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Sustainability
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Macroprudential Policy, Monetary Policy, and Financial Sustainability
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Macroprudential Policy, Monetary Policy, and Financial Sustainability

A special issue of Sustainability (ISSN 2071-1050).

Deadline for manuscript submissions: closed (23 December 2022) | Viewed by 17395

Special Issue Editor

Prof. Dr. José A. Carrasco-Gallego

E-Mail Website
Guest Editor
Department of Applied Economics, King Juan Carlos University, 28007 Madrid, Spain
Interests: macroeconomics; finance; economic history; labor economics; macroprudential policies

Special Issue Information

Dear Colleagues,

Financial stability is defined by the European Central Bank, though the characterization is very diverse in the literature, "as a condition in which the financial system - which comprises financial intermediaries, markets and market infrastructures - is capable of withstanding shocks and the unraveling of financial imbalances."

Monetary policy and financial sustainability are linked. However, the role of monetary policy and its implementation came under particular scrutiny after the 2008 crisis, in which one of the main challenges was finance sustainability. Furthermore, in the meantime, many countries started to apply new macroprudential policies aiming at preserving financial sustainability.

The purpose of this Special Issue is bridging the gap by collecting papers that will improve the actual understanding of the influence of macroprudential policies and/or monetary policies on financial sustainability, especially after the Great Recession.

We encourage submissions from scholars, practitioners, and policymakers, addressing the analysis of macroprudential policies and/or monetary policies to achieve financial sustainability. This Special Issue also welcomes contributions from a broad range of fields related to economics and finance at large, including the address of regulatory and institutional issues connected to the topic. Both theoretical and empirical papers are welcome.

Prof. Dr. José A. Carrasco-Gallego
Guest Editor

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Sustainability is an international peer-reviewed open access semimonthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 2400 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • macroprudential policy
  • monetary policy
  • financial sustainability
  • financial stability
  • financial regulation
  • economic stability

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Further information on MDPI's Special Issue policies can be found here.

Published Papers (5 papers)

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Research

22 pages, 12521 KiB  
Article
Financial Stability and Economic Activity in China: Based on Mixed-Frequency Spillover Method
by Xuan Lv, Menggang Li and Yingjie Zhang
Sustainability 2022, 14(19), 12926; https://doi.org/10.3390/su141912926 - 10 Oct 2022
Cited by 4 | Viewed by 2270
Abstract
To improve financial sustainability and promote economic stability, it is important to understand the intricate relationship between finance and macroeconomy. Thus, focusing on financial stress and macroeconomic sectors, this paper investigates macro-financial spillovers in China. First, we develop a high-frequency financial stress index [...] Read more.
To improve financial sustainability and promote economic stability, it is important to understand the intricate relationship between finance and macroeconomy. Thus, focusing on financial stress and macroeconomic sectors, this paper investigates macro-financial spillovers in China. First, we develop a high-frequency financial stress index based on eight daily financial indicators to measure the stability of China’s financial markets. Through event identification, we find that China’s Financial Stress Index can effectively reflect the stress situation of China’s financial market. Then, given that the traditional co-frequency method fails to deal with financial stress index and macroeconomic data with different frequencies, we employ the mixed-frequency spillover method to evaluate macro-financial spillovers to examine the connectedness between China’s financial market and the real side of the economy. We find that financial stress is the leading net risk output and primarily affects the loan sector; deterioration of economic conditions can lead to more apparent fluctuations in spillover effects, with spillovers from financial stress to others being the most susceptible; within the sample, the 2015 stock crash, U.S.–China trade friction, and COVID-19 have the most impact on macro-financial spillover effects. In addition, we track the results of different risk events on spillover effects across sectors. Full article
(This article belongs to the Special Issue Macroprudential Policy, Monetary Policy, and Financial Sustainability)
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14 pages, 2096 KiB  
Article
Proposal of a Methodology for Assessing Financial Risks and Investment Development for Sustainability of Enterprises in Slovakia
by Alica Tobisova, Andrea Senova, Gabriela Izarikova and Ivana Krutakova
Sustainability 2022, 14(9), 5068; https://doi.org/10.3390/su14095068 - 22 Apr 2022
Cited by 13 | Viewed by 3760
Abstract
Investments are a demanding and, at the same time, threatening indicator for enterprises not only in the time of depression such as the current coronavirus pandemic but also under normal market conditions. The goal of this article is to propose a methodology for [...] Read more.
Investments are a demanding and, at the same time, threatening indicator for enterprises not only in the time of depression such as the current coronavirus pandemic but also under normal market conditions. The goal of this article is to propose a methodology for assessing financial risks and investment development. The proposed methodology integrates the use of new modern and classical economic-statistical methods, which makes it an effective tool for the sustainability of enterprises. At the same time, the methodology can be used as an auxiliary tool for enterprise management in the investment decision-making process. In the first step, a methodology was created using a commercial software tool where the pdevelopment of the cash-flow indicator and the accumulated cash flow were modeled in order to calculate the net present value (NPV). The statistical modeling was performed using the one-way analysis of variance (ANOVA). The normality was monitored using the Shapiro–Wilk test, and the Kruskal–Wallis test was chosen as the non-parametric test. The deliverable of the applied methods was the creation of a mathematical model in the form of an algorithm that is applicable in different enterprises in Slovakia. Full article
(This article belongs to the Special Issue Macroprudential Policy, Monetary Policy, and Financial Sustainability)
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12 pages, 1439 KiB  
Article
Monetary Policy and Financial Sustainability in a Two-State Open Economy
by Yuwen Dai
Sustainability 2022, 14(8), 4825; https://doi.org/10.3390/su14084825 - 18 Apr 2022
Cited by 2 | Viewed by 2293
Abstract
Monetary policy and financial sustainability are linked. However, the role of monetary policy and its implementation have come under particular scrutiny after the 2008 Global Financial Crisis (GFC) and the 2010 European sovereign debt crisis, where one of the main challenges was financial [...] Read more.
Monetary policy and financial sustainability are linked. However, the role of monetary policy and its implementation have come under particular scrutiny after the 2008 Global Financial Crisis (GFC) and the 2010 European sovereign debt crisis, where one of the main challenges was financial sustainability. In this paper, we contribute to the literature by improving our understanding of the influence of monetary policy on financial sustainability for a monetary union. To that end, we develop a two-state open economy macroeconomic model, in which the two state economies have the same monetary policy but maintain their fiscal independence. Examples include two countries in the eurozone, two states in the United States, core and periphery countries, etc. The linkages between these two state economies are inter-state trade in goods and inter-state borrowing in bonds. We apply the calibrated model and conduct economic experiments under alternative monetary policy regimes. The model simulation shows that monetary policy is incorrect if inflation differentials persist in a monetary union, and that incorrect monetary policy leads to real interest rates that are too low for high inflation countries, which become indebted after excessive borrowing. This study sheds light on how monetary policy should be implemented if inflation differs in countries within a monetary union. Our findings draw policy implications for those “two-state” economies considering alternative macroeconomic policy regimes to achieve financial sustainability and regional economic integration. Full article
(This article belongs to the Special Issue Macroprudential Policy, Monetary Policy, and Financial Sustainability)
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19 pages, 1914 KiB  
Article
Monetary Policy, External Shocks and Economic Growth Dynamics in East Africa: An S-VAR Model
by Ebenezer Olamide, Andrew Maredza and Kanayo Ogujiuba
Sustainability 2022, 14(6), 3490; https://doi.org/10.3390/su14063490 - 16 Mar 2022
Cited by 9 | Viewed by 4050
Abstract
Resulting from the incessant political and economic uncertainty that bedevils the EAC region in the recent past, the various governments have used monetary policy changes in response to shocks from macroeconomic variables. However, the available literature shows a non-agreement by scholars as far [...] Read more.
Resulting from the incessant political and economic uncertainty that bedevils the EAC region in the recent past, the various governments have used monetary policy changes in response to shocks from macroeconomic variables. However, the available literature shows a non-agreement by scholars as far as the dynamics in monetary policy, external shocks and macroeconomic activity connections are concerned, for both country-by-country analyses and regional assessments. This article widens the frontiers of knowledge about how the dynamics of monetary policy, external shocks and macroeconomic performance interact within the EAC economic region. We adopted the S-VAR method because of its contemporary nature as far as a transmission of monetary policy approach is concerned. The interconnectivity among the countries of EAC is an indication that any shock to the price of commodities (non-oil commodities) has significant implication on the exchange rate, which will be channelled through the supply of money and monetary policy to the GDP. The need to diversify the productive and export base of member countries, compared to the continuous dependence on one or a few products as the major source of income, is hereby advocated. Full article
(This article belongs to the Special Issue Macroprudential Policy, Monetary Policy, and Financial Sustainability)
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19 pages, 2593 KiB  
Article
The Significance of Monetary Policy Transmission Mechanism in the Sustainable Development of the SAARC Economic Community
by Muhammad Zahid, Faiza Khalid, Muhammad Ramzan, Muhammad Zia Ul Haq, Wonseok Lee, Jinsoo Hwang and Jimin Shim
Sustainability 2021, 13(23), 13171; https://doi.org/10.3390/su132313171 - 28 Nov 2021
Cited by 1 | Viewed by 3592 | Correction
Abstract
The purpose of this study is to examine the monetary policy transmission mechanisms in seven South Asian Association for Regional Cooperation (SAARC) countries to discover the viability of the convergence of the SAARC into a monetary and economic union based on common monetary [...] Read more.
The purpose of this study is to examine the monetary policy transmission mechanisms in seven South Asian Association for Regional Cooperation (SAARC) countries to discover the viability of the convergence of the SAARC into a monetary and economic union based on common monetary channels. By employing optimal currency area theory, we used the restricted VAR analysis on the annual data from 1978 to 2017. We find that the money channel response provides proof for the presence of an exchange rate and credit channels. Furthermore, the real sector also responds to changes in fiscal and monetary shocks through the exchange rate and credit channels over short-run to long-run time horizons. This implies that the SAARC is a good candidate due to common exchange rate and credit channels. The function of the variance decomposition and the impulse for forming a monetary and economic union is that they share a coincidental pattern of dynamic reactions of inflation and growth to exogenous shocks. If the SAARC monetary and economic union is created, it will reap overall economic benefits inside and outside of Asia just like the European Union (EU). Full article
(This article belongs to the Special Issue Macroprudential Policy, Monetary Policy, and Financial Sustainability)
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