Research articles for the 2021-07-23
Energy Transition and Financial Fragility: the Impact of Oil and Cobalt Price Fluctuations on Non-Performing Loans
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This paper studies the causal effect of changes in the world spot prices of two key energy commodities, cobalt, and oil, on banks’ non-performing loans in 25 countries over the period 2006 to 2020. Using a sample of 113 banks’ balance sheets, I create a weighted measure of non-performing loans at the country-level to run a country-wise panel regression on both cobalt and oil prices, and an exposure measure that explicates that a specific country is exposed to the two commodities’ price volatility. I find that for oil-exporting nations which have a high reserve to production ratio, there is an increase in the banks’ non-performing loans with a negative price shock. For countries trading cobalt, I find a large effect of a positive price shock on importers who have continued to import the commodity regardless of price volatility and on exporters who face the risk of a trade diversion.
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This paper studies the causal effect of changes in the world spot prices of two key energy commodities, cobalt, and oil, on banks’ non-performing loans in 25 countries over the period 2006 to 2020. Using a sample of 113 banks’ balance sheets, I create a weighted measure of non-performing loans at the country-level to run a country-wise panel regression on both cobalt and oil prices, and an exposure measure that explicates that a specific country is exposed to the two commodities’ price volatility. I find that for oil-exporting nations which have a high reserve to production ratio, there is an increase in the banks’ non-performing loans with a negative price shock. For countries trading cobalt, I find a large effect of a positive price shock on importers who have continued to import the commodity regardless of price volatility and on exporters who face the risk of a trade diversion.
High Speed and Area Efficient 2D DWT Processor Based Image Compression
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This paper presents a high speed and area efficient DWT processor based design for Image Compression applications. In this proposed design, pipelined partially serial architecture has been used to enhance the speed along with optimal utilization and resources available on target FPGA. The proposed model has been designed and simulated using Simulink and System Generator blocks, synthesized with Xilinx Synthesis tool (XST) and implemented on Spartan 2 and 3 based XC2S100-5tq144 and XC3S500E-4fg320 target device. The results show that proposed design can operate at maximum frequency 231 MHz in case of Spartan 3 by consuming power of 117mW at 28 degree/c junction temperature. The result comparison has shown an improvement of 15% in speed.
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This paper presents a high speed and area efficient DWT processor based design for Image Compression applications. In this proposed design, pipelined partially serial architecture has been used to enhance the speed along with optimal utilization and resources available on target FPGA. The proposed model has been designed and simulated using Simulink and System Generator blocks, synthesized with Xilinx Synthesis tool (XST) and implemented on Spartan 2 and 3 based XC2S100-5tq144 and XC3S500E-4fg320 target device. The results show that proposed design can operate at maximum frequency 231 MHz in case of Spartan 3 by consuming power of 117mW at 28 degree/c junction temperature. The result comparison has shown an improvement of 15% in speed.
Leverage Constraints and Bank Monitoring: Bank Regulation versus Monetary Policy
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Bank leverage constraints can emerge from regulatory capital requirements as well as from central bank collateral requirements in reserve lending facilities. While these two channels are usually examined separately, we are able to compare them with the help of a bank money creation model in which central bank reserves have to be acquired to settle interbank liabilities. In particular, we show that with regard to bank monitoring, monetary policy via collateral requirements leads to a unique collateral leverage channel, which cannot be replicated by standard capital requirements. Through this channel, banks can expand loan supply and deposit issuance when they face liquidity constraints, by raising the collateral value of their loans with tighter monitoring of firms. The collateral leverage channel can improve welfare beyond standard bank capital regulation. Our results may inform current policy debates, such as the design of central bank collateral frameworks or the question whether monetary policy remains effective in times with large central bank reserves.
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Bank leverage constraints can emerge from regulatory capital requirements as well as from central bank collateral requirements in reserve lending facilities. While these two channels are usually examined separately, we are able to compare them with the help of a bank money creation model in which central bank reserves have to be acquired to settle interbank liabilities. In particular, we show that with regard to bank monitoring, monetary policy via collateral requirements leads to a unique collateral leverage channel, which cannot be replicated by standard capital requirements. Through this channel, banks can expand loan supply and deposit issuance when they face liquidity constraints, by raising the collateral value of their loans with tighter monitoring of firms. The collateral leverage channel can improve welfare beyond standard bank capital regulation. Our results may inform current policy debates, such as the design of central bank collateral frameworks or the question whether monetary policy remains effective in times with large central bank reserves.
PROSPEK PENINGKATAN PRODUKSI KOPI (Coffea Sp) DI INDONESIA (Prospects of Increasing Coffee Production (Coffea Sp) in Indonesia)
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Indonesian Abstract: Kopi merupakan salah satu komoditas potensial di Indonesia dan dibutuhkan oleh banyak penggemar kopi di seluruh dunia. Seiring dengan bertambahnya jumlah manusia, permintaan kopi akan terus meningkat. Saat ini, produksi kopi Indonesia berada di peringkat ke4 dunia yang menandakan bahwa Indonesia mempunyai peluang bagus dalam perdagangan kopi dunia. Untuk mengetahui sejauh mana kemampuan Indonesia mencapai kenaikan produksi kopi dibandingkan negara-negara pesaingnya (Brazil -peringkat 1, Vietnam-peringkat 2, Columbia-peringat 3, Indonesia -4), maka perlu dilakukan prediksi bagaimana tingkat peningkatan produksi kopi di masing-masing negara tersebut pada periode mendatang dan bagaimana strategi pengembangannya agar dapat tetap eksis dalam pasar dunia. Penelitian ini menggunakan metode regresi linear sederhana berdasar pada data sekunder selama 30 tahun (1990 â€" 2019), dilengkapi dengan analisis SWOT. Dari hasil prediksi, produksi kopi Indonesia pada 2020 mencapai 773.915,7 ton dan jumlah produksi kopi Indonesia terus mengalami peningkatan hingga tahun 2050 jumlah produksi kopi Indonesia mencapai 1.119.953,7 ton. Apabila diasumsikan adanya perbaikan dalam pertumbuhan dan pemeliharaan kopi Indonesia, sehingga skenario hasil produksi kopi Indonesia bisameningkat sebesar 20 %, maka peningkatan produksi kopi di Indonesia pada tahun 2020 dapat meraih 845.430,22 ton hingga pada tahun 2050 hasil produksi kopi Indonesia mencapai 1.260.675.82 ton.Apabila diperbandingkan dengan negara-negara pesaing (Brazil, Vietnam dan Columbia) yang diprediksi dengan cara yang sama, maka di masa mendatang (2050), posisi Indonesia akan dapat menggeser Columbia. Dari hasil prediksi, pada 2050 , Columbia akan meraih jumlah produksi sebesar 953.550,02 ton , sementara Indonesia dapat meraih 958.469,3 ton. Dengan kata lain, Indonesia akan berhasil menggeser kedudukan Columbia sebagai produsen kopi peringkat 3 dunia, sementara Columbia yang saat ini menjadi produsen peringkat 3 dunia akan tersisih mmenjadi peringkat 4 dunia. Hasil analisis SWOT atau hasil perhitungan Matriks IFAS dan EFAS menunjukkan bahwa pengembangan kopi di Indonesia berada pada kuadran I (Strategi Agresif), dimana Indonesia berada pada situasi yang menguntungkan dengan kekuatan dan peluang yang dimiliki sehingga dapat mengambil peluang yang ada dengan mengoptimalkan kekuatan internal. Strategi yang diterapkan pada kondisi adalah menerapkan kebijakan yang agresif (Growth Oriented Strategy). Strategi tersebut terfokus pada strategi SO (Strenght-Opportunities) yaitu dengan mengoptimalkan kekuatan internal untuk mengambil peluang yang ada. Strategi SO (Strenght-Opportunities) yang diterapkan, yaitu : mengoptimalkan kekuatan internal untuk meningkatkan produksi (dengan cara pertumbuhan dan pemeliharaan kopi yang lebih baik), pengembangan perkebunan kopi ( intensifikasi) dan meningkatkan kualitas tenaga kerja.English Abstract: Coffee is one of the potential commodities in Indonesia and is needed by many coffee enthusiasts around the world. As the number of people increases, the demand for coffee will continue increased. Currently, Indonesia's coffee production is ranked 4th in the world which indicates that Indonesia has a good opportunity in the world coffee trade. To find out to what extent Indonesia's ability to achieve an increase in coffee production compared to its competitors (Brazil - ranked 1, Vietnam-ranked 2, Columbia-ranked 3, Indonesia -4), it is necessary to make predictions how is the rate of increase in coffee production in each of these countries in the coming period and how its development strategy can be in order to survive in the world market. This research using a simple linear regression method based on secondary data for 30 years (1990 â€" 2019), equipped with a SWOT analysis. From the prediction results, Indonesia's coffee production in 2020 will reach 773,915.7 tons and the number of Indonesian coffee production continues to increase until 2050, Indonesia's coffee production reached 1,119,953.7 tons. If it is assumed that there is an improvement in growth and maintenance of Indonesian coffee, so that the scenario of Indonesian coffee production can be increased by 20%, then the increase in coffee production in Indonesia in 2020 can reach 845,430,22 tons until in 2050 Indonesia's coffee production will reach 1,260,675.82 tons. When compared with competing countries (Brazil, Vietnam and Columbia) which predicted in the same way, then in the future (2050), Indonesia's position will be able to shift Columbia. From the predictions, in 2050 Columbia will achieve a total production of 953,550.02 tons, while Indonesia can reach 958,469.3 tons. In other words, Indonesia will succeed in shifting Columbia's position as the world's number 3 coffee producer, while Columbia is currently the the world's number 3 producer will be eliminated to become the world's number 4th. The results of the SWOT analysis or the results of the IFAS and EFAS Matrix calculations show that coffee development in Indonesia is in quadrant I (Aggressive Strategy), where Indonesia is in favorable situation with the strengths and opportunities it has so that it can take existing opportunities by optimizing internal strengths. The strategy applied to the conditions is implementing an aggressive policy (Growth Oriented Strategy). The strategy focuses on the SO . strategy (Strenght-Opportunities) by optimizing internal strengths to take advantage of opportunities there is. The SO (Strength-Opportunities) strategy implemented, namely: optimizing internal strengths to increase production (by means of better coffee growth and maintenance), development coffee plantations (intensification) and improve the quality of labor.
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Indonesian Abstract: Kopi merupakan salah satu komoditas potensial di Indonesia dan dibutuhkan oleh banyak penggemar kopi di seluruh dunia. Seiring dengan bertambahnya jumlah manusia, permintaan kopi akan terus meningkat. Saat ini, produksi kopi Indonesia berada di peringkat ke4 dunia yang menandakan bahwa Indonesia mempunyai peluang bagus dalam perdagangan kopi dunia. Untuk mengetahui sejauh mana kemampuan Indonesia mencapai kenaikan produksi kopi dibandingkan negara-negara pesaingnya (Brazil -peringkat 1, Vietnam-peringkat 2, Columbia-peringat 3, Indonesia -4), maka perlu dilakukan prediksi bagaimana tingkat peningkatan produksi kopi di masing-masing negara tersebut pada periode mendatang dan bagaimana strategi pengembangannya agar dapat tetap eksis dalam pasar dunia. Penelitian ini menggunakan metode regresi linear sederhana berdasar pada data sekunder selama 30 tahun (1990 â€" 2019), dilengkapi dengan analisis SWOT. Dari hasil prediksi, produksi kopi Indonesia pada 2020 mencapai 773.915,7 ton dan jumlah produksi kopi Indonesia terus mengalami peningkatan hingga tahun 2050 jumlah produksi kopi Indonesia mencapai 1.119.953,7 ton. Apabila diasumsikan adanya perbaikan dalam pertumbuhan dan pemeliharaan kopi Indonesia, sehingga skenario hasil produksi kopi Indonesia bisameningkat sebesar 20 %, maka peningkatan produksi kopi di Indonesia pada tahun 2020 dapat meraih 845.430,22 ton hingga pada tahun 2050 hasil produksi kopi Indonesia mencapai 1.260.675.82 ton.Apabila diperbandingkan dengan negara-negara pesaing (Brazil, Vietnam dan Columbia) yang diprediksi dengan cara yang sama, maka di masa mendatang (2050), posisi Indonesia akan dapat menggeser Columbia. Dari hasil prediksi, pada 2050 , Columbia akan meraih jumlah produksi sebesar 953.550,02 ton , sementara Indonesia dapat meraih 958.469,3 ton. Dengan kata lain, Indonesia akan berhasil menggeser kedudukan Columbia sebagai produsen kopi peringkat 3 dunia, sementara Columbia yang saat ini menjadi produsen peringkat 3 dunia akan tersisih mmenjadi peringkat 4 dunia. Hasil analisis SWOT atau hasil perhitungan Matriks IFAS dan EFAS menunjukkan bahwa pengembangan kopi di Indonesia berada pada kuadran I (Strategi Agresif), dimana Indonesia berada pada situasi yang menguntungkan dengan kekuatan dan peluang yang dimiliki sehingga dapat mengambil peluang yang ada dengan mengoptimalkan kekuatan internal. Strategi yang diterapkan pada kondisi adalah menerapkan kebijakan yang agresif (Growth Oriented Strategy). Strategi tersebut terfokus pada strategi SO (Strenght-Opportunities) yaitu dengan mengoptimalkan kekuatan internal untuk mengambil peluang yang ada. Strategi SO (Strenght-Opportunities) yang diterapkan, yaitu : mengoptimalkan kekuatan internal untuk meningkatkan produksi (dengan cara pertumbuhan dan pemeliharaan kopi yang lebih baik), pengembangan perkebunan kopi ( intensifikasi) dan meningkatkan kualitas tenaga kerja.English Abstract: Coffee is one of the potential commodities in Indonesia and is needed by many coffee enthusiasts around the world. As the number of people increases, the demand for coffee will continue increased. Currently, Indonesia's coffee production is ranked 4th in the world which indicates that Indonesia has a good opportunity in the world coffee trade. To find out to what extent Indonesia's ability to achieve an increase in coffee production compared to its competitors (Brazil - ranked 1, Vietnam-ranked 2, Columbia-ranked 3, Indonesia -4), it is necessary to make predictions how is the rate of increase in coffee production in each of these countries in the coming period and how its development strategy can be in order to survive in the world market. This research using a simple linear regression method based on secondary data for 30 years (1990 â€" 2019), equipped with a SWOT analysis. From the prediction results, Indonesia's coffee production in 2020 will reach 773,915.7 tons and the number of Indonesian coffee production continues to increase until 2050, Indonesia's coffee production reached 1,119,953.7 tons. If it is assumed that there is an improvement in growth and maintenance of Indonesian coffee, so that the scenario of Indonesian coffee production can be increased by 20%, then the increase in coffee production in Indonesia in 2020 can reach 845,430,22 tons until in 2050 Indonesia's coffee production will reach 1,260,675.82 tons. When compared with competing countries (Brazil, Vietnam and Columbia) which predicted in the same way, then in the future (2050), Indonesia's position will be able to shift Columbia. From the predictions, in 2050 Columbia will achieve a total production of 953,550.02 tons, while Indonesia can reach 958,469.3 tons. In other words, Indonesia will succeed in shifting Columbia's position as the world's number 3 coffee producer, while Columbia is currently the the world's number 3 producer will be eliminated to become the world's number 4th. The results of the SWOT analysis or the results of the IFAS and EFAS Matrix calculations show that coffee development in Indonesia is in quadrant I (Aggressive Strategy), where Indonesia is in favorable situation with the strengths and opportunities it has so that it can take existing opportunities by optimizing internal strengths. The strategy applied to the conditions is implementing an aggressive policy (Growth Oriented Strategy). The strategy focuses on the SO . strategy (Strenght-Opportunities) by optimizing internal strengths to take advantage of opportunities there is. The SO (Strength-Opportunities) strategy implemented, namely: optimizing internal strengths to increase production (by means of better coffee growth and maintenance), development coffee plantations (intensification) and improve the quality of labor.
RECHERCHE SUR LA RELATION DYNAMIQUE ENTRE LA LE RENDEMENT LA VOLATILITÉ ET LE VOLUME DE TRANSACTION: CAS DE SIX ACTIONS DE LA BRVM (Research on the Dynamic Relationship between Return Volatility and Trading Volume: The Case of Six BRVM Stocks)
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French Abstract: A partir de données journalières de la Bourse Régionale des Valeurs Mobilières (BRVM) sur une longue période (2009 à 2014), ce présent mémoire cherche à mesurer l’influence des variables caractérisant les volume et les volatilités sur les rendements de six actions (BOAB , BOAN , ETIT , ONTBF , SGBC et SNTS ) pour six pays de l’espace UEMOA (respectivement le Benin, le Niger, le Togo, le Burkina Faso, la Côte d’Ivoire et le Sénégal) et les interactions entre rendement et volatilité et inversement, ainsi que l’impact des volumes de transactions. La présence des volumes dans l’équation de rendement a conduit à un rôle significatif de la volatilité sur le rendement pour certaines actions. Les volumes de transactions ont des effets marqués, pour l’ensemble des indices de la BRVM, à la fois dans les équations de rendement et de volatilité. Il y’a eu aussi la présence du phénomène d’arbitrages entre les titres (lorsque le rendement du titre BOAN gagne 1 point, le BOAB grimperait de 2 points aussi) et des mécanismes de transmission d’un titre à l’autre. A titre illustratif, on remarque que la volatilité (choc international) de l’action BOAN a une influence sur la volatilité du titre ONTBF, c'est-à dire lorsque l’action BOAN augmente d’un point à la veille, le jour suivant l’action BOAB augmentera de 2 points toutes choses égales par ailleurs. English Abstract: The purpose of this study is to measure the impact of volume and volatility on the efficiency of six shares (BOAB, BOAN, ETIT, ONTBF, SGBC and NBTS) for the WAEMU (West African Economic and Monetary Union) countries (respectively Benin, Niger, Togo, Burkina Faso, Cote d'Ivoire and Senegal) and identify relationships between efficiency, volatility and volume exchange impact. We used five (5) years (2009-2014) of daily stock data collected from the regional stock exchange (BRVM). And we found out that the presence of volumes in the efficiency equation play an important role in some stock markets efficiency’s volatility. We also realized that exchange volumes have significant effects, for the whole set of BRVM indices, both in efficiency equations and volatility. Furthermore, this study involves arbitrages between securities (i.e. when the securities efficiency of BOAN acquires 1 point, at the same time BOAB rises by 2 points) and the mechanism by which these are transmitted from some securities to another. Which means that volatility (international shock) in BOAN shares has an impact on ONTBF’s one.
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French Abstract: A partir de données journalières de la Bourse Régionale des Valeurs Mobilières (BRVM) sur une longue période (2009 à 2014), ce présent mémoire cherche à mesurer l’influence des variables caractérisant les volume et les volatilités sur les rendements de six actions (BOAB , BOAN , ETIT , ONTBF , SGBC et SNTS ) pour six pays de l’espace UEMOA (respectivement le Benin, le Niger, le Togo, le Burkina Faso, la Côte d’Ivoire et le Sénégal) et les interactions entre rendement et volatilité et inversement, ainsi que l’impact des volumes de transactions. La présence des volumes dans l’équation de rendement a conduit à un rôle significatif de la volatilité sur le rendement pour certaines actions. Les volumes de transactions ont des effets marqués, pour l’ensemble des indices de la BRVM, à la fois dans les équations de rendement et de volatilité. Il y’a eu aussi la présence du phénomène d’arbitrages entre les titres (lorsque le rendement du titre BOAN gagne 1 point, le BOAB grimperait de 2 points aussi) et des mécanismes de transmission d’un titre à l’autre. A titre illustratif, on remarque que la volatilité (choc international) de l’action BOAN a une influence sur la volatilité du titre ONTBF, c'est-à dire lorsque l’action BOAN augmente d’un point à la veille, le jour suivant l’action BOAB augmentera de 2 points toutes choses égales par ailleurs. English Abstract: The purpose of this study is to measure the impact of volume and volatility on the efficiency of six shares (BOAB, BOAN, ETIT, ONTBF, SGBC and NBTS) for the WAEMU (West African Economic and Monetary Union) countries (respectively Benin, Niger, Togo, Burkina Faso, Cote d'Ivoire and Senegal) and identify relationships between efficiency, volatility and volume exchange impact. We used five (5) years (2009-2014) of daily stock data collected from the regional stock exchange (BRVM). And we found out that the presence of volumes in the efficiency equation play an important role in some stock markets efficiency’s volatility. We also realized that exchange volumes have significant effects, for the whole set of BRVM indices, both in efficiency equations and volatility. Furthermore, this study involves arbitrages between securities (i.e. when the securities efficiency of BOAN acquires 1 point, at the same time BOAB rises by 2 points) and the mechanism by which these are transmitted from some securities to another. Which means that volatility (international shock) in BOAN shares has an impact on ONTBF’s one.
Strategic Alliances and Idiosyncratic Information: Evidence From China
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This study examines how strategic alliances affect idiosyncratic information. Theory suggests that strategic alliances bring complementary resources and contracting hazards to firms. Accordingly, we conjecture that alliance involvement reduces firms’ incentives to disclose idiosyncratic information due to less capital market benefits of disclosure and possible use of such information by other partners and regulators to monitor the alliance activities. Our empirical results show that strategic alliance involvement is negatively associated with idiosyncratic information, and this relationship is more pronounced when firms enter into more contractual alliances. The results are robust to using the volume-synchronized probability of informed trading and the kurtosis of the return distribution as alternative idiosyncratic information proxies and two-stage instrumental variable regressions. We also find that allied firms have fewer incentives to voluntarily issue performance forecasts, more disclosure similarity to their industry peers, lower future earnings response coefficient, and greater analysts’ forecast dispersion and errors. Evidence from cross-sectional and difference-in-differences tests supports our prediction on the mechanisms through which strategic alliances affect idiosyncratic information.
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This study examines how strategic alliances affect idiosyncratic information. Theory suggests that strategic alliances bring complementary resources and contracting hazards to firms. Accordingly, we conjecture that alliance involvement reduces firms’ incentives to disclose idiosyncratic information due to less capital market benefits of disclosure and possible use of such information by other partners and regulators to monitor the alliance activities. Our empirical results show that strategic alliance involvement is negatively associated with idiosyncratic information, and this relationship is more pronounced when firms enter into more contractual alliances. The results are robust to using the volume-synchronized probability of informed trading and the kurtosis of the return distribution as alternative idiosyncratic information proxies and two-stage instrumental variable regressions. We also find that allied firms have fewer incentives to voluntarily issue performance forecasts, more disclosure similarity to their industry peers, lower future earnings response coefficient, and greater analysts’ forecast dispersion and errors. Evidence from cross-sectional and difference-in-differences tests supports our prediction on the mechanisms through which strategic alliances affect idiosyncratic information.
Supervisory Forward Guidance: The Effectiveness of the 2020 Supervisory Capital Relief on the Bank Credit Supply Channel
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We investigate the effectiveness of the Single Supervisory Mechanism’s (SSM) capital relief measures in response to the outbreak of the coronavirus pandemic, in terms of large non-financial corporations’ lending outcomes. Using a granular borrower level dataset and controlling for the policies of other euro area authorities, bank characteristics and demand effects, we find that the Pillar 2 Guidance (P2G) capital relief had a considerable statistically significant impact in preventing a credit crunch. The results are attributed to both, the capital made available and announcement effects. The latter are generated by the communication of supervisory plans and the fact the P2G requirements were not designed to be releasable. The announcement showed the supervisors’ flexibility, reduced uncertainty surrounding forthcoming regulatory responses and acted as a de facto “supervisory forward guidance†supporting bank business decisions. Going forward we propose the creation of a formal supervisory forward guidance strategy, to complement the existing communication channels, to the benefit of banks’ and market participants’ decision making during both normal and distress times. Our work therefore contributes to the literature threefold: i) it introduces a novel granular supervisory dataset at the borrower level, ii) it is the first paper to take a supervisory perspective in analysing the effectiveness of capital relief measures at the onset of the Covid-19 pandemic, and iii) it proposes a new supervisory policy instrument, the “supervisory forward guidance†with the goal of informing and steering banks’ and market participants’ expectations.
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We investigate the effectiveness of the Single Supervisory Mechanism’s (SSM) capital relief measures in response to the outbreak of the coronavirus pandemic, in terms of large non-financial corporations’ lending outcomes. Using a granular borrower level dataset and controlling for the policies of other euro area authorities, bank characteristics and demand effects, we find that the Pillar 2 Guidance (P2G) capital relief had a considerable statistically significant impact in preventing a credit crunch. The results are attributed to both, the capital made available and announcement effects. The latter are generated by the communication of supervisory plans and the fact the P2G requirements were not designed to be releasable. The announcement showed the supervisors’ flexibility, reduced uncertainty surrounding forthcoming regulatory responses and acted as a de facto “supervisory forward guidance†supporting bank business decisions. Going forward we propose the creation of a formal supervisory forward guidance strategy, to complement the existing communication channels, to the benefit of banks’ and market participants’ decision making during both normal and distress times. Our work therefore contributes to the literature threefold: i) it introduces a novel granular supervisory dataset at the borrower level, ii) it is the first paper to take a supervisory perspective in analysing the effectiveness of capital relief measures at the onset of the Covid-19 pandemic, and iii) it proposes a new supervisory policy instrument, the “supervisory forward guidance†with the goal of informing and steering banks’ and market participants’ expectations.
The Bitcoin Gold Correlation Puzzle
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Bitcoin is regularly referred to as new gold, digital gold or gold 2.0. If Bitcoin is indeed gold-like the correlation of Bitcoin and gold returns should be positive. We estimate the correlation of the two assets across time, across different return frequencies and across quantiles and find a near-zero correlation inconsistent with the claimed similarity. We offer two explanations for this puzzle: either the similarity is only a narrative and not accepted by investors or there are other forces at play that depress the true correlation. Such forces could be a substitution effect, investors sell gold and buy Bitcoin, and a catching up effect, investors buy Bitcoin to catch up with the market weight of gold.
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Bitcoin is regularly referred to as new gold, digital gold or gold 2.0. If Bitcoin is indeed gold-like the correlation of Bitcoin and gold returns should be positive. We estimate the correlation of the two assets across time, across different return frequencies and across quantiles and find a near-zero correlation inconsistent with the claimed similarity. We offer two explanations for this puzzle: either the similarity is only a narrative and not accepted by investors or there are other forces at play that depress the true correlation. Such forces could be a substitution effect, investors sell gold and buy Bitcoin, and a catching up effect, investors buy Bitcoin to catch up with the market weight of gold.
