qualitative Monetary Easing (QQE). To study monetary policy after the Bank of Japan exits the QQE, we ...develop a model in which the fiscal authority commits: (ⅰ) not to making fiscal adjustments needed to stabilize government debt and (ⅱ) not to providing financial supports for the central bank that incurs losses on its balance sheet due to a decline in the price of long-term bonds. Within this framework, this study investigates how the interaction between these commitments reduces the ability of monetary policy to control inflation after liftoff from the zero lower bound. We consider a situation in which the central bank that holds long-term bonds raises the nominal interest rates and show two key results: (ⅰ) when the Taylor principle is violated, under certain conditions, inflation right after liftoff cannot overshoot the central bank’s target; (ⅱ) when the central bank follows the Taylor principle, under certain conditions, it cannot prevent the economy from converging to the deflationary steady state.
•We study inflation after a central bank exits quantitative easing.•The fiscal authority is assumed to commit to a certain sequence of primary surpluses.•In addition, it is assumed not to cover losses on the central bank’s balance sheet.•There is an upper bound of inflation that the central bank can achieve.•When the upper bound is relevant, inflation cannot hit the central bank’s target.
We study a model for solvency contagion risk in financial networks, which allows the spread of contagion to occur before the point of default. This model can quantify systemic contagion loss through ...stress testing. In the usual case, only the total liabilities and total assets in such a network can be observed. To overcome this problem, we adopt a Gibbs sampling method to generate samples of the interbank liabilities matrix conditioning on the edges. This methodological approach is applied to a Chinese commercial bank network. Our results show that the systemic contagion losses of this network are highly dependent on the perceived exogenous recovery rate, especially when the external shock is strong. In the stress testing, we also analyze solvency contagion losses due to equity and exposure by decomposing the changes in contagion losses from 2008 to 2018 into several individual parts. We find that the contagion losses of the network exhibit a downward trend, indicating a more robust and stable network.
•Apply a financial risk contagion model to Chinese banks’ network.•Adopt a Gibbs Sampling method to recover the interbank debt network.•Model is highly sensitive to exogenous recovery rate.•Contagion losses in Chinese bank network are in a downward trend.
The implementation of a board gender quota in Norway in 2006 resulted in an extraordinary increase in the number of female directors over a short period of time. As a result, previous studies have ...used this unique scenario to examine the effects of appointing female directors on various corporate outcomes, such as the cost of debt. Extending this line of research, this study explores whether the appointment of female directors to the boardroom has a significant impact on a firm's solvency. The empirical analysis draws on a sample of firms from Denmark, Finland, Norway and Sweden and implements difference‐in‐differences estimations. The extant evidence is scarce and inconclusive and, more importantly, has been obtained without controlling for endogeneity. Our findings strongly suggest that the solvency of Norwegian firms did not change significantly after the appointment of a large number of female directors. This result is robust to a battery of sensitivity checks.
The Sovereign-Bank Diabolic Loop and ESBies Brunnermeier, Markus K.; Garicano, Luis; Lane, Philip R. ...
The American economic review,
05/2016, Volume:
106, Issue:
5
Journal Article
Peer reviewed
Open access
We propose a simple model of the sovereign-bank diabolic loop, and establish four results. First, the diabolic loop can be avoided by restricting banks' domestic sovereign exposures relative to their ...equity. Second, equity requirements can be lowered if banks only hold senior domestic sovereign debt. Third, such requirements shrink even further if banks only hold the senior tranche of an internationally diversified sovereign portfolio--known as ESBies in the euro-area context. Finally, ESBies generate more safe assets than domestic debt tranching alone; and, insofar as the diabolic loop is defused, the junior tranche generated by the securitization is itself risk-free.
Purpose: Determine the effect of liquidity ratios, profitability, solvency and activities of food and beverage sub-sector companies listed on the Indonesia Stock Exchange on stock prices.
...Design/methodology/approach: The analysis carried out is quantitative analysis using multiple linear regression to answer the problem formulation and determine the effect of predetermined variables.
Findings: Profitability, solvency and activity variables partially affect stock prices, liquidity variables partially have no effect on stock prices. Simultaneously, the variables of liquidity, solvency, profitability and activity affect the stock price of banking companies listed on the Indonesia Stock Exchange.
Practical implications: Intensify business in the economic field
Originality/value: This paper is original
Paper type: Research paper
This study investigates the impact of UAE’s Green Credit Policy on the non-performing loan. One of the main pillars in the UAE green agenda 2015–2030 is the green finance that has been growing in ...high acceleration in the Gulf Cooperation Council (GCC) countries and the whole world. Consequently, the main objective of this study is to investigate in the financial risks that associated with green lending and whether an increasing in green lending will decrease the non-performing loans ratio (NPLR) of UAE banks, based on the period 2015–2020 dataset of 23 UAE’s banks. To achieve this objective, we have used a regression technique that includes a two-stage least square regression analysis and random-effect regression analysis to test if the increase in green credit ratio can reduce the NPL ratio in a sample of UAE’s banks. The current study can be considered the first empirical attempt that conducted on the banking sector in UAE, to discover the variables that might have a direct impact on the NPL ratio. The results reveal that the ratio of green loans has a negative impact on the NPL ratio, as much as the return of equity, while the quality of credit, inefficiency, and the bank size have a positive impact on NPL ratio. But as was not as expected, we found that the impact of solvency ratio has a negative significant on the NPL ratio. Finally, the current study introduces a new value to the current literature about the impact of green lending policies and provides a new perspective which supports the financial sustainability in UAE.
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