Analysis of Dynamics of Net Home and Foreign Assets of Banking Systems Using the Case of the Czech Republic in 1996-2017
Year: 2020
Type: article
Abstract: Relative changes in home and foreign assets of the Czech banking system are negatively correlated in the period 1996-2017. The target of the research is to test this empirical fact deeply to explain how far this is only a balance sheet effect that is a result of booking the exchange rate changes in monetary survey statistics and how far this is a consequence of economic system behaviour. Our empirical analysis using the Granger causality test and the unconditional ARDL ECM model does not rule out the validity of the balance sheet hypothesis. Besides, it explains the economic nature of this phenomenon in relationship with GDP, exchange rate, foreign reserves, short-term interest rates and bank capital dynamics and confirms a possibility of substitutions between net home and foreign assets of a banking system within a money creation process represented by the M2 monetary aggregate.
Source: Politická ekonomie
Authors: Karel Brůna, Martin Mandel
Institution: Prague University of Economics and Business
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W3097441972