Exchange and interest rate channels during a deflationary era—Evidence from Japan, Hong Kong and China

Mehrotra, Aaron

doi:10.1016/j.jce.2006.10.004

Cited by 65 publications

(17 citation statements)

References 49 publications

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“…Both Kim (1999) and Mehrotra (2007) also find this to be the case in their analyses. Mehrotra (2007) further notes that the signs of the structural estimates of the A matrix deserve some discussion.…”

Section: Notesmentioning

confidence: 69%

“…While cointegration analysis of the five variables is still possible, the present paper follows a common approach in the literature by estimating the SVAR in level (Cushman and Zha. 1997;Kim, 1999;Kim and Roubini, 2000;Mehrotra, 2007). Sims et al (1990) note that differencing non-stationary variables to achieve stationarity is unnecessary because the statistics of interest often have the distributions that are robust to non-stationarity.…”

Section: Basic Resultsmentioning

confidence: 99%

“…The first three rows are drawn from the recent work by Mehrotra (2007), which have foundations in Rotemberg and Woodford (1999), Kim (1999) and Sims and Zha (2006), among others. The first row of equation (4) suggests that output responds to other variables in the system with a lag.…”

Section: Empirical Approach and Datamentioning

confidence: 99%

“…In row 2, the price level is also assumed to respond with a lag to innovations in monetary and financial variables. However, following Kim (1999) and Mehrotra (2007), the price level reacts contemporaneously to output shocks. The third row can be viewed as a monetary policy reaction function.…”

Section: Empirical Approach and Datamentioning

confidence: 99%

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A structural VAR analysis of Islamic financing in Malaysia

Ibrahim

Sufian

2014

Studies in Economics and Finance

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If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The purpose of this paper is evaluate the interrelations between Islamic financing and key economic and financial variables including real output, price level, interest rate and stock prices for the case of Malaysia. Design/methodology/approach -The paper makes use of a structural vector autoregressive (SVAR) model to discern the influences of key economic and financial variables on the behavior of Islamic financing. Findings -The basic results indicate that Islamic financing responds positively to innovations in real output. In addition, the price level shocks also tend to have significant but lagged effects on the financing provision of Islamic banks. Most interestingly, Islamic financing is impacted negatively and immediately by positive interest rate shocks, contradicting the argument that Islamic bank operations are shielded from interest rate fluctuations. Indeed, the excess sensitivity of Islamic banks to interest rate fluctuations and their lagged responses to price level shocks are found to be robust across alternative SVAR specifications. Practical implications -Operating under a dual banking system, Islamic banks are not immune from monetary conditions of the country. Indeed, it seems to be exposed to the interest rate risk, an aspect that needs to be accounted for by Islamic banks in their risk management. Originality/value -With the emergence of Islamic finance industry, understanding the implications of various macroeconomic factors on Islamic financing is essential. This study adds to this understanding, which has received limited attention.

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Section: Notesmentioning

confidence: 69%

Section: Basic Resultsmentioning

confidence: 99%

Section: Empirical Approach and Datamentioning

confidence: 99%

Section: Empirical Approach and Datamentioning

confidence: 99%

See 2 more Smart Citations

A structural VAR analysis of Islamic financing in Malaysia

Ibrahim

Sufian

2014

Studies in Economics and Finance

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“…These findings, thus, justify the level‐VAR specification or the vector error‐correction modelling for the analysis. The use of the SVAR in level seems to be common in the monetary transmission literature (Cushman & Zha, ; Kim, ; Kim & Roubini, ; Mehrotra, ). According to Sims et al .…”

Section: Framework and Datamentioning

confidence: 99%

Banking Models and Monetary Transmission Mechanisms in Malaysia: Are Islamic Banks Different?

Akhatova

Zainal

Ibrahim

2016

J of App Econs and Policy

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The present paper comparatively evaluates the credit channel of monetary transmission process of Islamic banks and conventional banks by focusing on their lending/financing behaviour in responses to monetary policy shocks as well as other shocks. Adopting structural vector autoregression (SVAR) specification, we validate the significant responses of both conventional bank credit and Islamic bank financing to monetary policy shocks. However, the dynamic behaviour of Islamic banks following monetary policy shocks as well as other shocks tends to be different. Our analysis indicates that the Islamic bank financing tends to respond immediately while the conventional bank credit exhibits delayed responses to interest rate hikes. These results are generally robust to alternative specifications of the SVAR.

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Exchange rate fluctuations and interest rate policy

Liu

Lee

2020

Int. J Fin Econ

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This research studies the non‐linear relationship between interest rates and exchange rates for China and the United States using the rolling‐window method. We also investigate uncovered interest rate parity (UIP) and the capital market theory for the whole time period and subperiods so as to reconsider various economic connections between China and the United States. The results suggest that the effect of the latter's interest rate adjustment on China/U.S. exchange rate volatility is stronger than that of China's interest rate adjustment. Moreover, changes in the China/U.S. exchange rate have a slightly stronger effect on the U.S. interest rate than on China's interest rate. Our findings reveal that the interest rate parity theory does not hold for the entire sample period but may hold in subperiods. The results provide a reference for the steady implementation of RMB internationalization.

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Exchange and interest rate channels during a deflationary era—Evidence from Japan, Hong Kong and China

Cited by 65 publications

References 49 publications

A structural VAR analysis of Islamic financing in Malaysia

A structural VAR analysis of Islamic financing in Malaysia

Banking Models and Monetary Transmission Mechanisms in Malaysia: Are Islamic Banks Different?

Exchange rate fluctuations and interest rate policy

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