The Central and Eastern European Countries (CEEC) which joined the European Union between 2004 an... more The Central and Eastern European Countries (CEEC) which joined the European Union between 2004 and 2007 show an interesting evolution of their exchange rate regimes. Although they all started from a comparable situation and have the common long-term goal of joining European Monetary Union, they opted for different exchange rate policies. Furthermore, the exchange rate policies were subject to frequent changes and adjustments. We first describe the evolution of exchange rate arrangements in CEEC, and survey in this paper various aspects of their exchange rate policy. We start with the discussion of differences between de facto and de jure exchange rate regimes. Second, we analyze the impact of exchange rate policy on exchange rate volatility, focusing on structural breaks or volatility regimes. While the level of volatility shows the external dimension of monetary stability, the break points may help to understand the processes that lead to changes in exchange rate arrangements. Thir...
We estimate monetary policy rules for six central and eastern European countries (CEEC) by taking... more We estimate monetary policy rules for six central and eastern European countries (CEEC) by taking changes in the policy settings explicitly into account. Distinguishing rather fixed and more flexible exchange rate arrangements we find that for most countries exchange rates played an important role in monetary policy during the fixed exchange rate regime, whereas their influence disappears after the introduction of floating exchange rate regimes. This indicates that most countries followed their officially announced policy settings. For Slovenia and to some extent for Romania, however, we find evidence for exchange rate targeting, although they officially announced a managed float.
This paper analyzes the exchange rate exposure of exporting firms in (the so far rarely addressed... more This paper analyzes the exchange rate exposure of exporting firms in (the so far rarely addressed) largest Eastern European transition economies, i.e. Russia and three EU accession countries (CEEC-3). It also controls for possible effects of different exchange rate regimes. Substantially improving the results from the existing literature we find for more than 80% of firms in our sample a significant exchange rate exposure. However, the magnitude and direction of firms’ exposure depends on the particular exchange rate and clearly differs between Russia and the CEEC-3. We find that share prices increase with a depreciation of the domestic currency and only against the US Dollar in Russia, but decrease with a depreciation and only against the Euro in the CEEC-3. Such substantial differences may result from a differing dominance of exposure channels in the respective economies, such as the countryspecific export structure and foreign debt. Finally, the switch from a pegged to a flexible...
This paper provides an analysis of the long- and short-run determinants of domestic bank lending ... more This paper provides an analysis of the long- and short-run determinants of domestic bank lending to the private sector in eleven Central, Eastern and Southeastern European (CESEE) countries. We identify regime shifts for the observation period of 1997 to 2009, and the resulting subperiods are characterized by a different impact of the credit growth determinants. Estimating a credit demand equation as the long-term relation, we find – for most countries – a cointegration relationship with economic activity. We then examine the short-run dynamics by applying both a linear and a nonlinear (Markov-switching) error correction model. While there is a significant correlation between credit growth and supply factors, namely bank deposits and banks’ equity, its impact differs across the subperiods. Identified regime switches in the short-run relation are driven primarily by differences in the credit supply factors rather than by the adjustment toward the credit equilibrium as the error corre...
Abstract To the best of our knowledge we are the first to test a broad set of trade classificatio... more Abstract To the best of our knowledge we are the first to test a broad set of trade classification rules on the foreign exchange interbank market. A unique data set on the Russian Rouble/US Dollar trade includes the true trade initiator. The modified EMO (Ellis, Michaely and O'Hara) rule is currently the best choice at classifying trades. When quote data is not present, the tick rule yields a considerably lower accuracy. Yearly variations in the accuracy can be attributed to the difference in the location where trades occurred. Not surprisingly, trades executed at the quotes are the most informative.
International Journal of Finance & Economics, 2019
A vast literature on Purchasing Power Parity (PPP) has evolved and PPP has become the most popula... more A vast literature on Purchasing Power Parity (PPP) has evolved and PPP has become the most popular concept in international finance. PPP is applied with various price indices such as consumer price index, wholesale price index, etc. In this article, we introduce a revised version of PPP equation for financial products, which is strongly supported by our panel data analysis.
The study provides the impact of social capital on credit choices and growth of household busines... more The study provides the impact of social capital on credit choices and growth of household businesses in Vietnam by using a data sample of 3,813 observations. Social capital is considered at different levels: micro for human capital and macro for social networks. It concludes that although both levels of social capital influence credit choices of household businesses, the micro level of social capital plays an important role in improving the household business’s growth, including asset and income growth. The study develops a broader view about the use of resources and financing choices in household businesses in Vietnam. Accordingly, it highlights the importance of social capital from multiple aspects — the household business itself, human capital, social networks and government — on the development of Vietnamese household businesses.
This paper addresses a potential shortcoming in the work on the market timing ability of fund man... more This paper addresses a potential shortcoming in the work on the market timing ability of fund managers. We adapt the Henriksson-Merton (1981) test for market timing by relaxing a behavioral assumption that is implicit in the use of daily data. To this end, we relax the assumption that managers base their market timing decisions on daily excess returns. Instead, we use results from the literature on bull and bear markets and test whether fund managers can successfully time such trends in financial markets. We make use of a proprietary dataset of daily Commodity Trading Advisors (CTAs) returns to show that CTAs, on average, are able to time the bull and bear markets we identify.
The Central and Eastern European Countries (CEEC) which joined the European Union between 2004 an... more The Central and Eastern European Countries (CEEC) which joined the European Union between 2004 and 2007 show an interesting evolution of their exchange rate regimes. Although they all started from a comparable situation and have the common long-term goal of joining European Monetary Union, they opted for different exchange rate policies. Furthermore, the exchange rate policies were subject to frequent changes and adjustments. We first describe the evolution of exchange rate arrangements in CEEC, and survey in this paper various aspects of their exchange rate policy. We start with the discussion of differences between de facto and de jure exchange rate regimes. Second, we analyze the impact of exchange rate policy on exchange rate volatility, focusing on structural breaks or volatility regimes. While the level of volatility shows the external dimension of monetary stability, the break points may help to understand the processes that lead to changes in exchange rate arrangements. Thir...
We estimate monetary policy rules for six central and eastern European countries (CEEC) by taking... more We estimate monetary policy rules for six central and eastern European countries (CEEC) by taking changes in the policy settings explicitly into account. Distinguishing rather fixed and more flexible exchange rate arrangements we find that for most countries exchange rates played an important role in monetary policy during the fixed exchange rate regime, whereas their influence disappears after the introduction of floating exchange rate regimes. This indicates that most countries followed their officially announced policy settings. For Slovenia and to some extent for Romania, however, we find evidence for exchange rate targeting, although they officially announced a managed float.
This paper analyzes the exchange rate exposure of exporting firms in (the so far rarely addressed... more This paper analyzes the exchange rate exposure of exporting firms in (the so far rarely addressed) largest Eastern European transition economies, i.e. Russia and three EU accession countries (CEEC-3). It also controls for possible effects of different exchange rate regimes. Substantially improving the results from the existing literature we find for more than 80% of firms in our sample a significant exchange rate exposure. However, the magnitude and direction of firms’ exposure depends on the particular exchange rate and clearly differs between Russia and the CEEC-3. We find that share prices increase with a depreciation of the domestic currency and only against the US Dollar in Russia, but decrease with a depreciation and only against the Euro in the CEEC-3. Such substantial differences may result from a differing dominance of exposure channels in the respective economies, such as the countryspecific export structure and foreign debt. Finally, the switch from a pegged to a flexible...
This paper provides an analysis of the long- and short-run determinants of domestic bank lending ... more This paper provides an analysis of the long- and short-run determinants of domestic bank lending to the private sector in eleven Central, Eastern and Southeastern European (CESEE) countries. We identify regime shifts for the observation period of 1997 to 2009, and the resulting subperiods are characterized by a different impact of the credit growth determinants. Estimating a credit demand equation as the long-term relation, we find – for most countries – a cointegration relationship with economic activity. We then examine the short-run dynamics by applying both a linear and a nonlinear (Markov-switching) error correction model. While there is a significant correlation between credit growth and supply factors, namely bank deposits and banks’ equity, its impact differs across the subperiods. Identified regime switches in the short-run relation are driven primarily by differences in the credit supply factors rather than by the adjustment toward the credit equilibrium as the error corre...
Abstract To the best of our knowledge we are the first to test a broad set of trade classificatio... more Abstract To the best of our knowledge we are the first to test a broad set of trade classification rules on the foreign exchange interbank market. A unique data set on the Russian Rouble/US Dollar trade includes the true trade initiator. The modified EMO (Ellis, Michaely and O'Hara) rule is currently the best choice at classifying trades. When quote data is not present, the tick rule yields a considerably lower accuracy. Yearly variations in the accuracy can be attributed to the difference in the location where trades occurred. Not surprisingly, trades executed at the quotes are the most informative.
International Journal of Finance & Economics, 2019
A vast literature on Purchasing Power Parity (PPP) has evolved and PPP has become the most popula... more A vast literature on Purchasing Power Parity (PPP) has evolved and PPP has become the most popular concept in international finance. PPP is applied with various price indices such as consumer price index, wholesale price index, etc. In this article, we introduce a revised version of PPP equation for financial products, which is strongly supported by our panel data analysis.
The study provides the impact of social capital on credit choices and growth of household busines... more The study provides the impact of social capital on credit choices and growth of household businesses in Vietnam by using a data sample of 3,813 observations. Social capital is considered at different levels: micro for human capital and macro for social networks. It concludes that although both levels of social capital influence credit choices of household businesses, the micro level of social capital plays an important role in improving the household business’s growth, including asset and income growth. The study develops a broader view about the use of resources and financing choices in household businesses in Vietnam. Accordingly, it highlights the importance of social capital from multiple aspects — the household business itself, human capital, social networks and government — on the development of Vietnamese household businesses.
This paper addresses a potential shortcoming in the work on the market timing ability of fund man... more This paper addresses a potential shortcoming in the work on the market timing ability of fund managers. We adapt the Henriksson-Merton (1981) test for market timing by relaxing a behavioral assumption that is implicit in the use of daily data. To this end, we relax the assumption that managers base their market timing decisions on daily excess returns. Instead, we use results from the literature on bull and bear markets and test whether fund managers can successfully time such trends in financial markets. We make use of a proprietary dataset of daily Commodity Trading Advisors (CTAs) returns to show that CTAs, on average, are able to time the bull and bear markets we identify.
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