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The International Journal of Banking and Finance (IJBF) Vol. 8 No.2 June 2011

Governing Banks: A British Perspective
Andy Milllneux
University of Birmingham, United Kingdom
 
Abstract Ɩ Full Text
This conceptual paper considers the corporate governance of shareholder owned deposit taking banks in light of the Global Financial Crisis (GFC). Deposit taking banks present a special corporate governance problem because depositors (and taxpayers) are stakeholders. The GFC revealed significant weaknesses in the regulation and corporate governance of banks. The UK government commissioned the Walker Review of the corporate governance of UK banks in February 2009. Its recommendations are discussed in the context of the wider governance (including regulation) of banks. Regulation and corporate governance systems should focus on the establishment of effective internal risk control mechanisms and the good management of banks.
 
Keywords: Walker report, bank corporate governance, stakeholder interest
JEL Classification: G43
 

 
Effectiveness of Central Bank Independence via Its Internal Characteristics
Caroll H. Griffin
Fontbonne University, United States
 
Abstract Ɩ Full Text
This study examines central bank independence in developing countries of Latin America and Asia as well as selected developed countries. Many countries around the world, both developed and developing, have accepted the idea of central bank independence over the last several decades, so central banks have autonomy. A majority of studies has examined primarily the impact of central bank independence on inflation as promoting the theoretical benefits of a more stable and prosperous macroeconomic environment. However, there is only now sufficient data to empirically determine whether these claims are true. This research attempts to answer why developing economies with an informal sector resort to inflationary measures to finance their activities; how does a government induce an agent to choose the formal economy. In the trade-off between inflation and reserve requirements, the optimal policy is maximum inflation and minimum reserve requirements as increasing the steady-state utility of an optimizing agent. Also agents prefer the informal economy if policy relies on a maximum reserve requirement.
 
Keywords: Central banks and their policies, international financial markets, monetary policy, Asia, central bank independence, financial markets, inflation, Latin America
JEL Classification: G22
 

 
US Monetary-Fiscal Policy Mix Evidence from a Quatrovariate VECM
George K. Zestos, Andrew N. Geary and Kevin S. Cooksey
Christopher Newport University, Indiana University and John Hopkins University, United States
 
Abstract Ɩ Full Text
This study investigates the effectiveness of monetary and fiscal policies in the US by employing cointegration and a quatrovariate Vector Error Correction Model together with Granger causality tests. Two models are estimated: (i) nominal national income, the ten-year government bond yield, and two policy variables, the federal government deficit and the federal funds rate; (ii) real national income, and the other same three variables. Monetary and fiscal policies are jointly ineffective in influencing nominal national income. However, monetary and fiscal policies are jointly effective in influencing real national income. In contrast to the first model, only monetary policy was found to be reactive to changes in real national income and the long-term interest rate. The asymmetric responses of the two policies to changes in real economic activity are attributed to the fact that monetary policy is much more efficient in promptly responding to changes in economic conditions than fiscal policy.
 
Keywords: Fiscal policy mix, VECM, Granger causality, real vs nominal income, interest rates, fed deficit, fed rate
JEL Classification: E12, E51
 

 
Present and Future Value Formulae for Uneven Cash Flow Based on Performance of A Business
Ameha Tefera Tessema
Construction and Business Bank, Ethiopia
 
Abstract Ɩ Full Text
Computational methods for present and future value calculations are difficult when the firm’s cash flow income is uneven. The firm’s decision to invest or borrow based on uneven cash flows needs a simple method to arrive at the present value of uneven cash flows. This paper is an attempt to simplify the current tedious calculations. A methodology to quickly estimate the present/future value of uneven cash flows is invaluable to practitioners in the banking and financial industries.
 
Keywords: Uneven cash flow, present value formula, future value formula, performance rate, rate of growth, uneven cash flow income, economic value added
JEL Classification: C02
 

 
Stochastic Frontier Analysis of Indonesian Firm Efficiency: A Note
T. Handono E. Prabowo and Emilyn Cabanda
Sanata Dharma University, Indonesia and Regent University, United States
 
Abstract Ɩ Full Text
This research attempts to model performance measurement for the firms listed on Indonesia Stock Exchange (IDX) using the stochastic frontier approach. There are 121 firms analyzed over the period of 2000-05 with 726 pooled observations. We also test whether firm’s age, size, market share, manufacturing classifications and time period have effects on the technical inefficiency of the manufacturing sector. Our findings reveal that the average technical efficiency of the tested firms is 0.7149, which is below the efficiency frontier: factors that affect inefficiency are found and explained. Our research has offered notable original contributions to performance measurement and provides insights or managerial decision making on operational performance of listed firms in an increasingly competitive Indonesian economy.
 
Keywords: Stochastic frontier analysis, performance measurement, efficiency, manufacturing sector, Indonesia stock exchange
JEL Classification: G21

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