Three essays on banking and central banking

Abstract

This dissertation studies banking and central banking from different perspectives, such as credit risk and monetary policy. Chapter 1 examines bank-specific factors such as related party lending, large exposure concentrations, and capitalization that determine nonperforming loans (NPLs) in Ukraine. It is demonstrated that banks’ NPL stock increases with related party lending, and this association depends on the banks’ ownership type and size in the case of the Ukraine banking system. For the study, we built a quarterly panel of 207 bank financial indicators and utilized dynamic panel fixed effects and panel VAR models. Chapter 2 examines the effect of monetary policy statements’ readability and complexity on financial markets in developing countries. We built a unique dataset for 21 countries over an 11-year horizon and applied text analysis and a panel fixed effects estimator to find that poorly readable and complex monetary policy statements are associated with higher foreign exchange rate volatility. Chapter 3 studies the impact of monetary policy transparency on inflation for 34 developing countries from 1998 to 2019, taking into account their monetary policy independence and stance. A median quantile regression with fixed effects analysis revealed that higher MPT is associated with lower inflation in the following period for countries with either tight monetary policy or independent monetary policy controlling for its tight regime.