showing 14 related works from this author
The relationship between credit ratings and asset liquidity: Evidence from Western European banks
2020
This study examines the role of asset liquidity in Western European banks’ credit rating downgrades and upgrades over the 2005–2017 period. The results suggest that changes in bank credit ratings have been more favorable for banks that have a liquid asset portfolio. Furthermore, asset liquidity has a stronger effect on the credit rating of banks that already have an illiquid asset portfolio. In contrast, the effect is significantly smaller or nonexistent for the most liquid banks. These results imply that the new liquidity regulation introduced by the Basel III requirements will improve the stability and hence decrease the fragility of the European banking sector. Furthermore, the benefits …
On the Stability of Stablecoins
2021
This paper investigates the volatility processes of stablecoins and their potential stochastic interdependencies with Bitcoin volatility. We employ a novel approach to choose the optimal combination for the power law exponent and the minimum value for the volatilities bending the power law. Our results indicate that Bitcoin volatility is well-behaved in a statistical sense with a finite theoretical variance. Surprisingly, the volatilities of stablecoins are statistically unstable and contemporaneously respond to Bitcoin volatility. Also, whereas the volatilities of stablecoins are not Granger-causal for Bitcoin volatility, lagged Bitcoin volatility exhibits Granger-causal effects on the vol…
Assessing the Commodity Market Price and Terms of Trade Exposures of Macroeconomy in Emerging and Developing Countries
2021
This paper provides novel evidence on commodity market exposure, i.e., the impacts of commodity price and terms of trade fluctuations on macro performance amongst 46 emerging and developing countries (EMDCs) in Africa, Asia and the Latin American and Caribbean (LAC) region. We estimate the exposure of six macroeconomic variables to the commodity prices and terms of trade. Our results indicate that in overall terms, there is a strong and statistically significant long-run relationship between the vector of analyzed world trade prices and macro variables in all EMDCs. However, based on the short-term reactions, only about 10% of the macroeconomic variation amongst the EMDCs is due to commodit…
Assessing commodity price risks and terms of trade exposures in emerging and developing countries
2020
This paper provides novel evidence on commodity exposure (impacts of commodity price and terms of trade fluctuations) amongst 46 emerging and developing countries (EMDCs) in Africa, Asia and the Latin American and Caribbean (LAC) region. We focus on the exposures of six macroeconomic variables to the commodity prices and terms of trade, based on the real business cycle (RBC) theory. Our empirical results indicate that, overall, about 10% of the macroeconomic variation amongst the EMDCs is due to commodity market-related exposures. The Asian and LAC economies are especially sensitive to changes in commodity prices. The changes in the prices of world trade have an imminent impact on non-commo…
Short-Run Dynamics of the Trade Balance in the EMU-12 Countries
2016
During the pre-EMU period real effective exchange rate or domestic and foreign GDP per capita growth rate differential Granger-caused aggregate trade balance in most of the EMU-12 countries. However, our data-driven paper provides evidence that during the EMU period neither the growth differentials nor the CPI-based real effective exchange rates have Granger-caused the aggregate trade balances. When we decompose the aggregate trade balances into the intra balances (trade balance vis-a-vis the euro area) and the extra balances (trade balance vis-a-vis the rest of the world), we find that typically the change in the dynamics of the aggregate trade balance resulted from a change in the dynamic…
Speculation and Lottery-Like Demand in Cryptocurrency Markets
2020
This is the first paper that explores lottery-like demand in cryptocurrency markets. Since recent research provides evidence that cryptocurrency returns are rather short-memory processes in their nature, we modify Bali et al.’s (2011, 2017) MAX measure and employ a weekly forecast horizon and last week’s daily log-returns for calculating the metric for our portfolio sorts. From an econometric point of view, this study proposes statistical tests that are robust to unknown dynamic dependency structures in the cryptocurrency data. Our results show that average raw and risk adjusted return differences between cryptocurrencies in the lowest and highest MAX deciles exceed 1.50% per week. These re…
Finland’s great depression of the 1990s: Lessons about financial reform based on econometric macro evidence
2020
The paper re‐examines the Finnish Great Depression of the 1990s, based on an open macro model, with specific dummy variables to identify the initial effects of liberalized financial markets and capital mobility, and of the Russian trade collapse. It is shown that the explosive credit expansion resulting from the simultaneous liberalization of the financial markets and international capital movements in 1986 has played the most important role in explaining the uncontrolled growth and the subsequent depression in 1989 in real economic activity in Finland. Their effects were strengthened by a vicious circle between the financial and asset markets. The Russian trade collapse in 1991 had a small…
Small fish in big ponds : Connections of green finance assets to commodity and sectoral stock markets
2022
We analyze return and volatility connectedness of the rising green asset and the well-established US industry stock and commodity markets from September 2010 to July 2021. We find that the time-varying return and volatility connectedness have exhibited serious crisis jumps. Some individual assets of both the green and commodity markets are in connection to the US sectoral stock market returns, and the volatility connections are even more common than the return connections. Furthermore, some financial and economic uncertainty indicators manifest positive impacts from the volatility of some `big pond markets for e.g. commodities, whereas some others affect the connectedness negatively. Additi…
Dependence between renewable energy related critical metal futures and producer equity markets across varying market conditions
2022
We study the dependence of renewable energy production-related critical metal futures and producer equity returns, compared to the non-renewable energy (oil and natural gas) and some other globally relevant commodity markets. We find different asymmetric and symmetric dependencies in these commodity markets. The dependence is asymmetric in the most important critical metal markets, i.e., of silver, copper, and platinum. Still, surprisingly, for example, in the oil market, the relationship is symmetric, and no relationship is found in the natural gas market. Furthermore, the oil and agricultural markets have homogenous dependence structures in most market conditions, so the information trans…
Speculation and lottery-like demand in cryptocurrency markets
2021
Abstract This is the first paper that explores lottery-like demand in cryptocurrency markets. Since recent research provides evidence that cryptocurrency returns appear to be short-memory processes, we modify Bali, Cakici and Whitelaw’s (2011) and Bali, Brown, Murray, and Tang’s (2017) MAX measure and employ a weekly forecast horizon and daily log-returns from the previous week to calculate the metric for our portfolio sorts. From an econometric point of view, this study proposes statistical tests that are robust to unknown dynamic dependency structures in the cryptocurrency data. Our results show that average raw and risk-adjusted return differences between cryptocurrencies in the lowest a…
On the stability of stablecoins
2021
This paper investigates the volatility processes of stablecoins and their potential stochastic interdependencies with Bitcoin volatility. We employ a novel approach to choose the optimal combination for the power law exponent and the minimum value for the volatilities bending the power law. Our results indicate that Bitcoin volatility is well-behaved in a statistical sense with a finite theoretical variance. Surprisingly, the volatilities of stablecoins are statistically unstable and contemporaneously respond to Bitcoin volatility. Also, whereas the volatilities of stablecoins are not Granger-causal for Bitcoin volatility, lagged Bitcoin volatility exhibits Granger-causal effects on the vol…
Keep the faith in banking : New evidence for the effects of negative interest rates based on the case of Finnish cooperative banks
2021
This paper analyses the profitability of Finnish cooperative banks during the period of negative nominal interest rates. Contrary to expectations, the continuous decline in money market interest rates between 2009 and 2014, and the following negative rate era, did not have adverse effects on the profitability of banks at the beginning of negative interest rate period. Based on especially using a risk-adjusted measure for bank profitability, these results contrast with previous findings. In our findings, the increasing wholesale funding (WSF) ratio seems to be an important factor. However, after 2017 the banks have not been able to improve especially their risk-adjusted profitability so stro…
Do commodity assets hedge uncertainties? What we learn from the recent turbulence period?
2022
AbstractThis study analyses the impact of different uncertainties on commodity markets to assess commodity markets' hedging or safe-haven properties. Using time-varying dynamic conditional correlation and wavelet-based Quantile-on-Quantile regression models, our findings show that, both before and during the COVID-19 crisis, soybeans and clean energy stocks offer strong safe-haven opportunities against cryptocurrency price uncertainty and geopolitical risks (GPR). Soybean markets weakly hedge cryptocurrency policy uncertainty, US economic policy uncertainty, and crude oil volatility. In addition, GSCI commodity and crude oil also offer a weak safe-haven property against cryptocurrency uncer…
Financial system in steering the economy towards planetary well-being
2024
This chapter discusses the possible roles that financial system may play in steering economic production towards planetary well-being. The costs associated with using natural resources are seldom equal to the actual environmental costs incurred. The present chapter proposes linking Sir Partha Dasgupta’s Impact Equation and the standard asset pricing framework and discusses the roles that financial institutions and central banks as well as debt and equity funding play in supporting production that preserve planetary well-being via the incentives of those in need for and those willing to supply funding. It is proposed that the increasing costs of capital and the financial exclusion of non-env…