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The Immunity of the Republic of Moldova in the Context of EU Financial Crisis

Author(s): Alexandru Fală / Language(s): English

Against a background of economic uncertainty worsening worldwide, the European Union has to play a significant role by working hard to lessen the effects that are caused by escalating sovereign debt crisis of certain Member States. At the same time, the Republic of Moldova, for which the EU is the main economic partner, has experienced good economic relations with the European countries - contrasting evolution with the dynamics in the EU.

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Corporate Governance in the Banks in the Republic of Moldova under the Impact of the Basel Committee Regulations

Author(s): Angela Secrieru / Language(s): English

Following the financial crisis started in 2007, in developed countries and at the level of international institutions, consistent efforts are being made to improve corporate governance in banks. Corporate governance (CG) in banks involves the allocation of authority and responsibility, i.e. the way the bank activities and operations are governed by its board and management. The recent adverse events in the banking sector in the Republic of Moldova regarding attempts to change the shareholding structure of banks including hostile takeovers may be partly explained by imperfect mechanisms of CG of the banks in the Republic of Moldova. In this context, is required the development of a consistent concept by the NBM regarding corporate governance in the banks in the Republic of Moldova aligned to BCBS recommendations and bringing banking regulations in compliance with this concept.

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THE STAKEHOLDERS: A COMPARISON BETWEEN IAS/IFRS AND ITALIAN OIC STANDARDS FOR FINANCIAL REPORTING

Author(s): Annalisa Baldissera / Language(s): English Publication Year: 0

The scope of this paper is to analyze – from a critical point of view – the financial statements, with particular regard to their main recipients and to their effective adequacy in satisfying the information needs of stakeholders. The paper aims to contribute to the current debate on the ability of financial reporting to be really useful and effective for stakeholders. It is important to note that in the last ten years the external information has increased considerably, moving from mere accounting and financial information towards several profiles, as sociality, environment, sustainability, corporate governance, risk policies and, more generally, non-financial data. This new direction highlights the growing need for information that the recipients of financial statements express, so that it is extremely important to verify if this need is really satisfied. In addition, given that the Italian accounting standards, settled by OIC (Italian Accounting Body), are very different from the International IAS/IFRS, the paper uses a comparative method, based on the reconstruction, for each of them: a) of the type of information provided; b) of the type of recipients to whom they are addressed. The comparison is made through the analysis of the conceptual framework of the two groups of principles, considering that the main difference between IAS/IFRS and OIC standards is that the former are mostly derived from practice and use a problem-solving approach, typical of Anglo-Saxon empiricism; while the latter are based on an opposite view, namely on the construction of an accounting theory aimed at guiding the practice. According to the majority doctrine, there is a typical and well-known difference between the two groups of principles: the IAS/IFRS standards are based on fair value and are mainly investor-oriented, while the OIC standards are based on historical cost and are mainly creditor-oriented. In addition to this distinction, the paper proposes a further one, based on the differentiation between informational effects and management effects. In particular, the accounting conservatism typical of prudent countries, like Italy, produces, above all, management effects due to the fact that it prevents the distribution of unrealized earnings, so protecting company’s capital. On the contrary, an opposite effect is produced by IAS/ IFRS, since the use of fair value can provoke the emersion of presumed but not effective profits, in some cases distributable.

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IMPACT OF NON-LINEAR VOLATILITY IN STOCK-SPECIFIC RISK ON THE TURNOVER OF ACTIVELY MANAGED PORTFOLIOS

Author(s): Plamen Patev,Kaloyan Petkov / Language(s): English Publication Year: 0

Active investment has been established as one attractive approach for portfolio management. In order to achieve additional return – alpha, it requires investors to rebalance their portfolios often and to apply it for broader set of assets. However, as a result of such strategy portfolios could be exposed to an enormous turnover which leads to higher transaction costs. In many cases models with proven high-quality fail to provide the projected alpha because of alpha decaying caused by transaction costs of high turnover. Our paper is aimed to give more details about influence of stock-specific risk on turnover of active investments. We find that the ratio between target tracking error of the portfolio and stock-specific risk of an important factor in establishing the optimum turnover (and transaction costs). We investigate how this ratio is related with the turnover and how it influences the portfolio optimization process. We prove that changes in stock-specific risk causes managers to rebalance their portfolios in order to achieve their target tracking error. It is shown that these changes occur due to the non-linearity of stock volatility. We use GARCH model to measure the impact of short-term volatility shocks on the turnover of portfolio. Our findings confirm the importance of non-linear volatility for active portfolio turnover. Furthermore, we present empirical example for keeping turnover in desired level by adjusting the target tracking error of the factor portfolio.

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IMPACT OF BANK LENDING ON DEVELOPMENT OF THE AGRICULTURAL SECTOR IN BULGARIA

Author(s): Damyan Kirechev / Language(s): English Publication Year: 0

The aim of the article is to analyze the role of bank lending for the development of the agrarian sector and to assess the impact of subsidies on bank lending, on the example of Bulgaria. The survey period is 2007-2018 – after the country joined the European Union. The correlation between the bank credit and the production generated in the sector is analyzed. Data from the Bulgarian National Bank and the Ministry of Agriculture and Food of Bulgaria were used. There is a correlation between the bank credit for agriculture and the production produced in the sector. The importance of credit for agrarian development is increasing. Improvements in credit conditions for agricultural holdings are observed. Bank loans are analyzed by type and term. The relationship between bank lending and agricultural subsidies for various scale producers has been studied. Small farms are more likely to use subsidies to secure short-term loans, and large farms prefer long-term loans. Subsidies typically have a push-out effect on short-term loans for large farms and on long-term loans for small farms. There is a positive causal effect of subsidies on bank loans for the agrarian sector. Recommendations are proposed to improve access to credit for farmers as a prerequisite for sector growth.

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CRYPTOCURRENCIES: PERSPECTIVES OF A DIGITAL-ECONOMIC PHENOMENON

Author(s): Armin Kovači,Slaven Ljolje / Language(s): English Publication Year: 0

Cryptocurrencies are a digital-economic phenomenon that appeared in the last 6-7 years and attracted considerable attention. From the seemingly worthless concept of so-called „cryptocurrencies”, they gained tremendous value and thus challenged some of the fundamental settings of the ruling economy. Their value is not determined by some monetary institution as it is with the euro, the dollar or some other currency. However, the seemingly stable value of the cryptocurrency has, over the period of its existence, been substantially oscillated several times, suggesting certain elements of risk in terms of future investment in them. The trend of the cryptocurrency value is currently unfavorable. Does this mean that a complete concept of cryptocurrencies will come to an end? What is the perspective? Can we expect the re-increase of the value of the cryptocurrency? Will the cryptocurrencies replace the existing money in recent time? This and many other issues are awaiting their answers in the upcoming period. This paper seeks to provide some guidelines based on the analysis of the previous trend of cryptocurrency value and to provide answers to some of these questions.

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№275. Implementing Basel III in Europe: Diagnosis and avenues for improvement

Author(s): Rym Ayadi,Emrah Arbak,Willem Pieter DE GROEN / Language(s): English

Adopted by the European Commission inJuly 2011, the proposed Capita lRequirements Directive and Regulation(CRD IV-CRR) translate into EU law the Basel III standards adopted by the Basel Committee for Banking Supervision (BCBS). Among other things,the proposal increases the quality and quantity ofthe minimum capital; introduces new rules on liquidity, leverage ratios, counter-cyclical buffers and systemically important financial institutions; and amends the definitions of counter party credit risk and rules for the banking book.

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№291. A Viable Alternative to Basel III Prudential Capital Rules

Author(s): Stefano Micossi / Language(s): English

There is something surreal in the implementation process of the new Basel capital framework for banks, known as Basel III, in the two key jurisdictions of the European Union and the United States (see BCBS, 2013b, for the latest official update by Basel Supervisors).

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A PERSPECTIVE OF MONETARY POLICIES WITHIN CHINA AND EU TOWARDS COVID-19

Author(s): Yuanxin Li / Language(s): English Publication Year: 0

COVID-19 has shut down the real economy since its outbreak by assaulting the society and its system, which was affected directly or indirectly, including the significant decrease of demand, huge shock of supplies, highly nervous and volatile of the financial market and the overall deterioration of the economic index. With the spread of the epidemic around the world, major economies have continuously introduced extraordinary economic policies to respond. This paper attempts to systematically sort out and analyze the characteristics and development of the epidemic, its impact mechanism, transmission path and actual impact on the global economy, as well as the response models, main goals and measures of macroeconomic policies of EU and China. It compares the macroeconomic policies by China and EU fighting against the COVID-19 and promoting the economy horizontally and vertically.

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RESEARCH OF THE ROLE OF FINANCIAL INSTITUTIONS IN THE COMMUNITY ECONOMIC DEVELOPMENT IN ONE OF THE WORLD’S LEADING COUNTRIES

Author(s): Svitlana Turchina,Kateryna Turchina,Liudmyla Dashutina / Language(s): English Publication Year: 0

The article addressed the community as the smallest unit in geography scope, which unites individuals, companies, and government. The role of each one is significant and irreplaceable. For this paper, the community is as a synergy between group of individuals, institutions, and a government that live and (or) operate within geographical, political, social, and economic boundaries. This article focuses on banks, as a link between individuals and government in the development process. In particular, the supply and retention of financial and human capital. The authors try to prove financial companies and banks play a key role in the community and economic development because they deliver financial capital to individuals and businesses. This research allows concluding that the Finance & Insurance industry contributes toward the development of both national and local levels with the high share and positive mix and competitive components.

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The 2020 Oil Price War Has Increased Integration Between G7 Stock Markets and Crude Oil WTI

Author(s): Rui Dias,Paulo Alexandre,Paula Heliodoro,Hortense Santos,Ana Rita Farinha,C. Marcia Santos / Language(s): English Publication Year: 0

This paper aims to examine whether the oil price war between Saudi Arabia and Russia has increased integration between the Crude Oil WTI Spot oil index and the G7 stock markets, namely France (CAC 40), Germany (DAX 30), USA (DOW JONES), UK (FTSE 100), Italy (FTSE MID), Japan (Nikkei 225), Canada (S&P TSX), from January 2018 to January 2021. The results show that in the period before the oil price war, the G7 stock markets and the WTI index had 29 integrations (out of 56 possible). The WTI index is integrated with the UK stock markets (FTSE 100), and Japan (NIKKEI 225), and is integrated into the Japanese market. In the period of the oil price war, the G7’s stock markets and the Crude Oil WTI Spot index had 43 integrations (out of 56 possible), namely the WTI, Dow Jones, and Nikkei 225 indexes, with all their peers (7 out of 7 possible). When comparing the period before and during the 2020 oil crash, we found that integrations increased significantly from 29 to 43 (out of 56 possible); we also found that the Crude Oil WTI Spot index is no longer a safe haven for portfolio diversification in G7 stock markets. These findings validate our research issue, i.e., the oil price war between Saudi Arabia and Russia had increased integrations, and this evidence could question portfolio diversification.

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Long-range Dependencies of Euronext Capital Markets: A Dynamic Detrended Analysis

Author(s): Rui Dias,Paula Heliodoro,Hortense Santos,Ana Rita Farinha,Marcia R.C. Santos,Paulo Alexandre / Language(s): English Publication Year: 0

This paper aims to test efficiency, in its weak form, in the capital markets of the Netherlands (AEX), Belgium (BEL 20), France (CAC 40), Ireland (ISEQ 20), Norway (OSEBX), Portugal (PSI 20), in the period from April 4, 2019 to April 1, 2021. The sample was partitioned into two subperiods, the first and second wave of the global pandemic: April 4, 2019 to April 30, 2020; May 4, 2020 to April 1, 2021. To carry out this analysis, different approaches were undertaken to analyze whether: (i) Euronext’s stock markets have more significant long memories in the first or second wave of the global pandemic? The results show the presence of sharp long memories during the first wave of the global pandemic, particularly in the stock indices OSEBX (0.67), PSI 20 (0.67), AEX (0.66), BEL 20 (0.64), CAC 40 (0.62), ISEQ 20 (0.61), which implies that the yields are autocorrelated in time and, there is a reversal of the average, in all indexes. Regarding the second wave of the global pandemic, we found that most Euronext stock markets don’t reject the random walk hypothesis, with the exception of the Norwegian (0.56) and Portugal (0.55) stock markets. These findings show that the impact of the Covid-19 pandemic was accentuated during the first wave, but from May 2020 the markets adjusted and showed balance. The authors believe that the results achieved will be a benefit to international investors seeking efficient diversification into their portfolios.

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Foreign Direct Investment (FDI) or Remittances? Which Contributes the Most to the Albanian Economy?

Author(s): Alban Korbi,Blisard Zani / Language(s): English Publication Year: 0

Foreign direct investment (FDI) and remittances entering an economy often play a very important role in the development and growth of economies year after year. Especially for economies with similar typologies and characteristics like that of Albania, both of these elements promote economic development and serve as financial incentives. This paper aims to assess the contribution of remittances and foreign direct investment in the Albanian economy in the last three decades, through a multifactorial econometric model. The model uses three endogenous variables, the value of remittances, the value of a foreign direct investment and the value of gross domestic product for the time series 1992 - 2019. As it results from the analysis of the econometric model, both remittances and foreign direct investment payments have a positive impact on economic growth and the value of gross domestic product. It is also evident that remittances are the ones that affect the gross domestic product more compared to foreign direct investment.

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The Standard & Poor’s 500 Index and The Chaotic Growth Model

Author(s): Vesna Jablanović / Language(s): English Publication Year: 0

Standard & Poor’s 500 Index (the S&P 500) includes the stocks of 500 of the most widely traded stocks in the U.S. It represents about 80% of the total value of U.S. stock markets. The basic aims of this paper are: firstly, to create the simple chaotic stock market index growth model that is capable of generating stable equilibrium, cycles, or chaos; secondly, to analyze the local stability of the S&P 500 index movements in the period 1932-1982; thirdly, to analyze the local stability of the S&P 500 index movements in the period 1982-2009; and fourthly, to discover the equilibrium levels of the S&P 500 index in the observed periods. This paper confirms the existence of the stable convergent fluctuations of the S&P 500 index in the observed periods. Further, two Elliot wave patterns were identified in the period 1932-2009. Also, the golden ratio can be used to define the equilibrium level of the S&P 500 index in the presented chaotic model.

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Impact of Russia’s Invasion of Ukraine on Central and Eastern European Capital Markets

Author(s): Rui Dias,Catarina Revez,Nicole Horta,Paula Heliodoro,Paulo Alexandre / Language(s): English Publication Year: 0

On February 24th, 2022, Russia launched a full-scale military invasion against Ukraine, marking a sharp escalation to a conflict that began in 2014. Several analysts have called the invasion the largest military invasion in Europe since World War II. Considering these events this paper aims to test the efficient market hypothesis, in its weak form, in the capital markets of Hungary (BUX), Croatia (CROBEX), Russia (IMOEX), the Czech Republic (PX PRAGUE), Slovenia (SBITOP), and Poland (WIG) over the period from April 25th, 2017, to April 22nd, 2022. The results show that the random walk hypothesis is not supported by the analyzed financial markets in this period with the occurrence of the 2020 global pandemic and the Russian invasion of Ukraine. The values of the variance ratios are less than unity, implying that the returns are autocorrelated over time and mean-reverting, and no differences between the financial markets have been identified. This has implications for investors, since some returns may be expected, creating arbitrage opportunities and abnormal returns, contrary to the assumptions of random walk and informational efficiency. In conclusion, we believe that investors should eventually exercise some caution, at least while this uncertainty persists, and invest in less risky markets to mitigate risk and improve the efficiency of their portfolios.

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Sustainable Development Goals and FDI – Case of Albania

Author(s): Edmira Cakrani,Dimitrios A. Karras,Gjergji Shqau / Language(s): English Publication Year: 0

Sustainable Development Goals were adopted by countries in 2016, as a way to fight poverty, protect the planet and ensure sustainable development, while Foreign Direct Investments are inflows of investments that are very important for host countries, especially those in development. They enable the transfer of technology, create new jobs, provide inflows of foreign currency, etc. Their impact on the economic development of the host countries is very large and can also affect the realization of the SDGs. The purpose of this article is to analyze the impact of FDI on some SDGs in Albania. For this purpose, the ARDL model with data for the period 1999-2021 will be used. There are relatively few studies that have analyzed this relationship, and this article completes the existing literature on this topic. The results of the study can help in the design of policies regarding FDI that enhance rather than compromise the fulfillment of the SDGs.

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Financial Performance and Large Sustainable Companies: What Relationships in the Italian Blue Chips of the MIB ESG Index?

Author(s): Annalisa Baldissera / Language(s): English Publication Year: 0

This study aims to analyze the relationship between financial performance and ESG performance with particular reference to a market segment characterized by high liquidity. The research concerns, in fact, the Italian blue chips that make up the MIB ESG index, that is, the first forty companies among the best sixties. The methodology used is based on a sample of the top ten companies in the index and uses regression analysis, assuming liquidity ratio, debt ratio, ROE and ROA as independent variables, while dependent variables are ESG scores. The results show that relationships between variables are mostly positive. However, they are still rather weak and therefore have room for improvement. The study helps to deepen the knowledge of a market segment still little studied in the literature.

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The Effectiveness of the Albanian Monetary Policy

Author(s): Evis Kumi / Language(s): English Publication Year: 0

This article aims to assess the efficiency of the Bank of Albania’s monetary policy in attaining its goals of price stability and economic expansion. Price stability is essential for ensuring a favorable business environment, preserving the purchasing power of the currency, and reducing uncertainty in the economy. The analysis takes into account the unique characteristics and challenges faced by the Albanian economy. This article offers insights into the effectiveness of the monetary policy framework in Albania by assessing the primary instruments and tactics used by the BoA, including interest rates, reserve requirements, and open market operations. It also investigates how external influences affect the efficacy of monetary policy and makes suggestions for improvement. This paper concludes with suggestions for boosting the Albanian monetary policy’s efficacy. It recommends actions to strengthen the transmission mechanism, improve data quality and availability, enhance coordination between monetary and fiscal policies, and boost the institutional capability of the central bank. It also stresses how crucial it is to have a consistent and well-defined policy framework. In the end, this article provides recommendations for enhancing the effectiveness of the Albanian monetary policy. It suggests measures to strengthen the transmission mechanism, improve data quality and availability, enhance coordination between monetary and fiscal policies, and increase the central bank’s institutional capacity. Additionally, it emphasizes the importance of maintaining a stable and predictable policy framework.

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Financial Market Knowledge of the Young Generation: An Empirical Analysis of European Students*

Author(s): Dominika P. Galkiewicz,Mario Situm,Lukas Hartleif / Language(s): English Publication Year: 0

In the recent survey of 262 European students, we try to assess the level of financial market knowledge of the young generation around the age of 23 years. We can identify the following highlights in the first out of three parts: 54.3% out of 256 people, who answered the question, purchased at least once shares, bonds, mutual funds or made comparable investments in the past and the experience made by 179 out of 262 (68.3%) people was perceived to be very positive. Similarly, the attitude of 230 out of 262 (87.8%) European students towards buying shares, bonds, mutual funds, or making comparable investments is very positive. However, the attitude of 247 and 249 people out of 262 attendees, respectively, towards the general economic situation driven by inflation and the observable increase in prices of everyday goods are rated rather low. In the main part of our survey, we analyze the level of competence of our European students to deal with calculus-related exercises (e.g. impact of the time value of money, interest or/and inflation, functioning of financial markets and instruments). We observe the following tendencies: 86.3% of people correctly stated that investments in shares offer the highest risk, which shows that European students understand the basic finance relationship between higher risk potentially leading to high returns or high losses. 82.8% of participants correctly stated that the possibility of losing money decreases with a higher degree of diversification. The third set of questions focuses on the knowledge related to investment possibilities and potential preferences for investments. For example, 45.4% of people signalized their willingness to invest their money into real estate investment funds, 43.9% chose shares, 28.2% mentioned ETFs, 20.2% would decide on bonds and 11.8% for cryptocurrencies. European students seem to be financially knowledgeable on an average level and the majority can choose instruments that fit their preferences.

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An Overview of Foreign Direct Investments in Tourism and Hospitality Industry

Author(s): Elvis Mujačević / Language(s): English Publication Year: 0

Tourism is one of the leading economic sectors of our time. The Tourism Investment report by fDi Intelligence of the Financial Times shows the link between foreign direct investment in tourism as a driver of job creation and economic growth worldwide. In an increasingly interconnected global economy, foreign direct investments (FDI) play a pivotal role in shaping the growth trajectory of various sectors. One such sector that has witnessed a substantial impact from FDI is tourism, a thriving industry that not only contributes significantly to a nation's GDP but also plays a pivotal role in job creation. This article delves into the symbiotic relationship between foreign direct investments in tourism and the generation of employment opportunities, shedding light on the mutual benefits that arise when nations open their doors to international investors. It also explores the significance of foreign direct investments in tourism, examining the positive effects on economic development, job creation, and the overall sustainability of the sector.

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