Gerti Shijaku | University of Rome Tor Vergata (original) (raw)

Papers by Gerti Shijaku

Eurasian Journal of Business and Economics, 2017

This paper analyses the inter-temporal competitionstability nexus after the global financial cris... more This paper analyses the inter-temporal competitionstability nexus after the global financial crises. For this reason, the empirical estimation approach follows a fivestep procedure. First, we utilise quarterly macroeconomic and balance sheet and income statement data for 16 banks operating in the Albanian banking sector over the period 2008-2015. Second, we calculate a new composite index as a measure of bank stability conditions, which includes a wide set of information rather than focusing only on one aspect of risk. Then, we construct a proxy for bank competition such as the Boone indicator. Empirical estimations are based on the General Method of Moments approach. A set of robustness checks include also the use of other alternative proxy of competition such as the Lerner index and the efficient-adjusted Lerner index, profit elasticity and the Herfindahl index. Empirical results strongly support the "competition-stability" view after the global financial crises-that higher degree of competition boosts further bank stability conditions. Results further indicate that greater concentration has also a negative impact on bank stability. Results imply also that bank stability is positively linked with macroeconomic conditions and capital ratio and inverse with operational efficiency. Finally, we do not find a non-linear relationship between competition and stability.

This paper examines the demand for foreign reserve holdings for the Albanian small open economy. ... more This paper examines the demand for foreign reserve holdings for the Albanian small open economy. The model is estimated through the Vector Error Correction Model approach. Results provide supportive evidence that reserve accumulation is more sensitive to precautionary motives rather than mercantilist ones. Other results reconfirm that current account patterns and fiscal imbalances are the main driving forces behind reserve holding. By contrast, reserve was yet again found less sensitive regarding the opportunity cost and mercantilist motives.

Motivated by the debate on concentration-stability nexus, this paper studies the impact of bank c... more Motivated by the debate on concentration-stability nexus, this paper studies the impact of bank concentration on the likelihood of a country suffering systemic bank fragility. For this reason, we followed a new approach using on-site bank balance sheet information to construct our proxy that represent each bank stability condition and use a variety of internal and external factors to estimate a balance panel dynamic two-step General Method of Moments (GMM) approach for the period 2008 – 2015. First, results provide supportive evidence consistent with the concentration-fragility view. Second, macroeconomic variables seem to have a significant effect on bank stability, which is not found for the sovereignty primary risk. By contrast, the bank-specific variables have also a significant effect on bank stability conditions. Finally, non-systemic banks are found to be more sensitive to macroeconomic condition and market concentration, while the better capitalised banks are less sensitive ...

South-Eastern Europe Journal of Economics, 2016

The paper studies the pass-through effect of primary sovereignty risk on bank stability. For this... more The paper studies the pass-through effect of primary sovereignty risk on bank stability. For this reason, we followed a new approach using on-site bank balance sheet information to construct our proxy that represent each bank stability condition and use a variety of internal and external factors to estimate a balance panel dynamic two-step General Method of Moments (GMM) approach for the period 2008 Q3 – 2015 Q03. We found no supportive evidence that pass-through effect of primary sovereignty risk does affected bank stability. Rather improving macroeconomic and financial market condition are found to be important components through which banks are more immune. The rest of results imply that other bank-specific indicators, namely the extent of intermediation, off-balance sheet active, excessive capital, credit risk and profitability do not have a significant affect.

South-Eastern Europe Journal of Economics, 2017

This paper addresses the dynamic relationship between competition and bank stability in the Alban... more This paper addresses the dynamic relationship between competition and bank stability in the Albanian banking system during the period 2008 - 2015. For this reason, we estimate a new composite individual bank stability indicator that relies on bank balance sheet data. Then, we construct a proxy for bank competition as referred to by the Boone indicator. We also calculated the Lerner index and the efficiency adjusted Lerner Index, as well as the profit elasticity index and the Herfindahl-Hirschman Index. The main results provide strong supportive evidence for the "competition-stability" view - namely, that lower degree of market power sets banks to less overall risk exposure; results also show that increasing concentration has greater impact on bank fragility. Similarly, bank stability is positively linked to macroeconomic conditions and capital ratio and inversely proportionate to operational efficiency. We also used a quadratic term of the competition indicator to capture ...

Research Papers in Economics, 2016

The main focus of this paper is to appraise the money demand function and the velocity of broad m... more The main focus of this paper is to appraise the money demand function and the velocity of broad money, M3, in the medium and long-term, given its role as a second pivotal pillar for the monetary policy of the Bank of Albania, in accordance with its primary objective, that of price stability. The results show that the demand for money is stable, even in the aftermath of global financial crisis, as well as its performance contains important information for the inflation trend.

The main goal of this paper is to develop a better understanding of international capital flows b... more The main goal of this paper is to develop a better understanding of international capital flows based on the episode of sudden stop concept. First, we compute a sudden stop indicator (or our binary variable) in order to analyze movements in foreign capital flows. Second, the probability of these episodes is estimated as a function of some economic fundamentals by running a probit estimation with quarterly data over the period 2004–2012.

This discussion paper focuses on identifying and evaluating the long run determinants of bank cre... more This discussion paper focuses on identifying and evaluating the long run determinants of bank credit to the private sector in the case of Albania by employing a Vector Error Correction Mechanism (VECM) approach based on demand and supply indicators. Estimations show that an adjustment mechanism exists bringing bank credit back to equilibrium. The results imply that lending is positively linked to economic growth. Further, banking and financial intermediation, as well as financial liberalisation would stimulate higher lending demand. In addition, lower cost of lending, diminishing government domestic borrowing and a more qualitative bank credit would create further lending incentives. At the same time, the exchange rate is found to pick up some demand valuation and consumption smoothing effects.

This discussion material focuses on evaluating the long-run meanreverting properties of debt to G... more This discussion material focuses on evaluating the long-run meanreverting properties of debt to GDP ratio by unit root approach. Findings demonstrate that the debt to GDP is mean-reverting over time, while there seems to be no evidence when this indicator is measured in real terms. Further, the material considers a fiscal policy reaction function to understand whether government pursued appropriate policies to avoid excessive debt accumulation. Results presume that fiscal authorities react systematically to raising debt ratio, by generating future surpluses, but not enough to avoid excessive debt accumulation. Comparing simultaneously results from both approaches implies that Albanian fiscal policy is sustainable. But, the profligacy of fiscal authorities put it at risk, considering that the pursued fiscal policies do not avoid excessive debt accumulation. Error term analysis reveals that fiscal policy has been stable across time, even though evidence seems to illustrate that global...

The aim of this discussion material will be to examine the effects of fiscal developments on econ... more The aim of this discussion material will be to examine the effects of fiscal developments on economic activity and on the market condition over time. The study employs a threshold vector autoregressive approach for 10 Developing and Emerging Market economies in the Central Eastern and South Eastern European Countries. The financial stress index is constructed by considering a wide range of market patterns, including banking related stress, money market related stress, exchange markets stress and real estate markets related stress, upon which the threshold upon market condition is build. The threshold VAR model allows to analyses this interrelationship during episodes of economic downturn and stress in financial market. Finally, the empirical work considers a structural identification approach.

This paper analyses the inter-temporal competition – stability nexus after the global financial c... more This paper analyses the inter-temporal competition – stability nexus after the global financial crises. For this reason, the empirical estimation approach follows a five – step procedure. First, we utilise quarterly macroeconomic and balance sheet and income statement data for 16 banks operating in the Albanian banking sector over the period 2008 – 2015. Second, we calculate a new composite index as a measure of bank stability conditions, which includes a wide set of information rather than focusing only on one aspect of risk. Then, we construct a proxy for bank competition such as the Boone indicator. Empirical estimations are based on the General Method of Moments approach. A set of robustness checks include also the use of other alternative proxy of competition such as the Lerner index and the efficientadjusted Lerner index, profit elasticity and the Herfindahl index. Empirical results strongly support the “competition – stability” view after the global financial crises that high...

This paper analyses the inter-temporal competition – stability nexus after the global financial c... more This paper analyses the inter-temporal competition – stability nexus after the global financial crises based on a Generalised Method of Moments with quarterly data for the period 2008 – 2015. Empirical results strongly support the “competition – stability” view after the global financial crises that higher degree of competition boosts further bank stability conditions. Results further indicate that greater concentration has also a negative impact on bank stability. Finally, we do not find a non-linear relationship between competition and stability. JEL Codes: C26, E32, E43, G21, H63.

This paper addresses the dynamic relationship between competition and bank stability in Albanian ... more This paper addresses the dynamic relationship between competition and bank stability in Albanian banking system during the period 2008 - 2015. To this purpose, we construct a proxy for bank competition as referred to the Boone indicator. We also calculated the Lerner index and the efficient adjusted Lerner index, as well as the profit elasticity index and the Herfindahl–Hirschman Index. The main results provide support for the “competition – stability” view – that lower degree of market power sets banks to less overall risk exposure. The results further show that increasing concentration will have a larger impact on bank’s fragility. Similar, bank stability is positively linked with macroeconomic conditions and capital ratio and inverse with operational efficiency. We also used a quadratic term of the competition measures to capture a possible non-linear relationship between competition and stability, but find no supportive evidence.

This paper examines the transmission mechanism of monetary policy in Albania during 2002 M01 - 20... more This paper examines the transmission mechanism of monetary policy in Albania during 2002 M01 - 2014 M12. The main question addresses the macroeconomic pass-through effects of a monetary policy shock, with regards to a conventional interest rate and possible different balance sheet policy changes. The analysis is based on a structural vector autoregressive model for Albanian economy that includes means of the Cholesky identification scheme and the sign restrictions approach. The former produces mixed results, that are either statistically insignificant or show a puzzle behavior. The latter is found to reduce bias, albeit with some supportive significant clear cut robustness evidences of the short run macroeconomic pass-through effects of a stimulus monetary policy that materialises within twelve periods. A stimulus monetary policy is found to support economic activity and increase price level. The effect is positive with regards to bank lending and monetary money stock variables. Exc...

Eurasian Journal of Business and Economics, 2017

This paper analyses the inter-temporal competitionstability nexus after the global financial cris... more This paper analyses the inter-temporal competitionstability nexus after the global financial crises. For this reason, the empirical estimation approach follows a fivestep procedure. First, we utilise quarterly macroeconomic and balance sheet and income statement data for 16 banks operating in the Albanian banking sector over the period 2008-2015. Second, we calculate a new composite index as a measure of bank stability conditions, which includes a wide set of information rather than focusing only on one aspect of risk. Then, we construct a proxy for bank competition such as the Boone indicator. Empirical estimations are based on the General Method of Moments approach. A set of robustness checks include also the use of other alternative proxy of competition such as the Lerner index and the efficient-adjusted Lerner index, profit elasticity and the Herfindahl index. Empirical results strongly support the "competition-stability" view after the global financial crises-that higher degree of competition boosts further bank stability conditions. Results further indicate that greater concentration has also a negative impact on bank stability. Results imply also that bank stability is positively linked with macroeconomic conditions and capital ratio and inverse with operational efficiency. Finally, we do not find a non-linear relationship between competition and stability.

This paper examines the demand for foreign reserve holdings for the Albanian small open economy. ... more This paper examines the demand for foreign reserve holdings for the Albanian small open economy. The model is estimated through the Vector Error Correction Model approach. Results provide supportive evidence that reserve accumulation is more sensitive to precautionary motives rather than mercantilist ones. Other results reconfirm that current account patterns and fiscal imbalances are the main driving forces behind reserve holding. By contrast, reserve was yet again found less sensitive regarding the opportunity cost and mercantilist motives.

Motivated by the debate on concentration-stability nexus, this paper studies the impact of bank c... more Motivated by the debate on concentration-stability nexus, this paper studies the impact of bank concentration on the likelihood of a country suffering systemic bank fragility. For this reason, we followed a new approach using on-site bank balance sheet information to construct our proxy that represent each bank stability condition and use a variety of internal and external factors to estimate a balance panel dynamic two-step General Method of Moments (GMM) approach for the period 2008 – 2015. First, results provide supportive evidence consistent with the concentration-fragility view. Second, macroeconomic variables seem to have a significant effect on bank stability, which is not found for the sovereignty primary risk. By contrast, the bank-specific variables have also a significant effect on bank stability conditions. Finally, non-systemic banks are found to be more sensitive to macroeconomic condition and market concentration, while the better capitalised banks are less sensitive ...

South-Eastern Europe Journal of Economics, 2016

The paper studies the pass-through effect of primary sovereignty risk on bank stability. For this... more The paper studies the pass-through effect of primary sovereignty risk on bank stability. For this reason, we followed a new approach using on-site bank balance sheet information to construct our proxy that represent each bank stability condition and use a variety of internal and external factors to estimate a balance panel dynamic two-step General Method of Moments (GMM) approach for the period 2008 Q3 – 2015 Q03. We found no supportive evidence that pass-through effect of primary sovereignty risk does affected bank stability. Rather improving macroeconomic and financial market condition are found to be important components through which banks are more immune. The rest of results imply that other bank-specific indicators, namely the extent of intermediation, off-balance sheet active, excessive capital, credit risk and profitability do not have a significant affect.

South-Eastern Europe Journal of Economics, 2017

This paper addresses the dynamic relationship between competition and bank stability in the Alban... more This paper addresses the dynamic relationship between competition and bank stability in the Albanian banking system during the period 2008 - 2015. For this reason, we estimate a new composite individual bank stability indicator that relies on bank balance sheet data. Then, we construct a proxy for bank competition as referred to by the Boone indicator. We also calculated the Lerner index and the efficiency adjusted Lerner Index, as well as the profit elasticity index and the Herfindahl-Hirschman Index. The main results provide strong supportive evidence for the "competition-stability" view - namely, that lower degree of market power sets banks to less overall risk exposure; results also show that increasing concentration has greater impact on bank fragility. Similarly, bank stability is positively linked to macroeconomic conditions and capital ratio and inversely proportionate to operational efficiency. We also used a quadratic term of the competition indicator to capture ...

Research Papers in Economics, 2016

The main focus of this paper is to appraise the money demand function and the velocity of broad m... more The main focus of this paper is to appraise the money demand function and the velocity of broad money, M3, in the medium and long-term, given its role as a second pivotal pillar for the monetary policy of the Bank of Albania, in accordance with its primary objective, that of price stability. The results show that the demand for money is stable, even in the aftermath of global financial crisis, as well as its performance contains important information for the inflation trend.

The main goal of this paper is to develop a better understanding of international capital flows b... more The main goal of this paper is to develop a better understanding of international capital flows based on the episode of sudden stop concept. First, we compute a sudden stop indicator (or our binary variable) in order to analyze movements in foreign capital flows. Second, the probability of these episodes is estimated as a function of some economic fundamentals by running a probit estimation with quarterly data over the period 2004–2012.

This discussion paper focuses on identifying and evaluating the long run determinants of bank cre... more This discussion paper focuses on identifying and evaluating the long run determinants of bank credit to the private sector in the case of Albania by employing a Vector Error Correction Mechanism (VECM) approach based on demand and supply indicators. Estimations show that an adjustment mechanism exists bringing bank credit back to equilibrium. The results imply that lending is positively linked to economic growth. Further, banking and financial intermediation, as well as financial liberalisation would stimulate higher lending demand. In addition, lower cost of lending, diminishing government domestic borrowing and a more qualitative bank credit would create further lending incentives. At the same time, the exchange rate is found to pick up some demand valuation and consumption smoothing effects.

This discussion material focuses on evaluating the long-run meanreverting properties of debt to G... more This discussion material focuses on evaluating the long-run meanreverting properties of debt to GDP ratio by unit root approach. Findings demonstrate that the debt to GDP is mean-reverting over time, while there seems to be no evidence when this indicator is measured in real terms. Further, the material considers a fiscal policy reaction function to understand whether government pursued appropriate policies to avoid excessive debt accumulation. Results presume that fiscal authorities react systematically to raising debt ratio, by generating future surpluses, but not enough to avoid excessive debt accumulation. Comparing simultaneously results from both approaches implies that Albanian fiscal policy is sustainable. But, the profligacy of fiscal authorities put it at risk, considering that the pursued fiscal policies do not avoid excessive debt accumulation. Error term analysis reveals that fiscal policy has been stable across time, even though evidence seems to illustrate that global...

The aim of this discussion material will be to examine the effects of fiscal developments on econ... more The aim of this discussion material will be to examine the effects of fiscal developments on economic activity and on the market condition over time. The study employs a threshold vector autoregressive approach for 10 Developing and Emerging Market economies in the Central Eastern and South Eastern European Countries. The financial stress index is constructed by considering a wide range of market patterns, including banking related stress, money market related stress, exchange markets stress and real estate markets related stress, upon which the threshold upon market condition is build. The threshold VAR model allows to analyses this interrelationship during episodes of economic downturn and stress in financial market. Finally, the empirical work considers a structural identification approach.

This paper analyses the inter-temporal competition – stability nexus after the global financial c... more This paper analyses the inter-temporal competition – stability nexus after the global financial crises. For this reason, the empirical estimation approach follows a five – step procedure. First, we utilise quarterly macroeconomic and balance sheet and income statement data for 16 banks operating in the Albanian banking sector over the period 2008 – 2015. Second, we calculate a new composite index as a measure of bank stability conditions, which includes a wide set of information rather than focusing only on one aspect of risk. Then, we construct a proxy for bank competition such as the Boone indicator. Empirical estimations are based on the General Method of Moments approach. A set of robustness checks include also the use of other alternative proxy of competition such as the Lerner index and the efficientadjusted Lerner index, profit elasticity and the Herfindahl index. Empirical results strongly support the “competition – stability” view after the global financial crises that high...

This paper analyses the inter-temporal competition – stability nexus after the global financial c... more This paper analyses the inter-temporal competition – stability nexus after the global financial crises based on a Generalised Method of Moments with quarterly data for the period 2008 – 2015. Empirical results strongly support the “competition – stability” view after the global financial crises that higher degree of competition boosts further bank stability conditions. Results further indicate that greater concentration has also a negative impact on bank stability. Finally, we do not find a non-linear relationship between competition and stability. JEL Codes: C26, E32, E43, G21, H63.

This paper addresses the dynamic relationship between competition and bank stability in Albanian ... more This paper addresses the dynamic relationship between competition and bank stability in Albanian banking system during the period 2008 - 2015. To this purpose, we construct a proxy for bank competition as referred to the Boone indicator. We also calculated the Lerner index and the efficient adjusted Lerner index, as well as the profit elasticity index and the Herfindahl–Hirschman Index. The main results provide support for the “competition – stability” view – that lower degree of market power sets banks to less overall risk exposure. The results further show that increasing concentration will have a larger impact on bank’s fragility. Similar, bank stability is positively linked with macroeconomic conditions and capital ratio and inverse with operational efficiency. We also used a quadratic term of the competition measures to capture a possible non-linear relationship between competition and stability, but find no supportive evidence.

This paper examines the transmission mechanism of monetary policy in Albania during 2002 M01 - 20... more This paper examines the transmission mechanism of monetary policy in Albania during 2002 M01 - 2014 M12. The main question addresses the macroeconomic pass-through effects of a monetary policy shock, with regards to a conventional interest rate and possible different balance sheet policy changes. The analysis is based on a structural vector autoregressive model for Albanian economy that includes means of the Cholesky identification scheme and the sign restrictions approach. The former produces mixed results, that are either statistically insignificant or show a puzzle behavior. The latter is found to reduce bias, albeit with some supportive significant clear cut robustness evidences of the short run macroeconomic pass-through effects of a stimulus monetary policy that materialises within twelve periods. A stimulus monetary policy is found to support economic activity and increase price level. The effect is positive with regards to bank lending and monetary money stock variables. Exc...