rss_2.0Journal of Central Banking Theory and Practice FeedSciendo RSS Feed for Journal of Central Banking Theory and Practice of Central Banking Theory and Practice Feed Breaks and Co-Movements of Bitcoin and Ethereum: Evidence from the COVID-19 Pandemic Period<abstract> <title style='display:none'>Abstract</title> <p>This study examined the structural breakdowns and co-movements of Bitcoin (BTC) and Ethereum (ETH) cryptocurrencies from the onset of the COVID-19 pandemic. The Bai-Perron test was used to determine the change in the mean and variance of the two principal actors regarding market capitalization in the cryptocurrency market. Wavelet coherence analysis was also used to detect the co-movements between BTC and ETH. As a result of the study, several similar breaks were seen in each BTC and ETH series. Only one break could be directly associated with the pandemic process. This means that the pandemic is internalized and normalized in the process. The wavelet coherence results indicate a strong positive dependency (dark warm colours) between BTC and ETH and in phase (in the same direction) in the short and long bandgaps.</p> </abstract>ARTICLEtrue Between Internet Banking Service Quality, e-Customer Satisfaction, and Loyalty: A Comparative Study of India and Pakistan<abstract> <title style='display:none'>Abstract</title> <p>The objective of this study is to examine the structural relationship between e-service quality, e-satisfaction, and e-loyalty for both Pakistani and Indian Banks. The study was conducted on 800 respondents who were users of internet banking services. The independent variables were 1) reliability, 2) responsiveness, 3) accessibility, 4) ease of use, and 5) security. The e-customer satisfaction and e-customer loyalty are independent variables. The study was conducted on 400 Indians and 400 Pakistani who had been availed internet banking services. The theoretical model was assessed using the PLS-SEM technique. The study found overall significant positive relationship between e-service quality, e-satisfaction, and e-loyalty for both Pakistani and Indian banks. The study has managerial implications that the managers of the banks should focus more on the internet banking services for customer loyalty. The study found overall significant relationship in both India and Pakistan, as both are emerging economies. This study intends to fill the void and adds to the literature on internet banking and provides pathways for the researchers working in the domain of banking services. The study provides recommendations for the top level of management and bank branch managers as well.</p> </abstract>ARTICLEtrue Quantity Theory of Money, Quantitative Easing and the Missing Inflation Phenomenon<abstract> <title style='display:none'>Abstract</title> <p>Several explanations have been put forward for the observation that massive inflation has not appeared as a result of the explosive monetary growth generated by quantitative easing that was in 2008. Several plausible explanations have been put forward for this observation, but none of them can explain the huge gap between monetary inflation and price inflation. The alternative explanation presented in this paper is that monetary inflation is more reflected in stock prices than the CPI. It is demonstrated that by adjusting the CPI to reflect changes in stock prices, the gap between the trends of the money supply the CPI can be almost eliminated.</p> </abstract>ARTICLEtrue Spillover: Garch Analysis of S&P 500’s Influence on Precious Metals<abstract> <title style='display:none'>Abstract</title> <p>In this study, the volatility spillovers from the S&amp;P 500 to the precious metals (gold, silver and platinum) are investigated. By using the TGARCH and DCC GARCH model, the evidence is found that there are spillovers between the S&amp;P 500 and these global commodity markets. However, there are some differences in times of crises which have occurred during the observed 15 years (global economic crisis, debt crisis and corona crisis). In the case of gold, despite extreme volatility, there is no clear evidence of the specific influence of the crises. In contrast, silver and platinum showed clearer situations, both demonstrating significant increases in correlation with the S&amp;P 500 index during global economic crises.</p> </abstract>ARTICLEtrue of the Transparency Index of the Central Banks of the Western Balkan Countries<abstract> <title style='display:none'>Abstract</title> <p>Transparency in the work of central banks has become one of the key features of monetary policy. Because of this, many economists have diverted to finding the most suitable way to measure it. Although a unique method of measurement has yet to be achieved, there are various studies in the literature that deal with the calculation of the transparency index of central banks. Most studies have focused on measuring transparency of the largest central banks, while countries of the Western Balkans have been neglected. In the literature, there are no studies related to the analysis and measurement of transparency of the central banks in the Western Balkan countries. Starting from the index calculated by Eiffinger &amp; Geraats, this paper aims to calculate the transparency index for five central banks: the Central Bank of Montenegro, the Croatian National Bank, the Central Bank of Bosnia and Herzegovina, the National Bank of the Republic of North Macedonia, and the Bank of Albania.</p> </abstract>ARTICLEtrue Responsibility of the Financial Sector in the Information and Network Economy: The Example of Systemically Important Banks in Ukraine and Comparison With Banks in Other Countries of the World<abstract> <title style='display:none'>Abstract</title> <p>The article examines the problem of increasing social responsibility of the financial sector on the example of systemically important banks that operate in the modern information and network economy under conditions of uncertainty. A comparative analysis of dimensions of social responsibility of banks in different countries of the world was carried out. Based on the obtained results, the importance of social responsibility of banking structures for a wide range of stakeholders and thus for stable and successful operation of banks in the economics of information and uncertainty was confirmed. The general purpose of the study is to develop, test and suggest a comprehensive methodology for monitoring and assessing the level of social responsibility of the financial sector on the example of Ukrainian banks in conditions of uncertainty and recognizing gaps between the actual level and the desired, maximally high state of social responsibility. In our research, we considered social responsibility as a key direction towards achieving and harmonizing the strategic goals of financial institutions. The article focuses on the development of practical measures to monitor public opinions and assess the level of social responsibility of financial institutions. The research offers the following directions: 1) A comparative analysis of data for systemically important banks in Ukraine and other world countries regarding social responsibility; 2) determination of factors that influence the activity of the banking sector; 3) determination of question-indicators applied to the level of social responsibility of banks; 4) analysis of public opinion on the level of social responsibility of banks; 5) analysis of gaps in assessments of the level of social responsibility on the example of systemically important banks of Ukraine. The study involved the methods of statistical research and expert evaluations that made it possible to suggest a methodology for determining the level of social responsibility of financial institutions on the example of systemically important banks. Higher expectations from social responsibility of banks on the part of society were also revealed. The suggested methodology involves analyzing gaps between assessments by stakeholders and the desired level of social responsibility of banks in evaluating the level of compliance with social responsibility. A comparison of the average score of the public assessment with the highest level of social responsibility of banks is visualized. The directions for improving the social responsibility policy are outlined on the example of systemically important banks in Ukraine on the basis of a comparative analysis and taking into account various experiences around the world.</p> </abstract>ARTICLEtrue Asset Holdings and Banking Profitability: Evidence from South Asia<abstract> <title style='display:none'>Abstract</title> <p>Ensuring liquidity is critical for the functioning of banks. This study investigates the functional form of bank profitability and liquid asset holdings. We test for an inverted Kuznets curve-shaped quadratic polynomial relationship using generalized least square regression on an unbalanced quarterly dataset of Islamic and conventional banks of South Asia from 2016 to 2021. The study finds that profitability and liquid asset holdings have a concave nonlinear relationship suggesting a profit-maximizing level of liquidity. However, Islamic banks are less nonlinear than conventional banks, suggesting that their profitability is less responsive to changes in liquid asset holdings and needs more liquid assets to maximize profitability. Additionally, we find that the optimal level of liquidity to maximize profitability fell during Covid-19 as the relationship became more nonlinear. The study provides evidence of unique liquid management requirements for different types of banks based on how bank profitability response differs across different types of banks. The development of a one-fit-all liquidity management framework as in the case of the Basel III liquidity risk framework may not be appropriate. From a policy standpoint, the Basel III liquidity risk framework needs to be tailored especially in the context of Islamic banks.</p> </abstract>ARTICLEtrue Side Effects of Macroprudential Policies on Economic Performance in the Arab Region<abstract> <title style='display:none'>Abstract</title> <p>Macroprudential policy mainly aims to enhance financial stability and reduce the possibility of costly financial crises. However, to achieve this, macroprudential policy decisions may have some unintended side effects on economic growth. The paper provides an empirical framework for investigating potential side effects of macroprudential policy tools in developing countries. The results show that macroprudential policy decisions may lead to a decline in economic growth in developing countries, but the depth and efficiency of the financial sector may interact with macroprudential policy decisions to support economic environment stability. In the Arab region, the results differ compared to other developing countries, as the macroprudential policy interventions have a positive impact on economic growth, especially for the macroprudential tools that aim to enhance the resilience of the banking sector, while there is no effect of the cyclical macroprudential tools on economic growth.</p> </abstract>ARTICLEtrue Green Central Bank Index<abstract> <title style='display:none'>Abstract</title> <p>Climate change is one of the biggest risks to the global financial system and to the economies of perhaps every nation upon this planet. Central banks could play a prominent role in protecting us from this economic upheaval. This paper develops an objective Green Central Bank Index. The index is constructed by identifying nine distinct policy tools which central banks can deploy to further their countries’ climate resilience. Central banks can be graded against each of these areas using publicly available information, and the grades combined into an index using appropriate weights. We can therefore measure the intensity with which individual central banks engage with the green agenda and compare to their peers. We apply our Green CB Index to thirteen of the largest and most developed economies in the world. We identify three distinct groups of countries: leaders in climate change who actively use the central banks power and influence to encourage their economies to become sustainable; a second set of countries who either publicly announce their policies to reduce financial risks from climate change but are yet to deploy their full arsenal in support of climate, or the reverse – keeping a low public profile but nonetheless discretely using the position of the central bank to further climate goals; and a final group of countries who are yet to prioritise climate issues. The Index highlights the differing policy challenges facing these three separate central bank groups.</p> </abstract>ARTICLEtrue Borrowers and Mortgage Type: Implications for Monetary Policy Leaning against the Wind<abstract> <title style='display:none'>Abstract</title> <p>Leaning against the wind of credit booms is a monetary policy that is tighter than what is consistent with standard inflation targeting. This way the central bank tries to address excessive household debt. While the merits of such policy have been analysed, I argue that there are two dimensions that have been overlooked but are crucial: (i) ability of borrowers to freely adjust outstanding debt (refinancing) and (ii) dominant mortgage type in the economy (fixed or adjustable rate). I answer the research question using a standard macroeconomic model extended for the presence of borrowers who consume all their disposable income (hand-to-mouth) net of payments on long-term mortgage. I find that the optimal simple policy rule significantly depends on the ability to adjust debt and on mortgage type. Policy prescriptions based on models not accounting for these realistic features may lead to wrong monetary decisions.</p> </abstract>ARTICLEtrue Impact of Energy on Climate and Economic Stability: Forecast for Serbia<abstract> <title style='display:none'>Abstract</title> <p>In the conditions of modern business environment of energy companies, studies of their impact on environmental protection are becoming increasingly important. The growing concern at the macro level of the resulting climate change due to energy production is justified. The ecological component in the business of energy entities is becoming a priority for the sustainable development of energy, and therefore must be thoroughly examined. The focus of this paper is to determine the impact of energy on climate change through the emission of Greenhouse Gases on the example of the Republic of Serbia. The paper also examines the long-term interdependence between key economic and energy indicators at the national level. The IPAT/Kaya identity was used for research purposes and three alternative scenarios of energy development in Serbia until year 2050 were developed. The obtained results point to different possibilities for the development of energy and its impact on climate. The importance of promoting renewable energy sources for environmental protection and overall economic stability is also pointed out through proposed alternative scenarios. Significant results were obtained for the predicted level of energy intensity for the observed period, suggesting how the development of energy in Serbia could affect economic stability until 2050.</p> </abstract>ARTICLEtrue Options for CBDC<abstract> <title style='display:none'>Abstract</title> <p>This paper provides an overview of the distributed ledger technology (DLT) options available to central banks for issuing central bank digital currency (CBDC). We discuss the main requirements that a DLT solution must fulfill and analyze the various structures for implementation offered by DLT — public, permissioned and private — and the implications that each has for the central bank and the existing financial system. While a CBDC built on an open, permissionless system would provide the full functionality offered by DLT, it is also far more disruptive to the existing financial system and consequently requires more new infrastructure on the part of the central bank.</p> </abstract>ARTICLEtrue Financial Markets Allow the Independence of Central Banks?<abstract> <title style='display:none'>Abstract</title> <p>The research work presented below addresses the possible concern of central bank independence through the development and application of econometric models. The complexity of the modelling has allowed a step further in corroborating that financial independence is not only linked to the appointments and pressures of the states regarding their economic policy but also the role that financial markets play by acting as a force that dictates and contaminates decisions of central banks. In this sense, the paper proposes a theoretical basis for recommendations on the application of the new monetary policy in a more complex environment, both due to the pandemic that was sweeping the world and the bulky debt that countries are carrying. The paper concludes with a series of measures and suggestions that could be addressed by monetary policymakers given the necessary but not easy normalization of monetary policy required at the global level.</p> </abstract>ARTICLEtrue Bank Digital Currency Adoption Challenges, Solutions, and a Sentiment Analysis<abstract> <title style='display:none'>Abstract</title> <p>We identify some factors limiting CBDC adoption and some of the possible solutions. We also assess the media sentiment about central bank digital currencies in general as well as about locally issued CBDCs. We find that there is a high correlation between the negative media sentiment about CBDCs in general and locally issued CBDCs. We also find that the negative media sentiment about the eNaira, DCash and Sand Dollar was caused by the existing negative media sentiment about CBDCs in general. However, a positive media sentiment about the eNaira, DCash and Sand Dollar was not caused by the existing positive media sentiment about CBDC in general.</p> </abstract>ARTICLEtrue National Bank: Is the Recent Loss a Threat to Monetary Policy? A Research Note<abstract> <title style='display:none'>Abstract</title> <p>The Swiss National Bank (SNB) has announced it will refrain from profit distribution in 2022 owing to the accumulation of a huge financial loss. In this paper we examine key determinants of the SNB’s loss and shed light on its implications to monetary policy pursuit. In particular, we show that different accounting principles yield different results concerning the equity position of a central bank’s balance sheet, yet not affecting the ability to run monetary policy.</p> </abstract>ARTICLEtrue Fragility in Developing Countries: An Analysis in the Context of Monetary Policy and Central Bank Independence<abstract> <title style='display:none'>Abstract</title> <p>This study aims to examine the effects of monetary policies implemented by developed countries and central bank independence of developing countries on the financial fragility of developing countries. According to the findings, it was seen that the contractionary monetary policies implemented by the central banks of developed countries increase the financial fragility for both groups of countries, as do the change of central bank governors. However, the change in governors strengthens positive effects of contractionary monetary policies on the financial fragility.</p> </abstract>ARTICLEtrue Refinement of the Relationship Between Central Bank Independence, Inflation, and Income Inequality in Developing Countries<abstract> <title style='display:none'>Abstract</title> <p>This paper analyzes the impact on income inequality of a set of variables usually considered in the growth literature as potential growth determinants. There is evidence to suggest that unemployment and inflation are positively associated with income inequality; except for countries with central bank independence where a negative association exists between inflation and income inequality. The empirical evidence shows that income inequality increases when unemployment increases.</p> </abstract>ARTICLEtrue Policy Press Releases of 24 Inflation Targeting Central Banks – A Comparison of their Key Features and Complexity<abstract> <title style='display:none'>Abstract</title> <p>This paper describes the process of constructing a dataset of available online press releases related to monetary policy decisions published by central banks that have been pursuing a form of inflation targeting. A total of 3,807 documents were considered, as the review encompasses 24 central banks over the past 30 years. To prepare the dataset for text-mining analysis, a cleaning procedure has been performed, which is also presented in detail. The next step was to look at the readability of the documents in order to detect any patterns in its changes. We find that while there is a significant variation between central banks, there is no clear time trend in the readability of the monetary policy press releases, i.e. some central banks tend to have easier-to-read press releases than others, and this does not change with time. In turn, there is a weak indication that following the Global Financial Crisis outbreak and the European Sovereign Debt Crisis apogee, as well as at the time of withdrawing unconventional measures introduced in response to those two emergencies, press releases of advanced economy inflation targeters got temporarily harder-to-read. Overall, this paper can be viewed as a first attempt towards assessing qualitatively central banks’ transparency, with respect to a flagship communication tool of inflation targeters, namely their monetary policy press releases.</p> </abstract>ARTICLEtrue Policy Between Stability and Growth<abstract> <title style='display:none'>Abstract</title> <p>The global financial crisis and the coronavirus pandemic were marked by expansionary policies of key central banks in an attempt to stop the recession. The degree of expansiveness of monetary policy was unprecedented. As a result of expansionary policies, global inflation has been present since 2021. The change in the macroeconomic environment has led to a turnaround in monetary policy pursuits and a rapid rise in reference interest rates. The FED reacted much faster than the ECB and that is why inflation was lower in the USA compared to the euro area. All announcements for 2023 point to the continuation of contractionary policies.</p> <p>The subject of the paper’s analysis is the monetary policy of key central banks, as well as expectations for the next period. The paper raises the question of whether central banks have gone from one extreme of overly expansionary monetary policy to the other extreme of overly contractionary monetary policy and whether such policies carry the risk of reoccurrence of recession. The paper also contains recommendations for improving existing monetary policy regimes, as well as for creating a completely new monetary policy regime which will be based on two nominal anchors.</p> </abstract>ARTICLEtrue the Banking Sector of Bosnia and Herzegovina: An Analysis of Financial Indicators through the MEREC and MARCOS Methods<abstract> <title style='display:none'>Abstract</title> <p>The banking sector assumes a pivotal role in the economic development of nations. The assessment of financial indicators pertaining to banks holds fundamental importance in the evaluation of bank stability and sustainability. This research employs the MEREC (Method based on the Removal Effects of Criteria) and MARCOS (Measurement of Alternatives and Ranking according to COmpromise Solution) methodologies to delve deeper into the financial landscape of the banking sector in Bosnia and Herzegovina (BiH). Specifically, the objective is to rank banks according to their financial indicators, utilizing financial data from the year 2022. The MEREC method is applied to gauge the significance of financial indicators and ascertain their respective weights, while the MARCOS method is employed to rank banks within BiH based on their financial indicators. The examination of financial indicators within the BiH banking sector, facilitated by the MEREC and MARCOS methodologies, yields a more comprehensive understanding of the sector’s present condition. Limitations of this research, which primarily stem from its reliance on available financial data and predefined methodologies, lies within limited consideration for external factors. To provide a broader contextual perspective, the inclusion of additional financial indicators and comparative analyses with banking sectors of other nations would be imperative. The findings of this research reveal that Raiffeisen Bank exhibits the most favourable financial indicators and demonstrates the highest level of efficiency within this context. Consequently, this research offers insights into identifying exemplary banks that can serve as models for enhancing the performance of others.</p> </abstract>ARTICLEtrue