scholarly journals Another reason for non-neutrality of financial liquidity

2019 ◽  
Vol 66 (1) ◽  
pp. 41-50
Author(s):  
Jong-Eun Lee
Keyword(s):  
Theoretical Model ◽  
Interest Rate ◽  
Financial Market ◽  
Rate Of Return ◽  
Financial Policy ◽  
Real Economy ◽  
Rates Of Return ◽  
Price Stickiness ◽  
Financial Liquidity ◽  
Meaning Of Money

This paper reinterprets the non-neutrality of financial liquidity under a general equilibrium model with multiple financial liquidities, but without price stickiness. Non-neutrality opens the possibility of effective monetary or financial policy on the crisis-prone real economy and thus revisiting its nature is worthwhile. We find that models with only one asset and money limit our perspectives to see the nature of financial liquidities interacting with real economy. Departing from abstracting an economy with only one interest rate allows us to see the underlying reason of non-neutrality of financial liquidities, that is, industry-specific rates of return distinguishable from the representative rate of return. Without the assumption of price stickiness but with a wider frame of multiple liquidities, this paper offers another reason for non-neutrality of financial liquidity and naturally clarifies the meaning of money neutrality. We incorporate complicated reality of multiple financial liquidities in a theoretical model, which is a way of deepening our understanding of financial market.

scholarly journals A Theoretical Framework for Estimating the Rate of Return to a Pharmacy Education Anywhere

Pharmacy ◽  
2020 ◽  
Vol 8 (3) ◽  
pp. 162
Author(s):  
Manuel J. Carvajal ◽  
Ioana Popovici
Keyword(s):  
Human Capital ◽  
Theoretical Model ◽  
Pharmacy Education ◽  
Rate Of Return ◽  
Costs And Benefits ◽  
Rates Of Return ◽  
Trade Off ◽  
Education Investment ◽  
The Individual ◽  
Benefits And Costs

Undertaking a pharmacy education is an investment in human capital. Candidates trade off present versus future costs and benefits. They make this investment with the expectation of earning enough income throughout their worklives to make their undertaking financially worthwhile. Whether or not this occurs is determined by the rate of return. The aim of the current study was to construct a theoretical model to estimate the rate of return to a pharmacy education investment. Specifications for model assumptions, inputs, and outputs are discussed. The outputs are the rates of return, the inputs are the costs and benefits of a pharmacy education, and the assumptions illustrate the circumstances of the individual or group for whom the model is built. The rate of return is the annual percentage that equates the streams of benefits and costs over the investment span. The higher the value of the rate of return to a pharmacy education is, the more profitable is the investment. This theoretical model may be used to estimate the financial viability of pharmacy and compare it to the viability of other professions or to the viability of pharmacy among various locations.

Modeling debt choice in agriculture: the effect of endogenous asset values

2017 ◽  
Vol 77 (1) ◽  
pp. 95-110 ◽  
Author(s):  
Maria Bampasidou ◽  
Ashok K. Mishra ◽  
Charles B. Moss
Keyword(s):  
Panel Data ◽  
Interest Rate ◽  
Agricultural Sector ◽  
Macroeconomic Policy ◽  
Rate Of Return ◽  
Data Set ◽  
Content Type ◽  
Asset Values ◽  
The Usa ◽  
Non Parametric

Purpose The purpose of this paper is to investigate the endogeneity of asset values and how it relates to farm financial stress in US agriculture. The authors conceptualize an implied measure of farm financial stress as a function of debt position. The authors posit that there are variations in the asset values that are beyond the farmer’s control and therefore have implications on farm debt. Design/methodology/approach The framework recognizes the endogeneity of return on assets (ROA). It uses a non-parametric technique to approximate the variance of expected ROA (VEROA). The authors model the rate of return on agricultural assets and interest rate with a formulation that focuses on macroeconomic policy. Further, the authors use a dynamic balanced panel data set from 1960 to 2011 for 15 US agricultural states from the Agricultural Resource Management Survey, and information from traditional state-level financial statements. Findings Estimation of linear dynamic debt panel data models accounting for the endogeneity of ROA and VEROA is a challenging task. Estimated variances are unstable. Hence, the authors focus on variance specification that uses the residuals squared from the ARIMA specification and non-parametric estimators. Arellano-Bover/Blundell-Bond generalized method of moments estimation procedures, although may be biased, show that VEROA has a negative and significant effect on the total amount of debt in the agricultural sector. Research limitations/implications The instruments used in this analysis are lagged regressors which may be weakly correlated with the relevant first-order condition, hence not properly identifying the parameters of interest. Future research could include the identification of better instruments, potentially use of sequential moment conditions. Originality/value Unlike previous study, the authors use non-parametric approximation of VEROA. The authors model the rate of return on agricultural assets and interest rate with a formulation that focuses on macroeconomic policy. Second, the authors make use of a large dynamic balanced panel data set from 1960 to 2011 for 15 agricultural states in the USA. To the best of the authors’ knowledge, this study is one of the few that provides evidence on risk-balancing behavior at the agricultural sector level, of the USA.

scholarly journals Heterogeneity in the Relationship Between NPLs and Real Economy: Evidence from the Mongolian Banking System

2021 ◽  
Vol 10 (2) ◽  
pp. 133-155
Author(s):  
Enkhzaya Demid
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Manufacturing Sector ◽  
Banking System ◽  
Real Economy ◽  
Economic Sectors ◽  
Macroeconomic Shocks ◽  
Credit Quality ◽  
Loan Supply ◽  
The Relationship

Abstract The paper analyses the relationship between the banks’ credit risk and macroeconomic conditions by addressing the following questions; (i) How are macroeconomic shocks transmitted to lending risk depending on the ban-specific features? (ii) Are the effects of macroeconomic shocks different across the loan portfolios in various economic sectors? Unlike the common assumption in the literature, the empirical analysis considers banks’ heterogeneity and diversification across borrowers. It employs heterogeneous panel SVARs and standard SVAR models on a dataset from 2002. Q1 to 2019.Q1. The results suggest that the deterioration in credit quality is affected by both macroeconomic and bank-specific factors, with substantial heterogeneity in the magnitudes and timing in terms of the type of loans in various business sectors and bank characteristics. In particular, we find strong evidence of cyclical sensitivity of loan quality, and about 1/4 of banks’ NPLs increases stronger in response to the shocks to growth, exchange rate, interest rate, and profitability. The highly profitable banks tend to less engage in excessive risk-taking, resulting in lower NPLs, whereas the relation of asset size to NPLs is not significant for the sample. A growth shock plays a prominent role in explaining the variation of NPLs for the trade and mining sectors. Similarly, the loan supply shock is the main determinant for the construction sector’s NPLs, while the exchange rate shock is the most responsible for the manufacturing sector. The interest rate shock and exchange rate shock are the most effective factors on NPLs of consumer loans. Finally, the feedback effect of NPLs shows that deterioration of credit quality slows down economic growth.

scholarly journals Banking system stability in the context of the relationship between banks and the state

2020 ◽  
Vol 3 (45) ◽  
pp. 155-166
Author(s):  
V. O. Kornіvska ◽  
Keyword(s):  
Banking System ◽  
Legal Framework ◽  
The State ◽  
System Stability ◽  
Banking Union ◽  
Real Economy ◽  
The Real ◽  
Euro Zone ◽  
European Experience ◽  
Financial Liquidity

The article presents the results of a study of the banking system stability under the conditions of increased financial support from the state during the financial and economic destabilization. The banking system stability in the euro zone has been analyzed to assess the prospects for monetary and financial development in Ukraine. The European experience proves that strengthening relations between banks and the state amidst the financialization process is harmful. The author of the article treats this relationship as a closed-loop problem of public and financial liquidity circulation, which leads to financial bleeding in the real economy and destabilization of the financial system, as a whole. This problem requires to be fixed by reducing banking transactions with government securities. The article gives facts proving that the search for solutions to this problem made in the European financial space has become one of the factors of financial and institutional transformations in the euro zone and the EU, in general, and has led to the creation of a banking union. The newly introduced legal framework has manifested itself as unable to stimulate efficient financial distribution. It has also been demonstrated that due to the public and financial liquidity circulation the banking system becomes subject to profound redesigning, thus losing its ability to conduct effective financial distribution in the real sector of economy.

scholarly journals Does the Interest Rate Form Business Cycle?

2019 ◽  
Vol 4 (1) ◽  
pp. 29-34
Author(s):  
Bijan Bidabad ◽  
Abul Hassan
Keyword(s):  
Interest Rate ◽  
Business Cycle ◽  
Interest Rates ◽  
Banking System ◽  
Real Economy ◽  
Short Term ◽  
The Usa ◽  
Rate Form ◽  
The Interest Rate

Dynamic structural behavior of depositor, bank and borrower and the role of banks in forming business cycle are investigated. We test the hypothesis that does banks behavior make oscillations in the economy through the interest rate. By dichotomizing banking activities into two markets of deposit and loan, we show that these two markets have non-synchronized structures, and this is why the money sector fluctuation starts. As a result, the fluctuation is transmitted to the real economy through saving and investment functions. Empirical results assert that in the USA, the banking system creates fluctuations in the money sector and real economy as well through short-term interest rates

scholarly journals Influence of Access To Finance On The Competitive Growth of SMEs in Lesotho.

2021 ◽  
Author(s):  
Donald Edes Osakpamwan Amadasun ◽  
Ashley T. Mutezo
Keyword(s):  
Financial Market ◽  
Developing Economies ◽  
Information Access ◽  
Support Service ◽  
Financial Information ◽  
Financial Policy ◽  
Competitive Growth ◽  
Access To Finance ◽  
Business Support ◽  
Funding Programs

Abstract Background: Access to finance is identified as one of the biggest problems faced by Small and Medium-Sized Enterprises (SMEs) in most developing economies. Consequently, access to finance has been identified as a dominant constraint facing the SMEs sector in Lesotho. This paper established the factors of access to finance that influence the competitive growth of the SME sector in Lesotho. The factors addressed include financial information access, bank and business support services, the structure of banks and collateral requirements by the financial sector. Findings: The results from our analysis indicated that there is a relationship between independent variables of financial information access, Bank and business support service, the structure of banks and the collateral requirement by commercial banks and such influence SMEs capacity to attain competitive growth in Lesotho. In addition, the results indicated that Basotho entrepreneurs and managers see the predictors as critical factors of access to finance that constrained most enterprises access to needed credit from banks and such influence SMEs capacity to attain competitive growth in Lesotho. Conclusions: The study concludes that access to finance significantly affect the competitive growth of SMEs in Lesotho. Thus, this study suggests that several specific and harmonized financial policy actions are needed in the Lesotho financial market to identify enabling policy that ease enterprises access to adequate funding programs. These funding programs should target improved financial schemes that are coordinated, competitive and directed towards SMEs access to finance; harmonized credit policy which guarantees a win-win for SMEs loan applicants and the financial market operators.

scholarly journals Time-Consistent Investment and Reinsurance Strategies for Mean-Variance Insurers under Stochastic Interest Rate and Stochastic Volatility

Mathematics ◽  
2020 ◽  
Vol 8 (12) ◽  
pp. 2183
Author(s):  
Jiaqi Zhu ◽  
Shenghong Li
Keyword(s):  
Interest Rate ◽  
Stochastic Volatility ◽  
Financial Market ◽  
Equilibrium Strategy ◽  
Stochastic Interest Rate ◽  
Programming Approach ◽  
Model Parameters ◽  
Stochastic Interest ◽  
The Impact ◽  
Mean Variance

This paper studies the time-consistent optimal investment and reinsurance problem for mean-variance insurers when considering both stochastic interest rate and stochastic volatility in the financial market. The insurers are allowed to transfer insurance risk by proportional reinsurance or acquiring new business, and the jump-diffusion process models the surplus process. The financial market consists of a risk-free asset, a bond, and a stock modelled by Heston’s stochastic volatility model. Interest rate in the market is modelled by the Vasicek model. By using extended dynamic programming approach, we explicitly derive equilibrium reinsurance-investment strategies and value functions. In addition, we provide and prove a verification theorem and then prove the solution we get satisfies it. Moreover, sensitive analysis is given to show the impact of several model parameters on equilibrium strategy and the efficient frontier.

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