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In the context of the debate on Exchange Rate Pass-Through (ERPT) under inflation targeting regimes, this study analysis the ERPT in inflation targeting and non-targeting economies of ASEAN-5. Employing a Non-linear Autoregressive Distributed Lag (N-ARDL) framework on data from 2000: Q1 to 2019 Q:4, our key empirical findings suggest that the exchange rate shocks do lead to significant changes in inflation. There is also prima facie evidence of asymmetric effects of exchange rate shocks in Singapore, Philippines, and Indonesia and the results varied between and among inflation targeting and non-targeting countries. The results also varied in the short and long-terms, whereas in the long-run, asymmetric effects of real exchange rate persist only for Indonesia and Singapore. Regardless of the inflation targeting or non-targeting regime, oil price shocks are found to be the most crucial factor with the largest impact on inflation in ASEAN-5 economies. Money supply and output growth also found to have some effect on inflation, though the results varied among countries. Our findings have profound implication for monetary policy formulation and price stability.

Using the longest spanning monthly data ever studied in the empirical literature, dating back to 1870, we investigate the relationship between the money supply and the stock market in the United Kingdom. In the context of bivariate and multivariate structural generalized autoregressive conditional heteroskedasticity (GARCH)-in-Mean VAR models, we document that increased money growth volatility has significant negative effects on the stock market. Our results are broadly consistent with the empirical literature and provide conclusive evidence that increased uncertainty about the growth rate of money, has a negative and statistically significant effect on economic activity. Also, accounting for money growth uncertainty, we find that an unanticipated increase (decrease) in money growth leads to fall (rise) in the unemployment rate and the interest rate and to a rise (fall) in share prices.

To explore how speculative trading influences prices in financial markets, we conduct a laboratory market experiment with speculating investors (who do not collect dividends and trade only for capital gains) and dividend-collecting investors. Moreover, we operate markets at two different levels of money supply. We find that in phases with only speculating investors present (i) price deviations from fundamentals are larger; (ii) prices are more volatile; (iii) mispricing increases with the number of transfers until maturity; and (iv) speculative trading pushes prices upward (downward) when the supply of money is high (low). These results suggest that controlling the money supply can help to stabilize asset prices.

This paper investigates the dynamic effects of monetary and fiscal policy shocks on Chinese aggregate investment and three of its components. Our findings are as follows: First, we find that government spending shocks have no significant impact on aggregate investment or its components. Second, we compare the effectiveness of two kinds of monetary policy and show that shocks to the benchmark lending rate have a non-significant effect on aggregate investment, while shocks to the money supply have a positive and significant effect on aggregate investment only during periods of expansion. Third, a positive interest rate shock has a significant negative effect on state-owned investment, while it has an insignificant impact on private investment and foreign investment. Overall, our results show that both government spending policy and monetary policy have rather limited impacts on boosting domestic investment in China. Thus, it is not necessary for the Chinese government to implement a large-scale economic stimulus package to boost domestic investment and output growth.

This study investigates the impact of monetary policy on renewable energy generation in Iran. It examines three types of renewable energy generation: total renewable energy generation; solid biomass and biogas energy generation; and the hydropower, solar, and wind group energy generation. The study uses the Kalman filter and vector autoregression (VAR) models to examine annual data from 1984 to 2016. The Kalman filter model showed that the money supply parameter moved with a steady trend, except for a sharp point during the Iran-Iraq War. A sharp point can be found for real interest rate parameter as well, although the time of global crisis and sanctions also affects this coefficient. The VAR model results indicate that only a shock to money supply can affect all the three renewable energy generation types.

This paper analyzes the influence of certain factors on the demand and supply of solar modules by employing the fully modified ordinary least squares method using Japanese data. Our regression analysis shows that interest rates and money supply (M2) significantly impact the solar photovoltaic module supply, indicating that lower interest rates and more funding channels for the renewable energy sector will increase solar photovoltaic module production. Based on this finding, the paper concludes that, for Japan to increase its energy self-sufficiency rate, the Government of Japan should implement green financing policies, providing renewable energy business owners with a wider variety of funding channels with lower interest rates, and ultimately invigorating investments in solar photovoltaic installation.

This paper revisits the debate on ruling out speculative hyperinflations in monetary models. Although apparently a narrow issue, studying these extreme economies turns out to be quite illuminating in understanding the fundamentals of price level determination. It is also relevant in evaluating the broader claims that advocates of the fiscal theory of the price level have made. In Obstfeld and Rogoff ( 1983 , 1986 ) we show that in pure fiat money models with rational expectations, where the government gives no backing whatsoever to currency, there is in fact no reasonable way to rule out speculative hyperinflations where the value of money goes to zero, even if the money supply itself is exogenous and constant. Such perverse equilibria are ruled out, however, if the government provides even a very small real backing to the currency – a fiscal mechanism, but one that comes into play only as a backstop. Indeed that backing does not have to be certain. Cochrane ( 2011 , 2019 ), however, argues that this result is wrong, and that fractional currency backing is a Maginot line that is insufficient to rule out hyperinflation. We show here why, in fact, his analysis involves a subtle change in model specification that adds a distinct monetary fragility to our model. Our baseline analysis uses a canonical money-in-the-utility-function setup due to Brock ( 1974 , 1975 ), but following Wallace (1981) , we show the same results go through in an overlapping-generations model of money.

This paper investigates the real effects of a disinflationary policy in China, in which we conduct a disinflation experiment in a medium-scale New Keynesian model. We highlight two key features of China's economy: the relevance of money to monetary policy rules and household inequality. For the former, we consider two monetary policy regimes: an expanded Taylor rule with money and a money supply rule. For the latter, we take into account a share of the population that is limited in its ability to participate in assets markets. Our analysis suggests that a disinflation policy is more costly when the central bank controls the money supply than the case in which the nominal interest rate is the policy instrument. Our results are driven by the different impacts of disinflation on nominal and real interest rates under the two regimes.

In the context of inflation targeting, this study analyses the exchange rate pass-through (ERPT) to inflation expectations in a small open inflation targeting economy. We also augment the inflation expectations function with GDP, inflation, unemployment, fiscal stance, oil prices and money supply. Drawing on the data from May 1999 to Dec 2018 on the Czech Republic, which was the first developing country to adopt inflation targeting, our key results suggest that ERPT has significant implications for inflation expectations. Inflation expectations are also strongly influenced by actual inflation and past inflation expectations suggesting evidence of adaptive expectations. Economic growth, labour market outlook, money supply, oil price shocks and fiscal stance also showed a considerable impact on inflation expectations, though results varied in the short and long run. Our study contributes to the debate on ERPT and inflation targeting by reflecting on the inflation expectations channel.

Since the recent financial crisis along with more concentration of banking supervision, we have stepped into a new regulatory regime where multiple regulations are at play simultaneously. In this paper, we study the collective impacts of multiple regulations on credit creation in a heterogeneous banking system. Each single regulation imposes a constraint on credit creation for each bank, while with multiple regulations, only the most stringent one plays the determinant role on money supply. For the homogeneous banking system with identical balance sheets, they share the same binding regulation. In contrast, for the heterogeneous banking system with diverse balance sheets, the binding regulation for each bank may be different from other's. Those banks, who are bound by different regulatory constraints from homogeneous banks, would bring about an overall reduction in money supply, because those binding regulations impose a lower capacity (compared with the one in the case of homogeneous banks) for the banks to extend their balance sheets in this condition. We put forward an agent-based model of commercial banks integrated with two processes: credit creation and fund transfer, to demonstrate the reduction effect. The results facilitate the understandings of the transmission mechanism of monetary policy via banks and its interaction with prudential regulations.

While the relationship between stock market returns and macroeconomic variables have been amply examined, there is a gap in the literature when it comes to the relationship between different sector indices and various macroeconomic variables. This study examines how certain macroeconomic variables influence different sectors of the stock market differently in the US and Canada. Using monthly data over the 2000–2018 period, a cointegration analysis is applied to model the relationship between industrial production, money supply, long-term interest rate, and different sector indices. Sectors that have been examined in this study include energy, financials, real estate, industrial, healthcare, consumer discretionary, and consumer staples. Results suggest that there is a stable long-term relationship between the macroeconomic variables used in the study and different sector indices for the US but not for Canada. However, US money supply and interest rate can explain the Canadian stock market. The results suggest important insights for private investors, pension funds, and governments as long-term investors often base their decision to invest in equities on the stated macroeconomic variables.

This study investigates the asymmetric effects of unanticipated monetary shocks on stock prices in India over the period 1994M4–2018M11. We find that the evolution of stock prices is state-dependent across different monetary policy processes. Unanticipated monetary shocks appear to have significantly asymmetrically lagged effects on stock prices, namely: (i) the positive effect of negative unanticipated shocks in bull markets; and (ii) the negative effect of positive unanticipated shocks in bear markets. Our findings imply that monetary policy-markers should attend to these situations for the future of money-supply policies to diminish the degree of uncertainty about the money supply in adjusting stock prices.

Whether money is exogenous or endogenous is the subject of one of the most important and intriguing debates in monetary economics. The aim of this article is to contribute to this longstanding debate through detailed examination of different notions of endogeneity and exogeneity of money. I argue that the debate has been too simplified. In reality, money can be either endogenous or exogenous, depending on several factors. Not only has the debate prompted some economists to draw too far-reaching conclusions, but it also misses the point.

We develop a random-matching model to study the price dynamics of divisible monies produced privately through mining. The equilibrium set is composed of a unique equilibrium where the value of money increases until it reaches a steady state and, if money has no intrinsic value, a continuum of perfect-foresight equilibria where the price of money inflates and bursts over time. Early on private money is held for a speculative motive and it acquires a transactional role when money supply becomes sufficiently abundant. We study different mining and matching technologies, fiat and commodity monies, single and competing currencies.

The financialization in energy and commodity markets is the overwhelming subject of energy and resource policy, which is exercised in the context of China to analyzed government financial policies to support natural resource markets during the period of 1967–2016. The results show that real interest rate supports energy and resource markets through increased energy production, oil rents, and crop production in a country. Money supply increases fossil fuel energy demand, energy efficiency, and agricultural and livestock production. Domestic credit provided by financial sector is negatively influenced to energy and resource markets with some exceptions. FDI inflows largely influenced soft and hard commodity markets to decrease natural resource rents and agricultural & livestock productions, except total fisheries production, which substantially increases FDI inflows in a country. The commodity prices distorted energy and natural resource markets except for ores and mineral exports that inflamed by higher price level. The growth-specific factors substantially improve the efficiency of energy & resource markets. Thus, the overall debate comes to the conclusion that commodity prices distorted energy and commodity markets, which may be subsidized by sound economic growth, trade liberalization policies, financial development, tight monetary policy, and optimized growth strategies in a country.

The growth of official foreign reserves in emerging Asian countries over recent decades has been extensive but its effects on the money market appear to be well sterilized in that decreases in interest rates or acceleration of credit growth have not been registered. We analyze the effect of foreign exchange intervention on components of the banking system’s balance sheet for 19 emerging economies that pursued an independent interest rate policy and did not maintain an exchange rate peg. The sample includes six Asian countries (India, Indonesia, Korea, Malaysia, the Philippines, and Thailand). We apply a vector autoregressive technique to quarterly data for the period 2001Q4 to 2016Q1. For the sample as a whole, we find that money stock tends to expand in response to an increase in the foreign reserves of the central bank. For the Asian countries in particular, we conclude that external transactions have contributed to money growth acceleration despite sterilization that succeeded in stabilizing interest rates.

China’s central bank frequently adjusts reserve requirements for macroeconomic stabilization. We evaluate the effectiveness of such policy in a two-sector DSGE model. A heavy-industry sector—proxied as state-owned enterprises (SOEs)—is financed through government-guaranteed bank loans subject to reserve requirements, while more productive private firms rely on unregulated off-balance sheet financing. Increasing reserve requirements reallocates resources towards private firms, raising both aggregate productivity and SOE bankruptcies. Optimal reserve requirement adjustments complement money supply adjustments in improving macroeconomic stability and welfare. However, gains are greater under sector-specific shocks, which call for resource reallocation, than under aggregate shocks.

This study examines the connections between stock prices and key macroeconomic indicators: inflation, industrial production, interest rates, money supply and select interactions between the latter group of variables. Such links are evaluated through vectorautoregressions (VARs) on monthly data spanning over the period 1999-2017, for Belgium, France, Germany, Netherlands and Portugal. We check whether such relations are confirmed across different sub-periods and also adopt a non-parametric approach by using a Pesaran-Timmermann test. We find different contemporaneous and lead-lag relationships between stock prices and the selected variables, although there are variations across countries. VAR models indicate that stock prices significantly lead inflation across all countries during the sample period and in most cases this relationship was positive. In addition, stock prices significantly lead industrial production in four of the sampled countries and these relationships were positive as well. Contrary to long-established finance theories, we did not find numerous significant links between interest rates and stock indices; however the interaction between interest rates and money supply was a leading indicator of stock prices in France, Germany and Portugal., peer-reviewed

In recent years, the price of international nonferrous metals has undergone drastic fluctuations, which could exert significant shock effects on macroeconomic variables. Based on the perspective of resource security, this paper reveals the relationship between the nonferrous metal price shocks and China's macroeconomic variables by establishing a Dynamic Stochastic General Equilibrium (DSGE) model embedded with nonferrous metal consumption and means of production blocks. The model is based on the optimal decision-making behaviours of three departments that satisfy multiple constraints to realize optimal policy making. Furthermore, the Structural Vector Autoregression (SVAR) method is applied to verify the shock effects of nonferrous metal price and obtain more robust results. The Bayesian results show that there is consistency among nonferrous metal price shocks, consumer reference shocks, wage bonus shocks, technical shocks, and price-adjusted shocks. The impulse response function results indicate that the stimulation of an international nonferrous metal price increase would have significant positive impacts on the macroeconomic variables of investment, money supply, consumption and total output but negative effects on labour demand. In addition, the impulse responses of wage levels and the rate of inflation to nonferrous metal price shocks present obvious lagging effects.

Macroeconomic forecasting in China is essential for the government to take proper policy decisions on government expenditure and money supply, among other matters. The existing literature on forecasting Chinas macroeconomic variables is unclear on the crucial issue of how to choose an optimal window to estimate parameters with rolling out-of-sample forecasts. This study fills this gap in forecasting economic growth and inflation in China, by using the rolling weighted least squares (WLS) with the practically feasible cross-validation (CV) procedure of Hong et al. (2018) to choose an optimal estimation window. We undertake an empirical analysis of monthly data on up to 30 candidate indicators (mainly asset prices) for a span of 17 years (2000–2017). It is documented that the forecasting performance of rolling estimation is sensitive to the selection of rolling windows. The empirical analysis shows that the rolling WLS with the CV-based rolling window outperforms other rolling methods on univariate regressions in most cases. One possible explanation for this is that these macroeconomic variables often suffer from structural changes due to changes in institutional reforms, policies, crises, and other factors. Furthermore, we find that, in most cases, asset prices are key variables for forecasting macroeconomic variables, especially output growth rate. Keywords: Cross-validation, Optimal rolling window, Rolling out-of-sample forecasts, Structural changes, Weighted least squares, JEL classification codes: C2, C13

This study explores the causality between housing prices and money supply in order to support the dynamic equilibrium model in China. Considering structural changes, the long-run nexus using full-sample data is found to be unstable, suggesting the causality test is not reliable. Instead a time-varying rolling-window approach is employed to revisit the dynamic causal relationship. The results highlight the existence of a bidirectional causal link between housing prices and money supply in China. Specifically, soar and crash of housing prices manifest both positive and negative impacts on money supply in different sub-periods. In turn, money supply has a positive impact on housing prices, which supports the dynamic equilibrium model. In order to support a relatively stable housing price level, especially during structural economic changes, it is critical to facilitate the pegged money supply precautionary control and insure a reasonable and stable level of money supply into the real estate market.

Whether an economy can be categorized as middle-income or not is an empirical issue. We apply the World Bank’s standard to divide middle-income economies into trapped middle-income economies and graduated middle-income economies, and compare them with high-income economies. This paper tests how financial system development positively impacts a nation’s economic development among the above-mentioned three groups of economies. We combine models and methodology from previous studies (King and Levine, 1993a; Levine and Zervos, 1998; Rousseau and Wachtel, 2000, 2002; Xu, 2000). Augmenting these models with new measures and relations of financial development, we find that (1) consistent with previous studies, financial development contributes significantly to economic growth through channels of physical capital stock and total factor productivity; (2) there is Granger causality between equity market development and economic growth for all three groups of economies, although some stronger and some weaker; (3) there is a reverse causality between economic growth and equity market development in high-income economies, which is not detected in other economies; (4) strong evidence of Granger causality and feedback between banking system development and inflation is found only in the trapped middle-income economies.

This paper has examined the transmission of shocks from macroeconomic variables, namely money supply, inflation, exchange rate and real GDP onto natural gas consumption using Structural VAR (SVAR) model with sign restrictions. The results revealed that both in the short run and long run, natural gas consumption responds significantly to the shocks emanating from money supply and real GDP while its response to inflation shock is significant only in the short run but exchange rate shock is not significant. However, money supply has contributed greater proportion of the shocks followed by the real GDP, inflation and exchange rate in the ordering of the variance decomposition. The paper recommends that Nigerian authorities adjust the monetary policy tools towards regulating the money supply and checking the inflation rate to ensure increased demand for natural gas and sustained economic growth. On the response of natural gas consumption to the shock in the exchange rate, since the shock is positive though insignificant, it implies that depreciation of the exchange rate can discourage the demand for foreign exchange, imports and, boost the local production which would reciprocally lead to more natural gas consumption and improved growth in the country.

In this paper, I test the long-run monetary model of exchange rates determination for a collection of 22 Sub-Saharan African countries. My approach is in two phases. First, I perform a country-by-country analysis. Results obtained fail to lend considerable support for the model in most countries analysed. Following this failure, I resort to the second phase and employ panel techniques to test the validity of the monetary model. Interestingly, and in sharp contrast with the country-by-country analysis, I find some convincing partial support for the model, which suggests that relative money supply and relative real output play significant roles in exchange rates determination in Sub-Saharan Africa. The results yield cointegrating coefficients with correct signs and significance as predicted by the theoretical model and are generally robust to an array of estimation techniques, but the estimated elasticity of relative money supply is mostly less than unity – which explains why the support is partial.

Both cryptocurrencies and gold are scarce, expensive for extraction, and less affected by money supply. We focus on these similarities and investigate whether cryptocurrency network affects impact on expected return on gold. Our results show that the number of cryptocurrency wallet users is positively related to the expected return on gold. Moreover, we employed a machine-learning approach and considered the interactions among predictors. We reveal that network factors have a greater impact on gold than returns on Bitcoin and other macroeconomic and financial variables.

This paper studies the relationship between two series of the money supply (M2), short-term international capital flows and housing prices by employing a continuous wavelet method. This method can enable us to examine the relation in both time and frequency domains in detail. We use data from China for empirical analysis. Although the relations are not stable, several main findings are observed. First, M2 affects short-term international capital flows mainly in the long term. The upward momentum of M2 has led foreign investors to be optimistic about China's economy, thus attracting inflows of capital. However, capital flows have little effect on the M2 due to the effectiveness of sterilization. Second, housing prices and M2 move synchronously before 2008. After 2008, housing prices are caused by M2 due to the excessive currency from the government's monetary and fiscal policies. Furthermore, M2 affects housing prices significantly in the long term. Additionally, after eliminating the influence of the M2, we find that a strong relationship exists between short-term international capital flows and housing prices in the short term, which means that this influence is mainly through a direct effect. These findings provide implications for the government to formulate monetary policy and regulate the housing market and capital flows.

This paper examines the determinants of the domestic credits in the panel data of 61 developing economies (22 emerging markets and 39 non-emerging developing economies) for the period from 1984 to 2016. The paper finds that the income and the money supply are positively associated with the domestic credits. There also are the negative effects of the current account balance and the interest rate differences on the domestic credits. Further analyses for the subcomponents of the overall political risk measures indicate that the better socioeconomic conditions (i.e. the less poverty, the lower unemployment, and the higher consumer confidence) and the lower corruption positively affect the domestic credits.

The study assesses the role of financial development on income inequality in a panel of 48 African countries for the period 1996 to 2014. Financial development is defined in terms of depth (money supply and liquid liabilities), efficiency (from banking and financial system perspectives), activity (at banking and financial system levels) and stability while, three indicators of inequality are used, namely, the: Gini coefficient, Atkinson index and Palma ratio. The empirical evidence is based on Generalised Method of Moments. When financial sector development indicators are used exclusively as strictly exogenous variables in the identification process, it is broadly established that with the exception of financial stability, access to credit (or financial activity) and intermediation efficiency have favourable income redistributive effects. The findings are robust to the: control for unobserved heterogeneity in terms of time effects and inclusion of time invariant variables as strictly exogenous variables in the identification process. The findings are also robust to the Kuznets hypothesis: a humped shaped nexus between increasing GDP per capita and inequality. Policy implications are discussed.

U.S. monetary conditions are occasionally considered a driver of commodity prices. Using a cointegrated vector autoregression and quarterly data for over the last three decades, this article examines the effect of U.S. money supply on oil prices, controlling for industrial prices and echange rates. We find that monetary shocks cause adjustments of oil prices and industrial prices to be vastly different in the long-run, thereby indicting non-neutrality of money in the long-run. It is also found that oil prices tend to adjust more quickly than industrial (sticky) prices to monetary shocks to achieve the long-run equilibrium, thereby affecting relative prices in the short run.

The rate of fluctuation of Exchange rate in Uganda has been on a rise and this prompted research (study) to examine the major determinants and also analyse the real effective Exchange rate. The study focused on four specific objectives which are; to examine the influence of Balance of Payment on exchange rate in Uganda for the period 1990-2019, to determine the effect of Money supply on exchange rate in Uganda between 1990 and 2019, to analyze the influence of Debt service on external debt on the exchange rates in Uganda between 1990-2019, to measure the impact of Terms of Trade on exchange rate in Uganda for the period 1990-2019 in Uganda. The study involved the use of a quantitative research approach using secondary data for the period 1990-2019. Several diagnostic tests were conducted to determine the econometric properties of the variables such as Multicollinearity, Autocorrelation, heteroscedasticity, and stationarity. Tests on heteroscedasticity indicated that there was constant variance in the series since the P-value 0.2451 > 0.05 thereby concluding that there is Homoscedasticity, while the Autocorrelation test provided evidence that there was no autocorrelation given the d-statistic of 1.7004 being approximated to 2. Tests on stationarity indicated that there was stationarity in the variables Balance of Payment while Exchange rate, Debt, Terms of Trade and Money Supply were nonstationary at level which were later differenced once to make them stationary. In addition, the Multicollinearity test indicated that there was no Multicollinearity in the data set given the VIF results being all less than 5. In order to establish the relationship between the Exchange rate and the independent variables, a multiple regression model was fitted for the stationary variables and the results indicate that there was a positive significant relationship between Exchange rate and Money Supply with P-value (0.0000

In this paper, we have reviewed the COVID induced shock to the debt and deficit profiles of 10 of the largest economies by size of GDP in 2019 referred to in this paper as the Big-10 economies. There is a sharp upsurge in their government debt-GDP ratios because their policy responses to the COVID induced recession have been large fiscal stimuli based on borrowing. With low and often negative growth rates and high fiscal deficit, the debt-GDP ratios are projected to rise sharply in these economies. As normalcy is restored, these countries may attempt to sharply reduce their borrowing levels relative to GDP. However, we argue that before this is done, individual countries may do well to reassess their sustainability norms whether cast in terms of agreements such as the Maastricht Treaty or country level Fiscal Responsibility Legislations (FRLs) or other similar norms. This revision is called for because of the longer-term trends in these economies of rising money supply, falling nominal interest rates and nominal growth rate. The contribution of this article lies in highlighting that the existing FRL norms have become dated in the European and other similar economies because of significant changes in macro parameters such as the interest rate, the long-term growth rate and the government debt-GDP profiles of these countries as compared to the time when these norms were originally determined. There is thus a need now to re-determine these norms which may be higher than their current levels. Even though, some recent literature suggests that the sustainability benchmarks may have shifted upwards, we argue that the post COVID debt-GDP ratios have exceeded these revised benchmarks by significant margins in the case of a number of the Big-10 economies.

China has been promoting the internationalization of the RMB over the past two decades. As a result, the offshore foreign exchange market has been substantially revitalized, even though China's capital market remains partially open. Accordingly, there are two exchange rates for RMB, of which the phenomenon is dubbed as ``one currency, two exchange rates.'' The movements of the onshore and offshore exchanges may provide crucial clues to understanding the differences in the market structure and the effect of interventions by Chinese monetary authorities. Using the GARCH-MIDAS model, this paper examines how the degree of openness and economic fundamentals---both observed and unobserved---affect the long-term volatility of offshore exchange rates. Our results show that there is a substantial difference in the offshore and onshore volatility of RMB exchange rates. The long-term volatility of the offshore RMB exchange rates appears to be determined by the following. First, the openness of both trade and financial systems attenuates the long-term volatility of offshore exchange rates. Particularly, the use of bilateral currency swap agreements and the relaxation of capital control are associated with lower volatility, while stock market connect programs tend to increase the volatility. Second, observed fundamentals, including relative measures for output, interest rate, and money supply, have significant negative effects on offshore volatility. Third, although economic policy uncertainty and market risk amplify long-term offshore volatility through financial markets, liquidity does not appear to be a culprit of increased volatility. On the other hand, FX interventions, including central parity rate (CPR) adjustment and oral interventions, increase the volatility. Our findings thereby imply that the regulatory authorities need to promote market-oriented mechanisms and reduce speculative activities.

This paper is a concise review of the equity markets' reaction to the COVIDcrisis in 2020. Relative to other global institutions, equity markets performed remarkably well in 2020 and investors ought not to be ashamed of their reactions relative to consumers. It would be a terrible abuse of language to characterize 2020 as being financially irrational. The COVIDcrisis in 2020 was one of the most orderly crises ever. The damage and the reward across companies, sectors, and countries made a lot of sense. Although there are pockets of extremely high valuations in the tech sector, humility has always been a virtue when it came to valuing tech firms. While stocks are very expensive in absolute terms especially in the US, they are not relative to governmental bonds. But there is a big caveat to all this: the rise in the monetary supply since 2010 has been so incredible that markets have dived deep in unchartered waters. Central banks must find our way back to homeland.

Kenya’s current account for quite over a long time has experienced deterioration and hence reflecting a deficit. This worsening in the current account balance is as a result of high growth in import merchandise bill relative to export merchandise hence the import-export gap has continued to worsen, the high continuous rise of inflation rate and overall slow economic growth in Kenya. It is however despite the deterioration Kenya marked some significant surpluses the current accounts within the period for some years that is 1977 and 2003. In 1977 the surplus was attributed to the coffee boom and in 2003 it was attributed to decline in imports as receipts from exports increased. The performance of BOP is influenced by a number of factors which among others include; trade balance, terms of trade, competitiveness, domestic money supply, exchange rate, fiscal deficit, economic growth rate, domestic capital formation, inflation rate, net foreign direct investment, capital market, remittances and loans.

This study investigates the strong and the weak relationship between macroeconomic variables and the purchasing power parity of Sri Lanka and Pakistan. Purchasing power parity is compared with the relative price level of identical product available in both countries. This paper includes 20 years of macroeconomic annual data from 1997 to 2016. These data have been analyzed using descriptive statistic, reliability test and time series multiple regression. Result reveals that real exchange rate is not constant in both economies of Sri Lanka and Pakistan, and this illustrates Sri Lanka has weak relationship between the purchasing power parity and exchange rate, inflation, interest rate, money supply, gross domestic product, foreign direct investment, whereas Pakistan has strong relationship between the selected macroeconomic variables and the purchasing power parity. This study helps enhance knowledge about how purchasing power parity affects the growth of the economies

This paper disproves Ohlin’s version of the loanable fund theory. It proves that a demand for goods does not give a supply of fund (indeed, it gives rise to a demand for fund), and a supply of goods does not give a demand for fund (indeed, part of it gives a money supply). It also disproves aggregate supply and demand, to remove even Ohlin’s foundation.

Recent developments in the monetary sphere of Liberia including the “dearth of local currency banknotes” have triggered escalating public conversations about the financial system of Liberia and perceived risks and opportunities. Many pundits from within and outside Liberia have yielded to the innate summons of the moment to express their views on the nature of the problems and what solutions they believe exist. I have observed with keen interest the trend of the debate and deemed it super important to advance some thoughts that would at least refresh the experts and provide orientation for others. I have explained why the concept of money, its creation process and management framework need to be properly understood as the discussions in the public about the financial sector and the dearth of local currency banknotes heighten. I have posited that under the fractional reserve system, part of what we term as money and queue up to banks to collect physical currency against, is created out of “thin air” and is not matched by any available physical currency/banknotes. Coupled with the fact that banks use currency/banknotes deposited to extend loans which is expected to be repaid overtime, no financial system in the world can survive if an extremely high number of depositors show up for their deposits. The highly dollarized nature of the financial system makes the implementation of monetary policy a serious challenge as a greater share of the country’s money supply is in foreign currency (United State dollars) for which the local authorities have no control. The total money supply is incomplete as the quantum of United States dollars circulating outside the banking system is not calculated and reported. Calculating and reporting the total USD in circulation is practically difficult. At any point, it is difficult to know the total amount of US dollars circulating in the economy and impacting monetary conditions as anyone could fly in and out of Liberia with the US dollars. Therefore, expediting the de-dollarization roadmap would prove useful. And this would require the right monetary autonomy to have adequate amount of local currency to substitute the foreign currency. Actions directed at increasing the use of the Liberian dollar in daily transactions such as the Remittance Split Policy introduced few years ago but now suspended, while good for de-dollarization, led to significant surge in the Liberian dollar in circulation. In other words, significant de-dollarization would mean having more Liberian dollar for the conduct of daily transactions. Except digitization efforts gain traction, this would require more printing!

Both cryptocurrencies and gold are scarce, expensive for extraction, and less affected by money supply. We focus on these similarities and investigate whether cryptocurrency network affects impact on expected return on gold. Our results show that the number of cryptocurrency wallet users is positively related to the expected return on gold. Moreover, we employed a machine-learning approach and considered the interactions among predictors. We reveal that network factors have a greater impact on gold than returns on Bitcoin and other macroeconomic and financial variables.

This study is a single bank analysis that aims to examine the determinants of credit risk within the scope of Shinsei Bank of Japan. This study uses regression to conduct empirical data analysis to investigate the impact levels affecting fifteen (15) internal bank specific variables such as ROA, total regulatory capital ratio, loan loss provisions ratio among the few; and external macroeconomic variables such as Japan's GDP growth rate, M3 money supply, output gap, inflation rate and yield curve over the course of five years worth of data starting from year 2015 until 2019 towards credit risk. This study found that the internal ratios ROE and RWA had the most significant impact on Shinsei Bank's credit risk, while external variables and internal, external variables combined were not significant.

Closer integration between Central and Eastern Europe (CEE) and the EU has opened up channels facilitating the propagation of economic shocks from the core to the eastern periphery. This paper examines the effects of such shocks to economic activity and monetary conditions originating in the Euro Area (EA) on output, prices, money, and interest rates in 10 CEE countries over the period 2005–2018 using a bilateral restricted VAR framework. In contrast to previous studies, we use Divisia monetary aggregates and compare the effects of EA spillovers to domestic shocks. The results indicate that EA shocks explain the majority of variation across all macroeconomic indicators, with money supply shocks playing the most prominent role. Despite some heterogeneity, the impulse response of monetary aggregates to domestic and EA monetary shocks is almost identical across countries. The impact of the EA shock increases over time and persists, while the domestic shock dies out relatively quickly. Accordingly, we find no meaningful monetary independence in the majority of CEE countries. This is likely to prove detrimental to the effectiveness of monetary policies in CEE.

This paper examines the relationship between monetary policy and bank performance in a multiple-instrument environment, particularly highlighting the conditioning role of bank business models. Employing a unique dataset of Vietnamese commercial banks from 2007 to 2019, we display that banks react to monetary policy changes, either when the central bank increases policy rates or injects money into the economy through open market operations, by decreasing overall returns and increasing financial instability. Additionally, we document that the accumulation of foreign exchange reserves benefits bank outcomes, contrasting to open market operations, albeit the central bank uses both of these policy instruments to alter money supply in the economy. Our key analysis of interest reveals that business models considerably matter in the effects of monetary policy on bank performance. Collectively, our findings demonstrate that banks’ business models that yield more non-interest income or diversify more into different income sources may mitigate the pass-through of monetary policy to bank performance. This finding holds across all interest- and quantitative-based monetary policy indicators and across all the functions of risk-taking behavior, earning-profit capacity, and financial stability. Furthermore, while plotting the marginal effects of monetary policy, we realize that they are insignificant for banks whose business models heavily rely on non-traditional segments.

This scholarly work is an effort to capture the effects of oil prices on the actual exchange rate between dollar and rupee. This is done with reference to the U.S. dollar as oil prices are marked in USD (U.S. Dollar) in the international market, and India is among the top five importers of oil. Using monthly data from January 2001 to May 2020. The study used the real GDP, money supply, short-term interest rate difference between two countries, and inflation apart from the crude oil prices per barrel as the factors that help define the exchange rate. The analysis, through cointegration and vector error correction method (VECM), suggests long and short-run causality amid prices of oil and the rate of exchange fluctuations. Oil prices are found to be negatively related to the exchange rate in the long term but positively related in the short term. The result of the Wald test also indicates the short-run causation from the short-term interest rate and the prices of crude oil towards the exchange rate. The present study shows that oil prices are evidence of the existence of short-term and long-term driving associations with short-term interest rates and exchange rates.

This research analyzes the effect of monetary policy of central bank on the poverty alleviation. Monetary policy is the policy adopted by the monetary authority of a country that controls either the interest rate payable on very short-term borrowing or the money supply, targeting inflation or the interest rate to ensure price stability and general trust in the currency. This study is taking two variables in monetary policy namely interest rate and money supply. Effects of both variables examined on poverty rate in context of Pakistan. Moreover, association and effect examined between both variables (interest rate and money supply). This study comprises on quantitative research methodology as secondary data taken from world indicator from 2001 to 2017. Regression analysis applied on collected data. According to findings, if central bank increases in supply of money in economy, it cannot reduce poverty rate in Pakistan. It is because more money supply will bring inflation, which discourages investment of all types. If high interest rate set by central bank then it cannot bring significant reduction in poverty rate of Pakistan as it will reduces the investment and overall employment. If central bank set increased interest rate then it deceases the money supply in the economy of Pakistan, as funds will be, divert to banks for earning interest on deposits. Recommendations and conclusion are given at the end of this paper.

To explore how speculative trading influences prices in financial markets, we conduct a laboratory market experiment with speculating investors (who do not collect dividends and trade only for capital gains) and dividend-collecting investors. Moreover, we operate markets at two different levels of money supply. We find that in phases with only speculating investors present (i) price deviations from fundamentals are larger; (ii) prices are more volatile; (iii) mispricing increases with the number of transfers until maturity; and (iv) speculative trading pushes prices upward (downward) when the supply of money is high (low). These results suggest that controlling the money supply can help to stabilize asset prices.

The main objective of this study is to examine the impact of the macroeconomic indicators such as interest rate, real GDP, money supply and inflation on Nepal Stock Exchange (NEPSE) Index. This study is an empirical research based on secondary data and used the time series data for the total period of 24 years from fiscal year 1994 to 2018. The results of correlation analysis showed that broad money supply, real GDP and CPI have a statistically significant linear relationship with NEPSE index. However, T-bill rate and NEPSE index have a statistically insignificant linear relationship. Furthermore, the results of regression analysis showed that money supply is significant in predicting NEPSE index of the investors. Interest rate, real GDP and CPI are found to be insignificant in predicting NEPSE index. Similarly, relationship between stock market performance and macroeconomic variables is of pertinent importance to policy makers, regulators, academicians, researchers and investment community.

In many countries, inflation has become less responsive to domestic factors and more responsive to global factors over the past several decades. We study the linkages between domestic inflation and global liquidity (money and household balances) and argue that it is important for inflation modeling and forecasting. We introduce money and credit markets into the workhorse open-economy New Keynesian model. With this framework, we show that: (i) an efficient forecast of domestic inflation can be based solely on domestic and foreign slack, and (ii) global liquidity (either global money or global credit) is tied to global slack in equilibrium. In this technical appendix, we derive these theoretical results which can be used to empirically evaluate the performance of open-economy Phillips curve-based forecasts constructed using global liquidity measures (such as G7 credit growth and G7 money supply growth) instead of global slack as predictive regressors. We also include additional results not found elsewhere: in particular, we document that global liquidity variables also perform significantly better than the domestic variable counterparts and outperform in practice the poorly-measured indicators of global slack when expressed in real terms (not just in nominal terms).

Using Pooled Ordinary Least Square (Pooled OLS) on a daily panel dataset from the US and Canada from January 22 to September 22, 2020, this study examines the impact of macroeconomic indicators impact on the stock market indices during the COVID-19 pandemic. We improved the interaction relationship of government action variables with the trend in COVID-19 affected and death cases in finding the reaction of stock market returns. We find that the industrial production and money supply significantly influence the stock market return during this pandemic. As there is a paucity of literature together with unclear findings, we improved that social distancing and government economic support significantly affect the stock market returns. Further, this study implies that the interaction of social distancing with the trend in COVID-19 affected cases reduces the adverse reaction of stock market returns during this pandemic. But the interaction of social distancing with the trend in COVID-19 death cases enters negative and significant, suggesting that social distancing action with the trend in death cases of COVID-19 doesn’t weaken the inverse reaction of stock market returns. During this pandemic period, this study can be a policy dialog for the government, policymakers, researchers, and regulatory bodies.

Notwithstanding China’s rapidly growing role in the world economy, there is surprisingly little analysis of the extent to which inflation dynamics in China are passed through to other regional economies. We find evidence of significant inflation transmission from China to Australia and the five larger ASEAN economies under our Markov-switching analysis that allows for variation across high and low volatility states. Chinese inflation effects are further confirmed when we incorporate money supply and commodity price effects with a Markov-Switching Vector Autoregressive (VAR) framework.

This study examined financial inter-mediation indicators on the economic growth, The Nigerian perspective from 1990 – 2018. The data for this work were sourced from CBN statistical bulletin. This study considered credit to private sector, broad money supply, interest rate and lending rate as the independent variables while Real Gross Domestic Product (RDGP) as the dependent variable. Vector error correction model were employed for this study and Eview 10 was used for the analysis. The results of the analysis show that there is a significant relationship between financial inter-mediation indicators and economic growth. Based on the result the following recommendations were made, federal government together with monetary authorities should enforce a policy that will mandate financial institutions to lower their lending and interest rates to encourage the most productive sectors of the economy to do better. Secondly, the floating of money supply into the economy should be strictly monitored to avoid inflation which will endanger economic growth. Finally, accessible credit facilities should be granted to the viable and high sensitive sectors that drive economic growth.