The Role of Net Working Capital in the Financing of the Operating Activities of Mining Companies

The paper examines how companies’ net working capital is used to finance their operating activities. Net working capital is a source oflong-term financing (equity and long-term external capital) and is more expensive than financing through short-term sources, henceits rational use has a significant impact on the efficiency of companies’ operations. The computed level of net working capital is usedto calculate ratios enabling companies to control this capital. The ratios indicate the relationship of net working capital to currentassets, to the sum of accounts receivable and short-term investments, to cash and cash equivalents, and sales revenues. Based on thesecalculations of the relationships, an assessment was made of net working capital engagement in the financing of operating activities inmining companies. These companies maintain a high degree of current asset financing through long-term capital. In mining companieswith diverse mining activities, the level of current assets financing through long-term capital is higher than in coal mining companies.This is due to the maintenance of a higher level of inventories of extracted raw materials, the distance of outlets from the place ofextraction and the method of transport used. Based on the ratio of net working capital to cash and cash equivalents, it was found thatsome companies were overly liquid. Cash balances significantly exceed the value of this capital over a period of three to four years. Asurplus of cash over net working capital in the short term cannot be treated as excess liquidity, as it is the due to flexible managementof this capital.

Impact of the level of bank liquidity on the relationship between concentration and bank efficiency: the case of the WAEMU

In this article, we investigate the impact of bank liquidity level on the relationship between bank concentration and efficiency using a panel dataset of 60 banks across 7 WAEMU countries over the period 2005-2016. Our empirical methodology is based on the 2SLS IV estimator and non-linear analysis. Our results show that the concentration of the banking sector and the bank liquidity are negatively correlated with cost efficiency in the WAEMU. This is consistent with the Quiet Life Hypothesis which established that concentrated market incites suboptimal behaviors damaging to the banking profitability. However, the effects of concentration on cost efficiency are reduced for banks with lower levels of excess liquidity. This result shows that the holding of excess liquidity reinforces the effects of the Quiet Life Hypothesis.

Bank heterogeneity in interest rate pass-through: A panel evidence of Pakistan

This article examines the role of bank-level characteristics in determining the nature of interest rate pass-through from monetary policy rates to commercial banks’ lending rates in Pakistan. Several bank-level factors, namely market size, liquidity, capitalisation, profitability, and competition level, were used in analysing the pass-through mechanism. This study utilised a dynamic heterogeneous panel technique, namely the Pooled Mean Group (PMG) estimation for the sample of 12 private commercial banks, over the time span 2003:Q2 to 2015:Q4. Banks of smaller size, large capital, and higher liquidity were significantly affecting the interest rate pass-through procedure. Thus, to improve monetary policy’s transmission mechanism, Pakistan’s central bank should limit bank capitalisation and draw out excess liquidity from the banking sector.

How Monetary Policy Affects the Lending and Economic Activity in a Banking System with Excess Liquidity

Research purpose. The purpose of this paper is to examine the efficiency of the transmission mechanism of the monetary policy in a banking system with excess liquidity. More specifically, it aims to examine how the interest rates of the central bank bills and inflation rate affect total lending and the overall economic activity in the country. For this purpose, the analysis is based on the case of the Republic of North Macedonia, whose banking system has exhibited excess liquidity in the past decade. Design / Methodology / Approach. The paper is based on two different VECM models, analyzing the impact of the central bank bills interest rates and the inflation rate, on lending and real GDP in the Republic of North Macedonia, for the period 2000 – 2019. The analysis also encompasses unit root tests for the variables of interest in order to determine their order of integration and choose appropriate statistical methods. The short-run causality is assessed using the Granger causality test, whereas the existence of the potential long-run relationship is examined using the Johansen cointegration test. In addition, in order to determine the magnitude of the mutual relationship, variance decomposition is employed in both estimated models. Moreover, the stability of the models when exposed to external shocks is observed through their impulse response functions. Findings. Conducted analysis shows the negative long-term impact of the central bank bills interest rates on lending and real GDP in North Macedonia. However, no statistically significant impact in this regard is found in the short run. Opposingly, the inflation rate negatively affects lending and real GDP in North Macedonia in the short run, whereas, in the long run, it does not have a statistically significant impact. Originality / Value / Practical implications. Unlike many other studies in this area, this paper provides practical guidance for the monetary authorities in countries with excess liquidity in the banking system. Namely, its findings imply that central banks should reduce the interbank rate when faced with crises that cause liquidity disparities between banks. Failure to reduce interest rates during the crisis disrupts financial stability, which causes banks to withhold investing their liquid assets in the real economy.

Cryptocurrencies, Evolution of Means of Payments and Validity of Monetary Principles

The paper explores the role, evolution and ruling principles of the concept of “money” in the 21st Century. In this continuously evolving context, cryptocurrencies and Blockchain technology are widely considered the most relevant monetary innovations of the last decades. By means of a macro-founded logical-analytical approach combined with statistical evidence, the paper provides arguments: 1. dismissing the “innovation myth” behind cryptocurrencies because of de facto representing a comeback of the private issue of means of payments and, more problematically, seigniorage at its best; 2. confirming that crypto-tokens do not comply with basic, still ruling monetary principles; 3. suggesting that excess liquidity is already invested in crypto-markets (which are themselves “inflationary”, namely not backed by real value (i.e. GDP). The concrete risk is, once again in economic history, represented by facing a financial bubble.

Factors That Affect Liquidity of Commercial Banks in Kosovo

A very important factor that affects the growth and survival of commercial banks is also the level of liquidity. Banking industry regulators require banks to possess liquid assets in order to fulfill their obligations to depositors and third parties accurately. Lack of liquidity reduces the ability of banks to meet their obligations and otherwise excess liquidity may be the cause of reduced profits for banks. There are many factors that can affect the position of liquidity in commercial banks and which factors cause unbalanced liquidity and as such also affect their performance. As a result, the study of these factors is of particular importance. The main objective of this study is to analyze the liquidity empathy of the banking sector to several specific banking and macroeconomic factors. To achieve this objective, the study uses regression analysis per a data set that includes a time of 8 years respectively the years 2012 - 2019. To build the necessary econometric model and to achieve the purpose of the study, data are taken from the publications of the Central Bank and the World Bank (GDP data), which data are analyzed for each quarter for the study period. After analyzing the available data, the study concludes that between the main factors that can affect the liquidity position of commercial banks, Non-performing loans, Capital adequacy, and Credit interest rate have the grand and most important impact on the liquidity banking position.

EXPORT ANALYSIS: AUTHORITY OF INFLATION AND EXCHANGE RATE IN ASEAN-8

This study was aimed to analyze the relationship of long-term and short-term equilibrium between exchange rates and inflation on exports in ASEAN-8 countries (Brunei Darussalam, Laos, Indonesia, Malaysia, Singapore, Philippines, Vietnam and Thailand) by using analysis model with the Autoregressive Distributed Lag (ARDL) panel from the period 1990 to 2017. The model selection was based on long-term and short-term capabilities with different stationary levels. The results revealed that in long-term the exchange rate and inflation had a dominant influence on export activities in ASEAN-8 countries, while inflation had a dominant influence on exports in short-term. This result proved that inflation had a large influence on the growth of the trade stability, if the cost of products and services continuously increased in the market mechanism, it will result in the increased public consumption. The excess liquidity in the market triggered the consumption or speculation which resulted in the non-compliance products distribution and the decline in currency value continuously.

Passing on negative interest rates

Since the ECB has lowered the interest rate on deposits into negative territory, more and more commercial banks are also passing on this negative interest rate to their customers. The main aim of this paper is to answer the question under which conditions the commercial banking sector will be more or less reluctant to pass the negative deposit rate on to its private customers. We first clarify the circumstances under which demand deposits and excess liquidity arise, and what role quantitative easing plays in this context. Within a game-theoretical framework, it is derived that the pressure to pass on the negative interest rate is particularly high if there are no switching costs, and the banking market follows a Bertrand competition.