Browsing by Subject "G15"

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  • Fungáčová, Zuzana; Hanousek, Jan (2006)
    BOFIT Discussion Papers 14/2006
    This paper deals with the relationship between mass privatization and stock market development in transition economies.The link is investigated empirically using a panel of data that includes most transition countries.Our results confirm the hypothesis that mass privatization exerted a negative influence on stock market functioning over the short and medium term.Further, it appears that stock markets in countries with mass privatization were initially perceived as mere byproducts of the privatization process.Such stock markets typically not only failed in their core mission of providing capital for the corporate sector, but generated negative investor sentiment and did little to catalyze economic growth. JEL Classifications: G15, G28, P34 Keywords: privatization, mass privatization, emerging stock markets, stock market
  • Cheung, Yin-Wong (2020)
    BOFIT Policy Brief 13/2020
    This article recounts China’s renminbi (RMB) internationalization experiences since the 2009 RMBcross-border trade settlement initiative. In the first few years, the RMB made inroads into global financial markets and had a few remarkable accomplishments, including the Special Drawing Right currency status. Since the 2015 market turmoil, RMB internationalization has levelled off – possibly due to changes in both domestic and geopolitical conditions. The RMB is currently under-represented in the global market compared with China’s economic importance. China’s deliberate and schematic policies will elevate the RMB’s global stature in a gradual manner but there will not be a leapfrogging in the near term.
  • 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
  • Fang, Yiwei; Hasan, Iftekhar; Li, Lingxiang (2014)
    BOFIT Discussion Papers 19/2014
    ​The dynamic banking reforms of Central and Eastern Europe (CEE) following the collapse of the Soviet Union provide an ideal research setting for examining the causal effect of institutional development on financial reporting. Using five earnings quality measures, we consistently find that banking reform improves accounting quality and reduces earnings management incentives in the 16 transition countries considered. The results strongly hold in our within-country and difference-in-difference models, as well as in non-parametric analyses. We also find supporting evidence for the notion that excessive risk-taking of banks impairs earnings quality. As a result, banking reform improves earnings quality partially through its ability to curb risk-taking behavior. Publication keywords: earnings management, earnings quality, institutional development, bank risk-taking
  • Ripatti, Kirsi (2004)
    Suomen Pankin keskustelualoitteita 30/2004
    A Central Counterparty (CCP) is an entity that interposes itself between transacting counterparties - a seller vis-à-vis the original buyer and a buyer vis-àvis the original seller - to guarantee execution of the transaction.Thus, the original transacting parties substitute their contractual relationships with each other with contracts with the CCP.Central Counterparty Clearing has become increasingly popular in Europe, not just in derivatives markets, where, due to the high risk involved, it has been common for decades, but also in equities markets.Within the European Union, the main factor motivating the increased sophistication in clearing arrangements is the ongoing process of European economic integration, ie the euro's introduction, the ongoing organisation of an internal market for financial services and the corresponding objective of creating a pan-European financial infrastructure for payments and securities clearing and settlement.Central counterparty clearing houses exert a broad influence on the functioning of financial markets.They can increase the efficiency and stability of financial markets to the extent that their smooth functioning results in a more efficient use of collateral, lower operating costs and greater liquidity.As market players actively try to achieve economies of scale and scope with mergers and through harmonising their technical processes, they inevitably have had to focus on one of the most fragmented areas in Europe's securities market infrastructure - clearing and settlement.Because of the importance of its role, a CCP must have sound risk management.The CCP assumes responsibility in the aggregate and reallocates risk among participants.Moreover, if the CCP fails to perform risk management well, it can increase risk in the markets.While the big market players dominate the current CCP market in Europe, it is not only the big players who can benefit from a functioning CCP.With the right structure, a CCP enables small players to stay in the market and makes it possible for issuers in a regional marketplace to achieve market funding. Indeed, this is the tendency currently seen in the newest EU member states - and one of the main arguments against the single European CCP model.Although, the purpose has been to leave CCP questions to market participants, regulatory, oversight and supervisory issues can drive the actions of market participants.Indeed, authorities must sometimes be actively involved in boosting a CCP project to keep their home markets competitive.This may well be the situation faced by the Nordic/Baltic market in the near future.Thus, this paper attempts to give a neutral evaluation of the risks and benefits related to the functionality of CCPs in integrating markets and construct a framework for possible future risk-benefit analysis in a Finnish/Nordic-Baltic clearing and settlement infrastructure that incorporates a CCP solution.This is an updated version of a Bank of Finland working paper (Financial Markets Department 01/04).1 Key words: central counterparty clearing, clearing, settlement, securities markets, infrastructure, integration JEL classification numbers: G15, G20, G28, G33, G34
  • Jokipii, Terhi; Lucey, Brian (2006)
    Bank of Finland Research Discussion Papers 15/2006
    Published in Economic Systems, 31,1, 2007: 71-96
    Making use of ten years of daily data, this paper examines whether banking sector co-movements between the three largest Central and Eastern European Countries (CEECs) can be attributed to contagion or to interdependence. Our tests based on simple unadjusted correlation analysis uncover evidence of contagion between all pairs of countries. Adjusting for market volatility during turmoil, however, produces different results. We then find contagion from the Czech Republic to Hungary during this time, but all other cross-market co-movements are rather attributable rather to strong cross-market linkages. In addition, we construct a set of dummy variables to try to capture the impact of macroeconomic news on these markets. Controlling for own-country fundamentals, we discover that the correlations diminish between the Czech Republic and Poland, but that coefficients for all pairs remain substantial and significant. Finally, we address the problem of simultaneous equations, omitted variables and heteroskedasticity, and adjust our data accordingly. We confirm our previous findings. Our tests provide evidence in favour of parameter instability, again signifying the existence of contagion arising from problems in the Czech Republic affecting Hungary during much of 1996.
  • Amstad, Marlene; Ye, Huan; Ma, Guonan (2018)
    BOFIT Discussion Papers 11/2018
    Inflation in emerging markets is often driven by large, persistent changes in food and energy prices. Core inflation measures that neglect or under-weight volatile CPI subcomponents such as food and energy risk excluding information helpful in assessing current and future inflation trends. This paper develops an underlying inflation gauge (UIG) for China, extracting the persistent part of the common component in a broad dataset of price and non-price variables. Our proposed UIG for China avoids the excess volatility reduction that plagues traditional Chinese core inflation measures. When forecasting headline CPI, the proposed UIG outperforms traditional core inflation measures over a variety of samples.
  • Bonin, John P.; Louie, Dana (2015)
    BOFIT Discussion Papers 31/2015
    Our objective is to examine empirically the behavior of foreign banks regarding real loan growth during a financial crisis for a set of countries in which these banks dominate the banking sectors due primarily to having taken over large existing former state-owned banks. The eight countries are among the most developed in Emerging Europe, their banking sectors having been modernized by the beginning of the time period.We consider a data period that includes an initial credit boom (2004 – 2007) followed by the global financial crisis (2008 & 2009) and the onset of the Eurozone crisis (2010). Our main innovations with respect to the existing literature on banking during the financial crisis are to include explicit consideration of exchange rate dynamics and to separate foreign banks into two categories, namely, subsidiaries of the Big 6 European MNBs and all other foreign-controlled banks. Our results show that bank lending was impacted adversely by the crisis but that the two types of foreign banks behaved differently. The Big 6 banks remained committed to the region in that their lending behavior was not different from that of domestic banks corroborating the notion that these countries are a “second home market” for these banks. Contrariwise, the other foreign banks were primarily responsible for fueling the credit boom prior to the crisis but then “cut and ran” by decreasing their lending appreciably during the crisis. Our results also indicate different bank behavior in countries with flexible exchange rate regimes from those in the Eurozone. Hence, we conclude that both innovations matter in empirical work on bank behavior during a crisis in the region and may, by extension, be relevant to other small countries in which banking sectors are dominated by foreign financial institutions.
  • Hasan, Iftekhar; Schmiedel, Heiko (2003)
    Suomen Pankin keskustelualoitteita 2/2003
    The economic theory of network externalities provides the rationale for this paper, which investigates whether adoption of network strategies in European stock exchanges creates additional value in the provision of trading services.Using unbalanced panel data from all major European exchanges over the period 1996-2000, the paper examines empirically the presence of network effects on the liquidity, growth, and efficiency of the exchanges; the transaction cost of trades; and the cost of exchange operations.The evidence shows that adopting a network strategy is significantly associated with higher liquidity, growth and efficiency in the sample markets. Moreover, a network strategy helps to reduce transaction costs of trades as well as operational costs for stock exchanges. Key words: stock exchanges, network externalities, remote access, Europe JEL classification numbers: F36, G15, 052
  • Beckmann, Joscha; Comunale, Mariarosaria (2021)
    BOFIT Discussion Papers 11/2021
    This paper assesses the financial channel of exchange rate fluctuations for emerging countries and the link to the conventional trade channel. We analyze whether the effective exchange rate affects GDP growth, the domestic credit and the global liquidity measure as the credit in foreign currencies, and how global liquidity affects GDP growth. We make use of local projections in order to look at the shocks’ transmission covering 11 emerging market countries for the period 2000Q1–2016Q3. We find that foreign denominated credit plays an important macroeconomic role, operating through various transmission channels. The direction of effects depends on country characteristics and is also related to the policy stance among countries. We find that domestic appreciations increase demand regarding foreign credit, implying positive effects on investment and GDP growth. However, this is valid only in the short-run; in the medium-long run, an increase of credit denominated in foreign currency (for instance, due to apeiation) decreases GDP. The financial channel works mostly in the short run except for Brazil, Malaysia, and Mexico, where the trade channel always dominates. Possibly there is a substitution effect between domestic and foreign credit in the case of shocks in exchange rate.
  • Korhonen, Iikka; Peresetsky, Anatoly (2013)
    BOFIT Discussion Papers 15/2013
    We use a Kalman filter type model of financial markets to extract a global stochastic trend from the discrete non-synchronous data on daily stock market index returns of different stock exchanges. The model is tested for robustness. In addition, we derive "most important" hours of world financial market and estimate the relative importance of local versus global news for different stock markets. The model generates results that are consistent with intuition. Key words: emerging stock markets, transition economies, financial market integration, stock market returns, global stochastic trend, state space model, Kalman filter, non-synchronous data. JEL codes: C49, C58, G10, G15, F36, F65
  • Francis, Bill B.; Hasan, Iftekhar; Sun, Xian (2006)
    Bank of Finland Research Discussion Papers 24/2006
    Published in Journal of Banking & Finance, Volume 32, Issue 8, August 2008, pp. 1522-1540
    Using theories of internal capital markets, this paper examines the link between financial market integration and the value of global diversification.Based on a sample of 1,491 completed cross-border mergers and acquisitions (M&As) conducted by US acquirers during the 1990-2003 period, we find that, in general, US shareholders gain significant positive abnormal returns following the announcement of the merger/acquisition.Specifically, firms that acquire/merge with targets from countries with financially segmented markets experience significantly higher positive abnormal returns than those that acquire/merge with targets from countries with financially integrated capital markets.We find that the significantly higher positive returns are driven particularly by deals between firms from unrelated industries.These firms with higher announcement returns are also characterized by positive and significant post-merger operating performance.This finding is consistent with our event study results and suggests that the overall improvement in the merged firms' performance is likely due to the influx of internal capital from wholly integrated acquirers to segmented targets, firms that, on average are usually faced with higher capital constraints. Keywords: financial market integration, global diversification, internal capital markets, mergers, acquisitions JEL classification numbers: G15, G31, G34
  • Jokipii, Terhi (2006)
    Bank of Finland Research Discussion Papers 22/2006
    This paper studies the extent to which market crashes are predictable for a set of six countries, focusing in particular on possible differences between transition economies (The Czech Republic, Hungary and Poland) and mature markets (UK, US and EU). We estimate a set of individual country and pooled specifications to find that market crashes, in the broader sense, are predictable for all countries analysed.We additionally investigate the role that investor heterogeneity, proxied by trading volume, plays in this predictability and find some varying results between countries.For the Central and Eastern European Countries (CE3), an increase in trading volume relative to trend appears to have great predictive power, a result that is supportive of the theory of investor heterogeneity outlined in the relevant background studies. For the more mature markets (G5), on the other hand, market crashes appear more likely to follow a period of increased stock prices and returns, a result fitting a number of traditional theories, in particular the stochastic bubble model.Further analysis, allowing for time-varying coefficients, confirms the volume-crash relationship for the CE3 and provides preliminary evidence that macro news releases may additionally contribute to the predictability of market crashes. Keywords: aggregate market returns, skewness, trading volume, market crash JEL classification numbers: C14, G12, G15
  • Arola, Mika (2006)
    Suomen Pankki. E 37
    The main objective of the study is to evaluate the Finnish central government's foreign borrowing between the years 1862 and 1938. Most of this period was characterised by deep capital market integration that bears resemblance to the liberal world financial order at the turn of the millennium.The main aim is to analyse the credit risk associated with the state and its determination by evaluating the world financial market centres' perception of Finland.By doing this, the study is also expected to provide an additional dimension to Finland's political and economic history by incorporating into the research the assessments of international capital markets regarding Finland during a period that witnessed profound political and economic changes in Finnish society.The evaluation of the credit risk mainly relies on exchange-rate risk free time series of the state's foreign bonds.They have been collected from quotations in the stock exchanges in Helsinki, Hamburg, Paris and London.In addition, it investigates Finland's exposure to short-term debt and Moody's credit ratings assigned to Finland.The study emphasises the importance of the political risk. It suggests that the hey-day of the state's reliance on foreign capital markets took place during last few decades of the 19th century when Finland enjoyed a wide autonomy in the Russian Empire and prudently managed its economy, highlighted in Finland's adherence to the international gold standard.Political confrontations in Finland and, in particular, in Russia and the turbulence of the world financial system prevented the return of this beneficial position again.Through its issuance of foreign bonds the state was able to import substantial amounts of foreign capital, which was sorely needed to foster economic development in Finland.Moreover, the study argues that the state's presence in the western capital markets not only had economic benefits, but it also increased the international awareness of Finland's distinct and separate status in the Russian Empire and later underlined its position as an independent republic. Keywords: credit risk, government borrowing, financial market, government bonds, state finances JEL classification: E65, G15, H63, N13
  • Fedorova, Elena; Vaihekoski, Mika (2008)
    BOFIT Discussion Papers 27/2008
    Published in Finance a uver-Czech Journal of Economics and Finance, 2009, vol.59, no.1,2-19
    We study a pricing model for global and local sources of risk in six Eastern European emerging stock markets. Utilizing GMM estimation and an unconditional asset-pricing framework with and without time-varying betas, we perform estimations based on monthly data from 1996 to 2007 for Poland, Czech Republic, Hungary, Bulgaria, Slovenia and Russia. Most of these markets display considerable segmentation; the aggregate emerging market risk, as opposed to global market risk, is the significant driver for their stock market returns. It also appears that currency risk is priced into stock prices. The difference between local and global interest rates can be used to model the time-variation in the betas for both sources of risk. JEL Classification: G12, G15, G32 Keywords: market integration, segmentation, asset pricing, emerging markets, Eastern Europe country risk
  • Yao, Yi; Yang, Rong; Liu, Zhiyuan; Hasan, Iftekhar (2012)
    BOFIT Discussion Papers 9/2012
    Published in Global Finance Journal, Volume 24, Issue 1, 2013, Pages 44-68
    This study investigates the effectiveness of government intervention in rescuing bearish markets in a transition economy. Focusing on a pre- and a post-intervention period, the findings reveal that government intervention successfully rescued bearish markets in China and led to a fundamental change in institutional trading strategy after the intervention. We observe that following an intervention, institutions are more sensitive to long-term stock market regulations, whereas individual investors are more concerned about the rules related to their short-term interests. Evidence suggests that a credible signal from the government can be helpful in creating a positive outcome in the market (Bhanot and Kadapakkam, 2006). The findings are important to the current debate regarding the role of govern-ment intervention in markets in other transitional economies, as well as in developed countries. Keywords: Government Intervention; Institutional Trading Strategy. JEL Codes: G15, G18, G32
  • Hasan, Iftekhar; Song, Liang; Wachtel, Paul (2013)
    BOFIT Discussion Papers 20/2013
    Published in Journal of Comparative Economics, Volume 42, Issue 1, February 2014, Pages 92–108
    Better developed legal and political institutions result in greater availability of reliable firm-specific information. When stock prices reflect more firm-specific information there will be less stock price synchronicity. This paper traces the experience of China, an economy undergoing dramatic institutional change in the last 20 years with rich variation in experiences across provinces. We show that stock price synchronicity is lower when there is institutional development in terms of property rights protection and rule of law. Further-more, we investigate the influence of political pluralism on synchronicity. A more pluralistic regime reduces uncertainty and opaqueness regarding government interventions and therefore increases the value of firm-specific information that reduces synchronicity. JEL Classification Numbers: G14; G15; G24; G38 Keywords: Institutions; China; stock price synchronicity
  • Babecký, Jan; Komárek, Lubos; Komárková, Zlatuse (2012)
    BOFIT Discussion Papers 4/2012
    Published in National Institute Economic Review, Volume 223, Issue 1, 2013, Pages R16-R34 as Convergence of Returns on Chinese and Russian Stock Markets with World Markets: National and Sectoral Perspectives.
    Interest in examining the financial linkages of economies has increased in the wake of the 2008/2009 global financial crisis. Applying the concepts of beta- and sigma-convergence of stock market returns, we assess changes over time in the degree of stock market integration between Russia and China as well as between them and the United States, the euro area and Japan. Our analysis is based on national and sectoral data spanning the period September 1995 to October 2010. Overall, we find evidence for gradually increasing stock market integration after the 1997 Asian financial crisis and the 1998 Russian financial cri-sis. Following a major disruption caused by the 2008/2009 global financial crisis, the process of stock market integration resumes between Russia and China, and with world markets. Notably, the episode of sigma-divergence from the 2008/2009 crisis is stronger for China than Russia. We also find that the process of stock market integration and the impact of the recent crisis have not been uniform at the sectoral level, suggesting potential for d-versification of risk across sectors. JEL classification: C23, G15, G12. Keywords: Stock market integration, beta-convergence, sigma-convergence, China, Russia, sectoral and national analysis
  • Saleem, Kashif (2008)
    BOFIT Discussion Papers 8/2008
    Published in Research in International Business and Finance, Volume 23, Issue 3, September 2009, Pages 243-256
    This study considers the linkage of the Russian equity market to the world market, examin-ing the international transmission of the Russia's 1998 financial crisis utilizing the GARCH-BEKK model proposed by Engle and Kroner (1995). We find evidence of direct linkage between the Russian equity market and the world markets with regards to returns and volatility. While the weakness of the linkage suggests that the Russian equity market was only partially integrated into the world market at the time of the crisis, evidence of contagion is clear. Keywords: Multivariate GARCH; Volatility spillovers; Russian Financial crisis; contagion; partial integration JEL Classification: C32, G15.
  • Isoré, Marlène (2016)
    Bank of Finland Research Discussion Papers 28/2016
    This paper develops a two-country model in which transmission of financial shocks arises despite a flexible exchange rate regime and substitutable financial assets, contrary to the open-economy literature results under these two conditions. The search and matching approach first accounts for the time needed to restore normal functioning of financial markets following a disruption. It also allows dissociating two types of financial shocks: (i) pure liquidity contractions imply negative co-movements of home and foreign outputs, so that the model nests the standard open macroeconomy results as a particular case; (ii) shocks to banks’ capitalization costs in one country do generate international financial contagion.