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This article presents empirical estimates of bank credit procyclicality for a sample of 11 Central and Eastern European countries (CEECs) for the period 2000Q1–2016Q4. In the first step, we estimate a traditional‐type panel vector autoregressive (VAR) model and analyse the evolution of credit procyclicality in the CEECs by comparing the impulse response functions for different business cycle periods. The results confirm the existence of credit procyclicality in the CEECs and show that procyclicality is higher during boom periods. Furthermore, we observe the heterogeneity of credit procyclicality in the different countries in our sample. To explain the cross‐country heterogeneity in credit procyclicality we construct an interacted panel VAR model and analyse whether bank‐level competition, proxied by the aggregate Lerner index, constitutes a driving force of credit procyclicality. Our findings indicate that bank competition affects credit procyclicality and explains the differences in credit dynamics across the CEECs. Specifically, we show that the reaction of credit to a gross domestic product shock is on average higher in a less competitive banking market. [ABSTRACT FROM AUTHOR]

The aim of this paper is to shed some light on the issue of the co-movement between residential real estate and commercial real estate using a newly developed database by the Bank if International Settlements. Our results point for the existence of a unique common nonlinear trend in the five countries analysed. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to investigate the mutual dependence between housing prices and housing credit in Estonia, a country that experienced rapid debt accumulation during the 2000s and big swings in house prices during that period. Design/methodology/approach: The authors use Bayesian econometric methods on data spanning 2000–2015. Findings: The estimations show the interdependence between house prices and housing credit. More importantly, negative housing credit innovations had a stronger effect on house prices than positive ones. Originality/value: The asymmetry in the linkage between housing credit and house prices highlights important policy implications, in that if central banks increase capital buffers during good times, they can release credit conditions during hard times to alleviate the negative spillover into house prices and the real economy. [ABSTRACT FROM AUTHOR]

In this paper, the interest rate pass‐through is examined within its intermediate lag of action to shed light on the credibility of monetary policy in Jordan, where the reputation of low inflation is imported through a fixed exchange rate system to the US dollar. We use time series methods which allow us to test for asymmetric adjustment. The results are compared to that of two inflation targeting countries at time proceeding building the credibility of price stability domestically: New Zealand and the UK. The empirical findings suggest that the interest rate pass‐through in Jordan is weak and slow. In addition, our results indicate the existence of non‐competitive pricing behaviour in the market. Comparing the results to the two inflation targeters, the study suggests that Jordan needs to move to a more resilient exchange rate arrangement. [ABSTRACT FROM AUTHOR]

This paper aims to investigate the relationship between housing prices and their main fundamental determinants using the example of Spain and considering the possibility of structural breaks in the relationship. We find that the cointegrating coefficient estimates are quite unstable over 2001Q1-2017Q4 and need to be estimated for different subperiods. Specifically we find that the main long-run fundamentals explain the behaviour of equilibrium house prices well during the boom-bust period. However, only corporate profit, or capital income, seems to explain the evolution after the recovery from the recession. [ABSTRACT FROM AUTHOR]

This paper empirically assesses the potential nonlinear relationship between competition and bank risk for a sample of commercial banks in the Baltic countries over the period 2000–2014. Competition is measured by two alternative indexes, the Lerner index and the market share, while we consider the Z-score and loan loss reserves as proxies for bank risk. In line with the theoretical predictions, we find an inverse U-shaped relationship between competition and financial stability. This then means that above a certain threshold, the lack of competition is likely to exacerbate the individual risk-taking behaviour of banks, and could be detrimental to the stability of the banking sector in the Baltic countries. The threshold is around 0.60 for the Lerner index, and close to 50% for market share in terms of assets. The policy implications are that the existence of such a threshold suggests that the future evolution of the structure of the banking industry in these countries is of critical importance. Specifically, this implies that policy-makers should place greater emphasis on mergers and acquisitions to avoid any significant increase of banking sector concentration. [ABSTRACT FROM AUTHOR]

The aim of this paper is to shed some light on the degree of sustainability of fiscal debt for a group of Central and Eastern European countries. We apply a battery of time series econometrics methods to show how the financial crisis has affected the debt‐to‐gross domestic product ratio and how the ratio has behaved recently. The results give us important insights into how governments in Central and Eastern Europe have reacted to the accumulation of debt. We distinguish between two groups of countries: one group where the sovereign debt stock stabilized after the crisis, and another where debt has been accumulated more quickly in recent years. The results provide important policy lessons for the authorities responsible. [ABSTRACT FROM AUTHOR]

The aim of this article is to shed some light on the issue of fiscal austerity within Europe. We focus specifically on the 2008Q1-2014Q4 period, and on the effect of shocks to government expenditure and taxes on unemployment, controlling for other macro factors. We find that expenditure contractions may be detrimental for employment. [ABSTRACT FROM AUTHOR]

The aim of this article is to analyse empirically whether the level of institutional quality influences how financial development affects poverty for a sample of developing countries covering the period from 1984 to 2012. Using an interaction term constructed as a product between financial development and institutional quality we find that the pro-poor impact of financial development decreases as the quality of institutions rises. Such a differential effect can be ascribed to the capacity of banks to provide functions that mimic those performed by an institutional framework that works well. The results of this article can be used for policy management. [ABSTRACT FROM AUTHOR]

We examine the credibility of the pegged exchange rate system to the US dollar in eleven emerging market economies: Bahamas, Bahrain, Barbados, Belize, Egypt, Jordan, Oman, Kuwait, Lebanon, Qatar and Venezuela, over the annual span from 1996 to 2012. The interest rate differential between the domestic economies and the base country are regressed on a set of macro-fundamentals derived from the theory and empirical work of currency crises. We construct different setups to consider the small sample size at hand and the nexus between current account and money stock as in the notion implied by the monetary approach to the balance of payments. Both unbalanced fixed effects and first difference GMM models provide evidence that inflation differential is the main driving force for generating realignment expectations, and explains why anchoring interest rates in not feasible for soft fixed exchange rate targeting countries. [ABSTRACT FROM AUTHOR]

This article analyses the duration of cycles in the unemployment rate series in a group of EU countries. It extends the model by Bierens (2001) and follows Gil-Alana (2001) by allowing for fractional cyclical integration. Once cycles are introduced in the model, we have more evidence of mean reversion than in previous studies. [ABSTRACT FROM PUBLISHER]