Browsing by Subject "C22"

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  • Anatolyev, Stanislav (2005)
    BOFIT Discussion Papers 9/2005
    Published in Research in International Business and Finance, Vol. 22, 2008: 56-67
    We study three aspects of the Russian stock market - factors influencing stock returns, integration of the stock market with world .financial markets, and market efficiency - from 1995 to present, putting emphasis on how these evolved over time.We .find many highly unstable relationships, and indeed, greater instability than that generated by financial crises alone.While most computed statistics exhibit constant ups and downs, there are recently clear tendencies in the development of the Russian stock market: a sharp rise in explainability of returns, an increased role of international financial markets, and a decrease in the profitability of trading. Key words: Russia, transition, stock returns, integration, efficiency. JEL codes: C22, F36, G14, G15
  • Vuorenmaa, Tommi A. (2005)
    Bank of Finland Research Discussion Papers 27/2005
    This paper investigates the dependence of average stock market volatility on the timescale or on the time interval used to measure price changes, which dependence is often referred to as the scaling law.Scaling factor, on the other hand, refers to the elasticity of the volatility measure with respect to the timescale.This paper studies, in particular, whether the scaling factor differs from the one in a simple random walk model and whether it has remained stable over time.It also explores possible underlying reasons for the observed behaviour of volatility in terms of heterogeneity of stock market players and periodicity of intraday volatility.The data consist of volatility series of Nokia Oyj at the Helsinki Stock Exchange at five minute frequency over the period from January 4, 1999 to December 30, 2002.The paper uses wavelet methods to decompose stock market volatility at different timescales.Wavelet methods are particularly well motivated in the present context due to their superior ability to describe local properties of times series.The results are, in general, consistent with multiscaling in Finnish stock markets.Furthermore, the scaling factor and the long-memory parameters of the volatility series are not constant over time, nor consistent with a random walk model.Interestingly, the evidence also suggests that, for a significant part, the behaviour of volatility is accounted for by an intraday volatility cycle referred to as the New York effect. Long-memory features emerge more clearly in the data over the period around the burst of the IT bubble and may, consequently, be an indication of irrational exuberance on the part of investors. Key words: long-memory, scaling, stock market, volatility, wavelets JEL classification numbers: C14, C22
  • Stolbov, Mikhail (2015)
    BOFIT Discussion Papers 15/2015
    Causality between the ratio of domestic private credit to GDP and growth in real GDP per capita is investigated in a country-by-country time-series framework for 24 OECD economies over the period 1980–2013. The proposed threefold methodology to test for causal linkages integrates (i) lag-augmented VAR Granger causality tests, (ii) Breitung-Candelon causality tests in the frequency domain, and (iii) testing for causal inference based on a fully modified OLS (FMOLS) approach. For 12 of 24 countries in the sample, the three tests yield uniform results in terms of causality presence (absence) and direction. Causality running from credit depth to economic growth is found for the UK, Australia, Switzerland, and Greece. The findings lend no support to the view that financial development shifts from a supply-leading to demand-following pattern as economic development proceeds. The aggregate results mesh well with the current discussion on “too much finance” and disintermediation effects. However, idiosyncratic country determinants also appear significant.
  • Égert, Balázs; Leonard, Carol S. (2007)
    BOFIT Discussion Papers 9/2007
    Published in Open Economies Review, Volume 19, Issue 2, April 2008, Pages 147-165
    In this paper we explore the evidence that would establish that Dutch disease is at work in, or poses a threat to, the Kazakh economy.Assessing the mechanism by which fluctuations in the price of oil can damage non-oil manufacturing-and thus long-term growth prospects in an economy that relies heavily on oil production-we find that non-oil manufacturing has so far been spared the perverse effects of oil price increases from 1996 to 2005.The real exchange rate in the open sector has appreciated over the last couple of years, largely due to the appreciation of the nominal exchange rate.We analyze to what extent this appreciation is linked to movements in oil prices and oil revenues.Econometric evidence from the monetary model of the exchange rate and a variety of real exchange rate models show that the rise in the price of oil and in oil revenues might be linked to an appreciation of the U.S. dollar exchange rate of the oil and non-oil sectors.But appreciation is mainly limited to the real effective exchange rate for oil sector and is statistically insignificant for non-oil manufacturing.Key words: price level, inflation, Balassa-Samuelson, tradables, house prices, regulated prices, Europe, transition JEL codes: E43, E50, E52, C22, G21, O52
  • Gaganis, Chrysovalantis; Hasan, Iftekhar; Pasiouras, Fotios (2013)
    Bank of Finland Research Discussion Papers 14/2013
    Published in Journal of Productivity Analysis, December 2013, Volume 40, Issue 3, pp 429-442
    This study investigates whether the capital market values the efficiency of firms. After tracing stock returns and efficiency changes of 399 listed insurance firms in 52 countries during the 2002-2008 period, the paper reports a positive and statistically significant relationship between profit efficiency change and market adjusted stock returns. However, there is no robust evidence that cost efficiency change is associated with stock returns. Keywords: Efficiency, insurance, stock returns. JEL: C22 C34 G22
  • Wang, Jiao; Ji, Andy G. (2006)
    BOFIT Discussion Papers 19/2006
    Traditional assessments of the impact of exchange rate depreciation or appreciation on trade have involved estimating the elasticity of trade volume to relative prices.Such studies relied heavily on aggregated trade data.More recent studies employ bilateral trade data and methodologies such as ECM and gravity models.This study uses a generalized gravity model with data panel analysis in assessing the impact of currency depreciation or appreciation on bilateral trade flows between China and its top trading partners. The empirical evidence suggests exchange rates (both real and nominal) do not exert a significant influence on the overall exports from China.Thus, a devaluation or revaluation of the yuan should be expected to have only limited impact on China's trade balance.Moreover, previous studies provide limited evidence of a negative relation between exchange rate volatility and trade flows. Given the current revaluation expectations, we find China's anticipated shift toward a more flexible exchange rate regime fails to address China's trade surplus issues, and thus will merely lead to a revaluation of the nominal exchange rate and increased exchange rate volatility.It appears a major overhaul of the country's heavily subsidized export regime must first occur for the exchange rate to assume a larger role in China's international trade. Keywords: Exchange Rate, Trade, China, Competition, Gravity Model, Panel JEL Classification: C22, C23, F14, F31
  • Laakkonen, Helinä (2007)
    Bank of Finland Research Discussion Papers 23/2007
    Published in Quantitative Finance, Volume 14, Issue 12, 13 December 2014: 2093-2104
    Filtering intraday seasonality in volatility is crucial for using high frequency data in econometric analysis. This paper studies the effects of filtering on statistical inference concerning the impact of news on exchange rate volatility. The properties of different methods are studied using a 5-minute frequency USD/EUR data set and simulated returns. The simulation results suggest that all the methods tend to produce downward-biased estimates of news coefficients, some more than others. The study supports the Flexible Fourier Form method as the best for seasonality filtering. Keywords: high-frequency, volatility, macro announcements, seasonality JEL classification numbers: C22, C49, C52, E44
  • Caporale, Guglielmo Maria; Gil-Alana, Luis A.; You, Kefei (2016)
    Bank of Finland Research Discussion Papers 20/2016
    This paper investigates whether the RMB is in the process of replacing the US dollar as the anchor currency in nine ASEAN countries, and also the linkages between the ASEAN currencies and a regional currency unit. A long-memory (fractional integration) model allowing for endogenously determined structural breaks is estimated for these purposes (Gil-Alana, 2008). The results suggest that the ASEAN currencies are much more interlinked than previously thought, whether or not breaks are taken into account, which provides support for a regional currency index as an anchor. Moreover, incorporating a break shows that the linkages between these currencies and the RMB and the US dollar respectively are equally important, and in fact in recent years the former have become stronger than the latter. Therefore including the RMB in the regional index should be considered.
  • Pönkä, Harri; Stenborg, Markku (2020)
    Finnish Economic Papers 1
    We employ probit models to study the predictability of recession periods in Finland using a set of commonly used variables based on previous literature. The findings point out that individual predictors, including the term spread and the real housing prices from the capital area, are useful predictors of recession periods. However, the best in-sample fit is found using combinations of variables. The pseudo out-of-sample forecasting results are generally in line with the in-sample results, and suggest that in the one-quarter ahead forecasts a model combining the term spread, the unemployment expectation component of the consumer confidence index, and the real housing price index performs the best based on the area under the receiver operating characteristic curve. Autoregressive probit models yield higher in-sample fits compared to the static probit models, and the best pseudo out-of-sample forecasts for longer forecasting horizons are given by an autoregressive model.
  • Oinonen, Sami; Paloviita, Maritta; Vilmi, Lauri (2013)
    Bank of Finland Research Discussion Papers 6/2013
    Published in the Scandinavian Journal of Economics, Volume 114, Issue 2, pages 601–628, June 2012
    This paper analyzes euro area and U.S. inflation dynamics since the beginning of the 1990s by estimating New Keynesian hybrid Phillips curves with time-varying parameters. We measure inflation expectations by subjective forecasts from Consensus Economics survey and so do not assume rational expectations. Both rolling regressions and state-space models are employed. The results indicate that in both economic areas the inflation dynamics have steadily become more forward-looking over time. We also provide evidence that the impact of the output gap on inflation has increased in recent years. Overall, diminished inflation persistence emphasizes the role of credible monetary policy in inflation dynamics. JEL Classification: E31, C22, C51 Key words: inflation, Phillips curve, time-varying parameters, survey expectations
  • Funke, Michael (2005)
    BOFIT Discussion Papers 6/2005
    Published in Pacific Economic Review (2006), Vol. 11, No. 4, pp. 413-430
    The New Keynesian Phillips curve (NKPC) posits the dynamics of inflation as forward looking and related to marginal costs.In this paper we examine the empirical relevance of the NKPC for mainland China.The empirical results indicate that an augmented (hybrid) NKPC gives results that are consistent with the data generating process.It is in this respect that the NKPC provides useful insights into the nature of inflation dynamics in mainland China as well as useful insights for the conduct of monetary policy. Keywords: China, inflation, New Keynesian Phillips curve JEL-Classification: C22, E31
  • Mehrotra, Aaron; Peltonen, Tuomas; Santos Rivera, Alvaro (2007)
    BOFIT Discussion Papers 19/2007
    Published in China Economic Review 21 (2), 2010: 237-255
    We model provincial inflation in China during the reform period. In particular, we are interested in the ability of the hybrid New Keynesian Phillips Curve (NKPC) to capture the inflation process at the provincial level. The study highlights differences in inflation formation and shows that the NKPC provides a reasonable description of the inflation process only for the coastal provinces. A probit analysis suggests that the forward-looking inflation component and the output gap are important inflation drivers in provinces that have advanced most in marketisation of the economy and have most likely experienced excess demand pressures. These results have implications for the relative effectiveness of monetary policy across the Chinese provinces. Keywords: China, inflation, regional, New Keynesian Philips Curve, GMM JEL Classification: E31, C22
  • Funke, Michael; Li, Xiang; Tsang, Andrew (2019)
    BOFIT Discussion Papers 23/2019
    This paper studies monetary policy transmission in China’s peer-to-peer lending market. Using spectral measures of causality, we explore the impacts of Chinese monetary policy shocks on China’s P2P market interest rates and lending amounts. The estimation results indicate significant spectral Granger causality from monetary policy surprises to P2P lending rates for borrowers, but not the reverse. Unlike the lending channel for traditional banks, monetary policy shocks do not Granger-cause the credit amount in the P2P lending market.
  • Krupkina, Anna; Ponomarenko, Alexey (2013)
    BOFIT Discussion Papers 31/2013
    We estimate money demand models for certain monetary aggregates across different institutional sectors (a novelty for the Russian case). Our results comprise a collection of money demand equations that include different combinations of explanatory variables. Comparing the validity of these models on the basis of statistical criteria is virtually implausible. Therefore we suggest the simultaneous employment of a whole set of such models and illustrate the approach by presenting the distribution of monetary overhangs calculated on the basis of the estimated models. Keywords: monetary aggregates, money demand, households, non-financial corporations JEL classification: E41, C22, D14, D22.
  • Gallegati, Marco; Giri, Federico; Fratianni, Michele (2019)
    Bank of Finland Research Discussion Papers 1/2019
    How long is the long run in the relationship between money growth and inflation? How important are high inflation episodes for the unit slope finding in the quantity theory of money? To answer these questions we study the relationship between excess money growth and inflation over time and across frequencies using annual data from 1871 to 2013 for several developed countries. Wavelet-based exploratory analysis shows the existence of a close stable relationship between excess money growth and inflation only over longer time horizons, i.e. periods greater than 16 and 24 years, with money growth mostly leading. When we investigate the sensitivity of the unit slope finding to inflation episodes using a scale-based panel data approach we find that low-frequency regression coefficients estimated over variable-length subsamples before and after WWII are largely affected by high inflation episodes. Taken together the results that inflationary upsurges affect regression coefficients but not the closeness of the long-run relationship call for a qualification of the Quantity Theory of Money and suggests that policymakers should not lose interest on monetary developments.
  • Zagaglia, Paolo (2008)
    Bank of Finland Research Discussion Papers 23/2008
    In this paper we study how the pattern of segmentation in the euro area money market has been affected by the recent turmoil in financial markets. We use nonparametric estimates of realized volatility to test for volatility spillovers between rates at different maturities. For the pre-turmoil period, exogeneity tests from VAR models suggest the presence of a transmission channel from longer maturities to the overnight. This disappears in the subsample starting in August 9 2007. The results of the semiparametric tests of Cappiello, Gerard and Manganelli (2005) report evidence of an increase in volatility contagion within the longer end of the money market curve. However this takes place in the lower tail of the empirical distributions. Keywords: money market, high-frequency data, time-series methods JEL classification numbers: C22, E58
  • Siklos, Pierre L. (2012)
    BOFIT Discussion Papers 17/2012
    Even before the events of the past few years, economists and policy makers were musing about the apparent contradiction between globalization, as it is generally understood, and the seemingly different paths in overall economic activity taken by the emerging and more mature economies of the world. The present paper reconsiders whether it is, in fact, useful to think of correlations in business cycle movements as reflecting some form of coupling or decoupling and, instead, suggests that, even if business cycles may well have become more synchronous for a time, it is more useful to think of international business cycle co-movements as reflecting their mutual dependence that can be subjected to short-run interruptions or affected by a variety of other economic factors. I report evidence based on factor-augmented quantile regressions for a panel of annual data since 1980 from 9 regions of the world. A panel is used to estimate the common factors which are then applied to the quantile regression model to determine the sources of business cycle co-movements across countries and regions of the world. JEL Classification numbers: E32, C21, C22, C23 Keywords: business cycles, quantile regression, panel estimation, factor model, coupling, decoupling
  • Arias, Jonas E.; Ascari, Guido; Branzoli, Nicola; Castelnuovo, Efrem (2020)
    International Journal of Central Banking 3 ; June
    This paper studies the challenge that increasing the inflation target poses to equilibrium determinacy in a mediumsized New Keynesian model without indexation fitted to the Great Moderation era. For moderate targets of the inflation rate, such as 2 or 4 percent, the probability of determinacy is near one conditional on the monetary policy rule of the estimated model. However, this probability drops significantly conditional on model-free estimates of the monetary policy rule based on real-time data. The difference is driven by the larger response of the federal funds rate to the output gap associated with the latter estimates.
  • Granziera, Eleonora; Sekhposyan, Tatevik (2018)
    Bank of Finland Research Discussion Papers 23/2018
    Also in International Journal of Forecasting 35 ; 2019 https://doi.org/10.1016/j.ijforecast.2019.01.010
    The relative performance of forecasting models changes over time. This empirical observation raises two questions: is the relative performance itself predictable? If so, can it be exploited to improve forecast accuracy? We address these questions by evaluating the predictive ability of a wide range of economic variables for two key US macroeconomic aggregates, industrial production and inflation, relative to simple benchmarks. We find that business indicators, financial conditions, uncertainty as well as measures of past relative performance are generally useful for explaining the relative forecasting performance of the models. We further conduct a pseudo-real-time forecasting exercise, where we use the information about the conditional performance for model selection and model averaging. The newly proposed strategies deliver sizable improvements over competitive benchmark models and commonly used combination schemes. Gains are larger when model selection and averaging are based on financial conditions as well as past performance measured at the forecast origin date.
  • Laakkonen, Helinä (2015)
    Bank of Finland Research Discussion Papers 4/2015
    This paper studies the impact of uncertainty on the investors' reactions to news on macroeconomic statistics. With daily data on realized volatility and trading volume, we show that the investors in the US Treasury bond futures market react significantly stronger to US macroeconomic news in times of low macroeconomic, financial and political uncertainty. We also find that investors are more sensitive to the uncertainty in the financial market compared to the macroeconomic and political uncertainties. Our results might partly explain the sudden freeze and low liquidity in some financial markets during the latest financial crisis.