http://bura.brunel.ac.uk/handle/2438/218 2013-05-25T23:19:01Z 2013-05-25T23:19:01Z Caporale, GM Ali, FM Spagnolo, N http://bura.brunel.ac.uk/handle/2438/7430 2013-05-21T13:05:30Z 2013-01-01T00:00:00Z

Title: Exchange rate uncertainty and international portfolio flows Authors: Caporale, GM; Ali, FM; Spagnolo, N Abstract: This paper examines the impact of exchange rate uncertainty on different components of portfolio flows, namely equity and bond flows, as well as the dynamic linkages between exchange rate volatility and the variability of these two types of flows. Specifically, a bivariate GARCH-BEKK-in-mean model is estimated using bilateral data for the US vis-à-vis Australia, the UK, Japan, Canada, the euro area, and Sweden over the period 1988:01-2011:12. The results indicate that the effect of exchange rate uncertainty on equity flows is negative in the euro area, the UK and Sweden, and positive in Australia, whilst it is negative in all countries except Canada (where it is positive) in the case of bond flows. Under the assumption of risk aversion, this suggests that exchange rate uncertainty induces a home bias and causes investors to reduce their financing activities to maximise returns and minimise exposure to uncertainty. Furthermore, since exchange rate volatility and the variability of flows are interlinked, exchange rate or credit controls on these flows can be used to pursue economic and financial stability.

2013-01-01T00:00:00Z Samargandi, N Fidrmuc, J Ghosh, S http://bura.brunel.ac.uk/handle/2438/7429 2013-05-21T13:05:29Z 2013-01-01T00:00:00Z

Title: Financial development and economic growth in an oil-rich economy: The case of Saudi Arabia Authors: Samargandi, N; Fidrmuc, J; Ghosh, S Abstract: We investigate the effect of financial development on economic growth in the context of an oil-rich economy. In doing so, we allow for the effect of financial development to be different for the oil and non-oil sectors of the economy in the long–run. Using the Autoregressive Distributed Lag (ARDL) bounds test technique; we find that financial development has a positive impact on the growth of the non-oil sector in Saudi Arabia. In contrast, its impact on total GDP growth is negative but insignificant.

2013-01-01T00:00:00Z Hassan, OAG Barrell, R http://bura.brunel.ac.uk/handle/2438/7428 2013-05-21T13:05:15Z 2013-01-01T00:00:00Z

Title: Accounting for the determinants of banks’ credit ratings Authors: Hassan, OAG; Barrell, R Abstract: The contribution of the banking industry to the recent financial crisis 2007/8 has raised public concerns about the excessive involvement of banks in risky activities. In addition there have been public concerns about the ability of credit rating agencies to evaluate these risks in advance. In this context, this study uses an ordered logit analysis to examine the determinants of banks’ credit ratings using a sample of US and UK banks’ accounting data from 1994 to 2009. Our intention is to examine to what extent banks’ ratings reflect banks’ risks. Our analysis shows that a small number of accounting variables, namely: bank size, liquidity, efficiency and profitability are able to correctly assign credit rating for approximately 74% to 78% the sample banks. Surprisingly, the association between banks’ credit ratings and each of leverage asset quality and capital is not robust, suggesting that the rating agency’s models did not pick them up despite their importance in the crisis. In addition, the relationship between banks’ credit ratings and liquidity is the reverse of that which an adequate early warning system would require. As banks benefit from higher credit ratings they will have addressed their determinants rather than taking care of systemic factors that affect underlying risk. Policy makers therefore need to intervene to address this market failure.

2013-01-01T00:00:00Z Caporale, GM Gil-Alana, LA http://bura.brunel.ac.uk/handle/2438/7427 2013-05-21T13:05:34Z 2013-01-01T00:00:00Z

Title: Long memory and fractional integration in high frequency data on the US Dollar / British Pound spot exchange rate Authors: Caporale, GM; Gil-Alana, LA Abstract: This paper analyses the long-memory properties of a high-frequency financial time series dataset. It focuses on temporal aggregation and other features of the data, and how they might affect the degree of dependence of the series. Fractional integration or I(d) models are estimated with a variety of specifications for the error term. In brief, we find evidence that a lower degree of integration is associated with lower data frequencies. In particular, when the data are collected every 10 minutes there are several cases with values of d strictly smaller than 1, implying mean-reverting behaviour; however, for higher data frequencies the unit root null cannot be rejected. This holds for all four series examined, namely Open, High, Low and Last observations for the US dollar / British pound spot exchange rate and for different sample periods.

2013-01-01T00:00:00Z