This document provides background information on a study about the effects of inflation on the profitability of commercial banks in Uganda. It discusses inflation and how it can reduce purchasing power. It also defines key terms like interest rates, lending, and consumer price index. The problem statement indicates that despite financial reforms, commercial bank performance in Uganda has remained poor due to high inflation, interest rates, and exchange rate volatility. The specific objectives are to determine the effects of exchange rates, interest rates, and consumer price index on bank profitability. The significance is that bank management can use the study to understand inflation's impacts and develop strategies to handle its effects.
The document summarizes a study that uses a structural vector autoregressive (SVAR) model to estimate the impact of unconventional monetary policy on macroeconomic variables in the UK. The study focuses on the bank lending channel as a possible transmission mechanism. The results from the baseline SVAR model show that unconventional monetary policy can generate inflation and increase output, but the effects are small and short-lived. However, the results are not robust for output based on sensitivity analysis. The study also does not find strong evidence that the bank lending channel is a significant transmission mechanism for unconventional monetary policy.
With banks being the major avenue that the CBK relies on to execute monetary policy, the paper
sought to investigate whether commercial banks are actually responsive to monetary policy.
The study used an Error Correctional Model to estimate a relationship where lending rates were
treated as the dependent variable while the independent variables were monetary policy,
specifically CBR. The model was also expanded to include additional independent variables
specifically monetary policy transmission channels. These include the credit channel which is
represented by credit to the private sector, exchange rate channel represented as nominal
exchange rate and asset price channel. For consistency, inflation and economic growth were
included in the model because these are the targets of monetary policy.The study findings
showed that there was a long run relationship between lending rates and Central Bank Rate,
Exchange Rates, Asset Price, Credit to the Private Sector, Economic growth and Inflation Rates.
The results also indicated that CBRand Inflation cause lending rates to increase in the short run
while credit to the private sector causes lending rates to decrease in the short run. A statistically
significant relationship was also established between lending rates and CBR, credit to the
private sector. The study concludes that commercial banks’ lending rates are indeed positively
responsive to CBR and that in order to spur economic growth; commercial banks’ lending rates
should be stabilized by streamlining the economic environment in which commercial banks
operate, therefore ensuring stable rates of borrowing.
This document discusses a study examining the impact of monetary policy on the financial performance of banks in Pakistan from 2007-2011. It uses interest rates set by the State Bank of Pakistan as a measure of monetary policy. The study finds that higher interest rates, representing a tighter monetary policy, have a significant negative relationship with banks' financial performance as measured by their return on assets and return on equity. The document provides background on monetary policy, its tools of expanding or contracting the money supply, and how interest rates can affect bank risk-taking and performance. It also reviews prior literature finding that higher capitalized banks may increase risk-taking less in response to lower rates than other banks.
This paper examines how banking sector concentration impacts monetary policy transmission through the bank lending channel using bank-level panel data from 13 countries from 1999 to 2011. The main finding is that higher banking concentration weakens the effectiveness of monetary policy, though this effect decreases during crisis periods. The paper discusses how factors like banks' access to funds, profit margins, and bargaining power impact the relationship between concentration and monetary policy transmission. It has implications for how monetary policy should be implemented based on a country's concentration level.
Application of taylor principle to lending rate pass through debate in nigeri...Alexander Decker
This document summarizes research on the pass-through of policy interest rates to retail lending rates in Nigeria. It finds that pass-through is incomplete, which contradicts the Taylor principle and implications for monetary policy effectiveness. The paper also reviews literature showing that retail rates typically do not fully adjust to changes in policy rates due to factors like bank-customer relationships and asymmetric information. An incomplete pass-through can interfere with the stabilizing role of monetary policy and alter macroeconomic stability.
Analysis of the effect of interest rate on stock prices of ghana stock excha...Dr.Teitey Emmanuel Ph.D
This document summarizes a research study that analyzed the effect of interest rates on stock prices on the Ghana Stock Exchange from 2009 to 2013. The study found a negative relationship between interest rates and stock prices over this period. Specifically, a 1% increase in interest rates was found to decrease stock prices by approximately 1.48%, and vice versa. This negative relationship can be explained by investors preferring to invest in fixed income assets like treasury bills when interest rates rise. The document provides an overview of previous studies that have examined the relationship between interest rates and stock market returns, finding mixed results, and discusses the rationale for expecting a negative correlation.
The document discusses the relationship between interest rates and gross domestic product (GDP) in Pakistan. It provides background on interest rates and GDP, reviews previous literature that finds both positive and negative relationships between the two variables, outlines the methodology used including regression analysis on annual interest rate and GDP data from 1960 to 2005, and presents the results of the regression analysis showing a statistically significant relationship between interest rates and GDP in Pakistan.
This research proposal examines the determinants of interest rates in Nepal's financial market. It will analyze the relationship between interest rates and several factors including budget deficits, inflation, unemployment, treasury rates, and GDP. The study will use secondary data from Nepalese commercial banks and descriptive, correlation, and regression statistical tools. It hypothesizes that budget deficits, inflation, and unemployment will have significant relationships with interest rates. If supported, the findings could help banking sectors and other financial institutions in Nepal.
The document summarizes a study that uses a structural vector autoregressive (SVAR) model to estimate the impact of unconventional monetary policy on macroeconomic variables in the UK. The study focuses on the bank lending channel as a possible transmission mechanism. The results from the baseline SVAR model show that unconventional monetary policy can generate inflation and increase output, but the effects are small and short-lived. However, the results are not robust for output based on sensitivity analysis. The study also does not find strong evidence that the bank lending channel is a significant transmission mechanism for unconventional monetary policy.
With banks being the major avenue that the CBK relies on to execute monetary policy, the paper
sought to investigate whether commercial banks are actually responsive to monetary policy.
The study used an Error Correctional Model to estimate a relationship where lending rates were
treated as the dependent variable while the independent variables were monetary policy,
specifically CBR. The model was also expanded to include additional independent variables
specifically monetary policy transmission channels. These include the credit channel which is
represented by credit to the private sector, exchange rate channel represented as nominal
exchange rate and asset price channel. For consistency, inflation and economic growth were
included in the model because these are the targets of monetary policy.The study findings
showed that there was a long run relationship between lending rates and Central Bank Rate,
Exchange Rates, Asset Price, Credit to the Private Sector, Economic growth and Inflation Rates.
The results also indicated that CBRand Inflation cause lending rates to increase in the short run
while credit to the private sector causes lending rates to decrease in the short run. A statistically
significant relationship was also established between lending rates and CBR, credit to the
private sector. The study concludes that commercial banks’ lending rates are indeed positively
responsive to CBR and that in order to spur economic growth; commercial banks’ lending rates
should be stabilized by streamlining the economic environment in which commercial banks
operate, therefore ensuring stable rates of borrowing.
This document discusses a study examining the impact of monetary policy on the financial performance of banks in Pakistan from 2007-2011. It uses interest rates set by the State Bank of Pakistan as a measure of monetary policy. The study finds that higher interest rates, representing a tighter monetary policy, have a significant negative relationship with banks' financial performance as measured by their return on assets and return on equity. The document provides background on monetary policy, its tools of expanding or contracting the money supply, and how interest rates can affect bank risk-taking and performance. It also reviews prior literature finding that higher capitalized banks may increase risk-taking less in response to lower rates than other banks.
This paper examines how banking sector concentration impacts monetary policy transmission through the bank lending channel using bank-level panel data from 13 countries from 1999 to 2011. The main finding is that higher banking concentration weakens the effectiveness of monetary policy, though this effect decreases during crisis periods. The paper discusses how factors like banks' access to funds, profit margins, and bargaining power impact the relationship between concentration and monetary policy transmission. It has implications for how monetary policy should be implemented based on a country's concentration level.
Application of taylor principle to lending rate pass through debate in nigeri...Alexander Decker
This document summarizes research on the pass-through of policy interest rates to retail lending rates in Nigeria. It finds that pass-through is incomplete, which contradicts the Taylor principle and implications for monetary policy effectiveness. The paper also reviews literature showing that retail rates typically do not fully adjust to changes in policy rates due to factors like bank-customer relationships and asymmetric information. An incomplete pass-through can interfere with the stabilizing role of monetary policy and alter macroeconomic stability.
Analysis of the effect of interest rate on stock prices of ghana stock excha...Dr.Teitey Emmanuel Ph.D
This document summarizes a research study that analyzed the effect of interest rates on stock prices on the Ghana Stock Exchange from 2009 to 2013. The study found a negative relationship between interest rates and stock prices over this period. Specifically, a 1% increase in interest rates was found to decrease stock prices by approximately 1.48%, and vice versa. This negative relationship can be explained by investors preferring to invest in fixed income assets like treasury bills when interest rates rise. The document provides an overview of previous studies that have examined the relationship between interest rates and stock market returns, finding mixed results, and discusses the rationale for expecting a negative correlation.
The document discusses the relationship between interest rates and gross domestic product (GDP) in Pakistan. It provides background on interest rates and GDP, reviews previous literature that finds both positive and negative relationships between the two variables, outlines the methodology used including regression analysis on annual interest rate and GDP data from 1960 to 2005, and presents the results of the regression analysis showing a statistically significant relationship between interest rates and GDP in Pakistan.
This research proposal examines the determinants of interest rates in Nepal's financial market. It will analyze the relationship between interest rates and several factors including budget deficits, inflation, unemployment, treasury rates, and GDP. The study will use secondary data from Nepalese commercial banks and descriptive, correlation, and regression statistical tools. It hypothesizes that budget deficits, inflation, and unemployment will have significant relationships with interest rates. If supported, the findings could help banking sectors and other financial institutions in Nepal.
Macroeconomic and industry determinants of interest rate spread empirical evi...Alexander Decker
This document summarizes a study that examines the bank-specific, industry-specific, and macroeconomic factors that influence interest rate spreads in Ghanaian commercial banks from 1990 to 2010. The study uses data from 33 commercial banks over this 21-year period. Key findings include that interest rate spreads are significantly influenced by bank ownership, management efficiency, GDP per capita, and government securities. Government borrowing also influences spreads but has a negative effect. The paper aims to identify important determinants of interest rate spreads for central banks, commercial banks, and economic managers in Ghana.
This document summarizes a study that investigated the determinants of commercial bank lending behavior in Nigeria. The study aimed to test how common factors like deposits, investments, interest rates, reserve requirements, and liquidity ratios affect bank lending. Regression analysis found the model to be significant, with deposits having the greatest impact on lending. The study suggests banks focus on deposit mobilization to enhance lending performance and develop strategic plans.
This document is a dissertation submitted by Martin Reilly in partial fulfillment of an MFin degree in international finance. The dissertation examines the impact of quantitative easing announcements by the US Federal Reserve on equity prices in the US. Specifically, it analyzes the stock price movements of 100 equities and three major indices in response to 7 announcements regarding the Federal Reserve's QE3 program between 2008-2014. The dissertation reviews previous literature on the topics of policy-rate guidance, interest rate effects, and large-scale asset purchase programs. It then outlines the methodology used, presents results showing the statistical significance of stock price movements on announcement days, and concludes that QE announcements had a measurable impact on equity prices.
This document summarizes a study that examined the determinants of commercial bank lending in Ethiopia between 2005-2011. The study tested whether bank size, credit risk, GDP, investment, deposit, interest rate, liquidity ratio, and cash reserve requirements influenced bank lending. It found that bank size, credit risk, GDP, and liquidity ratio had a significant relationship with lending, but deposit, investment, interest rate, and cash reserves did not. The study suggests banks focus on managing credit risk and liquidity to support lending.
This thesis investigates the determinants of lending behavior among commercial banks in Ethiopia. The author conducted a case study of eight commercial banks over the period of 2001 to 2013. Through a panel data regression analysis, the author found that deposit volume and bank size had a positive and significant impact on loans and advances. Liquidity ratio and interest rate had a negative and significant impact. Cash reserve requirements and inflation rate had a positive impact, though the relationship was unexpected. GDP growth did not have a statistically significant impact. The study suggests commercial banks focus on deposit mobilization to enhance lending.
This document discusses empirical research on the determinants of bank lending across countries. It proposes estimating equations to model domestic credit levels based on bank balance sheet and capital requirements approaches. The analysis will use data from 146 countries over 1990-2013 to examine how economic growth, banking system health, and external capital flows influence domestic credit after controlling for other factors. Key determinants expected to impact credit include deposits, interest rates, costs, capital levels, and macroeconomic conditions.
11.impact of injection and withdrawal of money stock on economic growth in ni...Alexander Decker
This document discusses a research study on the impact of money stock injection and withdrawal on economic growth in Nigeria from 1970 to 2008. The study uses regression analysis to examine the relationship between money stock and GDP. It finds that injecting money stock into the economy tends to reduce interest rates and increase investment, thereby boosting economic growth. However, it also notes that withdrawing money stock reduces the money available in the economy. The document provides background on monetary policy and debates between Keynesian and monetarist views. It also reviews previous related literature and discusses how the Central Bank of Nigeria can inject and withdraw money from the economy through tools like reserve requirements and interest rates.
This document summarizes a research paper that analyzed the determinants of credit risk in the Indonesian banking industry. Specifically, it examined how bank-specific variables like bank size, profitability, capital adequacy, and ownership structure influence the level of non-performing loans (NPL), which is used as a measure of credit risk. The document reviews several previous studies that also analyzed the relationship between credit risk and bank-specific factors in other countries. It then outlines the methodology that will be used in the research, including the data collection and analysis methods.
This document summarizes a study that uses a matched sample of individual loans, borrowers, and banks to investigate the effect of banks' financial health on the cost of loans for borrowers, while controlling for borrower risk and information costs. The key findings are:
1) Borrowers pay higher interest rates on loans from low-capital banks compared to well-capitalized banks, even after controlling for borrower risk.
2) This effect is most significant for borrowers where information costs are likely important.
3) When borrowing from weak banks, these high-information-cost borrowers tend to hold more cash, indicating costs to switching lenders.
4) The results provide support for
Modelling the sensitivity of zimbabwean commercial banks’ non performing loan...kudzai sauka
This paper used complementary panel data models that are fixed effect regression model and panel vector auto regression model. The study was motivated by the hypothesis that both macroeconomic and microeconomic variables have an effect on the loan quality. The first part of the research was to determine the specific macro and microeconomic variables that give rise to the non-performing loans (NPLs) using fixed effect regression model. The empirical findings of this study provide evidence that nonperforming loans depends on macro and micro economic variables, the trend analysis of Zimbabwean commercial banks’ shows an upward movement of over the period of study. The study found out that Gross domestic product (GDP), Inflation, loan deposit ratio and bank size had a statistical significant effect on the level of non-performing loans (NPLs). The second part was mainly to model the dynamic relationship of all the variables that were found to affect non-performing loans (NPLs); this was done through impulse response analysis based on PANEL VAR model. One standard shock to credit growth will be greatly felt in the sixth year, whereas of size of the bank will have a great negative impulse in the seventh year.
Determinants of commercial banks lending evidence from ethiopian commercial b...Alexander Decker
This document summarizes a study that examined the determinants of commercial bank lending in Ethiopia between 2005-2011. The study tested whether bank size, credit risk, GDP, investment, deposit, interest rate, liquidity ratio, and cash reserve requirements influenced bank lending. It found that bank size, credit risk, GDP, and liquidity ratio had a significant relationship with lending, but deposit, investment, interest rate, and cash reserves did not. The study suggests banks focus on managing credit risk and liquidity to support lending.
The moderating role of bank performance indicators on credit risk of indian p...Alexander Decker
The document analyzes the moderating role of bank performance indicators on the relationship between lending (advances) and credit risk (non-performing assets or NPA) for Indian public sector banks from 2000-2001 to 2011-2012. It finds that bank performance variables like borrowing, investments, reserves, deposits, capital, and total assets moderate the relationship between advances and NPA. Specifically, the study shows that over 90% of the variability in gross NPA for State Bank of India and its associates can be explained when including these bank performance variables and their interaction with advances in the regression model.
The aim of this paper is to examine the impact of bank minimum capital requirement on credit supply in Ivory Coast, over the period from 1982 to 2016. To this end, the ARDL method was used to study the nature of the relationship between our explanatory variables and bank credit supply in Ivory Coast. The study indicates some major results. The results showed that in the short term, real GDP per capita and bank size influence credit supply in Ivory Coast. Real GDP per capita acts negatively on credit supply in the short run while bank size has a positive influence on banks’ capacity to finance the economy. In the long run, the Cooke ratio and the openness rate have an impact on bank credit supply in Ivory Coast. The recovery of bank minimum capital requirements positively influences bank credit supply while the openness of the economy negatively impacts banks’ ability to offer bank credit. In terms of economic policies implications, monetary authorities must enforce and respect the policy of increasing bank minimum capital requirements. They must encourage banks to increase their banking assets.
Mosaic Financial Conditions Index is an effective asset allocation tool, based on the credit markets as a leading indicator for both economy and risk assets.
The long run impact of bank credit on economic growth in ethiopia evidence f...Alexander Decker
This document analyzes the long-run impact of bank credit on economic growth in Ethiopia from 1971/72 to 2010/11 using a multivariate cointegration approach. The results support a positive relationship between bank credit and economic growth, with bank credit affecting growth through both higher investment and more efficient resource allocation. Deposit liabilities were also found to positively impact long-run growth. Control variables like human capital, domestic capital, and trade openness positively impacted growth, while inflation and government spending negatively impacted growth. The findings imply policymakers should focus on developing Ethiopia's banking sector to promote domestic investment and long-run economic growth.
The Impact of Monetary Policy on Economic Growth and Price Stability in Kenya...iosrjce
The government of Kenya’s economic blueprint dubbed ‘Kenya Vision 2030’ acknowledges the
importance of maintaining a stable macro-economic environment. Despite Kenya implementing monetary
policy aimed at achieving stable prices and fostering economic growth, the economy has been reporting low
economic growth and high rates of inflation. These implies there is still a point of disconnect between what
Central bank of Kenya Pursues and the outcome of the objectives. In this study, structural vector autoregresion
(SVAR) model is estimatedto trace the effects of monetary policy shocks on economic growth and prices in
Kenya. Three alternative monetary policy instruments were put into use i.e. broad money supply (M3), interbank
lending rate (ILR) and the real effective exchange rate (REER). The study found evidence that monetary policy
innovations carried out on the quantity-based nominal anchor (M3) has modest effects on economic growth and
prices with a very fast speed of adjustment. Innovations on the price-based nominal anchors (ILR and REER)
have relative and fleeting effects on real GDP. The study recommended that Central Bank of Kenya should
place more emphasis on the use of the quantity-based nominal anchor rather than the price-based nominal
anchor
This document provides an overview of a master's thesis that investigates the influence of shadow banking activity on real economic growth. The thesis uses a multivariate regression analysis with GDP growth as the dependent variable and shadow banking leverage growth as the main independent variable, along with several control variables. The results of the regression analysis do not confirm the hypothesis that shadow banking activity positively impacts economic growth. Specifically, the coefficient for the shadow banking proxy is found to be significantly negative. However, robustness tests show that this sign and significance do not hold firmly. Therefore, the data cannot clearly establish a significant relationship between shadow banking activity and real growth.
Policy Rate, Lending Rate and Investment in Africa - A Phd proposal for defenseSamuel Agyei
The document discusses a PhD proposal on the relationship between policy rates, lending rates, and investment in Africa. It provides background on monetary policy transmission mechanisms and reviews literature on whether fiscal or monetary policy is more effective. The main channels of monetary policy transmission are discussed as the interest rate channel, credit channels, exchange rate channel, equity price channels, and expectations channel. The proposal aims to determine the main determinants of policy rates, lending rates, and deposit rates in Africa and how lending rates may affect investment.
Determinants of interest rate empirical evidence from pakistanAlexander Decker
This document summarizes a research paper that analyzes the determinants of interest rates in Pakistan. It begins with background definitions of key rate indicators like KIBOR and inflation. It then states the purpose is to study the determinants of interest rates, with the hypotheses that inflation and exchange rates have a positive impact on interest rates. The literature review summarizes several past studies on factors influencing interest rates in countries like Pakistan, Austria, and Japan. These studies examined the relationship between policy rates, market rates, inflation, and economic growth.
The Impact of Monetary Policy on Financial Performance: Evidence from Banking...Muhammad Arslan
The document analyzes the impact of monetary policy on the financial performance of banks in Pakistan. It specifically examines the relationship between interest rates set by the State Bank of Pakistan and two measures of bank performance: return on assets (ROA) and return on equity (ROE). The study finds that interest rates have a statistically significant negative relationship with both ROA and ROE, indicating that higher interest rates are associated with lower financial performance for banks. This supports the hypothesis that monetary policy has a negative effect on bank performance in Pakistan.
Volume of Deposits, A determinant of Total Long-term Loans Advanced by Commer...iosrjce
Commercial banks have exponentially increased their total loans advanced over the period 2002-
2013. However commercial banks in Kenya have shown varying long term lending behavior. The main objective
of this study was to establish the effect of determinants of long term lending in the Kenyan banking industry, a
case of Bungoma County. This study was guided by the following specific objective; to determine the effect of
volume of deposit on total loan advanced, of selected commercial banks in Kenya. The target population
comprised 13 commercial banks in Bungoma County with a sample size of 52 respondents. From the findings,
for every unit increase in volume of deposits, a 10.9%, unit increase in total loans advanced is predicted. The
model hypothesizes that there is functional relationship between the dependent variable and the independent
variable. The study then recommends that commercial banks should focus on mobilizing more deposits as this
will enhance their lending performance.
Macroeconomic and industry determinants of interest rate spread empirical evi...Alexander Decker
This document summarizes a study that examines the bank-specific, industry-specific, and macroeconomic factors that influence interest rate spreads in Ghanaian commercial banks from 1990 to 2010. The study uses data from 33 commercial banks over this 21-year period. Key findings include that interest rate spreads are significantly influenced by bank ownership, management efficiency, GDP per capita, and government securities. Government borrowing also influences spreads but has a negative effect. The paper aims to identify important determinants of interest rate spreads for central banks, commercial banks, and economic managers in Ghana.
This document summarizes a study that investigated the determinants of commercial bank lending behavior in Nigeria. The study aimed to test how common factors like deposits, investments, interest rates, reserve requirements, and liquidity ratios affect bank lending. Regression analysis found the model to be significant, with deposits having the greatest impact on lending. The study suggests banks focus on deposit mobilization to enhance lending performance and develop strategic plans.
This document is a dissertation submitted by Martin Reilly in partial fulfillment of an MFin degree in international finance. The dissertation examines the impact of quantitative easing announcements by the US Federal Reserve on equity prices in the US. Specifically, it analyzes the stock price movements of 100 equities and three major indices in response to 7 announcements regarding the Federal Reserve's QE3 program between 2008-2014. The dissertation reviews previous literature on the topics of policy-rate guidance, interest rate effects, and large-scale asset purchase programs. It then outlines the methodology used, presents results showing the statistical significance of stock price movements on announcement days, and concludes that QE announcements had a measurable impact on equity prices.
This document summarizes a study that examined the determinants of commercial bank lending in Ethiopia between 2005-2011. The study tested whether bank size, credit risk, GDP, investment, deposit, interest rate, liquidity ratio, and cash reserve requirements influenced bank lending. It found that bank size, credit risk, GDP, and liquidity ratio had a significant relationship with lending, but deposit, investment, interest rate, and cash reserves did not. The study suggests banks focus on managing credit risk and liquidity to support lending.
This thesis investigates the determinants of lending behavior among commercial banks in Ethiopia. The author conducted a case study of eight commercial banks over the period of 2001 to 2013. Through a panel data regression analysis, the author found that deposit volume and bank size had a positive and significant impact on loans and advances. Liquidity ratio and interest rate had a negative and significant impact. Cash reserve requirements and inflation rate had a positive impact, though the relationship was unexpected. GDP growth did not have a statistically significant impact. The study suggests commercial banks focus on deposit mobilization to enhance lending.
This document discusses empirical research on the determinants of bank lending across countries. It proposes estimating equations to model domestic credit levels based on bank balance sheet and capital requirements approaches. The analysis will use data from 146 countries over 1990-2013 to examine how economic growth, banking system health, and external capital flows influence domestic credit after controlling for other factors. Key determinants expected to impact credit include deposits, interest rates, costs, capital levels, and macroeconomic conditions.
11.impact of injection and withdrawal of money stock on economic growth in ni...Alexander Decker
This document discusses a research study on the impact of money stock injection and withdrawal on economic growth in Nigeria from 1970 to 2008. The study uses regression analysis to examine the relationship between money stock and GDP. It finds that injecting money stock into the economy tends to reduce interest rates and increase investment, thereby boosting economic growth. However, it also notes that withdrawing money stock reduces the money available in the economy. The document provides background on monetary policy and debates between Keynesian and monetarist views. It also reviews previous related literature and discusses how the Central Bank of Nigeria can inject and withdraw money from the economy through tools like reserve requirements and interest rates.
This document summarizes a research paper that analyzed the determinants of credit risk in the Indonesian banking industry. Specifically, it examined how bank-specific variables like bank size, profitability, capital adequacy, and ownership structure influence the level of non-performing loans (NPL), which is used as a measure of credit risk. The document reviews several previous studies that also analyzed the relationship between credit risk and bank-specific factors in other countries. It then outlines the methodology that will be used in the research, including the data collection and analysis methods.
This document summarizes a study that uses a matched sample of individual loans, borrowers, and banks to investigate the effect of banks' financial health on the cost of loans for borrowers, while controlling for borrower risk and information costs. The key findings are:
1) Borrowers pay higher interest rates on loans from low-capital banks compared to well-capitalized banks, even after controlling for borrower risk.
2) This effect is most significant for borrowers where information costs are likely important.
3) When borrowing from weak banks, these high-information-cost borrowers tend to hold more cash, indicating costs to switching lenders.
4) The results provide support for
Modelling the sensitivity of zimbabwean commercial banks’ non performing loan...kudzai sauka
This paper used complementary panel data models that are fixed effect regression model and panel vector auto regression model. The study was motivated by the hypothesis that both macroeconomic and microeconomic variables have an effect on the loan quality. The first part of the research was to determine the specific macro and microeconomic variables that give rise to the non-performing loans (NPLs) using fixed effect regression model. The empirical findings of this study provide evidence that nonperforming loans depends on macro and micro economic variables, the trend analysis of Zimbabwean commercial banks’ shows an upward movement of over the period of study. The study found out that Gross domestic product (GDP), Inflation, loan deposit ratio and bank size had a statistical significant effect on the level of non-performing loans (NPLs). The second part was mainly to model the dynamic relationship of all the variables that were found to affect non-performing loans (NPLs); this was done through impulse response analysis based on PANEL VAR model. One standard shock to credit growth will be greatly felt in the sixth year, whereas of size of the bank will have a great negative impulse in the seventh year.
Determinants of commercial banks lending evidence from ethiopian commercial b...Alexander Decker
This document summarizes a study that examined the determinants of commercial bank lending in Ethiopia between 2005-2011. The study tested whether bank size, credit risk, GDP, investment, deposit, interest rate, liquidity ratio, and cash reserve requirements influenced bank lending. It found that bank size, credit risk, GDP, and liquidity ratio had a significant relationship with lending, but deposit, investment, interest rate, and cash reserves did not. The study suggests banks focus on managing credit risk and liquidity to support lending.
The moderating role of bank performance indicators on credit risk of indian p...Alexander Decker
The document analyzes the moderating role of bank performance indicators on the relationship between lending (advances) and credit risk (non-performing assets or NPA) for Indian public sector banks from 2000-2001 to 2011-2012. It finds that bank performance variables like borrowing, investments, reserves, deposits, capital, and total assets moderate the relationship between advances and NPA. Specifically, the study shows that over 90% of the variability in gross NPA for State Bank of India and its associates can be explained when including these bank performance variables and their interaction with advances in the regression model.
The aim of this paper is to examine the impact of bank minimum capital requirement on credit supply in Ivory Coast, over the period from 1982 to 2016. To this end, the ARDL method was used to study the nature of the relationship between our explanatory variables and bank credit supply in Ivory Coast. The study indicates some major results. The results showed that in the short term, real GDP per capita and bank size influence credit supply in Ivory Coast. Real GDP per capita acts negatively on credit supply in the short run while bank size has a positive influence on banks’ capacity to finance the economy. In the long run, the Cooke ratio and the openness rate have an impact on bank credit supply in Ivory Coast. The recovery of bank minimum capital requirements positively influences bank credit supply while the openness of the economy negatively impacts banks’ ability to offer bank credit. In terms of economic policies implications, monetary authorities must enforce and respect the policy of increasing bank minimum capital requirements. They must encourage banks to increase their banking assets.
Mosaic Financial Conditions Index is an effective asset allocation tool, based on the credit markets as a leading indicator for both economy and risk assets.
The long run impact of bank credit on economic growth in ethiopia evidence f...Alexander Decker
This document analyzes the long-run impact of bank credit on economic growth in Ethiopia from 1971/72 to 2010/11 using a multivariate cointegration approach. The results support a positive relationship between bank credit and economic growth, with bank credit affecting growth through both higher investment and more efficient resource allocation. Deposit liabilities were also found to positively impact long-run growth. Control variables like human capital, domestic capital, and trade openness positively impacted growth, while inflation and government spending negatively impacted growth. The findings imply policymakers should focus on developing Ethiopia's banking sector to promote domestic investment and long-run economic growth.
The Impact of Monetary Policy on Economic Growth and Price Stability in Kenya...iosrjce
The government of Kenya’s economic blueprint dubbed ‘Kenya Vision 2030’ acknowledges the
importance of maintaining a stable macro-economic environment. Despite Kenya implementing monetary
policy aimed at achieving stable prices and fostering economic growth, the economy has been reporting low
economic growth and high rates of inflation. These implies there is still a point of disconnect between what
Central bank of Kenya Pursues and the outcome of the objectives. In this study, structural vector autoregresion
(SVAR) model is estimatedto trace the effects of monetary policy shocks on economic growth and prices in
Kenya. Three alternative monetary policy instruments were put into use i.e. broad money supply (M3), interbank
lending rate (ILR) and the real effective exchange rate (REER). The study found evidence that monetary policy
innovations carried out on the quantity-based nominal anchor (M3) has modest effects on economic growth and
prices with a very fast speed of adjustment. Innovations on the price-based nominal anchors (ILR and REER)
have relative and fleeting effects on real GDP. The study recommended that Central Bank of Kenya should
place more emphasis on the use of the quantity-based nominal anchor rather than the price-based nominal
anchor
This document provides an overview of a master's thesis that investigates the influence of shadow banking activity on real economic growth. The thesis uses a multivariate regression analysis with GDP growth as the dependent variable and shadow banking leverage growth as the main independent variable, along with several control variables. The results of the regression analysis do not confirm the hypothesis that shadow banking activity positively impacts economic growth. Specifically, the coefficient for the shadow banking proxy is found to be significantly negative. However, robustness tests show that this sign and significance do not hold firmly. Therefore, the data cannot clearly establish a significant relationship between shadow banking activity and real growth.
Policy Rate, Lending Rate and Investment in Africa - A Phd proposal for defenseSamuel Agyei
The document discusses a PhD proposal on the relationship between policy rates, lending rates, and investment in Africa. It provides background on monetary policy transmission mechanisms and reviews literature on whether fiscal or monetary policy is more effective. The main channels of monetary policy transmission are discussed as the interest rate channel, credit channels, exchange rate channel, equity price channels, and expectations channel. The proposal aims to determine the main determinants of policy rates, lending rates, and deposit rates in Africa and how lending rates may affect investment.
Determinants of interest rate empirical evidence from pakistanAlexander Decker
This document summarizes a research paper that analyzes the determinants of interest rates in Pakistan. It begins with background definitions of key rate indicators like KIBOR and inflation. It then states the purpose is to study the determinants of interest rates, with the hypotheses that inflation and exchange rates have a positive impact on interest rates. The literature review summarizes several past studies on factors influencing interest rates in countries like Pakistan, Austria, and Japan. These studies examined the relationship between policy rates, market rates, inflation, and economic growth.
The Impact of Monetary Policy on Financial Performance: Evidence from Banking...Muhammad Arslan
The document analyzes the impact of monetary policy on the financial performance of banks in Pakistan. It specifically examines the relationship between interest rates set by the State Bank of Pakistan and two measures of bank performance: return on assets (ROA) and return on equity (ROE). The study finds that interest rates have a statistically significant negative relationship with both ROA and ROE, indicating that higher interest rates are associated with lower financial performance for banks. This supports the hypothesis that monetary policy has a negative effect on bank performance in Pakistan.
Volume of Deposits, A determinant of Total Long-term Loans Advanced by Commer...iosrjce
Commercial banks have exponentially increased their total loans advanced over the period 2002-
2013. However commercial banks in Kenya have shown varying long term lending behavior. The main objective
of this study was to establish the effect of determinants of long term lending in the Kenyan banking industry, a
case of Bungoma County. This study was guided by the following specific objective; to determine the effect of
volume of deposit on total loan advanced, of selected commercial banks in Kenya. The target population
comprised 13 commercial banks in Bungoma County with a sample size of 52 respondents. From the findings,
for every unit increase in volume of deposits, a 10.9%, unit increase in total loans advanced is predicted. The
model hypothesizes that there is functional relationship between the dependent variable and the independent
variable. The study then recommends that commercial banks should focus on mobilizing more deposits as this
will enhance their lending performance.
Lesson 6 Discussion Forum Discussion assignments will beDioneWang844
Lesson 6 Discussion Forum :
Discussion assignments will be graded based upon the criteria and rubric specified in the Syllabus.
550 Words
For this Discussion Question, complete the following.
1. Review the two articles about bank failures and bank diversification that are found below this. Economic history assures us that the health of the banking industry is directly related to the health of the economy. Moreover, recessions, when combined with banking crisis, will result in longer and deeper recessions versus recessions that do occur with a healthy banking industry.
2. Locate two JOURNAL articles which discuss this topic further. You need to focus on the Abstract, Introduction, Results, and Conclusion. For our purposes, you are not expected to fully understand the Data and Methodology.
3. Summarize these journal articles. Please use your own words. No copy-and-paste. Cite your sources.
Please post (in APA format) your article citation.
Reply to Post 1: 160 words and Reference
Discussion on Bank’s failures and its diversification
Over the last two decades, business cycle volatility has decreased in the US. For example, some analysts claimed that companies handle inventory better today than ever, or that advances in financial systems have helped smooth industry volatility. Some emphasized stronger economic policy. Banking changes were also drastic in this same era, contributing to the restructuring and convergence of massive, global banking institutions in a better-organized structure. The article (Strahan, 2006) points out that some regulatory reform driven by individual countries rendered it possible for banks to preserve their resources and income by gradually diversifying from local downturns. Both low state volatility rates and a decline in partnerships between the local market and the central banking sector is a net influence on the diversification in banks. Considering the less fragile state economies following these intergovernmental financial reforms, there are some signs that financial convergence – while certainly not the only piece of the puzzle – has been less unpredictable.
Another article (Walter, 2005) argues that a long-standing reason for bank collapses during the crisis is a contagion, which contributes to systemic bank failures and the collapse of one bank initially. This indicates why several losses in the crisis period were unintentional, which ensured that the banks remained stable and endured without contagion-induced falls. The response to the contagion was the central government’s deposit policy, bringing an end to defaults. Nevertheless, since the sequence of errors began in the early 1920s, well before contagion was evident, the underlying trigger must be contagion.
Now it seems like the bank sector has undergone a shake-out that was worsened during the crisis by the deteriorating economic conditions. Although the reality that incidents occurred almost syno ...
6.[60 67]impact of injection and withdrawal of money stock on economic growth...Alexander Decker
This document discusses a research study on the impact of money stock injection and withdrawal on economic growth in Nigeria from 1970 to 2008. The study uses regression analysis to examine the relationship between money stock and GDP. It finds that injecting money stock into the economy tends to reduce interest rates and increase investment, thereby boosting economic growth. However, it also notes that withdrawing money stock reduces the money available in the economy. The document provides background on monetary policy and debates between Keynesian and monetarist views. It also reviews previous related literature and discusses how the Central Bank of Nigeria can inject and withdraw money from the economy through tools like reserve requirements and interest rates.
The literature shows little evidence on the effects of the business model upon the volatility of banks in developing and fast growing economies. Hence, this study examines the effects of busi-ness model choice on bank’s stability in ASEAN countries. Using GMM and other robust econo-metric methods on the sample of 99 joint stock commercial banks, we find significant and nega-tive impacts of diversification model in which bank shifts toward non – interest and fee – based activities. We also find that the impacts are different between two groups of countries. For Vi-etnam, Indonesia and the Philippines, the diversification entails negative impacts on the stability while demonstrating positive impacts for Thailand and Malaysia. Upon the findings, we draw policy implications for a more sustainable development in ASEAN banking business.
This study examined the effect of interest rate deregulation on Nigerian banking system. The study adopted Augmented Dickey – Fuller (ADF), Bound test and Autoregressive Distributed Lag (ARDL). The correlation result indicated that of the correlation matrix that all the explanatory variables (interest rate, lending rate and deposit rate) had effect on loan and advances. The results of the unit root test revealed that interest rate and lending rate were stationary at level 1(0) while loan and advances and deposit rate were stationary at first difference 1(1). Also the results of the bound test revealed that there exist long run equilibrium relationship among the variables. The result of the ARDL indicated that interest rate had significant effect on loan and advances while lending rate and deposit rate had an insignificant effect on loan and advances. It was concluded that banks should monitor the level of loan and advances in respect to major ratios for effective performance. The study thus, recommended that banks should monitor lending rate which should be fixed in order to enhance lending performance. Regulatory authority should ensure that macroeconomic variables such as money supply, liquidity ratio, lending rate, monetary policy rate are effectively managed to enhance bank performance.
Question 1Response 1Development inside and out effects t.docxaudeleypearl
Question 1:
Response 1:
Development inside and out effects the entire country's economy. It impacts the managing body, regardless the clearly irrelevant subtleties in the average person's dependably life. Both a conditions and clear deferred results of how the economy is getting along, swelling has the two its fans and spoilers. Distinctive envisions that particular degrees of swelling are helpful for a prospering economy, yet that progressively critical rates raise concerns. It can degrade the money basically and, at logically lamentable, has been a key part to subsidences.
Swelling, as referenced, is the rate a worth ascensions, and fundamentally how much the dollar is worth at a given moment concerning checking. The idea behind swelling being an impact for good in the economy is that a reasonable enough rate can nudge financial movement without debasing the money so much that it ends up being basically vain (Kohn, 2006).
Swelling can in like manner falter from asset for asset. Subordinate upon the season, the expense of gas could go up independently from with everything considered headway as it routinely does as summer moves close. In reality, there is even a term - focus improvement - for swelling that parts in everything except for sustenance and imperativeness (gas and oil), as these regions have separate factors that add to them. There are a wide degree of sorts of swelling, subordinate upon what remarkable is being viewed comparatively as what the development rate truly is by all accounts. For example, what happens if the swelling rate is well over the Fed's normal goal? At a higher rate, yet still in the single digits, that is known as walking swelling. It is seen as concerning yet sensible (Ball, 2006).
Swelling is generally depicted reliant on its rate and causes. By and large, Inflation happens in an economy when vitality for thing and experiences outmaneuvers the supply of yield. in this manner, clarifications behind Inflation have different sides, the intrigue side and supply side. The widely inclusive activity of hazard premiums in driving enlargement pay over the scope of advancing years is dependable with secured budgetary improvement and inside and out oblige cash related procedure events in the moved economies. The degree for further fitting budgetary enabling seen with money related stars seems to have declined amidst the enough low advance charges and gigantic monetary records of national banks (Bodie, 2016).
In relentless time, the correspondence of perils has wound up being constantly phenomenal, the general point of view has lit up, and money related conditions have engaged on net. With the work superstar proceeding to reinforce, and GDP improvement expected to keep up a vital good ways from back in the consequent quarter, it likely will be fitting soon to change the affiliation supports rate. Likewise, if the economy propels as shown by the SEP concentrate way, the affiliation supports rate will probably app ...
This document analyzes the relationship between inflation and economic growth in Bangladesh from 1980 to 2014. It finds that inflation has negatively impacted growth when inflation rates are very high, such as over 20%. However, moderate inflation rates between 3-8% appear correlated with higher economic growth of around 5-6%. The relationship between inflation and growth is non-linear, with inflation potentially stimulating growth up to a certain threshold, after which high inflation hinders growth. Understanding this relationship is important for Bangladesh's central bank in conducting monetary policy.
Article 1Authors Christian Ewerhart, Nuno Cassola, Steen Ejersk.docxfredharris32
Article 1
Authors: Christian Ewerhart, Nuno Cassola, Steen Ejerskov, Natacha Valla
Title of the article: Manipulation in money markets
Journal Name: International Journal of Central Banking, March 2007
Summary
The article talks about the impact of manipulation in the implementation of the monetary policy. The authors claim that as a result of the impulsive reactions to the fundamental index of interbank interest rates, manipulation has turned out to be a major challenge for the operational enactment of the monetary policy. Therefore, to address the issue, the authors have focused on a microstructure model whereby a commercial bank can have a strategic alternative to the standing facilities of the central bank. They typify equilibrium where market rates are positively manipulated. The findings of the study prove that manipulation can be lucrative for a commercial bank with appropriate ex-ante features. And so, manipulation will continue to be a characteristic of equilibrium albeit stakeholders in the derivatives market create rational prospects regarding potential manipulation. The authors conclude by recognizing that the monetary authority has controlling techniques to fight manipulation and that further vigilance is required to ascertain that there is no operational manipulation (Ewerhart, Cassola, Ejerskov, & Valla, 2007).
Key points
The principal ideas discussed in the article regarding manipulation in the money markets include:
· Manipulation is a potential concern in money markets, particularly when a commercial bank holds a profitable position in which it can gain from may be an increase in interest rates.
· From an operational viewpoint, manipulation can increase volatility to the immediate interest rate thereby complicating the liquidity control of both the central bank and the commercial banks.
· Manipulation can have an impact on the market's confidence during a smooth execution of monetary policy, which will in turn affect the long-term refinancing conditions thereby upsetting the effectiveness of the monetary policy.
· The decision to manipulate a market by a commercial bank is contingent on factors such as the bank's general trading and deposit capacities, its readiness to take premeditated measures in search of profitable frontiers as well as the internal distribution of its risk budget between money markets.
· Competition amongst potential manipulators cannot impede the likelihood of manipulation.
· The immediate reaction by the central bank can help in reducing the volatility in the money markets caused by manipulations.
Reaction to the article
The microstructure model used in the study to show that manipulation can be lucrative for a commercial bank is efficient to illustrate the nature of financial markets. The model implies that investors can benefit from insider information and use it to change the nature of financial markets. In the financial stock market, insider information may lead to trading of stocks between invest ...
MACROECONOMIC FOCUS AND INDUSTRY ANALYSIS .docxsmile790243
MACROECONOMIC FOCUS AND INDUSTRY ANALYSIS 1
MACROECONOMIC FOCUS AND INDUSTRY ANALYSIS 2
Milestone Two
Macroeconomic Focus and Industry Analysis
NOTE: highlighted any change you made. Know which one is revised. Thanks.
Note: See all highlighted on yellow comments and revised it.THANKS.
Macroeconomic Focus and Industry Analysis
Macroeconomic forecast of the monetary school of thought.
From a monetarist perspective, regulation of the flow and circulation of money is important in determining and influencing preferred economic conditions in the United States. Reducing the circulation of money in the economy has many effects on the macroeconomic environment and determines the activities of other stakeholders in the financial market. From a monetarist school of thought, the government has sole responsibility to both country and citizens in ensuring favorable monetary policies are implemented that are akin to the prevailing economic conditions through the control of inflation and prevention of deflation in the country (Fair, 2011).
Reducing the supply of money in the economy has effects on the macro-economic Cory Kanth:
This point is not clear. It needs clarification in terms of better explanation.
environment as earlier mentioned. Reducing money circulation has both short run and a long run effect that shift practices in the economic environment. For instance, consumer spending is affected by the implementation of monetary policies. When the government implements monetary policies that do not favor money circulation, consumer spending capabilities are significantly reduced (Fair, 2011). The reduction in the spending is due to the reduced flow of money in the financial market which limits the funds accessible to consumers in the market. This policy is usually exercised in a bid to control inflation in the market where prices go up due to increased demand catalyzed by the availability of money in the hands of the spenders.
Reducing the growth of money circulation from a monetary perspective is empirical in determining the cost of labor. When there is a circulation of money in the market, individuals can opt for willing unemployment due to the availability of funds through other sources other than the low paying jobs (Gnimassoun & Mignon, 2015). Further analysis on the effect of reducing money circulation is the government stabilizes the prices of labor meaning little choice is left for personnel who may discriminate employment due to reduced wages or low salaries.
Investment spending is a factor directly affected by the increase in interest rates. This is because investors avoid high lending rates due to high interests that are amassed over operational periods. Moreover, increased lending rates affect investment spending since capital and ...
The relationship between net interest margin and return on assets of listed b...Alexander Decker
This study examined the relationship between net interest margin (NIM) and return on assets (ROA) of listed banks in Ghana from 2005-2011. It found a strong positive correlation between NIM and ROA, with NIM explaining 82.6% of the variation in ROA. Both NIM and ROA generally decreased over the period, though they increased between 2009-2010. The study also found a very strong positive relationship between net interest income and profit before tax, with net interest income explaining 99.8% of the variation in profit before tax. In conclusion, the ability of banks to generate net interest income was highly influential in determining their level of profitability.
An analysis of loan portfolio management on organization profitability case o...Alexander Decker
This document summarizes a research study that investigated the determinants of profitability among commercial banks in Kenya. Specifically, it examined the impact of loan portfolio management, interest expenses, and administrative costs on bank profitability.
The introduction provides background on the important role of banks in financing economic activity and intermediating funds. It also discusses previous research that has identified various internal and external factors that influence bank profitability, including capital ratios, loan loss provisions, interest rates, and expense control.
The document then reviews literature related to the factors being studied - loan portfolio and its relationship to bank liquidity and risk/profit tradeoffs, how interest rates impact bank revenues and yields, and the link between administrative costs and managerial
Using a series of econometric techniques, the study analysed interaction between monetary policy and private sector credit in Ghana. This study made use of monthly dataset spanning January 1999 to December 2019 of credit to the private sector (PSC) and broad money supply (M2). The results reveal that there exists cointegration, a long run stationary relation between monetary policy and private sector credit. This implies, increases in credit should prompt long-term increases in monetary policy. It is not surprising that growth in the private sector might have a stronger effect on monetary policy. The Error Correction Test is statistically significant and that all the variables demonstrate similar adjustment speeds. This implies that in the short run, both money supply and credit are somewhat equally responsive to their last period’s equilibrium error. There is unidirectional causation from private sector credit to monetary policy. It can be said that, there is an interaction between money supply and private sector credit. Thus, credit to private sector holds great potential in promoting economic growth. It can be recommended to the government to increase the credit flow to the private sector because of its strategic importance in creating and generating growth of the economy.
Finance companies, central bank of nigeria and economic developmentAlexander Decker
This document summarizes an empirical study that examines the relationship between Central Bank of Nigeria (CBN) regulatory activities, finance house activities, and economic development in Nigeria from 1992-2010. It uses gross domestic product (GDP) as a measure of economic development and proxies CBN activities with minimum paid up capital and shareholders fund, and finance house activities with domestic credit and total assets. The study finds that a significant relationship exists between finance house activities and economic development, but that CBN regulatory activities have no significant relationship with finance house operations. It recommends policies to encourage existing finance houses and license new ones to better support Nigeria's overall economy.
Impact of injection and withdrawal of money stock on economic growth in nigeriaAlexander Decker
This document summarizes a study that examines the impact of injecting and withdrawing money stock on economic growth in Nigeria from 1970 to 2008. It uses regression analysis to study the relationship between money supply (M2) and interest rates as indicators of money stock changes, and gross domestic product (GDP) as a measure of economic growth. The study finds that injecting money stock by increasing the money supply tends to reduce interest rates and increase investment, thereby stimulating economic growth. However, excessive money stock increases that are not matched by growth in real output can lead to inflation instead of higher growth.
This paper examines the efficiency dynamics and convergence of Islamic and conventional banks across 23 countries from 1999 to 2014. Using parametric and non-parametric methods, the authors find that on average, Islamic and conventional banks have similar steady state efficiency levels and rates of efficiency convergence. However, classification tree analysis reveals that steady state efficiencies and convergence rates can vary between bank types in some countries. The alignment of Islamic and conventional banking systems is positively related to factors like financial depth, transparency, and economic stability. The paper provides novel insights into differences and similarities between Islamic and conventional banking models across countries.
Estimation of Net Interest Margin Determinants of the Deposit Banks in Turkey...inventionjournals
Banks, which are the irreplaceable intermediaries of the financial system, are financial institutions that significantly contributeto economic development. The basiccriterion that indicates the efficiency of the intermediation activities of banks is the net interest margins. These costs are assumed to be high for developing countries such as Turkey. The degree to which banks are willing to redeem the funds they collect as credit to the system is directly related to how low their intermediation costs will be. In this paper, it is aimed to estimate the net interest margin determinants of deposit banks in Turkey. Three different panel data models are used for this purpose. These are the Fixed and Random Static models and the GMM (Generalized Moment Models) Dynamic model
This document examines the impact of monetary policy on the Nigerian economy from 1981 to 2008. The results of the analysis show that monetary policy, as represented by money supply, has a positive impact on GDP growth and the balance of payments, but a negative impact on inflation. The recommendations are that monetary policy should facilitate investment through appropriate interest rates, exchange rates, and liquidity management, and that the money market should provide more financial instruments to satisfy the growing sophistication of participants.
How to Fix the Import Error in the Odoo 17Celine George
An import error occurs when a program fails to import a module or library, disrupting its execution. In languages like Python, this issue arises when the specified module cannot be found or accessed, hindering the program's functionality. Resolving import errors is crucial for maintaining smooth software operation and uninterrupted development processes.
Walmart Business+ and Spark Good for Nonprofits.pdfTechSoup
"Learn about all the ways Walmart supports nonprofit organizations.
You will hear from Liz Willett, the Head of Nonprofits, and hear about what Walmart is doing to help nonprofits, including Walmart Business and Spark Good. Walmart Business+ is a new offer for nonprofits that offers discounts and also streamlines nonprofits order and expense tracking, saving time and money.
The webinar may also give some examples on how nonprofits can best leverage Walmart Business+.
The event will cover the following::
Walmart Business + (https://business.walmart.com/plus) is a new shopping experience for nonprofits, schools, and local business customers that connects an exclusive online shopping experience to stores. Benefits include free delivery and shipping, a 'Spend Analytics” feature, special discounts, deals and tax-exempt shopping.
Special TechSoup offer for a free 180 days membership, and up to $150 in discounts on eligible orders.
Spark Good (walmart.com/sparkgood) is a charitable platform that enables nonprofits to receive donations directly from customers and associates.
Answers about how you can do more with Walmart!"
हिंदी वर्णमाला पीपीटी, hindi alphabet PPT presentation, hindi varnamala PPT, Hindi Varnamala pdf, हिंदी स्वर, हिंदी व्यंजन, sikhiye hindi varnmala, dr. mulla adam ali, hindi language and literature, hindi alphabet with drawing, hindi alphabet pdf, hindi varnamala for childrens, hindi language, hindi varnamala practice for kids, https://www.drmullaadamali.com
How to Manage Your Lost Opportunities in Odoo 17 CRMCeline George
Odoo 17 CRM allows us to track why we lose sales opportunities with "Lost Reasons." This helps analyze our sales process and identify areas for improvement. Here's how to configure lost reasons in Odoo 17 CRM
Main Java[All of the Base Concepts}.docxadhitya5119
This is part 1 of my Java Learning Journey. This Contains Custom methods, classes, constructors, packages, multithreading , try- catch block, finally block and more.
This presentation includes basic of PCOS their pathology and treatment and also Ayurveda correlation of PCOS and Ayurvedic line of treatment mentioned in classics.
This presentation was provided by Steph Pollock of The American Psychological Association’s Journals Program, and Damita Snow, of The American Society of Civil Engineers (ASCE), for the initial session of NISO's 2024 Training Series "DEIA in the Scholarly Landscape." Session One: 'Setting Expectations: a DEIA Primer,' was held June 6, 2024.
This slide is special for master students (MIBS & MIFB) in UUM. Also useful for readers who are interested in the topic of contemporary Islamic banking.
Chapter 4 - Islamic Financial Institutions in Malaysia.pptx
Propo
1. Background of the Study
Historical background
Inflation is generally the persistent increase of price level of goods and services in an economy
over a period of time. When price level rises, each unit of currency buys fewer goods and services.
Consequently, inflation results into a reduction in the purchasing power per unit of money, a loss
of real value in the medium of exchange and unit of account within the economy (Boyd and
Champ, 2004).They further observes that high inflation rates are caused by excessive growth of
money supply in the economy compared to the rate of economic growth, a lower rate of inflation
is thus favored since it reduces severity of economic recessions by enabling the labor market to
adjust more quickly in a down turn.
Commercial banks comprise the largest group of depository institutions in size. They perform
functions similar to those of savings institutions and credit unions, that is, they accept deposits
(liabilities) and make loans (Saunders and Cornett, 2003). Thus financial institutions must be
profitable in order to ensure the stability of the financial system during economic crisis like the
one that started at the end of 2007 and was deteriorated after the collapse of Lehman Brothers in
USA. Many studies have attempted to identify the factors affecting banks’ profitability, since their
knowledge is considered very significant for different groups of people such as the managers, the
investors or even the governments. Banks’ management is interested in knowing the determinants
that designate their performance, in order to adjust their policy over them and increase their
prosperity. On the other hand, investors by knowing such kind of information are able to control,
if the financial institutions operate by taking into consideration these factors and invest to them.
Conceptual back ground
The chief measure of price inflation is the inflation rate, the annualized percentage change in a
general price index (normally the consumer price index) over time, The consumer price index
measures movements in prices of a fixed basket of goods and services purchased by a typical
consumer, The inflation rate is the percentage rate of change of a price index over time. Lending
is the most important services that commercial banks do render their customers, in other word
banks grant advances and loan to individuals, government and business organization (Cheboi,
2012).
2. Commercial banks are the most important savings, mobilization and financial resource allocations
institutions, consequently these roles make them an important phenomenon in economic growth
and development. In performing this role, it must be realized that banks have the potential, scope
and prospects for mobilizing financial resources and allocating them to productive investments.
Therefore, no matter the sources of the generation of income or the economic policies of the
country, commercial banks would be interested in giving out loans and advances to their numerous
customers bearing in mind, the three principles guiding their operations which are, profitability,
liquidity and solvency (Cheboi, 2012).
Taner (2000) study on the effects of inflation uncertainty on credit markets reveals that
unpredictable inflation raises interest rates, decreases loan supply and affect loan demand. This
therefore suggests that an increase in inflation may raise the bank lending rates and lead to low
bank lending volumes. Emon (2012)confirms this assertion and states that lenders are very aware
that inflations erodes the value of their money over the time period of a loan, so they increase the
interest rates to compensate for the loss. The increased interest rates may therefore influence the
borrowing patterns for any commercial bank. This also suggests that there is a positive relationship
between the inflation rates and the lending rates even though the extent to which one affects the
other for different time periods is not certain.
Contextual background
Chodechai (2004) while investigating factors that affect interest rates, degree of lending volume
and collateral setting in the loan decision of banks, under notes that Banks have to be careful with
their pricing decisions as regards to lending as banks cannot charge loan rates that are too low
because the revenue from the interest income will not be enough to 2 cover the cost of deposits,
general expenses and the loss of revenue from some borrowers that do not pay. Moreover, charging
too high loan rates may also create an adverse selection situation and moral hazard problems for
the borrowers. However, commercial banks decisions to lend out loans are influenced by a lot of
factors such as the prevailing interest rate, the volume of deposits, the level of their domestic and
foreign investment, banks liquidity ratio, prestige and public recognition to mention a few.
Interest rate is the amount charged as percentage of principal by a lender to a borrower for the use
of assets based on the risk level that is the compensation for the loss of asset’s use by the lender.
Inflation is a key determinant of commercial banks‟ lending rates globally. According to Santoni
3. (1986), inflation depreciates the value of money such that a percentage increase in inflation results
into a similar percentage fall in value of the country’s currency.
Thulani (2012) study investigated the relationship between inflation and interest rate spread in
Kenya and the extent to which the Fisher effect hypothesis holds. The study utilized annual time
series data for the fifteen year period starting from the year 1997 to the year 2011. The study found
that inflation had a long term relationship with interest rate. The previous studies such as Liu et al.
(2000), Ubide (1997), Leheyda (2005) and Khan et al. (2006) have addressed the determinants of
banking lending rates and performance and use of monetary policy by the central banks to control
money markets. From these previous studies, it is evident that none of the studies investigated the
effects of inflation on profitability of commercial banks in Uganda.
Theoretical background
Broadly, inflation theorists attribute inflation to monetary causes and mal adjustments in economic
system (Chand, 2008). The performance of commercial banks has been a considered issue in the
developing countries. This phenomenon is attributed to the crucial role of the commercial banks
in the economy. Further, the performance of banking is important to depositors, owners, potential
investors and policy makers as banks are the effective executors of monetary policy of the
government (Mian et al.2013). This suggests that the volumes of bank lending may partly depend
on the performance of commercial banks.
According to the quantity theory of money, most exactly stated in Professor Fisher's " equation of
exchange," an increase in money and bank credit beyond the needs of trade at a given price level
tends to raise that price level. Such is the common conception of inflation. The equal and
simultaneous movements of total purchasing power and trade would result in a stable price level.
Total purchasing power has been shown to be the sum of two products, namely, the quantity of
money in circulation multiplied by its efficiency (or velocity of circulation) and the quantity of
bank deposits multiplied by their efficiency. If this total purchasing power remains the same but
the quantity of trade declines, there will be inflation. If the quantity of trade remains the same, then
inflation may be caused by increases in the quantity of money or of bank credit, or in their
efficiencies. There can be gold inflation as well as paper money inflation or bank credit inflation
(Smith, William & Blinder, 2006)
4. Problem statement
Despite financial sector reforms in Uganda since the 1980s and 1990s, commercial banks’
performance has remained poor and inefficient in the overall financial intermediation. Poor
performance of the banks have continued to manifest into high levels of credit risk to private
agents, poor asset quality, limited and or inadequate capitalization, operational inefficiencies, and
higher incidences of non-performing loans and higher levels of liquidity risk and high cost in
overall financial intermediation. Poor performance of commercial banks is also blamed on low
levels of economic growth as reflected in the high interest rate spreads, high inflation rates, high
interest rates, lower deposit rates to capital investment, high volatility in exchange rate, and low
growth in GDP and GDP per-capita
Furthermore, the increased trend toward bank disintermediation in Uganda, the role of banks has
remained central in financing economic activities in general and different segments of the market.
Empirical evidence show that a sound and profitable banking sector is in a better position to
withstand negative shocks and contribute to the stability of the financial system. The hogh inflation
in Uganda has been the significant force behind DFCU and other commercial banks’ poor
performance resulting into interest rate spread, high cost of financial intermediation, credit risk
and inefficient and non-competitive financial systems are features of underdeveloped banking
system. This study attempts to bridge the gap by determining the effects of inflation on profitability
of commercial banks in Uganda focusing DFCU Nateete Branch
Specific objective of the study
To establish the effect of high exchange rate on the profitability of commercial banks in Uganda
To assess the influence of high interest rate on the profitability of commercial banks in Uganda
To ascertain the relationship between consumer price index and the profitability of commercial
banks in Uganda
5. Significance
The commercial banks management, especially the top level management will use the study to
understand how inflation affects the financial performance of the commercial banks and set up
strategies in handling its effects.
They will also understand the causes and effects of inflation and positively manage the
consequences for better performance of the commercial banks.
The government and its agencies will be assisted by this study to understand the ideal level of
inflation that will have maximum stimulation of the best financial performance of commercial
banks that will in turn stimulate economic growth.
The researchers and scholars will use the study to get more information about the relationship
between inflation levels and financial performance of commercial banks in Kenya. This will assist
them in their scholarly works.
1.9 Conceptual framework
INDEPENDENT VARIABLE DEPENDENT VARIABLE
INTERVENING VARIABLE
Inflation
- Exchange rate
- Interest rate
- Consumer price index
Profitability
- Return on assets
- Return on equity
- Return on investment
- Bank of Uganda policies
- Government policies
- Economic policies
6. LITERATURE REVIEW
Lots of studies have attempted to identify the major determinants of banks‟ profitability, which is
affected by internal and external determinants. The measures that are used usually, in the literature,
for bank profitability are the return on assets (ROA) and/or the return on equity (ROE) and
especially the average value of them. With the term internal determinants we define bank specific
determinants of profitability, such as capital adequacy, liquidity, operational efficiency (expenses
management), bank size and other. The external determinants are industry-specific and
macroeconomic variables affecting financial institutions‟ profitability. Such external influences
include GDP growth, interest rates, inflation, ownership and other.
Theoretical review
Theoretical models in the money and growth literature analyze the impact of inflation on growth
focusing on the effects of inflation on the steady state equilibrium of capital per output. There are
three possible results regarding the impact of inflation on output and growth: money is neutral and
supernatural in an optimal control frame work considering real money balances (M/P) in the utility
function. The assumption that money as substitute to capital, established the positive impact of
inflation on growth; this result being known as the Tobin effect. The negative impact of inflation
on growth, also known as the anti-Tobin effect, is associated mainly with cash in advance models
which consider money as complementary to capital (Tobin 1999).An increase in the general level
of prices implies a decrease in the purchasing power of the currency. That is, when the general
level of prices rises, each monetary unit buys fewer goods and services. The effect of inflation is
not distributed evenly in the economy, and as a consequence there are hidden costs to some and
benefits to others from this decrease in the purchasing power of money.
According to Greenspan (2002) one theory of inflation is called monetarism. This theory says that
inflation is always present and that it is a monetary problem. This theory also says that the amount
of money that exists will determine the amount of money that people spend. The idea is that the
price of items will go up only if the supply of the items is lower than the demand for the items.
The price of items will also go down if the demand for the items is higher than the supply of the
items. This theory also says that since the amount of spending is determined by the amount of
7. money in circulation the demand for items can be determined by calculating the amount of money
in existence. Because of this theory, one could assume that if the amount of money in circulation
goes up so does the amount of spending and so does the demand for consumer goods. Using this
theory, the only reason that prices would go up is if the amount of money in circulation goes up.
Inflation
Inflation can have positive and negative effects on an economy. Negative effects of inflation
include loss in stability in the real value of money and other monetary items over time; uncertainty
about future inflation may discourage investment and saving, and high inflation may lead to
shortages of goods if consumers begin hoarding out of concern that prices will increase in the
future. Positive effects include a mitigation of economic recessions, and debt relief by reducing
the real level of debt. The effect of inflation on the Ugandan economy has been experienced by
various sectors in the economy including the banking sector. Huybens and Smith (1999) argue that
an increase in the rate of inflation could have at first negative consequences on financial sector
performance through credit market frictions before affecting economic growth. In fact, market
frictions entail the rationing of credit, which reduce intermediary activity and capital formation.
The reduction of capital investment impacts negatively both on long-term economic growth and
equity market activity. However, Azariadis and Smith (1996) emphasize the importance of
threshold level of inflation in the relationship between inflation and financial sector performance
Bank Profitability
The profitability of bank is typically spoken as a function of interior and exterior determinants.
The interior determinants are called micro or bank specific determinants of profitability because
they are initiated from bank accounts like balance sheet or profit and loss account. While on the
other hand the exterior determinants are the variables which are not in the control of bank’s
management. These variables reflect the legal and economic environment which can influence the
process and performance of an economic body. Moreover the expenses of bank are considered
significant determinant of bank’s profitability which is directly associated to the concept of capable
management. For instance Bourke (1989) and Molyneux and Thornton (1992) discovered an
encouraging affiliation among profitability and better-quality management. Another appealing
8. matter is that whether the bank‟s ownership status is associated with its profitability or not but to
support the assumption that private organization will earn comparatively higher profit, small proof
is founded.
The study of Short (1979) is from one of the few studies contributing cross country proof of direct
negative correlation among public owned organization and the profitability of banks. The final set
of the determinants of banks profitability works with macro-economic control variables. Growth
rate of money supply, inflation rate and long term interest rates are usually used as variables. The
issue of the association among inflation and bank’s profitability has been introduced by Revell
(1979). He noted that the consequence of inflation on the profitability of banks depends upon
whether wages and other operating expenses of banks are increasing faster than the inflation.
Exchange rate and profitability of commercial banks
The effect of exchange rate changes on the profitability of commercial banks in Uganda is stronger
for which are often either imported or exposed to import competition so that their prices have a
high degree of co-movement with the exchange rate (Norman and Richards 2010). These goods
include clothing, footwear, household appliances, furniture, motor vehicles, books and recreational
equipment. The transmission may be fairly direct, for example when consumers buy imported
goods, or it may be indirect, where the prices of domestically produced goods and services are
affected by changes in the cost of imported inputs.
Profitability is the primary goal of all business ventures. Without profitability the business will not
survive in the long run. So measuring current and past profitability and projecting future
profitability is very important. Profitability is measured with income and expenses. Business will
makes higher profits when the exchange rate is low and stable and once the exchange rate is
volatile it becomes very risky to invest hence the low profitability (Allen Mark, 2006).
The exchange rate determines the business performance whereby when the exchange rate is high
the volume of goods that can be bought by the same amount of money will reduce and vice versa
(Rey, Helene, 2001) Large exchange rate movements are of the interest to researchers and
policy makers because they may produce hysteretic effects that is persistent reactions of
firms (such as entry and exit) that may not be reversed even when the exchange rate
returns to its initial level. Moreover, the effects of large exchange rate movements may
9. be comparable to the effects of significant episodes of tariff changes. Although in recent
years exchange rate movements have been much larger than trade policy changes, the effect of
exchange rate movements have not been given the same attention as the impact of changes
in trade policy. Where exchange rates are considered, their implications are most often
analyzed at the country or industry level, not at the firm level.
Fung (2004), an appreciation of the domestic currency gives foreign firms a cost advantage
in both domestic and foreign markets, driving some domestic firms out of business. For the sales
of a surviving firm (to both domestic and foreign markets), the model shows two opposing effects
of an exchange rate appreciation. While the cost disadvantage faced by domestic firms
causes each of them to sell less, the exit of some firms leaves the surviving firms with a
larger market share.
Interest rate and profitability of commercial banks
Interest rates measure the price paid by a borrower or debtor to a lender or creditor for the use of
resources during some time intervals (Fabozzi and Modigliani, 2003). Goedhuys (1982), defined
interest rate as the general level in financial assets and claims of all types whether call loans or
debentures, company shares or government bonds, bank overdraft or bill of exchange.
There are nominal and real interest rates. Nominal interest rate is the rate not corrected for inflation.
Nominal interest rate on loan relates the amount of interest on the loan to the amount of money
lent, while real interest rate is that which incorporates the effect of inflation. It is measured in terms
of purchasing power.
The two rates are connected by a simple relation called Fisher Effect, which says that real interest
rate is measured as nominal interest rate minus expected inflation rate, because an expectation
about future inflations definitely affects market interest rate (Kaufman, 1986). The market interest
rate is the interest rate offered most commonly on deposits in banks, other interest bearing
accounts, as well as loan, it is determined by the supply and demand for credit (Farlex, 2009).
Market interest rate largely depends on the supply and demand for credit, competition in the
loanable market, and other economic factors, such as inflation rate.
Due to the competition among the banks interest rate remains in a comparable range. For tracking
and managing the significant development interest rate is to be addressed a significant economic
10. problem (Boulier, Huang &Taillard, 2001; Laubach, 2009). On the other hand, in the profit and
loss statement interest rate also engage in managing the interest component entirely (Buiter &
Panigirtzoglou, 2003). In addition, the interest rate also summarizes the way of whole business
debt summary, including the receipt of debt, excellence of the debt, expectations of visions
participation proportions and fixed floating mixture of the debt ( Brigo & Mercurio, 2006; Einav,
Jenkins, & Levin, 2008).
When interest rate rises up, businesses have to pay more for borrowing. In other words their cost
of taking loan increases which decreases their profitability and due to decrease in profitability
market price of their share also decline. Moreover, a rise in interest rate also decreases the worth
of corporate bond. The interest rate that a bond pays to its holder is not much attractive due to high
interest rate (Accaglobal.com). For borrowing and saving there are various types of interest rates
that bank offers. To set the rate of interest that influence the lively of financial system, central bank
plays a significant role. The central bank executes that job by controlling the loan rate for
interbank. Because it considerably influences the interest rates for loan and savings that
commercial banks offer. The main source of commercial bank’s income is the interest income by
interest rate which is to some extent below or above.
The decline in the interest rate as a common rule is most excellent for the economic atmosphere
because customers can easily pay for taking loan as they don’t have to pay higher interest rate for
taking the loans. To regulate the economic development, interest rate is used as a device. As
economy developed rapidly it will cause inflation in the economy. In other words prices go up to
higher point which reduce the buying power of people which affect the demand of people for goods
and services because of the shifting accessibility of bank loans. But on the other hand when interest
rates are low the cost of borrowing decline which increase the buying power of public and as result
they tend to make investments and spend in different forms.
Lower interest rate also gives opportunity to businesses to take capital investment loan. By making
huge investment in rising sectors and making significant profit, it also enhances the firm’s
confidence. As result the economy become stable and employment opportunities in the country
increases. Another feature of lower interest rate is that it reduces the risk of other party to failure
to pay. It shows that when interest rates are lower people have more disposable income to pay off
their loans and to make savings decision. When trade rates decline, the demand for those
11. manufacturers that sells their goods and services in international markets increase which enhance
the export’s growth and as result it will increase collective demand and improves the economy.
Moreover, boost the income factor of those in work. And it directs to amplify the level of national
income.
Interest rates are applied in various shapes like there are different interest rates for saving account
and for taking loan. Central bank sets the interest rate to control the interest rate that transforms
the interest rates to control the lively of financial system. But the results of the variation in the
interest rate are not constantly the projected results (ehow).Central bank plays many important
roles in the economy but the major task of it is to regulate the interest rates which affect the
financial system. For instance, this can be completed by regulating the interbank loan rate. The
rates that commercial banks present for saving and lending are influenced by interbank interest
rates and banks as result present their rates which are below or above from the interbank rate in
certain percentage. In this way commercial banks earn their profit (ehow).
To check the effect of changes in interest rate on commercial bank’s profitability in Pakistan,
number of studies has been conducted in the past decades. In this section researchers will describe
the profitability of commercial banks and interest rate with the review of previous literature on this
topic. Interest rate is described the certain amount of cash compensated by someone on the
utilization of funds for a specific time period. Moreover when a debtor compensates to creditor
with the amount of cash for the utilization of creditor’s funds for a specific time period, is called
interest rate. Creditors charge the interest rate as percentage of the sum of funds lent. Similarly,
the institutions like bank for the utilization of money pays interest rate to the depositor. Profitability
of bank is described as income by interest or non-interest and after tax profits which are computed
as a amount of income (both interest & non-interest) after the subtraction of provisions and
operating costs (Albertazzi & Gambacorta, 2006).
In our routine life, interest rate plays an important function. It can considerably influence
purchasing power of people. Therefore, as depositor it is essential to focus on these trends in
interest rate because the common trends in interest rate can have a major influence on savings of
people. The major variation in these trends makes it essential to examine the existing investment
opportunities and potential opportunities. The changes in interest rate have significant impact on
banks. The major part of bank‟s revenue comes from the difference in the interest rate that it
12. charges from and pays to customers. Previously, in the commercial bank‟s operations interest rates
have become slight element. To accomplish the stability in the overall economy by managing
foreign trade rates and by controlling the inflation, the SBP uses interest rate as a tool.
Consumer price index and profitability of commercial banks
Although it may vary around the world, most countries use the CPI (Consumer Price Index),
including Australia, as the main indicator of inflation levels. The CPI measures inflation by
constructing a basket of around 100,000 goods and services that are weighted according to their
importance to the metropolitan household. Whilst the CPI does act as a relatively good indicator
of inflation, it does have its limitations. As this ‘basket’ of goods and services is essentially fixed,
it may over-exaggerate the increase in the price level, as it doesn’t account for the technological
improvements in certain goods and services. For example, whilst smartphones are much more
expensive than what mobile phones used to cost over 10 years ago, their functions go beyond of
just being a form of communication. Smartphones can be a gaming platform, business tool, or even
simply an electronic encyclopaedia, with their ease of access to search engines such as Google.
However, when analysing price changes, Central banks are not limited to simply one measure of
inflation in the economy. Central Banks may also use the Core Inflation measurement, as an
indicator of underlying price trends in the economy. Core inflation aims to take out the ‘one-off’
price shocks to the economy, which may either over-exaggerate or underwhelm price changes.
For example, when Cyclone Yasi hit Queensland in 2011, a lot of banana crops were destroyed,
very noticeably decreasing the supply of banana’s, coinciding with a significant increase in prices
to around $3 a banana. Whilst this price shock may hay have most likely coincided with slight
13. increases in Headline Inflationary figures, there would be no change in Core Inflation, as it
eliminates those ‘one-off’ price shocks that may lead economists and analysts astray. Therefore,
when measuring the levels of inflation in the economy, central banks, economists and analysts
alike utilise several measurements of price changes in the economy, in order to fully understand
the bigger picture.