The Bank of Japan's exchange traded fund purchases: a help or hindrance to market efficiency?

We examine the impact of the Bank of Japan's exchange traded fund (ETF) purchases on two aspects of market efficiency—long-range dependence and price delay—of the TOPIX and Nikkei 225 indices. An increase in ETF purchases results in lower long-range dependence for both indices while the impact on the price delay varies according to index and measure. A sub-period analysis shows that the impact on market efficiency varies over time, with the dominant pattern being a delayed harmful effect, followed by a positive impact and thereafter a negative effect. The implications of these findings are discussed.

The effects of monetary policy response to the Covid-19 crisis on dynamic connectedness across financial markets in Central and Eastern Europe

This study investigates the effects of monetary policy interventions in Central and Eastern European (CEE) economies on shifts in financial market linkages during the Covid-19-induced crisis. We explore the market reaction to both standard and non-standard (e.g., quantitative easing) monetary policy announcements by central banks in Czechia, Hungary, Poland, and Romania, and analyse the way they affected sovereign bond and stock market linkages. The analysis is further extended to include international spill-over effects. Research Design & Methods: We first quantify a set of time-varying asset correlations using asymmetric generalised DCC-GARCH models and daily data on financial asset returns. Going beyond the domestic stock-bond interdependencies, we explore cross-border connectedness between CEE economies, Germany, and the US. Next, we investigate the effects of detailed central bank announcements, as they unfolded during the Covid-19 crisis.

Does bank affiliation affect firm capital structure? Evidence from a financial crisis

PurposeThis study aims to assess the determinants of corporate debt with a particular focus on bank-affiliated and non-bank-affiliated firms during the global financial crisis.Design/methodology/approachThe authors analyse the data of 395 listed manufacturing firms from Pakistan with 2,370 firm-year observations. The sample is divided into subsamples, namely bank-affiliated, non-bank-affiliated and stand-alone firms. Fixed and panel effect regression models are applied to determine the during, pre-crisis and post-crisis effects on corporate capital structure.FindingsThe robust results of the study reveal that non-bank-affiliated firms have different leverage determinant behaviours with a greater reliance on size, tangibility and profitability. However, bank-affiliated firms seemed to show greater immunity from a crisis compared to other firms. Simultaneously, the stand-alone firms remained at a disadvantage subject to internal financial ties of group-affiliated firms and form a base of market imperfection.Practical implicationsThis study's findings imply that financial managers should contain better ties with financial institutions to enhance financial immunity in worse time of financial crisis or COVID-19 global calamity. On the regulation front, these findings call for critical policy regulations to govern the internal ties with financial institutions to create a level playing field for the corporate sector.Originality/valueTo the best of the authors' knowledge, this study is the first to investigate determinants of corporate debt with a particular focus on bank-affiliated and non-bank-affiliated firms. This work is also novel to explore corporate debt of bank-affiliated and non-bank-affiliated firms during the financial crisis.

News from HAL

[...]based on the improved financial performance and cash flow position, the Credit Rating Agencies CARE Ratings and ICRA Limited have upgraded the Company's credit rating from AA+ Stable to AAA/Stable during the financial year. HAL and BEL sign contract for indigenous IRST HAL and BEL signed a contract for co-development and coproduction of Long Range Dual Band Infra-Red Search and Track System (IRST) for Su-30 MKI on 26 April 2022 under the MAKEII procedure of Defence Acquisition Procedure (DAP) 2020, as part of the 'Make in India' initiative. The proposed IRST system will be a high end strategic technology product in the field of defence avionics and technically competitive to existing IRST system in the global market with features of Television Day Camera, Infrared and Laser sensors in single window for air to air and air to ground target tracking and localisation.

LA POLÍTICA MONETARIA Y LA PANDEMIA: CLAVES DEL DEBATE ACTUAL

La pandemia de la COVID-19 marcará un antes y un después en el entorno y el desarrollo de la política monetaria del BCE. Este artículo comienza por repasar y valorar de forma concisa las principales medidas de política monetaria instrumentadas para hacer frente al impacto económico de la pandemia. Tras ello, el análisis trata de enmarcar el debate sobre dos de los retos a los que el BCE habrá de hacer frente en los próximos años. En primer lugar, deberá de prepararse para normalizar los tipos y la composición de su balance, minimizando el impacto sobre la estabilidad financiera y resistiendo las presiones para que retrase el necesario ajuste. En segundo lugar, deberá de prevenir la materialización de los riesgos al alza para la estabilidad de precios, desde una posición aún más confortable que los bancos centrales de otras economías avanzadas. Probablemente, el BCE sea el banco central mejor preparado para evitar cualquier sombra de dominancia fiscal y financiera. Sin embargo, cualquier complacencia en este frente podría ir en detrimento del logro de su mandato fundamental. Tras explorar estas cuestiones con una perspectiva de medio plazo, el artículo valora brevemente los principales elementos de la nueva estrategia de política monetaria del BCE, subrayando la trascendencia de los cambios más relevantes y también aquellos otros aspectos que en un futuro deberán recibir atención.Alternate :The COVID-19 pandemic marks a before and an after in the economic environment and the stance of the monetary policy of the ECB. This article starts by reviewing and assessing the main monetary policy measures aimed at cushioning the economic impact of the pandemic. Next the analysis intends to frame the debate surrounding two of the challenges ahead of the ECB in the coming years. First, the central bank should prepare to normalize policy rates and the composition of its balance sheet, while minimizing the impact on fiscal and financial stability and resisting pressures to delay the necessary adjustment. And second, the ECB ought to prevent the materialization of risks to price stability, admittedly from a more comfortable position than other central banks in advanced economies. Arguably, the ECB is the central bank best prepared to dispel any shadow of fiscal and financial dominance. However, any complacency on this front could be detrimental to the achievement of its main mandate. After exploring this issues with a medium term perspective, the article briefly assesses the key elements of the new monetary policy strategy of the ECB, emphasizing the relevance of the most important changes, as well as other aspects that will need to receive attention going forward.

Financial spillovers, spillbacks, and the scope for international macroprudential policy coordination

This paper discusses the scope for international macroprudential policy coordination in a financially integrated world economy. It begins with a review of the transmission channels associated with, and the empirical evidence on, financial spillovers and spillbacks. Limitations of the existing literature are also identified. The potential gains associated with cross-border macroprudential coordination, dwelling on both recent analytical contributions and quantitative studies based on multi-country models with financial frictions, are then evaluated. The issue of whether coordination of macroprudential policies simultaneously requires some degree of monetary policy coordination is also discussed. The analysis focuses on the potential for policy coordination between major advanced economies and a group identified as systemically-important middle-income countries (SMICs). Next, practical ways to promote international macroprudential policy coordination are considered. Following a discussion of Basel III’s Principle of reciprocity and ways to improve it, the paper advocates a further strengthening of the current statistical, empirical and analytical work conducted by international financial institutions to evaluate, and raise awareness of, the gains from international coordination of macroprudential policies.