ABSTRACT This article analyzes the effects of monetary and foreign exchange policies on the exchange rate in China by using structural VAR models with sign restrictions. In the empirical model, a number of monetary and foreign exchange policy instruments are considered, and interactions among these instruments and with the exchange rate are allowed. The main results are as follows: contractionary shocks to various monetary policy instruments, such as the required reserve ratio, the repo rate, and the benchmark lending or deposit rate, lead to a significant appreciation of the RMB against the U.S. dollar. However, shocks to foreign exchange intervention have limited effects on the exchange rate.
The COVID-19 episode provided a unique quasi-experimental setting to revisit the relative roles of domestic policies and global factors in shaping capital flows. Using high-frequency portfolio flows data, this paper examines the effects of pandemic severity, containment measures, and fiscal and monetary policy responses during the initial phase of the pandemic, while shedding light on the associated transmission channels. We find that domestic conditions and policies explained a large share of cross-country heterogeneity in flows, particularly for emerging markets and bond flows. Higher domestic COVID-19 cases and tighter lockdown measures led to significantly larger portfolio inflows, on account of higher financing needs and de-risking effects of containment measures. Fiscal stimulus supported foreign inflows on average but amplified the adverse impact of the global shock. By contrast, expansionary monetary policy reduced flows in developed markets but had no significant effect in emerging markets, pointing to the role of the global financial cycle in constraining monetary policy effectiveness in emerging markets.
This study investigates controlling shareholders' share pledging motivations in China, focusing on alignment with firms' future development needs. Using the LDA model on annual reports, we find that pledging intensity in topics like Primary Business and New Energy positively correlates with subsequent pledging. Moderation analysis reveals that government subsidies mitigate this relationship, while financing constraints exacerbate it. Further analysis shows that pledging-funded strategic investments enhance return on assets. Heterogeneity tests indicate these effects are more pronounced in non-state-owned firms and during the COVID-19 pandemic. Our findings support the 'propping' motive, suggesting share pledging serves as a vital internal financing bridge. Policy implications emphasise that regulators should shift from simple pledging caps to information-based oversight, encouraging transparent disclosure of funds' use to mitigate adverse selection risks and support corporate resilience.
This study examines the evolution of Turkey's monetary policy during the period from Turkey's implementation of an implicit inflation-targeting regime in 2002 to Turkey's last presidential election in May 2023. Unlike previous studies, this study found insignificant evidence for a weakening in Turkey's monetary policy during the 2010s. However, the tug-of-war between government officials and the central bank over a rise in short-term interest rates seems to have resulted in a significant violation of Taylor's principle in the post-COVID period. Turkey's ever-weakening monetary policy during the COVID period marks a divergence from monetary policy in other emerging market economies (EMEs). This study shows that such a lax monetary policy has had two major adverse consequences. First, Turkey had one of the highest inflation rates in the world owing to its excessively loose monetary policy stance. Second, Turkey's borrowing terms on dollar-denominated external debt worsened relative to those of other EMEs.
ABSTRACT This study examines how institutional distance shapes the effectiveness of institutional investors' monitoring of corporate earnings quality. Using a sample of 3125 firm‐year observations for non‐US firms cross‐listed on US exchanges from 2001 to 2017, we distinguish between two forms of proximity: geographic proximity, which captures the informational advantages of home‐country institutions (IO_Home), and market proximity, which reflects US institutions' familiarity with the listing market (IO_US). We employ panel regressions with firm and year fixed effects and double‐clustered standard errors and find a significant and positive association between IO_Home and all three earnings attributes: persistence, value relevance and timeliness. In contrast, IO_US shows no significant monitoring effect. These findings support the geographic proximity advantage over the market proximity advantage. Moreover, geographic advantage exerts a stronger effect in firms with greater information opacity (proxied by research and development intensity) and remains robust in instrumental variable estimation that addresses selection endogeneity. Our results highlight the critical role of geographic closeness, rather than market familiarity, in determining institutional monitoring effectiveness on earnings quality.
