Template-Type: ReDIF-Article 1.0 Author-Name: Joseph J. St. Marie Author-X-Name-First: Joseph J. St. Author-X-Name-Last: Marie Title: Hitting the right target: an examination of inflation targeting and labour within the varieties of capitalism framework Abstract: This study examines the interaction of state and social institutions, namely labour unions. Examining the type of capitalist structure of the state, one can draw conclusions about institutional arrangements and economic structures. The literature on Varieties of Capitalism (VoC) and inflation targeting are numerous; a synthesis takes into account economic and social structures including interactions with monetary policy. Multivariate models test the assumption of differences between inflation targeters and non-targeters. Models demonstrate state intervention in labour markets and union activities. The study concludes by presenting findings about relationships between the capitalist structure of the state, social institutions and inflation targeting. Journal: Int. J. of Monetary Economics and Finance Pages: 11-23 Issue: 1 Volume: 5 Year: 2012 Keywords: VoC; varieties of capitalism; Taylor rule; corporatism; inflation targeting; labour unions; trade unions; monetary policy. File-URL: http://www.inderscience.com/link.php?id=44463 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:1:p:11-23 Template-Type: ReDIF-Article 1.0 Author-Name: Ibrahim A. Onour Author-X-Name-First: Ibrahim A. Author-X-Name-Last: Onour Title: Crude oil price and stock markets in major oil-exporting countries: evidence of decoupling feature Abstract: This paper investigates common cyclical feature between crude oil market and stock markets in major oil-exporting countries including Saudi Arabia, United Arab Emirates (UAE) and Kuwait. The results of the paper show the evidence of common cyclical association between oil price and each of the stock prices at low levels of oil prices, below $40 per oil barrel, but no evidence of such cyclical association between the two asset prices at the high oil price levels above $72 per barrel. This implies that the capital markets in these countries and oil market respond in different pattern to cycle generating shocks, as high oil prices may raise global investment risk. Journal: Int. J. of Monetary Economics and Finance Pages: 1-10 Issue: 1 Volume: 5 Year: 2012 Keywords: common trends; shared cycles; nonlinear cointegration; crude oil prices; stock markets; oil exporting countries; oil exports; Saudi Arabia; United Arab Emirates; UAE; Kuwait; investment risks. File-URL: http://www.inderscience.com/link.php?id=44464 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:1:p:1-10 Template-Type: ReDIF-Article 1.0 Author-Name: Yacine Hammami Author-X-Name-First: Yacine Author-X-Name-Last: Hammami Title: Monetary environment and market inefficiency Abstract: This paper contends that abundant liquidity in the economy might be an important determinant of market inefficiency. Restrictive monetary periods are characterised by high bank lending growth compared with expansive monetary periods. Therefore, if excess liquidity is a cause of market inefficiency, the latter is expected to come out essentially in restrictive monetary environments. Consistent with this intuition, empirical tests here highlight that expected stock returns in the USA are driven by fundamentals only in expansive monetary phases whereas investor sentiment seems to be the most important driving force in restrictive monetary environments. Journal: Int. J. of Monetary Economics and Finance Pages: 24-37 Issue: 1 Volume: 5 Year: 2012 Keywords: asset pricing models; bank lending; monetary policy; market efficiency; overreaction; market inefficiency; liquidity; USA; United States. File-URL: http://www.inderscience.com/link.php?id=44465 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:1:p:24-37 Template-Type: ReDIF-Article 1.0 Author-Name: Pilar Abad Author-X-Name-First: Pilar Author-X-Name-Last: Abad Author-Name: Antonio Díaz Author-X-Name-First: Antonio Author-X-Name-Last: Díaz Author-Name: M. Dolores Robles-Fernández Author-X-Name-First: M. Dolores Author-X-Name-Last: Robles-Fernández Title: Credit rating announcements, trading activity and yield spreads: the Spanish evidence Abstract: We test whether different rating announcements contain pricing-relevant information and modify trading activity patterns in the Spanish corporate debt markets. We observe a significant widening of yield spreads in short- and long-term corporate debt after reviews of downgrades and negative outlook reports. Additionally, certain rating announcements encourage trading activity even when the information is not pricing-relevant. The release of information arouses investor interest for the involved securities. Thus, trading frequency increases, although larger-sized transactions, which should denote possible portfolio rebalancing, are not observed. In the short-term market, trading volumes are found to fade after reviews for downgrade. Journal: Int. J. of Monetary Economics and Finance Pages: 38-63 Issue: 1 Volume: 5 Year: 2012 Keywords: CRAs; credit rating agencies; rating changes; event study; yields; liquidity; trading frequency; corporate bond markets; commercial paper market; Spain; corporate debt; trading patterns; trading activity. File-URL: http://www.inderscience.com/link.php?id=44466 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:1:p:38-63 Template-Type: ReDIF-Article 1.0 Author-Name: Tafirenyika Sunde Author-X-Name-First: Tafirenyika Author-X-Name-Last: Sunde Title: Financial sector development and economic growth nexus in South Africa Abstract: The study investigated the nexus between financial sector development and economic growth in South Africa using cointegration and error correction modelling and; the Granger causality tests. The results of the study show that economic growth is explained by the financial sector variables and control variables such as inflation, exchange rate, and real interest rates. The Granger causality test results show that there is generally a bidirectional relationship between economic growth and financial sector development which implies that if the economy grows the financial services sector also grows and vice versa. Journal: Int. J. of Monetary Economics and Finance Pages: 64-75 Issue: 1 Volume: 5 Year: 2012 Keywords: financial development; economic growth; financial sector development; monetary economics; finance; unit root tests; cointegration; error correction modelling; Granger causality; bidirectional; South Africa. File-URL: http://www.inderscience.com/link.php?id=44467 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:1:p:64-75 Template-Type: ReDIF-Article 1.0 Author-Name: Mohamed A. Osman Author-X-Name-First: Mohamed A. Author-X-Name-Last: Osman Author-Name: Rosmy Jean Louis Author-X-Name-First: Rosmy Jean Author-X-Name-Last: Louis Author-Name: Faruk Balli Author-X-Name-First: Faruk Author-X-Name-Last: Balli Title: Estimating the output gap for the UAE: a production function approach Abstract: In this paper, we accomplish two tasks. First, we estimate the output gap for the United Arab Emirates using the production function approach. Secondly, we evaluate to what extent the fluctuations of the output gap are an important indicator of domestic inflation. We find that the output gap profile produced by the production function approach fits reasonably well the UAE's recent economic history in capturing past peaks and troughs. To assess how well the output gap performs in explaining domestic inflation, we used a backward-looking Phillips curve equation. The output gap variable had the expected sign but was statistically insignificant. Journal: Int. J. of Monetary Economics and Finance Pages: 76-86 Issue: 1 Volume: 5 Year: 2012 Keywords: UAE; United Arab Emirates; output gap; inflation; Hodrick–Prescott filter; production function; Phillips curve. File-URL: http://www.inderscience.com/link.php?id=44468 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:1:p:76-86 Template-Type: ReDIF-Article 1.0 Author-Name: Abraham Abraham Author-X-Name-First: Abraham Author-X-Name-Last: Abraham Author-Name: Haider Madani Author-X-Name-First: Haider Author-X-Name-Last: Madani Title: Price linkages between the GCC stock markets: a bounds test using an Auto Regressive-Distributed Lag model Abstract: This paper examined the linkages between the equity markets in the Gulf Cooperation Council's (GCC) region. Specifically, we applied a bounded test using an Auto Regressive-Distributed Lag (ARDL) model to determine if the markets are co-integrated. In contrast to traditional co-integration analysis, the ARDL procedure does not require the prior determination of the order of integration of the variables. The co-integration tests showed that the GCC markets are segmented. However, the subset of the markets comprising the oil and gas economies of Saudi Arabia, Kuwait and Qatar, along with Oman and Dubai share a common trend. Journal: Int. J. of Monetary Economics and Finance Pages: 87-98 Issue: 1 Volume: 5 Year: 2012 Keywords: stock market linkages; GCC emerging markets; ARDL model; Gulf Cooperation Council; equity markets; co-integration tests; oil and gas economies; Saudi Arabia; Kuwait; Qatar; Oman; Dubai; common trends. File-URL: http://www.inderscience.com/link.php?id=44482 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:1:p:87-98 Template-Type: ReDIF-Article 1.0 Author-Name: Sergio Rossi Author-X-Name-First: Sergio Author-X-Name-Last: Rossi Author-Name: Bernard Dafflon Author-X-Name-First: Bernard Author-X-Name-Last: Dafflon Title: Repairing the original sin of the European Monetary Union Abstract: This study shows that the origins of the sovereign debt crisis within the euro area are to be found within the private sector and in economic policy mistakes rather than only in the profligacy of some national governments in the Southern periphery of Euroland. Sovereign debtors and their private creditors should therefore meet in order for them to arrange a financial package including debt restructuring, rescheduling and cancellation. In this study we argue in favour of a European political union in the form of a federation of states, with its own taxation powers and some financial equalisation transfer mechanisms, to be coupled with a proactive investment policy carried out by the European Investment Bank (EIB) and the issue of euro-bonds to channel global savings into an investment-led European Economic Recovery Plan. Journal: Int. J. of Monetary Economics and Finance Pages: 102-123 Issue: 2 Volume: 5 Year: 2012 Keywords: Euro area; Eurozone; fiscal policy; political union; sovereign debt crisis; stability and growth pact; Economic and Monetary Union; EMU; European Union; EU; private sector; economic policy; debt cancellation; debt rescheduling; debt restructuring. File-URL: http://www.inderscience.com/link.php?id=48731 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:2:p:102-123 Template-Type: ReDIF-Article 1.0 Author-Name: Pantelis Sklias Author-X-Name-First: Pantelis Author-X-Name-Last: Sklias Author-Name: George Maris Author-X-Name-First: George Author-X-Name-Last: Maris Title: Reassessment of the OCA criteria in the Euro area: the case of Greece Abstract: The Greek crisis should not be considered an unexpected phenomenon. On the contrary, it has been caused by, among other things, rushed political decisions, incomplete EU institutions of governance and hidden political and economic causes. We analyse the optimality and effectiveness of the European monetary framework on two different levels: first by applying the OCA criteria to the EMU and second, by evaluating the main political and economic institutions and their vulnerabilities within the European level. We claim that many European countries, including Greece and other countries of Southern Europe remain unable to afford the vulnerable and one-sided, weak political and economic European monetary context. Additionally, we claim that unless deep governance structures emerge, a possible enlargement of the Eurozone could create more costs than benefits for both the candidate members and the Eurozone itself. Journal: Int. J. of Monetary Economics and Finance Pages: 124-138 Issue: 2 Volume: 5 Year: 2012 Keywords: EMU; Economic and Monetary Union; European governance; Greek crisis; optimal currency areas; political economy; Euro area; European monetary framework; Eurozone. File-URL: http://www.inderscience.com/link.php?id=48732 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:2:p:124-138 Template-Type: ReDIF-Article 1.0 Author-Name: Georgios Karras Author-X-Name-First: Georgios Author-X-Name-Last: Karras Title: Optimal stabilisation policy in a monetary union: implications of the Mankiw-Weinzierl model Abstract: This paper uses the Mankiw and Weinzierl (2011) general equilibrium model of optimal stabilisation policy to ask how macroeconomic outcomes are affected by membership in a monetary union. The model agrees with much of the previous literature that the effects of various shocks may be amplified or dampened depending on how the common central bank responds, or fails to respond, to them. This in turn depends on how well (or poorly) correlated the domestic shocks are with their union-wide counterparts. For example, a negative spending shock will be the most recessionary when the shock is confined to the domestic economy, much less (if at all) recessionary when the shock is union wide, and actually expansionary if the shock is restricted to the rest of the union. Fiscal and productivity shocks are characterised by similar properties. Journal: Int. J. of Monetary Economics and Finance Pages: 139-152 Issue: 2 Volume: 5 Year: 2012 Keywords: optimal stabilisation; monetary policy; monetary union; Mankiw-Weinzierl model; general equilibrium model; macroeconomics. File-URL: http://www.inderscience.com/link.php?id=48733 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:2:p:139-152 Template-Type: ReDIF-Article 1.0 Author-Name: Jens Klose Author-X-Name-First: Jens Author-X-Name-Last: Klose Title: Implicit Taylor reaction functions for Euro area countries Abstract: This study estimates modified Taylor reaction functions which tackle the real rather than the nominal interest rates for the Euro area as a whole, and separately for the individual member states, before the onset of the current sovereign debt crisis. We show there are significant differences between Taylor reaction functions in the Euro area countries, which cast doubts on the Euro area being an optimal currency area. The results are used to carry out out-of-sample forecasts for the sovereign debt crisis period which show that the ECB has held the interest rate low for most of the countries during the crisis. Journal: Int. J. of Monetary Economics and Finance Pages: 153-168 Issue: 2 Volume: 5 Year: 2012 Keywords: Taylor reaction functions; ECB; European Central Bank; asymmetries; optimal currency area; interest rates; Euro area; Eurozone; sovereign debt crisis. File-URL: http://www.inderscience.com/link.php?id=48734 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:2:p:153-168 Template-Type: ReDIF-Article 1.0 Author-Name: Rishav Bista Author-X-Name-First: Rishav Author-X-Name-Last: Bista Author-Name: Biniv Maskay Author-X-Name-First: Biniv Author-X-Name-Last: Maskay Author-Name: James W. Saunoris Author-X-Name-First: James W. Author-X-Name-Last: Saunoris Title: The effect of inter-country competition on interest rate pass-through in the European Union Abstract: Using monthly data on countries in the European Union (EU) over seven years, this study examines the pass-through of the Central Bank (CB) rate to retail lending interest rates. Recent advances in spatial econometric methods allows for relaxing the assumption of perfect competition in interest rates by specifically modelling the spatial interaction of countries within the EU. Questions concerning the effect of spatial interaction on the pass-through of the CB rate to the lending rates are of particular interest. The results indicate statistically significant spatial interaction among countries, which results in faster pass-through. Journal: Int. J. of Monetary Economics and Finance Pages: 169-182 Issue: 2 Volume: 5 Year: 2012 Keywords: monetary policy transmission; EU; European Union; interest rate pass-through; spatial econometrics; interest rates; modelling; spatial interaction. File-URL: http://www.inderscience.com/link.php?id=48735 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:2:p:169-182 Template-Type: ReDIF-Article 1.0 Author-Name: Guglielmo Maria Caporale Author-X-Name-First: Guglielmo Maria Author-X-Name-Last: Caporale Author-Name: Nicola Spagnolo Author-X-Name-First: Nicola Author-X-Name-Last: Spagnolo Title: Stock market, economic growth and EU accession: evidence from three CEECs Abstract: This paper estimates a bivariate VAR-GARCH (1,1) model to examine linkages between the stock market and economic growth in three CEEC countries (the Czech Republic, Hungary and Poland). The empirical findings suggest that there is unidirectional causality running from stock markets to growth in the levels; this linkage becoming stronger following EU accession, which appears to have been beneficial, presumably as a catalyst for institutional building and development. The same holds in most cases for volatility spillovers as well. In addition, Germany is confirmed to act as a locomotive for these countries, and a tight monetary policy is found to affect both economic and stock market growth adversely. Journal: Int. J. of Monetary Economics and Finance Pages: 183-191 Issue: 2 Volume: 5 Year: 2012 Keywords: CEEC countries; Central and Eastern Europe; GARCH model; volatility spillovers; stock markets; economic growth; EU accession; European Union; Czech Republic; Hungary; Poland; Germany; modelling; monetary policy. File-URL: http://www.inderscience.com/link.php?id=48736 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:2:p:183-191 Template-Type: ReDIF-Article 1.0 Author-Name: Mohsen Bahmani-Oskooee Author-X-Name-First: Mohsen Author-X-Name-Last: Bahmani-Oskooee Author-Name: Amr Sadek Hosny Author-X-Name-First: Amr Sadek Author-X-Name-Last: Hosny Title: Egypt-EU commodity trade and the J-Curve Abstract: Due to data availability, most theories in international economics are tested by using data from developed countries. The J-Curve phenomenon, which summarises the short-run response of the trade balance to currency depreciation, is no exception. Egypt has kept close track of its commodity trade with her major trading partner, the European Union (EU). We use such trade data and test the J-Curve phenomenon for each of the 59 industries that trade between the two regions. Using quarterly data over the period 1994I-2007IV and the bounds testing approach we find support for the phenomenon in 24 out of the 59 industries. Journal: Int. J. of Monetary Economics and Finance Pages: 192-209 Issue: 2 Volume: 5 Year: 2012 Keywords: J-curve; Egypt; EU; European Union; commodity trade; trade balance; currency depreciation. File-URL: http://www.inderscience.com/link.php?id=48737 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:2:p:192-209 Template-Type: ReDIF-Article 1.0 Author-Name: Nicholas Apergis Author-X-Name-First: Nicholas Author-X-Name-Last: Apergis Author-Name: Alexandros Gabrielsen Author-X-Name-First: Alexandros Author-X-Name-Last: Gabrielsen Author-Name: James E. Payne Author-X-Name-First: James E. Author-X-Name-Last: Payne Author-Name: Paolo Zagaglia Author-X-Name-First: Paolo Author-X-Name-Last: Zagaglia Title: Convergence and clustering of Tier 1 capital in the European banking sector: a non-linear factor approach Abstract: This short communication examines the convergence of the Tier 1 capital ratio in the banking sector across the EMU. The study applies the Phillips-Sul convergence and clustering algorithm for 251 European banks over annual periods from 1990 to 2010. The null hypothesis of full convergence is rejected; however, the convergence tests reveal heterogeneity in the Tier 1 capital ratio in the European banking sector, with five distinct clusters. Journal: Int. J. of Monetary Economics and Finance Pages: 210-221 Issue: 2 Volume: 5 Year: 2012 Keywords: Tier 1 capital ratio; Phillips-Sul club convergence method; Europe; banking sector; EMU; Economic and Monetary Union; European Union; clustering algorithms; European banks; equity capital; risk-weighted assets. File-URL: http://www.inderscience.com/link.php?id=48738 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:2:p:210-221 Template-Type: ReDIF-Article 1.0 Author-Name: Shinya Minegishi Author-X-Name-First: Shinya Author-X-Name-Last: Minegishi Title: Market structure and competitiveness of Credit Associations and Credit Cooperatives in Japan Abstract: This paper investigates how the consolidation process has affected the market structure and the degree of competition within Credit Associations (CA) and Credit Cooperatives (CC) in Japan. From the estimated results, I tentatively find they operate in an environment without collusive behaviour. The magnitudes of competitiveness by H-statistics suggest mutual financial institutions do not necessarily make decisions only for their own benefit but also consider the social welfare in their community. These results represent the geographical restriction to mutual financial institutions affects to the competitiveness, but the other factors such as good corporate governance relate to the market structure. Journal: Int. J. of Monetary Economics and Finance Pages: 223-243 Issue: 3 Volume: 5 Year: 2012 Keywords: market efficiency; H-statistics; Japan; credit associations; credit cooperatives; consolidation; market structure; competition; social welfare; mutual financial institutions; mutuals; corporate governance; competitiveness. File-URL: http://www.inderscience.com/link.php?id=49046 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:3:p:223-243 Template-Type: ReDIF-Article 1.0 Author-Name: Robert Czudaj Author-X-Name-First: Robert Author-X-Name-Last: Czudaj Title: Modelling euro area money demand and forecasting inflation in a time-varying environment Abstract: In this paper, we present euro area money demand functions estimated for the sample period ranging from January 1994 to November 2010 with total and partial time-varying coefficients accounting for two structural changes. For this purpose, we make use of two different procedures viz. the Lee and Strazicich (2003) unit root test as well as the Bai and Perron (1998, 2003a, 2003b) methodology, which both enable us to determine unknown structural breaks endogenously from the data and we find evidence of two structural breaks in our series owing to the burst of the new economy bubble in 2001 and the global financial and economic crisis around 2007. Moreover, we illustrate that these breaks have affected the parameters of the money demand as well. Furthermore, we check if our demand for broad money with time-varying coefficients helps to improve p-star model based inflation forecasts and show that our forecasts outmatch those resulting from a fixed coefficient approach. Journal: Int. J. of Monetary Economics and Finance Pages: 244-267 Issue: 3 Volume: 5 Year: 2012 Keywords: cointegration; Euro area; Eurozone; in?ation forecasting; monetary economics; money demand; structural breaks; modelling; financial crisis; economic crisis. File-URL: http://www.inderscience.com/link.php?id=49047 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:3:p:244-267 Template-Type: ReDIF-Article 1.0 Author-Name: Sahar Bahmani Author-X-Name-First: Sahar Author-X-Name-Last: Bahmani Author-Name: Mohsen Bahmani-Oskooee Author-X-Name-First: Mohsen Author-X-Name-Last: Bahmani-Oskooee Title: Exchange rate volatility and demand for money in Iran Abstract: In 1963, Nobel Laureate, Robert Mundell (1963) argued that the demand for money could depend on the exchange rate, in addition to income and interest rate. In this paper, we argue that, in addition to the exchange rate itself, its volatility could also serve as another determinant of the demand for money. We demonstrate our conjecture by using data from post-revolutionary Iran and the bounds testing approach. Our results reveal that indeed, exchange rate volatility has short-run as well as long-run effects on the demand for real M2 monetary aggregate in Iran. Journal: Int. J. of Monetary Economics and Finance Pages: 268-276 Issue: 3 Volume: 5 Year: 2012 Keywords: money demand; exchange rate volatility; bounds testing; Iran. File-URL: http://www.inderscience.com/link.php?id=49048 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:3:p:268-276 Template-Type: ReDIF-Article 1.0 Author-Name: Bechir Raggad Author-X-Name-First: Bechir Author-X-Name-Last: Raggad Author-Name: Mohamed Boutahar Author-X-Name-First: Mohamed Author-X-Name-Last: Boutahar Title: Structural change in tail behaviour and the recent financial crises Abstract: This paper is a contribution in exploring the empirical evidence of the instability in the tail behaviour returns of stock market indices, based on some developments in the analysis of structural change models. The proposed approach can jointly determine the number of structural breaks in a series of tail-indexes and estimate the mean tail-index levels in different regimes. Here we advocate a modified Hill estimator for the tail index. We provide simulations that indicate good finite sample properties of our procedure. The proposed method is then applied to the tail behaviour returns of two international stock market indices, SP500 (USA) and CAC40 (France). The results indicate that procedures perform reasonably well and lead to an appropriate number of breaks with locations coinciding with major financial crisis and events such as the LTCM crisis, September 11, 2001 terrorist attack, sub-prime crisis in 2008 and European Union (EU) debt crisis triggered on 2010. Journal: Int. J. of Monetary Economics and Finance Pages: 277-298 Issue: 3 Volume: 5 Year: 2012 Keywords: multiple structural change; extreme value analysis; tail index; modified hill estimator; break dates; tail behaviour returns; stock markets; SP500; CAC40. File-URL: http://www.inderscience.com/link.php?id=49060 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:3:p:277-298 Template-Type: ReDIF-Article 1.0 Author-Name: Min Lu Author-X-Name-First: Min Author-X-Name-Last: Lu Title: Current account dynamics and optimal monetary policy in a two-country economy Abstract: This paper explores optimal monetary policy when current account dynamics is taken into consideration in a sticky-price intertemporal optimising model. It investigates how monetary policies affect current account movement in a two-country model. The main issues addressed include: 1) what factors affect the current account dynamics in response to technology and monetary shocks in a two-country open economy; 2) how should the monetary authority respond to these shocks to maximise the welfare of the household. Using a non-linear solution method, we find that the current account dynamics depends critically on the intratemporal and intertemporal elasticities of substitution, the degree of monopolistic competition, the degree of Local Currency Pricing (LCP) and the type of shocks. With sluggish price adjustment among firms, the home monetary authority will choose an expansionary monetary policy when facing a home technological improvement. If a supranational monetary authority is to choose an optimal monetary policy for both countries, the welfare gain from the expansionary monetary policy for both home and foreign counties is quantitatively small. Journal: Int. J. of Monetary Economics and Finance Pages: 299-324 Issue: 3 Volume: 5 Year: 2012 Keywords: new open economy; macroeconomics; current account dynamics; monetary policy; optimisation; modelling; shocks; price adjustment. File-URL: http://www.inderscience.com/link.php?id=49065 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:3:p:299-324 Template-Type: ReDIF-Article 1.0 Author-Name: Fassil Fanta Author-X-Name-First: Fassil Author-X-Name-Last: Fanta Title: Macroeconomic uncertainty, excess liquidity and stability of money demand (M3) in Australia Abstract: There has been limited research that explains the breakdown of the relationship between M3 and real activity after the financial deregulation in Australia. This paper contributes to the existing body of literature by examining the stability of money demand as a function of real income, interest rate and economic uncertainty index. We use the Johansen procedure of cointegration to estimate the long-run stationary relationship between an Australian monetary aggregate (M3) and the explanatory variables. We use the GARCH (1, 1) model to construct an economic uncertainty index. When we account for economic uncertainty, our results establish a long-run equilibrium relationship for the post-deregulation and for the entire sample period, and show an improvement in excess liquidity. Our result has an implication for reopening an important policy question on the viability of framing monetary policy around monetary aggregate. Journal: Int. J. of Monetary Economics and Finance Pages: 325-344 Issue: 4 Volume: 5 Year: 2012 Keywords: economic uncertainty index; money demand; financial deregulation; cointegration; macroeconomic uncertainty; excess liquidity; demand stability; Australia; M3; real income; interest rates; monetary policy; monetary aggregate. File-URL: http://www.inderscience.com/link.php?id=52499 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:4:p:325-344 Template-Type: ReDIF-Article 1.0 Author-Name: Martina Alexová Author-X-Name-First: Martina Author-X-Name-Last: Alexová Title: What determines inflation? Abstract: This paper focuses on the determinants of inflation for new European Union members during the period from 1996 to 2011. We utilise a structural vector error correction model to estimate mark-up or long-run output gap relationships and the analyse dynamic properties of the models. We find that Slovakia, the Czech Republic, Hungary, Poland and Bulgaria can be characterised by cost-push inflation from a long-run perspective whereas demand-side factors are more characteristic for Slovenia, Estonia, Latvia, Lithuania and Romania. Inflation dynamics in short-run inflation were influenced by inertia, labour costs, foreign market competitiveness, production as well as some exogenous shocks. We also investigate the direct relationship between inflation and government deficit; however, there seems to be no interdependency between these variables in the long run. Journal: Int. J. of Monetary Economics and Finance Pages: 345-369 Issue: 4 Volume: 5 Year: 2012 Keywords: inflation determinants; long-run structural VARs; subset VEC model; mark-up; output gap; deficit; commodity prices; new EU members; European Union; Slovakia; Czech Republic; Hungary; Poland; Bulgaria; cost-push inflation; demand side; Slovenia; Estonia; Latvia; Lithuania; Romania; inflation dynamics; inertia; labour costs; foreign market competitiveness; production; some exogenous shocks; government deficit. File-URL: http://www.inderscience.com/link.php?id=52500 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:4:p:345-369 Template-Type: ReDIF-Article 1.0 Author-Name: Adam Stokes Author-X-Name-First: Adam Author-X-Name-Last: Stokes Author-Name: Ahmed S. Abou-Zaid Author-X-Name-First: Ahmed S. Author-X-Name-Last: Abou-Zaid Title: Forecasting foreign exchange rates using artificial neural networks: a trader's approach Abstract: This study investigates the use of two different types of the Artificial Neural Networks (ANNs), Feed-Forward (FF) Neural Network and Nonlinear Autoregressive with Exogenous Input (NARX) neural network, in forecasting the exchange rate of the US dollar against the three major currencies: the Euro, the Pound and the Yen. Although the ANNs technique is not very common in economic discipline, the results are expected to be more accurate in terms of market timing ability and sign prediction than those of the standard econometric techniques such as ARMA. ANNs are, in fact, capable of dealing with high-frequency data as well as the nonlinearities in exchange rate movements. Our results support the notion that ANNs is an effective method in forecasting the exchange rates. The NARX networks output shows a significant market timing ability. Both FF and NARX proved to forecast at a higher accuracy (sign prediction) than random walk and ARMA models. Journal: Int. J. of Monetary Economics and Finance Pages: 370-394 Issue: 4 Volume: 5 Year: 2012 Keywords: foreign exchange rates; artificial neural networks; ANNs; exchange rate forecasting; US dollar; euro; pound sterling; yen; market timing ability; sign prediction; forecasting accuracy. File-URL: http://www.inderscience.com/link.php?id=52502 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:4:p:370-394 Template-Type: ReDIF-Article 1.0 Author-Name: Linus Wilson Author-X-Name-First: Linus Author-X-Name-Last: Wilson Title: Debt overhang and bank bailouts Abstract: When a bank is deemed 'too big to fail' by regulators, it may be tempted to buy risky assets. This paper analyses bank bailouts involving the purchases of toxic assets, preferred stock and common stock when the government wants to encourage efficient lending. It finds that preferred stock recapitalisations are the least efficient in correcting debt overhang problems from both an ex post and ex ante perspective. In contrast, efficient lending and voluntary participation can be best achieved without subsidy by purchasing either toxic assets or common stock. Nevertheless, troubled banks must be subsidised if they will voluntarily participate in any recapitalisation. Journal: Int. J. of Monetary Economics and Finance Pages: 395-414 Issue: 4 Volume: 5 Year: 2012 Keywords: bank bailouts; banking; debt overhang; common stock; capital assistance program; capital purchase program; Emergency Economic Stabilization Act; lending; preferred stock; PPIP; public-private investment partnerships; TARP; too big to fail; toxic assets; efficient lending; voluntary participation; recapitalisation. File-URL: http://www.inderscience.com/link.php?id=52512 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijmefi:v:5:y:2012:i:4:p:395-414