rss_2.0Sciendo RSS Feed for Journal of Central Banking Theory and Practicehttps://sciendo.com/journal/JCBTPhttps://www.sciendo.comhttps://sciendo-parsed.s3.eu-central-1.amazonaws.com/64720bce215d2f6c89db9f5b/cover-image.jpghttps://sciendo.com/journal/JCBTP140216https://sciendo.com/article/10.2478/jcbtp-2025-0010<abstract><title style='display:none'>Abstract</title> <p>The Quantity Theory of Money claims to provide one of the few long-run guides to economic policy by providing specific numbers to characterise the correlation between money growth and inflation. Acceptance of the Quantity Theory has been greatly helped by the claim, propounded most effectively by Robert Lucas, that the evidence for the central claims of the Quantity Theory can be corroborated by ‘a theoretical’ examination of the data. We reexamine this empirical claim in two ways. First, we show how, for both theoretical and statistical reasons, the facts accepted by Lucas lack the force he attributes to them. Secondly, we then examine the data from 102 countries in three parts: first as an aggregate, then again across five regions, and finally in a sample of specific countries. There is a positive relationship between money supply growth and inflation, but the correlation is not the proportional one predicted by the Quantity Theory - either for the full sample or any of the sub-samples. These results are inconsistent with the primary empirical claims made for the general applicability of the Quantity Theory.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2025-00102025-01-20T00:00:00.000+00:00https://sciendo.com/article/10.2478/jcbtp-2025-0009<abstract><title style='display:none'>Abstract</title> <p>This paper reflects on the experience of the Federal Reserve Bank (Fed) related to its policy of Quantitative Tightening (QT) and spillover effect on BRICS (Brazil, Russia, India, China, South-Africa) and other selected emerging market economies. We have chosen a sample of countries to examine the impact of the Fed’s QT on 10-year government bond yields, between the period of 2012-2022. The result proves that the highest correlation between the long-end yields of the United States and the selected EM has materialized during the first QT (QT1) operation by the Fed between 2017 and 2019 for Peru, Brazil, India and Hungary. We expect the same behaviour of long-end yields during the second QT (QT2) policy for the selected emerging market countries.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2025-00092025-01-20T00:00:00.000+00:00https://sciendo.com/article/10.2478/jcbtp-2025-0004<abstract><title style='display:none'>Abstract</title> <p>The motivations and benefits of issuing a central bank digital currency (CBDC) are well known but the challenges faced by central banks in developing and issuing a CBDC have received less attention. To fill this gap, this article provides a succinct understanding of how politics hinder CBDC development. It presents the common arguments used by politicians to stifle CBDC development. It also suggests some ways to reduce political resistance towards CBDC development.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2025-00042025-01-20T00:00:00.000+00:00https://sciendo.com/article/10.2478/jcbtp-2025-0002<abstract><title style='display:none'>Abstract</title> <p>The evidence of financial globalization and the rapid and uniform contagion that it entails among the different international financial markets, have been exposed after the 2008 crisis outbreak, as well as the different chapters of financial stress that have been experienced since then, such as the sovereign debt crisis, the Brexit event, the COVID-19 pandemic, and the war in Ukraine. Despite these specific episodes, volatility in the post-subprime crisis period has been low in historical terms due, among many other factors, to the monetary policies of central banks which, with their increases in the money supply and low interest rates, have led to a change of substance and form in the financial markets, not only at a national level but also at a supranational level. However, after the COVID-19 pandemic and the outbreak of the war in Ukraine, inflation appeared abruptly putting central banks in an uncomfortable situation, which have been forced to raise interest rates quickly and forcefully. In this paper, an estimation and quantification of the pre-pandemic and post-pandemic volatility thresholds is carried out for each of the main stock market indices to estimate the changes in these borders that affect and determine different degrees of financial contagion. Additionally, this study may determine the potential causal relationship between the change in the balance sheets of the main central banks and market volatility. If such relationships exist, it could un-doubtedly mark a before and after in the implementation of monetary policies by these banking entities.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2025-00022025-01-20T00:00:00.000+00:00https://sciendo.com/article/10.2478/jcbtp-2025-0007<abstract><title style='display:none'>Abstract</title> <p>This paper examines the role of foreign exchange reserve demand in mitigating inflationary pressures resulting from money supply growth in reserve currency issuing states (RCISs). Despite recurrent substantial monetary expansions in RCISs in response to recessions such as the 2000 Post-Dot Com Bubble, the 2008 Great Recession, and the 2020 Covid-19 pandemic-induced recession, RCISs have not experienced commensurate inflation. Within the framework of the Quantity Theory of Money (QTM), factors such as economic slowdown and reduction in the velocity of money may contribute to dampening inflationary pressure that stems from money supply growth; however, GDP slowdowns have not explained the disproportionally low inflation in RCISs compared to their monetary expansions, and the impact of reduction in the velocity on lowering inflation remains unclear due to limited real-world data. In contrast, there is reliable data for foreign exchange reserve demand, characterized by currency exports in exchange for real economic resources of equivalent value. By analyzing the relationship between money supply growth, foreign exchange reserve demand, and inflation within the framework of QTM, this paper introduces the foreign exchange reserve demand-inflation buffer hypothesis. The theoretical and empirical investigation sheds light on the role of foreign exchange reserve demand in moderating inflationary pressures in RCISs.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2025-00072025-01-20T00:00:00.000+00:00https://sciendo.com/article/10.2478/jcbtp-2025-0001<abstract><title style='display:none'>Abstract</title> <p>The traditional approach to monetary policy, which relied on one instrument to achieve a single goal, has proven ineffective during recent periods of global instability. In response to the challenges that this traditional framework could not address, non-standard monetary policy instruments have emerged. While they have somewhat alleviated problems, they cannot be considered a solution, as their long-term application could lead to the emergence of several other imbalances. Therefore, this paper explores a new framework for monetary policy based on two nominal anchors. The analysis focuses on two monetary regimes. The first is based on a modification of the inflation targeting regime, which would additionally include a nominal anchor in the form of an exchange rate. This is not a completely new regime, as some countries have already used an implicit exchange rate target alongside an inflation target. The second regime under consideration is entirely new and would be based on a monetary target and an interest rate target.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2025-00012025-01-20T00:00:00.000+00:00https://sciendo.com/article/10.2478/jcbtp-2025-0003<abstract><title style='display:none'>Abstract</title> <p>This paper analyzes the unanalized topic in macroeconomic (monetary) politics, which is the emergence of the currency crisis as a consequence of targeting inflation. Many central banks adopted inflation targeting under a pressure from the IMF. Sudden depreciation of exchange rate which results from a fall of foreign exchange reserves to a critically low level (below an optimal level) leads to currency crisis due speculative attack. The most widely used model in the decision of creating process of monetary policy in inflation targeting regime is the macroeconomic model of a small open economy from the group New Keynesian model.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2025-00032025-01-20T00:00:00.000+00:00https://sciendo.com/article/10.2478/jcbtp-2025-0006<abstract><title style='display:none'>Abstract</title> <p>Over the last decade, monetary policy frameworks and instruments have undergone significant modifications. In this regard, Central Bank Digital Currency (CBDC) has emerged as a new money invention to offset the advancement of cryptocurrencies and maintain central ability to distribute cash as a common good. Thus, the purpose of this study is to examine how the adoption of CBDC can change monetary policy transmission mechanism. CBDC can disintermediate the conventional banking industry and produce inflationary pressure through the money supply unless central banks adopt suitable regulatory frameworks to facilitate a seamless transition. On the other hand, a well-structured CBDC can encourage increased financial inclusion, resulting in a favourable outcome on the interest rate pass-through of monetary policy. Meanwhile, since interest-bearing CBDC can affect bank reserves, deposit rates and lending policies, it can also have an impact on the credit channel.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2025-00062025-01-20T00:00:00.000+00:00https://sciendo.com/article/10.2478/jcbtp-2025-0005<abstract><title style='display:none'>Abstract</title> <p>Climate change indicators are a measurable and acceptable method of collecting evidence of changes in the Earth’s climate throughout time. Thus, climate change indicators capture the total impact of climate change on all economic activities and their participants. These indicators are used by policymakers, researchers, and scientists to better understand the effects of climate change, including trends and patterns. Adequate understanding and monitoring of these indicators are critical for developing successful climate change mitigation and adaptation strategies. Climate change indicators are examined by combining data collection, measurement, and analysis with scientific observations. These analyses need the use of complex statistical techniques and models, as well as the participation of scientists with varying specialties, such as ecologists, climatologists, and meteorologists. The purpose of collecting climate change indicators is to understand current and future climatic trends, as well as to provide policymakers with trustworthy information for developing climate change adaptation strategies.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2025-00052025-01-20T00:00:00.000+00:00https://sciendo.com/article/10.2478/jcbtp-2025-0008<abstract><title style='display:none'>Abstract</title> <p>Digitalization of the global economy, catalysed by advancements in blockchain technology and the rise of cryptocurrencies, has led to a paradigm shift in the monetary landscape. Central Bank Digital Currencies (CBDCs) have emerged as a transformative force with the potential to revolutionize financial systems and enhance stability. CBDCs represent a pivotal development in the evolution of monetary systems, holding the potential to enhance financial stability across various dimensions. The transformational impact of CBDCs on the banking landscape, whether through direct customer distribution or intermediation via commercial banks, underscores the need for thoughtful design and consideration of their distribution method. Careful planning can mitigate risks associated with deposit outflows, ensuring financial stability. This paper examines the multifaceted impact of CBDCs on financial stability, focusing on key dimensions such as their role in reshaping the banking sector, mitigating bank runs, influencing monetary policy, and addressing trust and privacy concerns. We discuss the importance of striking a balance between privacy and transparency. Through a comprehensive exploration of these dimensions, we assess how CBDCs can contribute positively to financial stability and provide a roadmap for their effective implementation.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2025-00082025-01-20T00:00:00.000+00:00https://sciendo.com/article/10.2478/jcbtp-2024-0024<abstract> <title style='display:none'>Abstract</title> <p>This study examines the impacts of macroeconomic policies (i.e. fiscal policy through government consumption spending and total tax revenue, and monetary policy through broad money and real interest rate) along with other regressors such as inflation, Gross Domestic Product (GDP) per capita, remittances, exchange rate, and financial development on income distribution in four Central Asian countries from 1995 to 2020. After conducting unit root tests, the Autoregressive Distributed Lag (ARDL)/Pooled Mean Group (PMG) approach was implemented for empirical analysis. The results show that both fiscal and monetary policies have positive and negative effects on income inequality. Moreover, inflation is found to increase income inequality, while financial development, higher levels of per capita income, and foreign remittances decrease inequality in the panel and individual country analyses. These findings suggest that coordinated policies, along with increased remittances and financial sector development, are needed to reduce income inequality.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2024-00242024-09-19T00:00:00.000+00:00https://sciendo.com/article/10.2478/jcbtp-2024-0023<abstract> <title style='display:none'>Abstract</title> <p>This article analyses the impact of minimum bank capital on the financing of economies of the Economic and Monetary Community of Central Africa over the period 1998-2020, based on data from the Bank of Central African States and the annual reports and bulletins of the Banking Commission of Central Africa. To do this, we analysed the impact of minimum bank capital requirements on the real cost of credit, the term structure of credit and on economic agents with financing needs. We used a panel VAR specification estimated using the Generalised Method of Moments and impulse response function analysis based on Monte Carlo simulations to arrive at two main results: minimum bank capital reduces the cost of credit and increases the economy’s credit level. The conclusion is that regulators would benefit from encouraging credit institutions to increase the current level of bank capital in order to benefit from the positive effects of minimum bank capital.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2024-00232024-09-19T00:00:00.000+00:00https://sciendo.com/article/10.2478/jcbtp-2024-0030<abstract> <title style='display:none'>Abstract</title> <p>This research investigated the influence of central bank transparency on credit expansion in 15 Asian nations (both advanced and emerging) during the period from 2000 to 2019. Panel OLS and Dynamic GMM estimation are used to identify the impact of central bank transparency on the credit spread. The findings indicate that central bank transparency plays a crucial role in lowering credit spreads and facilitating credit expansion. In addition, the influence of central bank transparency on credit spreads has a greater effect in emerging economies than in developed economies, highlighting the significance of transparency for tackling information asymmetry within the credit system. Overall, the research highlights the significance of central bank independence in reducing knowledge disparities and promoting a more transparent credit environment.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2024-00302024-09-19T00:00:00.000+00:00https://sciendo.com/article/10.2478/jcbtp-2024-0022<abstract> <title style='display:none'>Abstract</title> <p>Bangladesh adopted floating exchange rate system in May 2003. After that regime change, the country has faced a relatively higher volatility of nominal exchange rate than previous regime. Economic theories on volatility suggests that trade flow is adversely affected in response of fluctuation of the exchange rate. Bangladesh is the second largest readymade garments (RMG) exporter in the world and it is the main export product of the country. In this research, Difference in Difference (DID) model introduced by Card and Krueger (1994) is used for the yearly data of 1983 to 2022 to discern this impact of volatility on the RMG exports of Bangladesh. The result shows that RMG exports is negatively affected due to the exchange rate volatility and the estimated figure shows that on Bangladesh‘s average RMG exports has been lessened to the USA and EU regions by US$1.04 billion and 1.02 billion, respectively, owing to the volatility incurred by the regime change. Therefore, as volatility obviously has hindered RMG exports, the central bank of Bangladesh should stay alert to avoid high volatility of the nominal exchange rate to keep the RMG exports flow uninterrupted.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2024-00222024-09-19T00:00:00.000+00:00https://sciendo.com/article/10.2478/jcbtp-2024-0026<abstract> <title style='display:none'>Abstract</title> <p>This paper investigates the nexus between poverty and central bank independence in developing countries. The study examines data from up to 35 developing countries from 2000 to 2018. Using the GMM dynamic panel data method, the study finds that de jure central bank independence is more robust than de facto in reducing inflation. However, the effect of de facto central bank independence is significant in reducing poverty, while de jure central bank independence is not. The paper concludes that central bank independence may play a role in managing inflation in developing countries with high inflation and could relatively contribute to poverty reduction in these countries.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2024-00262024-09-19T00:00:00.000+00:00https://sciendo.com/article/10.2478/jcbtp-2024-0025<abstract> <title style='display:none'>Abstract</title> <p>This paper focuses on the first link of the monetary transmission mechanism – interest rate channel. It forks on two subchannels: credit vein and deposit vein. We will investigate the second one, i.e. the impact of the discount (also key, reference) rate of a central bank on the deposit policy of commercial banks. Deposit channel is a very rarely treated as a separate line of the monetary policy from the credit channel. On the basis of VAR analysis of monthly data over several-years period on the banking system of Ukraine, Poland, and Montenegro we found out a tendency of the discount rate to impact banks’ deposit rates changes with some lag of time. The tightest liaison between these indicators is observed during the periods of discount rate stability and sloping down. However, sensitivity of banks‘ deposit rates is lost when the discount rate is rapidly increased during the periods of restrictive monetary policy. It was defined that the essential reason for such picture is an extra liquidity of the banking system. On the one hand, it symbolizes the soundness of banking system, while from the other it makes more difficult for a central bank policy to absorb extra liquidity from the market to reduce pressure on prices. The paper contains some thoughts for increasing effectiveness of restrictive monetary policy in such periods.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2024-00252024-09-19T00:00:00.000+00:00https://sciendo.com/article/10.2478/jcbtp-2024-0028<abstract> <title style='display:none'>Abstract</title> <p>This paper empirically examines the effect of the central banks independence on exchange rate volatility by using a large data-set for the E7 (7 emerging countries) covering the period 1998-2017. This paper applies the time-varying panel causality analysis to obtain country-based results. The results show that the policy design, with relatively independent central banks, provides supportive results for macroeconomic stability. It is concluded that policies focusing on current problems by ignoring macroeconomic stability, such as the 2008 crisis, have eliminated the relationship between bank independence and stability.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2024-00282024-09-19T00:00:00.000+00:00https://sciendo.com/article/10.2478/jcbtp-2024-0029<abstract> <title style='display:none'>Abstract</title> <p>Recent empirical research finds little or mixed evidence in favour of a negative relationship between central bank independence and inflation. In this paper, we construct a theory where the relationship between inflation and central bank independence depends on the extent of informational asymmetry regarding the government’s efficiency in its provision of public goods and also provide some empirical support for it. In the theoretical part of the paper, we introduce the degree of central bank independence as a fixed cost that is paid when the government (whose objective is to minimize output gap via inflation or costly fiscal expansion) rejects the monetary policy proposal of the central bank (which aims to minimize inflation) and determines both fiscal and monetary policies itself. Government efficiency in providing public goods, i.e. the cost of fiscal expansion, is the private information and the source of informational asymmetry in our model. In this setting, increasing the fixed cost of rejecting the central bank’s offer creates two opposite effects on inflation: delegation effect and seesaw effect (since fiscal and monetary expansion are substitutes for the government, now it relies more on fiscal expansion). We show that while the magnitude of the delegation effect is equal to or higher than the seesaw effect, the magnitude of each effect depends on the current level of the fixed cost. If the current fixed cost is not high enough, then a small improvement in central bank independence creates a relatively smaller delegation effect compared to the case where fixed cost is high enough and both efficient and inefficient government types accept the offer.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2024-00292024-09-19T00:00:00.000+00:00https://sciendo.com/article/10.2478/jcbtp-2024-0021<abstract> <title style='display:none'>Abstract</title> <p>Technological development particularly boosted by artificial intelligence (AI) has substantial potential to transform many aspects of human lives and the way doing businesses. On the one side, it can offer opportunities, while on the other brings challenges and increases risks. Financial industry is considered the largest user of digital technologies and provider of innovative services. Therefore, it is strongly influenced by digital transformation and under constant threat of cyberattacks. In this paper, the authors are researching the opportunities and risks stemming from the application of AI and its macroeconomic and financial system impacts. The special attention is given to the challenges posed by financial technological development and AI to central banks as they have to adopt to the novel times dominated by electronic financial services and AI tools while at the same time stay persistently dedicated to achieving their key objectives of safeguarding monetary and financial stability as well as contributing to the stability of economic growth. Additionally, the invention of generative artificial intelligence (GenAI) has significantly influenced processes throughout numerous industries, including the financial sector, due to the ability to imitate human behaviour which has enabled computers to behave like humans. Hence, it is important to develop human-centric innovations where AI tools create benefits and serve people instead of replacing them. AI can deteriorate overall inequality so policymakers should act towards developing policies that will ensure AI is used for the good of people and provide benefits for them. The authors further draw attention to the necessity of adopting a robust regulatory framework and building strong and resilient institutions with developed systems for prevention of ever raising cyberattacks.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2024-00212024-09-19T00:00:00.000+00:00https://sciendo.com/article/10.2478/jcbtp-2024-0027<abstract> <title style='display:none'>Abstract</title> <p>This study utilizes the Analytic Hierarchy Process (AHP) in combination with the Technique for Order of Preference by Similarity to Ideal Solution (TOPSIS) and Grey Relational Analysis (GRA) models to thoroughly assess the performance of banks in China, India, Pakistan, and Thailand. The integrated results offer significant insights into the relative rankings of various banks in each country. In China, Bank of China Ltd (BOC) emerges as the top performer, setting a benchmark for others. Similarly, in India, the State Bank of India is consistently identified as the leading bank. The National Bank of Pakistan stands out as the top performer in Pakistan. In Thailand, despite minor deviations in results, Kasikornbank PCL (KBANK) consistently shows strong performance. The alignment of results between AHP-TOPSIS and AHP-GRA underscores the reliability of both models, providing stakeholders and decision-makers with a comprehensive understanding of bank performance. This enables them to identify benchmarks, leverage strengths, and address areas for improvement within each country’s banking sector.</p> </abstract>ARTICLEtruehttps://sciendo.com/article/10.2478/jcbtp-2024-00272024-09-19T00:00:00.000+00:00en-us-1