Assessing the performance of inflation targeting in East Asian economies

This paper examines the implementation and performance of inflation targeting (IT) in four East Asian emerging market economies: Indonesia, Korea, the Philippines, and Thailand. It also examines monetary policy in Malaysia, a country that has not adopted IT. The study estimates policy reaction functions to test the links between the adoption of IT and use of a monetary policy rule. The impulse responses of prices to a monetary policy shock are also estimated to identify monetary policy impacts on prices. The findings on the monetary policies of the five economies can be summarised as follows. Korea has taken an inflation‐responsive and forward‐looking policy stance under inflation targeting, which has had an effect on the stability of prices. Indonesia and Thailand have conducted inflation‐responsive but backward‐looking policy stances, which have had no impact in terms of price stabilisation. The Philippines (which adopted IT but under a pegged exchange rate regime) and Malaysia have neither followed inflation‐responsive rules nor had policy impacts in terms of controlling inflation.     

金融元素的变动对通货膨胀影响的实证研究

本文主要研究货币供应量(M2)、外汇储备、汇率、国际石油价格变动对通货膨胀的影响。构建VAR模型和向量误差修正模型,通过脉冲响应函数和方差分解分析了金融元素对CPI的影响。实证结果表明:货币供给量、外汇储备、汇率和CPI之间存在一种长期的稳定关系,外汇储备和汇率的变动对通货膨胀的影响皆较小。CPI与实际有效汇率间存在负相关关系。国际石油价格变动对通货膨胀的影响较大,汇率变动对通货膨胀的影响较小,说明汇率对价格传递的不完全性。     

The effect of North Korean threats on financial markets in South Korea and Japan

This paper examines the effects of North Korean threats, as measured by the proprietary North Korean Threat Index (NKTI), on financial markets in South Korea and Japan. We examine the effects of the threats on stock markets, foreign exchange markets, and overnight interest rates. We consider causality in mean and variance tests to determine any link between the NKTI and financial variables. The causality-in-mean test results indicate the presence of a causal link running from North Korean threats to stock returns and exchange rate returns in both countries, but no significant link to the overnight interest rate in either country. The causality-in-variance test results indicate no significant impact emanating from North Korean threats. Integrating the North Korean economy into the global economy stands to eliminate these threats and thus to contribute to regional financial stability.     

Contagion in the stock markets: The Asian financial crisis revisited

This paper presents empirical evidence of herding contagion in the stock markets during the 1997 Asian financial crisis, above and beyond macroeconomic fundamental driven co-movements. We analyze the cross-country time-varying correlation coefficients among the stock prices for the countries of Thailand, Malaysia, Indonesia, Korea, and the Philippines, between crisis and tranquil periods. Macromodels are constructed and implemented to capture the pure contagion effects on the markets. After controlling for the economic fundamentals for the five countries, the paper finds strong evidence of herding contagion.     

The effectiveness of financial incentives in controlling the health care expenditures of seniors

This paper examines whether financial incentives imposed on health insurers are effective or not in containing the health care expenditures of seniors. Under the Japanese health care system, the degree of financial incentives to restrain the health care expenditures of seniors varied significantly among almost 5300 insurers. The extent to which the strength of financial incentives is related to the actual health care expenditures is analyzed. The results indicate that financial incentives do not appear to restrain expenditures significantly.     

The relationship between financial sector development and savings mobilisation in South Africa: An empirical study

This article examines the link between financial sector development and savings mobilisation in South Africa for the period 1980–2012. Taking the life-cycle hypothesis as our theoretical background and using Johansen co-integration that allows for hypothesis testing, the empirical results revealed a long-run relationship between savings, interest rates and financial sector development. We find an inverse relationship between the interest rate and savings, implying that South Africans are net borrowers because the income effect overwhelms the substitution effect. This in part explains the low level of savings in recent time. Important policy lessons for boosting the national savings rate are discussed.     

安徽省参与泛长三角区域发展分工中的金融战略分析

加入长三角区域,参与泛长三角区域发展分工,是安徽省发展的良好机遇,不仅能够促进安徽省经济快速发展,也会促进安徽省金融的迅速壮大。在加速融入长三角的过程中,安徽省应当合理制定参与泛长三角区域发展分工的经济战略步伐。于此同时,紧紧围绕经济发展这个中心,拟定安徽省融入长三角的金融战略。本文通过对安徽省的金融战略目标的定位,分析安徽省金融发展过程中应注意的问题和采取的策略。     

The impact of banking services on poverty: Evidence from sub-district level for Bangladesh

The extent to which banking services can reduce poverty is under question as recent experimental evidence has suggested that there is no impact. Our findings, based on survey and administrative data, are to the contrary. We compile a unique dataset of banking measures and poverty indicators at the level of Bangladesh’s 544 administrative sub-districts. We find a relationship between banking services and poverty reduction, and show that the relationship works through the deposit channel rather than the credit channel. We exploit variation in branch placement by sub-district between 2010 and 2015 to implement a difference-in-difference estimation approach. We also estimate ordinary least squares and fixed effects models to explore the role of factors other than banking services in poverty incidence. Broad findings supporting a role for the deposit channel, but not the credit channel, are confirmed. These results have significant policy implications as governments in developing countries are actively involved in promoting financial inclusion through the banking sector.     

An empirical analysis on the effects of the inflation targeting framework on monetary policy in South Africa

This article examines the impact of the adoption of an Inflation Targeting (IT) framework in 2000 on the conduct of South Africa’s monetary policy. Taylor rule analysis is used to test empirically whether the implementation of IT in South Africa can be shown to have impacted on the conduct of monetary policy. In particular, the article analyses whether the implementation of the IT framework yields the expected changes when comparing the conduct of monetary policy pre and post the adoption of the IT framework. Thereafter, an analysis of term structure of interest rates, which serve as a proxy variable for market expectations, is used to test whether South Africa’s IT framework has resulted in more predictability and transparency in monetary policy conduct. Lastly, the article analyses the impact of the global financial crisis of 2008–2009, the so‐called Great Recession, on the predictability and transparency of monetary policy in South Africa.     

Rethinking the impact of GDP on financial development: Evidence from heterogeneous panels

This paper examines the nonlinear impact of real GDP per capita on financial development in a panel of 125 countries. It also determines the moderating effect of inflation on the impact of GDP on financial development. It employs the dynamic panel system generalized method of moments (GMM) and the dynamic common correlated effects (CCE) to do both panel and country‐specific analysis, as well as control for cross‐sectional dependence, heterogeneity and endogeneity. This study shows that GDP has a positive impact on financial development in the entire panel. However, when we split the panel into different income groups, we find a positive impact in the high‐ and middle‐income groups while the impact is insignificant in the low income group. Although we find no evidence of a nonlinear impact of GDP on financial development in the panel, the country‐specific analysis reveals a significant nonlinear relationship between GDP and financial development in 73 countries. We also show that inflation adversely moderates the positive impact of GDP on financial development in middle‐income countries. This study implies that the relationship between GDP and financial development depends on the levels of GDP and inflation rate. We recommend some policy options based on the findings.     

Robust determinants of growth in Asian developing economies: A Bayesian panel data model averaging approach

This paper investigates the determinants of growth in the Asian developing economies. We use Bayesian model averaging (BMA) in the context of a dynamic panel data growth regression to overcome the uncertainty over the choice of control variables. In addition, we use a Bayesian algorithm to analyze a large number of competing models. Among the explanatory variables, we include a nonlinear function of inflation that allows for threshold effects. We use an unbalanced panel data set of 27 Asian developing countries over the period 1980–2009. Our empirical evidence on the determinants of growth suggests that an economy's investment ratio is positively correlated to growth, whereas government consumption expenditure and terms of trade are negatively correlated. We also find evidence of a nonlinear relationship between inflation and economic growth, that is, inflation impedes economic growth when it exceeds 5.43% but does not have any significant effect on growth below that level.     

Some aspects of the impact of inflation on the debt burden of developing countries

The effect of inflation on the external indebtedness of developing countries is examined in this UNCTAD paper in a more comprehensive framework than is usually the case. The conventional view on this has been that international inflation reduces the ‘real’ burden of external debt. However, viewed in the context of the net effect of inflation on the import capacity of debtor developing countries, the paper shows that the situation is by no means so simple. It demonstrates by examining the cases of a sample of 71 developing countries that the effect of price increases of developing countries' imports (relative to price increases for their exports) caused by international inflation can and often has more than offset the so-called favourable effect on the burden of debt. For example in 1975, a year with particularly high inflation, no less than 75% in the sample experienced negative consequences. In these cases, therefore, international inflation on balance has reduced import capacity and thus made it more not less difficult for them to maintain servicing on their external debt and so increased the ‘real’ burden of their debt. Thus the UNCTAD paper brings into serious question the conventional wisdom on this important issue.     

日本金融改革的性质及其效果分析

日本金融业在战后日本经济发展过程中发挥了举足轻重的作用。无论是战后经济高速发展的奇迹,还是失去的15年的磨难,日本金融体制均扮演了主要角色。分析战后日本历次金融改革,结果表明,第一,美国主导的战后金融改革尽管发生了目标与结果的背离,但是其"吸收"、"改良"与"创建"的制度建设过程体现了改革的主导思想。第二,金融"大爆炸"是对日本战后30年金融体制的本质变革,然而,安全第一惯性思维下的错失良机,决定了这场改革依然无法摆脱高成本和不彻底的命运。第三,"金融再生"改革强化监管与治理的重拳出击对根治银行坏账的决定性效果值得肯定。但是,政府注资不能与市场优胜劣汰制度建设相结合的局限性,使得改革最终未能实现挽救经济困局的使命。     

财务管理在电子商务时代的变化与发展

电子商务的普及使现有财务管理的对象、筹资管理、投资管理、资金分配、财务分析、财务目标等受到重大影响,发生了诸多变化,要求现有的财务管理理论和实践操作方法应有所改进和发展。     

The impact of declining terms of trade and inflation on the export proceeds and debt burden of developing countries

This paper considers two problems related to the calculation of losses arising from changes in the terms of trade. First, the author discusses the choice of an appropriate formula for calculating the national gains or losses with respect to the trade balance as a result of changes in the terms of trade. Second, he studies the problem of determining whether the analysis can be extended to elucidate the gains or losses arising with respect to the service of the debt. These two questions are approached in the light of two earlier UNCTAD studies.     

Terms of Trade Shocks and Inflation Targeting in Emerging Market Economies

Emerging market economies (EMEs) have persistently experienced different waves of commodity terms of trade disturbances, generating macroeconomic instabilities. The adoption of inflation targeting (IT) by many EMEs has raised questions about its relative suitability in dealing with these shocks compared with other monetary policy regimes. This paper tests the robustness of IT compared with monetary targeting and exchange rate targeting regimes in coping with commodity terms of trade shocks using the panel vector autoregressive technique. The results show that in general, IT countries respond better to commodity terms of trade shocks especially with respect to inflation and output gap. However, exchange rates are more volatile in IT countries than in exchange rate targeting countries. The results suggest that EME countries can reduce the adverse effects of commodity terms of trade fluctuations when they adopt IT, but they also need to pay attention to exchange rate movements.     

Monetary and Fiscal Policy Interaction in the Euro Area with Different Assumptions on the Phillips Curve

In this paper we apply a static version of a New Keynesian macromodel to a monetary union (see Bofinger et al., J Econ Educ, 37:98–117 (2006), Walsh, J Econ Educ, 33:333–346 (2002)). We show in particular that a harmonious functioning of a monetary union critically depends on the correlation of shocks that hit the currency area. Additionally a high degree of integration in product markets is advantageous for the ECB as it prevents national interest rates from driving a wedge between macroeconomic outcomes across member states. In particular small countries are in need for fiscal policy as an independent stabilization agent with room to breath.

A nonlinear ARDL model of inflation dynamics in the Philippine economy

This study investigated whether global oil price changes, exchange rate, interest rate, and economic output exert symmetric or asymmetric pass-through effects on inflation in the Philippines. A Nonlinear Autoregressive Distributed Lag (NARDL) model was fitted to the observable data using quarterly observations from 1998 to 2019. Knowledge of these relationships is important in monetary policy setting in achieving targeted inflation; the Philippines adopted inflation targeting in 2002. The finding shows that world oil price shocks are still prominent and the most important determinants of inflation variations in the country. There is prima facie evidence on the short-run asymmetry of oil price changes to inflation. Exchange rate pass-through to inflation was very minimal in the short-run, and there is no long-run effect. Evidence that interest rate and demand shocks have a long-run asymmetric effect on inflation was found. These findings imply that monetary policy setting should account for the asymmetric effects of inflation determinants. Study results provide a deeper understanding of how positive and negative changes of inflation determinants affect actual inflation, which aids policymakers in achieving targeted inflation.