In this paper we stress test the banking sectors of the PIIGS countries. We focus in particular on modeling the credit risk and estimating the impact of changes in macroeconomic variables on the level of capital adequacy. We develop two scenarios - a baseline stress testing scenario and an adverse scenario. The results indicate that under both scenarios, the analyzed banking systems have some capital adequacy issues. We find that the Portuguese banking sector is facing biggest capitalization problems. Number of undercapitalized banks under the adverse scenario is bigger than in baseline scenario for all the countries. Another finding which is common for all the countries is that large-sized privately owned banks are better capitalized than small and medium-sized ones. Last finding concerns ownership structure where we have found that all the state-owned banks are undercapitalized in both scenarios. JEL Classification F12, F21, C53, E37, G21, G28 Keywords bank, credit risk, macro stress testing, PIIGS Author's e-mail igor.vukic@gmail.com Supervisor's e-mail adibabin@gmail.com

This thesis studies several issues in the field of macroeconomic and financial stability. In Chapter 2, I argue that systemic bankruptcy of firms can originate from coordination failure in an economy with investment complementarities. I demonstrate that in such an economy, a very small uncertainty about economic fundamentals can be magnified through the uncertainty about the investment decisions of other firms and can lead to coordination failure, which may be manifested as systemic bankruptcy. Moreover, my model reveals that systemic bankruptcy tends to arise when economic fundamentals are in the middle range where coordination matters. High financial leverage of firms greatly increases the severity of systemic bankruptcy. Optimistic beliefs of firms and banks can alleviate coordination failure, but can also increase the severity of systemic bankruptcy once it happens. Chapter 3 studies how coordination failure in a country's new technology investment dampens a country's economic growth. I establish a two-sector Overlapping Generation model where capital goods are produced by two different technologies. The first is a conventional technology with constant returns. The second is a new technology exhibiting increasing returns to scale due to technological externalities, about whose returns economic agents have only incomplete information. My model reveals that coordination failure in new technology investment can lead to slower economic growth. More interestingly, the model generates a positive correlation between economic growth and volatility. In Chapter 4, Frank Milne and I establish a dynamic currency attack model in the presence of a large player. In an attack on a fixed exchange rate regime with a gradually overvalued currency, both the inability of speculators to synchronize their attack and their incentive to time the collapse of the regime lead to the persistent overvaluation of the currency. We find that the presence of a large player can accelerate or delay the collapse of the regime, depending on his incentives to preempt other speculators or to ``ride the overvaluation." / Thesis (Ph.D, Economics) -- Queen's University, 2007-11-28 15:26:27.834

This paper examines the relation between competition in the banking sector and the financial stability on country level. Compared to previous research, it takes a different approach in that it uses realized systemic risk in the form of systemic banking crises instead of the total systemic risk. Theory provides us with two opposing theories regarding the role of competition on stability. Previous studies presented mixed results which leaves us with unresolved questions which this paper tries to answer. The results show that there is evidence for both views, but without giving an all comprehending answer.

Magister Economicae - MEcon / The transmission mechanism of monetary policy has generated a substantial amount of interest in economic research in many countries, with most studies focusing on how a change in monetary policy stance, usually defined as an exogenous shock in a short-term interest rate, affects the economy at a national level, with changes in output, inflation and exchange rates being the key variables under investigation. This study adopts a similar analysis, with the general objective of examining the effectiveness of monetary policy in Botswana. Specifically, this study aims at finding out how the central bank rate affects inflation in Botswana and the duration of its effects on economic variables in Botswana. The study adopts the recursive VAR methodology, using quarterly data from 1995 quarter one to 2009 quarter four. The results show that monetary policy is most effective via the interest rate channel in Botswana, followed by the credit channel and then the exchange rate channel. In addition, the results reflect that the economy reacts to monetary policy actions with a one period lag, with the effect lasting for seven quarters.

Для соблюдения оптимального объема оборотных активов и источников их финансирования управленческому персоналу предприятия необходимо регулярно проводить мониторинг и оценку финансовой устойчивости. Короткий срок хранения товара с учетом его наибольшей доли в составе запасов компании и высокие значения кредиторской задолженности при практике отсроченных платежей создают риск повышения уровня долговых обязательств у предприятий розничной торговли продовольственными товарами. Целью магистерской диссертации является разработка научно-методических рекомендаций по совершенствованию оценки финансовой устойчивости предприятий розничной торговли продовольственными товарами. В работе рассматривается понятие финансовой устойчивости, теоретические и методические основы ее анализа, вопросы оценки финансовой устойчивости предприятий розничной торговли продовольственными товарами. При написании работы применялись методы общенаучного исследования, логический подход, сравнение изучаемых показателей, метод финансовых коэффициентов, системный подход и др. В магистерской диссертации был разработан методический подход к оценке финансовой устойчивости предприятий розничной торговли продовольственными товарами, результатом которого стали сформированный специфический комплекс показателей финансовой устойчивости для предприятий розничной торговли продовольственными товарами, отличающийся оптимальным количеством показателей, исключением дублирования применяемых коэффициентов, который позволяет повысить точность оценки, а также усовершенствованный метод сравнительной диагностики и мониторинга финансовой устойчивости, включающий специфический способ объединения показателей в рейтинговой оценке, который позволяет принимать лучший конечный итог по рейтингу в качестве эталонного (нормативного) при принятии решений по повышению финансовой устойчивости. / To comply with the optimal volume of current assets and sources of their financing, the management personnel of the enterprise must regularly monitor and assess financial stability.The short shelf life of the goods, taking into account its largest share in the company's inventory, and the high values of accounts payable in the practice of deferred payments, create the risk of an increase in the level of debt obligations of food retailers. The aim of the master's thesis is to develop scientific and methodological recommendations to improve the assessment of the financial stability of retail food retail enterprises. The paper discusses the concept of financial stability, theoretical and methodological foundations of its analysis, issues of assessing the financial stability of retail food retail enterprises. When writing the work, the methods of general scientific research, a logical approach, comparison of the studied indicators, the method of financial ratios, a systematic approach, etc. were used. In the master's thesis, a methodological approach to assessing the financial stability of food retail enterprises was developed, which resulted in a specific set of financial stability indicators for food retail enterprises, characterized by the optimal number of indicators, excluding duplication of the applied coefficients, which improves the accuracy of the assessment, and also an improved method for comparative diagnostics and monitoring of financial stability, which includes a specific way of combining indicators in a rating assessment, which allows taking the best final rating result as a reference (normative) one when making decisions to improve financial stability.

This thesis is a collection of essays where I explore and extend the study of the role of financial frictions for the determination of asset prices, financial stability, and economic resilience. The frictions included in the analysis are individual and aggregate uncertainty, agent heterogeneity, money, liquidity and default. The first essay is an empirical study that motivates my research objectives. This work starts with the exploration of the role of liquidity on asset prices, specifically on sovereign bonds of emerging countries. I present a comprehensive model where I developed a novel methodology for finding the role of liquidity in the determination of asset prices during the financial crisis. In the second essay, illuminated by the empirical findings, I apply and expand the general equilibrium theory of money, default and financial stability. The contributions at the theoretical level are the extension of two-period model with discrete state space to the infinite horizon dynamic stochastic setting, and the inclusion of liquidity restrictions. In the third essay, I further extend this framework, allowing for production technology and endogenous market liquidity. Given the theoretical setting, I have analyzed the responses of financial stability and economic performance variables to real and financial shocks. Finally, in the fourth essay I produce an empirical application of this work. I apply a novel semi-parametric financial stability metric, and evaluate its relevance for the determination of asset prices, in the presence of liquidity restrictions. As a result, this thesis suggest plausible explanations for financial and economic issues that conventional models have not dealt with adequately.

After the recent financial crisis of 2007, a connection between monetary policy and financial stability has started to be thoroughly investigated. One of the particular areas of this research field deals with the role of various financial variables in the monetary policy rules. The main purpose of this research is to find whether direct incorporation of the financial variables in the monetary policy rule can bring macroeconomic benefits in terms of lower volatility of inflation and output. So far, the main emphasis of the research has been placed on the investigation of the augmented Taylor rules in the context of a closed economy. This thesis sheds light on the performance of the augmented Taylor rules in a small open economy. For this purpose, a New Keynesian DSGE model with two types of financial frictions is constructed. The model is calibrated for the Czech Republic. The thesis provides four conclusions. First, incorporation of the financial variables (asset prices and the volume of credit) in the monetary policy rule is beneficial for macroeconomic stabilization in terms of lower implied volatilities of inflation and output. Second, the usefulness of the augmented monetary policy rule is the most apparent in case of the shock originating abroad. Third, there is a strong link between the financial and the...

The membership of the Group of 20 was selected without any official criteria. This paper investigates whether group membership can be explained through the consideration of several different factors that coincide with the mission of the organization. I found strong evidence that membership in the Group of 20 was based on some combination of land mass and economic output. The results demonstrate that these factors are highly predictive of group membership.

The thesis assesses bank performance from two aspects: growth sustainability and the externality impact on the growth of non-financial industries. With regard to sustainability, the study considers two issues. One is financial performance with a focus on understanding what determines profitability and stability, particularly the role of market structure in generating profits. The second aspect is that of exploring what drives bank growth. Do banks grow through a competitive process or a noncompetitive one? In the context of externality, the thesis investigates whether bank competition and stability contribute to the growth of non-financial industries. The thesis starts by investigating the effects of market structure on profitability and stability using the sample data of 1929 banks from 40 countries including both emerging and advanced economies over 1999-2008. It attempts to examine which school of theories provide more explanatory power to profitability and stability in banks: the traditional structure-conduct-performance (SCP) or relative-market-power (RMP) hypotheses. The results show that a greater market share leads to higher bank profitability in favour of the RMP theory evidenced in advanced economies; however interestingly there is no evidence in support of these theories in emerging economies. Furthermore, the RMP effect appears more sustainable when compared with the SCP. This suggests that a more concentrated banking system may be more vulnerable to financial stability. Regarding the second aspect of banking sector performance, we look at an issue of competition by employing data from around 5850 banks across 49 economies during 2001-2010. We employ different industrial economics theories to estimate the degree of bank competition. The results show that bank competition varies across countries in terms of competition intensity and process. Some banks compete more intensity for efficiency and some compete less. Interestingly, all indicators show that emerging banking markets are less competitive than their counterparts in advanced economies. Furthermore, the thesis explores whether competition and stability in the banking sector can affect the growth and market structure of nonfinancial industries and hence economic growth. Empirical evidence from 23 industries for 48 emerging and advanced economies shows robustly that a more vigorously competitive and thus efficient banking sector allows financially dependent industries to grow faster through supporting small firms and new entrants that disconcentrate market structure. Policy implication is clear: competition, rather than market structure, is what we need for restructuring our banks that can help economic growth.

The thesis focuses on the interaction between macroprudential and monetary policies in the presence of bank runs. In particular, it is examined whether the two policies should be conducted separately or jointly, and whether the occurence of a bank run affects the result. Furthermore, it is studied how a bank run impacts the efficiency of the two policies. \\ The baseline results suggest that cooperation between the two policies is less efficient than when they are determined separately. The reason might be a coordination issue that arises because the same objective is being assigned to both policies in the cooperative case. On the other hand, when facing a bank run the cooperative regime achieves a higher degree of financial stability by reducing the probability of a next run. This is caused by the fact that cooperating authorities choose more aggresive macroprudential policy when a bank run occurs. A bank run itself does not change the ranking of the two policy regimes. However, an occurence of a bank run induces higher efficiency of both policies, irrespective of the regime in place. In addition, the policies are more effective when they face financial shocks, as opposed to a productivity shock.