The Inflation Target in the Euro Area

Inflation Targeting(IT)is nowadays the basis of the monetary policy framework in most of the advanced and the emerging economies of the world.For many years the inflation target was conceived as the upper bound of permissible inflation rates and Central Banks tried to prevent them to trespass the bound.But after the Great Financial Crisis of 2007-2008 the world monetary scenery changed deeply:nominal interest rates dropped down near to zero,inflation rates began to run well below the targets and the task of Central Banks became to raise them towards the target.A new instrument of policy was employed by Central Banks in order to try to raise inflation rates,namely Quantitative Easing(QE)operations,consisting in massive outright purchases of various kinds of financial assets(mainly national governments bonds)to be held and rolled over at maturity,so producing a structural enlargement of liquidity and expansionary effects throughout the economies.In the Euro Area since 2015 onwards the European Central Bank(ECB),which defined the inflation target as an year—on year increase in the Harmonized Index of Consumer Prices(HICP)of below but close to 2%,launched various Asset Purchasing Programmes(APPs)in order to increase liquidity and raise too low inflation rates;in year 2020 in order to face the heavy economic effects of Covid-19 Pandemic a new great App of 750 billion euro was launched.But QE operations are clumsy and roundabout ways to raise inflation rates because they must first pass through the financial sectors which may be destabilized by the excess of liquidity:anomalous rises in asset prices,debts,financial leverages and derivatives threaten the economic equilibrium and solvency of banks and other financial institutions.Moreover,in the medium and long run,the availability of credit at too low interest rates favours the survival of unprofitable,noncompetitive and even obsolete business enterprises,hindering the birth and growth of new more productive and innovative enterprises.

Nexus between selected macroeconomic variables and carbon emission in Kenya

Agriculture is not only influenced by climate change,but it is also one of the significant contributors of CO_(2) emission.Understanding CO_(2) emission and macroeconomic variables is critical to solving the challenges and threats faced by Kenya’s agriculture and environment.This study used the Environmental Kuznets Curve(EKC)hypothesis and the autoregressive distribution lag model(ADLM)to analyze the relationships of CO_(2) emission with agricultural output,government direct investment,trade openness,and inflation rate in Kenya from 1983 to 2019.The study found that there exists a positive(direct)relationship between CO_(2) emission and foreign direct investment in the long run in Kenya.Additionally,CO_(2) emission and trade openness have a negative(indirect)and statistically significant relationship after the error correction term adjustment in the long run.Moreover,the relationship between CO_(2) emission and agricultural output is positive(direct)and statistically significant in the long run.There is a positive(direct)and statistically insignificant relationship between CO_(2) emission and inflation rate in the short run.Notably,the EKC hypothesis indicated that the Kenya’s economy is still on the environmental degradation trade-off through the gradual increase of both CO_(2) emission and agricultural output.Our results are important to Kenya’s economy because the derived insights will assist in relevant departments to formulate sustainable strategies to minimize environmental degradation.

Does financial depth impact economic growth in North Cyprus?

This study purpose is to connect the proxy of financial development which is total banking sector’s deposits with the economic growth in North Cyprus.The reason for using the total deposit differently with the existing literature is because North Cyprus is bank-based financial system.Therefore,this study provides an analysis of the connection between finance-growth nexus in North Cyprus from 1978 through 2015,using the autoregressive distributed lag(ARDL)model and combined cointegration to evaluate and verify the relationship.In addition,this research added the inflation rate to the model specification to investigate the inflation-growth interaction.The results revealed that both methods of cointegration provided robust evidence for a long-run relationship between financial debt and growth.The ARDL long-run and short-run coefficients showed the positive impact of depth and the negative impact of inflation on economic growth,thereby confirming the strength of the financegrowth and inflation-growth connections.Moreover,financial depth had a larger coefficient than the inflation rate.Finally,the VECM Granger causality test provided evidence for unidirectional causality from the total deposits and inflation rate to economic growth in North Cyprus.These results are significant for the policymakers of North Cyprus because the findings show that economic growth can be improved by enhancing the deposit rates in the financial system.

Facing Both Challenges and Opportunities:How Can Financial Service Firms Survive Under the Pandemic?SOAR Analysis of Three Leading Firms in the Financial Service Industry

After the breakout of COVID-19,many entity industries have to shut down.The rapid decline of money transaction caused by the shutdown of the entity industries has shocked the financial service industry while the increase in digital transactions also offers them opportunities.Facing both challenges and opportunities,financial services firms should change their target and compensation policy during the pandemic to survive.After analysing three major firms in this industry by using SOAR method,we conclude four keys for financial services firms to survive in COVID-19.

Macroeconomic Instabilities and Cost-Recovery Potentials of Public Sector Organisations

The 2008 financial crisis raised concerns over the performance of public sector organisations operating under different cost recovery regimes.These concerns were linked to potential failure in attaining cost recovery targets as a result of declining revenues during economic downturn.This study utilised the Linear Mixed Effect(LME)models to analyse the data from the World Bank Indicator website and from six national Land Administration Organisations(LAOs),two of which being under“No cost recovery”(NCR)and the remaining being in“Full Cost Recovery”(FCR).Cost recovery indicators were computed from financial statement of national LAOs of these countries.The findings establish that a global financial crisis that is associated with declining GDP and a higher inflation rate can insignificantly reduce the level of cost recovery for LAOs while persistent decline in GDP growth rate significantly eliminates potentials for cost recovery.However prospects for recovery can be traced within the cost-revenue microstructures of LAOs themselves.With a significantly negative relationship between spending in information and technology as a ratio of GDP to the degree of cost recovery,LAOs need only to eliminate rigidities in their cost-revenue structure which tie them to macro-instabilities of the real estate market.Such flexibility can be attained through elastic cross-substitution in the LAO’s gross cost-revenues schedules for registration tasks in favour of information delivery tasks.

A countermeasure designed to restrain self-serving behavior and strategic rating disclosure of credit rating agencies

This study examines an incentive of the credit rating agency(CRA)to exert effort to observe projects’signals and strategically disclose ratings when the upfront fee and performance-based fee scheme are imposed.Under the upfront fee scheme,the CRA obtains an upfront fee in exchange for its services but gains a performance-based fee only if its ratings accurately foresee the rated project’s outcome.In the setting,an issuer solicits a rating from the CRA,whose conduct of inflating and deflating ratings is considered.In addition,the CRA can endogenously exert effort to observe a project’s signal,which specifies the signal accuracy and how much operating costs the CRA incurs.After receiving the observed signal,the CRA can strategically decide to announce a rating corresponding to or contradicting the observed signal.The findings reveal that the performance-based fee scheme incentivizes the CRA to exert greater effort and truthfully disclose a more accurate rating.

Determinants of China’s outward foreign direct investment in Asia:a panel data analysis

This paper is an attempt to examine the trends and significant determinants of China’s outward foreign direct investment(OFDI)in Asia.In order to find out the important determinants of China’s OFDI in Asia,this study applies the panel data regression technique.The time period from 2006 to 2015 is taken into consideration.Econometric analysis has been done based on three data sets:the first includes 27 Asian countries/regions which attract Chinese OFDI.While Chinese Hong Kong is excluded from the sample,the second data set consists of 26 countries the same as those in data set one.The third data set comprises China’s top 12 destination countries of OFDI in Asia.The findings show that China’s OFDI has risen rapidly and secured the second rank globally,only behind the United States and surpassing Japan.For the first time,the flow of Chinese OFDI exceeded the level of inward foreign direct investment(IFDI),and Asia attracted a 74.4%share out of China’s total OFDI in 2015.The results reveal that inflation rate,export,import,corruption,infrastructure and geographic distance are the significant determinants of China’s investment in Asia.This paper provides new evidence on the determinants of China’s OFDI in Asia.By using currently available data of 27 Asian host countries,this paper offers a new insight into significant determinants of China’s OFDI in the region.