Towards a Greenification

This study provides an empirical analysis on the existence of a green bond premium on the secondary market. The green bond premium is defined as the yield differential between a green and a comparable brown bond, while controlling for liquidity. The EUR-denominated green bonds are studied to determine if they diverge from comparable conventional bonds in terms of yields, during the period from January 2018 to December 2020. Through a matching method, a sample composed of 35 bond couples is obtained. On average, this study reports a negative greenium of -3.20 bps within the sample. The greenium differs across the sub-samples, being negative for green bonds issued by financial institutions, in domestic currency, by AA- and A-rated issuers, and for those issued by issuers with low or medium ESG risk levels. Finally, the ESG risk level has been found to be the driver of the negative green bond premium.

Deposit Determinants and Domestic Currency Deposits In Nigeria (2000-2018)

The study was carried out to investigate the effects of macroeconomic and banking sector-specific variables on domestic currency deposits in Nigeria within a temporal scope 2000-2018. On the theoretical threshold of Ayodeji-Ajala bank-intermediation (economic value) theorem, the study proxied the dependent variable, domestic currency deposit, by total domestic currency deposit of banks, and the independent variable, deposit determinants, by three macroeconomic variables (interest rate, gross domestic product, inflation) and two banking sector-specific variables (private sector credit and bank size). Secondary data were sourced from the Central Bank of Nigeria statistical bulletin of various editions, and were estimated using Auto Regressive Distributed Lag (ARDL) approach. It was found that, while interest rates exhibited insignificant negative effects on domestic currency deposits in Nigeria, inflation rate exerted significant negative effect on it, and gross domestic product exerted significant positive effect on it. It was, also, found that, private sector credit exerted a significant positive effect on domestic currency deposit while bank size exhibited insignificant positive effect on it. It was, further, found that, a significant long-run relationship existed between deposit determinants and domestic currency deposits in Nigeria. It was, therefore, concluded that macroeconomic and banking sector-specific variables exert significant long-term influence on domestic currency deposits in Nigeria. It was, therefore, recommended that, government should effectively adopt the instruments of monetary and fiscal policies for enhancing the effects of interest rates and curbing the effects of inflation on the Nigerian economy. Also, banks are encouraged to invest more on their assets, as this would help attract more customers of various types while they should increase private sector credits, and channel the same to the productive sector of the economy so that economic growth can be enhanced.

Does the impact of the COVID-19 pandemic influence the FX? A note.

This note shows that the effective response of a country in its battle against COVID-19 influences the exchange rate of its currency. Particularly, we examine the GBPUSD, AUDUSD and AUDGBP pairs of currency during the COVID-19 outbreak and the results show that the domestic currency of the country which documents more COVID-19 cases in each pair is depreciated against the foreign one. Therefore, a country which cannot effectively mitigate the impact of COVID-19 and whose currency is depreciated may present further economic consequences in the future. Such consequences extend beyond economic recession and may include sovereign and interest rate risk. These findings may be useful for policy makers in order to estimate the cost of the pandemic.

Coming to Terms: The Politics of Sovereign Bond Denomination

Governments interact strategically with sovereign bond market creditors: they make choices not only about how often and how much to borrow, but also under what terms. The denomination of debt, in domestic or foreign currency, is a critical part of these terms. The “original sin” logic has long predicted that creditors have little appetite for developing-country government debt issued in domestic currency. Our novel data, including bond issues by 131 countries in 240,000 primary market transactions between 1990 and 2016, suggest otherwise. Domestic-denominated bonds have come to dominate the market, although domestic-currency issuance often is accompanied by shorter bond maturities. We argue that ideologically rooted policy preferences play an important role in this unexpected trend in denomination. All else equal, right governments choose foreign denomination as a means of mitigating currency risk and thus minimizing borrowing costs. In contrast, left governments opt for the flexibility of domestic denomination, and they are better able to act on their preferences in the presence of risk-mitigating monetary institutions and macroeconomic stability. We find support for our argument that partisanship has a robust and enduring relationship with denomination outcomes, even in a marketplace in which domestic-denominated developing-country sovereign bonds have become the norm.

A Study on Non Conventional Financing with Special Reference to ‘P2P Lending’ and its Growth during Covid-19 Pandemic in India

The new financial face imploded after the collapse of the so longed conventional system in 2008 after demonetisation, and following covid-19 pandemic, India witnessed a millions of extraordinary debt bearing borrower in all sectors. The instable stock markets, bond prices and devaluation of domestic currency popularized the term dis-intermediation and prompted more investors to turn to a cashless financial system and non-conventional sources funding. With the gradual growth of global market Indian potential investors and borrowers face some financial challenges and this is where these digitalisation and green banking system became an inevitable technology which enabling them to operate more efficiently and at cost advantage than the traditional banking system. Several online portals have sprung up in India to facilitate such lending, especially after demonetisation and some even getting private financing and investments from investors, even it isis still at an emerging stage comparing with US and China. RBI brought a discussion paper on P2P lending in April 2016, it points that there were 30 such start-ups have emerged in the country. After that it have been proceeded as a fast-growing sector and came out with some regulations in October 2017 and this study aims to analyse the mode and operations of the non-conventional lending P2P system and its initial growth during pandemic period.

VOLATILITY CONTAGION AMONG STOCK, CURRENCY, AND BULK SHIPPING MARKET DURING THE CHINA’S STOCK MARKET CRASH CRISIS

Six financial markets were verified contagious to Shanghai Stock Exchange Composite (SSEC): domestic equity market (SSEC and China COSCO Shipping Co.), domestic currency market, international currency market, global shipping market, commodity future market and bulk shipping market (BDI) which regarded as a leading indicator of future economic growth instead of Li Keqiang index. This research analyzed intermarket contagion from March 14, 2008 to March 31, 2018. MIDAS-GARCH model was adopted to identify the spillover effect among the Shanghai Stock market and inter-market indices. The findings of this study were concluded as follows: (1) The commodity, global shipping market had significant volatility transmission to SSEC both before and after the crash crisis. (2) The volatility of domestic currency market was significantly contagious to SSEC only after the crash.

Analysis of the Bank of Russia's activities

Subject. This article analyzes the activities of the Central Bank of the Russian Federation. Objectives. The article aims to reveal the type of activity of the Bank of Russia in the modern economy. Methods. The study is based on the systems approach and statistical analysis. Results. The article assesses the changes in summarizing financial indicators presented on the official website of the Bank of Russia. As a result of the assessment, it reveals the Bank of Russia's activities to maintain a stable level of mandatory reserves for the funds raised by credit organizations in the domestic currency. The study describes the typed activities of the Bank of Russia. Conclusions and Relevance. The identified typed activity of the Bank of Russia indicates the need to remove the priority in retaining the reserve position in the IMF, thereby expanding the ability of the Russian Ministry of Finance to cover the budget deficit through federal loan bonds. The results of the study form the necessary level of competence of State authorities to make management decisions to eliminate inconsistencies in the activities of the Bank of Russia in the constitutional and legal status.

What About Currency Manipulation?

What is the exchange rate and what does it have to do with trade? A country’s currency, or exchange rate, is the price of a unit of foreign exchange in domestic currency (such as 1 British pound costs $1.30) or its converse, the amount...

Tourism demand from Europe to Mexico, 2005-2018: A cointegration analysis

This paper analyzes tourism demand in the countries of Europe for Mexico from 2005 to 2018. Unit root and cointegration tests in panel data are applied. Results indicate that there is presence of unit roots in the variables. A long-term equilibrium relationship was found among tourism demand, real exchange rate, and income, and also there are bidirectional causality relationships between these variables. The positive relationship among the variables implies that a depreciation of the domestic currency and a higher level of income of the releasing countries would generate greater tourism demand in Mexico.

Financial Crises, Dollarization, and Lending of Last Resort in Open Economies

Foreign currency debt is considered a source of financial instability in emerging markets. We propose a theory in which liability dollarization arises from an insurance motive of domestic savers. Since financial crises are associated to depreciations, savers ask for a risk premium when saving in local currency. This force makes domestic currency debt expensive, and incentivizes borrowers to issue foreign currency debt. Providing ex post support to borrowers can alleviate the effect of the crisis on savers’ income, lowering their demand for insurance, and, surprisingly, it can reduce ex ante incentives to borrow in foreign currency. (JEL E21, E42, E44, F34, G01)