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This study analyses the implications of Jeffery–Lindley’s paradox and Global Financial Crisis (GFC) for the operational aspect of macroeconomic policy coordination for financial stability. Using a Bayesian Vector Auto-regressive model and data from Jan 1985 to June 2016, our key findings suggest that the claim of macroeconomic policy interaction, interdependence and significance of coordinated policy operations for the financial stability holds its ground. The argument in the support for policy coordination for financial stability was found to be robust against the Jeffreys–Lindley’s paradox and in the Post-GFC era. A profound practical, operational and philosophical implication of this study is the positive aspects of Jeffreys–Lindley’s paradox and the possibility of employing the Frequentist and Bayesian estimation techniques as complementing rather competing frameworks.

Previous studies have focused on the co-movements between the prices of different types of energy and, to some extent, the co-movements between the energy and financial assets prices, falling short of analysing the co-movements between the different types of energy and emission price. In this study, using the daily data from November 2007–31st October 2017 on quotes of Brent Crude oil and Natural Gas spot returns and quotes of the EU-ETS spots, we employed a time-varying copulas connection function to assess the risk dependency relationship between ETS and energy prices. The results show that there is an asymmetry dependence change rule between ETS, oil and gas spot index, with the correlation of the lower tail significantly higher than that of the upper tail. These findings indicate that, with the use of time-varying SJC Copulas model, economic agents can control investment risk and forecast abnormal fluctuations in oil prices

The purpose of this research paper is to examine the proposition that capacity utilisation is an important factor in the determination of unemployment and wages. Underlying this proposition is the notion that capacity utilisation helps to determine the future path of the economy and is a significant factor in the response of the economy to different supply and demand shocks. We derived capacity utilisation and unemployment relationships, which were estimated and tested using data covering from 1997 to 2016 for three West Africa countries. The results suggest that long-term unemployment and capacity utilisation have a significant impact on unemployment. The policy implications of our findings are that in view of the strong effect of capacity utilisation on unemployment, programmes that enhance efficiency in production and investment enhancing policies may allow unemployed to regain access to the labour market.

This concise study analyses the symmetry of financial markets’ responses to macroeconomic policy interaction in the United Kingdom. Employing the Vector Auto-regression (VAR) model on monthly data of the British financial sector and macroeconomic policies from January 1985 to August 2008, this study found that the equity and sovereign debt markets showed identical symmetry in response to macroeconomic policy interaction.

This study analyses the implications macroeconomic policy coordination for the financial stability in the United Kingdom. We also considered the aspect of Global Financial Crisis (GFC) and its implications for the macroeconomic policy interaction and its impact on the financial sector. Employing a Bayesian Vector Auto-regressive (BVAR) model and monthly data from Jan 1985 to June 2016, our key findings suggest that the macroeconomic policy interaction and interdependence is significantly important for the financial markets in the United Kingdom. In the Post-GFC period, we found significant evidence of change in the response of stock and bond markets to each other which have important implications in terms of portfolio adjustment. The argument in the support of policy coordination for the financial stability was found to be robust. A profound practical implication of this study is the positive aspects of Jeffreys-Lindley’s paradox and the possibility of employing the Frequentist and Bayesian estimation techniques as complementing rather competing frameworks.

The association between economic and financial stabilities and influence of macroeconomic policies on the financial sector creates scope of active policy role in financial stability. As a contribution to the existing body of knowledge, this study has analysed the implications of macroeconomic policy interaction/coordination for financial stability, proxied by financial assets, i.e. equity and bonds price oscillation. The critical review and analysis of the existing literature on the subject suggests that there is also ample evidence of interdependence between monetary and fiscal policies and this interrelation necessitates coordination between them for the sake of financial stability. There is also a case for analysing the symmetry of financial markets responses to macroeconomic policy interaction. On methodological and empirical grounds, it is vital to test the robustness of policy recommendations to overcome the limitation of a single empirical approach (Jeffrey–Lindley’s paradox). Hence, the Frequentist and Bayesian approaches should be used in commentary manner. The policy interaction and optimal policy combination should also be analysed in the context of institutional design and major financial events to gain insight into the implications of policy interaction in the periods of stable economic and financial environments as well as period of financial and economic distress.

This paper examines the monetary transmission mechanism in six EU member states. It provides useful empirical evidence for assessing the impact of a common monetary policy in the early stages of EMU, and enables us to form a view on how the regime change represented by EMU is likely to be translated into changes in policy multipliers in the various EU countries. The empirical analysis applies techniques recently developed by Wickens and Motto (2001) for identifying shocks by estimating a VECM for the endogenous variables, and a stationary VAR in first differences for the exogenous variables. Our findings suggest that there are significant differences between EU countries in the transmission mechanism of monetary policy.

This paper re-examines the relationship between stock market development and economic growth. It provides a theoretical basis for establishing the channel through which stock markets affect economic growth in the long run. It examines the hypothesis of endogenous growth models that financial development causes higher growth through its influence on the level of investment and its productivity. The empirical part of this study exploits techniques recently developed to test for causality in VARs. The evidence obtained from a sample of four countries suggests that investment productivity is the channel through which stock market development enhances the growth rate in the long run.

This study derives an optimal macroeconomic policy combination for financial sector stability in the United Kingdom by employing a New Keynesian Dynamic Stochastic General Equilibrium (NK-DSGE) framework. The empirical results obtained show that disciplined fiscal and accommodative monetary policies stance is optimal for financial sector stability. Furthermore, fiscal indiscipline countered by contractionary monetary stance adversely affects financial sector stability. Financial markets, e.g. stocks and Gilts show a short-term asymmetric response to macroeconomic policy interaction and to each other. The asymmetry is a reflection of portfolio adjustment. However in the long-run, the responses to suggested optimal policy combination had homogenous effects and there was evidence of co-movement in the stock and Gilt markets.