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Determinants of Financial Instability in Selected East and Southern African Countries
Temesgen Furi,
Wondafarahu Mulgeta,
Badassa Wolteji Chala
Issue:
Volume 10, Issue 2, April 2022
Pages:
37-44
Received:
25 November 2021
Accepted:
10 January 2022
Published:
9 March 2022
Abstract: These studies intend to identify the major determinants of financial instability in the East and Southern African Countries from 2010 to 2019. The issue of financial instability has, for long, been the major concern of policy makers, but still, there have been on-going debates and extensive discussions on measuring the financial instability. Several studies show that limits on LTV and DTI ratios can curb the feedback loop between mortgage credit availability and house price appreciation. Nevertheless, there is to date only every limited analysis of any macroeconomic effects and the use of macroprudential tools and no macro prudential instruments in East and Southern African Countries in general. Study used Credit growth and PCA analysis of financial stability index and system GMM model to identify financial instability in contemporary inclusive financial economy. FII constructed based on PCA of different variables like bank Z-Score and net interest margin in the first scenarios and using composite index of Credit growth, banking Score and net interest margin in the second scenarios. Result of the study reveals FII affected by Money supply, debt growth, inflation rate and economic growth etc. In spite of the credible theoretical arguments, using the system GMM method study found that FII negatively affected by Money supplies, debt growth, inflation rate, volatility of economic growth in 14 East and Southern African Countries included in the study between 2010 and 2019. Therefore, building integrated, coordinated and potentially consistent macro prudential policies was required to avoid negative spillovers that could counteract the financial instability. Furthermore, to constrain funding or liquidity risks, liquidity-related instruments like limits on net open currency positions, currency mismatches and reserve requirements are an asset.
Abstract: These studies intend to identify the major determinants of financial instability in the East and Southern African Countries from 2010 to 2019. The issue of financial instability has, for long, been the major concern of policy makers, but still, there have been on-going debates and extensive discussions on measuring the financial instability. Severa...
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Size of Cities and Transport Costs in African Countries of the CFA Franc Zone
Issue:
Volume 10, Issue 2, April 2022
Pages:
45-53
Received:
10 February 2022
Accepted:
2 March 2022
Published:
9 March 2022
Abstract: The results presented here want to make a contribution in the field of transport. Our purpose is to shed light on the evolution of public transport costs as the size of the city increases. We also try to highlight the role of certain factors that are characteristic of the supply: level of service, vehicle capacity, spatial extension, frequencies, etc. In this article, we show, from a sample of 25 African cities, that it is doubtful that economies will emerge in the operation of urban public transport when the size of cities grows. The growth in operating expenses, more than proportional to the size of the cities, can be explained by both a growth in the unit cost (at the place-kilometer-offered) and the offer to the inhabitant. Large cities (in terms of population) escape the drift of unit charges, but not per capita charges because of a particularly strong supply. The comparison between large cities and small towns suggests that the capacity of the buses in circulation can be a decisive factor in the improvement of productivity. Capacity growth, however, appears to be occurring in very large cities, such as Abidjan or Bamako, whose counterpart may well be @ the lengthening of travel times and distances. These results then raise the question of a divergence between the performance of urban services and the economic efficiency of spaces.
Abstract: The results presented here want to make a contribution in the field of transport. Our purpose is to shed light on the evolution of public transport costs as the size of the city increases. We also try to highlight the role of certain factors that are characteristic of the supply: level of service, vehicle capacity, spatial extension, frequencies, e...
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External Debt-Economic Growth Nexus: The Sierra Leonean Case (1973-2021)
Issue:
Volume 10, Issue 2, April 2022
Pages:
54-66
Received:
1 March 2022
Accepted:
25 March 2022
Published:
8 April 2022
Abstract: The study investigates the nexus between external debt and economic growth in Sierra Leone for the period spanning between 1973 and 2021. In many developing countries, huge external indebtedness has been seen as a strong break on the road to economic growth and development. Indeed, the study focuses on both external and internal factors that are responsible for the external debt problem in Sierra Leone. Data employed in this study are secondary and were collected from various sources including the Central Bank of Sierra Leone and the Ministry of Finance. Key macroeconomic variables such as external debt to Gross Domestic Product (GDP) ratio, external debt service to export earnings ratio and terms of trade were specified in the model and tested for stationarity using unit root tests. The study also employed the ordinary least square (OLS) technique for the purpose of estimating the relevant parameters of the model. Various diagnostic tests are carried out to appraise the robustness of the estimated growth equation using appropriate econometric criteria. The study empirically reveals a negative nexus between external debt and economic growth in Sierra Leone for the period under study signifying that debt accumulation impacts adversely on the country’s long-run growth trajectory which confirms debt “overhang” problem in Sierra Leone. This is clearly evident in the coefficients of the variables representing debt as a ratio of GDP, debt service as a ratio of export earning and terms of trade. The study, therefore, proffers certain recommendations in line with the findings.
Abstract: The study investigates the nexus between external debt and economic growth in Sierra Leone for the period spanning between 1973 and 2021. In many developing countries, huge external indebtedness has been seen as a strong break on the road to economic growth and development. Indeed, the study focuses on both external and internal factors that are re...
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How the Quest for Huge Returns by Financial Institutions Trumps Prudent Risk Management: The Archegos Saga
Issue:
Volume 10, Issue 2, April 2022
Pages:
67-72
Received:
20 March 2022
Accepted:
13 April 2022
Published:
25 April 2022
Abstract: Competition in the financial services sector has always been fierce. In many respects financial services is a sophisticated borrower’s market. Sophisticated borrowers with a proven track record are able to mobilise significant amounts of financial resources as they pursue complex and innovative financial strategies which are regarded by the various lenders as so likely to be profitable, that the risk is worth taking. The risk is attached to a specific instrument, real or synthetic such as a total return swap, and is a bet on the direction of the value of the instrument. In the quest for business, especially “aggressive deal makers” like Bill Hwang of Archegos, securities financing institutions can and do compromise their own due diligence and risk management processes and procedures. Often, tension arises within firms when the dealmakers pushing hard to take on business come up against resistance from cautious risk managers. In a profit driven industry, risk managers are often overruled by management, in favour of deal makers. This case had an impact across borders. When the implosion eventually occurred securities financing firms were shown to have disregarded prudent risk management practices. The failure of Archegos compelled regulators to act in order to prevent similar possibly worse collapses in the future. Remedial measures included a direction to securities financing institutions to demonstrate a commitment to safe practices by adopting a risk based approach to their supervisory activities. The failure of Archegos highlights the importance of an understanding of the key inherent risks faced by entities offering equity financing transactions, and also the supervisor’s expectation for the mitigation of these risks. In the operational sphere, it is evident that risk mitigation can be enhanced by a clear demarcation and understanding of the roles of the first line of defense, second line of defense, senior management and the board.
Abstract: Competition in the financial services sector has always been fierce. In many respects financial services is a sophisticated borrower’s market. Sophisticated borrowers with a proven track record are able to mobilise significant amounts of financial resources as they pursue complex and innovative financial strategies which are regarded by the various...
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Research on Household Wealth Management Risk Identification and Countermeasures Under the Background of Interest Rate Reduction
Issue:
Volume 10, Issue 2, April 2022
Pages:
73-82
Received:
26 April 2022
Published:
28 April 2022
Abstract: In July 2020, the People's Bank of China announced that the transition period of the new rules on capital management would be extended to the end of 2021, so there would be no so-called capital protection and interest protection financial products, and large banks would not be able to use the cost valuation method to evaluate financial products, resulting in continued decline in earnings and principal loss. Secondly, asset transparency is in full swing. On March 10, 2021, in the third session of the fourth Session of the 13th CPPCC National Committee, the committee members' Passage proposed that "the continuity and sustainability of macro policies should be maintained in 2021, and no sharp turn should be made". Since the outbreak, China's monetary policy has been lowering interest rates. The reduction of interest rate directly affects the interest income of people's bank financial management. The future trend of interest rates will directly affect the wealth management of families. In the face of the risks of wealth management, how to maintain and appreciate the existing assets? In the face of the downward interest rate, asset transparency and the reform of the tax system, this paper puts forward wealth management countermeasures for families under this background, and provides guarantee strategies for wealth management, such as the health of the elderly, the marriage of children and the inheritance of wealth.
Abstract: In July 2020, the People's Bank of China announced that the transition period of the new rules on capital management would be extended to the end of 2021, so there would be no so-called capital protection and interest protection financial products, and large banks would not be able to use the cost valuation method to evaluate financial products, re...
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