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Extant literature investigates on the determinants of NPL (non-performing loan) many a time, however, little is known on the relationship between economic uncertainty and NPL for any developing country. Historically, Bangladesh is suffering from high level of NPL in the banking sector. In addition to that, Bangladesh observes high level of macroeconomic uncertainty as characterized by high and volatile Gross Domestic Products and inflation, continuous exchange rate devaluations, and shallow financial markets. Motivated by this, we investigate the nexus between economic uncertainty and NPL for Bangladesh. Based on the data availability, we use the annual dataset covering 1990-2018. Furthermore, we use autoregressive distributed lag (ARDL) model considering its benefit accommodating both I(0) and I(1) variables. The empirical results show that there is positive relationship between economic uncertainty and NPL in the long run. The results are robust to the alternative measures of economic uncertainty and specifications. Consistent with the expectation, financial development carries a negative sign on the asset quality albeit the effect of economic uncertainty is actually pronounced (both the size and significance changes) in the augmented models. Key policy implication of this study is that government should formulate well anchored, rule-based policies to reduce inflation and interest related uncertainties. With a rule-based policy (for example, inflation targeting), people believe that central bank can achieve its targets. Government should adopt floating exchange rate regime that will adjust the external shocks well via exchange rates. In addition to this, government can monitor, and regulate stock market so that uncertainty in stock market is reduced. Finally, monetary and fiscal policies should be communicated well to the people. Thus, it is possible to reduce asymmetric information among the people, which may reduce economic uncertainty, and thus reduce NPL. JEL Classifications: E44, G28, E58 Keywords: Non-performing loan, economic uncertainty, Bangladesh evidence., INTRODUCTION Given the persistent and rising Non-performing loans (NPL) in Bangladesh since 1990, we are motivated to study whether economic uncertainty, as the key macroeconomic factor, lead to systematic development [...]

This paper describes the growth of local-currency bond markets in Emerging Asia and the institutional and policy challenges facing the region's economies for their further development. It presents an empirical analysis of the relationship between local-currency government bond (LCGB) market development and the components of financial development, using panel data for selected Emerging Asian economies. The analysis seeks to identify the key determinants for the development of LCGB markets. The results show that the depth of and access to both financial markets and financial institutions have a significantly positive impact on LCGB market development. Critical factors associated with local-currency bond market depth include macroeconomic variables, the exchange-rate regime, capital account openness and creditor rights. Based on these results, the paper offers policy directions for fostering the development of local-currency bond markets in the region. Keywords: Local-currency government bond, bond market development, financial deepening, financial development, Southeast Asia, Asia, 1. Introduction Emerging Asia's bond markets have grown substantially over the last two decades. For instance, in the six ASEAN countries for which data are available (Indonesia, Malaysia, the Philippines, [...]

Oil prices have dropped sharply in recent years. If for some countries, the decrease represents tremendous benefits, for others, namely the oil-producing countries, it is a huge loss which is susceptible to cause budget deficit. With respect to such deficit, this study investigates the impact of budget deficit and public debt on monetary policy in Sub-Saharan Africa. We apply the panel instrumental variables (IV)generalized method of moments (GMM) estimator to a pool of 44 countries over the period 1997-2017. The estimator implements IV/GMM estimation of the fixed-effects panel data models with endogenous regressors and is heteroskedastic and autocorrelation consistent. Regardless of the exporting or importing nature of the country, the results indicate no significant relationships between the fiscal variables and interest rates over the period 1997-2017. However, we find significant positive relationships between public debt and the discount rate and, to a lesser extent, between budget deficit and the discount rate, following the fall in oil prices from 2014. Put simply, monetary authorities have increased the discount rate from 2014. In the net oil-exporting countries, the evidence indicates from 2014 that public debt has significant positive impacts on the interest rates, whereas no significant impacts arise between budget deficit and interest rates. Monetary authorities in those countries seem to respond to the stock of debt rather than to its flow. In the net oil-importing countries, the results show a positive relationship between public debt and the discount rate following the fall in prices. Overall, our results suggest that monetary authorities may have been accommodating monetary policy, mainly through the discount rate, to prevent financial instability that may result from the falling oil prices since 2014. That is, tightening monetary policy may mitigate the inflationary pressure the long-standing decrease in oil prices may have created. Finally, while the falling oil prices should be good news for the oil-importing countries in terms of transportation and production costs, the results shed light on the fact that both oil-importing and exporting countries may be equally affected by the fall since the response of monetary authorities in the two sets of countries is very similar. JEL Classifications: E30, E58, H60 Keywords: Monetary policy, budget deficit, oil prices Corresponding Author's Email Address: fdonouadonsou@jcu.edu, INTRODUCTION Since June 2014, the international oil price has been falling (see Figure 1). If for some countries, the decrease represents tremendous benefits, for others, namely the oil-producing countries, it [...]

The objective of this paper is to understand what sovereign and country risk ratings actually measure. These ratings were created by key financial agencies to serve as a way of guiding a significant part of investment in developing nations. Theoretically, this project deals with one of the key debates in the social sciences: Are markets rational and efficient, or does uncertainty lead to the adoption of certain measures and policies because they are culturally and politically legitimate? To answer this question, this paper employs quantitative analyses, looking at both the factors that lead a country to be rated and what drives the ratings themselves. More specifically, I use different statistical techniques to show that the risk ratings are not driven solely by market factors but rather measure compliance with the existing neoliberal paradigm, such as financial deregulation and privatization. They are measures of compliance with the existing policy paradigm and fail to adequately capture investment risk. As such, they play a key role in the adoption of neoliberal policies even in the face of financial crises worldwide, especially in the Global South, as is the case with Latin America studied here. Keywords: sovereign risk ratings; policy paradigm; neoliberalism; Latin America, INTRODUCTION In our daily lives, measures of risk have become increasingly commonplace. We have our personal credit scores, which are supposed to signal to lenders the likelihood that we will [...]

COVID-19 can be rightfully considered the most economically damaging worldwide pandemic. In many aspects, the global crisis related to the coronavirus spread is unique, as this destructive recession has no economic precursors and goes mostly down non-economic lines. The global economy has already lost almost 90 trillion dollars because of the pandemic. Quarantine policies introduced in Russia due to the COVID-19 outbreak helped to reduce infection and mortality rates by implementing emergency mobilization measures in the healthcare system that can be compared to wartime situation and led to serious economic issues. Consumer-focused sectors of the Russian economy were the ones most affected by the downturn, with the volume of paid services plummeting by almost 40%, while retail trade turnover decreased by 22.6% and 18.6% in April and May 2020 respectively. Nevertheless, the Russian economy survived the downturn better than other large countries where more severe quarantine restrictions had been imposed. According to the Federal State Statistics Service, the Russian GNP fell by 8.0% in the second quarter of 2020, which was a lesser decline than predicted by the Ministry of Economic Development. In general, the recovery of the Russian economy will be smart (based on digital technologies), inclusive (focused on low-income households) and sustainable (facilitating clean energy investments and reducing environmental damage). It is also worth noting that monetary and fiscal policies themselves cannot provide sustainable growth and financial stability. A reasonable balance between monetary, budget and prudential policies, accompanied by adequate structural reforms, is the only way to ensure economic recovery and national welfare. Keywords: COVID-19, pandemic, crisis, economics, policymaking, stock market, COVID-19 as a global infection and economic disaster On January 30, 2020, the World Health Organization (WHO) declared the COVID-19 outbreak a global emergency (Sohrabi et al., 2020)Hubei province in [...]

This article examines the effectiveness of Guyana s fiscal framework as the country is set to usher in an era of oil wealth. It draws on a large body of literature to determine the key elements of an effective fiscal framework for resource-dependent economies. In summary, the literature argues for resource-dependent countries to have appropriate levels of stabilisation savings, a strong institutional framework, and effective spending policies and use taxation effectively to reduce revenue volatility. We examine how Guyana stacks up against those requirements and what lessons Guyana can learn from other hydrocarbon-dependent economies. We find that Guyana has a lot of work to do in all these areas. We argue that Guyana should place a strong emphasis on strengthening expenditure policies and improving budget transparency and governance. These improvements could potentially increase the productivity of public investment, reduce the wastage of public funds, and reduce the perception of corruption. Keywords: fiscal framework, fiscal policy, Guyana, oil-dependent countries. JEL classification: E62, Q02, H5 Cet article examine l'cfficacite du cadre fiscal de la Guyane alors que le pays s'apprete a entrer dans une ere de richesse petroliere. 11 s'appuie sur un large corpus de litterature pour determiner les elements cies d'un cadre fiscal efficace pour les economies dependantes des ressourecs. En resume, la litterature plaide pour que les pays dependant des ressourecs disposent de niveaux appropnes d'epargne de stabilisation, d'un cadre institutionnel solide, de politiques de depenses cfficaces et utilisent la fiscalite de maniere efficace pour reduirc la volatilite des revenus. Nous examinons comment la Guyane se situe par rapport a ces exigences et quels enseignements elle peut tirer d'autres economics dependantes des hydrocarbures. Nous constatons que la Guyane a beaucoup dc travail a fairc dans tous ccs domaincs. Nous soutenons que la Guyane devrait mettre l'acccnt sur le rcnforccmcnt des politiques dc depenses et l'ameliorarion dc la transparence budgctaire et de la gouvernance, Ces ameliorations pourraient potentiellement augmenter la productivite des investisscments publics, reduirc le gaspillage des fonds publics et diminuer la perception de la corruption. Mots-cles: cadre budgctaire, politique budgctaire, Guyana, pays dependant du petrole. Classification JEL: E62, Q02, H5 Este articulo examina la efectividad del marco fiscal de Guyana a medida que el pais esta listo para marcar el comienzo de una era dc riqueza petrolera. El mismo se basa en una gran cantidad de literatura para determinar los elementos clave de un marco fiscal eficaz para las economias dependientes de recursos. En resumen, la literatura aboga por que los paises que dependen dc recursos puedan tener niveles adecuados de ahorro para su estabilizacion, un marco institucional solido, y politicas de gasto efectivas, asi como un uso efectivo de impuestos que les permita reducir la volatilidad de los ingresos. Examinamos la situacion dc Guyana dc cara a esos requisitos y que lecciones puede aprender dc otras economias dependientes de los hidrocarburos. Encontramos que Guyana tiene mucho trabajo por hacer en todas estas areas. Sustentamos que Guyana debe hacer especial hincapie en fortalecer las politicas de gasto y mejorar la transparencia presupuestaria y la gobernacion. Tales mejoras podrian aumentar potencialmente la productividad dc la inversion publica, reducir el despiltarro de fondos publicos, asi como reducir la percepcion de corrupcion. Palabras clave: marco fiscal, politica fiscal, Guyana, paises dependientes del petroleo. Clasificacion JEL: E62, Q02, 115, INTRODUCTION Guyana is shaping up to become an oil giant in the Caribbean and as such has attracted a lot of attention from policymakers, academics, and economic pundits from both [...]

In the aftermath of the global financial crisis and in the wake of the COVID-19 pandemic, and the subsequent diminishing fiscal spaces of small islands, fiscal policy and the search for fiscal sustainability have regained prominence on both policy and research agendas. Strengthening fiscal rules and fiscal institutions have indeed emerged as a key response to the fiscal legacy of the crisis. This is more evident across small island economies in the Caribbean, especially the tourism-dependent island economies. While the recent surge in policy debates and discussion is certainly a sign of the mounting fiscal pressures, these are by no means new to the Caribbean. Over halfa-century ago fiscal matters were prominently on the Caribbean federation agenda. Nevertheless, fiscal sustainability remains ephemeral and illusionary; indeed, an odyssey in the Caribbean. Keywords: Fiscal sustainability, Fiscal rules, Fiscal institutions, Dutch Caribbean, Aruba Au lendemain de la crise financiere mondiale et a la suite de la pandemie de COVID-19, et de la diminution subsequente des espaces budgetaires des petites iles, la politique budgetaire et la recherche d'une viabilite budgetaire ont repris de l'importance dans les programmes politiques et de recherche. Le renforcement des regles budgetaires et des institutions budgetaires est en effet apparu comme une reponse cle a l'heritage budgetaire de la crise. Cela est plus evident dans les petites economies insulaires des Caraibes, en particulier les economies insulaires dependantes du tourisme. Bien que la recente vague de debats et de discussions sur les politiques soit certainement un signe des pressions budgetaires croissantes, celles-ci ne sont en aucun cas nouvelles pour les Caraibes. Il y a plus d'un demi-siecle, les questions fiscales figuraient en bonne place dans l'agenda de la federation des Caraibes. Neanmoins, la soutenabilite budgetaire reste ephemere et illusoire; en effet, une odyssee dans les Caraibes. Mots-cles: Viabilite fiscale, Regles fiscales, Institutions fiscales, Antilles neerlandaises, Aruba A raiz de la crisis financiera mundial y de la pandemia del COVID-19, y la consiguiente disminucion de los espacios fiscales de las islas pequenas, la politica fiscal y la busqueda de la sostenibilidad fiscal han recuperado protagonismo tanto en las agendas de politicas como en las de investigacion. El fortalecimiento de las reglas fiscales y las instituciones fiscales ha surgido de hecho como una respuesta clave al legado fiscal de la crisis. Esto es mas evidente en las pequenas economias insulares del Caribe, especialmente en las economias insulares que dependen del turismo. Si bien el reciente aumento de debates y discusiones sobre politicas es ciertamente una senal de las crecientes presiones fiscales, estas no son de ninguna manera nuevas en el Caribe. Hace mas de medio siglo, los asuntos fiscales ocupaban un lugar destacado en la agenda de la federacion caribena. Sin embargo, la sostenibilidad fiscal sigue siendo efimera e ilusoria; de hecho, una odisea en el Caribe. Palabras clave: Sostenibilidad fiscal, Reglas fiscales, Instituciones fiscales, Caribe holandes, Aruba., What is Past is Prologue In the aftermath of the global financial crisis and in the wake of the COVID-19 pandemic, and the subsequent diminishing fiscal space of governments, fiscal [...]

Indonesia fielded shocks due to the Asian Financial Crisis (AFC) and the Global Financial Crisis (GFC) quite differently. Financial contagion, policy misdirection, panic and political upheaval saw the AFC bring economic collapse. The GFC, however, brought about real domestic growth of 6.1 per cent (2008) and 4.5 per cent (2009)--amongst the world's best performances at the time. This paper reviews these events and employs numerical modelling of stylized AFC and GFC shocks to show that some of the contrast stems from differences in the shocks and intervening changes in Indonesia's economic structure. Critically, IMF conditionality during the AFC required unsustainably contractionary reforms. Capital flight elements were present in both crises, however, and exchange rate depreciations and moneyfinanced fiscal expansions are shown to have contributed significantly to resolution. Keywords: Indonesia, external shocks, financial crises, exchange rates, macroeconomic policy Article received: May 2019; revised: April 2020; accepted: June 2020, 1. Introduction Indonesia has an open, developing economy that has been affected, occasionally dramatically, by shocks from abroad. The most substantial of these was the Asian Financial Crisis (AFC), which [...]

This study presents an empirical analysis of the impact of the US unconventional monetary policy and its normalization on the dynamics of relatively volatile capital inflows (i.e., portfolio equity, portfolio debt securities, and bank and money market) into the Philippines using monthly data from January 2008 to March 2016. Results are obtained using a structural vector autoregression (SVAR) model, interacting both 'push' and 'pull' factors of capital inflows into the SVAR system. Overall, results show that the effects of these US monetary policy shocks on the aforementioned volatile capital inflows are minimal when scaled in terms of gross domestic product (GDP). The findings also suggest that, of the three volatile capital inflows, the impact of these shocks is more pronounced on portfolio debt securities, as well as on bank and money market inflows. Meanwhile, the impact on portfolio equity inflows is very limited. Additionally, the persistence of these shocks is seen to last from one to six months. Keywords: US unconventional monetary policy, US policy normalization, capital flows, monetary policy, the Philippines Article received: August 2018; revised: October 2019; accepted: December 2019, 1. Introduction Capital surges and subsequent reversals of greater magnitude have been observed in emerging market economies (EMEs) stemming from spillovers from US monetary policy aimed at mitigating the effects [...]

I am delighted to be at the Cato Institute today to participate in your annual monetary conference. The last time I had the privilege of speaking at this conference was [...]