International Financial Markets and Monetary Policy

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Collection Editor
Chair for Economics, Macroeconomics Department of Economics, Technical University of Freiberg, Schloßplatz 1, D-09599 Freiberg, Germany
Interests: applied econometrics; monetary economics; macroeconomics; time series analysis; financial econometrics; financial markets; exchange rates
Special Issues, Collections and Topics in MDPI journals

Topical Collection Information

Dear Colleagues,

Heightened geopolitical tensions, trade disputes, and unexpected events, such as the COVID-19 pandemic, have increased global economic uncertainty, making macroeconomic forecasting and policymaking more challenging. Rising income and wealth inequality pose significant challenges for macroeconomic stability, social cohesion, and policymaking. Addressing these disparities requires nuanced macroeconomic approaches. The recognition of climate change as a major economic concern demands that macroeconomic models incorporate environmental factors and assess the economic implications of transitioning to a more sustainable future. After a long period of low-interest rates in many economies limiting the effectiveness of traditional monetary policy tools, shifting patterns in inflation present challenges for central banks in managing inflation expectations. In addition, the emergence of digital currencies, including central bank digital currencies (CBDCs) and cryptocurrencies, introduces new challenges for monetary policymakers in terms of financial stability, privacy, and the role of traditional currencies. Financial markets are increasingly interconnected globally, making them susceptible to contagion effects. Geopolitical events and economic shocks in one region can quickly impact markets worldwide. Researchers, policymakers, and market participants must navigate these complexities to ensure economic stability and sustainable growth. Therefore, the aim of this Collection is to disseminate important empirical and theoretical research questions concerning the connection between Macroeconomics, Monetary Economics, and Financial Markets, which might include (but is not limited to):

  • Monetary policy transmission in times of uncertainty;
  • Anchoring of inflation expectations;
  • Digital currencies;
  • Green central banking;
  • Inequality;
  • Contagion and spillovers;
  • International coordination of monetary policy.

Prof. Dr. Robert Czudaj
Collection Editor

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Keywords

  • macroeconomics
  • monetary policy
  • financial markets
  • inflation expectations
  • forward guidance
  • global uncertainty
  • inflation dynamics
  • inequality
  • digital currencies
  • interconnectedness
  • environmental sustainability

Published Papers (4 papers)

2024

Jump to: 2023

22 pages, 2720 KiB  
Article
Exchange Rate Regimes in India: Central Bank Interventions and Purchasing Power Parity in the Context of ASEAN Currencies
by Angad Siddharth, Constantinos Alexiou and Sofoklis Vogiazas
Economies 2024, 12(4), 96; https://doi.org/10.3390/economies12040096 - 19 Apr 2024
Cited by 1 | Viewed by 4041
Abstract
In this study spanning four decades, we explored the relationship between the Reserve Bank of India’s (RBI) interventions and the validity of Purchasing Power Parity (PPP) across two distinct exchange rate regimes: the fixed exchange rate regime (1975–1993) and the managed floating regime [...] Read more.
In this study spanning four decades, we explored the relationship between the Reserve Bank of India’s (RBI) interventions and the validity of Purchasing Power Parity (PPP) across two distinct exchange rate regimes: the fixed exchange rate regime (1975–1993) and the managed floating regime (1994–2015). Applying an error correction model (VECM), our analysis reveals that under the fixed exchange rate regime, the environment is conducive to PPP due to frequent interventions by the RBI. However, in the managed floating regime, selective interventions weaken the applicability of PPP. These findings align with prior research but also hint at the limitations of linear models in capturing the intricate dynamics of PPP when central banks are involved. Nonlinear models may hold the key to unraveling the relationship more effectively. Full article
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20 pages, 2275 KiB  
Article
Can ESG Stocks Be a Safe Haven during Global Crises? Evidence from the COVID-19 Pandemic and the Russia-Ukraine War with Time-Frequency Wavelet Analysis
by Ioannis Katsampoxakis, Stylianos Xanthopoulos, Charalampos Basdekis and Apostolos G. Christopoulos
Economies 2024, 12(4), 89; https://doi.org/10.3390/economies12040089 - 12 Apr 2024
Cited by 1 | Viewed by 2214
Abstract
In times of intense economic variability and social turbulence worldwide, this paper aims to examine the existence of transient correlations and interdependencies between the most important MSCI ESG indices worldwide and the most important commodities’ index, economic uncertainty, natural gas, gold, and VIX, [...] Read more.
In times of intense economic variability and social turbulence worldwide, this paper aims to examine the existence of transient correlations and interdependencies between the most important MSCI ESG indices worldwide and the most important commodities’ index, economic uncertainty, natural gas, gold, and VIX, in a geographical and social context during two recent crises: the COVID-19 pandemic and the energy crisis due to the Ukrainian war. Using daily data from 3 January 2020 and extending until 23 August 2022, this study applies a wavelet coherence approach to analyze time series co-movements, in order to emphasize all possible combinations’ correlations and achieve more accurate outcomes at any given time and frequency band simultaneously and spontaneously. The results show robust coherence between different geographical areas, time, and frequency bands, indicating both positive and negative correlations with most of the combined ESG indices and other economic indicators. The study suggests that stock indices of leading ESG companies in North America and Europe constitute a safe investment haven during major upheavals and crises, providing a way for investors to manage risk and generate positive returns while contributing to economic sustainability. Full article
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29 pages, 1246 KiB  
Article
Discretely Distributed Scheduled Jumps and Interest Rate Derivatives: Pricing in the Context of Central Bank Actions
by Allan Jonathan da Silva and Jack Baczynski
Economies 2024, 12(3), 73; https://doi.org/10.3390/economies12030073 - 19 Mar 2024
Cited by 2 | Viewed by 1750
Abstract
Interest rate dynamics are influenced by various economic factors, and central bank meetings play a crucial role concerning this subject matter. This study introduces a novel approach to modeling interest rates, focusing on the impact of central banks’ scheduled interventions and their implications [...] Read more.
Interest rate dynamics are influenced by various economic factors, and central bank meetings play a crucial role concerning this subject matter. This study introduces a novel approach to modeling interest rates, focusing on the impact of central banks’ scheduled interventions and their implications for pricing bonds and path-dependent derivatives. We utilize a modified Skellam probability distribution to address the discrete nature of scheduled interest rate jumps and combine them with affine jump-diffusions (AJDs) in order to realistically represent interest rates. We name this class the AJD–Skellam models. Within this class, we provide closed-form formulas for the characteristic functions of a still broad class of interest rate models. The AJD–Skellam models are well-suited for using the interest rate version of the Fourier-cosine series (COS) method for fast and efficient interest rate derivative pricing. Our methodology incorporates this method. The results obtained in the paper demonstrate enhanced accuracy in capturing market behaviors and in pricing interest rate products compared to traditional diffusion models with random jumps. Furthermore, we highlight the applicability of the model to risk management and its potential for broader financial analysis. Full article
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2023

Jump to: 2024

21 pages, 1770 KiB  
Article
An Empirical Study of the Impact of the Euro on Cross-Country Diversification
by Demissew Diro Ejara and Kamal Upadhyaya
Economies 2024, 12(1), 8; https://doi.org/10.3390/economies12010008 - 27 Dec 2023
Viewed by 1856
Abstract
The euro was launched, on 1 January 1999, as a common currency for members of the European Union that complied with the Maastricht Treaty. The Maastricht Treaty calls for the coordination of major macroeconomic policies, such as inflation, budget balance, public debt, and [...] Read more.
The euro was launched, on 1 January 1999, as a common currency for members of the European Union that complied with the Maastricht Treaty. The Maastricht Treaty calls for the coordination of major macroeconomic policies, such as inflation, budget balance, public debt, and long-term interest rates. Theoretically, the coordination of these policy issues and the launch of a common currency will increase the degree of market integration among member countries. This paper empirically tests the impact of the euro on the degree of market integration by looking at the comovement of the European equity markets and a sample of OECD equity markets. Weekly stock market indices for the period covering seven years before the euro and seven years after the euro was implemented was used. The results show that cross-country divergences in stock markets continued after the euro. There is no evidence of cointegration after the adoption of the euro. Cross-country portfolio diversification continues to be beneficial even among euro countries. Full article
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