scholarly journals Digital currencies: a problem of trust

2021 ◽  
Vol 2021 (2) ◽  
pp. 93-117
Author(s):  
Viktor Koziuk ◽  
Keyword(s):  
Age Structure ◽  
Financial Stability ◽  
Market Failure ◽  
Central Banks ◽  
Economic Agents ◽  
Collective Experience ◽  
Digital Money ◽  
The Stability ◽  
Monetary Order

The rising cryptocurrencies have revived discussion about the prospects of monetary order and the central bank’s role in it. Functionality is in the core of the competition between the forms of money and the payment landscape could be fractionalized affecting further decline in the efficiency of monetary policy. Central bank digital currency (CBDC) is looked by monetary authorities as a way to respond to technological challenge and fulfill the gap of the market failure related to some imperfections of privately issued digital money. The success of each money form is dependent on the trust as a collective experience. The paper raises the question if the central banks are more credible than private digital money when probable change in the age structure matters for the spread of fintech. Based on empirical analysis, it is found that economic agents differentiate digital money of central banks from those of private issuers. Private cryptocurrencies are considered more reliable when inflationary experience is stronger, while central banks’ independence level and financial stability are not factors of higher trust to CBDC. Also, a country’s institutional features do not indicate that successful central banks can use the “the umbrella” of trust to their own cryptocurrencies while the factors of technological advance fail to show a clear significance. Social capital better contributes to the trust to private digital money. At the same time, the age structure is the strong factor due to which digital currencies are more reliable in younger societies. It is concluded that in the case then trust in cryptocurrencies is not grounded on institutional factors that historically contributed to stability of the monetary order, preconditions for the latter’s higher vulnerability are likely to rise. With the growing role of age structure as a factor of higher trust to digital money, the quality of social interactions will become a very important institutional precondition for the stability of monetary order.

scholarly journals Securitization of (bad) loans to Italian SMES: The role of the public guarantee

2021 ◽  
Vol 16 (4) ◽  
pp. 193-208
Author(s):  
Lucilla Bittucci ◽  
Stefano Marzioni ◽  
Pina Murè ◽  
Marco Spallone
Keyword(s):  
Financial Stability ◽  
Positive Impact ◽  
Central Banks ◽  
General Purpose ◽  
Recent Past ◽  
Balance Sheets ◽  
Access To Credit ◽  
The Public ◽  
Main Factors

This study investigates the main factors driving the evolution of the securitization of loans to Italian small and medium-sized enterprises (SMEs). The value of securitization increased in last two years, even though it has not been used as collateral for central banks. The disposal of non-performing loans (NPLs) may have been rather triggered by increasing attention of the international institutions to such an issue, within the general purpose of financial stability. The purpose of this paper is to interpret such a phenomenon focusing on Italian banks and restricting the analysis to the case of securitizations backed with loans to small and medium-sized enterprises (SMEs). The interesting result that emerges, supported by econometrically tested empirical evidence, is that given the orientation of international financial institutions, such as the ECB and the EBA, and reacting to incentives coming from the fiscal policy authorities for the public guarantee of loans, banks have been using securitization to reduce the burden on their bad balance sheets due to (NPLs). It was found that the public guarantee had a positive impact on SME securitization, whereas securitization in other sectors has not been affected significantly. Such evidence suggests that, in the absence of a public guarantee, the financial stability target would have been at risk, and the effectiveness of collateral-based policies in the recent past must be improved to enhance access to credit for SMEs.

scholarly journals Determinants of The Application of Macro Prudential Instruments

2017 ◽  
Vol 20 (3) ◽  
pp. 117-136 ◽  
Author(s):  
Firano Zakaria ◽  
Filali A. Fatine
Keyword(s):  
Financial Stability ◽  
Central Banks ◽  
Economic Cycle ◽  
Bank Profitability ◽  
Economic Cycles ◽  
Financial Expertise ◽  
Early Warning Indicators ◽  
The Stability ◽  
Intermediate Variables ◽  
Warning Indicators

The use of macro prudential instruments today gives rise to a major debate within the walls of central banks and other authorities in charge of financial stability. Contrary to micro prudential instruments, whose effects remain limited, macro prudential instruments are different in nature and can affect the stability of the financial system. By influencing the financial cycle and the financial structure of financial institutions, the use of such instruments should be conducted with great vigilance as well as macroeconomic and financial expertise. But the experiences of central banks in this area are sketchy, and only some emerging countries have experience using these types of instruments in different ways. This paper presents an analysis of instruments of macro prudential policy and attempts to empirically demonstrate that these instruments should be used only in specific economic and financial situations. Indeed, the results obtained, using modeling bivariate panel, confirm that these instruments are more effective when used to mitigate the euphoria of financial and economic cycles. In this sense, the output gap, describing the economic cycle, and the Z-score are the intermediate variables for the activation of capital instruments. Moreover, the liquidity ratio and changes in bank profitability are the two early warning indicators for activation of liquidity instruments.

scholarly journals From cash to central bank digital currencies and cryptocurrencies: a balancing act between modernity and monetary stability

2020 ◽  
Vol 47 (4) ◽  
pp. 911-938 ◽  
Author(s):  
Ansgar Belke ◽  
Edoardo Beretta
Keyword(s):  
Central Bank ◽  
Financial Stability ◽  
Service Providers ◽  
Central Banks ◽  
Payment Systems ◽  
Content Type ◽  
Paper Money ◽  
Payment Instruments ◽  
Tier System

PurposeThe paper explores the precarious balance between modernizing monetary systems by means of digital currencies (either issued by the central bank itself or independently) and safeguarding financial stability as also ensured by tangible payment (and saving) instruments like paper money.Design/methodology/approachWhich aspects of modern payment systems could contribute to improve the way of functioning of today's globalized economy? And, which might even threaten the above-mentioned instable equilibrium? This survey paper aims, precisely, at giving some preliminary answers to a complex – therefore, ongoing – debate at scientific as well as banking and political levels.FindingsThe coexistence of State's money (i.e. “legal tender”) and cryptocurrencies can have a disciplining effect on central banks. Nevertheless, there are still high risks connected to the introduction of central bank digital currency, which should be by far not considered to be a perfect substitute of current cash. At the same time, cryptocurrencies issued by central banks might be exposed to the drawbacks of cryptocurrencies without benefiting from correspondingly strong advantages. A well-governed two-tier system to be achieved through innovation in payment infrastructures might be, in turn, more preferable. Regulated competition by new players combined with “traditional” deposits and central bank elements remains essential, although central banks should embrace the technologies underlying cryptocurrencies, because risk payment service providers could move to other currency areas considered to be more appealing for buyers and sellers.Research limitations/implicationsWe do not see specific limitations besides the fact that the following is for sure a broad field of scientific research to be covered, which is at the same time at the origin of ongoing developments and findings. Originality and implications of the paper are, instead, not only represented by its conclusions (which highlight the role of traditional payment instruments and stress why the concept of “money” still has to have specific features) but also by its approach of recent literature's review combined with equally strong logical-analytical insights.Practical implicationsIn the light of these considerations, even the role of traditional payment systems like paper money is by far not outdated or cannot be – at this point, at least – replaced by central bank digital currencies (whose features based on dematerialization despite being issued and guaranteed by a public authority are very different).Social implicationsNo matter which form it might assume is what differentiates economic from barter transactions. This conclusion is by far not tautological or self-evident since the notion of money has historically been a great object of scientific discussion. In the light of increasingly modern payment instruments, there is no question that money and the effectiveness of related monetary policies have to be also explored from a social perspective according to different monetary scenarios, ranging from central bank digital currencies to private currencies and cash restrictions/abolition.Originality/valueThe originality/value of the following article is represented by the fact that it (1) refers to some of the most relevant and recent contributions to this research field, (2) moves from payment systems in general to their newest trends like cryptocurrencies, cash restrictions (or, even, abolition proposals) and monetary policy while (3) combining all elements to reach a common picture. The paper aims at being a comprehensive contribution dealing with "money" in its broadest but also newest sense.

scholarly journals Monetary Policy within a COVID-19 Environment: The Role of Central Banks and the Main Challenges for the Euro-zone

2021 ◽  
Vol 27 (2) ◽  
pp. 197-212
Keyword(s):  
Interest Rate ◽  
Crisis Management ◽  
Financial Stability ◽  
Inflation Rate ◽  
Central Banks ◽  
Environmental Crisis ◽  
Monetary Policies ◽  
Health Crisis ◽  
Euro Zone

The last financial crisis in 2008 has weakened the Euro-zone countries. Most of them were deeply affected, and their economic growths have not returned to their pre-crisis rates. Moreover, the inflation rate is still very low despite the European Central Bank’s interventions. Twelve years later, a health crisis occurred. The ECB have reacted to this event by using monetary tools. We can cite for example the famous temporary Pandemic Emergency Purchase Programme (PEPP) to save the Euro-zone countries from a systemic disaster. The current interest rate is negative, and it seems to raise some questions about the efficiency of policies and the threat to economic, monetary, and financial stability. Negative interest rate may also generate the next crisis. This paper is dedicated to recommendations based on the role of Central Banks in the health crisis management and, more generally, environmental crisis management instead of evaluating the impacts of the monetary policies on Eurozone countries because it is too early to measure with acuity the COVID-19 effects.

scholarly journals Theoretical and Empirical Research on The Analysis and The Assessment of The Stability of National Financial Systems. Romania’s Experience

2017 ◽  
Vol 23 (2) ◽  
pp. 124-129
Author(s):  
Leontin Stanciu ◽  
Liliana-Mioara Stanciu
Keyword(s):  
Sustainable Development ◽  
Empirical Research ◽  
National Economy ◽  
Financial Stability ◽  
Central Banks ◽  
The Other ◽  
Financial Systems ◽  
The Sustainable Development ◽  
Regulatory Authorities ◽  
The Stability

Abstract The stability of the financial systems is an objective necessity for the sustainable development of each national economy. Within this framework, ensuring financial stability is a priority for the central banks and for the other macro-prudential supervisory and regulatory authorities. In order to ensure the stability and "the health" of the national financial system, the competent authorities should analyze, assess and adopt optimal and timely measures to eliminate potential imbalances. These and other aspects are the main objectives of our research.

scholarly journals A new paradigm of modern central banking

2013 ◽  
Vol 2 (2) ◽  
pp. 75-78
Author(s):  
Aleksandra Szunke
Keyword(s):  
Monetary Policy ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Central Banks ◽  
Central Banking ◽  
First Century ◽  
Financial Instability ◽  
New Paradigm ◽  
The Global Financial Crisis

The changes in the modern monetary policy, which took place at the beginning of the twenty-first century, in response to the global financial crisis led to the transformation of the place and the role of central banks. The strategic aim of the central monetary institutions has become preventing financial instability. So far, central banks have defined financial stability as a public good, which took care independently of other monetary purposes (Pyka, 2010). Unconventional monetary policy resulted in changes the global central banking. The aim of the study is to identify a new paradigm of the role and place of the central bank in the financial system and its new responsibilities, aimed at countering financial instability.

scholarly journals Monetáris politikai kihívások a szubszaharai régióban

2019 ◽  
Vol 13 (1-2.) ◽  
pp. 57-74
Author(s):  
Szabolcs Pásztor
Keyword(s):  
Monetary Policy ◽  
Natural Resources ◽  
Financial Stability ◽  
Central Banks ◽  
Fiscal Policies ◽  
Appropriate Treatment ◽  
Short Synthesis ◽  
Sub Saharan ◽  
Adequate Management

The monetary policy of the Sub-Saharan countries is a lesser-known field for those Hungarian readers who are interested in Africa. In the last few decades several fundamental changes took place so a short synthesis is badly needed to better understand this issue. Apart from the fact that this study tries to shed light on the monetary policy challenges of different periods, it also places much emphasis on the contemporary issues in central banking.After the turn of the new millenium the central banks have been struggling with unpredictable fiscal policies, the appropriate treatment of the revenues of the natural resources, not to mention the inflow of foreign aid. It is also highly important to monitor the frequency of the supply shocks and the efficiency of the monetary transmission mechanism. After shedding more light on these issues, the paper tries to focus on the role of the exchange rates, the room for manoeuvre of the central banks in the financial stability and the adequate management of the revenues stemming from the export of natural resources.

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