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Many emerging markets have undertaken significant financial sector reforms, especially in their banking sectors, that are critical for both financial development and real economic activity. In this paper, we investigate the success of banking reforms in India where significant banking reforms were implemented during the 1990s. Using the argument that well-functioning credit markets would reflect a credit channel for monetary policy at work, we test whether a change in monetary policy has a predictable impact on borrowing behaviour of several types of firms, including business group affiliated, unaffiliated private firms, state-owned firms and foreign firms. The empirical results suggest that unaffiliated private firms have the most vulnerable to monetary policy stance during tight policy regimes. We also find that during tight monetary policy regimes, bank credit of smaller firms is more sensitive to changes in the interest rate than that of large firms. In an easy money regime, monetary policy and the associated change in interest rate does not affect change in bank credit, change in total debt and the proportion of bank credit in total debt for any of the firms. We discuss the policy implications of the findings. [ABSTRACT FROM AUTHOR]

Using the high-quality intraday transaction data from 2001-2012, we investigate changes in stock market liquidity in response to the monetary policy announcements of the Bank of Korea (BOK). We find that liquidity impairment associated with informed trading occurs prior to the announcements but it disappears subsequent to the global financial crisis. In addition, liquidity impairment appears to become more severe with insufficient experts' predictability and accuracy rather than with policy rate change itself and unscheduled announcements. Finally, the Federal Open Market Committee (FOMC) announcements, changes in the Volatility Index (VIX), and trading by foreign investors play a limited role in explaining stock market liquidity changes. Overall, results indicate that central bank communication plays a significant role in reducing liquidity impairment by enhancing the predictability of policy actions, and therefore, mitigating information asymmetry. [ABSTRACT FROM AUTHOR]

Limited studies that have assessed the impact of economic uncertainty on the demand for money have concentrated on using a volatility measure of money supply and output. Certainly, other factors such as regulation, taxes, budget deficits, national debt, etc. can contribute to an uncertain environment. This new measure of uncertainty, which is called ‘policy uncertainty’, is now constructed for several countries and published. We investigate the impact of this new measure on the demand for money in the UK and find that it has a negative and significant short-run effect, but not any log-run effects. [ABSTRACT FROM PUBLISHER]

One of the key elements of implementing the monetary policy is stability of the demand for money. The literature includes a large number of studies that have tested the stability of the money demand in developed as well as less-developed countries but not in emerging economies of Eastern Europe. As market-based data becomes available from these countries, there is an urgency to test old theories for these modern market-oriented economies. In this article we consider the experiences of Armenia, Bulgaria, the Czech Republic, Hungary, Poland, Russia and the Slovak Republic. Using the bounds testing approach to error-correction modelling and cointegration, we show that money demand is stable in these countries. [ABSTRACT FROM AUTHOR]

We extend the literature on the effectiveness of International Monetary Fund (IMF) programs in two directions. First, we undertake a sensitivity analysis by applying several assessment methods commonly used in the literature to a common data set to check the robustness of inferences regarding the effectiveness of IMF-related programs. Second, we employ a new set of countries that are largely ignored in the literature—namely, those of Eastern Europe. The findings show that the inferences regarding the effectiveness of IMF programs obtained under different approaches seem robust: IMF programs in East European countries appear to be ineffective. However, it may be simplistic to blame solely the IMF for ineffective programs, as effectiveness may be determined by many factors, including the nature of the programs, the commitment of the corresponding country's officials, policy changes, and external shocks. [ABSTRACT FROM AUTHOR]

In an effort to fight relatively high inflation, many developing countries try to manage their nominal exchange rates through official intervention. In addition, developing countries tend to have high transportation costs, tariffs, and nontariff barriers. These factors are among the sources of generating nonlinearity in real exchange rates and hence some nonlinear adjustment toward purchasing power parity (PPP) in developing countries. In this paper, we employ monthly real effective exchange rate (REER) data of 88 developing countries and test the null of nonstationarity versus an alternative of linear stationarity by the means of a conventional unit root test and compare the results with those obtained from a new test in which the null is the same but the alternative hypothesis is nonlinear stationarity. The latter test supports the PPP theory in more developing countries compared with the former test, suggesting that nonlinear adjustment toward PPP in developing countries is an important phenomenon. Reported country characterizations indicate that reversion in REER occurs more often for high-inflation countries and for countries with high flexibility in their exchange rates. [ABSTRACT FROM AUTHOR]

This paper analyses the impact of news, oil prices, and international financial market developments on daily returns on Russian bond and stock markets. First, regarding returns, energy news affects returns, while news from the war in Chechnya is not significant. Market volatility does not appear to be sensitive to either type of news. Second, a significant effect of the growth in oil prices on Russian stock returns is detected. Third, the international influence on Russian financial markets depends upon the degree of financial liberalization. The higher the degree of financial liberalization, the stronger is the impact of US stock returns on Russian financial markets. In addition, banking reform and interest rate liberalization efforts seem to dictate the globalization of Russian stock markets, while it is the progress in liberalizing securities markets and non-bank financial institutions that matters more for the globalization of Russian bond markets. [ABSTRACT FROM AUTHOR]

Using monthly post-WWII data from 13 developed and developing countries and a battery of GARCH models, the influential study of Schwert's (Journal of Finance, 54(5), 1115–53, 1989) on US stock market volatility is extended to an international setting. In line with the evidence reported in Schwert (1989), it is found that macroeconomic volatility, measured by movements in inflation and real output, have a weak predictive power for stock market volatility and returns. The findings suggest that there is no strong support for the Fisher effect in international stock returns. Moreover, with the exception of a few countries, a procyclical monetary policy response seems evident in data during the sample period. [ABSTRACT FROM AUTHOR]

Examines the empirical relation between money, interest rates and output across a sample of 20 countries. Money as a potentially informative tool in setting monetary policy; Use of stationary and difference stationary specifications of a vector autoregressive model.

Examines inflation in the Czech Republic, from 1991 to 1998. Relationship between inflation, exchange rate and macroeconomic policies and the currency crisis of May 1997; Causes of the persistence of moderate inflation; Policy implications in the context of the Czech National Bank's policy of inflation targeting.

The article discusses various reports published within the issue, including one by Frederic S. Mishkin on the different economic challenges faced by emerging markets, one by Pierre L. Siklos on the status of inflation targeting in industrial and emerging markets and another by Hakan Yilmazkuday on the implications of structural bleaks on the monetary policy of emerging markets.

Introduces a series of articles concerning monetary policy and trade policy in emerging markets, published in the May 2005 issue of the periodical "Emerging Markets Finance and Trade".

An introduction is presented in which the editor discusses various reports within the issue on topics including stock market, monetary policy in China, and external shocks in the world economy.

The article introduces topics published within the issue including one by Adam Elbourne and Jacob de Haan on the transmission of European Union monetary policy decisions, one by Alexander Muravyev on the dual trading mechanism in Russia, and one by George R. G. Clarke on the export performance of several African countries.

• A rule-based trading system, which integrates central bank announcements, is proposed. • Analysis broadly covers 3 segments: stock market, foreign exchange market and bonds market. • Using the proposed rule-based trading system, we simulate trades in order to quantify their profitability. • Individual transactions delivered profits in 72.7% cases in the out–of–sample forecasting period. • Central bank communication is useful for investors in the design of rule-based trading strategies. This paper proposes a rule-based trading system to investigate how much the central bank's announcements matter on a financial market. We design a novel investment strategy and we simulate trades in order to quantify their profitability in the out–of–sample period using the data from a broad financial market in Poland spanning across 3 segments: stock market, foreign exchange market and bonds market. Our results show that the individual transactions delivered profits in 72.7% cases. The overall profitability across all events and all trading horizons was positive in as many as 63.6% cases. Although the financial market in Poland was only moderately sensitive to the NBP central bank's communication, the identified types of the monetary policy announcements are economically significant and very useful for the investors, who can trade based on them and exploit them directly in the design of the rule-based trading strategies. [ABSTRACT FROM AUTHOR]