Endogenous money supply, global liquidity and financial transactions: Panel evidence from OECD countries

Abstract

Research background: Endogenous money creation is an inherent feature of today?s economies and widely accepted phenomenon. As the various theories of money rely on the money quantity equation, most empirical research is heading towards the analysis of the two-way relationship between the quantity of money and nominal GDP. In today's world, with the extraordinary development of the financial sector, money is used not only for transactions in the real economy, but increasingly also for purchasing financial assets. This observation was absorbed by Werner in the quantity theory of disaggregated credit. Purpose of the article: The aim of the paper is to join the debate on endogenous character of money supply by tasting a disaggregated equation of money. It assumes that the domestic money supply is positively determined not only by growth in GDP-based transactions but also by growth in non-GDP-based transactions (financial transactions). Additionally, it is assumed that in the age of globalization it can be also positively influenced by the global liquidity. Methods: Testing of the above-mentioned hypotheses takes place with the use of panel unit roots tests, panel Granger causality test and panel estimations (OLS, models with fixed/random effects, GMM). In the study, annual data from 2002 to 2018 for OECD countries were chosen for statistical research. Findings & value added: The article confirms the hypothesis that real and financial economic activity together with global liquidity positively influence domestic credit and thus money supply. As the amount of money in an economy is driven not only by the real economy but also by the financial economy, prudential regulations that restrict leverage (and thus control the amount of credit) and limit risk-taking during price bubbles periods should be therefore considered. In the research, the reaction of domestic money supply to the changes in US money supply is positive. It confirms the importance of spill-over effect of expansionary policy in major economies to other economies.

Corporate Debt Dynamics: Sectoral Clustering Analysis Using NACE Classification in Slovakia

“…On the contrary, a high ratio value indicates that additional revenue is not being used effectively (Buneta, 2021). The liquidity of the company is a precondition for its financial stability (Sliwinski, 2023), while if the liquidity is impacted, it might indicate corporate insolvency (Karas & Reznakova, 2023), which is directly related to indebtedness (Abinizano et al, 2023). Corporate indebtedness is the use of funds borrowed by a firm to finance its activities and assets (Wang, 2023).…”

Artificial intelligence and customers’ intention to use robo-advisory in banking services

“…In recent decades, there has been a noticeable increase in the importance of the financial sector for both business entities and individual consumers. Financial institutions have skillfully expanded and tailored their services to meet the needs of a strongly growing and globalizing economy (Śliwiński, 2023;Purewal & Haini, 2022). They have also recognized the attractiveness of the retail customer segment by offering financial services based on modern information and communication technologies (Gallego-Losada et al, 2023;Mehdiabadi et al, 2022).…”